Loading...
HomeMy WebLinkAbout2013-12-03; City Council; 21457; Resolution Negotiations SDGE and NRG EnergyCITY OF CARLSBAD - AGENDA BILL 14 AB# 21.457 RESOLUTION OF THE CITY COUNCIL DIRECTING STAFF TO PARTICIPATE IN NEGOTIATIONS WITH SDG&E AND NRG ENERGY DEPT. HEAD MTG. 12/3/2013 RESOLUTION OF THE CITY COUNCIL DIRECTING STAFF TO PARTICIPATE IN NEGOTIATIONS WITH SDG&E AND NRG ENERGY CITYATrY. Iff DEPT. CA RESOLUTION OF THE CITY COUNCIL DIRECTING STAFF TO PARTICIPATE IN NEGOTIATIONS WITH SDG&E AND NRG ENERGY CITY MGR. RECOMMENDED ACTION: Adopt Resolution No. 2Q13-288 directing staff to work with SDG&E and NRG Energy to determine whether all three parties can agree on mutually beneficial terms for supporting a change in the proposed Carlsbad Energy Center Project ("CECP") technology conditioned upon the decommissioning, demolition and remediation of the current Encina Power Station site, as well as other changes in energy infrastructure and property considerations beneficial to the residents of Carlsbad. ITEM EXPLANATION: On May 31, 2012 the California Energy Commission approved NRG's application for certification for the CECP. The approval was for a 558 Megawatt combined cycle power plant. The City of Carlsbad opposed the project, and its motion for reconsideration was denied. The City subsequently took its case to the California Supreme Court but that action was also denied. San Onofre Nuclear Generation Station ("SONGS") ceased operation in January 2012. In June 2013, SDG&E and Southern California Edison determined they would not recommence power generation at SONGS. The early closure of SONGS has caused an increased and accelerated need for power generation facilities in Southern California. CAISO (California Independent System Operator) has determined that an additional 600 MW is currently needed in the San Diego Region. SDG&E is interested in entering into a Power Purchase Agreement ("PPA") with NRG, but only if NRG amends its application to change the proposed plant's technology. NRG would only be interested in amending its application with the City's support. City staff believe the City could substantially improve its position and seek the Council's direction to negotiate with the parties. FISCAL IMPACT: There is no fiscal impact associated with this action. Dept. Contact: Celia A. Brewer, City Attorney 760-434-2891 FOR CITY CLERKS USE ONLY. COUNCIL ACTION: APPROVED CONTINUED TO DATE SPECIFIC • DENIED • CONTINUED TO DATE UNKNOWN • CONTINUED • RETURNED TO STAFF • WITHDRAWN • OTHER-SEE MINUTES • AMENDED • 1 ' ENVIRONMENTAL IMPACT: Pursuant to California Code of Regulations Title 14, Chapter 3, Section 15061(b)(3), this action is exempt from environmental review since it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. EXHIBITS: 1. Resolution No. 2013-288 1 RESOLUTION NO. 2013-288 9 10 11 12 13 14 20 21 22 23 24 25 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, DIRECTING STAFF TO ^ PARTICIPATE IN NEGOTIATIONS WITH SDG&E AND 4 NRG ENERGY 5 WHEREAS, on May 31, 2012 the California Energy Commission ("CEC") 6 approved NRG Energy's application for certification of the Carlsbad Energy Center 7 Project ("CECP"); and ^ WHEREAS, the approval was for a 558 Megawatt combined cycle power plant to be located in the City of Carlsbad, east of the existing plant along the 1-5 corridor; and WHEREAS, the City of Carlsbad unsuccessfully opposed the project and its motion for reconsideration was denied; and WHEREAS, the City subsequently appealed to the California Supreme j3 Court and its Petition for Review of the CEC proceedings was also denied; and 16 WHEREAS, San Onofre Nuclear Generation Station ("SONGS") ceased 17 operations in January 2012; and 18 WHEREAS, in June 2013, SDG&E and Southern California Edison determined that they would not recommence power generation at SONGS; and WHEREAS, the early closure of SONGS has caused an increase and accelerated need for power generation facilities in Southern California and Caiso (California Independent System Operator) has determined that an additional 600 Megawatts is currently needed in the San Diego Region; and WHEREAS, SDG&E is interested in entering into a Power Purchase 26 Agreement ("PPA") with NRG, but only if NRG amends its application to change the 27 proposed power plant's technology; and 28 1 WHEREAS, NRG will only amend its application if the City were supportive 2 of such an amendment. ^ NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council does hereby direct staff to negotiate with SDG&E and NRG in an attempt to reach a mutually beneficial agreement acceptable to all three 9 parties, supporting a change in the proposed CECP technology conditioned upon the 10 decommissioning, demolition, and remediation ofthe current Encina Power Station site, 11 as well as other changes in energy infrastructure and property considerations beneficial to the residents of Carlsbad. // // // // // // 13 14 15 16 17 18 19 20 // 21 // 22 23 24 25 26 27 28 // // // // // PASSED, APPROVED AND ADOPTED at a Regular Meeting ofthe City Council ofthe City of Carlsbad on the 3'''^ day of December 2013, by the following vote to wit: AYES: NOES: Council Members Hall, Packard, Wood, Blackburn, Douglas. None. ABSENT: None. