Champlain Hudson Power Express debated

Thursday, September 27, 2012

As policymakers seek to secure energy supplies for the future, how far abroad should they cast their nets?  In addition to cost, reliability, and energy mix goals like renewable electricity standards, should decisions be made based on other factors such as local economic development?

New York legislators debated these questions yesterday in hearings over a proposed transmission line that would connect New York City to Canadian hydroelectric generation.  The $2.2 billion high-voltage direct current line, known as the Champlain Hudson Power Express, would run from the U.S.-Canadian border to the New York metro area. The line would run underwater through Lake Champlain, the Hudson River, and East River for much of its route, with the remainder of the line buried underground.

The Champlain Hudson Power Express was first proposed in 2010, and has been the subject of controversy.  New York Governor Andrew Cuomo has launched the N.Y. Energy Highway program, a public-private initiative to upgrade and modernize New York State’s energy system.  The Champlain Hudson Power Express's developer, Blackstone Group, L.P. subsidiary Transmission Developers Inc., is promoting the line as part of that solution.  It would connect over 1,000 megawatts of Canadian generation - primarily Hydro-Quebec's hydropower projects, as well as some wind - to power-hungry consumers in the New York City area.

Some stakeholders question the effects of the line on existing and new generation in New York.  Older domestic power plants may be unable to compete with the Canadian power; if imports are priced just below what domestic generation needs to operate, the result could be a loss of jobs and tax revenues without significant consumer savings.  Stakeholders such as the International Brotherhood of Electrical Workers Local 97, representing more than 4,000 workers in electric generation and utility jobs in New York, have publicly opposed the project on these grounds, while calling for growth of domestic generation projects.

The Canadian power might also compete with existing and proposed indigenous renewable power projects.  New York has adopted a renewable portfolio standard of obtaining 30 percent of its electricity from renewable sources by 2015.  New York currently excludes large-scale hydropower projects from qualification for its RPS, but Canadian imports could dampen market demand for in-state renewable generation.

The Champlain Hudson Power Express reportedly featured prominently in a public hearing held yesterday by the New York Senate Standing Committee on Energy and Telecommunications to "consider and analyze the long-term base load energy generation and transmission needs of the State of New York".  Debate over the proposed line is likely to continue, with economics and regulation likely to play key roles in its fate.

Arctic sea ice and oil drilling

Friday, September 21, 2012

This week has held several precedential events in Arctic policy, with both record low sea ice extent and changes to plans for Arctic oil exploration and production.

According to a preliminary report by the National Snow & Ice Data Center, this week Arctic sea ice appeared to have reached its minimum extent for the year of 3.41 million square kilometers (1.32 million square miles).  Sea ice extent refers to the area of the Arctic Ocean and its nearby seas covered by sea ice.  While the seasonal climate appears to have turned to conditions favoring more sea ice for the fall and winter - colder temperatures and the setting Arctic sun - the September 16, 2012 sea ice extent represents the lowest seasonal minimum extent since the satellite record began in 1979.

Coincidentally, the next day Royal Dutch Shell plc announced that it will suspend its Arctic oil exploration and production efforts in the U.S. Chukchi Sea until next summer.

Earlier this month, a Shell subsidiary began preliminary drilling at its leased Berger prospect site, located about 70 miles off the coast of Alaska.  But one day after the Noble Discoverer drill ship began drilling at the site, advancing sea ice forced the ship to retreat to a safer location.

Oil spill prevention and containment is essential in any offshore drilling operation, and may be especially so in the Arctic given the sensitivity of the environment and the challenges posed by sea ice.  This month Shell tested its Arctic Containment System, but during a final test a critical containment dome was damaged.  Between the dome's failure to meet Shell's acceptance standards, concerns over operational safety amidst ice floes, and steps taken to protect local whaling operations, Shell announced this week that it has revised its plans for the 2012-2013 exploration program.  Rather than drilling into hydrocarbon zones this year, Shell plans to drill top holes - think of pilot holes that stop short of the oil-bearing layers -  and then cap and temporarily abandon the wells until next summer.

