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Home My WebLink AboutThe Lake & Peninsula Borough Regional Energy Plan 2008 The Lake and Peninsula Borough Regional Energy Plan OCTOBER 2008 {(o Information Insights Fairbanks + Anchorage Lake and Peninsula Borough Regional Energy Plan OCTOBER 2008 Mark A. Foster, Screening Study Ginny Fay, Economist Cady Lister, Senior Consultant LAKE AND PENINSULA BOROUGH P.O. Box 495 KING SALMON, ALASKA 99613 war 02 2009 Alaska Energy Authority Attn: Steven Haagen” 813 West Northern Ligh vd. Anchorage, AK 99503 Prepared for Lake and Peninsula Borough Prepared by Information Insights, Inc. In collaboration with Mark A. Foster and Associates & Ginny Fay, Ecosystems (J information insights : ~ The Lake and Peninsula Borough Regional Energy Plan : CONTENTS - ; List Of Figures 0.0... eececeeeeseescseeseseseesesessesecseeesscsessesseaseessesssisesssessseeeeeeees ii List of Tables... cceceeeeeeeeseeccseesseceeceseeesceeesceesscsecacseceesseasiseaseessseeesseees li a Executive SUMMary..........ecccecccsceeseeseeeerceseeeeeceeeceeesseceeeseeeeseeeaeseseeeseeseeeeeeeee 3 Introduction ......ceeeeeeseeeeseeeesceeescseeseseeecseeeceeeessesecsesesseereesessseeessnesseeeeeeeeese 10 Electric oie. eceeesceeeeecseeecseneeeeseseesesscnesessesessesscseessseessesessseesesesasecaeeneaes 12 - Heating oe. cece csecseeeeseeseesesesseessessesseseesueseeessecsseseseseeseeneeeseeeeees 35 - End-USE .0....eecesccescesceeseeeseeseeeseececsceesecnecseeeseeeaceeaeceeeeeeseeeaeseaeeeeeeneseaeeeseees 44 - Tramsportation ..........ceeesesesseeceeeeeeesceseesceseeaceseesceseeseeseeseeseeaeesesseseeeeeeeeeeeeeees 51 Pebble Mine Considerations ..0..........ccseesseeseesesceeesceeeeeeesscseescseseeseteeeeeseees 53 : Appendices 0... eeceeessecsseeeeeeesesseseecscsecscsecseseescsecacsessesesersetessesevseseseeeaeets 58 Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems i LIST OF FIGURES Figure 1 Lake and Peninsula Borough Long Run Forecast - Electric Utility Rate... sees Figure 2 Lake and Peninsula Borough Electric Generation Screening Study Options. Figure 3: Annual Average U.S. Consumer Electronic Electrical Consumption (2006)... “ Figure 4 PCE Utilities - Aggregate Average Cost of Utility Diese! Fuel (1982-2008)... Figure 5 AHFC Weatherization Regions — Lake and Peninsula served by ACDC (DEFINE) and Bristol Bay Housing Authority ...........ceeccceceseeseeeeecseeeeeeeseeeeseenseenaeenaecnaeeaeeeaeseaeeeseeeeeeenees 46 LIST OF TABLES Table 1 Regional hydroelectric projects - RANK OFdeP......... cc eessesssesceseesseeseeeeeeeseeseeeeceessesseeessees Table 2 Wind Class - Project cost and performance, HOMER modeling Table 3 Individual community preliminary reconnaissance level resource assessment - Wind. Table 4 Wind project benefits to communities .. Table 5 Wind project preliminary cost estimates Table 6 Long run cost of wood for space heating —- Lake and Peninsula communities. Table 7 Equivalent delivered cost per end-use heating requirement - Fuel oil versus wood.. Table 8 Fuel oil versus wood cost per unit by community. Table 9 Estimated project cost components: Wood boiler, connections and support systems........ Table 10 School energy consumption - Fuel oil versus wood cost.. Table 11 Potential community savings - Weatherization Table 12 Potential household savings - Weatherization... Table 13 Energy use per year — by BEES energy ratings.. Table 14 Runway extensions - Estimates of fuel cost savings. Table 15 Small scale fuel delivery system — Cost of fuel transportation legs from Kenai ... Table 16 Large scale fuel delivery system — Cost of fuel transportation legs from Kenai... see Table 17 Pebble project potential impacts .............cccscescesceseescescesceseesceseesecaseaeeseesecseeseeaseneeaeeasees ii | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan EXECUTIVE SUMMARY The price of energy in the Lake and Peninsula Borough, as in other rural remote locations in Alaska, increased rapidly over the past four years, peaking during this past summer's fuel barge delivery season, raising the specter that extraordinarily high rural energy costs may drive population to migrate to communities with lower energy costs. This spring the Legislature appropriated hundreds of millions of dollars for efficiency and conservation measures at the household level and development of renewable energy sources on the local and regional level. This summer the Legislature approved a resource “dividend” of $1,200 per person to share the wealth from high oil prices and help households with high energy and related costs. In response to the rapid increase in energy costs, the Lake and Peninsula Borough contracted with the project team to assist in evaluating energy opportunities in the region and development of a Borough energy plan. The project team conducted a screening study for the Borough that considered the economics of a range of options in electric generation, space heating and transportation. This screening study identified the projects with the highest potential for reducing energy costs and developed the recommendations described in this report. Development of renewable resources offers attractive projects for many communities in the region but will take considerable time and money. Demand side management, energy efficiency and conservation can offer more immediate relief in every community in the Borough. The primary source of imported energy in the Borough is diesel. A community’s ability to obtain reasonable pricing for diesel fuel drives space heat affordability and the cost of electric generation. It is worth noting that many entities within the Borough are working together and actively pursuing opportunities for joint purchasing. Joint fuel purchasing is occurring in many communities — driving down the unit price of fuel and helping to ensure regular delivery. The Borough could take an active role in creating the structure under which all fuel purchases in the region occur in a coordinated way, creating larger volume and lower unit cost. The Alaska Village Electric Cooperative (AVEC) along with several school districts in its Western Alaska region, provides a successful model for cooperative fuel procurement. Consolidating fuel purchases in an area could save smaller buyers on the order of 25 cents per gallon. Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 3 For the purposes of outlining the energy needs and potential solutions for the Borough, this report is presented in five sections: electric generation, space heating, energy efficiency and conservation, transportation, and the Pebble Mine project. An appendix provides technical backup and details of the analysis. A brief summary of opportunities and findings is outlines below. e Electric generation: Despite its high cost, diesel with secondary heat recovery, a.k.a. “waste heat,” remains competitively priced compared to many other electric generation alternatives. In some communities, diesel prices have become high enough to warrant _ serious investigation of alternative generation resources. The most promising alternative electric generation opportunities are: hydro/wind/intertie serving the three Chignik communities and wind development in other communities in the region including: Pedro Bay, Port Alsworth, Egegik, Iliamna, Newhalen, Nondalton, Port Heiden and Pilot Point. These alternatives have the potential to reduce the cost of electricity by as much as 15c/kWh. In-stream turbines and geothermal electricity may be technically feasible, but small scale remote rural developments may not be economic without further sustained increase in the cost of imported diesel and identification of high quality local resources. Two communities, Igiugig and Port Alsworth, are exploring potential in-stream resources in the hopes of identifying a reliable energy source with environmental benefits and price stability. Since the PCE program covers a significant portion of household electric bills, most of the monetary savings associated with electric generation alternatives will be shared between commercial/government customers and the State of Alaska through a reduction in PCE support to the utility serving that community. Median households will not see a significant decrease in their energy bills. Thus, the Borough should continue to work with the Alaska Energy Authority to finance projects that will reduce the cost of electricity and reduce the need for PCE support. e Heating: The Lake and Peninsula Borough has a high penetration rate of high efficiency direct vent heating units relative to other rural areas. These units offer such dramatic improvement over older less efficient heating units that it is worth continued efforts to ensure that these units are utilized in homes and small businesses where they are not currently utilized. Where wood is, or can be made available, Alaskans are turning to wood as an 4 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan alternative to fuel oil. The Borough should continue to support the Bristol Bay Housing Authority’s initiative to provide wood stoves in new housing and explore whether opportunities exist to retrofit wood stoves and wood boilers for existing houses. In addition, the schools in the Lakes area may be able to utilize high efficiency wood boilers to supplement their existing heating systems which rely on a combination of fuel oil and secondary heat from diesel electric generation sets. Initial screening suggests that at least seven communities may have the local wood resources necessary to provide supplemental space heat with estimated net savings of $18,000 per year. Even with oil as low as $70/bbl and heating oil prices in the $4 per gallon range (equivalent to $340 per cord), wood remains an attractive option at $200 to $250 per cord. The biggest savings can be found by applying new wood burning technology to larger buildings in the community, e.g. schools. Energy efficiency and conservation: The least expensive unit of energy is the one that is never used. Not only are energy efficiency and conservation cheaper than other options, but they also are the fastest to implement. Rural Alaskans already practice conservation in many ways and on average use considerably less energy than their urban counterparts. There are, however, significant potential savings in energy efficiency measures that will have little impact on delivery of the energy-end-product, i.e. heat, light, and other consumer uses. Energy efficiency options are evaluated for electric, space heat and transportation. The Borough can play a lead role in encouraging the adoption of energy efficiency and conservation measures. End-use efficiency measures offer opportunities for savings at any price level. State sponsored programs such as the Home Energy Rebate and Weatherization programs run through the Alaska Housing Finance Corporation offer assistance in determining the best measures and paying for their implementation. Housing stock in the Lake and Peninsula Borough that is more than five years would likely benefit from the energy efficiency measures these programs offer. Potential household savings range from $927 to $1,718 depending on consumption and the price of fuel. Opportunities to save electricity can be found in almost all households, businesses, schools, government buildings and commercial facilities. Measures to reduce electric consumption include: lowering the temperature on hot water heaters, replacing old Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 5 light fixtures with new efficient lighting (T-12 to T-8 fixtures and incandescent to compact florescent bulbs), and replacing old refrigerators with efficient models. It is recommended that the borough lead by example and implement energy efficient procurement policies as well as support the development of commercial and residential building energy codes. e Transportation: in the long run, improvements in the transportation infrastructure in the region can make a significant reduction in the cost of importing energy and other goods. The potential savings of the Pile Bay Road on delivered fuel costs in seven Lake and Peninsula Borough communities may range from $1.23 in Nondalton to $1.82 per gallon in lgiugig compared to flown-in fuel. Annual estimated savings for the villages are substantial, totaling between $1.3 million to $1.5 million depending upon future economic growth in the area. The communities of Igiugig, Kokhanok, Nondalton and Pedro Bay have limited barge service and would benefit from reduced unit costs for fuel if their local runways were extended to accommodate larger aircraft. e Pebble mine: Regardless of whether Pebble Mine is developed, many energy initiatives, including energy efficiency, implementation of a building energy code, weatherization, and wood space heating should help reduce the cost of energy in the Borough. If Pebble continues with the exploration and preconstruction phases, there may be opportunities for the cooperative purchasing of diesel for electric generators, space heating and transportation fuels that may lower prices for Borough residents. If Pebble proceeds to construction and operations, the Borough may benefit from a combination of importing power from the Railbelt and further development of local larger scale hydro resources. In addition, the lower cost of generation associated with imported power and larger scale hydro may be sufficient to justify the development of a regional electric grid providing power from Port Alsworth all the way over to Dillingham and Manokotak, up to Koliganek and down to Egegik. 6 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Recommended Action Plan The price of basic fuels in the Lake and Peninsula Borough, as in other remote rural locations in Alaska, has increased by more than a factor of three over the past five years, peaking late this summer at levels as high as $9 per gallon for heating oil (crude oil peaking at $147/bbl). Unfortunately the fuel price peak occurred at the same time as the summer fuel delivery season and many communities filled their tank farms with diesel and heating oil priced based on those record oil prices. While crude oil has rapidly declined and is now trading around $50/bbl, roughly comparable to the summer of 2005, the residents and businesses in the Borough face three main energy challenges: 1. The immediate short term challenge of heating their homes and businesses with extremely expensive heating oil purchased during this summer's peak 2. Next summer's challenge of buying heating oil and diesel utility fuel while the US and world economy cools rapidly and Alaska’s economy adjusts to the rapid decline in oil prices 3. The long term challenge of highly volatile fuel prices that could very well run back up to $85/bbl to $120/bbl by 2015." Immediate Short Term Action Plan The Alaska resource dividend of $1200 per person that arrived in September may have provided short term relief from high energy prices this fall, but the high price of fuel from this summer’s delivery is likely to persist throughout the winter and into next spring. To help provide relief to residents and businesses this winter the Borough should: 1. Identify a local lead person to sign up at least a dozen local households to participate in the AHFC weatherization/energy grant program and schedule a village visit by a home energy auditor as soon as practical 2. Work with the Bristol Bay Housing Authority to identify people who can accompany the home energy auditor(s) and provide, at a minimum, *immediate* caulking, sealing, furnace, toyo or wood stove tune-ups and chimney cleaning for households, commercial and government facilities 3. Identify a local lead person to quickly assess whether the local wood supply is adequate to meet local demand for supplementary wood heat. Where additional wood supply may be of high value, seek quotes from wood supply vendors to import wood and relay the quotes back to the local lead who can then attempt to round up enough orders to make a winter wood delivery worthwhile. ' $85/bbl - NYMEX Crude Oil Contract, 2015 Delivery (Week of November 17-21, 2008); $120/bbl — IEA World Energy Outlook (November 12, 2008). Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 7 4. Apply for low interest loans from the AHFC and AEA where appropriate to enable up- front funding of weatherization, heating, and energy grant efforts (raters and contractors) for households and businesses and leverage equity participation by government facilities 5. Contact Steve Osborne, Alaska Inter-Tribal Council, to coordinate delivery of 100 gallons of free heating fuel for those communities in the Lake & Peninsula Borough who wish to participate in the free fuel program. Next Summer’s Fuel Supply Action Plan Convene a meeting this winter with fishing, mining, tourism, government, native and tribal entities, other interested parties and local residents to explore a cooperative fuel purchase arrangement for next spring/summer. Engage Roger Kemppel to talk about lessons learned from other fuel cooperative purchase arrangements and his assessment of when it might make sense to buy a fixed price long term fuel supply or other fuel price hedging strategies. Long Term Action Plan 1. Support the AHFC weatherization/energy grant program (funding + training of front line auditors and contractors) to ensure local residents have an opportunity to participate in the program in a timely manner 2. Support funding for the Williamsport-Pile Bay road to reduce the cost of delivering fuel ~ to the villages in the Lakes region; this could save on the order of $1-2 per gallon compared to flown-in fuel 3. Support funding for lengthening runways out to 4000 feet where possible; this could save on the order of $1.50 per gallon by enabling DC-6 vs. C-46 fuel deliveries : 4. Support grant applications to explore the feasibility of supplemental wood heat for schools in the Lakes Region” 5. Support grant applications to explore feasibility of hydro/wind power and electrical interties in the Chigniks® 6. Support funding for roads in the Chignik area to reduce the cost of transportation and reduce the cost of electrical interties to enable the area to share high value hydro and wind resources 7. Support grant applications to explore the feasibility of wind power opportunities in - Pedro Bay, Port Alsworth, Egegik, I-N-N, Port Heiden and Pilot Point* — 8. Support grant applications for in-stream vertical axis turbine demonstration projects in Igiugig and Port Alsworth ? Grant application filed with AEA Renewable Energy Program > Grant application filed with AEA Renewable Energy Program _ “ Grant application filed with AEA Renewable energy program 8 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan 9. Monitor the development of energy supply options for the Pebble Mine to ensure that those options enable local residents and businesses to participate. Continue to explore the potential for development of the Newhalen River hydroelectric project to complement power imported via high voltage interties and provide local employment opportunities. Continue to explore the potential for a regional electric grid to enable reliable cost effective sharing of regional hydro and wind resources from the Lakes region down to Egegik and over to Manokotak and Aleknagik. 10. Continue to seek regional partnerships to provide cost effective and reliable operations, maintenance and management support to local utility and fuel supply operations Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 9 INTRODUCTION The purpose of this project is to provide the Lake and Peninsula Borough with an energy plan that will serve the needs of Borough residents, offer relief from high energy costs and facilitate a more sustainable future. A sustainable energy future is one in which individuals, businesses and industries have access to reliable and affordable energy. Sustainable energy forms a key component of an atmosphere in which businesses can thrive, and it is an essential piece of the infrastructure of a healthy community. Energy prices in the Lake and Peninsula Borough have risen dramatically during the past five years and are poised to continue to rise in the future. The median household income in the Lake and Peninsula Borough is roughly 40 percent lower than the statewide median- yet the cost of living is considerably higher. In addition to higher heating and electricity prices, the high cost of fuel affects all consumer goods transported to the Borough. Diesel is the dominant energy source for the Lake and Peninsula Borough communities. The price of energy in the Lake and Peninsula Borough is primarily driven by the price of crude oil that provides feedstock for diesel, heating oil, gasoline and aviation fuels. Over the past five years, the price of crude oil has ranged from $30/bbl to $147/bbl and has recently fallen to below $70/bbl. Over the past six months, the Alaska Energy Authority (AEA) has been using long term oil price forecast values of $100 to $110/bbI as a benchmark for economic studies. Oil Price Assumptions The price of energy in the Lake and Peninsula Borough is primarily driven by the price of crude oil that provides feedstock for diesel, heating oil, gasoline and aviation fuels. Over the past five years, the price of crude oil has ranged from $30/bbl to $145/bbl. Over the past twelve months the price has gone from roughly $60-$70/bbl in the summer of 2007 up to a peak of $145/bbl in mid-summer 2008, and has fallen back down to below $70/bbl in October 2008 and remained below $70/bbI despite OPEC commitments to reduce supply . While many energy analysts have revised their price outlook for crude oil as financial and commodity markets have deflated and become highly volatile over the past 60 days, this same set of analysts still see supply constraints becoming a prominent consideration over the next several years after the current recessionary trends abate, lending continued support for a long- term price forecast of around $110/bbl.