• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Peaker Plants Return, for the Moment Controversial Power Plants Struggle After Being All the Rage

Posted on: Monday, 12 September 2005, 21:00 CDT

The red phone springs to life with an outmoded mechanical ring inside the otherwise-modern control room of Reliant Energy's power plant in far north Aurora.

It's company headquarters in Houston. They've just gotten a call from PJM Interconnection in Valley Forge, Pa., the operation that runs the sprawling electricity grid that includes northern Illinois. Some utility between here and New Jersey needs electricity.

Rolling an office chair back and forth between a few computers, Plant Controller Michael Harper mouse-clicks and monitors his way through the startup sequence for two 747-sized, natural gas-fueled jet engines, generators known simply as Unit 5 and Unit 6.

"It's been like this a lot this summer," Plant Manager James Mason said. "And we like it that way."

That's because this is how his company makes money.

It's 10:35 a.m. and an hour later out East. With temperatures climbing into the 70s and 80s, air conditioners are just starting to kick in at stores, offices and homes. These days, that's usually when similar red phones ring at similar small power plants throughout the state.

These are peaker plants, so-called because they're generally needed only during times of high, or peak, demand. Unlike large plants, they're limber enough to start quickly.

That's been quite a bit this summer. Above-average temperatures have sent electricity demand blistering to near-record levels throughout northern Illinois.

And peakers, which five years ago were the focus of fierce debates throughout the suburbs and state, finally have come into play. Many are being called on to generate more power for more hours than ever, according to interviews and public records that monitor the energy industry.

Amid forecasts that peaker plants weren't needed, most of the plants proposed locally never got built. And for the moment, even though plants have been called into service this summer, there's actually a bit of a glut of peaker power, which has proven valuable this summer but far less profitable than the onslaught developers and investors hoped when they optimistically arrived on the scene beginning in 1998.

The reasons behind the peaker bubble illustrate the difficulty predicting how things will turn out in the evolving energy industry, especially as Illinois heads toward its version of residential deregulation for electricity, the only product that can be bought and sold, but not stored. A rate freeze is scheduled to be lifted next year.

Even though many in the army of usually gas-fired generators dotting the landscape are helping to keep lights on and A/Cs humming this summer, plenty aren't.

For instance, amid corn and bean fields off the I-88 hinterlands near Nelson, sits one pricey unfinished bright idea. Since getting a permit in 2000, the more than $300 million Nelson peaker plant went through two owners before Chicago-based Invenergy scooped it up at a bankruptcy auction for $19.5 million - a pittance for 1,160 megawatts of power, enough to power a million homes.

But the company can't find anyone to buy the juice, so the plant remains 20 percent to 50 percent unfinished.

Others are running, but the long-term success is unclear.

Geneva spent $16 million in tax money to build a peaker. It revved up its turbine June 1 and has been selling electricity on the open market ever since. Officials said they hope it'll make money for the town.

"We're getting a lot of practice at running it," beams Geneva Electric Superintendent Mike Buffington.

But even though it's generating at capacity, officials announced last week, it's basically broken even during its first two months.

Controversies moot

Most of the high-voltage controversies that swept through the suburbs several years ago over the plants have turned into lessons in unnecessary consternation, blood pressure and money.

From Aurora to Bartlett to Libertyville, environmentalists and not-in-my-backyard neighborhood groups faced down developers who warned that we'd need natural gas-fired plants to avoid the nightmares fresh on our minds: California's crippling energy crisis and ComEd's power shortages of 1999.

Caught in the middle, public officials sweated. McHenry County officials called a moratorium while the issue was studied, and then- Gov. George Ryan formed a task force to investigate.

"The market went crazy," recalls Don Sutton.

As head of the Illinois Environmental Protection Agency's air permit section, he was deluged with applications for peaker plants as well as larger natural gas plants that would run most of the year.

