One concern that I have heard from others is the proposed Metcalf Energy Center could lead to a further industrialization of Coyote Valley. I did not give this concern much thought until I started investigating some of the issues raised by Jeff Wade's latest post. What I discovered is the waste heat or steam exhausted from turbine power plants is an attractive source of heat for industrial or commercial processes. For example in CEC's Preliminary Staff Assessment for Calpine's Delta Energy Center in Pittsburg, CA: "Approximately 200,000 lb/hr of saturated steam will be supplied to Dow Chemical in a 0.7 mile above ground insulated carbon steel pipeline. Condensate will be returned in an uninsulated pipe carried on the same structures."

and from the CEC's Staff Assessment for what is now Calpine's Pittsburg District Energy Facility:

"Approximately 60 MW of electrical energy and industrial process steam produced by the power plant will be sold to USS-POSCO, the project�s steam host, for use in their industrial processes....The proposed steam pipeline is expected to be six-tenths of a mile, traveling east then south to USS-POSCO�s Boiler Plant #2." [USS-Posco was formerly known as US Steel before merging with Pohang Iron and Steel Company, Ltd.]

Power plants that enter in this type of relationship with other industrial facilities are known as qualifying facilities (QFs) and are given special treatment in terms of rates and regulations. QFs were created by the Public Utility Regulatory Policies Act of 1978 (PURPA).

The web site at the U.S. Energy Information Administration discusses the structure of the electric power industry at http://www.eia.doe.gov/cneaf/electricity/chg_str/contents.html. The following quotes are from the site.

PURPA defined two types of QFs:

"Cogenerators

Cogenerators are generators that sequentially or simultaneously produce electric energy and another form of energy (such as heat or steam) using the same fuel source. Cogeneration technologies are classified as "topping-cycle" and "bottoming-cycle" systems. In a typical topping-cycle system, high-temperature, high-pressure steam from a boiler is used to drive a turbine to generate electricity. The waste heat or steam exhausted from the turbine is then used as a source of heat for an industrial or commercial process. In a typical bottoming-cycle system, high-temperature thermal energy is produced first for applications such as reheat furnaces, glass kilns, or aluminum metal furnaces, and heat is then extracted from the hot exhaust stream of the primary application and used to drive a turbine. Bottoming-cycle systems are generally used in industrial processes that require very high-temperature heat.

Renewables

A renewable resource is an energy source that is regenerative or virtually inexhaustible. Renewable energy includes solar, wind, biomass, waste, geothermal, and water (hydroelectric). Solar thermal technology converts solar energy through high concentration and heat absorption into electricity or process energy. Wind generators produce mechanical energy directly through shaft power. Biomass energy is derived from hundreds of plant species, various agricultural and industrial residues, and processing wastes. Industrial wood and wood waste are the most prevalent form of biomass energy used by nonutilities. Geothermal technologies convert heat naturally present in the earth into heat energy and electricity. Hydroelectric power is derived by converting the potential energy of water to electrical energy using a hydraulic turbine connected to a generator. "

The document describes why Congress created QFs

"In passing PURPA, Congress ensured that QFs had a guaranteed market for their power at a price equal to the avoided cost of the utilities that purchased their power. This is quite different from traditional regulation, which generally sets the price of electricity on the basis of the cost (to the producer) of producing it. The QFs themselves are not subject to cost-of-service regulation, and the prices paid to them are not based on their cost of producing the electricity. Instead, the prices they are paid reflect the avoided cost of the purchasing utility, that is, the cost the utility avoided by not producing the electricity received from the QF or purchasing it from another source. One initial interpretation of avoided cost under PURPA was the cost of additional electricity produced by the utility itself. However, under PURPA's requirements, some utilities which already had sufficient supply available to meet demand, either through their own generation or through purchases from other sources, in addition had to purchase QF generation. "

To qualify as a QF there are certain ownership requirements:

"Under PURPA provisions, both cogenerators and small power producers cannot have more than 50 percent of their equity interest held by an electric utility."

Yesterday Calpine released their quarterly report that can be found at http://biz.yahoo.com/e/990812/cpn.html. In that report there is a discussion of the importance of QFs to their business:

"Under present federal law, we are not subject to regulation as a holding company under PUHCA, and will not be subject to such regulation as long as the plants in which we have an interest (1) qualify as QFs, (2) are subject to another exemption or waiver or (3) qualify as exempt wholesale generators ("EWG") under the Energy Policy Act of 1992. In order to be a QF, a facility must be not more than 50% owned by an electric utility company or electric utility holding company. In addition, a QF that is a cogeneration facility, such as the plants in which we currently have interests, must produce electricity as well as thermal energy for use in an industrial or commercial process in specified minimum proportions. The QF also must meet certain minimum energy efficiency standards. Any geothermal power facility which produces up to 80 megawatts of electricity and meets PURPA ownership requirements is considered a QF."

"If any of the plants in which we have an interest lose their QF status or if amendments to PURPA are enacted that substantially reduce the benefits currently afforded QFs, we could become a public utility holding company, which could subject us to significant federal, state and local regulation, including rate regulation. If we become a holding company, which could be deemed to occur prospectively or retroactively to the date that any of our plants loses its QF status, all our other power plants could lose QF status because, under FICC regulations, a QF cannot be owned by an electric utility or electric utility holding company."

"In particular, the state of California has restructured its electric industry by providing for a phased-in competitive power generation industry, with a power pool and an independent system operator, and for direct access to generation for all power purchasers outside the power exchange under certain circumstances. Although existing QF power sales contracts are to be honored under such restructuring, and all of our California operating projects are QFs, until the new system is fully implemented, it is impossible to predict what impact, if any, it may have on the operations of those projects."

As far as I know there has not yet been any discussion about the QF status of the proposed Metcalf Energy Center but I am concerned because all of Calpine's current operating projects in California are QFs.