Palo Alto Weekly

News - May 7, 2010

Palo Alto looks to landfills for 'green' electricity

Despite major concerns, City Council approves two 20-year contracts with energy company Ameresco

by Gennady Sheyner

The phrase "green energy" may evoke idyllic images of solar panels and gently tilting wind turbines, but in Palo Alto the term can now be chiefly associated with methane gas burning in Central Valley landfills.

After a lengthy debate that stretched into the wee hours of Tuesday morning, a split Palo Alto City Council decided to commit the city to two 20-year contracts with the energy firm Ameresco, which converts escaping landfill gas into electricity. The two contracts will cost the city about $233.7 million over their terms.

With the decision, the proportion of electricity the city receives from renewable sources will increase from 22 percent to 28 percent in 2013. The city's goal is to get 33 percent of its electric load from renewable sources by 2015.

But the new contracts also mean that the city's renewable-energy portfolio is dependent, more than ever, on landfill gas. The portfolio now consists of seven landfill-gas contracts with Ameresco and two wind-energy contracts. With the two agreements, Ameresco accounts for 56 percent of Palo Alto's renewable-energy supply and 16 percent of its total supply.

The City Council reached the controversial decision a month after a similarly split Finance Committee failed to reach a consensus or offer a recommendation to the full council. Greg Scharff and Greg Schmid, the two council members who opposed making major commitments to Ameresco during the Finance Committee meetings, once again urged their colleagues not to sign the two contracts.

Both warned about the potential of new and better technology emerging over the next two decades and wondered aloud whether the Ameresco plants, which burn methane gas, can truly be considered "green." Mayor Pat Burt and Council member Karen Holman voted with them to sign just one of the two contracts recommended by staff.

Karen Holman said she wouldn't feel right buying energy from the San Joaquin landfill, which she learned still accepts materials such as wood and cardboard. She equated the city's decision to buy energy from a landfill that accepts such materials to "looking the other way.

"I really feel we'd be fostering bad practice if we support the activities at San Joaquin," Holman said. "If there are things actually going into the landfill, I feel it is a very bad policy and an inconsistent message that we're sending if we support both contracts."

The second contract is based on the Crazy Horse Landfill in Salinas, which closed a year ago and no longer accepts waste. The San Joaquin landfill is expected to remain in operation until 2059.

But a five-member council majority, led by Larry Klein, argued the two contracts are a good bargain for the Palo Alto, whose Utility Department normally has a hard time competing with energy giants like PG&E for long and lucrative contracts. Klein also pointed to the city's commitment to hydroelectric power, which he said proved to be wise.

"This is an area that lends itself to long-term contracts," Klein said.

Klein's argument ultimately prevailed with Vice Mayor Sid Espinosa and council members Gail Price, Nancy Shepherd and Yiaway Yeh joining him in supporting the two contracts.

Burt called the Ameresco contracts a tough decision but emphasized that the city's goal isn't to use more renewable energy, but rather to use less nonrenewable, so-called "brown" energy. In fact, earlier in the evening, the council unanimously approved a new 10-year energy efficiency plan, which seeks to curb the city's electricity consumption by 7.2 percent over the next 10 years through a wide range of programs.

Burt called the city's new renewable contracts as means to that end, not ends in themselves.

"The higher objective should be reduction of brown electricity," Burt said.

Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.

Comments

Posted by Stephen Rock, a resident of Adobe-Meadows
on May 5, 2010 at 10:51 am

I wish I had more information about these contracts for methane produced electricity.
1) How much will this electricity cost compared to PA other sources?
2) What would happen to the methane if it was not used for electricity generation or other needs (e.g. heating homes, petrochemicals)? Would it be released into the air (methane is a powerful greenhouse gas)?
If the alternative is releasing methane into the air, OR burning it and creating CO2 and electricity, and not using coal, then it is a good deal. It is important to look at the entire picture of the energy and green house costs of each option.


Posted by JO, a resident of College Terrace
on May 5, 2010 at 12:02 pm

The city has made some very bad decisions about electricity providers in the past. (Remember Enron?) I fear that this may be another one. The sad thing is that by the time we realize what a bad decision it was, the Council members are out of office and not held accountable.


Posted by bill, a resident of Barron Park
on May 5, 2010 at 5:18 pm

Is this company sound financially? Is there a Plan B if the landfills don't produce over the contract life?

