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HomeMy WebLinkAboutCordova Power Plan, Findings & Recommendations 1986 Alaska Power Authority Cordova Power Plan FINDINGS AND RECOMMENDATIONS CORDOVA POWER PLAN Findings and Recommendations October 1986 Project Team Gwen Obermiller, Project Leader Research Analyst Peter Hansen Rural Systems Engineer Brent Petrie Don Shira Director, Systems Planning Director, Program Development Robert D. Heath Executive Director © 1986 Alaska Power Authority 4026/595/1 fii nts CORK, Cordova Power Plan Table of Contents EXECUEI VG) SUMMA TY <5 c:eicre 0.010 c1cie) «0 cleo] eles (clelersle\esioisiels eleletoleyere 10 BAGKG WOU orercrercisiere)oie\eiclelo/acelelerelslcre(elelelsl slelelers/cclers 50000 2.0 Ongoing Studies and Activities..... pleleraielel ereroreieleleiers 3.0 Scope of Analysis 4.0 Cordova Waste Heat............. elelotleleleieierelere eteterelalere 5.0 CVEA Analysis Blt Se, CASE. cciere ciclatieicieisiclssicleies elelelolelerctereretererelelere 5.2 Silver Lake Hydroelectric Project............ 5.3 Glennallen/Teeland Intertie...........eeeeeee 6.0 Cordova Economic Analysis WES CON HERE corereielcletererelo oreislcloleieleterele cicicicierate letereels 6.1 7.0 CVEA Economic Analysis 7.1 Economic Analysis Parameters and Data........ 7.2 Present Worth Analysis of Alternatives to Serve’ GVEA cc1csrerero1e) 01 cle lo otererole) oisisy sleVelolelelsie' 80! GONG TUSH OM siseyerescieisscisle)oleisle)oe1eiera Bereereeiteleeiteireeirerers 9.0 References.......... ate lelolelsielolet ofe o eleTole]s\ oieieloleyeielersieve\ ae Tables: Table 1 Present Worth Cost of Alternatives - Cordova ANG: GVEA slave oreis srocirinre sieveleisisiereie sieis/s cisieisis. cic Table 2 CVEA Present Worth RatioS..........ceeeeeeeee Table 3. CVEA Present Worth Ratio Sensitivities...... ; Figures: FE GUO Lie ccrere eietelercters Bie oielelelelevelevalerovetotele etoiersisye eiorsreroereraisie e Figure 2.......6. aratorele cloteleloisieleieisletele eeielelorers sfoletohelelerers ofere 4026/595/2 12 12 14 5) 16 18 20 21 18 19 Figure 1 Glennalien CORDOVA POWER PLAN Humpback Creek Prince William Sound Power Creek Eyak Lake ‘es Cordova ~~. “~"s._ COPPER RIVER HIGHWAY ,-” EXECUTIVE SUMMARY An alternative energy generation source for the City of Cordova served by Cordova Electric Cooperative (CEC) has been sought for over 70 years. Potential small hydroelectric sites were identified in the early 1900's by the United States Geological Survey (USGS). The Cordova Power Plan is the result of a study by Stone and Webster Engineering Corporation (SWEC) under the direction of the Power Authority to evaluate alternatives -- diesel, coal, hydroelectric, and interties -- and to formulate energy supply plans. In an interim feasibility assessment, SWEC recommended a 15 MW Silver Lake hydroelectric project with an overhead transmission intertie between Cordova and Solomon Gulch and a transmission tap to Silver Lake. A second alternative of a phased series of small hydro projects for Cordova was recommended. A Preliminary Permit application to the Federal Energy Regulatory Committee (FERC) for the Silver Lake project was approved in March 1983 for three years. Because a transmission line linking Cordova to the Silver Lake project had a cost of approximately $30 million, APA had SWEC eval- uate Silver Lake to serve Copper Valley Electric Association (CVEA) only -- primarily Glennallen and Valdez. This alternative appeared to be more economically sound. APA staff now has updated and reassessed the Silver Lake to CVEA alternative in addition to considering an expanded scenario of Silver Lake to serve CVEA and an intertie from Glennallen to the Teeland substation of the Anchorage-Fairbanks Intertie. This configuration would allow the sale of potential excess power from Silver Lake and Solomon Gulch to customers on the Anchorage- Fairbanks Intertie. In addition during peak use, energy could be purchased from the intertie instead of using diesel generation. The Silver Lake project to serve CVEA without an intertie to the Railbelt proves to be the most economically viable of all the Silver Lake alternatives considered under the analysis assumptions used. The Power Authority has no plans at this time to pursue the Silver Lake Hydroelectric project, and the FERC permit application was allowed to lapse. Lower power cost alternatives for Cordova appear to lie in smaller, capital intensive projects (such as Humpback Creek currently being pursued by CEC); optimizing diesel generation efficiency