The market pressures driving Shell and other upstream oil companies to prospect for Arctic resources will likely remain for the foreseeable future.  But some political forces are questioning the wisdom of Arctic oil production.  Yesterday the Environmental Audit Committee of Britain’s House of Commons called for an international moratorium on oil and gas drilling in the Arctic until the eight-nation Arctic Council establishes universal standards for spill or other disaster response, as well as strong financial safeguards to ensure spills are both deterred and capable of full remediation.

Utility coal plants closing, natural gas to replace

Monday, September 17, 2012

A North Carolina utility closed one of its coal-fired power plants this past weekend, to be replaced with a natural gas-fueled combined cycle combustion turbine facility.  Duke Energy subsidiary Carolina Power & Light, which does business as Progress Energy Carolinas, announced on Friday that it would close its coal-fired H.F. Lee facility on September 15.  The Lee Plant closure is part of a broader shift away from utility and non-utility "merchant" use of coal to generate electricity, in favor of natural gas and other fuels.

Progress Energy Carolinas provides electricity to about 1.5 million customers in both North Carolina and South Carolina.  The utility owns more than 12,200 megawatts in generation capacity, and serves a 34,000 square mile territory, including the cities of Raleigh, Wilmington and Asheville in North Carolina and Florence and Sumter in South Carolina.

The Lee Plant's story resembles that of a number of other coal plants across the country.  Built in 1951 on the Neuse River near the town of Goldsboro, the plant was gradually expanded over time.  By the 1960s, the Lee Plant hosted three coal-fired units with a total generating capacity of 382 megawatts.  Four oil-fueled combustion turbine units were also added to the plant, adding another 75 MW of generating capacity, will be retired Oct. 1, 2012.

U.S. energy markets and environmental regulations continued to develop over the ensuing decades.  Most recently, tighter federal air emissions regulations and an abundant supply of low-cost natural gas have made older and smaller coal-fueled power plants uneconomic to operate.  As a result, owners are retiring these plants, and converting others to alternative fuels.  For example, last week utility Dominion Virginia Power announced plans to convert its Bremo Power Station in Virginia from coal to natural gas

Progress Energy Carolinas is following this trend.  The utility closed its coal-fired W.H. Weatherspoon power plant near Lumberton, N.C. last year.  It also plans to retire the remainder of its coal-fired plants without advanced environmental controls by the end of 2013: the Cape Fear Plant near Moncure, N.C., the Robinson coal-fired unit near Hartsville, S.C., and the L.V. Sutton Plant near Wilmington, N.C.  These coal-fired unit retirements will represent about a third of the utility's coal-powered fleet, or about 1,600 MW of generating capacity.

To replace the power produced from these closing plants, Progress Energy Carolinas is building new natural gas-fueled combined-cycle units.  Adjacent to the Lee Plant site, the utility is extending an existing natural gas pipeline and building a new, 920-MW natural gas-fueled combined-cycle facility.  This plant, along with the five dual-fueled combustion turbines at the existing Wayne County Energy Complex, will be called the H.F. Lee Energy Complex when complete.

Projections suggest that natural gas will remain available at a relatively low cost for the next twenty years.  At the same time, environmental regulations tend to grow tighter over time.  These two factors suggest that the current trend of utilities switching from coal to natural gas to fuel electric generation may continue for the foreseeable future.

Canada auctions Arctic oil rights

Friday, September 14, 2012

As the hunt for new energy resources intensifies, the warming Arctic climate prompts some oil exploration and production companies to look north for untapped petroleum sources.  Earlier this week, Royal Dutch Shell started drilling the first new oil well in the U.S. Arctic in over twenty years, only to have the drill ship pushed off the site by encroaching sea ice a day later.  But the United States is not alone in seeking to develop its Arctic energy resources, as other circumpolar nations offer upstream oil companies lease opportunities in the northern seas.

