Update on the Holland Energy Plan
Please see previous Posts on the Holland Energy decision here and here.
On November 2, the Holland BPW will be holding an all-day session at the DoubleTree Hotel in Holland entitled Risk Analysis Process: Session 2. It is a follow up to the first session held back on September 28 by HDR Consultants that set out the perimeters (workbook here) for the subsequent sessions that the BPW has held as as part of what it calls P21decison, a relatively elaborate process whose stated goal is to go through approximately eight major options they've laid out as possible ways in which the BPW can supply the Holland area with its future energy needs. Because the November 2 Session will seek to fix the economic inputs and values, and thus be fairly determinative, it seems a good time to review what has happened up to now in anticipation of that meeting.
On October 17, the Holland Sustainability Committee voted to approve the recommendations of the Community Energy Plan which it had spent the previous year working on, together with Garforth International. The recommendation was to approve Scenario B, which offered a wide variety of generation options and time schedules to provide for the next 40 years of Holland's energy future. This recommendation was sent to City Council, and is awaiting action.
On a parallel course, the Holland BPW has begun its P21decision process on September 28. It has its website, and the BPW is beginning the process of putting power points and videos of the presenters online, both on its own site and on Macmedia.org. Up to now, we've seen discussion of generation options, fuel types, regulations, and assorted topics such as dredging, district heating and thermal discharge into Lake Macatawa.
The two processes, Garforth and P21decision, definitely have different emphases. But they do agree on one central question, that is, what should be the very next step for Holland and which asset should we go with to power the next 5-10 years. And they both come up with the same possible three options:
1. Solid Fuel/Circulating Fluidized Bed - A 70 MW plant located at current JDY site, costing $270 million, and fueled by a mix of Petroleum Coke, Coal and Biomass. It will be able to support current snowmelt system as well as, with additional modifications, a district heating system. The CEP puts the levelized cost of electricity from this starting in 2016 option at $74.9 per MwH with no Greenhouse gas penalty, and $98.6 per MwH with one.
2. Combined Cycle Gas Turbines - Two LM2500 Combined Cycle turbines costing $105M for 70 MwH capacity (Garforth) or $90M for 55 MwH capacity (HDR/P21). It will be fueled with Natural Gas. It will be able to support current snowmelt system as well as, with additional modifications, a district heating system. The CEP puts the levelized cost of electricity from this option, starting in 2016, at $65.5 per MwH with no Greenhouse gas penalty, and $75.7 per MwH with one.
3. Combined Heat and Power Plant - One LM2500 Combined Cycle turbine costing $60M for 30 MwH capacity (Garforth) or $40M for 20 MwH capacity (HDR/P21). It will be fueled with Natural Gas. It will be able to support current snowmelt system as well as, with additional modifications, a district heating system. The CEP puts the levelized cost of electricity from this option, starting in 2016, at $81.1 per MwH with no Greenhouse gas penalty, and $91.9 per MwH with one.
The following table shows the Option-Benefit matrix as developed by HDR, and discussed at the first RAP session:
If this is supposed to be just a preliminary idea of how the final process is going to work, that's fine. But if these are the only real categories that are going have weight in the final decision, that seems problematic. There are at least two fairly important concerns that are not dealt with at all here.
One, there's no scoring of emissions, which is important when we talk about the high cost of externalities. A new paper in the American Economic Review attempts to estimate the cost imposed on society by air pollution, and allocate it across industries. The costs being calculated don’t include the long-run threat of climate change; they’re focused on measurable impacts of pollution on health and productivity, with the most important effects involving how pollutants — especially small particulates — affect human health, and use standard valuations on mortality and morbidity to turn these into dollars. The following table represents their findings as it relates to the present discussion:
A lot of that backs up what the Garforth report details. In the case of the AER report, it estimates the the Gross Economic Damage (GED) costs of Coal at an additional $28 per MwH, and Natural Gas at an additional $8 per MwH. This is very consistent with the GHG penalty the Garforth report applies to the two different fuel sources, which assigned a $24 and $10 penalty respectively.
Secondly, what the matrix also doesn't do is score financial risk. The larger list of categories does talk about fixed and variable costs, and that underscores in some sense the idea that larger projects carry more downsides than smaller ones do, as well as the idea that both Coal and Natural Gas have very uncertain price forecasts. But I don't think they are robust enough to underscore how much downside financial risk there is in large scale public works projects that are built, in some sense, on speculation of future revenues from a future clientele that is not at all certain. There is a category entitled 'Capacity Market Revenue' that deals with selling excess energy, but that is scored as a pure positive, without a corresponding acknowledgement that having an excess built capacity represents a downside risk as well.
Hopefully, these two areas get fuller attention in the next RAP session; without a fuller accounting of emissions as a serious social cost and financial risk as a large element, its hard to say that the final analysis will be at all comprehensive.
Douglas Zylstra is a small business owner, Vice-Chair of the Ottawa County Democratic Party, and a contributor to West Michigan Politics. Connect with him on Facebook HERE