Title
Evaluation of Biomass-Fueled Generation Facility Proposals (B)
On May 12, 2008 the City Commission authorized the General Manager to negotiate and execute a purchased power agreement (PPA) for the output of a nominally 100 mega-watt (MW) net power plant, fueled with biomass and located on the Deerhaven Power Plant site. Negotiations have been successfully concluded, but because of adjustments to the initial proposal to reflect changing fuel prices, demand for electricity, and power plant construction costs, the General Manager has decided to advise the City Commission of these negotiated changes, their economic implications and to submit the executed PPA to the Commission for final approval.
Explanation
On May 12, 2008 the City Commission authorized the General Manager to negotiate and execute a purchased power agreement (PPA) with Nacogdoches Power LLC for the output of a nominally 100 mega-watt (MW) net power plant, fueled with biomass and located on the Deerhaven Power Plant site. Nacogdoches Power LLC was a subsidiary of Energy Management Inc. and BayCorp holdings. Since that time these two entities have been joined by Tyr Energy, a subsidiary of ITOCHU Corporation and a new company, American Renewables, was formed and the power plant project for GRU was renamed Gainesville Renewable Energy Center, LLC.
Negotiations have been successfully concluded but there are a number of changes in the project in the contract structure from the initial proposal. The fixed contract prices have increased to reflect changes in the cost of power plant construction, but these price increases have been partially offset by extending the term of the contract. The economic stimulus bill has also provided a grant option that will provide an offset to these price increases, provided that the facility goes on line by January 1, 2014. While the long term economics for the facility are favorable compared to conventional alternatives, the biomass plant may increase...
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