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MATT HALL, Mayor ATTEST: B^fiB^RA ENGLESON, City Clerk NRG Energy, Inc. Confidential SM Carlsbad Energy Center Update John Chillemi President, West Region December 3, 2013 NRG Energy, Inc. Confidential •NRG received permits from the California Energy Commission and San Diego Air Pollution Control District to construct the Carlsbad Energy Center in May 2012 with final appeals being dismissed in October 2012 •The sudden and extraordinary loss of capacity after the closure of SONGS, combined with the looming retirement of once-through cooled (OTC) plants creates a critical need to plan for replacement capacity that can be operational as soon as possible •The San Diego grid has a need for fast-start “peaking” generation •NRG would need to amend its permits to construct the type of peaking facility needed by the grid Recent Developments 2 NRG Energy, Inc. Confidential •To better match the needs of the San Diego grid, NRG would amend its permit to construct a peaking facility with a capacity of approximately 600MW •Peaking units provide fast-start capability necessary to respond to sudden increases in power demand and fast ramping to support the growing supply of intermittent renewable power •This kind of facility typically runs less and has a lower visual profile as compared to the facility currently permitted •The proposed facility would fit in NRG’s tank farm property between the North County Transit District Railroad and Interstate 5 •NRG envisions a 16-18 month permitting process for the proposed facility, with construction to commence in late 2015, and grid service in late 2017 The Proposed Carlsbad Energy Center 3 NRG Energy, Inc. Confidential Location: •Located in Northwest San Diego County where CAISO identified need •NRG has site control with all critical infrastructure in place including transmission capacity, interconnection agreement, natural gas supply and water supply Economic: •Will create construction jobs, totaling millions of dollars in wages •Millions of dollars of new expenditures spent annually on local operations and maintenance • Millions in new local property and fuel taxes annually Environmental: •25% more fuel-efficient than the existing Encina Power Station •10-minute start capability and quick ramp time support integration of renewable power sources •Reduced air emissions Aesthetic: •Facilitates the retirement and removal of Encina Power Station, freeing up coastal land for redevelopment •Lower visual profile and reduced footprint as compared to Encina •Accelerates removal of oil tanks 4 Carlsbad Energy Center – Project Benefits NRG Energy, Inc. Confidential SM NORTH SDG&E North Coast Service Center 5 Encina Generating Station Property Proposed Carlsbad Energy Center Carlsbad Desalination Plant SDG&E Switchyards Indicative, for discussion purposes only. All boundaries are approximate NRG Energy, Inc. Confidential 6 Collaboration With the City of Carlsbad •Because of the SONGS closure and the December 31, 2017 OTC deadline for the existing Encina units, there is an urgent need for new generation in the San Diego area that the Carlsbad Energy Center can meet •NRG had intended to build the current configuration by 2017 but would like to discuss with the City possible changes that could benefit all parties •NRG, working with SDG&E, would like to meet this need in partnership with the City of Carlsbad using a different technology that would provide unique benefits, but would require an amendment to the existing permit NRG Energy, Inc. Confidential 7 Next Steps •Time is of the essence with the loss of SONGS generating capacity and Encina’s December 31, 2017 OTC deadline •In order to provide critical peaking capacity and allow for the shutdown of the existing Encina Power Station on the OTC deadline, NRG needs to commence the permit amendment process by February 1 •The parties would need to reach consensus by mid-January •NRG seeks to work with City staff to discuss terms of an agreement •Should the Council request further details or desire an update, NRG can provide materials for future meetings San Diego Gas & Electric Meeting the energy needs of San Diego and Southern Orange County, managing future system reliability & SONGS closure © 2012 San Diego Gas & Electric Company. All copyright and trademark rights reserved. 1 Future System Reliability and Needs: Post SONGS Shutdown 2 •SDG&E serves 3.4 million customers in San Diego & Southern Orange Counties through 1.4 million electric and 860,000 gas meters •The face of energy supply in So. Cal. changed dramatically when the San Onofre Nuclear Generating Station (SONGS) was retired 9 years ahead of schedule •Early retirement of SONGS created a major resource adequacy gap and an equally important voltage support gap for the region •Resource Adequacy is the power supply (actual electrons); voltage support is needed to move the power where it is needed (think of conveyor belt) •SDG&E, had plans in place to allow the timely shutdown of the old coastal power plants that use Once Through Cooling (OTC), and had been planning for the future retirement of SONGS, but State wide planning was not prepared for the 9 year-early retirement •Examples of portfolio planning to accommodate the retirement of older plants include; •New power producing facilities scattered throughout the region, like the Palomar Energy Center in Escondido •Proposed power producing facilities like Pio Pico (a proposed peaking facility in San Diego County) •Upgraded transmission infrastructure, like the Sunrise Powerlink, 117- mile transmission line completed in 2012, which also acts as a catalyst for several large, SDG&E-contracted renewable energy projects in the Imperial Valley Additional Power Supply Required 3 •There are specific needs attributed to power supplies (base load power, peaking power, and power supplies that fall in the middle) •SONGS cannot be solely replaced with renewable energy due to intermittency and locational issues •The San Diego region needs peaking supply •The Sunrise Powerlink and other system upgrades are not enough to supplement immediate losses from SONGS •SONGS shutdown permanently removes about 2,200 MW of capacity from the region, approximately 20 percent of which would have gone to SDG&E •With the closure of SONGS, and the future closure of plants that use (OTC) technology, the CAISO has found that the SDG&E area is deficient by at least 600MW by 2018; Edison is deficient by more than 3000MW by 2022 •Without SONGS, state regulators and government officials are now assessing the options to make sure utilities have adequate power resources on hand to meet demand, and utilities need to make sure they contract with the right kind of power to serve that demand