"People would get out a map of Illinois with utilities on it," he said. "And then they'd find a spot close to power lines and a gas pipeline and say, 'Wouldn't that be a great place to build a peaker plant?' So they went out and started securing property rights."

In the end, most of the proposals faded away.

Of the 55 proposed peaker plants, only 22 got built, according to Illinois Environmental Protection Agency permits. Of 21 proposals for larger gas-fired plants, a mere five were built.

For example, Buffalo Grove-based Indeck built a peaker in Rockford - but withdrew proposals from Island Lake, Libertyville, Holiday Hills and one near Woodstock. Several companies pushing peakers several years ago have since gone bankrupt.

One example of a larger plant was ABB Energy Ventures, which overcame strident local opposition to build a 558-megawatt gas- fired plant in Bartlett. First proposed in 1999, the 40-acre site in Brewster Creek Business Park lay dormant until this winter, when developers announced they were scrapping the whole thing, freeing up the land for other use.

Despite the rhetoric of many developers of peaker and other gas- fired plants, there wasn't a clear local demand for the power, documents show. But they built them anyway, hoping buyers would surface.

"There were an awful lot that were built on speculation," said Arlene Juracek, ComEd vice president of energy acquisition. "People do that with houses all the time, but it's different for a power plant."

At the time, companies like Enron and many investors were claiming massive profits by trading energy as if it were a commodity like corn.

They reaped huge profits during California's energy crisis. (Since then, a number of companies have agreed to pay back those profits, which regulators alleged were bolstered by price gouging.)

So when Illinois lawmakers passed a measure to open up our markets to competition by 2001, many saw dollar signs.

"I think people got caught up in the euphoria," Juracek said.

"The future curves were like a hockey stick," recalls Kevin Smith, senior vice president of Invenergy, referring to graphs that projected skyrocketing profits. "They were all going to make money."

Natural gas was cheap and it produced far fewer greenhouse gases than coal. That was key before President Bush was elected, said Jack Hawks, spokesman for the Electric Power Supply Association in Washington, D.C.

"During the Clinton administration, there was an assumption that environmental controls would be so strict as to preclude existing coal plants from continuing to operate," Hawks said. "Gas was the future."

But a lot of things didn't happen.

Predictions wrong

Greenhouse gases remain unregulated, and the price of natural gas skyrocketed, breathing new life into cheap coal. The freeze on ComEd's home electric rates was extended until 2006. The large open markets to which peakers can sell their power didn't get rolling until the last two years - later than predicted. The threat of power shortages was lessened, in part due to Exelon Generation squeezing more efficiency from their nuclear reactors, according to analysts independent of the company. The Enron-fueled euphoria collapsed in scandal, drying up much of the money to build plants on speculation.

So peakers didn't get built.

Many in the energy industry aren't shedding any tears over the burst peaker bubble, noting that in the end, market forces worked, weeding out most of the unnecessary plants at the expense of private investors, as opposed to plants living or dying at the whim of regulators, the guardians of the "old" system.

But the inventory of electricity supply will be increasingly important to ComEd customers when prices are unfrozen next year. Consumer advocates like Citizens Utility Board argue that with no power suppliers out there to match Exelon's fleet of nuclear plants, customers essentially will be at the whim of a monopoly.

Peakers, which supply power at up to 25 times the price of nuclear, can't directly compete.

"The trend is still toward peakers," says Dave Kolata, CUB's director of policy and governmental affairs. "Our region is going to need more generation and it's still the case that peaker plants are the easiest to build. ...But as we become more dependent on peaker and gas prices, the prices keep going higher and long-term (electricity) prices could go up."

Back inside Reliant's control room in Aurora, 17 minutes after the call came from Houston, controller Michael Harper echoes out loud the report over the two-way radio: "Breaker closure, Unit 6." About 90 megawatts of electricity, enough to power almost 100,000 homes, are now pulsing into the grid.

Source: Daily Herald; Arlington Heights, Ill.

More News in this Category