July 15, 2010

EPA Mandate Could Prove Costly For City Power Plant

Big changes are looming for the Memphis municipal light plant as recent mandates approved by the United States Environmental Protection Agency in March are forcing the city council to consider its options for the facility.

The light plant, which houses the citys 10 diesel powered generators, is facing required upgrades under the National Emission Standards for Hazardous Air Pollutants (NESHAPS). The federal mandate is targeting Reciprocating Internal Combustion Engines (RICE), such as the diesel engine-driven generators found at the plant, seeking to limit hazardous air pollutants by limiting carbon monoxide (CO) emissions.

The city council held a workshop July 9th to discuss the EPA mandate and its impact on the light plant. Dave Stevens, of BHMG Engineers, met with the council to explain the citys generator compliance options.

He explained that most non-emergency engines that exceed 500 horse power will require installation of a piece of hardware called an oxidation catalyst to be added to the engines exhaust systems in addition to basic instrumentation to measure and document the machines exhaust output.

NESHAP will require installation of these devices by no later than May 3, 2013. After that date, engine operators will be required to log data reports on all engines to allow for issuance of compliance reports to the EPA.

Nine of the citys 10 diesel generators, which date back to 1950 and earlier, exceed the 500 horse power rating and will be totally governed by the NESHAP standard.

In addition to limiting the CO emissions by 70 percent, NESHAP also requires the use of low sulfur diesel fuel, limiting exhaust temperatures, and continuous monitoring and recording of the system.

Stevens explained that the city basically has three options to consider.

NESHAP does allow engines such as the citys to be declared as emergency use only, limiting their utilization only to times of power outages. Under this declaration, the city would not be required to install the oxidation catalyst. But making such a designation would require the city to give up the capacity credits it receives through the agreement with MoPEP. The city received between $9,000 to $10,000 monthly simply for maintaining generating capacity, and making the 9.3 MW available for MoPEP purchase in times of high wholesale power costs.

Option one would require no cash output by the city, but would result in the higher electricity costs from MoPEP to the tune of $100,000 to $120,000 annually. That correlates to approximately $100 a year per electric meter in the city.

Option two would call for the installation of oxidation catalysts and the corresponding recording devices and upgrades to the citys nine engines that exceed 500 horsepower.

Stevens estimated the cost of these upgrades at $764,000 including engineering, permits, installation, instrumentation and testing. The upgrade would allow the engines to be classified as non-emergency and allow the city to maintain the current MoPEP agreement to receive the capacity credits.

Stevens also outlined a proposal that would allow the city to upgrade a portion of the engines, six units overall. That could generate approximately 7 MW, which would meet all of the citys demand at a time of need, but would be less than the current 9.3 MW available, meaning decreased capacity credit payments from MoPEP. The cost of this proposal was estimated at $565,000.

Steven noted there are many variables in the estimated costs that may or may not be applicable for the city power plant, such as structural modifications to the site. He noted the price tags could be firmed up by a site-specific analysis.

Several council members questioned the responsibility of expending half to three quarters of a million dollars to fix engines that are all more than 50 years old.

Stevens pointed out that the units are all operating at 100% capacity. He added that applicable parts and maintenance are still available. He estimated the cost of a new 2.25 MW generator at $1.1 million, leaving the city with a price tag of $3 - $3.5 million to purchase new generators that could supply the citys needs, and closer to $5 million to replace its current generation capacity of more than 9 MW.

He noted that the newer generators are roughly 20% to 25% more efficient, but added those savings would only be witnessed if the city was called on by MoPEP to generate far more frequently than it currently is being asked for.

No official action was taken during the workshop. The topic likely will be on the agenda for further consideration at the August meeting.

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