° > While in mid-October, Merrill Lynch, Citigroup, Deutsche Bank and Goldman Sachs had revised their 2009 oil price outlooks down to $75-$90, they were still predicting supply constraints and demand from emerging economies will lend support to $100-$110/bbl oil on the five year planning horizon. 10 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Thus, for the purpose of considering long-term infrastructure investments with useful lives typically ranging from 10 to 40 years (or potentially even longer in the case of hydroelectric) The screening study for this energy plan uses a long-term oil price benchmark of $110/bb!l for screening energy resource options. All of the utility scale capital investments that appear economically attractive in this screening study should be reviewed prior to financing and final commitment of capital funding to ensure that they continue to provide net benefits to local residents based on the best information available at the time concerning the range of future oil and delivered energy prices in Alaska and capital cost projections.° Consistent with AEA and UAA ISER fuel supply studies in 2008, we used the historic relationship between the price of crude oil and the price of refined fuels delivered to individual communities as the basis to estimate the long run delivered price of fuels to the local communities in Lake and Peninsula Borough. Based on a benchmark price of $110/bbl oil, the delivered price for utility diesel fuel ranges from $4.50 to $7.00 per gallon across the Lake and Peninsula Borough. The delivered price for fuel within individual communities varies depending upon whether the fuel was delivered by barge or airplane, the extent to which the cost of local storage and handling is included in price (or is subsidized), and the subsequent handling and administration associated with local fuel delivery. Within an individual community, the price for diesel/heating oil can vary from $1 to $2 per gallon — and the electric utility and school experiencing the lowest prices with the highest posted prices for heating oil for residences and small commercial and government facilities. The Alaska Rural Energy Plan, based on 2002 fuel costs, indicated widespread opportunities for cost-saving measures from end use efficiency, diesel generation efficiency, diesel combined heat and power, and wind energy.’ Renewable energy resources, available in some form throughout Alaska,® hold potential for displacing diesel fuel, reducing and stabilizing energy costs, stimulating local economic development, reducing fuel spills, and decreasing air pollution and greenhouse gas emissions. 6 We note that if one of the major energy infrastructure projects were ready to advance to finance and construction phases today, we would encourage the project sponsors to consider the risk/reward profile of the project under $50, $110 and $150/bbl oil (2008$) scenarios. It would also be appropriate to adjust the capital cost estimates to reflect energy project infrastructure costs consistent with each of those oil price scenarios. For example, as oil prices have returned to $70/bbl this past week, many capital cost estimates for projects to be built in 2009 and beyond are being adjusted to reflect lower material, equipment, labor costs and higher financing costs. Conversely, in a $150/bbl high oil price scenario, capital cost estimates may have to be increased even higher to reflect both higher construction and higher finance cost outlooks. 7 Foster, Mark A. in collaboration with Northern Economics, Inc. Alaska Rural Energy Plan, Initiatives for Improving Efficiency and Reliability. Anchorage: Alaska Energy Authority, 2004. ® Crimp, Peter and Reuben Loewen, Mia Devine, David Lockard (Alaska Energy Authority), Project), Chris Rose and Hannah Willard (Renewable Energy Alaska and Inc.), and Dan Rathert and Matthew Johnson (Resource Data. Renewable Energy Atlas of Alaska. Anchorage: Alaska Energy Authority and Renewable Energy Alaska Project, 2007. Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 11 ELECTRIC The results of the electric energy screening study support the following energy project | initiatives: 1. Chigniks Hydro/Wind Feasibility Study a. Chignik Bay, Chignik Lagoon, Chignik Lake 2. Regional Wind Recon/Feasibility Study a. Pedro Bay b. Port Alsworth c. Egegik d. Iliamna-Newhalen-Nondalton e. Port Heiden f. Pilot Point 3. Lakes Region School Supplemental Wood Heat Design Project a. Pedro Bay b. Kokhanok c. Nondalton d. Newhalen e. Port Alsworth 12 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Electric section Outline Q Screening Study Introduction a Cost of Power — Remote Rural a Price of Power — Power Cost Equalization (PCE) Q Tipping Point for Commercial/Government Customers without PCE to go “off-grid” and self-generate Q Forward Looking Electric Utility Options o Economic screening, including operational support © Supply Side: Generation and Transmission o Regional Systems vs. Island Systems o Newhalen Falls Diversion Project with Regional Grid = With and without industrial load o Industrial load served by Intertie with Railbelt + Regional Grid o Island Systems = End-use efficiency = Diesel with secondary heat recovery = Hydroelectric = Wind = Wood Boilers in combined heat and power applications = Geothermal = Tidal = Others Q Candidates for Further Development Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 13 Introduction This screening study compares the forward-looking costs of electric service in Lake and Peninsula Borough communities using various generation technologies, including diesel, hydro, wind, biomass, geothermal, household and neighborhood scale micro wind/solar/hydro hybrid systems, solar PV and end use efficiency. Cost of Power - Remote Rural Communities The total cost to provide electric service in remote rural communities includes the costs associated with electrical generation plus the cost of general and administrative activities and distribution system maintenance. Figure | below shows the total cost for electric energy generation by fuel and operations and maintenance cost as well as general administrative costs. For six communities in the region local mini-scale systems appear to be currently competitive. Figure 1 Lake and Peninsula Borough Long Run Forecast - Electric Utility Rate $1.00 5 $0.90 = Fuel+O&M = # General & Admin $0.80 $0.70 $0.60 4 $0.50 $0.40 $ per kWh (2008S) $0.30 I-N-N G&A includes $0.10 hydroelectric $0.20 $0.00 Price of Power - Power Cost Equalization (PCE) Program PCE program provides 95 percent of difference between cost of power and “urban average” for up to SOOkWh per month for residential customers and up to 70kWh/mo/person for community facilities (water, sewer, outdoor lighting, charitable education organization not funded by state or federal funds, public non-profit, etc.) 14 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan The apparent price for residential customers frequently approaches 20c/kWh, taking into account the net effect of the PCE credit and monthly consumption that exceeds SOOkWh. The apparent price for commercial/government facilities tends to more directly reflect actual cost and runs from 45c/kWh up to 90c/kWh across Lake and Pen communities. Tipping Point for Commercial/Government facilities without PCE Support As the cost to provide central small scale power in remote rural communities increases above $0.50 to $0.60 per kWh, there appears to be a point at which the cost and performance of central station diesel fired power becomes less attractive than the cost and performance of small scale systems that take advantage of the combination of wind/solar/diesel and/or micro- hydro hybrid systems at individual buildings, e.g., schools, clinics, fish processing plants, and remote resorts. While in theory the local utility could attempt to reduce its general and administrative overhead allocation to these prospective self-generators in order to price electricity at a point where they are motivated to stay on the system, it appears more likely that these small central station diesel based utilities have two practical choices. One, they can find a locally practical alternative that is less expensive than diesel or, two, they can lose customers to less costly self- generation alternatives. With the loss of any significant customer, small utilities are quickly exposed by having relatively fixed general and administrative costs spread over fewer and fewer kWhs. Thus, as the price of power increases above $0.50 per kWh, we recommend that the Borough and its local community and utility examine whether it might make more sense to 1) allow the development of more cost effective small household and small commercial systems, or 2) find a local generation resource that is less costly than diesel in order to keep the price of electricity under the price where customers are motivated to self-generate. (See Figure 1 for the total price of electricity in Lake and Pen communities that may still have a local central station diesel plant) In Kokhanok, Igiugig, Egegik, and Pedro Bay, where the long run cost of diesel-generated electricity ranges from $0.70 to $0.85 per kWh, the Borough should proceed to quickly explore the cost of practical locally available alternative generation resources in order to avoid rapid loss of government and commercial customers who do not receive PCE support to self- generation. For Levelock and Pilot Point, where the long run cost of diesel-generated electricity is in the $0.60 per kWh range, the hurdle rate of changing to a new unfamiliar system may slow the loss of non-PCE customers to self-generation. Nonetheless, the Borough should proceed to investigate the cost of practical locally available alternative generation resources in order to avoid loss of non-PCE customers to self-generation and to reduce the overall cost of service compared to continued reliance on diesel. Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 15 Electric Utility Alternatives When comparing energy resource alternatives for an existing electric utility, we focus on the long run forward-looking cost of each type of electrical generation system and assume that the general and administrative costs of the utility remain unchanged by the choice of generation systems. We have developed estimates for the forward-looking long run cost of several technologies that appear at least potentially attractive for remote rural Alaska to ascertain which resource - options appear the most promising and to estimate their potential value relative to the existing primary reliance on diesel fired electricity and secondary heat recovery. The economic screening analysis takes into consideration of long-term operational support for - various systems. First, it is useful to keep in mind that diesel systems have considerable installed base and operational support systems and as a result have lower incremental capital and operating costs compared to most other alternatives. New capital-intensive systems face the daunting challenge of finding and sustaining effective operational support in remote rural markets where adequate maintenance of well-known and robust energy systems can be problematic. Some systems are relatively low maintenance and will run indefinitely with modest maintenance. Other systems may not survive the many challenges of remote rural Alaska. - Neil Davis Energy Alaska cites the short-term proliferation of wind turbines in the 1980s and subsequent disappearance in the 1990s. In contrast, Skagway has a hydroelectric power plant operated by Alaska Power and Telephone that has been in essentially continuous operation for just over 100 years. While a particular solution may appear promising, it may not be ready for widespread commercial deployment in remote rural Alaska. Thus, while wind may have sufficiently matured to warrant further investigation and potential investment at this time, several technologies that are in development, e.g., tidal, in-stream hydro, may not be ready for more than selective demonstration projects at this time. Other technologies like geothermal might be promising, but the cost to prospect or the cost to move a community to a high quality uo geothermal site can quickly overwhelm the potential cost savings. Thus in this analysis we have tried to focus on energy solutions that are economic, which includes consideration of the risk of being able to sustain successful operations of relatively new technologies to a particular region where the established base of experienced operators u may be limited. 16 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Figure 2 Lake and Peninsula Borough Electric Generation Screening Study Options @Diesel Electric $0.60 $0.50 — $0.40 na eo S So x ei = 0.30 = I-N-N: This represents the & roughly 6% of kWhs An generated by diesel; balance generated by 0.20 existing hydro resources, incremental cost of hydro i < $0.05/kWh Peak shaving may be 0.10 attractive at first blush, but needs to be balanced against net energy provided by diesels producing electricity and 0.00 secondary heat sont oo" et ae ot Xa yer yor oot aN 8 oe 19 iN aw o a yu‘ an ot on oe 9 oot ao? wo =o wor ew eae vor —=“et oO ow Figure 2 summarizes the projected cost of providing electricity using existing systems, which are predominantly diesel engine generator sets with secondary jacket water heat recovery to offset heating oil requirements. Iliamna-Newhalen-Nondalton (I-N-N) Electric Cooperative uses a small (920kW) in-river hydro plant to provide over 90 percent of its energy needs, using diesel to back-up and supplement the hydro. In those communities served by diesel engines, end-use efficiency measures, e.g., converting lights to compact fluorescents (CFLs), replacing old inefficient electric appliances (refrigerators, freezers) with new efficient appliances, remains a very cost effective resource — costing somewhere on the order of 10c/kWh to 20c/kWh depending largely on the cost to procure, mobilize, distribute and install efficient appliances and lighting community wide programs.’ ° We note that the economic case for the replacement of incandescent lights with CFLs in Iliamna, Newhalen and Nondalton, which receive 94% of their electricity from run of river hydropower, may not be compelling where the Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 17 We also note that end-use efficiency measures have the potential to reduce the demand for electricity in the short term. However, over the intermediate and long term, even with increased penetration of more efficient lighting and appliances, electrical demand tends to grow, particularly as people become relatively wealthier. Figure 3: Annual Average U.S. Consumer Electronic Electrical Consumption (2006) Consumer Electronic Avg. Electrical Consumption 700 600 —— ~ 500} - > = 400 feos = 300 200 is I. 100 o ae -a de I i. xe PS Oo & x i ra " RK & we & = Ss ye & & Source: MAFA Analysis of Electronics Industry Survey Data, 2007 A recent micro illustration of these macro phenomena can be found in the proliferation of consumer electronics, see Figure 3 above, especially big screen televisions and entertainment centers. Even while the efficiency, as measured in energy required per square inch of screen has improved by a factor of 2, the overall size of the TV has increased by a factor of 4 or more, resulting in an increase in power demand on the order of 2 over previous types of TVs. And the old TVs tend to remain in the home providing service to other rooms. The proliferation of increasingly energy efficient gaming systems (as measured by speed/graphics resolution per watt of power) has also resulted in a net increase in power demand. At some point people’s interest in lighting, home appliances and home entertainment devices may be satiated and their electrical demand may plateau and end-use efficiency measures may result in net energy conservation per household. But given current market trends, it appears that most rural communities, like their suburban and urban counterparts, have households who are continuing to purchase household appliance and entertainment systems as their budgets allow. reduced heat contribution from the incandescent bulb may be made up with expensive heating oil and the incremental cost (and price) savings on electricity is modest. Switching to exterior LED Christmas lights on the other hand, may be worth considering during the low water winter months to avoid the need for diesel-fired electrical generation to meet winter peak load requirements. 18 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan So, for this screening study, we find that end-use efficiency is a very attractive approach to providing more value for each dollar spent on electricity. We also do not anticipate that end- use efficiency measures will have a significant impact on the overall demand for electricity since most of the households in the region do not appear to have reached a point where they believe they have too many electrical devices in their homes and we assume they will continue to purchase new and improved electrical devices and use them as their disposable incomes allow. Regional vs. Individual Island Electric Systems I-N-N Electric Cooperative provides an example of the beginnings of a regional electric system with a central power generation plant and a multi-community distribution system. It pursued the successful development of the $11.6 million 920 kW Tazimina run of river hydroelectric project and interconnected the hydro project with the three communities of Iliamna, Newhalen and Nondalton.*° Over the years the Tazimina hydro project has supplied as much as roughly 95 percent of the energy supply requirements of I-N-N Electric Cooperative." A prominent example of a larger scale potential regional project is the Newhalen River Diversion Project (16MW, <10% of stream flow) with a Bristol Bay regional grid (including Dillingham) that was found to be the most cost effective electrical project in a 1982 Stone and Webster regional feasibility study. It was estimated to have a life cycle cost on the order of 65 percent of diesel and 71 percent of Tazimina hydro (1MW) plus diesels for the balance of the region.” In other words, using the assumptions of the day (circa 1982), a large hydro project with a regional transmission grid was projected to be roughly 30 percent to 35 percent /ess costly than diesel or small hydro mixed with diesel alternatives. Newhalen River Diversion Project + Regional Grid (2008 Update) To illustrate the potential for an efficient large-scale electrical generation plant and regional grid to serve the area, we reviewed the project file on the Newhalen Diversion Project and Regional Grid (Alternative B-14) identified in the 1982 Stone and Webster Study and updated its cost assumptions based on: 1. Current trends in a. Capital and operating cost quotes for civil, electrical, mechanical, and transmission costs on hydro projects, b. Project procurement structure where the design and build phase have become consolidated into an Engineering, Procurement, and Construction (EPC) contract package, © See http://www.arctic.net/~newhalen/Tazfolder/Tazimina.html for additional details. ' PCE Statistics " Bristol Bay Regional Power Plan Interim Feasibility; Stone and Webster Engineering Corporation, for Alaska Power Association; July 1982; Executive Summary, Volumes | and 2, DOE Library. Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 19 c. Environmental assessment and permitting, d. Cost of right of way acquisition, and 2. Consultations with engineers with Alaska hydro experience as to cost effective modifications they might make in the design now that we have collectively accumulated over two decades of experience since the previous conceptual design and estimate.*? The updated estimate of the total project cost of the Hydro project and Regional Grid is roughly $290 million, $150 million for hydro and $140 million for a regional transmission grid.’ Based on an aggregate average long run cost of diesel fuel throughout the region of $4.50 per gallon, a 16MW hydro + regional grid project appears to yield a benefit/cost ratio of 0.83-—a result driven in part by excess capacity in the early years combined with the loss of roughly 2.2 million in high priced diesel kWhs that have subsequently been replaced by the Tazimina hydro project.*> The project can be rescaled to 8MW with corresponding increases in unit cost to roughly $12,000 per kW to achieve a break-even with the existing mix of diesel and hydro generation facilities.