with waste heat; and plans to reduce fuel prices through methods such as 4026/595/3 -l- greater bulk fuel purchase. The population, energy demand, and diesel fuel prices in Cordova are too low to economically justify a capital project as large as intertying Cordova to Silver Lake or Valdez would be. 4026/595/4 -2- CORDOVA POWER PLAN 1.0 BACKGROUND The City of Cordova is situated on the eastern boundary of Prince William Sound and is accessible only by air and sea. It is a community of approximately 2500 people with an economy based primarily upon seasonal fishing and crabbing industries. Diesel generation is the only present source of power generation for Cordova and its energy intensive canning and freezing activities. An alternative to expensive diesel generation has been sought by the efforts of the Power Authority (APA), Cordova Electric Cooperative (CEC), and the City of Cordova since 1980. CEC has been particularly aggres- sive in searching for a lower cost power alternative. The cost of diesel is higher in Cordova in comparison to other communities in the region. One of the primary reasons is the lack of sufficient bulk fuel storage. Further development of industry in Cordova is felt to be greatly dependent upon a "reasonable" electrical power rate, especially when other communities in the area can offer a more competitive rate due to the development of hydroelectric power for generation. In addition, the future price of diesel fuel is felt to be too unstable for the community to base any substantial amount of commercial development requiring electrical energy. The absence of road access to Cordova has largely influenced the cost of diesel fuel as all fuel must be received by barge. In the 1970's a highway route following the Tasnuna River to link Cordova with Valdez was explored. The community of Cordova rejected that scheme. On October 7, 1986, the voters of Cordova endorsed a new highway route, the Wood Canyon route, which would follow the Copper River to Chitina. No federal approval has been received and there is no money appropriated. The construction cost of a Wood Canyon highway is estimated to be $180 million, which is three times the annual federal grant amount to the region. Project completion for the Wood Canyon route is estimated to be 12 years (by Department of Transportation and Public Facilities, personal communication). Valdez is the city closest to Cordova of sufficient size and substantial enough power supply system to be considered for a "linkup" to provide a lower cost power by taking advantage of economies of scale for cooperative power generation. The distance from Cordova to Valdez is approximately 65 miles. 4026/595/5 -3- Valdez's economy is based primarily on development that has resulted from its position as terminus of the Trans Alaska Pipeline. Copper Valley Electric Association (CVEA) is the utility which produces and distributes power to the area including the City of Glennallen. Sixty-three percent of generation by CVEA is provided by Solomon Gulch Hydroelectric Project -- one of the Four Dam Pool Projects which together have long term power rate agreements for the communities which utilize their power. The Cordova Power Plan was one of the large scale power supply plans envisioned by state leadership in the late 1970's and early 1980's during the period of high state revenues arising from its oil resources. An "Interim Feasibility Assessment for Cordova Power Supply" was completed by Stone and Webster Engineering Company (SWEC) in June 1982. Hydroelectric and coal generation alternatives were pursued in addition to sce- narios of continued diesel generation and several transmission line alternatives. The hydroelectric sites investigated included Silver Lake (15MW), Allison Lake (8MW), Crater Lake (1.2MW), Power Creek (2.5MW) and other sites with less than 3 MW capacity. The coal generation alternatives consist- ed of five scenarios of differing plant size and configurations. Transmission line alternatives pursued were Cordova to Solomon Gulch (three different routings); Solomon Gulch with a tap to Silver Lake, Bering River Coal Field, Usibelli Coal via Whittier; and a line from Palmer (Teeland substation) to Glennallen (Copper Valley). SWEC's three overland transmission line route from Cordova to Solomon Gulch included two coastal routes of approximately 67.8 line miles and one interior route of 132 line miles. The base case was considered in two different scenarios: continuation of the current diesel plant with modification to the plant; and