The Carlsbad, Calif., City Council approved an agreement Jan. 14 that will allow NRG Energy (NYSE:NRG) to build a lower-profile natural gas peaker in exchange for ensuring that the old power station is torn down.
In the spring of 2012 the California Energy Commission (CEC) had approved NRG’s application for a new 558-MW power plant to be located on the site of the existing Encina power plan on the Carlsbad coastline.
With the agreement approved, the immediate next step is for NRG to prepare its amended project application for submittal to the California Energy Commission for review and approval.
“This agreement allows us to address long-standing community concerns about the use of our precious coastal land while doing our part in continuing to help meet the region’s energy demands,” Carlsbad Mayor Pro Tem Mark Packard said in a statement. “Best of all, the community will finally get the old power plant torn down and other benefits at no cost to taxpayers.”
“The revised project will be roughly the same size–about 600MW—but instead of combined cycle, we are developing peaking capacity consisting of 6 simple cycle gas turbines,” an NRG Energy spokesperson said when contacted Jan. 16.
New power generation in Southern California is of increased concern with the retirement of the Edison International (NYSE:EIX) San Onofre Nuclear Generating Station (SONGS). In mid-2013 Edison subsidiary Southern California Edison (SCE) decided to permanently retire San Onofre.
The California Independent System Operator, which manages California’s power grid, has determined that additional power is needed in the San Diego region by 2018, and even more in Southern California Edison’s territory.
While the CEC had approved NRG’s application for a new plant on the site of the existing Encina plant on the Carlsbad coastline, the approval did not ensure demolition of the existing generating plant.
NRG will file amended power plant application with CEC
On Dec. 3, 2013, the Carlsbad City Council directed staff to negotiate with Sempra Energy (NYSE:SRE) subsidiary San Diego Gas & Electric (SDG&E) and NRG on an amended project application that would better address the concerns of the city and the community while meeting the region’s power needs.
SDG&E was also a minority partner in the San Onofre nuclear plant.
The resulting agreement, approved by the Carlsbad City Council at its Jan. 14 meeting, outlines a number of conditions under which the City of Carlsbad would support an amended project. Among the conditions in the agreement are:
•NRG will amend its approved project, proposing a plant that is more environmentally friendly, lower profile and would run only during periods of peak demand.
•NRG will completely retire and tear down the old Encina Power Station at no cost to taxpayers and begin the process to redevelop the site.
•To support the City of Carlsbad’s goal of returning its coastal land to non-industrial uses, SDG&E proposes to relocate its operations yard (the North Coast Service Center) at NRG’s expense, pending regulatory approval, at no cost to ratepayers. SDG&E would then transfer ownership of the existing property to the city. If it is not possible to relocate the service center, NRG will pay the city $10 million.
“We are very pleased to have been able to reach this agreement which is a win for the people of Carlsbad, SDG&E customers and allows NRG to quickly redevelop a site that is very important to the needs and reliability of the local electrical grid,” said John Chillemi, president of NRG Energy’s West region. “We look forward to completing the permitting process so that we can move forward on building a new plant, removing the old plant and developing a site in which we can all take great pride.”
An SDG&E spokesperson called the deal a win for everybody.
“The agreement between NRG, the City of Carlsbad and SDG&E demonstrates the possibilities available through collaboration and compromise,” the utility spokespeson added. “This effort will deliver a win for Carlsbad and it’s residents by ensuring a more visual appealing project, including the removal of the old Encina Power Plant as well as the relocation of SDG&E’s service center; a win for NRG in its efforts to build a more viable project that will be more environmentally friendly and only run during periods of peak demand; and a win for SDG&E and the region with a new facility that will address the energy needs through technology that better addresses future load growth, replaces SONGS and helps integrate renewable energy,” said the SDG&E spokesperson.