Arizona Public Service wins appeal of air permit for Ocotillo repower project

The Environmental Appeals Board at the U.S. Environmental Protection Agency on Sept. 1 rejected a Sierra Club petition for review of a Clean Air Act prevention of significant deterioration permit that the Maricopa County Air Quality Department issued to Arizona Public Service in March 2016.

The permit authorizes Arizona Public Service to construct five new natural gas-fired combustion turbines at its Ocotillo Power Plant in Tempe, Arizona. Maricopa County issued the final permit pursuant to a delegation agreement between it and the U.S. EPA Region 9. The Sierra Club claimed that Maricopa County clearly erred or abused its discretion in conducting its Best Available Control Technology (BACT) analysis for Ocotillo’s projected greenhouse gas emissions when it concluded that pairing energy storage, which the club wanted, with combustion turbines would “redefine the source.”

Said the Sept. 1 order: “The Board denies the petition for review of Maricopa County’s final permit decision. The Board concludes that the fundamental business purposes and site-specific peaking capacity needs described in the administrative record support the County’s conclusion that adding energy storage options to this facility would redefine the source. The record also supports the County’s determination that Sierra Club’s proposed alternatives would interfere with the project’s inherent design elements, including the ability to start and stop quickly several times a day, which are needed to provide fast, flexible, and sustained capacity to meet fluctuating power demands and mitigate grid instability caused by the increasing integration of renewable energy into the electrical system served by the Ocotillo plant.”

The board added: “The County’s consideration of energy storage, and its conclusion that the paired stored energy may be exhausted before it can be recharged to meet fluctuating demand, supports the County’s determination that energy storage is not compatible with the purpose and design of a peaking facility, such as the Ocotillo plant, to provide rapid, reliable power to its customers. In making its determination, the County reasonably responded to Sierra Club’s comments on pairing energy storage with the proposed gas turbines. As such, the Board holds that, under the circumstances of this case, Sierra Club fails to demonstrate that Maricopa County clearly erred or abused its discretion in making its BACT determination.”

In April 2014, Arizona Public Service (APS) filed an initial application with Maricopa County for permission to construct the “Ocotillo Power Plant Modernization Project” at its existing Ocotillo facility in Tempe, Arizona. Ocotillo is a major stationary air emissions source and the Modernization Project is a major modification of the existing facility under the Clean Air Act. Arizona Public Service proposed to replace two 1960s-era steam electric generating units at Ocotillo with five new natural gas-fired simple-cycle combustion turbines, each generating a maximum of 100 MW.

In March 2015, Maricopa County issued and invited public comment on a draft PSD permit to regulate emissions from the proposed combustion turbines, along with a draft “Technical Support Document” containing technical information on the permit. On April 9, 2015, the Sierra Club submitted comments on the draft permit. Among many other things, Sierra Club commented that Maricopa County’s greenhouse gas BACT analysis was deficient because it did not consider the use of various energy storage technologies – such as battery storage, compressed air storage, or liquid air energy storage – as add-on or lower-emitting control options for reducing Ocotillo’s greenhouse gas emissions. Sierra Club asserted that Arizona Public Service’s project purpose could be served by replacing some or all of the proposed combustion turbines with energy storage. In discussing these alternatives, Sierra Club identified both replacement and pairing energy storage options with other technologies, including the project’s turbines.

Maricopa County responded in part to Sierra Club’s public comments by contacting Arizona Public Service and requesting more detailed information on the greenhouse gas BACT analysis and other matters. In turn, Arizona Public Service submitted more detailed explanations of its consideration of energy storage, including battery storage and other subjects. Consistent with the delegation agreement, Maricopa County conveyed this and other information to EPA Region 9 during the permit development process. Arizona Public Service subsequently shared with Maricopa County its draft of a response to Sierra Club’s comments and a revised BACT analysis for greenhouse gas emissions, and Maricopa County transmitted these documents for Sierra Club review.

Arizona Public Service followed up on Sept. 30, 2015, by submitting a revised permit application that consolidated its prior updates. Among other things, the revised permit application included an updated BACT analysis and discussion of energy storage, including battery storage, as options. The application described the purpose of the proposed project as a peaking and load shaping power plant, capable of quickly starting/escalating and stopping energy generation multiple times daily to meet rapidly changing electricity demands. Arizona Public Service identified an electric power ramp rate of 50 MW per minute per turbine as “critical for the project to meet its purpose,” because that rate would allow all five turbines operating together at 25% load to provide approximately 375 MW of ramping capacity (from 125 to 500 MW) in less than two minutes.

The board in the Sept. 1 decision warned that this order doesn’t automatically take energy storage off the table in this kind of permitting situation. “The Board’s decision should not be read as an automatic off-ramp for energy storage technology as a consideration in Step 1 of future BACT analyses. The Board is cognizant of (and views as significant) the statements in the brief jointly filed by two offices in EPA that describe the recent evolution of energy storage technology as a promising development in the electrical power supply sector that has the potential for reducing air pollutant emissions in some applications.”

Said the Aug. 2 quarterly Form 10-Q report of APS parent Pinnacle West Capital Corp. (NYSE: PNW) about this project: “APS has six natural gas power plants located throughout Arizona, including Ocotillo. Ocotillo is a 330 MW 4-unit gas plant located in the metropolitan Phoenix area. In early 2014, APS announced a project to modernize the plant, which involves retiring two older 110 MW steam units, adding five 102 MW combustion turbines and maintaining two existing 55 MW combustion turbines. In total, this increases the capacity of the site by 290 MW, to 620 MW, with completion targeted by summer 2019. APS completed a competitive solicitation process in which the Ocotillo project was evaluated against other alternatives. Consistent with the independent monitor’s report, the Ocotillo project was selected as the best alternative. APS must finalize the permitting process, including any EPA Environmental Appeals Board (‘EAB’) reviews, before construction can begin. On April 21, 2016, the Sierra Club filed a petition with the EAB to review the Prevention of Significant Deterioration permit issued by Maricopa County, Arizona for the Ocotillo project. Briefing from all parties to the proceeding, including APS, is complete and we expect a decision to be rendered by the EAB before the end of 2016. If the permit is upheld by the EAB, we do not expect a delay in the construction schedule for the project.”

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.