Morro Bay Power Plant to be shut down in the next few years; a new plant cannot be built, ending the facility’s 54-year life7 Comments Published by CAPE July 31st, 2009 in Press Releases
After years of sharply-reduced use and partial retirement, the 54-year-old Morro Bay Power Plant will be shut down for good in a few years, and no new replacement plant can be built, under just-revealed plans of the owner and a proposed new state policy prohibiting the plant’s continued use of water from the Morro Bay National Estuary, which has killed countless billions of small fish and other marine life over its lifetime.
The existing plant’s uncertain future, ongoing discussions of a possible new and bigger facility, its documented impacts on the marine life of the Estuary and public health across much of San Luis Obispo County and the tax revenues it would produce for local governments have combined to generate sharp debate among residents and community leaders over the past 10 years.
The landmark plant with its 450-foot tall smokestacks would be closed in no more than seven years by 2015 under the proposed new state policy but could be shut down in three years in 2011. In either case, the two remaining operational generating units–the other two were retired several years ago–would continue to operate occasionally and minimally in the summer–the most productive time of the year for aquatic life–if it runs at all.
In a letter to the Morro Bay City Council dated Sept. 9, the plant’s owner, Dynegy, said “continued operation of the plant is unlikely” due to a virtual ban on “the use of sea water for once-through cooling of power plants proposed by the California State Water Resources Control Board.” The letter was placed on the agenda of the Council Monday night (Oct. 13) for planned discussion in closed session later this month.
For several years, the state Board has been developing a new policy restricting use by plants of “once-through cooling” (OTC)–in which a steady flow of water from the ocean or estuaries is withdrawn to cool plant generators and is then discharged as heated water back into the ocean–and is scheduled to adopt the policy as binding regulations early next year. The policy was prompted by a landmark federal appellate decision in January, 2007, that ruled the U.S. Clean Water Act prevents use of once-through cooling by new or existing power plants throughout the nation.
The decision and the proposed new state policy require a cooling technology–”closed-cycle cooling” that recycles a limited amount of fresh water in the plant much like a radiator–that does not use sea water for cooling to avoid destruction of the marine environment. That requirement also applies to any new or replacement plants that are constructed along the California coast under the court decision and the proposed state policy. Although a new Morro Bay plant was not mentioned in its letter, Dynegy recognizes the proposed policy means it will not be able to build a new plant, according to city staff.
This is also because, as the Dynegy letter noted, the city has long refused to allow closed-cycle cooling in any new plant because of alleged visual impacts of the tall cooling units and the noise they give off. So unable to use once-through cooling or closed-cycle cooling, a new plant could not function.
An extensive biological study funded by the plant’s previous owner, Duke Energy, showed that a new plant would destroy between 16% and 33% of the fish and crab larvae in Morro Bay annually. The existing plant due to its limited operating scale does not kill nearly as many larvae but does continue to deplete the Estuary, which is a state Environmentally Sensitive Habitat Area, or ESHA.
The Coastal Alliance on Plant Expansion (CAPE), a non-profit citizens group founded in 1999, considers the Dynegy letter to be a victory in CAPE’s long fight to make certain that if a new or re-powered Morro Bay plant were built, adequate protections of the Estuary from OTC and public health from air emissions would be ensured. No proposed designs of such a plant have met those standards, in CAPE’s view.
Three years ago, environmental groups, including CAPE, launched an effort to convince the state water board to restrict OTC after the California Energy Commission staff in 2005 released the first study showing how California’s 21 coastal power plants using “once-through cooling are contributing to declining fisheries and the degradation of estuaries, bay and coastal waters (by killing) billions of aquatic organisms, including fishes, fish larvae and eggs, crustaceans, shellfish and many other forms of aquatic life from California waters each year.”
Planning for alternative uses of the Morro Bay plant site are already underway. A citizens committee appointed by the Council, named the Futures Group, recommended last year that the city consider engaging in a thorough study of non-plant uses, possibly through the establishment of a redevelopment agency. The city is known to be in the process of seeking a planning grant for this purpose. A number of visitor-serving uses of the 107-acre site have been discussed over the past several years, including a marine museum, an arts center and restored natural habitat for public use.
