Calpine Met Cisco, and Cisco Blinked

Silicon Valley met the energy crisis and backed off, clearing the way for Calpine Corp. and joint-venture partner, Bechtel, to develop a $400 million, 600 MW, natural gas-fired power plant, the Metcalf Energy Center, at the southern-most end of San Jose, CA. If all goes well, Calpine will begin construction this year and have the power plant running by summer 2003.

San Jose Mayor Ron Gonzales, among the last hold-outs opposing the plant after the California governor endorsed it two months ago, announced last Wednesday he had reached a compromise with plant developers and was withdrawing his opposition. A Cisco Systems spokesman, while not issuing an unqualified endorsement, said the company was pleased with health and safety concessions included in the compromise. Cisco, which has fought having the plant in its neighborhood, will continue with its plans for development of 688 acres a half-mile from the proposed Metcalf site to build a $1.2 billion office park complex for 20,000 additional employees, the spokesman said.

"We need power in San Jose and we believe this power plant is needed in San Jose," Gonzales said in a press briefing. He said the city had secured a commitment for two additional air monitoring stations and a reduction in the number of times the plant will start up, since emissions are higher on start-up. Calpine has agreed to a three-month window before the plant opens when San Jose businesses can negotiate long-term power contracts from Metcalf at a below market rate.

The agreement also includes a $6.5 million benefits package for parks and open space, energy conservation programs and assistance to low income power consumers and health insurance for San Jose children. Calpine also has agreed to install new technologies that reduce or eliminate the use of ammonia whenever those systems become economically feasible. Calpine is committed to switching from liquid ammonia to the less hazardous solid ammonia as soon as possible.

Calpine, also based in San Jose, said when it announced the new plant over a year ago, that a new design would result in NOx reduced by 33% from levels already approved by the local air quality district, which would make it the lowest such emissions for a California-licensed power plant. The company had held out against opponents who pushed for other locations, saying the site, less than a mile from critical gas supply pipelines and a major tie-in to the grid through a 50-year-old Pacific Gas & Electric substation, was the only viable one in the Silicon Valley area. The plant will be the first major electric generating plant in Silicon Valley, which sits in a somewhat precarious position at the bottom of a "funnel" of gas and electric transmission lines serving the power-hungry section of the San Francisco Bay Area.

Major electric transmission constraints make Metcalf the only viable site, according to the backers. The nearby 250 KV transmission line coming through the PG&E substation is a major attraction.

"If you put a plant in some outlying area and try to bring the power in, you have to build a whole new transmission corridor," Lisa Poelle, a San Jose-based spokesperson for the project said earlier in defending the plant. "You can't just hook up to the existing transmission lines (in outlying areas). Building a whole new transmission corridor is tougher than building a new power plant. Nowadays it would be a private venture, need property right-of-ways for miles, and it would take years. Maybe six or seven years, and we don't have that kind of time. We are in dire need now."

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