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GVEA reconsiders approach to Healy plant Homer Electric Association back-out makes fate of Healy Clean Coal Project uncertain; HEA was to have bought power starting in ‘14 Stefan Milkowski For Petroleum News
The fate of the long-idle Healy Clean Coal Project is once again up in the air after the Homer Electric Association board on May 12 backed out of a deal with Golden Valley Electric Association and the Alaska Industrial Development and Export Authority to buy power from the plant starting in 2014.
Under the agreement, reached in January, AIDEA would have sold the plant to GVEA for $50 million and provided an additional loan of up to $45 million for work needed to restart it. HEA would have bought half the electricity produced by the 50-megawatt plant starting in 2014 under a long-term power purchase agreement with GVEA. And litigation between AIDEA, which owns the plant, and GVEA, which owns the property underneath the plant, would have ended.
At a public meeting on the project May 14 in Healy, GVEA President and CEO Brian Newton said HEA’s decision will have a significant impact on plans to restart HCCP.
“If Homer exits, obviously we’re going to have to go back and re-negotiate the asset sale purchase,” he said, adding that the change will delay a final purchase agreement with AIDEA beyond the planned date of Aug. 1. “It changes the arrangements we have. It may even change the price; we’re not sure. As soon as we find out from AIDEA that their contract is terminated with Homer, Golden Valley will again start negotiating with AIDEA.”
Newton said using 100 percent of the power from HCCP could force GVEA to run other plants at partial capacity in certain circumstances, decreasing efficiency.
About 100 people showed up for the meeting, which lasted nearly two hours and included a presentation by Newton and questions from the public.
In a May 14 news release, AIDEA officials vowed to keep working to bring HCCP online despite HEA’s decision. The $300 million publicly funded plant was completed in 1997 but has not run since early 2000.
HEA pulls out Homer Electric Association, which currently gets 90 percent of its power through a supply contract with Chugach Electric Association that ends in 2013, had been eyeing the Healy Clean Coal Project for years. In November 2006, the utility reached an agreement with AIDEA in which HEA would get the plant running and use power from it. That plan was delayed by litigation between AIDEA and GVEA.
HEA made a separate offer in June 2008 in which GVEA would restart and operate the plant and sell power to HEA. GVEA never accepted the offer. The two utilities finally agreed to the terms of a power purchase agreement in the January deal reached with AIDEA.
Newly elected board Vice President Tim Evans told the Peninsula Clarion the board decided to move away from the coal plant because of concerns that it wouldn’t be economic and wouldn’t come online in time and because of widespread opposition from members of the cooperative utility. The board voted 8-1 in favor of a motion by Evans to cancel an RFP for a power supply study and move the cooperative “away from involvement in HCCP.”
Evans told the newspaper that he had received hundreds of e-mails and calls about the plant. “Ninety-nine percent of them say ‘no’ to Healy,” he said.
A group called HEA Members Forum quickly hailed the decision. “Unanswered questions about the functionality of existing plant equipment, new Clean Air Act permitting requirements, and the volatility of the coal market raise legitimate concerns that the costs of startup and buying half of the plant’s energy output could greatly exceed present estimates and threatened to increase HEA member electric rates,” spokesman Mike O’Meara said in a statement.
Environmental concerns Opposition from environmental groups also threatens to slow or halt the restart of HCCP.
A coalition of local and national groups including the Sierra Club, the National Parks Conservation Association and the Denali Citizens Council contends that GVEA will have to comply with the “prevention of significant deterioration” provisions of the federal Clean Air Act. The provisions, which apply to new and renovated facilities, would require that the plant use the best available technology to control pollution and not violate any current air quality standards. In an April 29 letter to GVEA’s Newton, lawyers representing the groups urged the utility to comply with the provisions as if it were a renovated facility.
At the meeting in Healy, Newton promised to seek the opinion of the Alaska Department of Environmental Conservation on the issue. But he added that GVEA officials don’t believe the plant will need to comply with the provisions because the plant has already been permitted and is not being renovated.
“We feel that the plant has been in warm lay-up status,” Newton said. “The plant was always intended to run. It has not been mothballed. The systems have been kept active. … Therefore it’s not a re-activation; it’s simply just a restart of the plant.”
Newton said after the meeting that the Healy plant was not designed for current pollution control technologies and may not be able to accommodate them. Even if it could, he said, the cost of retrofitting the plant with new technology would be “phenomenal.”
“That’s not what we’re willing to do,” he said.
GVEA secured a Title V operating permit for the plant in 2003. The permit came up for renewal in 2008 and was administratively extended pending public comment and renewal, according to Newton.
Newton said he expects the National Park Service to oppose the permit renewal, despite settlement agreements made with the agency and environmental groups in the mid-‘90s before construction of the plant.
Climate change Climate change legislation could also affect the economics of the plant.
Newton said GVEA will operate the facility with the “clean coal” technology originally installed, which is meant to minimize pollution from nitrogen and sulfur oxides. But he added that technology to capture and store carbon dioxide, the main pollutant linked to global climate change, “just isn’t there.”
Newton said the plant would still make economic sense even if the utility were forced to pay $20 to $40 per ton of carbon dioxide emitted under a cap-and-trade program like the one currently before Congress.
He said utility officials expect to produce power from HCCP for 9 or 10 cents per kilowatt-hour, assuming 85 percent availability and 25-year debt.
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