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Clean Energy for Jamestown Substituting Energy Efficiency for Coal Burning

By Clean Energy for Jamestown February 2011 Contact: Walter Simpson enconser@buffalo.edu, (716) 839-0062 The Jamestown Board of Public Utilities (JBPU), the municipal utility serving Jamestown, New York, is proposing to build a $500 million 50 megawatt (MW) experimental coal-fired power plant to replace its aging and polluting coal-fired Carlson plant. Originally envisioned as a conventional coal plant with no controls on climate-changing carbon dioxide emissions, the current version of this project is a proposed carbon capture and storage (CCS) demonstration project. The JBPU has been pursuing this new coal plant project despite its huge cost and the fact that it is not needed to meet Jamestown ratepayers’ electricity needs which are now met almost entirely by low cost hydropower from the New York Power Authority (NYPA). The project has been opposed by our coalition of twenty local, regional, state, and national environmental organizations which maintain that through conservation and efficiency the JBPU can reduce its ratepayer’s electric demand sufficiently that ratepayer electric needs can be met entirely by the JBPU’s NYPA allocation with only occasional modest purchases from the regional grid – thus making the proposed new coal plant, as well as the operation of the JBPU’s aged and polluting existing coal plant, entirely unnecessary. Eliminating coal-burning with a more aggressive energy conservation and efficiency program would cost much less, lower electric rates, save state and federal taxpayers hundreds of millions of dollars, and reduce both land destruction caused by coal-mining and air pollution caused by coal combustion. In 2008, NYS Governor David Paterson endorsed this ill-conceived coal plant demonstration project which then was turned down three times for funding by the U.S. Department of Energy, failed twice to get CCS-enabling legislation passed by the NYS Legislature, and saw two important backers -- Praxair Corporation and the University at Buffalo -- pull out because they believed the project was not viable. More recently it has become clear that this project will require a massive amount of state funding – as much as $100 million – to be built. These funds will not be forthcoming given New York’s budget crisis and growing taxpayer opposition to pork barrel spending. Governor Andrew Cuomo has an opportunity to resolve this controversy by indicating that he will not support this $500 million 50 megawatt (MW) experimental coal-fired power plant but instead will assist Jamestown in pursuing the energy efficiency-based program we have recommended. We believe that if the Cuomo administration were to take this step, the Governor could dramatically demonstrate fiscal prudence, a commitment to clean energy, and creative state-municipal partnerships to resolve difficult issues.

The following facts explain in detail why the JBPU’s $500 million plant should and will not be built:  The vast majority – e.g. over 90% in 2008 and 100% in 2009 -- of the electric needs of the JBPU’s 20,000 electric ratepayers are met by low cost power (2 cents per kWh delivered) from NYPA, making it obvious that there is no need for either continued operation of the JBPU’s existing coal-fired power plant or a new $500 million coal-fired power plant. A sensible, cost-effective and environmentally clean energy plan for JBPU ratepayers would rely on enhanced energy efficiency and demand reduction strategies coupled with occasional modest purchases off of the regional electric grid to achieve near 100% reliance on 2 cent per kilowatt hour NYPA hydro power for Jamestown ratepayers. This sensible plan has been rejected by the JBPU in favor of building a new coal plant at great expense and risk. The JBPU has never fairly examined alternatives to its proposed new coal plant. A March 2009 study by Optimal Energy, commissioned by NYPA, concluded that the JBPU could reduce its ratepayer electric load by 20% within 5 years through a costeffective energy efficiency program. The technology the JBPU intends to use for its proposed new coal plant is called “oxycoal,” i.e. burning coal in oxygen and recycled flue gas, an energy intensive process which significantly decreases power plant efficiency and therefore significantly increases power production costs. The proposed 50 MW Jamestown coal plant would have an output of just 30 MW because of the energy requirements of producing oxygen for oxycoal combustion and compressing, pumping and injecting carbon dioxide from the plant into the ground. While the JBPU refuses to release its estimates of the production cost of electricity from its proposed new coal plant, our estimate – based on JBPU data – is that the output will probably cost 20 cents per kilowatt hour or more, an amount which will significantly raise electric rates for JBPU ratepayers and make it impossible for the JBPU to sell excess power to non-ratepayers at anything other than huge losses. The JBPU plans to charge $145 million dollars of the cost of the plant to ratepayers and to pay debt service on this amount by raising ratepayer rates. Yet this project could never pass a fairly administered prudence review by the NYS Public Service Commission because of its high cost and the existence of much cheaper alternatives. The NYS PSC, in its July 20, 2010, ruling on a JBPU rate increase request established a process for evaluating future coal-burning in Jamestown and stipulated that JBPU new coal plant development costs should not be billed to its ratepayers. We estimate, based on the JBPU data presented to the PSC, that the JBPU has already spent $10 million developing and promoting this project. These costs amount to an incredible $500 per JBPU ratepayer. Thus far, New York State has paid an estimated $8 million in developmental costs for this coal plant through NYSERDA, the Empire State Development Corporation, and funds allocated by the NYS Legislature. The proposed plant would have an output capacity far in excess of any conceivable portion of JBPU ratepayer electric load not already met by low cost hydro power from NYPA. Thus, the JBPU must plan to sell all or most of the plant’s output to non-

