September 8, 2011

City Facing Costly Decision on Light Plant Generators

Behind door #1 is a nearly $1 million price tag for U.S. Environmental Protection Agency (EPA) mandated upgrades to the cities aging power generators. Behind door #2 is the loss of an estimated $100,000 in annual capacity credits returned to the city by its electric provider for maintaining the generation capability.

Those options have the Memphis city council questioning where is the exit?

Dave Stephens of BHMG Engineers presented three options for the city council to consider for the future of the light plant's 10 diesel powered generators in light of the looming EPA National Emission Standard for Hazardous Air Pollutants (NESHAP) for Reciprocating Internal Combustion Engines (RICE).

Unit three, the smallest of the city's 10 generators, falls below the 500 horse power limits and will only be subject to more strenuous inspections and filter changes.

Stephens stated the remaining nine units are all rated above 500 hp, making them subject to the NESHAP requirements for emission and operating limits.

He indicated these new guidelines will require the installation of new oxidation catalysts that will reduce carbon monoxide emissions by an estimated 70% while maintaining lower exhaust temperatures.

Initial price estimates provided by BHMG put the project cost at approximately $950,000 for all nine generators. A second estimate of $652,000 was provided for the six largest units, which would provide approximately 7 MW of generation capacity. Combined all nine units can generate 9 MW.

The city could chose not to install the new filter systems, but only if the generators were removed from the MoPEP capacity credit system. Currently the city receives roughly $1 a month per KW of generation capability as part of an agreement that the power supplier could call upon the city to utilize its generators to supply power for the city an/or other members of MoPEP, with full reimbursement to the city for the cost of the generation.

Stephens noted that even though the city's generators were ran less than the 100-hour maximum to be classified as emergency status, and thus not governed by the new NESHAP rules, they could not be exempted from the guidelines unless they were removed from the MoPEP agreement.

"It seems like such an in justice that the federal government is willing to try to force our local taxpayers to pay $1 million to fix the exhaust on a small group of generators that run less than 50 hours a year," said Alderman Chris Feeney.

Plant superintendent Mike Ahland estimated that at full capacity, the generators would burn approximately 640 gallons of diesel fuel an hour, or roughly 32,000 gallons a year. That is basically the equivalent amount of fuel burned by a semi truck that travels 180,000 miles..

Stephens pointed out that the city is already using ultra-low sulfur fuel to power the plant's generators, helping to reduce emissions, but agreed that the older units are heavy emitters compared to current standards.

Mayor William Reckenberg stated the cheapest option for the city itself was not an attractive one for utility customers. If the city chose not to make the upgrades, the plant could still be maintained for emergency situations, but the city would forfeit the more than $100,000 annual credits removed from the price of power purchased for local distribution.

"These would have a significant impact on citizens' electric bills," the mayor said. "Everyone in Memphis would lose on this deal. The alternative is to spend $1 million up front to keep that $100,000 annual savings, which would make it appear like you would break even in 10 years."

Alderman Lucas Remley pointed out that wouldn't necessarily be the case, since residents are already saving the $100,000 each year under the current rules. Ultimately the system would have to pay for the $1 million upgrades, meaning those costs would have to be spread out over future power bills.

"Am I the only one having a difficult time fathoming investing $1 million on nine pieces of equipment that are all 50 years old or older," Feeney asked at the meeting.

Stephens stated there have been mixed responses from other municipalities facing the same questions. He indicated some towns are moving forward with upgrades while others are deciding to close the doors on their plants.

He added that initial attempts to identify alternative energy generation options have not been productive. Replacing the current generators with new, more efficient units that would meet current standards would cost an estimated $3 to $4 million. Alternative energy sources such as wind, solar and biomass have also been considered but at much higher price tags.

BHMG recommended the city make a decision by the end of the year to allow adequate time to make the upgrades by the May 2013 deadline if that is the route the city chooses.

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