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Aging power plants pose problem for California grid

Andrew F. Hamm California could find itself darting between too much power and not enough this decade as new plants come on line and old plants begin to drop off.

Although 27 new plants producing 17,000 megawatts are scheduled to come on line by 2004, giving the state a temporary energy surplus, many older plants could be forced to close before decade's end as tougher air-pollution regulations, higher maintenance costs and cheaper electricity prices force obsolete power plants out of business.

That could drive the state back to importing electricity and playing the tricky and potentially expensive spot market, as it has this year. Currently, 30 percent of California's energy is produced by 20 plants that are more than 35 years old.

"Typically, the life span of an electricity-producing plant is 30 to 40 years," said Kenneth Lim, principal engineer for the Bay Area Air Quality Control District. "So these plants are operating on borrowed time."

One year after California is scheduled to reach energy independence, a new state air-pollution law could trigger the retirement of many of these older power plants. Ken Abreu, development manager for San Jose energy producer Calpine Corp., thinks new plant construction must continue at or near its current pace for California to maintain its goal of long-term energy independence.

"The surplus everybody is talking about is these old plants," Abreu said. "But economics will eventually force these (plants) to be closed down."

The pinch could come two ways. State threats to seize power plants, raise property taxes and levy windfall profit taxes on energy companies have prompted some generators, including Duke Energy and Atlanta-based Mirant Corp., to reconsider new projects, Duke officials say.

On the other side, tougher air-pollution regulations could force many older plants to close. By 2005, California power plants can emit no more than 2.5 parts per million of nitrogen oxides. That will be a tough number to meet for plants built to emit up to 300 parts per million.

Retrofitting these plants will cost several million dollars each and might not be worth it to energy generators, especially in the 2003-2006 time frame when wholesale electricity is expected to be much cheaper than it is today, Lim says.

Older natural-gas-fired power plants are about 50 percent less efficient than newer plants, and spare parts for them are costly, says Bryant Kinney, spokesman for Charlotte, N.C.-based Duke, which has three old plants in California that the company will either need to retrofit or close.

Some 20 percent of the Bay Area's power plants have closed since a gradual reduction in nitrogen oxide emissions took effect in 1995, according to Lim.

"It's like squeezing blood from a turnip. It wouldn't be economically feasible to keep some of these plants running," he said.

That's not to say all old power plants will close. Duke Energy is retrofitting its 51-year-old, 2,022-megawatt Moss Landing power plant, Kinney says. But the new plant will produce only 1,060 megawatts.

Duke also plans to tear down its 46-year-old, 2,088-megawatt Morro Bay plant and construct a 600-megawatt plant on its site, because the existing plant would be too expensive to retrofit, Kinney said. The fate of Duke's 600-megawatt plant in Chula Vista near San Diego hasn't been decided. That plant is at least 30 years old.

Meanwhile, a turbine at Pacific Gas and Electric Co.'s power plant at Hunters Point in San Francisco broke down 18 months ago and might never be repaired. The 52-year-old plant is one of the few natural-gas-fired plants PG&E hasn't been able to sell under the deregulation mandate to put all its power plants on the market. PG&E has offered to close the Hunters Point plant if San Francisco approves a smaller one elsewhere in the city.

Some observers believe there's another reason California may face further energy shortages in the years ahead they question whether energy generators can sustain their impressive power-plant building spree in California. Four plants totaling nearly 1,750 megawatts submitted for approval have been withdrawn for a variety of reasons, and more could be pulled as wholesale electricity prices drop.

The state can't count on the current construction boom to continue, says Hal Harvey, president of the San Francisco-based Energy Foundation.

Hamm is a reporter for the Silicon Valley/ San Jose Business Journal, an affiliated publication.

-- Martin Thompson (, October 08, 2001

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