Last week Canada held an auction for oil lease rights to over 900,000 hectares (about 3,500 square miles) of the Beaufort Sea, the Arctic sea off the Northwest Territories and Yukon.  The auction was won by a small British oil company (reportedly staffed by only two people, for now) called Franklin Petroleum Ltd. for just $7.6 million, a fraction of the price paid by some auction winners In recent years.

This month's lease auction is not the first time the Beaufort Sea oil resources have been pursued.  Major oil and gas reserves lie under the Mackenzie River Delta, where the river flows into the Beaufort.  Other fields lie farther offshore in Canadian waters.  On the U.S. side, Alaska's Prudhoe Bay oil patch abuts the Beaufort.

Franklin Petroleum was named for Sir John Franklin, a British explorer whose 1845 expedition to the Canadian Arctic vanished.  The lost Franklin party triggered many subsequent expeditions to the Canadian Arctic, but only trace evidence of their fate was found.  This summer Canada launched another expedition to discover new information about the Franklin party; Canadian motivations appear to be a mix of archaeological research and promotion of popular awareness of Canada's Arctic environments and resources.  As international pressure on the Arctic grows in the coming years, public excitement about the Canadian Arctic may support Canada's claims of sovereignty over valuable lands and sea spaces.

US first tidal project to come online

Wednesday, September 12, 2012

The nation's first commercial, grid-connected tidal energy project is scheduled to go live this month, as Ocean Renewable Power Company plans to start delivering power to the grid from its Cobscook Bay Tidal Energy Project.

A scene from the Maine coast: Crow Island off Great Cranberry Island, about 100 miles west of the Cobscook Bay Tidal Energy Project.

Earlier this year, the Federal Energy Regulatory Commission issued an pilot project license to Ocean Renewable Power Company Maine, LLC for its Cobscook project near Eastport, Maine.  The initial phase of ORPC's project involves a hydrokinetic turbine connected to a generator capable of producing up to 180 kilowatts of energy; after monitoring this turbine for a year, ORPC plans to expand the project to a capacity of 3 megawatts.

ORPC also won a 20-year power purchase agreement to sell the projects' output to Maine's three large electric utilities at a price escalating from 21.5 cents per kilowatt-hour.  That PPA was the result of a Maine law creating a competitive process for marine renewable energy developers to secure offtake agreements.

In a filing with the FERC earlier this week, ORPC announced that it anticipates delivering power from the Cobscook project to the mainland Bangor Hydro Electric Co. grid starting today.  According to the filing, this initial power delivery is part of the project's commissioning phase, with commencement of commercial operation expected by September 20.

Hydrokinetic projects -- generating electricity from tides, waves, and free-flowing rivers -- is a new sector of the U.S. energy portfolio.  Studies suggest that hydrokinetic resources have great potential, with tidal energy's electric production potential estimated to be 2.38 terawatt-hours per year, equal to an average power of 270 MW.  Wave energy appears to provide the larger resource, with an estimated electricity production potential of about approximately 260 TWh/yr (equal to an average power of 30,000 MW), with river in-stream electricity production potential estimated at approximately 110 TWh/yr.

Shell's US Arctic oil drilling starts, stops

Tuesday, September 11, 2012

Arctic waters are believed to be home to significant oil reserves, prompting Royal Dutch Shell PLC this week to start drilling the first new oil well in U.S. Arctic waters in more than 20 years -- but encroaching sea ice forced the drill ship off the site just a day later.

Despite its remote location and harsh climate, the Arctic is relatively rich in energy and mineral resources.  U.S. Arctic drilling occurred in the twentieth century, but no new wells have been drilled in the last two decades.  Shifting trends, including relatively high oil prices and a warmer Arctic climate (as evidenced by this summer's record low sea ice coverage in the Arctic), have increased the pressure on oil companies to expand Arctic production.

For the past six years, Shell committed about $4.5 billion to exploration for oil and gas reserves under the Outer Continental Shelf off Alaska.  Shell believes the region may host the largest untapped oil-bearing formation in the U.S., perhaps holding about 26 billion barrels of oil.  Environmental lawsuits and concerns over how any oil spill could be responded to have delayed Shell's drilling plans, but last month Shell obtained a permit from the federal Bureau of Safety and Environmental Enforcement to start preliminary drilling activities.  While the BSEE has not yet certified Shell's oil spill response barge, the preliminary permits allow the company to begin drilling pilot holes.

