From coal to natural gas?

Published 6:49 am Wednesday, April 14, 2010

The future — or at least a proposed future — for Austin’s northeast power plant became clearer Tuesday afternoon.

And that future could very well mean a switch from coal to natural gas.

That was the recommendation made Tuesday by engineering consulting firm Burns and McDonnell, who were hired by Austin Utilities in November for roughly $120,000 to study the plant’s options down the road.

The need for this type of analysis became urgent last summer when the Southern Minnesota Municipal Power Agency — which has a contract to provide power to Austin and purchase power from local plants — announced they would no longer buy power from the 40-year-old plant located near Todd Park starting Sept. 1.

SMMPA’s decision means that come September, the plant will not have an established buyer and will also not be able to produce power locally, given the city’s contract with SMMPA, which doesn’t expire until 2030.

The aim of the study, then, was to look at whether keeping the plant open and looking for other energy buyers was viable, or if retiring the plant would be best. Included in the analysis was a look at switching the plant’s fuel source to natural gas, or even to a bio-based energy source, such as agricultural waste.

Ultimately, the consulting firm concluded that going the bio-fuel route would be too expensive and potentially risky at this time given the shaky economy and energy market. Instead, they recommended going the natural gas route — which will not require any upfront costs because the plant’s boilers will not need renovation — at least until the energy market improves.

Alex Bumgardner, power production director at Austin Utilities, said the idea makes sense because it is conservative in the short term but doesn’t preclude future changes.

“There are a lot of ifs out there right now,” he told the board. “To me, it makes sense to hold out for a few years.”

Bumgardner said the cost to run the plant on natural gas would be roughly $1.5 million per year. He estimated that at least $1 million per year would come back to Austin Utilities through energy sales in the short term, meaning the cost to keep the plant open would be small.

This, he said, compares favorably with the potentially high costs of either constructing a bio-fuel burner — which could be upwards of $98 million — or decommissioning the plant altogether.

The plan would also keep roughly 15 of the 21 current staffers at the plant employed there going forward, with others expected to be lost via attrition or shifts to other sites, Bumgardner said. He added that he didn’t expect layoffs to occur if the switch to natural gas was made.

In addition, keeping the plant functional gives Austin a resource if it decides not to re-up with SMMPA after 2030, a move that would leave the city on its own for power generation. Bumgardner said the northeast plant is capable of meeting roughly one-third of the city’s energy needs, but added that power could be purchased elsewhere — or produced elsewhere in town — to complement the northeast plant. Currently, the northeast plant is the only operational facility in town following the board’s decision last October to decommission the downtown plant.

However, the Austin Utilities board will take some time before deciding on the fate of the northeast plant. Tuesday’s session was solely informational, as no votes were taken, and Bumgardner said plenty of research needs to be done regarding the plant, including his next big project — determining the facility’s “life expectancy,” a figure that will certainly play into the board’s decision.

The board is scheduled to meet again May 11.