CPS has dropped the ball on alternatives to nuclear

October 2, 2009

By Arjun Makhijani
Special to the San Antonio Express-News

CPS Energy is asking its board and the San Antonio City Council for permission to sell $400 million of bonds to follow the $276 million CPS Energy has already spent to get an option to buy a nuclear pig in a poke.

Yet, the price that Toshiba, the company that would build the plant, would charge won't be fully disclosed until 2012; a "baseline" cost estimate will be disclosed this winter. A commitment of such a vast additional sum is premature, at best.

First, CPS' electricity demand projections are suspect. Its projected annual growth rate would increase from about 1.5 percent during 2009-2020 to about 2.4 percent after that. Yet, stringent building and appliance efficiency regulations are in the works nationally. Carbon prices are likely to rise steeply after 2020.

CPS' assumption about an increasing growth rate makes neither market sense nor common sense. The risk to San Antonio would not be as serious had CPS done a careful analysis of the options. It has not. It only considered coal (a poor risk) and natural gas as potential alternatives.

CPS did not consider compressed-air energy storage, in use on a large scale both in Alabama and Germany. An investment of $400 million could convert the 1,250 megawatts of wind energy that CPS has or plans to acquire into about 400 megawatts of baseload capacity. CPS estimates a cost of $9,000 per kilowatt for a concentrating solar thermal power plant with heat storage, yet utilities are signing contracts (or purchased power agreements) for half this amount or less today. Google's green energy chief, Bill Weihl, recently stated that solar projects typically cost $2,500 to $4,000 per kilowatt, plus $1,000 for storage.

Moreover, these costs are coming down. CPS did not consider combined heat and power, which is commercial, biomass used in an integrated gasification combined cycle plant, or elements of a smart grid that could convert intermittent renewable capacity into dependable capacity for loads like washing machines and air conditioners. It doesn't appear to have considered recent drops in natural gas prices.

In brief, CPS has dropped the ball on alternatives. The argument that CPS must meet urgent deadlines to preserve its nuclear option should not rush the board or the city. NRG, CPS' 50-50 partner in the project, can hardly proceed without CPS. Without CPS' stellar bond rating and money, NRG, with its junk bond rating, would be far less likely to get federal loan guarantees.

Indeed, in my view, without CPS, NRG would not have a viable project. During the Clean Technology Forum in San Antonio on Sept. 16, Mayor Julián Castro promised the public that CPS' investment decision will be made on merits.

However, this cannot be done now, because CPS has not put the options on the table that would enable a comparison on the merits. An independent expert panel could probably do a study for City Council in six months, possibly less. It would be unwise to risk $400 million more without it.

Arjun Makhijani is president of Institute for Energy and Environmental Research. He has published two studies on CPS nuclear costs.

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