Stock image of power plant

ITHACA, N.Y. — “The proposed repowering would not benefit ratepayers in any meaningful way.”

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That’s one of the first lines in a recent report issued by the the Institute for Energy Economics and Financial Analysis, a non-profit that studies issues around energy use, about the Cayuga power plant. The line neatly encapsulates the overwhelming finding of the IEEFA study: That allowing the Cayuga power plant to retrofit to natural gas would offer little benefit to the general public.

(New to the topic? See related: A beginner’s guide to the crucial fight over the Cayuga power plant’s future)

New York state is currently evaluating the coal-fired plant’s proposal to retrofit for natural gas. Its closure could have severe economic repercussions for Lansing, including a 12 percent increase in property taxes and $1.25 million in lost revenue for the Lansing Central School District.

See related: School superintendent says death of Cayuga power plant would ‘be too much to bear’

But NYSEG, Assemblywoman Barbara Lifton and local activists say it’d be more efficient economically — and better for the environment — for area transmission lines to be upgraded to meet local energy demands. The competing proposals are heading for a showdown, with the state expected to pick between them soon.

The IEEFA report, issued this August, provides crucial ammunition to those who argue against the plant’s request to retrofit for natural gas.

Stock image of power plant
Photo by Philip N. Cohen. Creative Commons/Wikipedia

So you don’t have to read the full report (it’s not exactly beach reading!), I’ve pulled out five of its most important findings. In case for some reason you do want to see it in full, however, I’ve embedded it in full at the bottom of the story.

5 major conclusions

1) Report: Repowering won’t make plant profitable for long haul

The Cayuga power plant is asking for ratepayers to provide an annual subsidy of $9.6 million for the first 10 years of their conversion to natural gas.

But even with that subsidy, the report’s authors find, the repowered plant will still not find safe, long-term financial footing. Once a proposed 10 years of annual subsidies from ratepayers ends, the report finds, the owners of the Cayuga power plant just won’t have much economic incentive or viability to keep the plant afloat — largely because energy prices aren’t likely to continue to stay low. (See #3 for more on this point.)

“Even with Cayuga’s proposed 10-year, $9.6 million/year subsidy, the plant’s profitability is likely to be marginal … There is a reasonable likelihood that the plant will close upon termination of ratepayer subsidies, if not sooner,” the report finds.

2) ‘Serious risk’ of continued subsidies

Since the report does not think repowering will put the plant on a path to stable financial footing, it follows that ratepayers are likely to be asked to continue subsidizing its operations.

“There also is a serious risk that ratepayers will be called upon to provide continued subsidies to the facilities even after the 10-year term of the proposal ends,” the report finds.

Once capital expenses are sunk into the plant’s overhaul, in other words, it’s likely to continue to draw from area residents’ pocketbooks.

Learn more about the Commons construction project with the Ithaca Voice Story Database, introduced today.
Click on the Ithaca Voice Story Database to learn more. Stories on this topic are filed under “Cayuga Power Plant faces closure.”
Click on the Ithaca Voice Story Database to learn more. Stories on this topic are filed under “Cayuga Power Plant faces closure.”

3) Why plant unlikely to be unprofitable without major subsidies

So, why are the report’s authors so down on the chances of the plant turning a profit absent ongoing ratepayer subsidies?

Because, according to their findings, there are only two ways the numbers work out: If there are major, unexpected, extended spikes in capacity; or, if there’s a similarly unexpected spike in energy market prices.

The report argues that both scenarios are at best “unlikely” — 1) Because the New York grid system is expected to produce “large amounts of excess capacity” in the upcoming years; and 2) Because “substantial amounts of energy efficiency savings” are projected as a result of New York’s ongoing push to reduce demand around the state with renewable energy alternatives.

Both facts make it highly unlikely for the plant to make economic sense, the authors say.

4) $25Mil. transmission line upgrades are necessary no matter what, authors find

As we’ve noted, NYSEG and others have pushed an alternative proposal of a $25 million upgrade to transmission lines as the necessary solution to meet the area’s energy needs.

What’s surprising, though, is that this isn’t really a choice between a $25 million transmission line upgrade and the more than $145 million plant retrofitting. Instead, the report says that the transmission line upgrades will have to happen with or without the plant — meaning that if the plant is repowered, local ratepayers won’t save the $25 million by avoiding the transmission line upgrades.

“Proposed transmission upgrades to address existing reliability issues will have to be made whether or not Cayuga is repowered,” the report finds, “thus negating the need to spend $145 million to repower an aging and potentially unreliable plant.”

5) Report: ‘Polar Vortex’ not reason to back plant

The Cayuga power plant cites the “Polar Vortex” — an extreme cold wave that hit much of the Northeast in the winter of 2013-2014 — as evidence that “the plant’s continued operation will provide significant benefits or ratepayers in terms of lower energy market prices and increased fuel diversity.”

The report’s authors admit that the Polar Vortex produced spikes in the energy market that suggested the continued necessity of the plant. But they counter that New York’s transmission operators responded to the Polar Vortex by fixing the grid to mitigate the energy highs and lows.

“These actions have already had an impact, as market prices were much lower in January and February 2015 than they had been in January and February 2014 (during the Polar Vortex Event),” the report’s authors state, “even though the weather was significantly colder in 2015, particularly in February, than it had been in 2014.”

IEEFA Aug 2015 Losing Proposition.pdf

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Jeff Stein

Jeff Stein is the founder and former editor of the Ithaca Voice.