IBM Leader Tells Vermont Politicians That a 25% Increase in Their Power Bill Would Force Them To Shut Down
Source: WCAX.com (January 26, 2011) IBM warns lawmakers about the loss of Vt. Yankee
Vermont is one of the lucky places where a mature nuclear power plant provides a significant portion of the electrical power. Unfortunately, Vermont leaders are acting a bit like a spoiled heir that has no idea how generous his ancestors have been in leaving behind valuable assets that make his life significantly more luxurious than it would be without that legacy. Those leaders have been working hard for several years to rid themselves of the “burden” of having to perform the occasional roof repairs and seasonal piping maintenance that I described in my post titled 40-year-old nuclear plants can produce electricity that is “too cheap to meter” – that capability angers the competition
On Wednesday, January 26, 2011, corporate leaders from IBM, the mature manufacturing company that is the largest single employer in the state of Vermont held a pointed discussion with state legislators and told them clearly that an increase in their power bill is unacceptable. The company currently pays $35 million per year for electricity and has calculated that their bill may increase by 25%. That is roughly $9 million more per year.
IBM is a well above average employer in terms of pay and benefits, so I would guess that their budgeters would use an average pay and benefits cost per employee of something close to $100,000 per year. If that is the case, the math is simple – an increase in the power bill could lead to a need to lay off 90 people if they have determined that costs have to remain the same.
As the leader points out, IBM competes in international markets where other participants have access to lower cost, often government subsidized power. Raising prices is simply not an option for a manufacturing company that competes in a global market.
I also want to clarify a statement made in the news story and in hundreds of other stories about Vermont Yankee. Ms. Davenport stated that “Vermont currently gets one third of its power from Vermont Yankee.” That is actually a bit of a simplification that can lead to confusion. Vermont actually gets all of its power from a complex machine called “the grid”. Vermont Yankee is one of the more important sources of electricity on that grid; it produces enough kilowatt hours to supply fully 85% of the kilowatt-hours that people and businesses inside the state borders consume each year.
Based on paper documents, it is possible to claim that VY only supplies 1/3 of the electric power in the state, but it is impossible to put manufacturer labels on kilowatt-hours. Once they are put onto the grid, they lose all identity. If the state of Vermont forces a cheap power source off of the grid, costs will increase for everyone else who buys power from that grid. If you live in Connecticut, New Hampshire, Massachusetts, or even Quebec, you have a legitimate interest in Vermont’s decision whether or not to keep operating a local asset.
Aside: I understand the importance of electrical power costs for competitive manufacturers from personal experience; I spent about 3 years as the General Manager of a small plastic injection molding company. We produced products like toys, boat parts and kitchen supplies in direct competition with Asian manufacturers. It was a tiny company so our power bill was not close to IBM’s, but it was equal to roughly 25% of our payroll cost. Any increase in electric power costs without an increase in production would have required a cut somewhere else. Our only choice would have been to reduce wages or reduce head count. End Aside.
Hat tip to Meredith Angwin for pointing to this important story. Meredith is the pronuclear activist who produces the exceptional Yes Vermont Yankee blog. Meredith recently founded the Ethan Allen Energy Education Project to help teach her neighbors about the important role that energy supplies play in modern society. That project deserves your support if you are looking for a way to contribute to improving the human condition.
Every time the media reports on the alleged successes of new wind/solar projects, they count the number of “homes” that will be powered. While not even that is true (intermittency), they never mention factories and businesses.
I am glad you mentioned that the loss of VY will have impacts outside Vermont proper. Here in Quebec we where all told to reduce our electric consumption during the recent cold snap that gripped the North East. We were told that Hydro Quebec’s generating capacity had just about maxed out, and the utility might be forced to resort to rolling twenty minute blackouts if things did not improve. Now in the Provence we have enough hydro to power ourselves many times over, and the bulk of our electricity is exported south, thus we were being asked to limit demand to help service to these markets, Vermont being one of them.
So yes the loss of a major generator in Vermont will have impacts that will effect me personally
DV8XL. I was watching the energy spot market that day. New York ISO, according to Platts, went above $1000 MWh. I didn’t catch it doing that. I did see Vermont and NH and so forth at $200 MWh. VY currently sells at $44 MWh and the grid usually runs at $40 to $80. Interesting that you were told to cut back!
Let’s see, If IBM is paying 35 million a year at 80/MWH, they need 437,500 MWHs of electricity. Assuming a level usuage 24/7 (a false assumption but should give an estimate of the capacity needed), gives us about a 50MW capacity need. With various peaks you would need an 80MW plant feeding IBM just to meet its needs with a small reserve capacity.
So, there are a few ways to look at this.
Loosing IBM would mean that the rest of the grid could balance more easily. With the other companies affected closing as well perhaps as much as 100 MW could be taken off the grid, this is true negawatts. (he said with his tongue firmly planted in his cheek). Amory Lovins pay attention! This is how you need to promote Negawatts!
Another, We would only need 400 to 500 windmills to supply this much power, but we would need some massive UPS’s to backup the slack wind times. (again a bit of sarcasm).
You could have a very large Biomass plant or two feeding IBM. This would make IBM very green (or brown depending on the fuel…).
You could plan to keep Vermont Yankee online until B&W finish the MPower and replace VY with “new” nuclear.
The bottom line here is the difference between a fully amortized capital asset and any ANY type of new generation which would take 10 to 20 years to pay off the loans thus needing to sell their electricity at at least 100/MWH. In running the numbers for a biomass plant in the Midwest we determined that we needed at least 100/mwh to pay off the loan because the loan amortization by itself was 1/2 of our operations costs.
So, will their power bill go up by 20 to 25% if VY goes off line? You betcha. Pretty simple math, even I can do that one.
You can check out latest news on Vermont Yankee here (Jan. 29)
Thanks for the link. The main and glaring oversight in the reporting is the actual potential danger from a tritium leak. Which is basically nothing. They are able to detect these leaks because you can detect a single atom decaying. But, and this is a big BUT, the dangers are so minor than you face a much greater risk walking down the side walk and bumping your toe. The amount of injury bumping your toe would likely be far far greater than if you drank all the water containing the tritium.
The main problem with tritium would be if you managed to breath some in so that the radiation stayed in one location (your lungs) for an extended period unable to be removed by the body. There might be a possibility of some damage then. However, if you drink the stuff, you body would naturally process it with the water you have and remove it after a fairly short period before it could do much damage. Again, when I say damage here, you are looking at picroscopic amounts. (Stubbing your big toe would damage millions more cells).
So, the reporter, by NOT mentioning the actual effects of the tritium release, and by accepting the statement that perhaps the non-functioning machine should have been reported to the health department, was greatly exaggerating the dangers. To put it bluntly – he lied through omission. Great for selling news terrible for making sound decisions about which dangers need to be paid attention to.
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