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HomeMy WebLinkAboutNatural Gas & Alaska Power, Executive Summary, Alaska Coal & Alaska Power est 1985PTL 020 LIBRARY COPY "NATURAL GAS AND ALASKA POWER" EXECUTIVE SUMMARY "ALASKA COAL AND ALASKA POWER" By Gregg Erickson PROPERTY OF: Alaska Power Authority 334 W. 5th Ave. Anchorage, Alaska 99501 EXECUTIVE SUMMARIES "Natural Gas and Alaska Power" +3 by Gregg Erickson "Alaska Coal and Alaska Power" by Gregg Erickson and Frederick Boness These studies were commissioned by the House Power Alternatives Subcommittee to assess respectively, the policy issues surrounding the use of natural gas and coal to meet future electric power needs of the railbelt area of Alaska. The most significant findings of the natural gas study are as follows: 1. The dilemma posed by the need to meet very uncertain future power needs in the most economical manner is not unprecedented. What most distinguishes the current questions about the choice of generation strategy is that for the first time it is Alaska, and Alaska ratepayers, rather than the federal government that will bear the costs of a "wrong" decision. The greatest advantage to Alaska in pursuing a natural gas based electrical economy in the railbelt, as oppossed to the early construction of the Susitna Project, lies in its ability to meet demand requirements in small increments, wa keeping the risks associated with each increment at relatively low levels. In view of the great uncertainity over future power demand, it may be of substantial benefit to delay for several years a final decision on whether to proceed with the Susitna project. The author finds that an expanded natural gas (and oil) based electrical economy is a viable near term option to the Susitna project. The natural gas resource base in Alaska is sufficently large to ensure that physical availability of the fuel will not be a constraint to any new gas fired generation facilities that could conceivabily be required to meet southern railbelt power needs between now and 1990. If the Northwest Alaska Gas Pipeline is constructed the Prudhoe Bay gas reserves will become physically available to power generation facilities in the northern railbelt in quantities large enough to meet any conceivable generation requirements through 1995, and probably much longer. Completion of the gas pipeline will also result in rapid substitution of gas for electricity in household and commercial applications (space heating, water heating, cooking) in the Fairbanks metropolitan area, thus moder- ating the growth of electricity demand to a level well below current projections. s Because of high levels of gas appliance saturation in the Anchorage area, and the likelihood of increases in gas ‘ prices, it is unlikely that further substitution of gas against electricity will be a significant moderator of demand growth in that area. The expanded use of natural gas (and oil) for power gener- ation is absolutely essential in the near term (to 1990). There is simply no other viable way to meet any growth of power demand in the railbelt area during this period. Costs of power generated by natural gas are subject to a very wide range of plausible estimates. The potentially high costs of electricity from gas, rather than the possi- bility that gas may become unavailable, constitutes the greatest risk in pursuing a "natural gas strategy." Most of the institutional and market factors which will affect the price of natural gas are beyond the control of Alaska. These factors include (a) the fact that the price of Alaska gas is and will continue to be linked to world energy prices, a linkage that will tend to be tighter in the future than it was in the past, (b) the terms and conditions under which Alaska utilities are allowed to use the jtanswenren tin services of the Northwest Alaska gas pipeline, and (c) the prices lower 48 consumers are willing to pay for Alaska gas. 235 10. At. a: The federal Power Plant and Industrial Fuel Use Act (FUA) does not establish conditions requiring Alaska to proceed with the Susitna project, nor does FUA currently present any insurmountable barrier to the continued expansion of gas fired generation facilities in the railbelt. As they currently stand, the exemption procedures in FUA will likely work to give the larger Alaska utilities an advantage when seeking exemptions from the general prohibi- tions contained in the Act. As result of these provisions, most new gas or oil fueled generating capacity in the Anchorage area is likely to be constructed by or under the control of Chugach Electric Association, the State's largest utility. If an export market for Beluga coal should be developed and exploited, FUA (as it currently stands) could be used to require the use of coal rather than gas or oil in newly constructed generation facilities required to meet inceased power demand in the southern railbelt. Future federal action modifying the end use controls embodied in FUA are likely. These changes could close "loopholes" in FUA, but it is more likely that the trend will be to relax the Act's restrictions on gas use. In concluding the study on natural gas the author observes that the "right" choice with respect to Susitna, or some other strategy for meeting future power demand, is as much involved with political and moral judgements about how Alaska should direct its development as it is with the engineering or economic questions being addressed by "experts" concerning the consequences of any particular development path. With respect to coal, the study by Erickson and Boness reaches the following conclusions: 1. Prior studies of coal fired power to meet demand growth in the railbelt area have failed to consider the ability of coal to provide a more modulated pace of development, and thus its potentially greater appropriateness in the face of very uncertain demand projections. De The previous studies have discarded coal fired generation as a possible "best option" on the basis of very narrowly drawn economic criteria, and have thus disregarded the ancillary benefits (and costs) of coal development that would be stimulated by a commitment to coal fired generation. w Previous studies have failed to consider the differing risk dimensions that surround the Susitna Project and the major proposal for coal fired power development at Buluga. They have therefore failed to note the fact that far more of the risks related to coal fired power development are under the control of the State of Alaska than is the case with respect to the Susitna Project. The study finds that an institutional focus for coal power development is necessary if the potential of coal fired electrical generation is to receive an adequate examination. It suggests that this institu- tional "advocacy" role could be best established through direct governmental involvement along with a utility (such as Chugach Electric Association) and a developer (such as PLACER-ALEX) in the necessary studies and consensus building efforts. A joint effort of this sort will adequately test any other choice of generation mode against the full spectrum of coal's benefits and costs.