Cayuga Operating revises coal-to-gas refuel plan, would retain some coal

New York State Electric & Gas and Cayuga Operating Co. LLC have failed to come up with a compromise on the refueling of the coal-fired Cayuga power plant, so the two sides on Feb. 6 filed with the New York State Public Service Commission differing recommendations on how to proceed from here.

“Despite lengthy good faith negotiations, NYSEG and Cayuga Operating Company, LLC (‘Cayuga’) have been unable to agree upon a revised repowering proposal that meets the Commission’s requirements, including ‘at the least cost to ratepayers,’ set forth in the Notice,” said the NSYEG filing. “NYSEG cannot agree with Cayuga’s repowering proposal because it would require NYSEG customers to finance the repowering of Cayuga Unit 1 and Cayuga Unit 2 (collectively, the ‘Cayuga Facility’) at a cost that is millions of dollars more expensive for customers than other available options. Therefore, NYSEG recommends that the Commission: 1) find that further pursuit of a largely customer-subsidized Cayuga Facility repowering is not in the public interest; 2) allow NYSEG to move forward with its transmission reinforcement projects; and 3) close this proceeding.”

Cayuga Operating, on the other hand, filed with the commission a revised repowering plan, saying: “Cayuga’s Revised Repowering Proposal satisfies the Commission’s requirements contained in its Order Instituting Proceeding and, if approved, would allow NYSEG to continue to provide reliable electric service to its customers in central New York and enable the creation and retention of significant economic benefits in the area. The Cayuga Facility’s continued operation would also provide beneficial market price effects. Further, adding natural gas capability to the Cayuga Facility would produce environmental benefits, including reduced emissions. Finally, adding dual-fuel capability would help meet the goals set by the New York Independent System Operator to establish fuel assurance from generators and would allow for enhanced reliability and potential ratepayer savings in times where natural gas supplies are scarce and/or natural gas prices are very high. Notably, most, if not all, of the benefits of the Revised Repowering Proposal cannot be achieved through alternative solutions such as reinforcements or additions to NYSEG’s transmission system.”

Cayuga Operating owns and operates the Cayuga Generating Facility, an approximately 312-MW facility located in Lansing, New York. The revised proposal recommends that NYSEG pay $49.5m in order to fund construction costs and $9.6m per year for 10 years ($104.2m net present value (NPV)) to Cayuga to add gas-fired capability to the two units at the Cayuga Facility, andoperate these units for 10 years commencing approximately Jan. 1, 2017.

In July 2012, Cayuga filed a notice of intent with the commission to mothball the Cayuga Facility by Jan. 16, 2013. In response, the commission directed the local transmission and distribution utility, NYSEG, and the New York Independent System Operator “to perform an analysis to determine the effects of this retirement on electric system reliability and local reliability issues, and to propose solutions in the event the retirement adversely affects reliability.” In August 2012, NYSEG advised the commission that studies indicated that mothballing the Cayuga Facility would have adverse impacts on transmission system reliability in central New York State. NYSEG’s preliminary studies identified a need to retain both units at the Cayuga Facility as available and capable of being committed to maintain near-term reliability.

In March 2013, Cayuga submitted an initial repowering bid/proposal pursuant to a Repowering Order from the commission. Cayuga’s initial proposal detailed four repowering options with various configurations and technologies, all meeting or exceeding the identified reliability need of 300 MW.

Cayuga’s Revised Repowering Proposal filed Feb. 6 proposes repowering Units 1 and 2 (each 150 MW net coal-fired boilers) to burn natural gas. After the repowering is complete, Units 1 and 2 will remain capable of generating approximately 300 MW in total. Notably, Unit 1 will retain its existing capabilities and will employ a highly-flexible design, such that the fuel source can be switched back and forth between natural gas and coal within 24 hours and, in most cases, while the unit is operating. “This responsive dual-fuel capability provides added reliability during times when natural gas supplies are either limited, too costly, or both,” said the proposal. Cayuga anticipates that repowering can be completed and commercial operation commenced on or about Jan. 1, 2017.