*® If additional industrial loads could be attracted to connect to the grid, e.g., fish processing, fish freezer facilities, Pebble Mine, a 16MW project appears economically attractive, achieving a benefit/cost ratio of 1.13 assuming diesel at $4.50."” Depending upon the potential for industrial loads to be added, the hydrology of the river may allow for additional capacity and output to be utilized, especially at high water flows that were associated with making the Newhalen Falls impassible for fish migration in previous studies. The appropriate balance between hydroelectric capacity, river flows and diversionary flows is beyond the scope of this screening study.?® Thus, at a reconnaissance level it appears that the Newhalen River + Regional Grid has the potential to provide lower cost power to the region. Those benefits may be enhanced if additional loads can be signed up to enable the hydro development to achieve greater economies of scale. 3 Among others, MAFA had conversations with Earl Ausman, PolarConsult and David Vogel, Bristol Environmental, on the Newhalen River ' See Appendix B: Newhalen River Project + Regional Grid Total Project Cost '5 See Appendix C: Newhalen River Project + Regional Grid Local Load Scenario '® See Appendix D: Newhalen River Project + Regional Grid Local Load Break-Even Scenario "7 See Appendix E: Newhalen River Project + Regional Grid — Industrial Load Scenario '8 Please note that we have substantially increased the budget for environmental assessment over prior estimates to reflect current and projected higher standards for assessment and mitigation considerations in hydro project development. 20 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Railbelt Intertie Another potential means to provide power to a large regional grid is to build an Intertie to the Railbelt, tying into natural gas, hydro, coal, and large-scale fuel oil generation options. The 1982 Stone and Webster study found a large intertie from the Chugach Electric Beluga Power Plant on the west side of the Cook Inlet that interconnected to a regional grid with local diesel back-up would cost on the order of 35 percent more than a large local hydro project providing the base load for the regional grid. Subsequent reconnaissance studies concerning how to provide 100MW — 200MW of power to the potential Pebble Mine have included a submarine cable electrical Intertie from the Kenai Peninsula across the Inlet plus on overland transmission line to the Pebble Mine. For a first order of magnitude estimate of the cost of power delivered into the region using this approach, we updated our estimates for 230kV submarine and terrestrial transmission facilities including recent reductions in the cost of materials. Based on this analysis, we estimate that the delivered cost of power from an HEA intertie and source of supply might be on the order of 24c/kWh.*® While it appears that importing power from the Railbelt and distributing it via a large regional grid might be on the order of 10-15 percent less than distributing power over that regional grid from a local large scale hydro project, our estimates are preliminary reconnaissance level estimates that are not sufficiently well developed to be able to use them to definitely distinguish between alternatives that appear this close. In either event, unless a local community has a high value adjacent generation resource, like the Indian Creek hydro project for the Chigniks mentioned below, it appears that a regional grid that distributes power from a large scale in-region hydro project or imported power from the Railbelt may be competitive with individual island electric utility systems served with diesel fired electrical generation. Other Regional Developments We note that Nushagak Electric has recently revived other small-scale localized hydro projects, e.g., Lake Elva and Lake Grant in the Wood Ticchik State Park, for further consideration. To the extent that these may get built to meet more localized needs, they may diminish the net total benefits available from a larger scale hydro development and regional transmission grid. Given what appears to be a continued preference for more expensive small-scale local projects rather than a large-scale project with a regional transmission grid, we focus the balance of our attention on smaller scale (IMW and less) local hydro developments. We have included data in Appendix G on a few of the larger projects as benchmarks against which to compare other projects. 1° See Appendix F: Power Supply from HEA to Pebble Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 21 Island Systems Basic energy options include: Q_ Diesel with secondary Heat Recovery, Hydroelectric, Wind, Wood Boilers — electric + heat, Geothermal, Tidal, In-stream hydro, Solar PV, micro-scale hybrid systems (10kW) Basic Diesel Generated Electricity with Secondary Heat Recovery With the exception of the Tazimina hydro project serving Iliamna-Newhalen-Nondalton (I-N-N), the electric generation picture in the Borough is dominated by diesel engine generator sets. _ One of the reasons for the continued reliance on diesel is that, while it has experienced a dramatic increase in price over the last four years, if you look back roughly 25 years, the basic price pattern is two price peaks separated by roughly 25 years of relatively low, non-volatile diesel fuel prices. See Figure 4 below. For the most part, PCE utilities over the past 25 years have improved performance through increasing fuel efficiency and generating more kWhs while managing non-fuel cost growth. A few utilities invested in alternatives to diesel where they had relatively attractive local resources — wind in Kotzebue and along the West Coast, hydroelectric in Southeast and near I- N-N. With the recent run-up in diesel fuel prices to a level that is more than twice the apparent long term average in real terms, there is considerable interest in alternatives to diesel. The key challenge we face in evaluating alternatives to diesel is whether we assume this most recent price spike reflects a fundamental change in the balance between supply and demand and, unlike a hundred years of prior price spikes in oil, the price of oil will remain roughly twice as high in real terms as it has over the past 140 years. For the purpose of this screening analysis, we’ve adopted what we would characterize as the consensus price forecast of energy industry analysts.”° After period of depressed prices over the next few months — down to around $50-S70/bbI - due to financial shocks and softening of demand due to a flat economy (declines in U.S. and Europe offset by continued, albeit slower, growth in China), as demand re- emerges, prices will return to around $100/bbl (2008S) due to ongoing limitations on the supply side. ?° See for example, Wall Street Journal, Financial Times, and the Oil & Gas Journal reporting on energy price movements and energy analyst price forecasts over the past three weeks (October 2008) as forecasts have been revised to reflect the financial crisis and anticipated downturn in many economies. 22 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borouah Reaional Enerav Plan Figure 4 PCE Utilities - Aggregate Average Cost of Utility Diesel Fuel (1982-2008) PCE Utilities - Aggregate Average Cost of Utility Diesel Fuel $3.50 EE $3.00 $2.50 “ S ° S —*Real $ —® Nominal $ e a 3 $ per gallon (2008S) $1.00 $0.50 $0.00 SESE EEE SEE EES EEE SEE EE OEE EEE ES Crude Oil at $100/bbI amounts to $2.38 per gallon of crude. Based on historic patterns of refinery margins and delivery margins to rural Alaska communities, we’ve estimated the delivered price of diesel fuel to Lake and Peninsula communities will range from $4.30 a gallon on the South Coast (Chigniks) to almost $7.00 a gallon for relatively small quantities of diesel fuel flown in to Igiugig and Kokhanok. Fuel efficiencies for the small-scale diesel utility operations typical of the Borough runs from 11 to 13 kWh per gallon. This results in a fuel cost of $0.35 to $0.56 per kWh. Add maintenance and operations, overhauls and capital replacement and the price for diesel electricity ranges from $0.40 to $0.61 per kWh.” Because a significant number of the utilities recover the heat from the diesel engine jacket water and use it to reduce heating oil purchases, we’ve adjusted our “diesel base case” to reflect the value of the secondary heat that would be given up if an alternative to diesel is deployed. We note that this approach is consistent with the AEA’s energy studies dating back to the early 1980s. The net result is a net cost of diesel electricity that ranges from $0.33 per kWh (Chigniks) up to $0.50 per kWh (Igiugig, Kokhanok). See Figure 2 It is against this diesel-fired electricity + secondary heat recovery base case that we compare various electric generation alternatives. *! See Excel Workbook tab “Tech Screening Electric” for detail of assumptions and calculations. Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 23 Hydroelectric Opportunities Alaska has over a century of cost effective development of hydroelectric resources in remote rural areas. The Alaska Energy Authority archives and hydroelectric project database reference a number of potential hydroelectric projects in the Lake and Peninsula Borough. Most of the more detailed reconnaissance and feasibility studies date to the 1978-1983 timeframe when oil prices were high and oil had begun to flow in the TransAlaska Pipeline System and state tax collections followed. The 1982 Stone and Webster Bristol Bay Regional Power Plan identified several economically attractive hydroelectric projects.’? These projects are identified in economic rank order in Table 1 below. Table 1 Regional hydroelectric projects - Rank order Project Life cycle cost of service Newhalen 16MW Run of River + Regional Grid (RG) $189,000,000 Alternative A-1 (Verify components) $213,700,000 Kontrashibuna Lake (16MW Tanalian River Dam + RG) $226,800,000 Intertie to Railbelt (Beluga Power Plant) + Regional Grid $255,000,000 Tazimina River (16MW with regional grid) $261,500,000 Tazimina River (1 MW with local INN grid) $267,100,000 Base Case (Diesel w/secondary heat recovery) $291,000,000 If the Lakes and Upper Peninsula and Dillingham region had joined together to develop the top ranked 16MW Newhalen River run of river fisheries enhancement project, electric rates might be on the order of 20c/kWh (without PCE) and electric heat could become an alternative to fuel oil consistent with the experience of the Four-Dam Pool communities’ as the price of fuel oil has climbed in recent years. In addition, the region would be interconnected with electrical interties that would more readily enable sharing of new wind, geothermal and hydro resources throughout the region. » Bristol Bay Regional Power Plan Interim Feasibility, by Stone and Webster Engineering Corp; for APA; July 1982; BRI 013, Executive summary, volumes | and 2; DOE Library °> We note that Sitka’s experience with the growth in hydroelectric supplied electric heat has lead them to actively explore expansions in their hydroelectric system capacity and to add new hydro projects to their generation mix. See for example, “Electric vs. Oil Heat cost” (September 2005) available at: http://www. cityofsitka.com/dept/electric/Documents/Electric%20vs%200iI%20Cost%20Comp.pdf and “‘Sitka’s Power Supply Plan” (January 2008), available at: http://www.cityofsitka.com/deptelectric/PowerGeneration.html 24 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan However, the development of cost-effective hydroelectric projects has faced two key constraints - patience and capital. When oil prices declined in the mid-1980s, the rapid reduction in the availability of state grant funds caused many to retreat to smaller scale lower capital cost alternatives, most prominently diesel-fired electric generation. I-N-N Electric Cooperative provides an example of an exception to the general retreat. It pursued the successful development of the $11.6 million (nominal $) 920 kW Tazimina run of river hydroelectric project.** Over the years the hydro project has been able to supply on the order of 96 percent of the energy supply requirements of I-N-N customers. Going forward, some of the relative value of a larger scale 16 MW Newhalen hydro development with a regional grid has diminished with the construction of the predominantly grant funded 920kW Tazimina run of river project (0.92MW). In addition, Nushagak has recently revived other more expensive small-scale localized hydro projects, e.g., Lake Elva and Lake Grant in the Wood Ticchik State Park, for further consideration. To the extent that these may get built to meet more localized needs, they will tend to diminish the net total benefits available from a larger scale hydro development and regional transmission grid. Given what appears to be a continued preference for more expensive small-scale local projects rather than a large-scale project with a regional transmission grid, we have focused our attention on smaller scale (IMW and less) local hydro developments. We have included data Appendix A on a few of the larger projects as benchmarks against which to compare other projects. We reviewed the AEA’s hydroelectric project database, archival studies, and consulted with engineers who participated in the hydro reconnaissance efforts over the past three decades. We screened out projects that were rated poorly in prior screening studies based on high cost. We then updated individual project cost estimates to ensure they reflected reasonable estimates of capacity, capacity factors, firm annual energy and did a quick reconciliation and interpolation of stream flow (cfs) and head (ft) data from various studies to ensure they reflected the most current information readily available in the archives. Then we updated the construction cost and total project cost estimates to 2008S using the U.S. Army Corps of Engineers Public Construction Cost Indices. We adjusted the total project cost estimates to ensure they had an adequate (42%) allowance for owner’s costs, including planning, design, permitting, right of way (ROW) acquisition, legal, and regulatory. We then benchmarked the Tazimina Falls reconnaissance and feasibility study estimates against the actual project cost of the 920kW Tazimina Falls project completed by I-N-N in 1997. It appears that the 1987 feasibility study estimated the project cost at $29,400 per kW of capacity (2008S) and that the 1997 actual project was completed for roughly $18,900 per kW of capacity (2008S) — a 33 percent reduction in the unit cost of the project due in part to installation of larger capacity turbines to better utilize available stream flows. Thus, we believe that the Stone ** See http://www.arctic.net/~newhalen/Tazfolder/Tazimina.html for additional details. Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 25 and Webster project cost estimates, though potentially conservative on the high side, remain - reasonable first order estimates for the purpose of a screening study. LAKES In the absence of significant load growth or the desire to resurrect a regional transmission grid, the existing Tazimina Falls hydroelectric project provides on the order of 92 percent of the electrical energy for Iliamna-Newhalen-Nondalton and diesel use is limited to peaking requirements during periods of low water and high demand. To the extent that the potential exists for large load growth, we note that the Taminina Falls hydro project capacity could be expanded and that the Newhalen River Project, rated as the least cost alternative in prior reconnaissance studies, appear to remain attractive cost effective candidates for expanding electrical generation. - In the meantime, in the absence of a large new load, the communities served by hydro-centric ; I-N-N may wish to explore peak shaving measures to avoid diesel peaking. Among other things - that have been effective in these situations in Alaska are electric water heating interruptible rates. CHIGNIKS The Chignik Alaska Draft Small Hydropower Feasibility Report and EIS, by the Army Corps of Engineers (ACOE) (July 1984) conducted a study of the Packers Creek, Mud Bay Lake, and Indian Creek drainages around Chignik. Indian Creek, with a potential head of 409ft and modest flows on the order of 22 cfs, appeared to be the most cost effective electric project in the area. Based on the updates to the prior study to use a consistent minimum mark-up on construction cost estimates to reflect total project cost including owner’s costs for planning, design, permitting, etc, and the synchronization to 2008S construction costs, the reconnaissance level estimate for the long run levelized cost of electricity from Indian Creek is 23¢/kWh - roughly 40 percent below the projected cost of electricity from diesel generator sets with secondary heat recovery (38¢/kWh).”° In addition, it appears that the cost of electricity from the Indian Creek hydro project is roughly 25 percent less than the potential cost of electricity from a Chignik area wind project (30¢/kWh; discussed in more detail in the wind section following). We also note that the monthly correlation between rain and wind in the Chignik area raises the possibility of being able to size hydro, wind and diesel back-up resources so as to take advantage of each resource’s cost and availability to optimize the system to meet both the winter and summer peak loads in addition to overall energy production requirements.”° a > See Appendix D for economic benefits and costs for the Indian Creek Hydro project for the Chigniks. See Appendix E for the electric rate impact analysis for the Indian Creek Hydro for a projected with 80% grant support. ?6 See Appendix C for initial reconnaissance on the hydro, wind and load profiles. = 26 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan In addition, there is an interest in exploring whether Chignik Lagoon can be cost effectively interconnected with Chignik (approx. 5 direct map miles) in order to be able to share the wind, hydro and back-up diesel generator resources. Thus, a feasibility study to optimize the location, generation mix and timing of hydro, wind, and diesel backup resources, taking into account the cost associated with the challenging terrain for electrical interties, would be extremely timely and could save government, commercial facilities and the PCE program on the order of 33 percent per kWh compared to the current diesel- dominated mix of generating resources.” Wind It appears that several Lake and Pen communities have sufficient wind and high enough diesel fuel prices to warrant further investigation into local wind prospects, a good location with affordable real estate, environmental assessment, permitting, and further refinement of cost and benefit estimates prior to seeking financing, if appropriate for a wind power project. Table 2 describes project costs associated with wind energy development for different classes of wind resources. Table 2 Wind Class - Project cost and performance, HOMER modeling Wind Class 3 4 5 6 7 Net capacity factor 18.0 % 21.5 % 24.5% 30.0 % 40.0 % Total project cost ($/kW) $ 7,500 $ 7,500 $ 7,500 $7,500 | $7,500 Levelized capital cost ($/kW-yr) $ 602 $ 602 $ 602 $ 602 $ 602 Turbine replacement cost ($/kW) $ 2,500 $ 2,500 $ 2,500 $2,500 | $2,500 Levelized capital cost ($/kW-yr) $ 76 $76 $ 76 $76 $76 Total capital levelized cost ($/kW-yr) $ 677 $677 $ 677 $677 $677 Fixed O&M ($/kW-yr) $ 120 $120 $ 120 $120 $ 120 Total levelized cost (capital + O&M) ($/kW-yr) | $ 797 $ 797 $ 797 $ 797 $ 797 Net annual production (kWh-yr/kW) 1,578 1,885 2,148 2,630 3,506 Levelized cost of electricity ($/kWh) $0.51 $ 0.42 $ 0.37 $ 0.30 $ 0.23 Source: MAFA Analysis of Wind Project Cost and Performance Data, HOMER Modeling (2008) Wind Resources Review - We reviewed the National Renewable Energy Lab high-resolution wind maps, weather station wind data, wind data from met tower studies, wind data collected by the Pebble Partnership, the wind data available on the AEA web site, including the Bristol Bay Native Corporation Wind and Hydroelectric Feasibility Study (March 2007), Independence Power and Energy Consulting LLC Wind Resource Assessment Report City of Chignik Bay (March 2006), and performance data from Port Heiden micro wind turbines to identify potentially °7 Our high level estimate of savings, assuming that the hydro resource may lose some modest amount of capital efficiency as it is scaled down to more closely match load and complementary diesel back-up resources during the feasibility study/conceptual design. We also note the existence of a micro-hydro resource near Chignik that generated roughly 10,000kWhs, or 2% of the total kWh’s generated in FY2008 and similarly a micro-hydro resource near Chignik Lagoon generated roughly 7,000 kWhs in FY2008. Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 27 attractive wind resource candidates for wind power in or adjacent to Lake and Pen communities. Wind Project Cost Updates - We updated wind power economic reconnaissance studies from the Renewable Power In Rural Alaska: Improved Opportunities for Economic Deployment, by Crimp, Colt, Foster (2007) to reflect September 2008 vendor quotes for 2009 construction year projects for engineering, permitting, procurement, construction and integration of wind power with existing diesel-fired electrical generation systems, an allowance for interties to connect the wind resource to the power plant, and testing and training of local site personnel. We also collected 2008 cost data on micro wind/pv/diesel hybrid systems. Table 3 Individual community preliminary reconnaissance level resource assessment - Wind Community Wind Power | Wind Power Diesel w/2nd Class - Class - Local Wind LCOE heat recovery - Wind Savings NREL Maps | Met Data |_($/kWh) LCOE (LCOE) Pedro Bay 7 $ 0.26 $0.51 $ 0.25 Kokhanok 7 6 $ 0.34 $ 0.56 $ 0.22 Newhalen, lliamna, Nondalton (diesel peaking) 6 $ 0.34 $ 0.46 $ 0.12 Igiugig 4 $ 0.42 $ 0.56 $ 0.13 Pilot Point 5 $0.41 $ 0.47 $ 0.06 Port Alsworth 5 $0.41 $ 0.45 $ 0.05 Chigniks 5 6 $ 0.34 $ 0.37 $ 0.03 Egegik 5 $0.41 $0.41 $ 0.00 Port Heiden 5 4 $ 0.42 $0.45 $ 0.03 Levelock 3 $0.51 $0.51 ($ 0.00) ($ 0.04) High value opportunity Good opportunity Investigate Wind Opportunity if other cost effective options are not available Marginal 28 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Table 4 Wind project benefits to communities Total annual value of Wind Gal/kWh Displaced Annual value Incremental avoided displaced diesel | diesel fuel | Long runcost | of diesel fuel diesel O&M diesel fuel kWhs/yr_ | Community diesel kWhs efficiency gallons of diesel avoided avoided and O&M 290,000 | Pedro Bay 174,000 0.0694 12,083 6.20 $74,917 3,480 $78,397 450,000 | Kokhanok 225,000 0.0806 18,145 6.90 $125,202 4,500 $129,702 650,000 | Newhalen. anna, 325,000 0.0732 23,792 $5.60 $133,236 6,500 $139,736 Nondalton 230,000 | Igiugig 69,000 0.0935 6,449 6.90 $44,495 1,380 $45,875 400,000 | Pilot Point 160,000 0.0895 14,324 5.75 $82,363 3,200 $85,563 640,000 | Port Alsworth 256,000 0.0769 19,692 5.50 $108,308 $5,120 $113,428 900,000 | Chigniks 450,000 0.0930 41,860 4.28 $179,163 9,000 $188,163 640,000 | Egegik 256,000 0.0769 19,692 4.95 $97,477 5,120 $102,597 620,000 | Port Heiden 186,000 0.0833 15,500 5.50 $85,250 3,720 $88,970 Table 4 above shows the estimated benefits of wind projects to communities in the Lake and Peninsula Borough. Benefits include displaced diesel and the avoided cost of the fuel itself as well as the avoided operations and maintenance costs of traditional energy generation. Table 5 on the following page describes the cost estimates associated with these projects, integrates benefits data and presents simple payback and a benefit/cost ratio. ** (diesel peaking kWhs) Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 29 Table 5 Wind project preliminary cost estimates Turbine Installed Annual Net annual Simple replacement capacity Capital cost | O&M benefit payback cost kWhrs/yr | Community k' $) ($) ($) ears) ($) BIC ratio 290,000 | Pedro Bay 65 $520,000 11,700 $66,697 8 162,500 2.0 450,000 | Kokhanok 100 $800,000 17,000 $112,702 7 250,000 1.7 650,000 | Newnalen. yamine, 130 | $1,040,000 | $22,100 $117,636 9 325,000 1.4 230,000 | Igiugig 65 $487,500 $7,800 $38,075 13 162,500 13 400,000 | Pilot Point 65 $520,000 10,400 $75,163 7 162,500 1.2 640,000 | Port Alsworth 130 | $1,040,000 20,800 $92,628 11 325,000 14 900,000 | Chigniks 200 | $1,600,000 34,000 $154,163 10 500,000 1.1 640,000 | Egegik 130 | $1,040,000 20,800 $81,797 13 $325,000 1.0 620,000 | Port Heiden 100 $750,000 12,000 $76,970 10 250,000 1.1 As demonstrated in the table above, all of the communities with identified wind energy generation potential have B/C ratios of one or greater. The communities with a simple payback period of less than 10 years include Pedro Bay, Kokhanok and Newhalen/Iliamna/Nondalton. Levelock and Nondalton (as a standalone) do not appear likely to benefit from a local wind project. Nondalton, by virtue of being intertied with the Tazimina hydro system, could benefit from wind resources developed in the \liamna/Newhalen area. *»’ (diesel peaking kWhs) 30 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems Tne Lake and Peninsula Borough Regional Energy Plan For the most part, it appears that the wind prospects that pass our initial economic screen are likely to have a class 4 or higher wind power regime which makes them potential candidates for “high penetration” wind systems that provide for systems to store the energy from the high wind when the electrical system cannot take all of it at once. The storage of the excess wind energy is often referred to as the “dump load.” In small systems, the dump load may be a battery bank. In more sophisticated systems the dump load may be an electric boiler, high temperature bricks, a flywheel, or other energy storage system. A key challenge in these high wind locations is to find a cost effective way to store the extra wind that might be generated so that it can be put to productive use reducing the need to burn heating oil. It is not uncommon to find that a simple battery storage system is more cost effective than more sophisticated, and potentially more complicated to maintain, systems with newer energy storage technologies. We defer the consideration of the most appropriate dump load technology to the preliminary design and feasibility study phase. Wood Boilers in Combined Heat and Power We reviewed the wood biomass reconnaissance studies from the Renewable Power In Rural Alaska: Improved Opportunities for Economic Deployment, by Crimp, Colt, Foster (2007) and focused on refining cost estimates for smaller scale <250kW wood biomass power plants.° It appears a 100kW scale wood electric + heat power plant might result in a long run life cycle cost on the order of $0.40/kWh where a substantial local wood fuel supply is available. At first blush, this alternative appears competitive with flown-in diesel with secondary heat in the Lakes region, $0.50/kWh. However, it appears that these Lakes Region communities have other alternatives, e.g., hydro, wind, that appear to be lower cost than wood boilers. In the event that the hydro and wind alternatives to not appear viable, the local wood supply should be more closely assessed to determine whether adequate supplies are available for electrical generation. Geothermal We relied upon two primary sources to develop a first order estimate of the cost of geothermal electricity in the Borough. The first is the SAIC Report (2005) on the Geothermal Potential for Chena Hot Springs outside Fairbanks. We used the performance parameters from that site investigation, which included drilling to characterize the geothermal resource, flow parameters, and estimated lifespan of the field, to establish a “base case” for performance parameters. We used the MIT Study on The Future of Geothermal Energy (2007) for basic assumptions about cost/performance of geothermal power plants for lower 48 locations based on specified performance parameters. We adjusted those lower 48 costs to reflect the cost challenges of remote rural Alaska and normalized them on the performance parameters SAIC estimated for 3° See Appendix J: Wood Boilers for assumptions and calculations. Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 31 the Chena Hot Springs resource in order to develop a very rough first order of magnitude cost estimate for potential geothermal resources in the Borough. The net result of the analysis is that if a community is currently sitting on top of a geothermal resource comparable to Chena Hot Springs, we estimate the cost of electricity will be on the order of $0.32 per kWh. To that base price we need to add the cost of prospecting, drilling to confirm the quality and quantity of the geothermal resource, and the cost to build an electrical intertie from the geothermal resource to the local community (or the cost to move the local community to the geothermal resource). Working back from the cost to build an electrical intertie from our local community to the geothermal power plant, unless the geothermal resource is located within 10 miles of one of the communities where fuel is flown in, diesel appears to remain a lower cost alternative. If one adds in the cost for prospecting including drilling to find an adequate resource, it appears that geothermal is unlikely to be more cost effective than diesel. In those communities where fuel is barged in, unless the geothermal resource is located within four or five miles from the community, diesel appears to remain a lower cost alternative. Again, if one adds in the cost for prospecting including drilling to find an adequate resource, geothermal quickly looks more expensive than diesel. Finally, we note that in response to inquiries concerning the potential for geothermal in the Lake & Peninsula and Bristol Bay region, we examined oil and gas exploration well log information for the purpose of reviewing data related to geothermal performance. Based on that paper prospecting and matching up the well log temperature data at depth to the performance parameters in the MIT Study on The Future of Geothermal, we believe our use of the Chena Hot Springs geothermal performance parameters as a benchmark may be optimistic. While the geothermal gradient is high as one would expect from the volcanic activity in the area, it does not appear high enough to provide an economic prospect for small remote rural communities that are not currently situated right on top of the resource. Tidal In addition to reviewing the proceeds of the Ocean Energy Conference held in Ketchikan last year, we relied on the “North American Tidal In-Stream Energy Conversion Technology Feasibility Study,” Roger Bedard, Ocean Energy Leader, Electric Power Research Institute (EPRI), July 11, 2006, and the International Energy Agency, “Energy Technology Perspectives, Scenarios & Strategies to 2050,” OECD/IEA, 2006 and 2007, to benchmark cost and performance data, bring the costs to 2008S, adjusted them to Cook Inlet Alaska and then adjusted them to reflect the added costs of small scale and remote rural construction mobilization down along the peninsula. In the case of the EPRI Study (2006), we adjusted the estimates for the specified Cook Inlet Alaska project (1S5MW) to include owner’s costs including site investigation and geotechnical, environmental assessment and permitting. We then adjusted the resulting cost to reflect remote rural project development and construction relative to the Cook Inlet and further 32 | Information Insights, Inc. —- Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan adjusted the costs to reflect the installation of two 220 kW units along the coast in the Borough rather than 66 units in the NREL Cook Inlet Project Study. We estimate the total project cost of a 15MW installation in the Cook Inlet might result in a life cycle cost of 11-12c/kWh, presuming it can get permitted in light of the potential for Beluga Whale and Salmon concerns. The net effect of our adjustments is that we estimate the total project cost to develop a remote rural tidal power site in the Borough with 2 each 220kW in-stream tidal turbine units with a tidal current resource comparable to the Cook Inlet would be on the order of $0.40-0.50/kWh. Along the coastal communities where tidal would be applicable, it appears that the cost of diesel electricity from barge delivered diesel fuel remains a lower cost alternative. In-Stream Hydro We were asked to examine the economic prospects for in-stream hydro for Igiugig on the Kvichak River. We reviewed the NREL report on the potential for in-stream hydro at Igiugig (2007) and used the monthly stream flow data from that theoretical analysis to drive the published performance curves for a 25kW Encurrent-025-F4 in stream vertical axis water turbine. Based on data from other Encurrent turbine quotes in Alaska and an estimate of total project cost (including environmental assessment and permitting) to develop a 25kW scale system in igiugig that would be integrated with the local small-scale diesels, it appears that even if we assume utility diesel fuel is flown in for a total cost of $7 per gallon (FYO8 PCE fuel cost reflecting prior year’s inventory was $4.26), the benefit cost ratio of 0.78 indicating it is not economic at this time. Nonetheless, the theoretical potential for in-stream hydro remains promising. In light of the relatively early stage of development for this technology, it may be appropriate to consider pursuing a demonstration project for Igiugig. Solar Photovoltaic (PV) We reviewed solar PV cost and performance for remote rural sites in Alaska. It appears that solar PV power, on a stand-alone basis, in the Borough would result in reliable low maintenance solar electric power on the order of 80c/kWh — 100c/kWh. It still appears to be on the order of 2X as expensive as diesel assuming $100/bbI oil. Solar PV remains an attractive for installations where the noise and emissions associated with diesel may not be acceptable on a constant basis. It also remains an attractive alternative for remote locations where access by people is infrequent, e.g., remote communications mountaintops. Micro-Scale Wind Solar PV Hybrid Systems Based on conversations with representatives from Renewable Energy Systems (Anchorage) and informal quotes for equipment, we estimate that small-scale (18kW) wind/solar PV hybrid systems with diesel and battery back-up have life cycle costs on the order of $0.50 per kWh. In communities where utility scale hydro, wind, wood and geothermal may not be available and diesel fuel is flown-in, the life cycle cost and relatively low maintenance profile of these systems may provide a cost effective, convenient and reliable alternative for small lodge owners, Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 33 commercial and government facilities compared to a local diesel utility, especially if the local utility has reliability and power quality issues. Economic Analysis BASIC ASSUMPTIONS Real Discount Rate = 5% (State of Alaska Opportunity Cost of Public Funds) Economic Life Hydro 50 years Interties 30 years Wind 20 years Diesel Gen Set 10 years Wood Biomass 20 years Geothermal 20 years Tidal 20 years Solar 20 years Diesel fuel price projections $110/bbl oil 5 ¢/gallon ultra low sulfur diesel fuel market premium 25¢/gallon cost associated with CO2 emissions tax/cap and trade program Screening Study Methodology Estimate Long Run Levelized Cost of Electricity based on: a Capital Cost * Annualized Capital Recovery Factor = Annualized Capital Costs a Annual Fuel Cost a Annual Fixed + Variable O&M Cost a Replacement Cost * Sinking Fund Factor = Annualized Capital Costs to Replace Key Components Q =Total Levelized Cost of Electricity (LCOE) 34 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems Tne Lake and Peninsula Borough Regional Energy Plan HEATING Based on our initial screening study of household and schoo! heating system opportunities in the Borough, we recommend: a Continuation of public education efforts to ensure that any remaining households that ' have not yet installed high efficiency direct vent “Toyo” type heating units are well aware of their benefits compared to older less efficient central oil-fired furnace or boilers a Continuation of the Bristol Bay Housing Authority practice of installing wood stoves as a supplemental and back-up heating source in all new homes © Net Fuel Savings = $2,400 per year © Total Capital Cost = $6,000 per household Q Exploration of the use of high efficiency low emissions wood boilers to provide we supplemental heating for schools and teacher housing in the Lakes region where robust / wood supplies appear available © Net Fuel Savings = $18,000 per year © Total Capital Cost = $157,000 per school Heating Oil Price Projection Consistent with AEA and UAA ISER fuel supply studies in 2008, we used the historic relationship between the price of crude oil and the price of refined fuels delivered to individual - communities as the basis to estimate the long run delivered price of fuels to the local communities in Lake and Pen. Based on a benchmark price of $110/bbI oil, the delivered price for PCE utility diesel fuel ranges from $4.50 to $7.00 per gallon across Lake and Pen communities. The delivered price for fuel within individual communities varies depending upon whether the fuel was delivered by barge or airplane, the extent to which the cost of local storage and = handling is included in price (or is covered by an external subsidy), and the subsequent handling <! and administration associated with local fuel delivery. Within an individual community, the price for diesel/heating oil can vary from $1 to $2 per gallon — with the electric utility and school experiencing the lowest prices with the highest posted prices for heating oil for i Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 35 residences and small commercial and government facilities. To simplify the analysis, we adopt a benchmark cost of heating oil that is $1.20 per gallon above the projected cost of electric utility diesel fuel. Wood Heating Fuel Price Projection Wood has historically been used for heating where supplies are readily available, e.g., the Lakes Region. Communities with limited local wood resources throughout Alaska have begun to import wood by ocean and river barge where importing wood is less expensive than importing fuel oil supplies. Where local wood is available, we estimate a market price of $200 to 250 per cord. Where wood will need to be imported, we estimate a market price ranging from $250 to $400 per cord depending upon delivery and local storage requirements. Thus, for our initial screening study, we have adopted the cost estimates for wood and fuel oil, summarized in Table 6 below. Table 6 Long run cost of wood for space heating — Lake and Peninsula communities Community Long run Long run Heating oil Wood delivered | Wood delivered outlook: diesel | outlook: fuel heating oil ($/gallon) ($/gallon) ($/MMBtu) ($/cord) ($/MMBtu) Chignik $ 4.52 $5.72 $ 42.37 $ 380 $ 27.14 Chignik Lagoon $4.72 $ 5.92 $ 43.85 $ 380 $ 27.14 Chignik Bay $ 4.57 $5.77 $ 42.74 $ 380 $ 27.14 Ivanof Bay $ 6.00 $ 7.20 $ 53.33 $ 400 $ 28.57 Perryville $ 5.00 $ 6.20 $ 45.93 $ 400 $ 28.57 Port Heiden $ 5.50 $6.70 $ 49.63 $ 400 $ 28.57 Pilot Point $ 6.00 $ 7.20 $ 53.33 $ 400 $ 28.57 Ugashik $ 6.00 $ 7.20 $ 53.33 $ 400 $ 28.57 Egegik $5.17 $ 6.37 $ 47.19 $ 400 $ 28.57 Levelock $ 6.40 $ 7.60 $ 56.30 $ 350 $ 25.00 Igiugig $ 7.00 $ 8.20 $ 60.74 $ 350 $ 25.00 Kokhanok $ 7.00 $ 8.20 $ 60.74 $ 250 $ 17.86 Pedro Bay $6.40 $ 7.60 $ 56.30 $ 250 $ 17.86 lliamna $ 5.80 $ 7.00 $ 51.85 $ 250 $ 17.86 Newhalen $ 5.80 $ 7.00 $ 51.85 $ 250 $ 17.86 Nondalton $ 5.80 $ 7.00 $ 51.85 $ 250 $ 17.86 Port Alsworth $5.75 $ 6.95 $ 51.48 $ 250 $ 17.86 Source: MAFA, Long Run Cost of Fuel, L&P Borough, 3Qtr, 2008 36 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Table 7 below describes the heat content in a gallon of fuel oil compared to a cord of wood so that we can compare the actual cost by unit of energy. What the table shows is that $6 per gallon fuel oil it is economical to purchase a cord of wood for more than $500 — higher than the estimated cost to deliver wood to Lake and Pen region communities that lack local resources. Table 7 Equivalent delivered cost per end-use heating requirement - Fuel oil versus wood Fuel Oil Wood Fuel oil heat content 135,000 Wood heat content 14,000,000 (Btu(LHV)/gallon) (Btu/cord) Fuel oil heating unit 85% Wood burner efficiency | 70% efficiency Net fuel oil heat 114,750 Wood system (Btu 9,800,000 content (Btu delivered/cord) delivered/gallon) ($/gallon) ($/MMBtu-eud) ($/MMBtu-eud) ($/cord) $ 1.00 $9 $9 $ 85.40 $ 1.50 $13 $13 $ 128.10 $ 2.00 $17 $17 $ 170.81 $ 2.50 $ 22 $ 22 $ 213.51 $ 3.00 $ 26 $ 26 $ 256.21 $ 3.50 $31 $ 31 $ 298.91 $ 4.00 $ 35 $ 35 $ 341.61 $ 4.50 $ 39 $ 39 $ 384.31 $ 5.00 $44 $44 $ 427.02 $ 5.50 $ 48 $ 48 $ 469.72 $ 6.00 $52 $ 52 $ 512.42 $ 6.50 $ 57 $ 57 $ 555.12 $ 7.00 $61 $61 $ 597.82 $ 7.50 $65 $65 $ 640.52 $ 8.00 $70 $70 $ 683.22 $ 8.50 $ 74 $ 74 $ 725.93 $ 9.00 $78 $78 $ 768.63 Source: MAFA, Long Run Cost of Fuel, L&P Borough, 3Qtr, 2008 Thus, if you only consider the cost of fuel and ignore capital and operating costs, $3.00 per gallon fuel oil is roughly equivalent to $250 per cord of wood. Based on our assumed long run cost of oil is $110/bbI oil, we estimate the long run cost of fuel oil for local delivery will range from $5.70 per gallon ($490/cord delivered heat equivalent) for South coast communities up to $8.20 per gallon ($700/cord delivered heat equivalent) for small remote communities that typically have to fly in their fuel. We note that even if oil remains at recent lows of $70/bbl, the heat content equivalent cost of wood would be in the range of $300 to $450 per cord. Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 37 Analysis of Residential Heating Options Over a wide range of assumptions, the installation of a high efficiency direct vent fuel oil heater, e.g., Toyo, Monitor, Rinnai, is very cost effective compared to reliance on an existing moderately efficient central fuel-oil fired furnace or boiler. The annual fuel savings with fuel oil at $6/gallon should be on the order of $1,000 a year for an investment of around $2,000. The next increment of capital investment is a retrofit of a high efficiency catalytic wood stove. Even if a household already has switched to a high efficiency direct vent fuel oil heater, with oil costs of $6 a gallon and wood costs of $250 a cord it appears that a wood stove can save on the order of $2,000 a year for an investment of around $6,000. The Bristol Bay Housing Authority installs backup wood stoves in all the homes they build in communities with wood resources. The Borough could offer assistance in bulk purchasing of wood stoves for interested parties with homes that were either not built by BBHA or are in communities that would require importing wood. Even if a household already has a high efficiency direct vent fuel oil heater, if it cannot fit a wood stove into the existing space, it still makes sense for the household to consider a capital intensive high efficiency low emissions wood boiler in an exterior enclosure. With oil costs of $6 a gallon and wood costs of $250 a cord, it appears that a wood boiler can save on the order of $2,000 a year on an investment of $15,000.°" 3! We note that the incremental investment in a wood boiler becomes a break-even compared to a direct vent fuel oil fired heater at a discount rate of 15% - a rate not atypical of moderate income households. 38 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Finally, we note that the addition of a wood stove as an alternative source of heat appears attractive down to fuel oil prices in the $3.50 a gallon range. Table 8 compares the cost per unit of heating oil and wood for Lake and Peninsula Borough communities. Table 8 Fuel oil versus wood cost per unit by community Heating Oil Heating Oil Wood ($/gallon) ($/MMBtu) ($/MMBtu) Chignik Lake $5.72 $33.48 $30.00 Chignik Lagoon $5.92 $34.96 $30.00 Chignik Bay $5.77 $33.85 $30.00 Ivanof Bay $7.20 $44.44 $36.00 Perryville $6.20 $37.04 $36.00 Port Heiden $6.70 $40.74 $36.00 Pilot Point $7.20 $44.44 $36.00 Ugashik $7.20 $44.44 $36.00 Egegik $6.37 $38.30 $36.00 Levelock $7.60 $47.41 $24.00 Igiugig $8.20 $51.85 $24.00 Kokhanok $8.20 $51.85 $18.00 Pedro Bay $7.50 $47.41 $18.00 lliamna $7.00 $42.96 $18.00 Newhalen $7.00 $42.96 $18.00 Nondalton $7.00 $42.96 $18.00 Port Alsworth $6.95 $42.59 $18.00 Analysis of Non-residential Heating Options Wood has historically been used for heating where supplies are readily available, e.g., the Lakes Region. Communities with limited local wood resources throughout Alaska have begun to import wood by ocean and river barge where it is less expensive than local fuel oil supplies. Communities on the Kuskowkim River have begun to barge in a wood supply from Homer. The development of the Pile Bay road would further facilitate the availability of wood resources in the Lake and Peninsula Borough. In addition to hauling wood from Homer, drift is available in west Cook Inlet bays as well as Lake Illiamna beaches. Other benefits of wood resources are that its delivery and preparation uses local residents - providing jobs and income, wood is also a non-toxic substance reducing the risk of hazardous fuel spills. Heating with wood is not a new idea but the ways in which we are able to heat with wood has changed considerably. High-Efficiency-Low-Emissions (HELE) wood burning boilers can provide space and water heating for both small and large buildings but the real economic savings come when utilized to provide heat for larger buildings. HELE units require some maintenance; the Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 39 most successful utilization of these systems can be seen in places where staff is employed to maintain wood supply and stoke the boiler two to three times per day. We reviewed the basic economic feasibility of adding a high efficiency, low emissions wood boiler to supplement the existing fuel oil heating systems for the schools in the area around Lake Iliamna and Lake Clark where there appears to be a relatively robust local wood supply available.>” Wood Boiler Heating Requirement Coverage We estimate that a wood boiler in the Lakes region would be operational from October through April and be available on the order of 90 percent of the time during that period. This timeframe represents 80 percent of the heating load for the year offering potential net heating load coverage of 72 percent. We assume that the wood boiler will be used to supplement existing fuel oil systems and that it will be sized to meet the existing peak heating requirement, relying - on the existing fuel oil system for backup and complementing any existing heating provided by secondary heat recovery from the diesel engine generator sets at the local electric utility. For Kokhanok, where the school and teacher housing use roughly 6,200 gallons of fuel oil per year, 72 percent heating coverage amounts to roughly 600 MMBtu/year of heating fuel required. Wood Boiler Peak Heating Requirement Sizing = We use Kokhanok school and teacher housing data for a baseline case study. Kokhanok school reports that they are burning roughly 6,200 gallons of fuel oil per year. This amounts to an average of 837 MMBTU over the course of the year with roughly 11,372 heating degree-days. The average heating degree-days per day 11,372/365 = 31.1. The coldest day driving the peak heating requirements is assumed to be —22°F, or 87 heating degree days (652F - -222F). — Applying the peak/average heating degree-day ratio (87/31.1) to the average annual BTU per hour (95,550) yields a first order estimate of the peak heating requirement of 268,000 BTU per hour. Thus, we assume a 350,000 BTU per hour wood boiler is adequate to meet the estimated peak boiler capacity requirement. *? We wish to acknowledge our indebtedness to Harold Andrew, Bristol Bay Native Association, and Daniel Parrent, Wood Utilization Specialist, Juneau Economic Development Council for their report, “Preliminary Feasibility Assessment for High Efficiency, Low Emission Wood Heating in Kohkanok, AK,” June 1, 2007. The analysis presented here updates and extends the analysis in that report. 40 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Table 9 Estimated project cost components: Wood boiler, connections and support systems Equipment Freight Installation Total Cost Fuel storage fabric bldg 1500 sf (75 cords) $37,500 Remote boiler building 400 sf $40,000 HELE wood boiler 350,000 btu/hr $12,599 $2,840 $15,340 Plumbing and interconnections $30,000 $30,000 Control and monitoring systems $2,500 $2,500 Subtotal | $125,340 Owner's development costs | 25% of construction cost $31,335 TOTAL | $156,675 Source: Kokhanok Study (2007), updated to 2008 HELE wood burning boilers are currently used in Alaska including in the following communities: City of Craig — wood fired boiler supplements oil/propane systems that provide heat for the municipal pool water, pool building, and the elementary and middle school buildings. The system is maintained by the school district. The project was funded by the USDA Forest Service, USDA National Resource Conservation Service, Alaska Energy Authority, Denali Commission, and the City of Craig. Kasilof — An intentional community of around 10 families located in Kasilof installed wood fired boilers to supplement their masonry heaters used to heat the community center, heat water for kitchen and laundry water. The project was funded by the Alaska Department of Health and Human Services** and the USDA Forest Service Jump-Start Wood Energy Program.** Tanana — Tanana has two wood fired boilers that heat the washeteria and the city water system. The city turned ownership and maintenance of the system over to the local non- profit utility Too’gha Inc. The project was funded by the USDA Forest Service Jump Start Wood Energy Program, the Alaska Department of Commerce Community and Economic Development and Too’gha Inc. The highest marginal savings from wood fired boilers are seen in larger buildings. For this reason all community buildings should be considered. The analysis below describes potential savings associated with installing the systems in school buildings. Where teacher housing is in “8 Note that AKDHHS funding was possible because the group is a non-profit providing mental health services ** Note this program is through the Division of Forestry and managed by the Juneau Economic Development Council http://jedc.org/2wood.shtml Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 41 close physical proximity to the school building it is recommended that the system incorporate those buildings as well. The cost of heating oil throughout the Lake and Peninsula Borough is very high even for by remote rural Alaska standards with heating oil costs running $6 to $9 per gallon. Where local wood is available, we estimate a market price of $250 per cord. Where wood will need to be imported, we estimate a market price ranging from $250 to $400 per cord depending upon delivery and local storage requirements. We estimate that the delivered cost of wood ranges from roughly $18/MMBtu to $36/MMBtu, the thermal equivalent of roughly $2.00 to $4.00 a gallon for diesel fuel. The communities included in the analysis (see table below) are in heavily wooded areas and, with the exception of Port Alsworth, they have few or no land-use issue that would create barriers to sustainable fuel (wood) supply. The schools in these communities served 243 children in the 2007-08 school year. An initial feasibility assessment indicates that these communities could displace tens of thousands of gallons of diesel currently used to heat the facilities. Actual fuel consumption for the 2007-08 school year was used in the analysis. Table 10 shows the estimated net savings and simple payback associated with installation of HELE wood boilers and avoidance of more than 25,000 gallons of fuel. Three of the schools — Nondalton, Newhalen/Iliamna and Levelock — show payback periods of less than ten years. When evaluating the payback for a project it is important to consider the life of the facility in question. Schools and other institutions can typically justify projects with longer payback periods than private residences. Table 10 School energy consumption - Fuel oil versus wood cost Current fuel Heating Simple consumption oil cost Wood heat | Net fuel savings payback Community 2007-08 yr ($/MMBtu) | ($/MMBtu) ($/year) (years) Pedro Bay 2,000 $56.30 $20.00 $ 6,011 aS Port Alsworth 2,000 $51.48 $20.00 $5,213 TY Levelock 4,000 $56.30 $20.00 $ 12,021 10 Kokhanok 6,200 $60.74 $20.00 $ 20,915 oT: Nondalton 12,000 $51.85 $20.00 $ 21,978 8 Newhalen 18,000 $51.85 $20.00 $ 32,967 6 Total 50,466 gallons $99,104 The change to HELE generated space heating in the school buildings and teacher housing should have no negative impacts on other energy users in the community. Positive impacts include decreased reliance on fossil fuels, development of local knowledge of an alternative system for space heating, and local job creation through contracting to collect wood and stoke the boiler. 42 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems Tne Lake and Peninsula Borough Regional Energy Plan Diesel Combined Heat and Power (“Waste Heat”) Combine Heat and Power (CHP), also known as “cogeneration” and “waste heat”, describes the utilization of excess energy generated by large machinery. One of the biggest creators of “waste heat” are generator sets used to create electricity — excess heat can be used for space heating, electricity generation, ice making etc. Rural Alaska has long recognized the opportunity presented by waste heat and where electric generation is in relatively close proximity to community facilities the opportunity to provide space heat is often exploited. Waste heat agreements are in place for the schools in the following communities: Chignik Bay, Chignik Lagoon, Chignik Lake, Kokhanok, Levelock, Pedro Bay, Pilot Point and Port Alsworth. The Borough could act as an intermediary to facilitate agreements between local utilities and potential users of waste heat where this resource is currently underutilized. Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 43 END-USE End-Use Electrical Efficiency Households, businesses, schools, government buildings, and fish processors all have opportunities to improve the efficiency of their use of electrical energy. The list of promising measures, such as reducing use where it’s not really needed, lower the temperature on hot water heaters, replacing incandescent bulbs with compact fluorescents, replacing T-12 fixtures with T-8 fixtures with electronic ballasts, replacing old inefficient refrigerators, remains much as it did almost a decade ago.*° The difference today is that more of these measures have already been adopted and the price and performance of new lighting systems and appliances have continued to improve. Nonetheless, many of these low life-cycle cost efficiency/conservation measures remain an underutilized resource to improve the cost effectiveness of the electrical service to consumers.°° A continuing challenge to further adoption of end-use efficiency measures in rural households involves the way the PCE program covers 95 percent of rural household electrical costs above 12.9c/kWh up to 500kWh a month. In households with usage below 500kWh, the household only sees up to five percent of the benefit of an end-use efficiency measure while the PCE program sees a reduction in support to the utility serving that household of 95 percent of every kWh reduced under SO0kWh a month. As household usage goes above 500kWh per month, more typical of wealthier fishing households with many children and multiple computers and TVs, the household theoretically sees 100 percent of the benefit of end-use efficiency. These benefits can be masked by month- to-month variation in electrical usage and overall growth in the number of lights and electrical devices. Non-PCE supported rural electric customers continue to see high prices and have been especially challenged by the recent diesel fuel price spike in the summer of 2008 that is now flowing through utility fuel inventories. >> See Chapter 4, End-Use Conservation, Screening Report for Alaska Rural Energy Plan (AIDEA), by Northern Economics, April 2001. 36 See Excel Workbook “AK Simple_GHG_Background_1b” for detailed analysis of the net benefits of CFLs over incandescent light bulbs, taking into account lighting, heating and carbon dioxide emissions considerations. The net benefit/cost ratio of a CFL investment tends to range upwards from 10 —a very favorable investment that frequently pays back in less than a couple of years. 44 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Among the many challenges faced by non-PCE rural electric customers is a lack of locally available efficient lighting and appliances and limited knowledge about what might work for their particular circumstance. Providing consumer education resources to address these needs is helpful, but frequently it is more effective, if more expensive, to have end-use energy experts engage in a conversation with the local community about needs and priorities and develop a community wide program. The AEA Efficiency Program and its associate organizations (RuralCAP, ACDC) have had good success with this approach. To the extent that a local community has a local energy efficiency champion, that person should take the lead in contacting the AEA Efficiency Program to see where their community is on the list to be visited and to volunteer to assist with AEA with data gathering to ensure a timely and effective visit. The Village End Use Efficiency Measures (VEUEM) program - run through the Alaska Building Science Network (ABSN) and funded through the Alaska Energy Authority and the Denali Commission - provides village community buildings with a range of energy efficiency measures including: relamping, weather stripping, set back thermostats, efficient boilers, etc. Relamping commercial facilities with efficient lighting can reduce consumption by 44 percent.?” Lighting in the average American household accounts for 10 percent of total energy consumption. Electricity in all Lake and Peninsula Borough households is subsidized through the PCE program so any potential savings from switching out standard incandescent bulbs with more efficient compact florescent bulbs (CFL) would be realized by the State of Alaska rather than the household. For this reason we recommend focusing relighting efforts in commercial and government facilities not covered under the PCE program. In winter of 2005, Port Heiden received energy improvements to their teacher housing and six community buildings through the program — reducing electric energy consumption in these facilities by an estimated 34 percent. Chignik Lake is on the list of communities to have received services over the summer, the last status report sent to the Alaska Energy Authority indicated that the assessment was complete and that relighting materials were being ordered. There is an opportunity in the future for the Borough to assist in coordinating commercial and government facilities in riding the coat tails of this program’s activity. When the VEUEM assesses a village’s need before making an order for energy efficient products, local commercial and government entities could pay for their own assessments and enjoy the cost savings associated with ordering products in bulk and through a preferred vendor (the State). The Borough could provide coordination of this effort, one that would not only save energy but would also save money for commercial properties not covered by the PCE program. We note that it is worthwhile to encourage policy makers to expand funding for this program. 37 The 44 percent energy savings on lighting energy conservation measures are based on pre and post measurements taken at eight state-owned facilities by Siemens as part of their performance contract with the state. Findings are in line with industry average savings going from T-12 to T-8 lighting. Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 45 End-Use Heat The last legislative session saw unprecedented spending on home energy efficiency programs with $200 million allocated to the low-to-moderate income home weatherization program and $160 million to the new home energy rebate program. Both of these programs offer opportunities to increase the energy efficiency of residential housing units. Figure 5 AHFC Weatherization Regions — Lake and Peninsula served by ACDC (DEFINE) and Bristol Bay Housing Authority Low-to-Moderate Income Weatherization e Weatherization program for households up to 100 percent of median income with priority given to the poor, elderly and disabled. The program requires no money outlay from the participant and is available to renters as well as home owners. e $200 million in state funding over the next five years with $1.3 million allocated to the Lake and Peninsula Borough e Between 1999 and 2007 nearly 200 homes, with 640 residents, participated in the home weatherization program offered by the Alaska Housing Finance Corporation. The US Census 2000 reported 562 occupied housing units in the Lake and Peninsula Borough communities. According to the 2005 Statewide Housing Assessment just under 45 percent of households report that their homes are drafty and 28 percent reported that they could not maintain a comfortable room temperature in the coldest parts of winter. 46 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan ¢. The weatherization program has an average B/C ratio”® of 2.0 for rural Alaska — excluding the Interior and the Four-Dam Pool areas. Home Energy Rebate Program e Offers rebate of up to $10,000 for home energy improvements recommended by a certified home energy rater. Participants must own and occupy the home on which they wish to make improvements e $160 million in state funding over the next five years with $205,484 allocated to the Lake and Peninsula Borough. If each household that applied for, and received, the maximum reimbursement of $10,000 per household, 20 homes could participate in the program. The actual reimbursements are likely closer to $5,000 to $6,000 per home, increasing the numbers of potential participants. e There are currently only a handful of households signed up to receive an energy rating to participate in the program. The Alaska Housing Finance Corporation facilitates a Roving Rater program to get raters out to remote locations but the wait is sometimes lengthy. The roving raters are sent to communities with multiple participants faster than those with few. e One barrier to participating in the program is the initial outlay of funds. The Borough might consider public education about the program and encouraging the Bristol Bay Housing Authority to offer low (or no) interest loans for energy improvements, etc. The North Slope Borough is offering residents who are participating in the rebate program additional funds to supplement the rebate cap of $10,000 per household, increasing the energy improvements done at each household and further improving the performance of the house. Both of these programs offer funding to make improvements that will increase the energy performance of residential building stock and decrease space heating costs for residents. According to a 2006 study conducted by the Oak Ridge National Laboratory (ORNL) the average a house that participates in the low income weatherization program sees a 32.3 percent decrease : in energy consumption for space heating. 