Karen Frantz
GHG Monitor
1/17/14
Summit Power’s Texas Clean Energy Project is renegotiating its purchase power agreement with CPS Energy after the Texas-based utility company allowed the agreement to expire at the end of 2013, citing project construction delays and a changing energy landscape. Laura Miller, Director of Projects of the Texas Clean Energy Project’s Summit Team, said a new agreement is expected soon. “All of our other agreements are in place and we continue to aggressively pursue financial closing—hopefully completed in the next few months,” she said in an e-mail to GHG Monitor. “All of our other contracts and off-take agreements are in place.”
CPS Energy signed the 25-year power purchase agreement to buy 200 MW of electricity from the Texas Clean Energy integrated gasification combined-cycle project in 2011, and said that it had extended Summit’s milestone deadlines for plant construction three times. “The project has continued to experience delays, however, and the energy landscape has changed,” CPS Energy said. “With abundant supplies of natural gas below our feet and prices for natural gas remaining moderate, the economics of energy produced from coal generation with carbon capture have changed. The prudent option was to allow our agreement with Summit to end, while we consider the possibility of an updated PPA with the Texas Clean Energy Project in the future. … We remain hopeful this project can proceed and that carbon-capture technology will become feasible for existing coal plants.”
Miller said that the project’s biggest obstacle, which took it past its December deadline, is high Texas labor costs. “Subcontractors will not agree to fixed-price, turnkey labor contracts, which is required for private equity-financed projects like ours,” she said. “This is complicated by the fact that this is happening to all three of our lead EPC contractors, who have all been soliciting bids from Texas contractors for their respective work. A large Shell gas-to-liquids project in Louisiana on the Gulf Coast was shelved two months ago for just this reason—too many energy-related infrastructure projects on the boards due to this oil and gas boom, resulting in a shortage of skilled workers and sky-high labor costs. But we are committed to getting through this challenge and breaking ground in 2014.”
The project is planned for a Greenfield site west of Odessa, Texas, in the Permian Basin, and was one of the first to utilize a poly-generation business model, which allows the plant to produce and sell electricity, captured CO2 for EOR, urea fertilizer and other chemicals for multiple revenue streams. The plant would generate 400 MW of electricity, and about 130 to 213 MW of that would go to the power grid, according to the Department of Energy. The DOE issued a Record of Decision in 2011 that awarded $450 million to the project under its Clean Coal Power Initiative.