im- proving the efficiency with a waste heat recovery system and/or the construction of a new diesel generation plant. SWEC's primary recommendation for a regional power supply solution was to pursue optimization of a Silver Lake hydro- electric project with an overhead transmission intertie be- tween Cordova and Solomon Gulch and a transmission tap to Silver Lake. The 15 MW project was proposed as a means of economically meeting future generational requirements for the region. A Preliminary Permit for Silver Lake project was granted by the Federal Energy Regulatory Committee (FERC) in March 1983 and expired in the spring of this year. The secondary recommendation by SWEC was to pursue the development of a series of small hydroelectric projects to serve the City of Cordova alone. 4026/595/6 -4- APA staff determined that the cost to construct a transmission line the distance from Valdez to Cordova is prohibitively high. APA staff reviewed the SWEC Interim Feasibility Assess- ment and requested that a 15 MW Silver Lake Hydroelectric Project to serve only Copper Valley Electric (CVEA) be analyzed. This scenario causes the construction cost to be reduced 30% to $68.2 million for both generation and transmission and the electrical load is reduced 25%, making the project much more economically attractive. Table 1 Present Worth Cost of Alternatives 1985 Cordova Present Worth Cost Present Worth ($000) Ratio Humpback Creek Hydro (850 KW) Project Plus Diesel 61,209 1.09 Diesel Base Case 66,449 1.00 Silver Lake Hydro Project 77,976 0.85 Coal Fired Plant (8 MW) 79,199 0.84 CVEA Base Case 106,389 1:0 Silver Lake Hydro Project 84,862 25 4026/595/7 -5- 2.0 ONGOING STUDIES AND ACTIVITIES With some preliminary assistance from APA, Cordova Electric Cooperative (CEC) has completed a final feasibility study of Humpback Creek Hydroelectric Project (January 1986). The proposed 850 KW project is located three miles from Cordova and would generate 3.5 million KWH or 20% of the 1984 gen- eration requirement. Project risk is expected to be within narrow limits as it utilizes proven technology § and construction methods. The construction cost, estimated at $3,250,000, was projected to be met by a state grant of $1.3 million (this amount was in the APA's and the original governor's fiscal 1987 budget), 5% state loan, and CEC contribution. Of the $1.3 million grant amount, $613,600 was appropriated in FY87 and the balance of $686,400 was included in APA's FY88 budget request. Of the $613,600 FY87 funds appropriated, $377,000 is frozen due to the FY87 budget shortfall. In addition, Cordova submitted an application to the Power Project Loan Fund for $1,950,000 and that amount was appropriated to the fund in SLA 1986, Ch. 129. At varying levels of state contribution and loan interest rates for the balance of the construction cost, Humpback Creek appears to remain marginally more attractive than diesel generation. As the project provides only about 20% of the generational needs of Cordova, the cost of power is still closely linked with the more volatile price of diesel fuel. CEC is also investigating the installation of bulk fuel storage tanks which would allow the utility to purchase directly from the distributor and to take advantage of price breaks by buying diesel fuel in much greater quantities than is presently possible. This would aid in maximizing the cost stability for the diesel generation component of Cordova's system, until the load grows to such a level as to justify another alternative generational system. In the four years since the SWEC study was completed, CEC has constructed a new diesel plant -- the Orca plant -- near the ocean dock area approximately 1.5 miles from the original Eyak plant. Two 2500 KW generators were installed as part of a plan to slowly retire the older generators at the Eyak plant. Due to increasing problems over extending the economic life of the Eyak generation plant, CEC determined to proceed with con- structing the Orca plant without waiting for final results of studies for alternative generation. 