$75 million contract, international opportunity hang in the balance
The future of the Neustream coal scrubber is in doubt, and that puts the future of Colorado Springs-based Neumann Systems Group in jeopardy as well.
The Colorado Springs City Council, which also serves as the board of directors for Colorado Springs Utilities, has ordered a stop to planning and installation of the technology that cleans emissions from the city’s Martin Drake power plant, located southwest of downtown, near Interstate 25 and Colorado Avenue.
The abrupt halt in plans came last week as city officials started to explore the feasibility of closing the plant and moving it from downtown.
While it was a quick decision for the board, it could have devastating consequences for Neumann.
“Cancellation of the Martin Drake project would in all probability result in the shutdown of our business, the loss of many current and future jobs here in Colorado Springs and the loss of this great clean coal technology for both national and international use,” said Dave Neumann, a former U.S. Air Force Academy researcher who founded the company. “We’ve been in contact with numerous utilities and many are watching the progress at Martin Drake in consideration of the future use of Neustream.”
The cancellation also threatens to end not only a $75 million contract to use Neustream, but also a partnership that made Colorado Springs Utilities testing ground for the technology that Neumann envisioned offering to an international market.
But the company won’t be the only loser, Neumann said in an email.
Colorado Springs Utilities will lose the 3 percent assistance fee gathered from sales of technology — a term of the agreement signed in 2008 when Neumann first started testing the scrubbers at Drake. CSU could earn about $40 million in sales fees during the first five years alone. At least four other utilities companies expressed interest in 2010 when the Neustream was undergoing outside testing.
Utilities has also already spent $63 million on testing to approve larger and larger Neustream prototypes.
It’s late in the game for Neumann, which has spent about half the money allocated in the $75 million contract. Major equipment purchases will arrive at Drake in the next few weeks. Construction drawings are finished and submitted to CSU this week. Contracts to break ground this summer have been signed.
But all that has come to a standstill while the idea to move Drake is discussed.
“We need to drag our feet a little, see what’s going to happen with Drake before we spend more money,” Councilman Tim Leigh said. “And we want to make sure the Neumann technology is what we need for the future.”
Neumann said he’s working with CSU staff to arrange details of the work slow-down.
“Our Neustream commercialization project at the Martin Drake plant has progressed rapidly and to this point was under cost and on schedule,” he said. “The project is very far along in terms of the commitment of funds. We are analyzing the impacts of the slowdown on total project costs.”
While the slow down spells financial trouble, CSU says it has not completely backed away from Neumann.
Spokesman David Grossman said CSU is considering its options but is standing by the technology and believes it can be put to good use somewhere else in its energy portfolio.
“We can put it at Nixon (the Ray Nixon plant in Fountain, Colo.) first,” he said. “It’s an option we’re considering and discussing with Neumann. That’s a coal-fired plant too, and we were planning on installing it there, after Drake.”
Utilities might have options, but Neumann doesn’t.
“We will continue to perform under our contract with CSU as directed,” he said. “We do not have other alternatives at the current time to handle the issue of project cancellation. We are expecting that CSU will direct us to perform a design study on the Nixon plant that will allow them to determine how much of the Martin Drake costs are recoverable for use at the Ray Nixon plant.”
While some members of the utilities board are skeptical about the benefits of the Neustream, CSU officials are firmly convinced moving ahead is the right thing to do.
“We invested in this technology because we thought it was the right technology to meet regulations,” said Bruce McCormick, chief energy officer. “We still do. But if the community says we want to look at something different downtown, we’re certainly open to looking at those options.”
Grossman said the public has some misleading information about both the effectiveness of the scrubber and its cost.
It’s been proven, he said, to sequester sulfur dioxide and to reduce the mercury found in coal emissions, which is the latest pollutant to receive stringent regulations by the EPA. Utilities has said in the past that the Neustream could possibly clean nitrogen dioxide and carbon dioxide from coal emissions, but that claim has not yet undergone serious testing. It’s received approval from CSU, independent electric researchers Electric Power Resource Institute and the Colorado Department of Public Health and Environment.
It works, and it’s less costly than many people think, he said.
“And just to correct some information that’s out there, the projected total cost for emissions reduction at Drake is approximately $121 million, substantially less than the cost of installing conventional scrubbers,” Grossman said. Without the Neustream, utilities officials place the cost to clean up SOX emissions alone at $360 million.
The coal scrubber and its costs came under scrutiny when downtown business leaders launched a campaign to decommission the Martin Drake power plant. The coal-fired plant dominates the Springs skyline, and in winter months, plumes of smoke obscure downtown and the mountains. Mayor Steve Bach adopted the idea quickly, and said he wants to move the power plant in order to build more attractions in the downtown area.
Sam Eppley, who owns Sparrowhawk on Tejon Street and is president of the Downtown Partnership, says he wholeheartedly supports the idea of tearing down Drake.
“I think that’s a great idea,” he said. “It’s a big hindrance to economic development downtown, and I’m behind the mayor’s plan to move it.”
However, not all businessmen view Drake as a problem to be excised from downtown. Kevin O’Neil, who owns Braxton Technologies at 6 S. Tejon St., said the coal-fired plant should be viewed as an asset for businesses.
“It’s cheap power,” he said. “That’s an economic development issue — we have some of the cheapest power. I don’t think it’s an eyesore — but I do think that surrounding neighborhood is an eyesore. That’s the bigger problem.”
Coal: days numbered?
Concerns are more than just aesthetic. Some people are concerned about pollution from the plant and others say emissions regulations from the EPA could get tougher. The Neustream, they say, might not be able to meet future requirements.
“We might be using an energy that has a bulls-eye on it,” said Councilwoman Angela Dougan. “We’re planning for today’s regulations, but are we spending money for solutions that won’t work under stricter regulations? We need to look into that.”
Closing aging coal-fired power plants isn’t a new idea. Energy companies across the country are moth-balling coal-fired plants because of new EPA regulations that monitor mercury and a host of other pollutants. Instead, they’re opting for new natural gas facilities that are cheaper than retrofitting old plants to new regulations. According to a recent Associated Press study, about 32 coal-fired plants must be closed due to the new regulations, and an additional 36 face renovations or closure.
Drake definitely falls into the “advanced age” category.
It was first built in 1925, and the generators now being used date back to 1962, 1968 and 1974. Its age is offset by coal use that burns more cleanly, utilities officials say. The power plant is currently classified as a low emitter for mercury and other pollutants with levels lower than state standards without having to install costly pollutant controls.
The reason: Utilities uses coal from Colorado and Wyoming that is naturally lower in mercury content. The majority of the coal comes from the Powder River basin, which has some of the lowest sulfur content of any coal in the nation.
The cost isn’t the only concern for critics. Coal mining and coal-driven power itself draw environmental concerns.
David Amster Olzeweski, owner of Sunshare Solar, told the board that he’s tried to recruit out-of-town workers for his solar company. When visiting the city, they declined the job because of Drake’s prominence downtown.
“I think it sends a signal about what this community’s about,” he said. “And they wouldn’t come here because it told them that this isn’t a forward-thinking community.”
As for Neumann, he recognizes the decision.
“As a personal note, I think we have great new leadership in the city in Mayor Bach and great and tested leadership on the City Council in President Scott Hente and President Pro Tem Jan Martin. We should support them and trust their judgment.”