The Council needs to discuss the letter because it also proposes extension of Dynegy’s lease from the city of land between the plant and Morro Rock, under which the “outfall” channel is located. In it flows used cooling water discharged by the plant, which empties into Estero Bay. The city receives $750,000 a year from Dynegy under the lease, and $250,000 of it must be spent on harbor operations and the remaining $500,000 can be used for general purposes by the city, according to city officials.
The current outfall lease expires in 2012, and the letter proposes extending it to Dec. 31, 2014, just before the new state policy’s deadline for halting the use of once-through cooling takes effect in 2015.
The plant has operated at about six per cent of capacity between 2005 and 2007 under a contract to sell electricity generated by the plant to PG&E. A new contract for the same purpose with Southern California Edison between 2009 and 2011 is in the offing, according to the California Public Utilities Commission. Dynegy has no contract for sale of the plant’s electricity this year, the letter states.
However, as the letter explains, if Dynegy cannot sign another contract after 2011 or if the city refuses to extend the outfall least beyond 2012, “the plant will be retired.”
In its letter, Dynegy said the proposed new state policy “would likely have a materially adverse impact to any continued usefulness of (the) Morro Bay (plant). Other cooling technologies such as air cooling or wet cooling towers (types of closed-cycle cooling) are prohibited by City of Morro Bay statute and would in any case be prohibitively expensive.”
This type of cooling has been opposed by the city, particularly during the California Energy Commission’s review of Duke Energy’s application filed in 1999 for a permit to build a new plant, but it is not prohibited by statute or ordinance, city staff said. During that review, the Energy Commission staff concluded that installation of dry cooling in a new Morro Bay plant would cost about 6% more than the overall projected capital investment. But Duke, which later sold the plant to LS Power, claimed it would cost $200 million of the plant’s estimated $800 million cost without evidence of that cost being submitted to the Commission. LS Power was later acquired by Dynegy.
After a near-record five-year review, the Energy Commission in 2004 tentatively approved Duke’s plan for a new plant, despite strong objections by its staff. The approval was contingent on issuance of a federal discharge permit by the Central Coast Regional Water Quality Control Board, which has not taken up the matter, in large part because Duke, LS Power and now Dynegy have declined to go forward with the project. The reasons probably are the uncertainties in the state energy market and mounting legal, regulatory and public opposition to the project as designed by Duke and endorsed by LS Power and Dynegy, which would use OTC and increase air emissions harmful to public health.
The Dynegy official who signed the letter, Randy Hickok, wrote, “These (state board) regulations have a proposed time-line for compliance, which for Morro Bay would be Jan. 1, 2015. Though the final form of these regulations is subject to modification until they have been ratified by the water board, the proposed compliance date of Jan. 1, 2015, strikes me as a meaningful milestone beyond which continued operation of the plant is unlikely.”
The proposed state policy says all “new and expanded coastal power plants using seawater for cooling” must use “the best…technology… to minimize the intake and mortality of all forms of marine life.” In addition, it says, “An existing power plant must reduce intake flow and intake velocity, at a minimum, to a level commensurate with that which can be attained by a closed-cycle cooling system.”
There are now 19 plants along the California coast, including Morro Bay and two nuclear plants, Diablo Canyon and San Onofre, that come under the new state policy restriction on use of once-through cooling. Most non-nuclear plants would have to comply by 2015 and nuclear plants by 2018, the proposed policy says.
The effects of enforcement of the policy on energy production by plants in the state were estimated in a state study called the Electric Grid Reliability Impacts from Once-Through Cooling in California, which was issued last April.
The study concluded that “more than enough power plants are expected to be operating in 2015 to more than compensate for any or all OTC plant retirements,” and its investigation “showed that given sufficient time to react, the electric industry could likely tolerate and compensate for mass OTC plant retirement at relatively modest costs to the ratepayer.”
The most “realistic scenario,” the study said, “in which some OTC plants would be retired while others repower or convert their cooling systems, showed potential for significant benefits to the environment because the overall power sector would be more efficient and produce fewer emissions, and because marine ecosystem impacts caused by use of OTC technology would be greatly reduced.”