4026/595/8 -6- Since 1983, CEC also has been investigating actively the pos- sibility of utilizing the vast amounts of waste heat produced in connection with power generation. To illustrate waste heat potential, it can be assumed that for every gallon of oil burned in the diesel generators, one half gallon equivalent of heat can be utilized for heating and process purposes assuming both jacket water and exhaust stack heat are utilized. This number will vary somewhat depending on local factors; actual amounts of useable heat may be slightly less. In 1984 CEC burned approximately 1.2 million gallons of diesel fuel in its generators; thus, initially it can be assumed that 0.6 million gallons of fuel oil equivalent of heat can be utilized from the power plant. It is a common misconception that waste heat can only be utilized in the vicinity near the power plant due to heat losses from insulated pipes over longer distances. The actual heat losses in a system designed to convey hot water from the Orca Power Plant to downtown Cordova would amount to less than 5% of the waste heat available. Based on the very extensive experience gained with waste utilization and district heating in similar climates in northern Europe and on_ recent experience in Alaska, it can be concluded that no technical problems would prevent the utilization of waste heat in Cordova outside the immediate vicinity of the Orca powerhouse. 4026/595/9 -7]- 3.0 SCOPE OF ANALYSIS Finding a cost effective way to tie Cordova into a power grid or to develop a major alternative power project -- which would also meet the total present and projected electrical energy needs of the community -- has been futile thus far. Cordova's geographic location far from any other load center of suffi- cient size to allow economies of scale causes interconnection costs to be _ prohibitive. SWEC estimated the cost of intertying Valdez and Cordova to be approximately $36 million, a cost which would have to be borne by a community with a population of only 2500. To fill Cordova's need for low cost electrical energy, APA staff determined that the most economical approach might be the development of a waste heat recovery system to improve the efficiency of the current generation system and the develop- ment of the smaller hydroelectric projects identified. SWEC pointed out the advantage of phased expenditures possible for the multiple hydro scenario; this phasing has even greater appeal with the advent of falling oi] prices and with expected decrease in state government investment in projects due to greatly decreased oi] revenues. Due to the encouraging results of SWEC's initial analysis of Silver Lake to serve CVEA only, APA staff pursued analysis of this option in addition to several variations. At present, CVEA serves Valdez and Glennallen through a_ transmission interconnection. The scenarios investigated include the 15 MW Silver Lake Hydroelectric Project to serve CVEA alone; and Silver Lake to serve CVEA, with the ability sell its potential excess power generation to customers on the Anchorage- Fairbanks Intertie through an intertie from Glennallen to Teeland substation. Solomon Gulch would also be able to utilize the intertie. There is no economic justification for building the Glennallen/Teeland transmission line without building the Silver Lake Hydro Project. There is not a large enough demand base in the Copper Valley region over which to spread the costs. An exception to this situation would occur only if large development took place along the Glennallen/Tee- land corridor, or if a proposed military backscatter radar in- stallation requiring 10 MW were built in the Glennallen area. 4026/595/10 -8- 4.0 CORDOVA WASTE HEAT The concept of district heating was common in the United States at the beginning of the 20th century. Typically steam was distributed through an underground system to all larger buildings located downtown in city districts. The steam was either generated in large boiler plants or it was low grade steam from a coal-fired steam power plant located in the area. Due to low fuel oi] prices and to the continued use of outdated steam technology, the benefits from centralized heat generation seemed to decrease in magnitude and the concept of district heating was slowly abandoned in many areas. In Europe and especially in Scandinavian countries the idea was kept alive, in part due to higher fuel prices. There, water, rather than steam, based district heating systems became the standard. Pre-insulated systems became common in the 1960's and today such hot water, rather than steam, based district heating systems supply up to 40% of the total heating demand in some countries. Centralized generation of process steam is common in many cities and such systems are often based on waste heat from power plants. The system concept envisioned for Cordova is designed to deliver 100 PSIG steams to the St. Elias and North Pacific Processors canneries. Also, hot water for heating purposes would be delivered to