Last Sunday, crews aboard the Noble Discoverer began drilling at a site known as the "Burger" prospect in the Chukchi Sea about 70 miles off the Alaskan coast.  (Shell posted a Youtube video of the drill bit entering the water.) 

But even in a low-ice year, the Arctic climate is forbidding.  Yesterday, drilling stopped as sea ice approached the Noble Discoverer.  Reports indicated that a pack of ice about 12 miles wide, 30 miles long and up to 82 feet thick was about 105 miles away from the drill ship and drifting closer.  It may take several days for this ice pack to pass.

According to Shell, the Noble Discoverer will resume drilling once the ice moves on.  As the Arctic winter approaches, more and more ice should form in the Chukchi Sea.  Will Shell find the oil it expects?  Can it produce the oil safely in the icy Arctic?

Utilities switching from coal to gas

Friday, September 7, 2012

Utilities around the country are closing or converting older coal-fired power plants, and increasing the use of natural gas.  Pressure to make this shift comes from several factors, including tighter regulation of air emissions and the low price of natural gas compared to recent history.

The stacks of the Salem Harbor Power Station rise above Cat Cove in Salem, Massachusetts.  Dominion announced last year that it would close this plant, which it then sold to Footprint Power.

One electric generation plant that may illustrate this trend is Dominion Virginia Power's Bremo Power Station on the James River in central Virginia.  Originally built by the Virginia Electric & Power Company in 1931, the plant can now produce 227 megawatts of electricity by burning coal to boil water; the resulting steam spins turbines attached to electric generators.  According to Dominion, the Bremo plant consumes an average of 2,500 tons of coal per day.

This week Dominion announced plans to convert the Bremo plant from coal to natural gas.  In a filing with the Virginia State Corporation Commission, the regulatory body responsible for electric utilities, Dominion asked for approval to convert the plant over the next year at an estimated cost of $53.4 million.  If the SCC approves the conversion, the utility anticipates stopping coal consumption at the plant by the fall of 2013.

Dominion had previously agreed to convert the Bremo Power Station by spring 2014 as part of the air permit it received for the 585-megawatt Virginia City Hybrid Energy Center.  That plant entered commercial operations in July of this year, burning a mix of coal and biomass.

Dominion describes the Bremo conversion as being the ninth company-owned, coal-fired power station with units recently announced to be closed or converted to alternative fuels.  The utility points to the uneconomic nature of operating smaller, older coal-fired stations given the spread of cheaper natural gas and new environmental regulations requiring operators to retrofit plants with upgraded emission control equipment.  According to Dominion, the Bremo conversion would allow consumers to save about $155 million when compared to continued operation on coal.

Other utilities are making similar conversions or are considering closing some existing coal-fired plants. Natural gas consumption is on the rise, particularly in the electric generation sector.  At the same time, many utilities continue to rely on coal as part of their generation portfolio, as evidenced by Dominion's construction of the the primarily coal-fired Virginia City plant.  The trend appears to be one of closing or converting older or smaller coal-fired plants, consolidating coal consumption in larger, newer plants and increasing the use of natural gas to produce power.

AWEA Regional Wind Energy Summit - New England 2012

Wednesday, September 5, 2012

This week the American Wind Energy Association (AWEA) is holding its New England regional wind energy summit in Maine. AWEA members and other attendees are convening to discuss the business and impacts of wind energy. Today's program includes panels on the demand for wind energy in New England, promoting community acceptance of wind projects, best practices for minimizing development and construction risks and impacts, and transmission and interconnection issues related to connecting wind generation to electricity consumers.

The event appears well attended, with nearly every seat in the conference room taken.  Attendees include regulators, community wind leaders, commercial project developers, and manufacturers of turbines and other equipment.

This year's New England summit runs through tomorrow, when panelists will present on issues related to community wind and offshore wind project development in the Northeast.