The Town of Burrillville today filed the supplemental testimony of expert witness Glenn Walker on the issue of whether or not the Invenergy power plant is needed to Rhode Island’s Energy Facilities Siting Board (EFSB). What the testimony reveals is that Invenergy has already reaped $26 million in profit from New England ratepayers and that Invenergy’s total three-year benefits/gross profit will soon blossom to over $46 million.
That’s money Invenergy will be making before sticking a single shovel into the ground or producing as much as one volt of electricity, money ratepayers in New England are giving away.
How does this work?
Invenergy has, for the last three years, promised to produce energy from its yet to be built power plant. When it becomes obvious that due to permitting delays that Invenergy will not be able to satisfy its commitment to produce the promised energy, Invenergy sells its promise to other companies, at a profit.
Here’s Walker being questioned under oath:
Q. Are you saying that, with its current Capacity Supply Obligation (CSO), Invenergy could just sell out of its obligation in successive Annual Reconfiguration Auctions (ARAs), receiving millions, while not having a power plant and not even necessarily having the permits to build a power plant?
A. Yes. Invenergy has been doing exactly that in the last two ARAs.
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Q. It seems counter-intuitive that a company with no power plant and no permits to even build a power plant would be able to receive benefits in the market, are you sure this is correct?
A. Yes. That is exactly what is happening. Invenergy is selling out of its CSO in successive ISO-New England ARAs and receiving millions of dollars in benefits. The ISO-NE Tariff, which must be approved by FERC, allows this to happen, because the ISO-NE Tariff contemplated the possibility of a plant being delayed by months or maybe a year. In that context, it makes sense that a resource with a CSO is obligated to “cover” its obligation, and still be made whole financially. However, the Tariff also gives the ISO-NE the ability to terminate the CSO based on lack of progress meeting critical milestones.
To understand the above, here’s a short glossary:
Capacity Supply Obligation (CSO): This is the amount of power the company agrees to provide for the bid upon price.
Annual Reconfiguration Auctions (ARAs): Companies unable to provide the promised energy can sell their obligations in this market.
ISO-New England: The non-profit that oversees the operation of New England’s bulk electric power system and transmission lines.
FERC (Federal Energy Regulatory Commission): The Federal agency that regulates ISO-NE.
The Invenergy permitting project has been seeing delays for some time now. These delays in permitting seem to be coming from Invenergy and seem to actually be helping the company.
Here’s Walker again, with emails from DEM backing up his assertions:
Q. Have you reviewed the status of the air permit?
A. Yes. As of July 25, 2018, a draft permit has not been issued by the Rhode Island Department of Environmental Management (DEM) and the Office of Air Resources seems to be unsure whether a draft permit will be issued at all for the project.
Q. Have you reviewed the status of the wetlands permit?
A. Yes. As of July 30, 2018, an email from the DEM Office of Water Resources states that DEM had not yet determined whether Invenergy had provided sufficient information for DEM to evaluate the request. In fact, it appears that DEM is still waiting for information from Invenergy.
Q. Given the delays and lack of progress by Invenergy in developing Clear River Energy Center (CREC), do you think it is possible that CREC may not even get built?
A. Yes. In fact, I am currently of the opinion that not only will Unit One be delayed beyond the June 1, 2021 date, but that it is uneconomical to build CREC in the foreseeable future due to the significant changes in the market that I have identified in this testimony. In my opinion, it is very likely Invenergy is seeking to simply permit the project and either sell the permits to another entity or wait for better market conditions before moving forward with construction.
Q. Is this approach common in the industry?
A. Yes. For example, the Towantic Energy Center in Oxford, Connecticut, originally proposed by Calpine, was conceived in the late 1990s. Calpine submitted an application to the Connecticut Siting Council for a Certificate of Environmental Compatibility and Public Need for the 512 MW project primarily fueled by natural gas in 1998.
Sometime after obtaining the original approvals, the development rights were transferred to Competitive Power Ventures, Inc (CPV). In 2014, CPV filed an application to upgrade the project’s two combustion turbines which increased the output from 512 MW to 785 MW and was granted a permit.
The facility was awarded a CSO in FCA 9 and began operating in June 2018.
This project represents a good example of how a project with little or no need at the time of original permitting and approval can be built almost 20 years later. A second example is the 431± MW Pioneer Valley Energy Center in Westfield, Massachusetts proposed by EMI, Inc which received its original approvals in the 2009 time period. The economic conditions were not suitable to profitably build the project and it was put on hold. The project was sold or transferred to Calpine to bid the project into FCA 10. However, the project failed to get a CSO (likely due to the introduction of CREC Unit One). After this project failed to get a CSO in FCA 10, Calpine abandoned the project due to the expectation that the unit would be financially infeasible to develop for the foreseeable future.
These examples illustrate how it is common for projects to be permitted by developers and held for more advantageous market conditions. Given the current lack of need for Unit One and the absence of a CSO for Unit Two, it is likely that if a permit is granted by the Rhode Island EFSB, the project will not be built in the near future due to the lack of need and poor economics.
Q. Are you saying that if the RI EFSB issues a permit, Invenergy or someone else may hold the project and possibly build it 10 or 20 years from now?
A. Yes. I believe that is the likely outcome given the lack of need in the current market and the Sponsored Policy Resources currently under contract negotiations. I recognize that doing so would require maintaining an option for site control and updating various permits. However, modifying or updating permits is typically much easier than obtaining the original permits.
“Folks have been wondering for months why Invenergy seems to be slow-walking the permitting process,” said Conservation Law Foundation (CLF) Senior Attorney Jerry Elmer in response to Walker’s submitted testimony. “Now we know. Invenergy is making tens of millions of dollars from ratepayers.”
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