basically any interested party within a reasonable distance from a main line extending from the Orca plant along North Railroad Avenue and Council Avenue to the alley between First Street and Second Street. Branch lines would extend along Water Street to the swimming pool, in the alley between First and Second Streets extending from Davis Avenue to Lake Avenue, along Adams Avenue and Second Street from the alley to the post office, and finally from the hospital along Second Street to the high school. (See map in figure 2). The steam pipe would run from the power plant along the road and across the new industrial fill area to the canneries. This line is envisioned to be a 10-12 inch pre-insulated steel line, possibly with a smaller diameter condensate return. The canneries are currently preparing to start reclaiming their steam condensate; depending on the success of these efforts, it may be prudent to return this condensate to the power plant. In order to meet requirements for fish processing, the steam pressure will have to be at least 90 PSIG. In order to compensate for pressure drops in the line, steam must be produced at 100 PSIG. 4026/595/11 -9- The hot water lines would be standard pre-insulated district heating pipe with a steel carrier pipe foamed in place with urethane foam in a high density polyethylene jacket pipe. The main lines from the power plant to Council Avenue are expected to be 8 inch diameter lines with separate supply and return pipes. Maximum temperature for the supply water would be 200 degrees Fahrenheit. The installation in the power plant will require slight modifications to the engine oil-cooling systems to allow for engine coolant outlet temperatures of up to 200 degrees Fahrenheit. After leaving the engine outlet, the coolant will be fed through a large flat plate heat exchanger, which transfers the heat to the water circulating in the district heating system. If the engine coolant needs additional cooling before returning to the engine, this will be accomplished in the existing radiators. On each exhaust system, the existing muffler will be replaced with an exhaust gas boiler/muffler, which produces steam at 100 PSIG. As mentioned earlier, this steam will be conveyed to the canneries through a 10-12 inch diameter line. During periods with low demands for steam, excess steam will be disposed of in a condenser which is cooled by the water circulating in the district heating system. Initially, no backup boiler is envi- sioned in the power plant. However, as operating experience is gained with the system, customers will get used to viewing the district heat as "firm heat" and the need for keeping individual boiler systems as back up boilers will decrease. At that time it may be advisable to install a backup boiler to secure the supply of heat during power plant shut downs. In the individual user buildings, the hot district heating water will be fed either directly into the boiler return or into a heat exchanger, which transfers heat to the boiler return water before it enters the boiler. It is not envisioned that the boilers will need to provide additional heat; the only reason for maintaining the existing boilers would be the advantage of having an automatic backup system in case of an interruption of service. Experience with Northern European district heating systems has shown that district systems generally are much more reliable than individual boiler systems. Invoicing of individual users could be based on heat meters that measure the amount of heat extracted from the district heating water in the user buildings heating system. Computer simulations indicate that approximately 215,000 gal- lons of heating fuel can be displaced as well as approximately 195,000 gallons of process fuel used in the canneries. Using the above mentioned assumptions together with the Power Authority's standard fuel escalation rate and a base fuel price of $0.935/gallon, the proposed waste heat recapture sce- nario in Cordova shows a 16 year pay back time or a 6.5% in- ternal rate of return. A base fuel price of $0.75/gallon 4026/595/12 - 10 - yields a payback time of less than 19 years. Waste heat projects for utilities the size of CEC is considered feasible if the payback time is within 20 years, it should be noted that these figures do not include an allowance for profit. 