38 The benefit cost ratio is the present value of all benefits from a project divided by cost of implementing the program. In benefit cost analysis values should be estimated for all impacts (costs and benefits) future and present. Ls Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 47 Table 11 Potential community savings - Weatherization Total consumption @ Potential savings from Occupied median consumption weatherization efforts at Housing of 718 gallons per average 30 percent Dollar savings Units household savings | at $7 per gallon Gallons Gallons $$ Chignik 29 20,822 6,247 $43,726 Chignik Lagoon 33 23,694 7,108 $49,757 Chignik Lake 40 28,720 8,616 $60,312 Egegik 44 31,592 9,478 $66,343 Igiugig 16 11,488 3,446 $24,125 lliamna 35 25,130 7,539 $52,773 Kokhanok 52 37,336 11,201 $78,406 Levelock 45 32,310 9,693 $67,851 Newhalen 39 28,002 8,401 $58,804 Nondalton 68 48,824 14,647 $102,530 Pedro Bay 17 12,206 3,662 $25,633 Perryville 33 23,694 7,108 $49,757 Pilot Point 29 20,822 6,247 $43,726 Port Alsworth 34 24,412 7,324 $51,265 Port Heiden 41 29,438 8,831 $61,820 TOTAL 555 398,490 119,547 $836,829 Savings are significant even at the household level. Table 12 shows the potential savings on space heat per household for a variety of fuel prices and consumption patterns. The high energy use of 818 gallons per year represents above average consumption for households with income similar to the averages in the Lake and Pen region. Typically, households that consume the most energy are those with above average incomes and are of less concern to local governments. Average fuel consumption per household is based on tables 3 and 13 of ISER "Effects of Rising Utility Costs on Household Budgets, 2000 - 2006" and conversations with Ben Saylor. Savings to individual households will vary by housing unit but should offer a median savings of just over $1,500 with heating fuel at $7 per gallon and weatherization offering 32 percent reductions in space hating energy consumption. Table 12 Potential household savings - Weatherization Low — Fuel @ 5/gal Med — Fuel @ 6/gal High — Fuel @ 7/gal Potential savings per household — Low 618 $927 $1,112 $1,298 gallons/yr Potential savings per household — Median 718 $1,077 $1,292 $1,508 gallons/yr Potential savings per household — High 818 $1,227 $1,472 $1,718 gallons/yr 48 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Building Codes The Borough should adopt energy building codes for residential and commercial construction. Commercial energy building codes should meet Leadership in Energy and Environmental Design (LEED) standards for new construction core and shell. LEED is a building rating system for sustainable energy practices in building. The core and shell certification sets standards for structure, envelope and the HVAC system. Actually obtaining LEED certification is not necessary, many policy makers and builders use language indicating they “meet LEED standards”. The benefit of tying a commercial energy code to the LEED standard is that it is continually updated, known and widely accepted in the commercial building industry. (appendices) Residential energy code should match the Alaska Building Energy Efficiency Standard (BEES). While there is no statewide residential energy code there is an energy code for all homes whose financing is underwritten by the Alaska Housing Finance Corporation (AHFC). AHFC underwrites roughly 40 percent of home mortgages in Alaska and all of these homes that began construction on or after January 1, 1992 must be built to BEES. As with LEED, BEES is continually reviewed and updated. (see appendices for a copy of the Alaska specific amendments to The International Energy Conservation Code (IECC) 2006, Second Printing) It is difficult to quantify the impact of creating a residential energy efficiency building code because there is so little information about homes that are built below that standard. The AKWarm database maintained at AHFC holds more than 25,000 records; the majority of them are energy audits conducted on homes for the purpose of financing the sale through AHFC, which will only finance homes that meet BEES. Even if impacts are not immediately evident, raising the bar on residential construction is an important piece of consumer protection policy. The table below shows the marginal change in energy consumption when moving from one energy rating level to the next. All homes sampled were built between 2000 and 2007. Unfortunately there were only 14 Four Star homes in AKWarm, making analysis of the change between Four Star (not shown in the table due to the small sample size) and Four Star Plus impossible. Table 13 Energy use per year — by BEES energy ratings Stars # houses Avg. floor Avg. energy Avg. energy Avg. CO2 area cost (2007$) cost per sq ft (tons/yr) 5 Star Plus 92 2,203 $ 1,369 $ 0.62 11.4 5 Star 1,428 1,873 $ 1,495 $0.73 12.0 4 Star Plus 5,435 1,842 $ 1,495 $ 0.81 13.7 Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 49 Borough Procurement The Borough should engage in simple energy conscious practices by: e evaluating all building bids and project costs using a life cycle cost analysis. Evaluation using life cycle cost analysis is the easiest way to ensure that future government buildings will built with energy efficiency in mind. e participating in Energy Star procurement practices for office supplies. Energy Star is a \ project of the US Department of Energy and the US Environmental Protection Agency which continually updates a list of approved efficient appliances. Establishing a policy to use Energy Star procurement removes the information barrier to efficient procurement by providing the research necessary to make an informed decision. (see appendices) Transportation Transportation in rural Alaska is expensive and fuel intensive. There is little that a community can do to reduce the fuel consumed in air travel beyond choosing not to fly. There are however, attractive options available for individuals and businesses that are replacing boats, cars, and ATVs. Fuel efficient engines are often price competitive with their less efficient counterparts and offer considerable savings over the life of the vehicle. Public Information Creating public awareness about energy efficiency and conservation is paramount to creating a sustainable energy future. Borough residents should be made aware of the programs available to assist them reducing energy consumption at the household, business and community levels as well as made aware of behavior change that can lead to reduced consumption. 50 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems Tne Lake and Peninsula Borough Regional Energy Plan TRANSPORTATION Fuel delivery via air can run upwards of $2 per gallon per one hundred one way air miles from the fuel source where runways are less than 4,000 feet. Runways over roughly 4,000 feet in length are able to accommodate a DC6 fuel delivery plane with costs on the order of $1 per gallon per one hundred air miles from the source. Table 14 estimates savings associated with runway extensions to communities without the option of barge delivery. Savings range from $3.00 in Pedro Bay to $4.40 in Igiugig, with annual savings reaching $403,200 in Kokhanok. Table 14 Runway extensions - Estimates of fuel cost savings Summary of estimated fuel cost savings from larger deliveries with runway extensions Igiugig 32 3,000 1,000 $4.40 48,000 $211,200 Kokhanok | 175 2,920 1,080 $3.60 112,000 $403,200 Nondalton | 197 2,800 1,200 $3.40 100,000 $340,000 Pedro Bay | 38 3,000 1,000 $3.00 50,000 $150,000 Source: MAFA Analysis, 2008 In many of the communities in the lliamna Lake region, airplanes are the only consistent way to deliver fuel. Earlier this year Crowley Maritime informed communities in the Lake region that it would not be able to delivery fuel up the Kvichak River. Fuel delivery via barge from the Kenai Peninsula to Williamsport, truck across an improved road to Pile Bay, and around the lake by barge could reduce the cost of fuel delivery on the order of $1.00 per gallon. In the long run, improvements in the transportation infrastructure in the region can make a significant reduction in the cost of importing energy and other goods. Table 15 and Table 16 show the potential effect of the Pile Bay Road on delivered fuel costs in seven Lake and Peninsula Borough communities. Completion of Table 15 shows savings per gallon on the assumption that the same small scale barge deliveries would occur. Saving per gallon with a smaller scale barge delivery range from $1.23 in Nondalton to $1.82 per gallon in Igiugig If a larger scale barge deliver system were put in place along with the construction of the road, saving range from $1.37 in Nondalton to $2.19 per gallon in Igiugig. Annual estimated savings for the villages are substantial, totaling $1.3 million using a small barge system, growing to $1.5 million annually for a larger barge delivery system. Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 51 Table 15 Small scale fuel delivery system — Cost of fuel transportation legs from Kenai Summary of estimated cost of fuel transportation legs from Kenai via Pile Bay Road by community — Existing small scale annual deliveries ($/gallon) ($/gallon) ($/gallon) Gallons $ Igiugig 32 $0.71 $2.53 $1.82 69,000 $125,580 lliamna 93 $0.48 $1.96 $1.48 200,000 $295,000 Kokhanok 175 $0.51 $2.07 $1.56 66,000 $102,960 Levelock 71 $0.76 $2.15 $1.39 180,000 $250,200 Newhalen 167 $0.48 $1.96 $1.48 270,000 $398,250 Nondalton 197 $0.73 $1.96 $1.23 60,000 $73,500 Pedro Bay 38 $0.46 $1.73 $1.27 50,000 $63,250 Source: MAFA Analysis, Pile Bay Road Fuel Delivery System, 2008 Table 16 Large scale fuel delivery system — Cost of fuel transportation legs from Kenai Summary of estimated cost of fuel transportation legs from Kenai via Pile Bay Road by community: Large scale fuel delivery system ($/gallon) ($/gallon) ($/gallon) Gallons $ Igiugig 32 $0.34 $2.53 $2.19 69,000 $151,110 lliamna 93 $0.31 $1.96 $1.65 200,000 $329,000 Kokhanok 175 $0.19 $2.07 $1.88 66,000 $124,080 Levelock 71 $0.39 $2.15 $1.76 180,000 $316,800 Newhalen 167 $0.31 $1.96 $1.65 270,000 $444,150 Nondalton 197 $0.59 $1.96 $1.37 60,000 $81,900 Pedro Bay 38 $0.29 $1.73 $1.44 50,000 $71,750 Source: MAFA Analysis, Pile Bay Road Fuel Delivery System, 2008 52 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan PEBBLE MINE CONSIDERATIONS At this stage in the exploration and permitting of the Pebble Creek Mine, whether the mine will be permitted or operated is still uncertain. However, to the extent that the mine remains a possibility, we consider the potential impact on the local energy picture during its exploration, construction and operation phases. Given the high costs of energy in the Lake and Peninsula Borough and its immediate impact on the sustainability of villages and businesses, the uncertainty of the mine, the long time horizon for its development even if permitted today, and the infrastructure (interties) required to link villages to energy from the mine, we encourage the Borough to vigorously pursue the building code, energy efficiency, weatherization, and wood space heating initiatives — they typically pay back in less than ten years. These initiatives also protect Borough residents from energy price fluctuations while improving comfort and quality of life. They also give residents more independence and control over their energy use. Over the longer term, the development of the mine may present some opportunities to reduce the unit cost of energy in the Borough. Some of these opportunities, like the construction of an electrical intertie from the Railbelt to serve a load of approximately 200MW at the mine with substations along the way that would allow local communities to tap into the Railbelt power grid, could be less expensive than small scale long lived local generation projects — like hydro or wind. Conversely, the cost of electricity from a larger scale local hydro resource may be comparable to an expensive reliable submarine transmission cable across the Cook Inlet with the added advantage that local residents could benefit from local jobs, local power project development and lower electrical rates. For now, the Borough should continue to monitor efforts to develop the power supply for Pebble and consider the possibility that scaling up a local energy resource, such as a hydro resource, could provide residents with lower cost power over the long term.” In the interim exploration and preconstruction phases, there may be opportunities for the cooperative purchasing of diesel for electric generators, space heating and transportation fuels that may lower prices for Borough residents. In addition, a larger fuel market may lower regional prices as costs are spread across more gallons. However, the ability to realize savings ona larger quantity purchases into a region will frequently depend upon whether all of the parties gather together under the same procurement. In this regard, it is important to note that a large outside firm may follow its’ own schedule - limiting synergies. The possibilities of sharing >° Juneau and Southeast Alaska present an interesting set of case studies in this regard. Hydro projects built to support mining activities in the pre WWI era, circa 1910, continue to supply cost effective power to Juneau and other communities in Southeast. Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 53 common costs and entering into bulk fuel procurement arrangement, ala Sand Point, present throughout the exploration, construction and operations phases of the mine. So, while every effort should be made to start out b y vigorously exploring potential for cooperative procurement, it should remain an issue to pursue even when it does not come together on the first try. To the extent that a local work force is hired, higher household incomes are likely to lead to higher energy consumption. Local hire from the villages may also lead to households making or being able to make different choices as to where to live year round or seasonally. Anecdotally, some believe that income and employment at the Red Dog Mine has lead to more households living in urban Alaska communities as well as “Outside.”” If village residents choose to continue living in their home villages, higher incomes help stabilize utility payments; higher energy use allows fixed costs to be spread across more kilowatt hours, which tends to improve utility viability. These employment and income effects are similar throughout the exploration, construction and operation phases of the potential mine. One potential impact of the mine on local energy prices could be larger, better maintained roads that lead to more efficient delivery of fuels, which could lower prices $1 to $2 per gallon compared to flying in fuel. However, the Pile Bay Road construction could occur with or without the mine. Though it seems likely that the presence of the mine would improve the prospects for higher quality and more frequent maintenance of the road. More extensive road construction could also reduce the cost to develop electrical interties along the transportation corridor, opening up the possibility of lower cost energy from regional resources being shared over a wider area. Our initial reconnaissance estimates suggest that the mine presents two interesting local electrical power opportunities: 1) Interconnection with the Railbelt power grid via undersea power cable across the Cook Inlet, potentially lowering electric costs to approximately $0.25 to $0.30 per kWh. 2) Development of larger scale local hydro resources and a regional electric grid, which could provide loca! residents with lower costs after the mine is played out due to lower long term operations and maintenance costs compared to the undersea cable option It should be noted that State of Alaska permits were recently issued for meteorological stations in the vicinity of the mine. While the permit request stated that the intended use is for wind data to assess the potential for wind generation, the met stations described in the application appear shorter than those typically used to assess commercial scale wind resources (30 or 50 meters). We note that these lower height met stations are frequently used to develop data for air shed modeling in order to assess the ability of the local wind to disperse local concentrations of material that might become airborne as a result of mining development and operations. “° This phenomenon will analyzed in more depth later in 2008 with a cooperative study between the University of Alaska Anchorage, Institute of Social and Economic Research that will match employment and permanent fund dividend recipient files over time to identify employment and migration patterns. This may be of interest to the Borough for anticipating potential social and economic impacts of the Pebble Mine. 54 | Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Table 17 on the following two pages outlines the potential impacts on the Lake and Peninsula Borough of activities associated with the Pebble Mine project. Information Insights, Inc. - Mark A. Foster & Associates - Ecosystems 55 Table 17 Pebble project potential impacts Development Phase Preconstruction exploration Electric Heating Transportation Fuels Planning for electrical requirements can create local options Planning for heating fuel requirements can create local options Planning for transportation fuel requirements can create local options Small scale diesel gen sets may be moved in to support local activities Preconstruction equipment may require diesel fuel. However, fuel inventory practices of outside firms tend to be less flexible than local inventory practices Preconstruction equipment may require diesel fuel. However, fuel inventory practices of outside firms tend to be less flexible than local inventory practices Local workforce hired Local workforce hired Local workforce hired Increase in household incomes leads to increase in energy consumption Larger local/regional fuel market may enable more cost effective delivery. However, outside firm fuel procurement will tend to follow a separate timeline limiting synergies Larger local/regional fuel market may enable more cost effective delivery. However, outside firm fuel procurement will tend to follow a separate timeline limiting synergies Some households may become snowbirds; work in region in summer, fly out for the winter Increase in household incomes leads to increase in energy consumption Increase in household incomes leads to increase in energy consumption Net impact = more annual kWhs over which to spread fixed costs (INN hydro fixed + G&A) Some households may become snowbirds; work in region in summer, fly out for the winter Some households may become snowbirds; work in region in summer, fly out for the winter Net impact = large summer, smaller winter population, clever local administrators capture summer scraps for winter Net impact = large summer, smaller winter population, clever local administrators capture summer scraps for winter Construction Diesel gen sets moved in to support local activities Larger local/regional fuel market may enable more cost effective delivery. However, outside firm fuel procurement will tend to follow a separate timeline limiting synergies Larger local/regional fuel market may enable more cost effective delivery. However, outside firm fuel procurement will tend to follow a separate timeline limiting synergies Construction on roads and electrical transmission infrastructure; potential for coordination with local systems Larger, better maintained roads allow more efficient delivery of fuel oil; could lower fuel costs on the order of $1 to $2 per gallon Larger, better maintained roads allow more efficient delivery of transportation fuels; could lower fuel costs on the order of $1 to $2 per gallon 56 | Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems The Lake and Peninsula Borough Regional Energy Plan Development Stage Electric Heating Transportation Fuels Interconnection with Railbelt Grid could lower electrical costs toward 25c/kWh range = Railbelt COP + Subsea cables + Local substations *IF* prices for electricity were significantly subsidized, heating systems could convert to electric heat (ala subsidized hydro systems) Electric four wheelers remain niche market due to high cost of electricity vs. fuel oil Local workforce expands rapidly Local workforce expands rapidly Local workforce expands rapidly local security guards with employment population, clever local administrators capture summer scraps for winter 5 Increase in household Increase in household Increase in household ear] incomes leads to incomes leads to incomes leads to ES significant increase in local | significant increase in local | significant increase in local = energy consumption energy consumption energy consumption n c 8 More households have the | More households have the | More households have the option to become option to become option to become snowbirds; work in region snowbirds; work in region snowbirds; work in region in summer, fly out for the in summer, fly out for the in summer, fly out for the winter winter winter Net impact = large Net impact = large Net impact = more annual | summer with some summer with some kWhs over which to carryover to winter carryover to winter spread fixed costs (INN population, clever local population, clever local hydro fixed + G&A) administrators capture administrators