City of Glendale
The Cost of the Alternative Grayson Repowering Plan
The cost savings from the approval of an alternative repower plan for the Grayson Repowering Project is upwards of $174 million.
As presented to City Council on July 23, 2019, Glendale Water & Power has proposed an alternative repower plan for the Grayson Energy Center. The plan includes a reduced amount of thermal generation, a robust battery storage component, and an operationally feasible amount of Distributed Energy and Energy Efficiency programs. The proposed project is essentially divided into two groups made up of the elements of the project that would be eligible for bond financing and the remaining components that are not eligible for financing, and must be funded directly by GWP.
The costs associated with the components eligible for financing would be included in the issuance of a $281 million bond over a 20 year term for the installation of 93MWh of thermal energy, the initial phase of the storage component comprised of a 50MW/200MWh of battery storage system (BESS), and the Balance of Site (BOS) work that includes demolition, construction, site prep etc., and a project contingency. See the figure below for the breakdown of the $281 Million bond. The issuance of the bond under this breakdown is not anticipated to impact or increase rates for our customers due to operations cost savings.
The Clean Energy Plan assumed an additional installation of a 25 MW/100 MWh BESS with an approximate cost of $50 million, which will be installed in the near future. The plan also included the cost of the Distributed Energy Resources (DER) and Energy Efficiency (EE) programs at a cost of $145 million, with approximately $62 million of the proposed costs to be incurred by 2024. These costs were as submitted by a group of private firms in response to the Clean Energy Request for Proposal. As stated, these program costs cannot be funded through tax exempt bonds, but must be cash funded through rates and/or cash reserves. Utilizing rate revenues or a combination of reserves and rate revenue will require analysis of the GWP rate structure and could likely result in the need for rate re-structuring, and ultimately an increase in rates to fund the new/additional DER/EE programs. Rate restructuring will require a Cost of Service Analysis, which is already in progress, to determine rate impacts moving forward. Actual costs are subject to contract negotiations, program implementation as proposed by the recommended vendors, final program design, customer participation, and final approval by the City Council.
The above costs are merely projections based on the information and proposals we have today. Until such time as the City Council gives final direction and the City commits to a plan for the repowering, this remains an estimate. No funds have yet been committed or expended. The results of a theoretical modeling exercise included in the Integrated Resource Plan (IRP) are based on present value, the supposition of significant revenue from the sale of unused assets, residual value from equipment that would be retired, and does not include the actual details of the project costs, the cost of service analysis and the ultimate impact to the rate payers. A Present Value cost analysis is dependent on how GWP’s assets interact with the market, and are therefore less certain. The approximate savings is reliant on the present value of the units after 20 years, fuel costs, market purchases, and market prices and sales.
Based on the current proposal for the entire project as stated above, the cost is $476 million; that includes the $281M (bonded equipment and construction) + $50 M (additional BESS) +$145M (DER/EE projects) = $476 million. This presents a savings of approximately $24 million to the originally proposed $500 million in the 2015 plan, not including the cost of the repower delay. While far less than the figures being stated, it is a respectable savings nonetheless.
In summary, it must again be stated that in all of the scenarios described above, the costs reflected are simply proposals. Per Section 13, page 86 in the IRP, “GWP has run preliminary simulations on the proposed power plan extending out through 2045 in order to gain an understanding of what will be required to achieve 100% GHG‐free status37.” Since it is nearly impossible to accurately simulate the market conditions, policy landscape, or available technologies 20+ years from now, the results of this simulation should not be relied on for any quantitative data or planning‐sensitive results. None of these scenarios or options has received final approval at this time, and many aspects are in ongoing negotiations. True costs and program content may change and certain aspects may be added or removed, but the estimates are based on the best information available today. As mere proposals, these cost projections have no impact on current expenditures or fees within GWP. There is no “savings” to the GWP budget or operations, simply more cost effective options for us to consider in the future for our critical infrastructure upgrades and regulatory compliance.