Power in play - Westfair Communications

The New York Independent System Operator in its annual review of the state”™s electrical system chronicled progress that has been made to make it more reliable, but also warned of forces putting the system”™s future in possible peril.

In a report released April 25, “Power Trends 2011: Energizing New York”™s Legacy of Leadership” NYISO stated: “The immediate outlook for New York”™s electric system is positive. As a result of developments that have contributed to a more reliable system over the past decade, as well as planned additions in the near future, the adequacy of power resources is not an imminent concern.”

However, NYISO, a nonprofit responsible for operating the state”™s bulk electricity grid, said the grid”™s sustained adequacy of power sources may be challenged by:

An aging energy infrastructure with 60 percent of the state”™s power plant facilities and 80 percent of its high-voltage transmission facilities over 30 years of age;
The ability to develop sufficient power generation to serve southeastern New York state if the Indian Point power plants were retired; and
The cumulative impact of pending federal and state environmental regulations that could cost power plant operators billions of dollars to comply with.

On the positive side of the ledger, the NYISO reported the anticipated supply of energy generation capacity exceeds the predicted consumption needs over the next 10 years. The agency also said that statewide the mix of fuels used to generate electricity is diverse and balanced among sources such as hydropower, nuclear, coal, natural gas and oil. However, due to stringent environmental regulations, fossil-fuel generated plants dominate the downstate region.

“New York state has adopted energy policies aimed to promote the growth of power supplies from clean and renewable sources,” the report stated. “Progress is being made toward expanding ”˜green power,”™ such as wind and solar energy, and increasing energy efficiency and demand-side resources.”

Comply or close?

In the report, the NYISO said that while predicted supply will adequately meet consumer demand, it comes with one significant caveat ”“ Indian Point remaining online, noting that Indian Point 2”™s and 3”™s operating licenses expire in 2013 and 2015, respectively. “Without the development of adequate replacement generation in southeastern New York, retirement of both nuclear units at the Indian Point Energy Center when their current licenses expire would result in violations of reliability standards in 2016. Impacts would include the loss of power supply and transmission voltage support affecting the metropolitan New York region.”

The report”™s most ominous passage was in reference to what it termed the “substantial” capital investment that may be required to comply with recently enacted and pending state and federal environmental regulations: “For example, the New York State Department of Environmental Conservation estimated that the compliance cost of proposed closed-cycle cooling regulations could total more than $8.5 billion for 27 power plants over a 20-year period.”

The $8.5 billion estimate was included in a draft report published by the state DEC in March 2010.

The NYISO warned, “Faced with the decision to retrofit or retire affected units, the power plant owners could choose to avoid the cost of compliance by closing or mothballing facilities, which could adversely impact the reliability of the electric system.”

Proposed policy change

The state DEC issued a proposed policy change in March 2010 under the “best technology available” requirements of the federal Clean Water Act that would require power plants, including Indian Point, and other industrial facilities that use significant amounts of water for cooling purposes to cut water intake via the “closed-cycle cooling system” in order to protect fish, fish eggs and larvae.

The policy change may require some plant operators to build large, expensive cooling towers. Michael Bopp, a spokesman for the DEC, said the agency is reviewing comments it has received on the proposed policy change and is working on finalizing the policy. He could not release a projected timeframe on when the policy will be finalized.

Entergy, which owns Indian Point 2 and 3, has challenged the DEC policy change in court and is now before an administrative law judge.

Entergy, which requires a water quality permit from the DEC to have its plants relicensed by the Nuclear Regulatory Commission, is disputing the department”™s position that it must build two cooling towers it says would cost $1.5 billion. Entergy spokesman Jerry Nappi said each cooling tower would be the size of Yankee Stadium.

Entergy has proposed a more modest wedge-wire screen system that is utilized at other power plants in the state, which would cost approximately $200 million to build. Public hearings are scheduled in June.

NYISO also said the DEC policy study as well as other federal environmental regulations concerning the emission of nitrogen oxides and other hazardous air pollutants that are either proposed or in effect and need to be complied with by 2014 could also “result in unplanned retirements that may impact reliability. The array of proposed regulations is estimated to impact 23,957 megawatts of capacity, more than half the installed generating capacity in New York state.”

The report did not put a cost estimate on compliance.

Indian Point comes into play

Stephen G. Whitley, president and CEO of the NYISO, in a phone interview with the Business Journal, said, “The bottom line is we are really in good shape today assuming none of these units that are providing power today retire. And we don”™t have notices from any of them that they are going to retire, so all of this analysis shows that we are in really good shape ”“ we have a surplus.”

In light of the political pressure on Indian Point after the nuclear disaster in Japan in March, Whitley said a forced closing of one or both of the reactors there prior to their retirement dates would pose problems for the system.

“Basically with all of them shut down it would cause reliability problems,” he said.

He said two new power generation facilities are expected to come on line soon to supply the New York City area that will total approximately 1,100 megawatts ”“ the 500-megawatt Bayonne Energy Center in New Jersey and the 576-megawatt Astoria Energy II plant in Queens.

Whitley said those facilities would help replace the power lost if one of the Indian Point units were shut down. However, if both were closed, the system would have reliability problems, he warned.

John Durso Jr., executive director of the New York Affordable Reliable Electricity Alliance (New York AREA), said the report was largely positive, although he agreed problems would be created by a closing of Indian Point”™s two nuclear units. “With New York still lacking a power plant siting law and without adequate base-load energy capacity available within the downstate region, closing Indian Point will be quite harmful,” Durso said in a statement. “This is not the way to jumpstart New York”™s economic recovery.”

”˜A case-by-case review”™

Gavin Donohue, president and CEO of the Independent Power Producers of New York Inc., an Albany-based trade association that represents suppliers that generate more than 75 percent of the state”™s electricity, praised the report. He said the costs of compliance with pending federal Clean Air regulations in the next two to three years “will have a direct impact on operations of all power plants, not just those in New York.”

He characterized the issue as “a sleeping giant on the energy policy front” both in New York and nationwide.

Donohue said the state”™s policy study on the closed-cycle cooling system would not only affect energy plants but any manufacturing facility that withdraws a significant amount of water per day in the state. He also said the federal government is looking at changes to “Best Technology Available” requirements of the Clean Water Act that could also involve closed-cycle cooling.

He related that based on discussions with state officials the DEC policy change, which is not final, “has been much more realistic than the federal approach.” He added that the last time he saw a draft of the DEC policy “I thought it was going in a good direction.”

Donohue said he believes the state recognizes it needs to look at the implementation of closed-cycle cooling on a facility-by facility basis.

“We need to make sure that the lights don”™t go out and we need to do this in a way that is practical,” he said. “I think a case-by-case review is the way to go.”