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Wednesday, July 21,2010

Now they’re cooking with gas

How BWL’s proposed plant changes the game

by Lawrence Cosentino

The light went on in the shower — a fitting epiphany for the top executive of Lansing’s Board of Water and Light.


BWL general manager J. Peter Lark made up his mind to propose a new, natural gas-powered cogeneration steam and power plant in REO Town while soaking wet.


“Nine or 10 months ago, I was taking a shower, thinking of all the different things we had confronting the BWL at that time,” Lark said last week.


“It just seemed to me that a combined cycle cogeneration plant would meet our needs at every available level.”


The BWL is rolling out the plant as a multi-pronged problem solver: steam plant, electric generator, a move toward energy diversity in a volatile market and a much-needed economic development boost to REO Town. (See related article.)


The proposed $182 million plant would burn natural gas to turn a turbine, generating electricity — about 100 megawatts for the proposed BWL plant, making up most of the 120 megawatts lost when the oldest Eckert units shut down in four to eight years. The heat riled up by the process will be captured to push steam through the downtown loop — the crux of cogeneration.


“It happens to kill several birds with one stone, to use a bad analogy,” Lansing Mayor Virg Bernero said Friday.


“It’s a win, win, win, win, win,” former Lansing mayor David Hollister enthused. (Playback confirmed 5 “wins.”)


One of Hollister’s “wins” may be the most significant thing about the plant — what it isn’t.


As recently as 18 months ago, BWL was still pushing its plan to build a $1 billion plant fueled mostly by coal.


Last week, after a century-plus of coal combustion and one last Hail Mary pass that would have thrown another generation into the furnace, new energy from coal was pronounced dead in Lansing.


“It would be very imprudent at this point to plan on using coal as a new generator,” BWL’s planning director, George Stojic, declared Friday. “You can’t even figure out how what the cost of your product will be at the end. Right now, I wouldn’t consider it.”


You can line up the dominos in different ways, but here is how they looked to BWL.


Downtown Lansing’s biggest players, from General Motors to the state of Michigan to the Accident Fund to the State Police, are hooked to a downtown steam loop. That steam is produced by a hulking quartet of boilers and stokers, at the BWL’s Moores Park steam plant, next to the Eckert Station. Three of the boilers are more than 50 years old and one is 43.


Without the steam loop, each of about 225 customers would have to install its own boiler, fueled most likely by natural gas.


A centralized steam loop is more efficient than 200 smaller boilers, but the Moores Park plant is steaming into a squall. In February, the federal EPA issued new rules for industrial boilers like the ones at Moores Park, calling for drastic cuts in carbon monoxide, mercury, particulate matter, toxic metals and other emissions. The rules are expected to go into effect in January.


Last week, Lark put the cost of upgrading the boilers at $30 million, with $35 million to $107 million more to comply with the new rules.


Lark said Wall Street would laugh at the prospect of investing money in the creaky boilers. Three of the boilers would be 85 years old by the time a 30-year loan was paid off. If the utility opted for an upgrade, ratepayers would have to cover it. On the other hand, he is confident about getting favorable bond ratings from Wall Street to finance a natural gas plant.


Lark had more to think about in the shower. The Eckert Plant’s electric generating units are in the same fix as the steam plant. In May 2010, the EPA proposed new rules for handling coal ash. In the first week of July, the feds announced sweeping new clean air rules targeting coal-fired plants.


The rules were widely expected and, to many observers, overdue. In 2008, power plants were responsible for 66 percent of sulfur dioxide emissions, 19 percent of nitrous oxide emissions, and 72 percent of mercury air emissions in the United States. The proposed EPA rules would cut these figures by more than half by 2014.


All this proposed rulemaking came down against the backdrop of federal action on greenhouse gases, still the industry’s biggest question mark.


Finally, as Lark lathered up, last year’s heated debate over the coal plant proposal rang in his ears.


A grass roots group, Lansing Can Do Better, fought BWL’s proposed coal plant on several fronts. The debate over the plant blended with a larger debate over the soul of Lansing, one of the few Michigan cities with cultural and economic momentum. Bernero called the prospect of a new coal plant “scary.”


“Had they moved forward with the coal, it would have been a nightmare, a slugfest,” Hollister said. “People were digging in.”


In February 2009, community debate over the proposed coal plant was at full heat. James Clift, policy director of the Michigan Enviromental Council and point man for the opposition, made the rounds with a “Plan B” at the Westside Community Center and other forums.