It's too easy for a politician/council member to commit taxpayer money for 20 years. If they are wrong, they are out of office and suffer no penalty for making a bad decision. But the residents are stuck with the bill.

The City committed itself to a long term contact with Enron and wound up paying >$20 Million to a bankrupt company without receiving a product. We sure could use that money now.


Posted by Will, a resident of Charleston Gardens
on May 5, 2010 at 10:21 pm

This article, like most of the Weekly's attempts to act like a newspaper, fails to dig into this matter in any meaningful way. For instance, what are the exit conditions to the contract? Why is this contract for 20 years? And who will be held accountable if this company goes "belly up" in a few years and can't deliver? How will this contract affect our electricity prices?

Given the mess with Enron, did anyone in the City Hall pantheon of geniuses actually make sure that the same thing can not happen again?

No one on the City Council seems to be even remotely aware of the Enron debacle. You can make certain that no one on the Council will talk to the public, or the public in general, and the Enron mess.


Posted by energy person, a resident of Downtown North
on May 6, 2010 at 10:29 am

You can see the presentations and read the city's reports to answer most of the questions posed by commenters.

Re: how much does this cost? It costs more than "brown" power, but the cheapest long-term "green" power the city could find (it says).

Re: if the biomethane was not used to power a generator, it would have to be burned ("flared") by law. The biomethane would have to be cleaned up at considerable more expense to put it into the gas pipelines to be used for other uses such as heating homes.

Re: what happens if the company goes belly up? Then the city will not get the energy AND WILL NOT PAY FOR IT. The risks are very low. If the company fails or if the landfill does not produce the expected amount of gas or if the generator does not generate energy for any reason, then the city just does not get the energy or pay for it. The result is that the city will have to buy brown power or some other green power instead.

Re: how will this contract affect our electric prices? The city reports that these two contracts will increase the fraction of renewables from 22% to 28% and the rates will increase by .23 cents per kilowatt-hour starting in 2013 when the two generators are expected to start operating. This is about a 2% increase starting in 2013 for significantly more green power in the portfolio.


Posted by JustMe, a resident of Duveneck/St. Francis
on May 6, 2010 at 3:25 pm

What I would like to see for that land is a permenant soap box derby race hill set up. You want green? What could possibly be greener than a car powered entirely by gravity? It's even greener than Tesla. The Silicon Valley Soap Box Derby group is trying to find a good spot to hold regular and frequent rally races, and with a little paving, that land could be perfect. However, PA might also like to install bleachers and out-buildings for storing race supplies, but it does not have to be anything fancy. All we REALLY need is a nice paved stretch that goes downhill at a moderate clip for about 700 feet and then (ideally) slightly uphill for bringing the cars to a stop gently. You provide the hill, we'll provide the excitement. Who wants to take their kids racing, real racing, head to head, with trophies and ego-boosts? It could all be brought home to Palo Alto!


Posted by Anoma Lee, a resident of Crescent Park
on May 6, 2010 at 4:36 pm

"The biomethane would have to be cleaned up at considerable more expense to put it into the gas pipelines to be used for other uses such as heating homes."

What's the biomethane moniker? Methane is CH4 is methane. Change that CH4 and you got something else. Therefore, what is in this bio-stuff that makes it unsuitable for burning in firnaces, stoves, etc., and how toxic is the exhaust from those generators?


Posted by Not impressed, a resident of Green Acres
on May 6, 2010 at 8:35 pm

Approval of these contracts was recommended by Ms. Fong head of our Utilities Department. Her past decisions have never filled me with much confidence and this one doesn't either. The Enron debacle was enormous when we paid out $21 Million to their creditors. On the other hand the City's Utility Department so overcharges us they can afford to make big mistakes and recover, and this latest one is a huge crap shoot!


Posted by Reads Staff Reports, a resident of Another Palo Alto neighborhood
on May 7, 2010 at 7:56 am

Here's teh link to the staff erport to Council:
Web Link

Cost: "The annual cost for both Power Purchase Agreements (PPA) would be up to $10.0 million in the first year, escalating at 1.5% per year over the 20-year term of the PPAs. In this case, the retail rate impact would be up to 0.45 cents per kWh."

Holding price increases to 1.5% a year sounds pretty good to me. I expect fossil fuel-based electricity will increase over 1.5% per year.

Even with the small rate increase to buy more renewable power we will be lower than PG&E's electric rates.


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