April 25, 2013

Amory Lovins highly critical of Aspen’s hydro project

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Downtown Aspen, where energy expert Amory Lovins says the city of Aspen should look for energy efficiencies before building a proposed hydro plant.

Photo: Brent Gardner-Smith/Aspen Journalism

Downtown Aspen, where energy expert Amory Lovins says the city of Aspen should look for energy efficiencies before building a proposed hydro plant.

Internationally renowned energy expert Amory Lovins of Old Snowmass has sent Aspen City Council members a witheringly detailed critique of the city’s economic and strategic assumptions regarding the proposed 1.17-megawatt Castle Creek Energy Center (CCEC) hydro power plant.

After studying the city’s proposal at great length, Lovins concluded that “the city’s economic analysis of CCEC is flawed and unreliable” and that the “CCEC has higher costs and risks than available, ample and suitable alternatives, even neglecting its sunk costs and counting only its to-go costs.”

To date the city has spent about $7 million on the project, which voters approved in 2007, when the budget was $6.2 million. It is now $10.5 million — not counting the cost of financing.

“It’s now clear to me, as it’s long seemed to many, that CCEC is economically unsound,” Lovins wrote in his 33-page letter to the council.

“CCEC’s total cost may make it the costliest hydro plant ever built,” he writes in another section of the letter. “It shouldn’t and wouldn’t have been started if it had been properly compared with many alternatives then available.”

Lovins recommends against completing the hydro project, which was designed to generate around 5 million kilowatt hours per year, and instead advises the city to seek energy efficiencies through retrofitting commercial lighting in downtown Aspen and by pursuing other renewable energy sources, including retrofitting the city’s hydro plant at Ruedi Reservoir.

He writes that “better options for displacing coal power are already widespread and getting rapidly even cheaper and better.”

In November, 51 percent of Aspen voters answered “no” to an advisory question that asked if the city should “complete the hydroelectric facility on Castle Creek.”

Despite the outcome of the vote, the city is still pursuing a license for the project from the Federal Energy Regulatory Commission and is planning to install a tailrace on the end of a pipe that the city says will double as both a penstock for the hydro plant and an emergency drain line for Thomas Reservoir. The tailrace serves as an outflow for the pipe into Castle Creek.

Lovins suggests the project ran into trouble for a variety of reasons, including: “Inadequate consideration of available alternatives and strategic risk management caused bad decisions; input from council’s technical advisors was either ill-informed or misinterpreted; and input from the public, which in this region includes world-class independent experts, was improperly solicited and inadequately considered.”

He also states that the project’s projected “operating and maintenance costs are unreliably analyzed and substantially understated,” and that information on the city’s website about the project is “often sketchy, outdated, or inaccurate.”

Aspen Mayor Mick Ireland said he had read Lovins’ letter and that he didn’t accept some of its “conclusions and premises,” especially regarding Lovins’ predictions that prices for coal-fired electricity will fall in the future, not rise, as the city is projecting as part of its economic analysis.

“There isn’t any guarantee that he’s right, or not,” Ireland said.

Will Dolan, a utilities and communications specialist with the city, met with Lovins and is currently reviewing the second iteration of the letter.

“Obviously he is an expert in the energy field and brings a lot of high-concept thinking to the table, but some of that stuff is not practical here because of limitations with our wholesale energy contract,” Dolan said.

The city’s energy contract is with the Municipal Energy Agency of Nebraska (MEAN) and Dolan says the price the city has paid for coal-fired electricity has gone up the last couple of years. But Lovins suggests over time that “the real power prices CCEC would avoid are likelier to fall than to rise.”

Dolan said city staffers did their best to try and craft an accurate forecast of what the project’s economics would like in the future. But it is clear that Lovins disagrees with some of the assumptions made by city staff.

“It is certainly a contribution to the conversation,” Dolan said of Lovins’ work. “I don’t agree with all of it, but I don’t disagree with all of it either.”

Mayor Ireland also said he thought the fact that Red Ant blogger and city government critic Elizabeth Milias requested Lovins’ letter to City Council through a Colorado Open Records Act request suggested politics were involved.

“It sounds more like a political statement to me, and a politically timed report, surprisingly,” Ireland said. “But that’s his right.”

Lovins originally sent in a letter on Jan. 14 and then had a series of meetings with city officials to review his conclusions, including two “technical meetings” with David Hornbacher and Phil Overeynder, the city’s two top officials on the hydro plant proposal; he also met with Don Taylor, the city’s finance director, and Randy Ready, the city’s assistant city manager.

Lovins then revised his letter, which includes four appendices and extensive footnotes, and sent the updated version to the council on April 15 marked “personal and confidential.” This week he acknowledged the letter is now in the public realm.

In his letter Lovins told the council members that he did his research on the project as a “completely independent” private citizen on a pro bono basis and not as the chairman and chief scientist at the Rocky Mountain Institute, which he co-founded in 1982.

Lovins, according to his bio, “is considered among the world’s leading experts and practitioners in energy (particularly its efficient use and sustainable supply) and its links with economy, security, development, and environment.”

Adam Frisch, a council member who is running for mayor, said he didn’t see how anyone could question Lovins’ professionalism or ethics.

“How it shows up and when it shows up is fairly irrelevant compared to what’s in there,” Frisch said about the letter, which he characterized as “a fairly damning report” on the city’s approach to the hydro plant.

Lovins explains in the letter that he begin looking into the hydro project after city officials called for public suggestions in December 2012 on how the city could meet its renewable energy goals.

One of areas Lovins eventually focused on was the city’s continued positioning of the penstock as being both for the hydro plant and an emergency drainline for the Thomas Reservoir, especially as the city is basing some of its economic projections on the dual-use of the 4,000-foot-long pipe.

Lovins writes that he was “not persuaded by the city’s view that the penstock was required as an emergency drainline.”

And he notes that “in the past couple of years the city has changed how it calculates and reports CCEC’s costs by reallocating some capital, financing, and operating costs to reflect the penstock’s assumed dual-purpose public-safety imperative. Citizens who reject that safety argument could calculate costs very differently.”

On another point, Lovins wrote that responding to the city’s request for public suggestions “was harder than I expected because the city’s website about CCEC and proposed alternatives turned out to be often sketchy, outdated, or inaccurate.”

Lovins’ report cites 15 examples of errors and omissions in the city’s online materials describing the CCEC. These include matters related to the price of energy alternatives, financing costs and a misunderstanding of how the electric grid system functions.

He was also critical of the criteria city staff laid out for a renewable energy project in the December request for suggestions from the public.

Lovins said the way the request was framed “invites the unhelpful inference that the eight criteria were tailored to restrict valid and admissible choices to CCEC, which Aspen voters just rejected.” And he says the criteria “are often unfounded or technically incorrect.”

Editor’s note:
William Dolan, the city of Aspen utilities project coordinator, wrote a memo to the Aspen city council on May 2 offering his department’s take on the Lovins letter. This story was done in collaboration with the Aspen Daily News, which published the story on April 26, 2013.

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