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Energy Plant Costs Soar from Estimate by Don Jenkins The Daily News, February 2, 2006

OLYMPIA --- Building a power plant at the Port of Kalama will cost far more than originally projected, translating into higher electric rates than plant developers forecast when they signed up potential customers last year, Energy Northwest project manager Ted Beatty said Friday.

The rising cost of steel and other building supplies have driven the plant's estimated price tag from $1 billion to $1.5 billion, Beatty said after a presentation on the project to the House Technology, Energy and Communications Committee.

Energy Northwest now predicts the plant's electricity will cost $50 per megawatt-hour, compared to the $45 per megawatt-hour it estimated when Cowlitz PUD and 22 other utilities indicated an interest in buying power from the plant.

PUD spokesman Dave Andrew said the escalating cost of equipping a power plant didn't surprise him. "We're experiencing the same kind of incredible increase in costs," he said.

Andrew said the PUD will continue to assess whether it will buy power from the Kalama project and hasn't made a decision yet.

The PUD purchased most of its electricity last year from the Bonneville Power Administration for $28 per megawatt-hour.

PUD officials, however, say they must find other energy sources to keep up with demand and expect those resources to be more expensive than BPA power. The PUD expects a wind farm being developed in Klickitat County will generate electricity for about $45 per megawatt-hour beginning late this year. Energy Northwest had proposed a 600-megawatt plant. But Beatty said design changes will increase the plant's capacity to 680 megawatts --- enough to supply 520,000 homes.

Increasing the plant's size wouldn't add much to construction costs and would hold down the per-megawatt price of the electricity, Beatty said.

The plant would convert coal or petcoke, a by-product of refining oil, into a gas to generate electricity.

Energy Northwest touts the plant as an environmentally friendly alternative to conventional coal-burning power plants and says the region will need the plant's energy.

Environmental groups say the plant would be a new large source of greenhouse gases, putting 4 million tons of carbon dioxide a year into the atmosphere just as public concern about global warming is rising.

Energy Northwest has held out the prospect that emerging technology could capture and store the plant's carbon dioxide deep underground.

The technology, however, is still being tested on a large scale, and it's unknown whether the rock formation under port ground could permanently store the carbon.

"We are working with Energy Northwest to assess the suitability of the Port of Kalama site for carbon sequestration," said research scientist Travis McLing of the Big Sky Carbon Sequestration Partnership.

McLing said a preliminary assessment could be done by the end of 2008.

Energy Northwest says it would build the plant with the equipment to capture 10 to 20 percent of the carbon, but it hasn't pinpointed how much the effort would increase electric rates. McLing said capturing and storing 100 percent of the greenhouse gases would be an unrealistic expectation because of the high cost.

State regulators are reviewing Energy Northwest's application to build the plant and will make a recommendation to Gov. Chris Gregoire, who will have the final say on whether the plant is built.

Energy Northwest hopes to open the plant in 2012.

Beatty told lawmakers the plant would take 3 1/2 years to build and create 500 to 1,000 construction jobs. Once completed, the plant would employ 125 workers, with annual salaries of roughly $60,000 to $70,000.

Energy Northwest's presentation introduced the project to some committee members and updated others. Longview Rep. Dean Takko, a committee member, said he supports the project.

"It's obvious we need energy, and I'm willing to look at all types of energy," he said. "Coal plants are coming --- in our state or other states. I'd just as soon see high-tech ones than the old smoky ones."