“Plan B” called for beefed-up energy efficiency and conservation programs and more aggressive pursuit of renewable energy, the once and future Holy Grails of fossil fuel opponents.


But Clift also recognized that more juice was needed to replace the aging Eckert units and to back up the fickle renewables.


Compared to coal, natural gas spews about half the greenhouse gases, including carbon dioxide, that cause global warming. But Clift stressed another benefit.


“Natural gas turbines are the cheapest things to build per megawatt-hour,” Clift told the Westside group in February 2009. “The wind stops blowing — you fire up your natural gas turbines.”


But in the BWL boardroom, the wind still hadn’t turned. Stojic said it was too costly.


“We go with this plan, we pay more than we need to,” Stojic told City Pulse in February 2009.


After three lively public meetings in the fall of 2008 and winter of 2009, the BWL’s citizens advisory panel gave the utility cover for a retreat.


In June 2009, the panel advised the BWL to “delay” investing in the new coal/ biomass plant and explore “the latest energy generation, including combined cycle options, energy efficiency technologies, renewable options and fuel diversity.”


The BWL has not yet worked out a new Integrated Resource Plan, or IRP, that would map out the utility’s energy strategy, but Stojic acknowledged that last week’s gas plant proposal looks a lot like Clift’s Plan B.


“These are units that are very flexible and can back up whatever savings we get from energy efficiency, and, to a degree, the renewables,” Stojic said. “It parallels very closely what his recommendation is.”


Lark said coal prices are going up 25 percent in January, making natural gas look better every minute. He’s looking forward to toggling from coal to gas and back as the market fluctuates.


In 2008, Ventyx, BWL’s consulting firm, played out a multitude of market and regulatory scenarios. In each case, the coal/biomass plant came out as the cheapest option.


How did they miss the scenario that actually happened?


“We’ve seen it time and time again,” Clift said. “They decide what they want to do and they hire a firm to reinforce a decision that’s already been made.”


Clift hopes the BWL has learned from the Ventyx experience and will continue to solicit input from the community.


“Don’t act like we don’t know what we’re talking about or that we can’t add,” Clift said.


Bernero said the proposal shows they’re already listening.


“It’s not the old utility company mentality,” he said. “They want to be good partners with the environment and the community.”


Stojic
said the wild card Ventyx didn’t foresee was a series of reports,
including a June 2009 report from the Potential Gas Committee, that
jacked the estimated natural gas reserves in the United States by 35
percent.


Recently,
the combination of higher reserve estimates and stricter emission and
carbon regulations have made natural gas an attractive “bridge” fuel
for communities moving from coal to a mix of cleaner energy options.
Energy experts worry that with so many utilities adopting plans similar
to BWL’s, the gas market will become strained and volatile again.


Clift
said he’s “nervous” about supply for many reasons. “We’ve seen this
before,” he said. “Something happens globally that becomes unsettling
to markets.”


Stojic said he was satisfied with the supply outlook, but there are other problems with gas.


A
lot of the newly discovered reserves are locked in shale deposits
scattered over 20 states and extracted by an increasingly controversial
process called hydraulic fracturing, or “fracking.”


The
documentary film “Gasland,” shown on PBS in March, alleges that the
chemicals used in the process are tainting drinking water in
Pennsylvania and other states. As natural gas use increases, energy
consumers can expect to swap images of mountaintop removal and fly ash
disasters associated with coal for another set of horror stories, such
as the tap water that lights on fire in “Gasland.”


But Clift said gas is still cleaner than coal and represents an “incremental step” of progress.


“There’s value to having transitional capacity,” he said. “To satisfy demand, but also to take old coal plants off line.”


“This is an interim step,” Stojic agreed. The gas plant is expected to last about 30 years.


Meanwhile, Clift wants the BWL to keep its eye on the larger ball of getting rid of fossil fuels entirely.


“This is still fossil fuel,” he said. “It’s better, but it has to be part of a bigger, better program.”


Clift’s Plan B helped fight off a new generation of coal, but he’s not crowing.


“You
want to see us clinking champagne glasses, it’s when we announce we
will reduce our energy demand by 2 percent a year and be a leader in
that area,” he said. “That’s when we’ll be dancing in the streets.”


Public forum


The BWL will host a public forum on the proposed cogeneration plant Wednesday, July 21 5:30 p.m.


1232 Haco Dr., Lansing

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