Subject: Metcalf Energy
Center
I recommend that the City Council:
1.
Approve the attached Proposed Agreement
on Metcalf Energy Center (MEC) Business Terms for Development/Cooperation
Agreement.
Earlier this year San José adopted
its Smart Energy Plan that focuses on achieving greater energy conservation by
residents, businesses, and government; creating more energy production with
generating facilities that are appropriately sized, located, and operated to
prevent adverse impacts on neighborhoods; and achieving solutions
collaboratively with other local governments and businesses in the region. This past month Calpine/Bechtel has
approached my office with a proposal to achieve our goal of improved local
reliability and neighborhood protection.
From the start, we have sought
neighborhood protection and a reliable power supply for our community. With this agreement we have gained
additional measures to assure local safety and benefits for our neighborhoods,
and it affirms our city’s commitment to doing our fair share to meet our
regional energy needs.
I appreciate the efforts of
Calpine to listen to our community and to make changes to the Metcalf proposal
that will result in a project that will be better for the people of San José.
Under terms of the proposed
agreement, the City of San José will support and provide municipal services for
construction of the 600-megawatt natural gas-fueled power plant in the Coyote
Valley in South San José. The city will
provide all requested municipal services in a timely manner at standard rates
and terms applicable to similar uses, and it will process annexation of the
portion of the site not already within the city limits.
Specific conditions of the
agreement include:
·
MEC will convert to air
quality protection technologies that reduce or eliminate the use of liquid
ammonia as soon as these systems are approved by state regulators and are
economically feasible. (See attached description of two alternatives that are
currently being researched.)
·
A ten-member community
advisory committee will be appointed by the city council and Calpine to provide
an additional and effective forum for clear, rapid communications between the
community and the energy center.
Members will include neighboring residents and representatives from the
City of San José, school and county agencies, business, and Coyote Valley
property interests.
·
Two new air-monitoring
stations will be added to those already operated by the Bay Area Air Quality
Management District (BAAQMD). One
station will be north of the MEC site, the other south, at locations to be
selected by the city. Both will be
monitored by an independent third party.
·
Start up and shut down of the
facility will be cut back by 25 percent in order to further reduce the
emissions associated with these operations.
·
Calpine/Bechtel will use its
best efforts to secure a “reliability must run” contract from the State of
California so the plant can better ensure local reliability of energy for the
Silicon Valley area and further limit the number of times it will start and
stop during the year.
·
MEC will post all required
BAAQMD monthly air quality compliance or violation reports on designated
community websites to ensure conveniently accessible and timely data for the
community.
Community
Benefits
·
MEC will offer competitive,
long-term contracts to San José businesses as allowed under state
regulations. These contracts will be
offered exclusively to San José businesses during a defined period of time.
·
MEC will provide $5 million
for parks and open space acquisition in the Santa Teresa/South San José area.
·
MEC will contribute $1
million in matching funds to the City's fund for energy conservation programs
and assistance for low-income families with their residential energy bills.
·
MEC will contribute $500,000
to the City of San José “Healthy Neighborhoods Venture Fund,” which supports
innovative community-based programs to improve education, health, and senior
services in San José neighborhoods, for the purpose of the children’s health
insurance initiative.
Cooperation
·
Calpine/Bechtel will
collaborate with the city to support specific state legislation that would
provide additional benefits for localities that host new power plants, such as
an increase in designated share of property tax revenues. Currently, MEC is expected to contribute $3
to $4 million annually in property taxes to schools and local governments in
Santa Clara County.
·
The City of San José will
provide all city services requested for MEC in a timely manner at standard
rates and terms applicable to similar users.
·
The City of San José will
process an annexation application for the portion of the site outside the city
limits and under Santa Clara County jurisdiction.
Reduced Amonia Technologies being researched
Urea
This is a non-hazardous solid material that would be used
in place of aqueous ammonia. It is shipped as small pellets and is often used
as an ingredient of fertilizer. It is
currently going through demonstration testing at two power plants in the USA. The
urea is mixed with water to form ammonia, as the ammonia is needed, so there is
only a very small amount of ammonia present at any time. The advantage of this
technology is that it eliminates the need to transport and store aqueous
ammonia. The open technical issues include system reliability, it's impact on
trace emissions of air toxics and the overall cost of implementation.
The current combustors for MEC are low NOx combustors with
output guaranteed at 25ppm. The plant also has Duct Burners that emit some
additional NOx. Improved combustor technology is currently under development
that will have lower NOx emissions. The technologies include lower NOx
combustors that use catalysts and those that use other sophisticated combustion
technology to lower NOx. All of these technologies are currently under
development. The open technical issues are reliability and performance of these
combustor technologies, as well as overall cost. If such technology is
implemented at MEC it will lead to less of a need for ammonia, since there is
less NOx that must be removed. This will then lead to a less frequent delivery
for aqueous ammonia. Eventually, if the advanced combustors and burners can
control NOX to MEC's permitted level, the
use of ammonia can be completely eliminated.
Mayor Ron Gonzales