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Professor Jeremy Firestone also presented comments on the IRP to the Public Service Commission Tuesday night. His comments are brief and very much to the point:
It is imperative that the IRP recognize the fundamental way in which the law of the state of Delaware has changed in the past year. Delmarva's IRP needs to be written in acknowledgement that the existing, planned load of its 2006 IRP is the load of the past; it is not the load of the future.
First, Delmarva must craft an IRP that is consistent with new section 1020(b) of Title 26, which requires that in preparing the IRP, Delmarva:
1. Shall first consider demand response and demand-side management strategies.
2. Shall preferentially obtain electricity through demand response, demand-side management, weatherization, and cost-effective renewable energy resources before
considering traditional fossil fuel-based electric supplies.
Second, Delmarva must write an IRP that accounts to the extent possible scientific studies that estimate environmental externalities. Importantly, the National Academy of Science recently released a review of health externalities of fossil fuel generation. It found that on average, US coal plants cause health externalities equivalent to 3.2 cents/kWh and the dirtiest coal plants, 12 cents/kWh. These costs have to be added to the cost that Delmarva can procure these energy sources. It does not stop there however; Delmarva must also account for the environmental externalities such as direct wildlife impacts of the air emissions associated with fossil fuels and the discharge of cooling water, not to mention climate change. As it also must account for these on a life-cycle basis, it must account for mountain-top mining of coal as well.
In light of these developments, the reference case should not be status quo ante-one that assumes a 20% RPS by 2019, which is where Delmarva already effectively will be given the land and offshore wind contracts it has signed. Rather, the reference case, should conservatively assume that Delmarva has contracts for 30% renewable by 2020. Delmarva could still analyze the existing, outdated case, but it should be viewed as a step back, not a reference.
In addition, the IRP should include scenarios with aggressive renewable targets such as 40% and 50%.
Delmarva should run variations on these, including a price based on additional purchases from BWW at the BWW-Delmarva price. All scenarios should use 2012 as the start date for national carbon price. They should base natural gas on NYMEX. They should also run with PTC and separately assuming the ITC is extended to 2016 for offshore wind.
A sensitivity analysis also could be run with a slightly lower "effective price" effect (that is, the differential between the wind price and local nodel price) which would show how selecting out-of-state land-based wind rather than offshore wind would affect ratepayer bills.
But Delmarva also must be cognizant that it is now much more difficult to site a land-based wind project in Maryland, Pennsylvania, Virginia and West Virginia given the endangered Indiana Bat and the recent case out of Maryland, Animal Welfare Institute v. Beech Ridge Energy.
Finally, the IRP must account for the new realities. Delmarva must provide a No MAPP scenario as the reference rather than assuming MAPP and only somewhat reluctantly undertaking an analysis of a delayed MAPP. Delmarva must also account for New Jersey
efforts to require a new cooling water tower for the Nuclear plant at Oyster Creek, including what it might mean for the Salem Nuclear Power Plant.
"References"
National Academy of Science, Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use, Committee on Health, Environmental, and Other External Costs and Benefits of Energy Production and Consumption; National Research Council, ISBN: 0-309-14641-0, 466 pages, 6 x 9, (2009)
Animal Welfare Institute v. Beech Ridge Energy, LLC, RWT 09cv1519 (D. MD Dec. 8, 2009)
The News Journal reports that Delmarva wants nothing to do with any source of new power in Delaware:
Delmarva Power's president said today the company won't negotiate with a wind power company or a natural gas company unless compelled by a court of law.The Public Service Commission, acting under the authority of 26 Del. C. SS 1007(d), opened Docket 06-241 on July 25, 2006. A request for proposal (RFP) was developed, and three companies (NRG, Bluewater Wind and DPL sister company Conectiv) came forward with proposals for new power generation in Delaware. After many hours of hearings, hundreds of thousands of dollars spent on consultants and thousands of pages of proposals, analyses and comments, Delmarva want to take its football and go home?
Surely such a drastic decision would not be taken lightly:
After taking a day to digest the report, Gary Stockbridge, Delmarva president, said that even if the commission votes to accept the conclusions of the report, Delmarva will refuse to negotiate. Delmarva believes accepting any of the bids would cause ratepayers to have to pay much more for years to come, he said.Let's be clear about a couple of points: First, the State of Delaware isn't presenting Delmarva with a take-it-or-leave-it deal. The RFP process calls for Delmarva to begin negotiations based on the findings of the PSC, OMB, Controller General and DNREC. If DPL has concerns it needs addressed, they can be put on the table in the negotiating process. But Delmarva doesn't even want to talk about it.
Second, Gary Stockbridge may cite the interests of ratepayers in refusing to negotiate, but he doesn't represent the public; he is accountable to DPL's parent company Pepco Holdings and its shareholders. The elected officials and agencies of state government are responsible for representing the public interest. It is sheer sophistry for Mr. Stockbridge to conflate Delmarva's interests with those of its customers, a point I discussed in a letter to the PSC sent just yesterday:
On this point, it is important to distinguish between Delmarva's risks and those of its customers, who are now exposed to considerable risk of fuel price increases. It is understandable that Delmarva's management would be concerned about the financial obligations imposed by a long term contract.
...
While a long term supply contract creates a risk for the company, purchasing power every three years is not without risk. Specifically, three year purchases of power leaves Delmarva's customers more exposed to the risk of future price increases-which is precisely the risk that the RFP is intended to ameliorate. Mr. Stockbridge says he would rather work something out than go to court:
Stockbridge said he hopes it doesn't come to that. Even if the commission votes to order negotiations, the company will have other tools short of litigation, including working with the Legislature, Stockbridge said.I have a hard time imagining that he'll get very far by thumbing his nose at the General Assembly, the Public Service Commission and the thousands of citizens who have taken an intense interest in Delaware's energy future.
Update: The News Journal has more on Delmarva's intransigence:
The company has long argued the state's energy needs can be fulfilled through a combination of conservation, competitive buying on the open market and new transmission lines. Under the staff proposal, Delmarva could be forced to buy more electricity than it can sell, the company argued.The amount of electricity produced and sold in Delaware are numbers that can be negotiated. Delmarva's argument on this point is unconvincing.
A factor that the "News Journal" missed, but was reported here on Wednesday, is that Bluewater Wind announced a twenty year deal with the Delaware Municipal Energy Corporation:
The agreement between DEMEC and Bluewater Wind is for the offshore wind energy generator to supply electricity, associated capacity, and related environmental attributes (also called Renewable Energy Credits) to DEMEC for 20 years. The contract is the first in the nation to provide for the purchase and delivery of energy from an offshore wind park and is valued between 200 million and 300 million over the life of the contract.In other words, DEMEC has already taken a sizable chunk of capacity off of Delmarva's hands. They seem to think, despite Delmarva's arguments, that a long term contract for energy is a valuable asset.
