Peaker Project Has Deep Economic/Environmental Flaw

A proposal to replace an aging power plant in San Francisco’s Potrero District
with four new fossil fuel burning plants,
has come under fire from environmentalists who say the project
is mired in economic and environmenal flaws.
Photo via skew-t, Flickr.com

By Eric Brooks, special to Fog City Journal

May 13, 2008

With the May 5 hearing testimony on the new peaker proposal by the San Francisco Utilities Commission (SFPUC) staff, it has become clear that the new plan has a deep flaw. If allowed to proceed, the SFPUC is going to get the City mired in a disastrous economic and environmental boondoggle.

The plan totally fails to account for the fact that over the next ten years, the California energy landscape will so profoundly change – due to new global warming regulations and spiking natural gas prices – that the entire project will become financially impossible to maintain as written, and the inevitable result will be that the proposed plant will be allowed to run at maximum, leaving severe economic and environmental damage in its wake.

Here’s the problem:

The SFPUC revealed that peakers must run at least 18 years in order to pay themselves off and will be contractually allowed as much as 30 years of operation if necessary to pay off those costs.

The critical flaw in this model is that in 2016, after the Department of Water Resources is no longer required to purchase electricity capacity from the peakers, the City and County of San Francisco will be fully on the hook for the remaining $110 million cost of the project with no guarantees of power purchasers. PG&E, the biggest such potential customer, has already said no, largely due to a new state mandate for it to cut its production of new fossil fuel projects. Other potential customers will face the same environmental restrictions over the next two decades and will likely be unable to purchase our peaker capacity.

This building environmental restriction on fossil fuel energy purchases will then combine like gasoline to a spark with the reality that natural gas production is about to peak (within the next decade) just as oil is peaking and skyrocketing in price now. This means that our ability to sell natural gas power capacity at a reasonable price will likely collapse, (driving potential gas energy customers even further away) and we will be forced to run the peakers full tilt, in what might well be a vain attempt, to sell enough hard power to meet even the 30 year contract deadline, and we will likely -still- not regain costs and will have to -amend- the contract to run the peakers well -past- 2040 and/or at higher than the 4000 hour per year limit to regain those costs.

This -guarantees- that the peakers will pollute -far- more than the existing Mirant plant, which will certainly close within the next decade. This is because Mirant is no longer locked into -any- operation to regain costs and just 4 years from now we will have built hundreds of megawatts of renewables, efficiency and capacity both under the Community Choice renewable energy project and under new State and San Francisco climate change requirements; and because the then completed Transbay Cable project will bring us -another- 400 megawatts of capacity (enough to meet almost half of San Francisco’s daily electricity needs).

The alarming boondoggle scenario described above makes the peaker plants a -probable- economic and environmental disaster. It would be insanity to put ourselves in this massively risky future scenario just to avoid a few years of air and water pollution from Mirant; pollution that can be much more effectively avoided by canceling the peaker project and then devoting our full time and energy on closing down Mirant as soon as possible by replacing it with a carefully designed mix of renewables, efficiency and Transbay Cable capacity that Cal ISO will be forced to acknowledge is adequate; and by redirecting the activist energies currently being wasted on the necessity of blocking the peaker project, into a full on high powered environmental and social justice campaign to demand the immediate closure of Mirant.

FCJ Editor

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