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ratepayers – a completely uneconomic plan given the super-high cost of producing this power vs. likely market prices for electricity. In 2009 the federal government’s Department of Energy (DOE) Clean Coal Power Initiative (CCPI) twice rejected the JBPU’s funding application for this project. Then, in early 2010 the DOE announced funding recipients of its industrial CCS program and the JBPU was not among them. Clearly, the JBPU’s funding applications have not been competitive with other CCS demonstration project funding candidates. Until recently, the DOE has not funded any oxycoal CCS demonstration projects. On August 5, 2010, Energy Secretary Steven Chu announced that FutureGen 2.0 will involve repowering a 200 MW existing coal plant in Meredosia, Illinois – making clear the DOE’s preference for demonstrating this technology on a larger, existing coal plant. Even if future federal funding did become available to build this project – and it is doubtful it will be – in addition to the $145 million the JBPU would need from its ratepayers the JBPU probably would need $100 million from the New York State in order to meet federal funding matching dollar requirements. NYS’ budget crisis guarantees that these funds will not be available. Even assuming the impossible, i.e. that all CCS construction and demonstration costs for this project were covered by others, JBPU ratepayers would still experience much higher electric rates for years to come because of the plant’s very high operating costs over its 50 to 60 year lifespan coupled with the huge losses the JBPU would experience trying to sell power from the new plant on the open market. Without on-going life-of-the-plant federal or state funding (both unlikely in the extreme), the JBPU would face severe economic pressure to abandon a high rate of CCS as soon as the DOE’s three year demonstration period was over in order to reduce operating costs and minimize expected dollar losses. Thus, carbon dioxide emissions levels for most of the plant lifespan would be much higher than promised and much higher than the near zero emissions which could be achieved by an energy plan more reliant on energy efficiency. Enabling legislation for this project failed to pass in the state legislature for two successive years (2009 and 2010). The proposed state enabling legislation did not address the critical CCS liability issue. So, even if the enabling legislation had been passed, the JBPU would have remained liable for all risks associated with the CCS component of the project, thereby potentially raising the costs of this plant to unforeseen even more astronomical levels. JBPU test drilling failed to find suitable geological reservoirs in which to bury CO 2 from the proposed new Jamestown coal plant. Key initial project partners -- Praxair, Inc. and the University of Buffalo – withdrew from the project team in 2009 on the eve of consideration of the project application by the federal government, and comparable new partners have never been found. Even the continued operation of the existing Carlson plant has recently been called into question. On January 24, 2011, the New York State Public Service Commission, in its decision in a National Grid matter, required National Grid to conduct a study to determine what must be done vis-à-vis the JBPU’s connection with the National Gridoperated regional grid to “enable the potential retirement of the Jamestown coal-fired facility.”

***** The following organizations have been participating in Clean Energy for Jamestown and are on record as being opposed to the proposed new coal plant for Jamestown, NY:                      Alliance for Clean Energy New York American Lung Association in New York Campus Climate Challenge, SUNY Fredonia Catholic Care for Creation Committee of Buffalo Citizens Campaign for the Environment Clean Air Coalition of Western New York Earthjustice Environmental Advocates of New York Global Warming Action Network, Syracuse Great Lakes United Jamestown Area Concerned Citizens Natural Resources Defense Council (NRDC) New York Interfaith Power & Light New York Public Interest Research Group (NYPIRG) Northeast Sustainable Energy Association Pace Energy and Climate Center Physicians for Social Responsibility (PSR), Washington, D.C. Sierra Club, Atlantic Chapter UB Environmental Network WNY Climate Action Coalition WNY Sustainable Energy Association