4026/595/12.1 - 10A - Figure 2 Cordova District Heating Concept LEGEND: Power Plant Canneries Fish & Game Hotel NBA City Hall Pool Apartments Youth Center 10} Hotel 11) Bar 12] Utility Office 13] Post Office 14] School 15] Hospital 16} High School WONDUNSWNHe ie 5.0 CVEA ANALYSIS 5.1 BASE CASE CVEA's electrical energy needs presently are met through energy from Solomon Gulch and diesel generation located at Glennallen. In the summer Solomon Gulch provides all of CVEA's needs and is estimated to have excess power available. Because the yearly peak electrical energy usage in this area is in the winters, the diesel generators must be used to fill the seasonal gap. The proceeds from the sale of Solomon Gulch's excess in the summer could in part lessen CVEA's system costs of generation. 5.2 SILVER LAKE HYDROELECTRIC PROJECT The proposed 15 MW Silver Lake project is located approx- imately 15 miles southwest from Valdez. The lake flows into the Duck River which then flows into Galena Bay or Prince William Sound. There are no existing facilities at the proposed site and all facility sizes, elevations, locations and capacities described in the following are based on an interim feasibility assessment. The detail studies to be conducted during the period of a permit would finalize the items and be defined in a FERC Application for License. (1) PROJECT COMPONENTS a. Dam and Spillway - The concrete dam would be a 100 to 150 ft. high located at the mouth of Silver Lake. The existing water surface elevation at the site is approxi- mately 306 ft. The lake elevation would be raised to a maximum elevation of about 450 ft. The dam would include outlet and intake facilities complete with gates and trashracks. A spillway would be located either on the southwest abutment or on the dam proper. It would be a non-gated overflow with a maximum crest at approximately elevation 440 ft. b. Pressure Penstock - The water would be transported by a 6,000 foot-long penstock approximately 8 feet in diameter to the powerhouse. The penstock route from the dam would be northwest along the south side of the Duck River to the powerhouse site. The powerhouse site is about 3,000 feet upstream of the river mouth at low tide 4026/595/14 - 12 - and located at the foot of the last downstream major natural falls at elevation 65 ft. c. Powerhouse - The powerhouse would be reinforced con- crete, with approximate dimensions of 80 feet in length, 65 feet in width and 45 feet in height. d. Tailrace - The proposed tailrace would be an open channel weir type constructed of concrete. It would be approximately 40 feet wide and 16 feet long and would discharge directly into the natural Duck River channel at approximately 65 foot elevation. e. Dock and Access Road - A dock would be constructed on Galena Bay on the south bank near the mouth of The Lagoon. An access road would extend from the dock to the powerhouse site and then to the dam area. (2) The proposed RESERVOIR would utilize an existing perched lake with water surface elevation at 306 feet above sea level. The dam at the foot will raise the water surface to a maximum of 450 feet elevation. The surface area would be 1,792 acres, providing approximately 200,000 acre-feet of storage with the water surface at elevation 450 feet. The normal operating maximum elevation of the reservoir would be about 440 ft. increasing to elevation 450 to pass the probable maximum flood. These are approximate elevations that would be better defined during a fea- sibility study. (3) PROJECT PRIMARY TRANSMISSION LINES - A three phase 138 kilovolt line would be constructed approximately 82.8 miles in length. This line would interconnect with the existing distribution systems of Cordova Electric Cooper- ative, in Cordova and Copper Valley Electric Assoc., Inc. in Valdez. A 7200 volt single phase line approximately 9 miles long would be constructed to connect the project with the village of Tatitlek. (4) TURBINE AND GENERATORS - Three turbines are presently proposed, each with a rated capacity of 7,600 h.p. and direct connection to a synchronous generator with a rated capacity of 5,000 KW. Estimated average annual energy produced would be 56.4 million kilowatt hours. The aver- age net hydraulic head is estimated to be 368 feet. The maximum annual project energy production would be 46,700 MWH. 4026/595/15 - 13- 5.3 GLENNALLEN/TEELAND INTERTIE This intertie consists of a 230 Kv transmission line from the Teeland substation on the Anchorage/Fairbanks Intertie to Glennallen (CVEA). The approximate length is 155 miles and it follows the Glen Highway. The transmission line is designed for a peak load of 31 MW at a 0.9 power factor. This proposed scenario would be constructed in tandem with the 15 MW Silver Lake Hydroelectric Project and would allow excess power from the Solomon Gulch and Silver Lake projects to be available for sale to customers on the Anchorage/Fairbanks Intertie. These revenues would partially alleviate the impact of the large capital investment required for project con- struction. In the seasons when additional power is required for operations, instead of operating expensive diesels, power could be purchased from intertie power producers. 