“The Revised Repowering Proposal differs significantly from the Initial Proposal,” said Cayuga. “Most notably, the estimated project construction costs and NYSEG’s proposed annual payments have been substantially reduced. For example, Option 1 (which had a similar technical scope to that proposed here) in the Initial Proposal would have required NYSEG to pay Cayuga an average of $40.5 million per year for 20 years as part of a traditional capacity and energy PPA. Under Option 1, NYSEG would have borne the market risk if the price paid to Cayuga for electricity and capacity under the PPA exceeded market prices. By contrast, this Revised Repowering Proposal, Cayuga has eliminated the PPA structure and assumed the market risk. Instead, an initial up-front payment of $49.5 million would be used to pay construction costs, and only $9.6 million would be required annually for the 10-year term. Further, the Repowering Proposal does not require NYSEG to acquire energy, capacity, or any other NYISO market product from Cayuga.”

Small solar projects also in the works for the Cayuga site

“The Revised Repowering Proposal also contemplates the addition of solar generation onsite,” Cayuga wrote. “Cayuga is currently working with the Lansing Central School District and a solar developer to place a 2 MW-AC solar photovoltaic (‘PV’) installation on a 10-acre portion of Cayuga’s property. The solar developer plans on entering into a 10-year PPA with the School District that will cover 100% of the District’s annual electricity consumption. This solar project has already been awarded funding through the New York State Energy Research and Development Authority’s (‘NYSERDA’) NY Sun Competitive PV Program.

“Cayuga is also working with another solar developer to place an additional 2 MW-AC solar PV installation on-site. Electric generation from this additional solar installation will be sold under PPAs with various local electric customers. Funding for this project will be sought through various NYSERDA renewable energy programs.”

Cayuga added that maintaining physical generation in the Finger Lakes and Southern Tier region is becoming increasingly important. “Over the past 10 years, electric generation in this area has decreased significantly. In 2000, the Finger Lakes and Southern Tier region had 820 MW of dispatchable generation. By 2006, however, this number decreased to 602 MW. Today, there are a mere 319 MW available, including the Cayuga Facility. If the Cayuga Facility is retired, total generation in this region will drop to 7 MW, which would result in a significant threat to power quality in NYSEG’s Zone C Finger Lakes/Southern Tier service area.”

Cayuga also wrote: “Addressing reliability through fuel diversity is important because recent generator retirements have significantly altered the composition and concentration of generators throughout the State. According to the 2014 NYISO Gold Book, over the last three years, owners of over 2.5 gigawatts (‘GW’) of generation, consisting of 1.4 GW of coal and 1.1 GW of oil and gas generation capacity, have provided notices of retirement or mothball.”

Cayuga said it opted against sometimes scarce oil, which tends to gum up in very cold weather. Oil is a more common back-up fuel to natural gas in this region. “Because the Cayuga Facility will use coal as an alternate fuel source after repowering, it will not suffer the same problems faced by generators using fuel oil as a back-up source,” it said. “Coal is in abundant supply and is generally not impacted by low temperatures.”

Local groups plan rally against Cayuga Operating’s plan

“As NYSEG explained, customers should not be forced to pay more than $145 million to bail out the uneconomic, inefficient, and aging Cayuga coal plant,” said Shannon Fisk, a Managing Attorney at Earthjustice, in a Feb. 9 statement. “We urge all interested stakeholders to work together to ensure that the Cayuga plant is replaced by modern clean energy resources and that a just economic transition is provided to the town of Lansing and Tompkins County.”

“NYSEG’s proposal and analysis confirms that the transmission upgrades are the cheaper and most definitive solution , and the PSC should move forward expeditiously to complete those,” said Lisa Dix, Senior New York Representative of the Sierra Club’s Beyond Coal Campaign. “Governor [Andrew] Cuomo’s PSC should stop sinking more of our families hard-earned money into the dirty energy of the past and make the right choices now that transition New York to a job creating, renewable energy future. NYSEG itself says that’s the right course, advocating for development of ‘distributed generation, micro-grids and clean generation’ to assist the local economy in the wake of retiring the coal plant.”

“Cayuga’s proposal to convert the plant is indefensible on both economic and environmental grounds,” said Irene Weiser, council member in the Town of Caroline and co-coordinator of the Ratepayer and Community Intervenors group. “NYSEG’s offer to mitigate the economic impacts of plant closure by bringing in renewable energy projects should make the PSC’s decision a no-brainer – close the plant and let’s move forward with a renewable energy future in Tompkins County!”

Ratepayer and community intervenors plan a press conference/rally on Feb. 10 at the Ithaca town hall with four local municipalities who’ve passed resolutions against re-powering Cayuga.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.