Scrapped coal plant would have cost taxpayers at least $175 million a year
Huntley Station project also would have relied on unproven technology
State officials pulled the plug Wednesday on a proposed $1.6 billion advanced coal project that would have brought more than 1,000 construction and operating jobs to the Town of Tonawanda, saying the electrical generating plant would cost taxpayers too much and relied on technology that remains unproven.
State Power Authority officials said that, even after intense efforts over 18 months, the proposed 680-megawatt power plant at the Huntley Station would have required annual subsidies of $175 million to $250 million.
“It was just a gap that couldn’t be overcome,” said Christine Pritchard, a Power Authority spokeswoman.
Over 20 years, those subsidies could saddle taxpayers with a burden of $1.5 billion to $3 billion in today’s dollars, while the state is facing budget deficits totaling $21.5 billion over the next three years.
“This all has to be considered given the fiscal realities the state is facing,” said Morgan Hook, a spokesman for Gov. David A. Paterson.
State officials also said they had doubts about the viability of the project’s plans to capture the carbon dioxide that the facility generates, liquefy it and store it in geological formations more than a mile underground, where it would be expected to stay for thousands of years.
The Huntley plant would have generated three times more carbon dioxide than the world’s biggest sequestration project, now under way in Norway.
“You were looking at a large-scale commercial facility that was hinging on an environmental technology that hasn’t been proven,” Pritchard said.
That led Power Authority officials to conclude that the project was too expensive and too risky, prompting the agency to pull the conditional offer it made in December 2006 to buy the electricity the new plant would have generated. That pledge, if finalized, would have been a key factor in efforts by NRG Energy, which owns the Huntley plant, to obtain financing for the project.
The decision, just days before Tuesday’s deadline for bridging the gap, disappointed local officials, who had mobilized an unprecedented coalition to support the proposed plant. NRG has estimated that the massive project would produce 100 additional power plant jobs, 1,000 construction jobs and spin-off benefits that could pump an average of $120 million annually into the local economy over 35 years.
“It’s very disappointing and shocking to me,” Tonawanda Supervisor Anthony Caruana said. “This was a pioneering project. Here we are, upstate New York, left in the lurch by our state government.”
David S. Falletta, the president of Local 97 of the International Brotherhood of Electrical Workers, which represents workers at the power plant, also expressed disappointment.
“Didn’t [the Power Authority] agree to work with NRG to address global warming? Why are they half-stepping?” Falletta asked. “Our members will work their hardest to keep the last 50-plus-year-old generators in operation at Huntley.”
In response to the Power Authority’s decision, David Crane, NRG president and chief executive officer, issued a statement saying: “In this era of sky high prices for oil and natural gas, it is critical that we demonstrate how to capture and store greenhouse gas emissions from coal plants so that we can use our most affordable and available domestic fuel source. Of course, we are disappointed in the [Power Authority’s] action today, but we recognize that the necessary funding was not there. The Huntley [clean-coal] project was, in many ways, ahead of its time.”
The Huntley project was on shaky ground from the start. Former Gov. George E. Pataki, who commissioned a statewide competition for an advanced coal power plant, declared the Huntley plant the winner less than two weeks before leaving office.
But that victory was conditional because state officials even then said they believed the electricity that the project would generate would cost 14 percent to 47 percent more than the market price.
The price gap widened even more early last year, when state officials decided that the Huntley project should be able to capture and store most of its carbon dioxide emissions from the day it opened, possibly as early as 2013. That inflated the projected cost to $2.3 billion and widened the gap between the estimated price of the project’s electricity to 65 percent to 112 percent above the market price, Power Authority officials estimated.
NRG and state officials have met repeatedly trying to narrow the gap. While the company proposed ways to reduce it by a third to a half, the Power Authority rejected some of those solutions and found others to be impractical, reducing the potential savings to less than 15 percent of the overall gap.
The measures that the Power Authority rejected included extending the power purchase agreement to 30 years from the original 20-year term and allowing NRG to use the authority’s bonding capabilities to reduce its financing costs.
In its report Wednesday, the Power Authority said that allowing NRG to use the authority’s bonding capacity was too risky and would require a special Internal Revenue Service ruling that “cannot be reasonably sought based on a hypothetical and without a customer lined up to purchase the output.”
Market conditions also worked against the Huntley project. While rising energy prices have pushed up the market price of electricity — a development that, by itself, would help narrow the price gap — construction and material costs also increased, probably boosting the overall cost of the project beyond the revised $2.3 billion estimate, the Power Authority said in its report.
Instead, the Paterson administration has thrown its support — and nearly $7 million — behind a much smaller proposal to build a 50-megawatt advanced coal plant in Jamestown. That $285 million project, using a different technology from the one planned at Huntley, would generate less than a 10th of the power of the Tonawanda project and cost roughly $2 billion less.
Paterson administration officials consider the Jamestown plant, which also would be designed to capture and store carbon dioxide underground, to be a better way for the state to support the development of advanced coal technology, while limiting its financial risk.
Power Authority officials said the agency won’t reconsider offering power purchase deals to other proposals from the 2006 competition, including an advanced coal project at the AES Somerset plant in Niagara County.
But State Sen. George D. Maziarz, R-Newfane, chairman of the State Senate Energy and Telecommunications Committee, said the Power Authority should do just that.
“I have always believed that [AES Corp.’s] bid to build the clean coal plant in Somerset was the better option — better on cost and better on technology,” he said. “Now is the time to see if AES’s bid still makes sense.”