4026/595/16 eA 6.0 CORDOVA ECONOMIC ANALYSIS 6.1 WASTE HEAT FOR CORDOVA ELECTRIC COOPERATIVE Based on actual power production figures provided by CEC and variation data compiled at the CEC power plant together with specific data for the generators in use, the available waste heat was calculated for each hour during the year. Based on heating degree variations for Cordova together with fuel consumption data and operational characteristics provided by CEC, the actual heat demand for space heating was calculated for each hour of the year. Based on information provided for the study by the management of the affected canneries, the hourly steam demand was estimated for each hour over the year for the canneries combined. A comparison was made between the available heat and steam and the actual demand. Then the amount of waste heat actually utilized was calculated. At this point, the estimated heat loss for the district heating lines and the steam lines was also taken into account. The waste heat utilized was added up hour by hour for the entire year. With a set of assumptions for load growth over the next 20 years, the same operation was done for each of the next 20 years and the annual fuel savings were derived. Based on current fuel cost and estimated fuel cost escalation together with the cost estimates presented in this report, a cash flow analysis and a pay back time was calculated. The annual operations and maintenance cost for each concept has been estimated at 3% of the construction cost. The estimated cost of waste heat recapture installation is $2.5 million and the economic life of a district heating system is 20 years. 4026/595/17 - 15 - 7.0 CVEA ECONOMIC ANALYSIS 7.1 ECONOMIC ANALYSIS PARAMETERS & DATA All of the intertie scenarios including the Silver Lake Hydro- electric Project projected that the construction process would commence in 1986 and take 4 years to complete. To take into account the longest economic life of the alternatives (50 years for hydroelectric), the study encompasses the period from 1986 to 2039. Solomon Gulch energy sold to CVEA is approximately 35,000 MWH per year. Additional energy of approximately 17,000 MWH is estimated to be available in the summer months; CVEA's peak demand is in the fall and winter, however, and this potential energy is lost at present. In analyzing the Cordova Power Plan alternatives the following assumptions were used: Load: CVEA 1986 energy load - 55141 MWH CEC 1986 energy load - 18201 MWH Load growths for CVEA and CEC are estimated at 3% average annual rate. Capital Costs: 15 MW Silver Lake hydro project (with Cordova) - $98.6 million 15 MW Silver Lake hydro project (without Cordova) - $68.2 million Teeland/Glennallen Intertie - $49.1 million Economic life: Transmission interties with steel towers - 40 years Hydroelectric projects - 50 years. Primary diesel generation - 20 years. Standby diesel generation - 30 years. 4026/595/18 - 16 - 0 & M Costs: Interties - $1500/mile per year. Silver Lake Hydroelectric Project - $984,000 per year. Diesel generation - 2.48 cents/KWH for CVEA 1.75 cents/KWH for Cordova Electric Coop. Diesel fuel: 86.8 cents per gallon at CVEA. 93.5 cents per gallon at CEC. Fuel efficiency for CVEA and CEC is approximately 12 KWH per gallon. Fuel escalation rate is -4% for 1986 0% for 2 years 2% for 17 years For sensitivity analysis: -4% for 1986-88 0% for 17 years Salvage value is done on a straight line depreciation basis. 