July 21, 2008

LIPA’s Program Energy Project Tests Has Mixed Results

By Mark Harrington, Newsday, Melville, N.Y.

Jul. 21--As fuel-related charges pushed electric bills to record highs, the Long Island Power Authority over the past 10 years kept up a lively program of testing a bizarrely diverse, and sometimes costly, range of energy projects, often with mixed results.

The list of projects compiled in a recent LIPA report sounded notes of alarm about cost and relevance that LIPA leadership recently tightened the rules to approve and finance them in the future. Many of the projects cataloged fall within LIPA's mission to reduce power costs for customers, but the agency itself is plainly concerned about the breadth and cost blowouts of some. "Obviously, the number [of projects] is of some dimension and a concern," said LIPA chairman James Larocca, adding the board will be "much more directly involved" in scrutinizing in future.

From a perpetually broken "hybrid" solar light ($37,382) and a malfunctioning electric laundry system ($73,907) to a $21 million fuel-cell program plagued by breakdowns and reporting irregularities, LIPA's research and development program has been the subject of criticism from legislators, business leaders and even the authority's new management.

"LIPA is not a business incubator or a venture capital firm, therefore any and all boondoggle R&D projects now coming to light must be accounted for fully and dealt with expeditiously to avoid the waste of ratepayer money," said Suffolk Legis. Wayne Horsley, chairman of the legislature's energy committee.

The costs and results raise questions about LIPA's role in R&D efforts in the first place, even though many of the programs were funded by a program "implemented at Gov. George Pataki's direction," according to a LIPA release.

Utilities spend less on R&D

Gerald Norlander, executive director of the watchdog group Public Utility Law Project, said utilities have been spending less on R&D as other costs rise. He noted LIPA contributes approximately $1 million annually to the New York State Energy Research and Development Authority, but said he doesn't object to LIPA doing its own R&D. But, he said, "It needs to be scrutinized."

Costs for the projects, ranging from several thousand dollars to tens of millions, also shine a spotlight on LIPA spending at a time when rates are creeping back to record levels. Last month, LIPA instituted a 3 percent bill hike, citing increased energy costs.

Consumer watchdogs say the $54 million LIPA has spent on R&D since 1998 is a drop in the bucket compared with expenditures of larger private utilities such as Con Edison, which spends $25 million annually. But they argue proper scrutiny and accountability are missing.

"All of these projects should have been thrown open to public scrutiny at the time they were made," said Blair Horner, legislative director at the New York Public Interest Research Group, a state watchdog agency. "To do otherwise just invites failure."

A review of LIPA's catalog of projects shows that often its own miscalculations, or optimism, resulted in costly overruns or worse.

Microturbines never used

In 2001, the authority went ahead with a plan to use methane gas from a closed Huntington landfill to fuel five microturbines to provide energy to the grid, and power and heat to the Huntington Animal Shelter. After buying five microturbines, three gas compressors and a heat exchanger, LIPA in 2002 was told "the town was not supporting the project" following "community objection to siting any form of generation in the area." After exhausting a range of alternatives, LIPA put the equipment into storage. Last year, the turbines were sold to an upstate dairy farm. Total net cost to ratepayers: $214,383.

Frequently, LIPA took surprisingly bold paths to test cutting-edge technology, but then faced unexpected price increases. In December 2006, the authority bought and had retrofitted a plug-in hybrid-electric bus ($606,833), a project whose cost ballooned $186,833 more than budgeted because a partner couldn't fund its share. The bus, now used by the MTA's Long Island Bus on public routes in Nassau, provided immediate returns, according to the authority.

"The drivers and passengers have all commented about the good efforts LIPA is doing to explore the use of plug-in hybrid technology," LIPA's report says.

LIPA sometimes seemed eager to move ahead with projects, even if test sites weren't formalized. In 2001, it launched a program to put five wind turbines on Long Island farmland. After buying the equipment, it found only a single farm, in Calverton, that would accept a windmill. Two other turbines had to be sited on LIPA property at the mothballed Shoreham nuclear plant "due to the difficulty in siting wind turbines on Long Island," LIPA's report said.

There were design problems with the equipment, some of which was ultimately used as spare parts. Complicating matters, the equipment maker, Atlantic Orient Corp., went bankrupt. As a result, LIPA acknowledged, the project has only been "partially successful," and it's studying decommissioning them. The cost thus far: $1.6 million. LIPA plans to spend another $95,000 this year, including for a study of decommissioning costs.

Still, the authority has set aside $45,000 in the 2008 budget to commission a small wind farm project consisting of three sites to "assist small commercial and residential customers in the siting of small wind [turbines] throughout the territory."

Fuel cell program put on hold

One of the costliest LIPA R&D projects involved a politically connected Albany-area company called Plug Power, a proponent of fuel-cell technology. From 1999 through 2008 Plug Power essentially used LIPA's service territory, and R&D budget, in an attempt to commercialize then-experimental fuel cells, which use hydrogen or natural gas in an electrochemical process to produce clean energy.

A LIPA study conducted after a series of Newsday stories about the fuel-cell program last year found numerous reporting irregularities in the project. Some $21 million in total was spent on fuel cells, which turned out to need frequent maintenance, and have short life cycles. Of the 168 fuel cells purchased and installed, none remain at LIPA facilities.

"Fuel-cell technology as a whole did not develop as rapidly as planned," LIPA said. Products expected to last five years instead lasted months. "For this reason, the fuel-cell program was placed on hold."

At a trustees meeting last month, chief executive Kevin Law amended an executive directive to guidelines for funding projects, requiring R&D spending of more than $50,000 be presented to and voted on by trustees. The previous limit was $250,000. Law also required cost increases 10 percent over budget to receive LIPA board approval.

Larocca said the board will ensure "rigor and discipline" are applied to approval of any new projects, even as they review the old.


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