capture summer scraps for winter summer scraps for winter Local Power Generation Employment vs. Offshore wn Power Generation c Employment associated 2 with interties pS 2 oO Net impact = large Net impact = large 5 Substations could provide | summer, declining winter summer, declining winter population, clever local administrators capture summer scraps for winter Information Insights, Inc. — Mark A. Foster & Associates - Ecosystems 57 Appendices Appendix A: Community Summary Electric Appendices Appendix B: Newhalen River Project + Regional Grid Total Project Cost Appendix C: Newhalen River Project + Regional Grid — Local Load Scenario Appendix D: Newhalen River Project + Regional Grid Break-Even Scenario Appendix E: Newhalen River Project + Regional Grid Industrial Load Scenario Appendix F: Pebble Mine Intertie to HEA Power Supply Scenario Appendix G: Update 1982 Stone & Webster Hydroelectric Reconnaissance Estimates to 2008 1 |Appendices L&P Borough Energy Plan Appendix H: Chigniks Hydro + Wind Combinations; Chignik + Chignik Lagoon Load Combinations Appendix I: Economic Value of Indian Creek Hydro Appendix J: Rate Impact Analysis of Indian Creek Hydro Heating Appendices Appendix K: Wood Boilers for Electricity and Heat Appendix L: Igiugig In-Stream Hydro Appendix M: Heating Fuel Comparisons, Alaska, Fall 2008 Appendix N: Long Run Incremental Cost Analysis — Includes Capital Replacement Costs Appendix O: Long Run Levalized Cost Comparison — Fuel Oil Versus Wood Heat (Household Scale) Appendix P: Wood Boiler Specifications Appendix Q: Industry Case Study References 2 |Appendices L&P Borough Energy Plan Appendix A: Community Summary Potential Funding Initiatives Sources for L&P POP Heating Electric Transport Install wood stoves, wood Regionwide boilers AHFC, AEA Aid development of wood collection and delivery businesses AIDEA, AEA, Denali Aid development of wood pellet businesses AIDEA, AEA, Denali Home weatherization, energy grants AHFC, AEA Village electric efficiency reviews AEA EE Program Weatherization, energy efficiency workforce training Denali, AEA Public education campaign - effective efficiency, conservation measures AEA, AHFC Bundle new AEA bulk fuel Bundle new AEA bulk fuel Chignik Lake 128 | loans loans, extend runway AEA, Denali Bundle new AEA bulk fuel Develop design-build Bundle new AEA bulk fuel Chignik Lagoon 68 | loans i Ns 5 loans AEA, Denali wind-diesel + intertie Bundle new AEA bulk fuel project, Develop hydro | Bundle new AEA bulk fuel Chignik Bay 81 | loans + intertie project loans, extend runway AEA, Denali Wind appears marginal from local met tower study, Bundle new AEA bulk fuel explore tidal for Bundle new AEA bulk fuel Perryville 119 | loans demonstration project_| loans AEA, Denali Develop met data for Bundle new AEA bulk fuel design-build wind Bundle new AEA bulk fuel Port Heiden 87 | loans project, explore tidal loans AEA, Denali Develop met data for Bundle new AEA bulk fuel design-build wind Bundle new AEA bulk fuel Pilot Point 61 | loans project, explore tidal loans AEA, Denali Bundle new AEA bulk fuel Bundle new AEA bulk fuel Ugashik 13 | loans loans AEA, Denali Develop met data for Bundle new AEA bulk fuel design-build wind Bundle new AEA bulk fuel Egegik 64 | loans project, explore tidal loans AEA, Denali Bundle new AEA bulk fuel Bundle new AEA bulk fuel Levelock 71 | loans loans AEA, Denali Bundle new AEA bulk fuel Bundle new AEA bulk fuel loans; Williamsport road Igiugig 32 | loans + lake barge AEA, Denali Bundle new AEA bulk fuel Bundle new AEA bulk fuel Develop design-build loans; Williamsport road Kokhanok 175 | loans wind procurement + lake barge Existing grant Bundle new AEA bulk fuel Bundle new AEA bulk fuel loans; Williamsport road Pedro Bay 38 | loans + lake barge AEA, Denali Bundle new AEA bulk fuel Bundle new AEA bulk fuel loans; Williamsport road lliamna 93 | loans + lake barge AEA, Denali Develop met data for Bundle new AEA bulk fuel Bundle new AEA bulk fuel design-build wind loans; Williamsport road Newhalen 167 | loans project + lake barge AEA, Denali Bundle new AEA bulk fuel Bundle new AEA bulk fuel loans; Newhalen River Nondalton 197 | loans Bridge + fuel truck AEA, Denali Develop hydro; hydro Bundle new AEA bulk fuel + intertie assessment | Newhalen River Bridge + Port Alsworth 118 | loans project fuel truck + lake barge AEA 3 |Appendices L&P Borough Energy Plan Appendix B: Newhalen River Project + Regional Grid Total Project Cost NEWHALEN REGIONAL HYDRO UPDATE PRELIMINARY ECONOMIC FEASIBILITY ANALYSIS CAPITAL COST ESTIMATE 16000 656 kW miles EPC Scope % of Total Estimated Cost 2009/1982 Reconfiguration + | Estimated Cost Project FERC Account Description (1982$) Cost Multiplier] Update to 2009$ | Value Engineering (20095) Cost $ hydro $ grid S/W. $/mile 330 Land and land rights $0 2.05 $0 $2,068 000 $2,068 000 1% — $2,068,000 331 Power plant, structures & improvement: $5,645 000 2.05 $11,572,250 $0 $11,572,250 4% $11,572,250 332 Waterway (diversion canal) $35,212,000 2.05 $72,184 600 ($1 443,692) $70,740,908 24% $70,740 908 333 Turbines and generators $8,570 000 2.05 $17 568 500 $0 $17 568 500 6% $17,568,500 334 Accessory Electrical Equipment $1,150,000 2.05 $2,357 500 $0 $2,357 500 1% $2,357 500 335 Misc. Power Plant Equipment $576,000 2.05 $1 180 800 $0 $1,180 800 0% $1,180,800 336 Roads $387 000 2.05 $793,350 ($90 000) $703,350 0% $703,350 2 | Substation. & Switching Station - $100,000 2.05 $205,000 $95,000 $300,000 0% $300,000 Structures and Improvements 363 Eaaenent & Switching Station 9625 000 2.05 $1,281,250 $0 $1,281,250 0% $1,281,260 353-359 Transmission Interties $51 375 000 2.05 $105 318,750 ($5 265 938) $100,052,813 34% $100,052,813 52% 48% Construction Camp, Mob & Demob $1,800 000 2.05 $3,690,000 $369,000) $3,321 000 1% $1,722,180 $1,598,820 71 Environmental assessment & permitting $2,040 000 2.05 $4,182,000 $2,000 000 $6,182,000 2% $3,205,816 $2,976,184 Prelim Engineering (pre-EPC) $8,435 000 2.05 $17 291,750 ($6,916,700) $10,375,050 4% $5,380,217 $4,994 833 Construction Management $6,854 000 2.05 $14 050,700 ($2,810,140). $11,240,560 4% $5 829047 $5,411,513 _ Allowance for Indeterminates $18,415,000 2.05 $37 750,750 ($7,750,750) $30,000,000 10% $15,557,180 $14,442,620 Interest nee Construction $8,683 000 2.05 $17 800,150 $3,314 487 $21,114 637 7% $10,949,474 $10,165,163 4 |Appendices L&P Borough Energy Plan Appendix C: Newhalen River Project + Regional Grid — Local Load Scenario NEWHALEN REGIONAL HYDRO UPDATE PRELIMINARY ECONOMIC FEASIBILITY ANALYSIS Ali values are in 20093 Hydro Power Transmission Infrastructure |Avoi iesel 16,000 Capacity (kW) $212,900 $/mile $4.50 /gallon long run diesel price 0.5 Annual Capacity Factor 620 miles 0.0769 Diesel Efficiency (gallons/kWh 0.94 Annual Availability $131,998,000 Capital ($) $0.35 $/kWh avoided fuel 66 096 000 Estimated annual production (kWh) $220,000 Annual O&M $0.02 $/kWh avoided diesel O&M. 1.66E+07 1 66E+07 $1,035 /kW Development Costs $9,450 /kW EPC Contract Cost 5.0% Real Discount Rate $50 /kW Annual O&M $100,000 5 year maintenance cycle 1.01 [COSTS Annual Date Year_| Development EPC Contract] O&M Cost Total Cost_| NPV COSTS |Avoided kWhs| Avoided Cost | NPV Benefits 2009 QO $2,000,000 $2,000,000 $239,334 014 $198,129 435 0.83 2010 1 $3,000,000 $3,000 000 2011 2 $3,600,000 $3,600,000 2012 3. $4,000,000 $4,000,000 2013 4 $4,000,000 $4,000,000 2014 5 $94 399 333 $94 399 333 26,000,000) $9,520,000 2015 6 $94 399 333 $94 399 333 26,260,000 | $9,615,200 2016 7 $94 399 333 $94 399 333 26,522,600 | $9,711,352 2017 8 $1,020,000 $1,020,000 26,787,826 | $9,808,466 2018 9 $1,020,000 $1,020,000 27 055,704 $9,906 550 2019 10 $100,000 $1,020,000 $1,120,000 27 326,261 | $10,005,616 2020 1 $1 020,000 $1,020,000 27 599,524 | $10,105,672 2021 12 $1,020,000 $1,020,000 27 875,519 | $10,206,729 2022 13 $1 020,000 $1,020,000 28,154,274 | $10,308,796 2023 14 $1,020,000 $1,020,000 28,435,817 | $10,411,884 2024 15 $100,000 $1,020,000 ‘$1,120,000 28,720,175 | $10.516,003 2025 16 $1,020,000 $1,020,000 29,007 377 | $10,621,163 2026 7 $1,020,000 $1,020,000 29,297 451 | $10,727 374 2027 18 $1,020,000 $1,020,000 29,590,425 | $10,834,648 2028 19 $1,020,000 $1,020,000 29,886,330 | $10,942,995 2029 20 $100,000 $1,020,000 $1,120,000 30,185,193 | $11,052,424 2030 21 $1,020,000 $1,020,000 30,487,045 | $11,162,949 2031 2 $1,020,000 $1,020,000 30,791,915 | $11.274578 2032 23 $1,020,000 $1,020,000 31 099,834 | $11 387,324 2033 24 $1,020,000 $1,020,000 31,410,833 | $11,501,197 2034 25 $100,000 $1,020,000 $1,120,000 31,724,941 | $11,616,209 2035 26 $1,020,000 $1,020,000 32,042,190 | $11,732,371 2036 27 $1,020,000 $1,020,000 32,362,612 | $11,849,695 2037 28 $1,020,000 $1,020,000 32,686,238 | $11,968,192 2038 29 $1,020,000 $1,020,000 33,013,101 | $12,087,874 2039 30 $100,000 $1,020,000 $1,120,000 33,343,232 | $12,208,753 2040 31 $1,020,000 $1,020,000 33,676 664 | $12,330,840 2041 32 $1,020,000 $1,020,000 34,013,431 | $12,454,149 2042 33 $1,020,000 $1,020,000 34,353,565 | $12,578,690 2043 34 $1,020,000 $1,020,000 34,697,101 | $12,704,477 2044 36 $100,000 $1,020,000 $1,120,000 35,044,072 | $12,831 522 2045 36 $1,020,000 $1,020,000 35,394 513 | $12,959 837 2046 7 $1,020,000 $1,020,000 35,748,458 | $13,089,435 2047 38 $1,020,000 $1,020,000 36,105,942 | $13,220,330 2048 39 $1,020,009 $1,020,000 36 467 002 | $13,352,533 2049 40 $100,000 $1,020,000 $1,120,000 36 831,672 | $13,486,058 2050 Al $1,020,000 $1,020,000 37,199,988 | $13,620,919 2051 42 $1,020,000 $1,020,000 37,571,988 | $13,757,128 2052 43 $1,020,000 $1,020,000 37 947,708 | $13,894,699 2053 44 $1,020,000 $1,020,000 38,327,185 | $14,033,646 2054 45 $100,000 $1,020,000 $1,120,000 38,710,457 | $14,173,983 2055 46 $1,020,000 $1,020,000 39,097 562 | $14 315,723 2056 47 $1,020,009 $1,020,000 39,488,537 | $14,458,880 2057 48 $1,020,000 $1,020,000 39,883,423 | $14,603,469 2058 4g $1,020,000 $1,020,000 40 282,257 | $14,749,503 2059 50 $100,000 $1,020,000 $1,120,000 40,685,079 | $14,896,998 5 |Appendices L& P Borough Energy Plan Appendix D: Newhalen River Project + Regional Grid Break-Even Scenario NEWHALEN REGIONAL HYDRO UPDATE PRELIMINARY ECONOMIC FEASIBILITY ANALYSIS. All values are in 2009$ Hydro Power Transmission Infrastructure [Avoided Diesel Costs 8,000 Capacity (kW) $212,900 $/mile $4.50 /gallon long run diesel price 0.5 Annual Capacity Factor 620 miles 0.0769 Diesel Efficiency (gallons/kWh 0.94 Annual Availability $131,998,000 Capital ($) $0.35 $/kWh avoided fuel 33,048,000 Estimated annual production (kWh) $220,000 Annual O&M $0.02 _$/kWh avoided diesel O&M. 1.286+07 1.28E+07/ $1,600 /kW Development Costs $12,500 /kW EPC Contract Cost 5.0% Real Discount Rate $50 /kW Annual O&M $100,000 5 year maintenance cycle 1.01 COSTS [EE seers = AVOIDED COSTS Annual Benefit / Cost Date Year _| Development EPC Contract! O&MCost_| Total Cost_| NPV COSTS | Avoided kWhs| Avoided Cost | NPV Benefits Ratio 2009 Q $2,000,000 $2,000,000 $192,745 097 $193 682 583 1.00 2010 1 $2,000,000 $2,000,000 2011 2. $2,800,000 $2,800,000 2012 3 $3,000,000 $3,000 000 2013 4 — $3,000,000 $3,000 000 2014 5 $77 332 667 $77 332 667 26,000,000} $9,520,000 2015 6 $77 332 667 $77 332 667 26,260,000] $9,615,200 2016 7 $77 332 667 $77 332 667 26,522,600) $9,711,352 2017 8 $620,000 $620,000 26,787 826 | $9,808,466 2018 9 $620,000 $620,000 27,055,704 | $9,906,550 2019 10 $100,000 $620,000 $720,000 27 326,261 | $10,005,616 2020 1 $620,000 $620,000 27 599,524 | $10,105,672 2021 12 $620,000 $620,000 27,875,519 | $10,206,729 2022 13 $620 000 $620,000 28,154,274 | $10,308,796 2023 14 $620 000 $620 000 28,435 817 | $10,411,884 2024 15 $100,000 $620,000 $720,000 28,720,175 | $10,516 003 2025 16 $620,000 $620,000 29,007 377 | $10,621,163 2026 17 $620,000 $620 000 29,297 451 | $10,727 374 2027 18 $620,000 $620 000 29,590,425 | $10,834,648 2028 19 $620,000 $620 000 29,886,330 | $10,942,995 2029 20 $100,000 $620,000 $720,000 30,185,193 | $11,052,424 2030 21 $620,000 $620,000 30,487 045 | $11,162,949 2031 22 $620,000 $620 000 30,791,915 | $11,274,578 2032 23 $620,000 $620,000 31,099,834 | $11,387,324 2033 24 $620,000 $620,000 31 410,833 | $11,501,197 2034 25 $100 000 $620,000 $720 000 31,724,941 | $11,616,209 2035 26 $620,000 $620 000 32,042,190 | $11,732,371 2036 27 $620,000 $620 000 32,362,612 | $11 849,695 2037 28 $620,000 $620,000 32,686 238 | $11 968,192 2038 29 $620,000 $620,000 33,013,101 | $12 087,874 2039 30 $100,000 $620,000 $720,000 33,048 000 | $12,100,652 2040 3 $620,000 $620,000 33,048 000 | $12,100,652 2041 32 $620,000 $620,000 33,048,000 | $12,100,652 2042 33 $620,000 $620,000 33,048 000 | $12,100,652 2043 34 $620,000 $620,000 33,048 000 | $12,100,652 2044 % $100,000 $620,000 $720,000 33,048 000 | $12,100,652 2045 36 $620,000 $620,000 33,048,000 | $12,100,652 2046 7 $620,000 $620,000 33,048,000 | $12,100,652 2047 38 $620,000 $620,000 33,048,000 | $12,100,652 2048 39 $620,000 $620,000 33,048,000 | $12,100,652 2049 40 $100 000 $620,000 $720,000 33,048,000 | $12,100,652 2050 a $620,000 $620 000 33,048,000 | $12,100,652 2051 42 $620,000 $620 000 33,048 000 | $12,100,652 2052 43 $620,000 $620,000 33,048,000 | $12,100,652 2063 44 $620,000 $620 000 33,048,000 | $12,100,652 2054 45 $100 000 $620,000 $720,000 33,048,000 | $12,100,652 2065 46 $620,000 $620 000 33,048,000 | $12,100,652 2056 a7 $620,000 $620 000 33,048,000 | $12,100,652 2057 48 $620,000 $620 000 33,048,000 | $12,100,652 2058 49 $620,000 $620,000 33,048,000 | $12,100,652 2059 50 $100 000 $620,000 $720,000 33,048,000 | $12,100,652 6 |Appendices L&P Borough Energy Plan Appendix E: Newhalen River Project + Regional Grid Industrial Load Scenario NEWHALEN REGIONAL HYDRO UPDATE PRELIMINARY ECONOMIC FEASIBILITY ANALYSIS Hydro Power Transmission Infrastructure Avoided Costs 16,000 Capacity (kW) $212,900 $/mile Local Industrial 0.5 Annual Capacity Factor 656 miles $4.50 $8.00. galion long run diesel / $MIMEBtU 0.94 Annual Availability 15133,662,400 Capital ($) 0.0833 7,120. Efficiency (galonséWh, ttuskwh) 66,096,000 Estimated annual production (kWh) $220,000 Annual O&M $038 $0.06 $/kWh avoided fuel 1.86E+07 1 .66E+07 $1,035 /kW Development Costs $0.02 $0.04 $/kWh avoided O8M $9,450 /kW EPC Contract Cost $50. /KW Annual O&M $100,000 5 year maintenance cycle 101 24 years [COSTS S = Avoided kWhs|Avoided kWhs} Annual Date Year | Development EPC Contract] O&M Cost Total Cost_ | NPV COSTS - Local Industrial__| Avoided Cost | NPV Benefits 2009 0 $2,000,000 $2,000,000 $245 057 846 $277 460,176 2010 1 $3,000,000 $3,000,000 2011 2. $3,600,000 $3,600 000 2012 3 $4,000,000 $4,000 000 2013 4 $4,000,000 $4,000 000 2014 5 $96 954 133 $96 954,133 28,000,000} 38,096,000} $14,753,788 2015 6 $96,954 133 $96 954 133 28,280,000 | 37,816,000} $14,837 239 2016 7 $96 954,133 $96 954,133 28,562,800 | 37,533,200 | $14,921,525 2017 8 $1,020,000 $1,020,000 28,848,428 | 37,247,572] $15,006,654 2018 9 $1,020,000 = $1,020,000 29,136,912 | 36,959,088} $15,092,633 2019 10 $100,000 $1,020,000 $1,120,000 29,428 281 36,667,719 | $15,179,473 2020 W $1,020,000 $1,020,000 29,722,564 | 36,373,436 | $15,267,181 2021 12 $1,020,000 $1,020,000 30,019,790 | 36,076,210 | $15,355,766 2022 13 $1,020,000 $1,020,000 30,319,988 | 35,776,012] $15,445,237 2023 14 $1,020,000 $1,020,000 30,623,188 | 35,472,812] $15,535,603 2024 15 $100,000 $1,020,000 = $1,120,000 30,929,420 | 35,166,580 | $15,626,872 2025 16 $1,020,000 $1,020,000 31,238,714 | 34,857,286 | $15,719,054 2026 7 $1,020,000 = $1,020,000 31,551,101 34,544,899 | $15,812,158 2027 18 $1,020,000 = $1,020,000 31,866,612 | 34,229,388] $15,906,193 2028 19 $1,020,000 $1,020,000 32,185,278 | 33,910,722 | $16,001,168 2029 20 $100,000 $1,020,000 = $1,120,000 32,507,131 33,588 869 | $16,097,093 2030 21 $1,020,000 $1,020,000 32,832,202 | 33,263,798 | $16,193,978 2031 22 $1,020,000 $1,020,000 33,160,524 | 32,935,476 | $16,291,831 2032 23 $1,020,000 $1,020,000 33,492,129 | 32,603,871 | $16,390,662 2033 24 $1,020,000 $1,020,000 33,827 051 32,268,949 | $16,490,482 2034 25 $100,000 $1,020,000 = $1,120,000 34 165 321 31,930,679 | $16,591 300 2035 2 $1,020,000 $1,020,000 34,506,974 | 31,589,026 | $16,693,127 2036 7 $1,020,000 $1,020,000 34,852,044 | 31,243,956 | $16,795,971 2037 2B $1,020,000 _ $1,020,000 35,200,565 | 30,895,435 | $16,899,844 2038 23 $1,020,000 $1,020,000 36 552570 $14,043,265 2039 30 $100,000 = $1,020,000 = $1,120,000 35 908 096 $14,183 2040 31 $1,020,000 $1,020,000 36 267.177 $14,325,535 2041 32 $1,020,000 $1,020,000 36 629,849 $14,468,790 2042 3 $1,020,000 $1,020,000 36 996 147 $14 613,478 2043 34 $1,020,000 $1,020,000 37 366,109 $14,759,613 2044 % $100,000 = $1,020,000 = $1,120,000 37,739,770 $14,907 209 2045 % $1,020,000 $1,020,000 38,117,167 $15 056 281 2046 7 $1,020,000 $1,020,000 38 498 339 $15,206 844 2047 38 $1,020,000 $1,020,000 38 883,322 $15,358,912 2048 3 $1,020,000 $1,020,000 39,272,156 $15,512,501 2049 40 $100,000 $1,020,000 = $1,120,000 39,664 877 $15,667 626 2050 al $1,020,000 $1,020,000 40,061 526 $15 824 303 2051 42 $1,020,000 $1,020,000 40,462,141 $15,982,546 2052 43 $1,020,000 $1,020,000 40 866,763 $16,142,371 2053 44 $1,020,000 $1,020,000 41,275,430 $16 303,795 2054 45 $100,000 $1,020,000 $1,120,000 41 688,185 $16 466 833 2055 46 $1,020,000 $1,020,000 42,105 066 $16 631,501 2056 47 $1,020,000 $1,020,000 42,526,117 $16,797 816 2057 48 $1,020,000 $1,020,000 42,951 378 $16 965,794 2058 43 $1,020,000 $1,020,000 43 380 892 $17,135,452 2059 50 $100,000 $1,020,000 $1,120,000 43,814,701 $17 306,807 7 |Appendices L&P Borough Energy Plan Appendix F: Pebble Mine Intertie to HEA Power Supply Scenario FIRST ORDER OF MAGNITUDE ESTIMATE - POWER SUPPLY FROM HEA TO PEBBLE ASSUME 230KV SUBMARINE + OVERLAND CABLE FROM HEA (Anchor Paint) TO PEBBLE ASSUME HEA POWER = COOK INLET NATURAL GAS, 260M CC SCALE TOTAL ESTIMATED PRICE OF POW EF $0.240 Cost of Power $0.100 $/kVWh General & Administrative $0.140 * $/kVWh Transmission Links $/mile Local Cost From To Mileage Baseline Multiplier Capital Cost $ Anchor Paint Chinitna 38 $3,000,000 1.00 = $114,000,000 Chinitna Pebble 70 $850,000 1.00 $59,500,000 Subtotal 108 $1,606,481 $173,500 000 Add local substations $2,500 000 Total $176 000 000 Assume 30 year capital recovery, 5% real interest CRF= 0.06505 Annual Capital $11,449 053 O&M = $500 000 Total Annual $11,949 053 Capacity Req'd (MVV) 200 Capacity Factor 08 Availability 09g MWh/year 1,262 304 S/MVWh $9.47 COOK INLET NATURAL GAS FIRED TURBINES 260MW CC Unit Heat Rate 7120 MMBTU/MVVh NYMEX (Jan 10) Long Run Price of Fuel $3.00 $/MMBtu Cost of Fuel $56.96 $/MYWh Fixed O&M 11 $kW-year Fixed O&M $2,860,000 §$/kW-year $1.74 Variable O&M $4.50 S/MVWh Capital Cost 1200 $/kW Capital Cost $312,000,000 20085 Capital Recovery Factor 0.08024 Capital Cost $25,035 687 $/year $15.26 Capacity Factor 08 Availability 0.9 MVVh/year 1,640 995 Fuel + O&M + Capital ($/MWh) $76.46 $17.00 CO2 Emissions Cost ($/MVVh) $12.00 TOTAL GENERATION COST ($/MWh) $90.46 ADD Transmission ($/MVVh) $9.47 TOTAL G&T ($/MVh) $99.93 8 |Appendices L&P Borough Energy Plan Appendix G: Update 1982 Stone & Webster Hydroelectric Reconnaissance Estimates to 2008 Lake & Peninsula Regional Energy Screening Study rat 4-0ct-08 qs to mafa@ alaska.net HYDRO OPPORTUNITY RECON & SCREENING Discount Rate 5.0% Lite 40 CRF 0.05828 oam $0.03 EPC + OC Transmission | Firm Energy | Project Cost | estimate | Construction | 20088 LCOE File 10 Project Name Source Land Issues | Environmental] (miles) (kWhiyr) (Ss) Year (20088) ($/kW) $/kWh Lakes Region Bristol Bay Regional Power Kontrashibuna Plan Interim Feasibility; by sw 1961 Lake, Tanalian Stone & Webster Engr Corp; Lak® Clark ational Park 218 River + Regional for APA; July 1982; BRI O13, Wavonal Pa Grid ex sum, vol 1 & 2; DOE Library. 450 70,128,000 $216,114,000 1982 $438,711,420 ‘$27,419 $0.39 Bristol Bay Regional Power Plan Interim Feasibility; by Diversion sw Stone & Webster Engr Corp; allows fish 128 575 Newhalen River ioe apa: July 1982; BRI013, boa! passage ex sum, vol 1 & 2; DOI enhancement Library 420 69,001,956 $149,867,000 1982 $304,230,010 _—$19,014 $0.29 Bristol Bay Interregional Power Plan Preliminary Diversion sw Assessment; by Stone and allows fish 151 651 Newhalen River Webster Engineering Corp.; *°Ce! passage for APA; April 1983; BRI 021 enhancement DOE Library 420 94,497,480 $201,407,000 1983 $402,814,000 _—‘$18,310 $0.28 Bristol Bay Regional Power Plan Interim Feasibility; by sw 4273 Tazimina Falls Stone & Webster Engr Corp; Salmon spawn 175 (Recon) for APA; July 1982; BRI 013, below falls ex sum, vol 1 & 2; DOI Library 16 5,259,600 $15,773,000 1982 $32,019,190 _ $26,683 $0.38 Feasibilty Report Tazimina River Hydroelectric Project; by eosin Stone And Webster; for APA; ee March 1987; TAZI 003-2; DOE Library 16 3,068,100 $10,665,000 1986 $20,583,450 ‘$29,405 $0.42 Tazimina Falls installed + Salmon spawn (Construction) iNet Transmission | ciow falls ROW 16 4,032,360 $11,600,000 1997 $17,400,000 __—$ 18,913 $0.28 Chigniks Chignik AK Draft Small Hydropower Feasibility Report and EIS; by ACOE; for ACOE; Rec'd Fed Chignik (Indian July 1984; TK 1424 A4 C44d; authorization SW 190 1595 Creek) BLMIAR Library and Reg Local for Inven. & Recon Study for construction Small Hydro Projects, ible otlanesOcs |. 