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NRG nuclear proposal to city includes sale of Fayette coal plant

Wednesday, February 2, 2011 by Josh Rosenblatt

NRG Energy, Inc. has offered to buy Austin’s share of the coal-fired Fayette Power Project and replace the energy currently generated by the plant with nuclear power from the South Texas Project. In addition, NRG President of Advanced Technology Juan Garza says the company will work to reduce emissions from the coal plant by use of new technology. 


In a letter sent to Austin Energy General Manager Larry Weis, Garza outlined an “internal framework for moving forward to explore the addition of more nuclear energy to Austin Energy’s baseload.” The proposal is composed of  “starting points for the negotiation of a nuclear power purchase agreement.”


The proposal is built around three components:


  1. NRG would acquire from Austin Energy its 50 percent interest in each of units 1&2 at the Fayette Power Project coal plant for fair market value.

  1. NRG and Austin Energy would enter into an interim power purchase agreement (600 megawatts) for the purchase and sale of nuclear power generated by units 1&2 at the South Texas Project at a fixed price. (Austin Energy currently gets 400 megawatts of its approximately 1100 MW base load from the STP 1&2 nuclear units.)

  1. Nuclear Innovation North America (NINA), a joint venture between NRG Energy and Toshiba, and Austin Energy would enter into one or more long-term purchase power agreements (totaling 800 MW) for the purchase and sale of nuclear power generated by STP’s proposed units 3&4 at a fixed price.

In order to secure a federal loan guarantee for the construction of STP 3&4, NRG will need to get a considerable portion of the proposed units’ capacity under contract.


According to Garza’s letter, NRG believes that if Austin Energy sells its stake in the Fayette coal plant and then buys an equivalent amount of nuclear energy from STP 3&4, it can continue to keep its rates low and reduce its carbon footprint. Those are two pressing issues for the city as it faces its first rate hike since 1994 and attempts to implement the 2010 generation plan, which calls for 35 percent of the city’s energy to come from renewables by 2020.


“If NRG purchases Austin Energy’s stake in the Fayette Power Plant it would provide a significant influx of capital to the utility that could be used to significantly delay the need for a rate increase,” Garza wrote. “Austin Energy could replace the coal-generated baseload provided by Fayette with carbon-free baseload from STP 3 and 4 through a power purchase agreement, thereby reducing the utility’s carbon footprint by 70 percent while ensuring affordable rates for a generation.”


Austin Energy has already made significant investments in renewable energy, particularly wind. If Austin Energy were to buy more nuclear power, it might end up with more base load than it needs. Under the current generation mix, the utility can operate its Fayette units at less than capacity when it has wind energy. That in itself reduces the amount of carbon being produced. However, if Austin sold its stake in the plant it would no longer have any control over its output, including the carbon it emits.


Garza told In Fact Daily that he respects the city’s efforts to reduce its carbon emissions but believes that nuclear energy could serve the city’s goals just as well as, if not better than, focusing on renewables and energy efficiency measures.


“The long-term goal of the generation plan is to reduce the output of carbon into the atmosphere,” he said. “The means they have chosen to get there are renewables and energy efficiency. But we’re saying that a more effective way to do that is nuclear, which is basically as carbon free as solar or wind.”


Approached yesterday, Mayor Lee Leffingwell told In Fact Daily that he is open to considering NRG’s proposal but that he is concerned how it fits into the generation plan.


“(The nuclear proposal) would reduce Austin’s carbon footprint but it would not qualify as a renewable because its not officially a renewable energy, technically. It wouldn’t count towards the 35 percent goal,” Leffingwell said. “But the reality is that it’s clean energy. People argue that the process of getting it out of the ground and building the plant (produces more carbon) … but to me that’s true of almost anything you choose. You’re going to face the same thing when you’re building windmills, right?”


For now, the city is sticking with its generation plan, but that doesn’t mean NRG’s proposals won’t be considered. Leffingwell said that it would be irresponsible to “just reject them out of hand.”


That’s especially true, Leffingwell continued, if NRG is able to develop its fledgling carbon-capture technology. NRG officials told In Fact Daily that they hope to be able to capture 90 percent of the carbon dioxide emitted by coal plants, including Fayette, using the technology they’re currently developing. Leffingwell said that is something he would want to hear more about.


“If they want to do that investment in this yet unproven carbon-capture technology, if we had a deal where the actual carbon footprint of Fayette were reduced, then certainly we’ve got to talk about that,” Leffingwell said. “Yes, I’d like to hear what their plan is for that.”

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