4026/595/19 oie ae 7.2 PRESENT WORTH ANALYSIS OF ALTERNATIVES TO SERVE CVEA The following table ranks the two Silver Lake alternatives and the Silver Lake project with the Glennallen/Teeland Intertie according to their cost to cost ratios. The Base Case is the scenario with corresponding costs against which all alternatives and their costs are measured. If the present worth of a scenario is less than 1.0, or costs more than the Base Case, then it is not considered as a viable alternative. If the present worth of an alternative is greater than 1.0, it is potentially a viable scenario and further evaluation is justified. As one can see, the Silver Lake Hydroelectric Project that serves only CVEA without the expanded scenario including the Glennallen/Teeland Intertie appears to be the most economic alternative for consideration. This hydro- electric power alternative replaces the remainder of CVEA's generation needs which would be otherwise met by costly diesel generation. In other words, this scenario represents CVEA on total hydroelectric generation, except for 2% that is met by diesel during projected down time of the hydro projects. Table 2 CVEA Present Worth Ratios (1986-2039) Present Present Worth Cost Worth ($000) Ratio Silver Lake Hydro 106,825 Vol? Base Case 124,927 1.00 Teeland/Glennallen Intertie (with Silver Lake Hydro) 169,960 74 The Teeland/Glennallen Intertie does not prove to be economic or feasible due to the large capital cost incurred, even when selling the excess energy from Silver Lake and Solomon Gulch through the Anchorage/Fairbanks Intertie. This might not be the case if a military installation were built near Glennallen and its projected demand of 10MW became a_e“*reality. Development along the corridor might also be accelerated by the availability of electrical power from the transmission line. The sensitivity of the present worth ratios to variations in selected input parameters to help in delineating particular risk scenarios is summarized in the following table. The amount of change in a ratio indicates the degree of sensitivity. 4026/595/20 - 18 - Table 3 CVEA Present Worth Ratio Sensitivity (1986-2039) Base Case Silver Lake +20% Construction Cost 1.0 1.05 -20% Construction Cost aoe Low Fuel Escalation Rate -96 (4%/3 years, 0%/17 years) 0% Load Growth -59 6% Load Growth 1514 4% Discount Rate 1.10 Glennallen/Teeland Intertie & Silver Lake -64 -86 -59 aoe) -85 -68 The sensitivity analyses illustrate that capital intensive alterna- tives are less attractive in times of falling fuel prices and low load growth. However, Silver Lake appears attractive even in light of increased construction costs. 4026/595/21 = 19 - rr 8.0 CONCLUSION At the current feasibility level of information, the proposed 15 MW Silver Lake hydro project remains favorable for further evaluation as an alternative to CVEA's remaining diesel gen- eration. This conclusion seems to hold through the range of variation in sensitivity cases. At this time of falling and uncertain fuel prices, however, the economic viability of Silver Lake could change drastically. Due to current government spending reductions, there are no further plans by the Power Authority to pursue this project unless additional entities request and support it. In spite of the conservative forecasts utilized in this analy- sis, a capital intensive, alternative generation source does not appear to result in low cost Cordova electrical power. While the geographic location of Cordova may be advantageous for the fishing industry, it does not make possible sharing any economies of scale by tying in with any other sizeable load centers. The newly proposed Wood Canyon highway, if constructed, would influence the cost of building an intertie linking Cordova to Glennallen. Right-of-way and clearing costs would be considerably less than intertie construction without a road. It is also unfortunate that no hydro sites of potential to match existing demand exist within a reasonably economic distance from Cordova. It appears, therefore, that maximizing the efficiency of CEC's present diesel generation, pursuing alternatives to minimize unstable diesel fuel costs, and discovery and development of small hydro sites to provide percentages of CEC's electrical needs should be supported. Provided that the cost of fuel remains at or above the current fuel price, installation of waste heat recovery is recommended as an additional way of controlling power costs. An increased population and energy load would enable the economic justification of capital intensive projects in the Cordova area. Short term solutions may well be able to provide the community with a less expensive, more stable power generation source and cost until long term affordable forms of energy generation are attainable. -20- 4026/595/22 9.0 REFERENCES Humpback Creek Final Feasibility Report, Cordova’ Electric Cooperative, Inc., Cordova, Alaska, 1986. Cordova Power Supply Interim Feasibility Assessment, Stone and Webster Engineering Corporation, Denver, Colorado, 1982. Updated Economic Evaluation of Cordova Power Supply Plan, Stone and Webster Engineering Corporation, Denver, Colorado, 1985. 4026/595/23 =a)