960) 0.25 5,118,000 $8,711,000 1983 $17,422,000 $15,838 $0.23 9 |Appendices L&P Borough Energy Plan Appendix H: Chigniks Hydro + Wind Combinations; Chignik + Chignik Lagoon Load Combinations Lake & Peninsula Regional Energy Screening Study draft: 4-Oct-08 q's to: maf laska.net HYDRO OPPORTUNITY RECON & SCREENING Initial Review of Precipitation (Hydro) and Wind (Wind Power) Monthly Coorelation CHIGNIK PRECIPITATION http: wree. dri. i-bin/cliMAIN.pl?ak171 1961-1990 JAN FEB MAR APR MAY JUN Average Total Precipitation (in.) 6.06 7.5 6.89 5.37 6.24 6.07 Monthly Mean vs. Avg. Annual 0.88 1.09 1.00 0.78 0.90 0.88 CHIGNIK WIND see Chignik Bay at: http: .akener hority.org/programwindre re htm! WIND (Mud Bay Hill MPH 15 iv 18 15.5 13.4 10.4 Monthly vs. Avg 1.01 1.15 1.21 1.04 0.90 0.70 WIND + PRECIP 1.88 2.23 2.20 1.82 1.80 1.58 Chignik Load kWh,/month 46,530 41,760 43,950 41,280 50,310 46,470 Monthly vs Avg 1.08 0.97 1.02 0.96 1.17 1.08 517,050 kWh/year Chignik Lagoon Load kWh/month 43240 39890 28430 35280 40520 41490 Monthly vs Avg. 1.13 1.04 0.74 0.92 1.06 1.09 458,190 kWh/year Chignik + Chignik Lagoon Loads kWh/month 89,770 81,650 72,380 76,560 90,830 87,960 Monthly vs Avg. 1.10 1.00 0.89 0.94 AA2 1.08 975,240 kWh/year 10 |Appendices L&P Borough Energy Plan JUL 4.18 0.61 12.4 0.83 1.44 43,770 1.02 42460 1.11 86,230 1.06 AUG 5.05 0.73 13.5 0.91 1.64 45,510 1.06 40200 1.05 85,710 1.05 SEP 9.53 1.38 13.8 0.93 2:34 43,560 1.01 37920 0.99 81,480 1.00 OCT 9.13 1.32 15.9 1.07 2.39 39,450 0.92 36800 0.96 76,250 0.94 NOV 9.45 1.37 18.2 1.22 2.59 42,540 0.99 35560 0.93 78,100 0.96 DEC 7.41 1.07 15.7 1.05 2.13 31,920 0.74 36400 0.95 68,320 0.84 Appendix I: Economic Value of Indian Creek Hydro |All values are in 2008S Hydro Power Avoided Costs 500 Capacity (kW) $4.36 /gallon long run diesel price 0.5 Annual Capacity Factor 0.0833 Diesel Efficiency (gallons/kWh) 0.94 Annual Availability $0.36 $/kWh avoided fuel 2,065,500 Estimated annual production (kWh) $0.02 _$/kWh avoided diesel O&M $1,500 /kW Development Costs $15,000 /kW EPC Contract Cost 5.0% Real Discount Rate $120 /kW Annual O&M $50,000 _5 year maintenance cycle 1.05 COSTS | - A\ D DIES! Annual Benefiit / Cost Date Year Development__EPC Contract |__O&M Cost Total Cost NPV COSTS | Avoided kWhs| Avoided Cost | NPV Benefits Ratio, 2008 0 $300,000 $300,000 $8,221,111 $11,423,098 1.39 2009 1 $450,000 $450,000 2010 2 $2,500,000 $2,500,000 2011 3 $2,500,000 $2,500,000 2012 4 $2,500,000 $2,500,000 2013 5 $60,000 $60,000 1,000,000 $383,611 2014 6 $60,000 $60,000 1,050,000 $402,792 2015 7 $60,000 $60,000 1,102,500 $422,931 2016 8 $60,000 $60,000 1,157,625, $444,078 2017 9 $60,000 $60,000 1,215,506 $466,282 2018 10 $50,000 $60,000 $110,000 1,276,282 $489,596 2019 1 $60,000 $60,000 1,340,096 $514,076 2020 12 $60,000 $60,000 1,407,100 $539,779 2021 13 $60,000 $60,000 1,477,455, $566,768 2022 14 $60,000 $60,000 1,551,328 $595,107 2023 15 $50,000 $60,000 $110,000 1,628,895 $624,862 2024 16 $60,000 $60,000 1,710,339 $656,105 2025 17 $60,000 $60,000 1,795,856 $688,910 2026 18 $60,000 $60,000 1,885,649 $723,356 2027 19 $60,000 $60,000 1,979,932 $759,524 2028 20 $50,000 $60,000 $110,000 2,065,500 $792,349 2029 21 $60,000 $60,000 2,065,500 $792,349 2030 22 $60,000 $60,000 2,065,500 $792,349 2031 23 $60,000 $60,000 2,065,500 $792,349 2032 24 $60,000 $60,000 2,065,500 $792,349 2033 25 $50,000 $60,000 $110,000 2,065,500 $792,349 2034 26 $60,000 $60,000 2,065,500 $792,349 2035 27 $60,000 $60,000 2,065,500 $792,349 2036 28 $60,000 $60,000 2,065,500 $792,349 2037 29 $60,000 $60,000 2,065,500 $792,349 2038 30 $50,000 $60,000 $110,000 2,065,500 $792,349 2039 31 $60,000 $60,000 2,065,500 $792,349 2040 32 $60,000 $60,000 2,065,500 $792,349 2041 33 $60,000 $60,000 2,065,500 $792,349 2042 34 $60,000 $60,000 2,065,500 $792,349 2043 35 $50,000 $60,000 $110,000 2,065,500 $792,349 2044 36 $60,000 $60,000 2,065,500 $792,349 2045 37 $60,000 $60,000 2,065,500 $792,349 2046 38 $60,000 $60,000 2,065,500 $792,349 2047 39 $60,000 $60,000 2,065,500 $792,349 2048 40 $50,000 $60,000 $110,000 2,065,500 $792,349 2049 41 $60,000 $60,000 2,065,500 $792,349 2050 42 $60,000 $60,000 2,065,500 $792,349 2051 43 $60,000 $60,000 2,065,500 $792,349 2052 44 $60,000 $60,000 2,065,500 $792,349 2053 45 $50,000 $60,000 $110,000 2,065,500 $792,349 2054 46 $60,000 $60,000 2,065,500 $792,349 2055 47 $60,000 $60,000 2,065,500 $792,349 2056 48 $60,000 $60,000 2,065,500 $792,349 2057 49 $60,000 $60,000 2,065,500 $792,349 2058 50 $50,000 $60,000 $110,000 2,065,500 $792,349 11 |Appendices L&P Borough Energy Plan Appendix J: Rate Impact Analysis of Indian Creek Hydro All values are in 2008$ Hydro Power 500 Capacity (kW) 0.5 Annual Capacity Factor Rate Impact Assumptions: 80% Pct Grant Funded 30 Amortization (yrs) ‘Avoided Costs $4.36 /gallon long run diesel price 0.0833. Diesel Efficiency (gallons/kWh)| 0.94 Annual Availability 7% Real Interest $0.36 $/kWh avoided fuel 2,065,500 Estimated annual production (kWh) $0.18 Non-Fuel Costs $0.02_S/kWh avoided diesel O&M $1,500 ‘kW Development Costs $15,000 /kW EPC Contract Cost 5.0% Real Discount Rate $120 /KW Annual O&M $50,000_5 year maintenance cycle 7.05 BENEFITS — AVOIDED | Existing Diesel] New Hydro DIESEL Rates Rates _| Rate Savings Revenue Annual Date Year Development EPC Contract O&M Cost Total Cost Requirement | Avoided kWhs| Avoided Cost S/KWh. S/kWh SkWh 2008 0 $300,000 $300,000 $0.56 2009 1 $450,000 $450,000 $0.56 2010 2 $2,500,000 $2,500,000 $0.56 2011 3 $2,500,000 $2,500,000 $0.56 2012 4 $2,500,000 $2,500,000 $0.56 2013 5 $60,000 $60,000 $204,301] 1,000,000] $383,611 $0.56 $0.38 $0.18 2014 6 $60,000 $60,000 $204,301} 1,050,000] $402,792 $0.56 $0.37 $0.19 2015 7 $60,000 $60,000 $204,301 1,102,500 $422,931 $0.56 $0.37 $0.20 2016 8 $60,000 $60,000 $204,301] 1,157,625] $444,078 $0.56 $0.36 $0.21 2017 9 $60,000 $60,000 $204,301] 1,215,506] $466,282 $0.56 $0.35 $0.22 2018 10 $50,000 $60,000 $110,000 $204,301 1,276,282 $489,596 $0.56 $0.34 $0.22 2019 11 $60,000 $60,000 $204,301 1,340,096 $514,076 $0.56 $0.33 $0.23 2020 12 $60,000 $60,000 $204,301] 1,407,100] $539,779 $0.56 $0.33 $0.24 2021 3 $60,000 $60,000 $204,301] 1,477,455] $566,768 $0.56 $0.32 $0.25 2022 14 $60,000 $60,000 $204,301] 1,551,328] $595,107 $0.56 $0.31 $0.25 2023 15 $50,000 $60,000 $110,000 $204,301] — 1,628,895] $624,862 $0.56 $0.31 $0.26 2024 16 $60,000 $60,000 $204,301 1,710,339 $656,105 $0.56 $0.30 $0.26 2025 17 $60,000 $60,000 $204,301 1,795,856 $688,910 $0.56 $0.29 $0.27 2026 18 $60,000 $60,000 $204,301 1,885,649 $723,356 $0.56 $0.29 $0.28 2027 19 $60,000 $60,000 $204,301] 1,979,932] $759,524 $0.56 $0.28 $0.28 2028 20 $50,000 $60,000 $110,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2029 21 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2030 22 $60,000 $60,000 $204,301 2,065,500 $792,349 $0.56 $0.28 $0.28 2031 23 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2032 24 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2033 25 $50,000 $60,000 $110,000 + $204,301} 2,065,500] $792,349 $0.56 $0.28 $0.28 2034 26 $60,000 $60,000 $204,301 2,065,500 $792,349 $0.56 $0.28 $0.28 2035 27 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2036 28 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2037 29 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2038 30 $50,000 $60,000 $110,000 $204,301 2,065,500 $792,349 $0.56 $0.28 $0.28 2039 31 $60,000 $60,000 $204,301} 2,065,500] $792,349 $0.56 $0.28 $0.28 2040 32 $60,000 $60,000 $204,301 2,065,500 $792,349 $0.56 $0.28 $0.28 2041 33 $60,000 $60,000 $204,301} 2,065,500] $792,349 $0.56 $0.28 $0.28 2042 34 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2043 35 $50,000 $60,000 $110,000 = $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2044 36 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2045 37 $60,000 $60,000 $204,301 2,065,500 $792,349 $0.56 $0.28 $0.28 2046 38 $60,000 $60,000 $204,301 2,065,500 $792,349 $0.56 $0.28 $0.28 2047 39 $60,000 $60,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2048 40 $50,000 $60,000 $110,000 $204,301] 2,065,500] $792,349 $0.56 $0.28 $0.28 2049 4 $60,000 $60,000 $0 2,065,500 $792,349 $0.56 $0.18 $0.38 2050 42 $60,000 $60,000 so} 2,065,500] $792,349 $0.56 $0.18 $0.38 2051 43 $60,000 $60,000 so} 2,065,500] $792,349 $0.56 $0.18 $0.38 2052 44 $60,000 $60,000 so} 2,065,500] $792,349 $0.56 $0.18 $0.38 2053 45 $50,000 $60,000 $110,000 $0 2,065,500 $792,349 $0.56 $0.18 $0.38 2054 46 $60,000 $60,000 $0 2,065,500 $792,349 $0.56 $0.18 $0.38 2055 47 $60,000 $60,000 $0 2,065,500 $792,349 $0.56 $0.18 $0.38 2056 48 $60,000 $60,000 so} 2,065,500] $792,349 $0.56 $0.18 $0.38 2057 49 $60,000 $60,000 so} 2,065,500] $792,349 $0.56 $0.18 $0.38 2058 50 $50,000 $60,000 $110,000 so] 2,065,500| $792,349 $0.56 $0.18 $0.38 12 |Appendices L&P Borough Energy Plan Appendix K: Wood Boilers for Electricity and Heat WOOD-FIRED POWER PLANT Crimp Biomass Cost Model; described in "Renewable Power in Rural Alaska" (Arctic Energy Summit, 2007) Adopted for use in screening study to ascertain first order economic value of wood power options in L&P Lakes Region Fuel Regional Cost X 20 20 $200 $250 per cord 1.2 (AP, 5%, years) 35% (AF, 5%, years) $70,000 4,400 kWh/cord Levelized Levelized Total Levelized | Net Average Capital Major Capital Total Capital Cost Annual Net Annual Levelized Cost Power Plant | Total Project Costrec Rehabilitation Costrehad |Levelized Cost} Fixed O&M | (Capital +O&M)| Capacity Production Fuel Cost of Electricity Size (kW) | Cost (G/kW) | (S/kW-yr) | Cost ($/kW) (S/KW-yr) (B/KW-yr) (S/KW-yr) (S/kKW-yr) Factor (kWh-yr/k WW) ($/KWh) ($/kWh) 50 $28 004 $2,247 $9,801 $296 $2,544 $1,600 $4,144 80% 7013 $0.057 $0.65 60 $24 002 $1,926 $8,401 $254 $2,180 $1367 $3,547 80% 7,013 $0.057 $0.56 70 $21,143 $1 697 $7 400 $224 $1,920 $1,200 $3,120 80% 7,013 $0.057 $0.50 80 $18 998 $1,524 $6 649 $201 $1,726 $1,075 $2,801 80% 7,013 $0.057 $0.46 90 $17 329 $1,391 $6 065 $183 $1574 $978 $2,552 80% 7013 $0.057 $0.42 100 $15,994 $1,283 $5,598 $169 $1,453 $900 $2,353 80% 7,013 $0.057 $0.39 13 |Appendices L&P Borough Energy Plan Appendix L: Igiugig In-Stream Hydro In-Stream Vertical Axis Turbine Recon Analysis $4.26 FYO8 100% $7.00 Projected Water Water | Encurrent Projected Fuel Velocity | Velocity 25kW Diesel gallons / | Gallons of | Price per Baseline | Savings Month kWh, req'd (ft/s) (m/s) kWhimo | kVVh req'd kWh, Fuel Req'd] Gallon | Fuel Cost | Fuel Cost ($) July-07 16634 50 1.52 2,269 14,365 0.0956 1,373 $7.00 $9,612 $11,130 $1,518 August-07 16111 56. 1.68 3,040 13,071 0.1004 1,312 $7.00 $9,183 $11,319 $2,136 September-07 17794 58 1.77 3,573 14,221 0.0926 1,316 $7.00 $9,214 $11,529 $2,315 October-07 17451 57 1.74 3,390 14,061 0.0944 1,327 $7.00 $9,290 $11,529 $2,239 November-07 18321 o2 1.58 2,560 15,761 0.0300 1,418 $7.00 $9,924 $11,536 $1,612 December-07 20047 48 1.46 1,999 18,048 0.0906 1,635 $7.00 $11,444 $12,712 $1,268 January-08 23979 45 1.37 1,633 22,346 0.0841 1,880 $7.00 $13,157 $14,119 $962 February-08 24000 40 1.22 1,121 22,879 g.0770 1,761 $7.00 $12,325 $12,929 $604 March-08 21518 3.8 1.16 948 20,570 0.0883 1,817 $7.00 $12,721 $13,307 $586 April-O8 19294 3.6 1.07 720 18,574 0.0898 1,667 $7.00 $11,672 $12,124 $462 May-08 17628 3.6 1.07 720 16,908 0.0964 1,631 $7.00 $11,414 $11,900 $486 June-08 15391 42 1.28 ‘1512 14,079 0.0960 1,352 $7.00 $9,464 $10,346 $882 TOTALS 228,168 23,284 204,884 18,489 $7.00 $129,420 $144480 $15,060 In Stream Vertical Axis Turbine Recon System Economics ma) 1 2 3 4 5 6 7 8 g 10 u 12 13 14 15 Benefit - Fuel Savings ($year) $15,080 $15,080 $15,080 $15,080 $15,060 $15,060 $15,080 $15,080 $15,060 $15,060 $15,060 $15,080 $15,060 $15,060 $15,060 In Stream Turbine ($110,000) Balance of Plant ($40,000) Investment ($150,000) am ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) ($4,800) Net Cash Flow ($150,000) $10,260 $10,260 $10,260 $10,260 $10,260 $10,260 $10,280 $10,260 $10,260 $10,260 $10,260 $10,260 $10,260 $10,260 $10,260 NPV (5%) ($43,507) BenefitiCost 0.78 14 |Appendices L&P Borough Energy Plan Appendix M: Heating Fuel Comparisons, Alaska, Fall 2008 Fuel price per unit gross heat _ heater efficiency $/1,000,000 BTU's of | useful BTUs (BTU) useful heat per $1.00 Natural gas (Southcentral) $8.40 / mef 1,010,000 85% $9.78 102,202 Coal (Fairbanks, North Pole) $120.00 /ton 15,200,000 75% $10.53 95,000 Wood, birch (local) $200.00 / cord 18,200,000 75% $14.65 68,250 Wood, spruce (local) $200.00 / cord 15,000,000 75% $17.78 56,250 Fuel Oil (Equivalent to $200/cord wood) $2.04 / gal 135,000 85% $17.78 56,250 Natural gas (Fairbanks) $23.35 /mef 1,010,000 85% $27.20 36,767 Electricity (MLP, Sitka, Ketchikan, Juneau) $0.10 /kWh 3,413 100% $29.30 34,130 Wood, birch (imported) $400.00 / cord 18,200,000 75% $29.30 34,125 ‘Wood, spruce (imported) $400.00 / cord 15,000,000 75% $35.56 26,125 Fuel Oil (Equivalent to $400/cord wood) $4.08 / gal 135,000 85% $35.56 28,125 Fuel oil (winter grade - Interior) $4.50 / gal 135,000 85% $39.22 25,500 Fuel Oil (winter grade - L&P/BB) $5.00 / gal 135,000 85% $43.57 22,950 Propane (Fairbanks) $4.00 / gal 91,333 85% $51.52 19,408 Propane (Anchorage) $4.00 / gal 91,333 85% $51.52 19,408 Fuel Oil (L&P/Pt. Alsworth) $7.00 / gal 135,000 85% $61.00 16,393 Electricity (GVEA $0.23 /kWh 3,413 100% $67.39 14,839 15 |Appendices L&P Borough Energy Plan Appendix N: Long Run Incremental Cost Analysis — Includes Capital Replacement Costs Long Direct Run Long Vent Outlook: Run Heating New New Passive Building Utility Outlook: Heating Oil - Unit Existing Wood Wood Solar Envelope: Diesel Heating Heating Wood Central (Toyo, Wood Stove Boiler Water/Space | Weatherization Fuel Oil Oil Delivered | Furnace/Boiler | Monitor) Stove ($/MMBtu) | ($/MMBtu) Heating & Insulation Difference ($/gallon) ($/gallon) ($/MMBtu) ($/MMBtu) ($/yr) ($/yr) (S/yr) ($/yr) ($/yr) ($/yr) (S/yr) Chignik $4.52 $5.72 $42.37 $25.33 $43,316 $532 $0 $0 $48,940 $0 $0 Chignik Lagoon $4.72 $5.92 $43.85 $25.33 $44,797 $532 $0 $0 $48,940 $0 $0 Chignik Bay $4.57 $5.77 $42.74 $25.33 $43,686 $532 $0 $0 $48,940 $0 $0 Ivanof Bay $6.00 $7.20 $53.33 $26.67 $54,278 $532 $0 $0 $50,073 $0 $0 Perryville $5.00 $6.20 $45.93 $26.67 $46,871 $532 $0 $0 $50,073 $0 $0 Port Heiden $5.50 $6.70 $49.63 $26.67 $50,575 $532 $0 $0 $50,073 $0 $0 Pilot Point $6.00 $7.20 $53.33 $26.67 $54,278 $532 $0 $0 $50,073 $0 $0 Ugashik $6.00 $7.20 $53.33 $26.67 $54,278 $532 $0 $0 $50,073 $0 $0 Egegik $5.17 $6.37 $47.19 $26.67 $48,130 $532 $0 $0 $50,073 $0 $0 Naknek/South Naknek $4.50 $5.70 $42.22 $25.33 $43,167 $532 $0 $0 $48,940 $0 $0 King Salmon $4.50 $5.70 $42.22 $25.33 $43,167 $532 $0 $0 $48,940 $0 $0 Dillingham $4.41 $5.60 $41.48 $25.33 $42,427 $532 $0 $0 $48,940 $0 $0 Aleknagik $4.41 $5.85 $43.33 $25.33 $44,278 $532 $0 $0 $48,940 $0 $0 Manokotak $4.61 $5.95 $44.07 $25.33 $45,019 $532 $0 $0 $48,940 $0 $0 Togiak $4.70 $6.00 $44.44 $25.33 $45,390 $532 $0 $0 $48,940 $0 $0 Ekwok $5.70 $6.90 $51.11 $25.33 $52,056 $532 $0 $0 $48,940 $0 $0 New Stuyahok $5.45 $6.65 $49.26 $25.33 $50,204 $532 $0 $0 $48,940 $0 $0 Koliganek $5.80 $7.00 $51.85 $25.33 $52,797 $532 $0 $0 $48,940 $0 $0 Levelock $6.40 $7.60 $56.30 $23.33 $57,241 $532 $0 $0 $47,240 $0 $0 Igiugig $7.00 $8.20 $60.74 $23.33 $61,686 $532 $0 $0 $47,240 $0 $0 Kokhanok $7.00 $8.20 $60.74 $16.67 $61,686 $532 $0 $0 $41,573 $0 $0 Pedro Bay $6.40 $7.60 $56.30 $16.67 $57,241 $532 $0 $0 $41,573 $0 $0 lliamna $5.80 $7.00 $51.85 $16.67 $52,797 $532 $0 $0 $41,573 $0 $0 Newhalen $5.80 $7.00 $51.85 $16.67 $52,797 $532 $0 $0 $41,573 $0 $0 Nondalton $5.80 $7.00 $51.85 $16.67 $52,797 $532 $0 $0 $41,573 $0 $0 — Port Alsworth $5.75 $6.95 $51.48 $16.67 $52,427 $532 $0 $0 $41,573 $0 $0 16 |Appendices L&P Borough Energy Plan Appendix O: Long Run Levalized Cost Comparison — Fuel Oil Versus Wood Heat (Household Scale) Total Rehab / TOTAL Capital + Levelized Replace Levelized Annual CAPITAL O&M + Incremental Capital Life Capital @ end of Capital O&M + O&M FUEL FUEL FUEL Fuel - Benefit / Description Cost ($) (years) ($/year) useful life ($/year) ($/year) ($/year) ($/gallon) ($/cord) ($/cerd) ($/year) Cost Ratio y 9: Central Fuel Oil Furnace, Boiler $0 15 $0 $5,000 $232 $200 $432 $5.00 $4,500 $4,932 High Efficiency Direct Vent Fuel Oil Heater, $2,000 15 $193 $0 $0 $50 $243 $5.00 $3,690 $3,933 43 e.g., Toyo, Monitor Stove High Efficiency Low Emissions Wood Stove $6,000 15 $578 $0 $0 $250 $828 $250 $2,000 $2,828 2.9 High Efficiency Low Emissions Wood Boiler $15,000 15 $1,445 $0 $0 $350 $1,795 $250 $2,000 $3,795 0.5 Where a wood stove cannot be installed within the household High Efficiency Direct Vent Fuel Oil Heater, €.9., Toyo, Monitor $2,000 15 $193 $0 $0 $50 $243 $5.00 $3,690 $3,933 Stove High Efficiency Low $15,000 15 $1,445 $0 $0 $350 $1,795 $250 $2,000 $3,795 1.1 Emissions Wood Boiler 17 |Appendices L&P Borough Energy Plan Appendix P: Wood Boiler Specifications Boiler Specifications - Summer 2008 BTU/Hour 350,000 425,000 950,000 MSRP (Price) $12,500 $15,000 $32,900 Wt (Ibs) 3,550 3,980 7,500 Air Freight to Lakes $2,840 $3,184 $6,000 Barge-Road-Barge Freight $1,420 $1,592 $3,000 Landed Cost of Boiler Low $13,920 $16,592 $35,900 High $15,340 $18,184 $38,900 18 |Appendices L&P Borough Energy Plan Appendix Q;: Industry Case Study The predominant Lake and Peninsula Borough private business opportunities are outfitter guiding/tourism and commercial fishing. Both of these sectors bring jobs and income to Borough residents and revenue to the Borough to help support schools and public services. Income from these activities also helps support the costs of subsistence activities critical to the lives of Borough residents. The costs of visiting Southwest Alaska, including the Bristol Bay region and Lake and Peninsula Borough are high compared to visiting other more accessible regions of Alaska. As a result, less than 10 percent of visitors to Alaska travel to the region. However, a large number of Alaska owned small businesses are based and operate in the region making it important both to regional income and employment, and to the Alaska tourism sector. To help understand the impact of higher fuel costs on businesses we conducted a case study of a handful of guiding businesses in the Lake and Peninsula Borough. We generally found that the largest increases in fuel prices occurred after most companies had posted their summer 2008 prices and advertising and had negotiated contracts with air carriers. As a result, most were forced to absorb approximately 30 percent increases in operating costs due to rising fuel costs. Most remote lodges and guides were not able to add fuel surcharges to their prices. Air carriers who did add fuel surcharges reported that the added charges generally were not sufficient to cover total cost increases. In addition to the 2008 operating challenges, all operators also stressed that fuel price increases were undermining Alaska’s ability to compete as a destination. If the cost of flying to Alaska erodes the state’s ability to attract visitors, then Southwest Alaska and the Lake and Peninsula Borough area have little chance of competing since they host such a small portion of Alaska visitors. Most operators noted that 2008 will be a watershed year for Alaska tourism in general and small remote operators in particular, with a high likelihood of many going out of business. There is relatively little the Borough can do to change these economic fundamentals. However, to the extent to which energy costs can be lowered, this will help all businesses in the Borough. The potential for cooperative purchases of aviation fuel, regional purchasing of aviation fuel transported across the Pile Bay Road, and support of tourism marketing efforts at the local, state and national levels are all actions that would support these businesses. For example, Kenai Fjords National Park provides web links to all the businesses permitted to operate in the park. If Lake Clark and Katmai National Parks and Preserves and the Alagnak Wild River hosted similar links it would provide considerable market exposure for these businesses. "19 |Appendices ‘L&P Borough Energy Plan References Alaska Energy Authority. Statistical Report of the Power Cost Equalization Program, Fiscal Year 2006. Anchorage: Alaska Energy Authority, 2007. Crimp, Peter and Reuben Loewen, Mia Devine, David Lockard (Alaska Energy Authority), Project), Chris Rose and Hannah Willard (Renewable Energy Alaska and Inc.), and Dan Rathert and Matthew Johnson (Resource Data. Renewable Energy Atlas of Alaska. Anchorage: Alaska Energy Authority and Renewable Energy Alaska Project, 2007. The Economist, Of Froth and Fundamentals, October 9, 2008. Foster, Mark A. in collaboration with Northern Economics, Inc. Alaska Rural Energy Plan, Initiatives for Improving Efficiency and Reliability. Anchorage: Alaska Energy Authority, 2004. Haley, S. and B. Saylor. Effects of Rising Utility Costs on Household Budgets, 2000-2006. University of Alaska Anchorage, Institute of Social and Economic Research, 2007. http://www. iser.uaa.alaska.edu/Publications/risingutilitycosts_final.pdf Saylor, Ben, Sharman Haley, Nick Szymoniak, Estimated Household Costs for Home Energy Use, University of Alaska Anchorage, Institute of Social and Economic Research, May 2008. http://www. iser.uaa.alaska.edu/Publications/webnote/LLFuelcostupdatefinal.pdf Wilson, Meghan, Ben Saylor, Nick Szymoniak, Steve Colt, and Ginny Fay. Dollars of Difference: What Affects Fuel Prices Around Alaska? University of Alaska Anchorage, Institute of Social and Economic Research, May 2008. http://www. iser.uaa.alaska.edu/Home/ResearchAreas/fuelcosts2.html 20 |Appendices L&P Borough Energy Plan