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HomeMy WebLinkAboutCalista Region Energy Needs Study Part II Final Report Vol. 1 2002CALISTA REGION ENERGY NEEDS STUDY PART I NUVISTA LIGHT & POWER, INC. 301 Calista Court Anchorage, Alaska FINAL REPORT VOLUME 1 July 1, 2002 Frank J. Bettine, P.E., Esq. 1120 E. Huffman Road, PMB 343 Anchorage, AK 99515 (907) 336-2335 Final Report 07/01/02 VOLUME 1 Page No. SECTION 1 - INTRODUCTION 1.1 -;Purpose of Study «00 v'ncsssiscosessessnesiiewseses 1-1 1.2 - Preferred Power Supply Alternatives ................. 1-1 FIGURES 1.1. Calista;Region Map oho ccc0vssss ss septecreesenaas 1-2 1.2 - SWGR System w/o Donlin Mine. ...............-.-- 1-4 1.3 — Regional Transmission System with Donlin Mine ..... . 1-6 1.4:-SWGR: Photographs |. p55 3's oe a te croshescmatias 1-8 SECTION 2 ~ EXECUTIVE SUMMARY 251 aIntroduction! .. 44 tctsenanawomsscicsaare wats Heese ts 2-1 2:2. -\Findinge’and ‘Conclusions. « .;..-siswocesonsads wens 2-1 De3)= RECOMMENCATIOMNS 5/216) 01 21 ores o1obos 10101 eveloselolololo cleielminiciier sie 2-2 2:4 =ProjectBinancing <4 <cnsns6 5s sass ase ee ese 2-4 SECTION 3 — SINGLE WIRE GROUND RETURN TRANSMISSION SYSTEM BEI Introductions sapeisicrererescreresserearetelesotete tee e leleleiere)ctell rele 3-1 3.2 - Description of Initial SWGR Transmission System. .... . 3-2 3.3 - Discussion of SWGR Transmission System. ........... 3-4 3.4 - Advantages of SWGR System.............----e eee 3-6 3.5 - SWGR Construction Procedure ..................5-- 3-7 3\6— EléctricaliPesformance!. 3920. csssessdle dt} ccce nn mae 3-9 3.6.1 —Earth Electrode System ...si..<.<5.0::05<0: foie icic ie ies so = 3-9 3.6.2 — Power Flow and Voltage Drop.............-000 005 3-11 8:6:5' — Line Lossesige van scccncescsonsadeatarnannarccrr 3-12 3.7 — Supplying Three-Phase Village Feeders from a Single-Phase SOUNce |... ..<.< <1 .'s1-/c1si oe iow eo eeieiei tieicie cle 3-13 34/21 = Three-Phase 10008 505-10 s5500 seeee semomens sas 3-14 B18i= Safety oa qaccreeecer sarees ieee eerecmoes 3-14 3.8.1 — Grounding Locations and Earth Return Currents ...... 3-14 3.8.2 — Fault Detection and Clearing ..................0055 3-15 3.9 — Unbalanced Generator Loading ..................55- 3-16 3.10 — Permitting and Environmental Impacts.............. 3-17 3.11 — National Electric Safety Code ...................08 3-18 FIGURES 3.1 —SWGR Transmission System Group | Villages ... 3-3 Table of Contents i Final Report 07/01/02 3.2 — “A” Frame Wood Pole Tangent Structure......... 3-8 3.3 — Aluminum or Fiberglass Tube Tangent Structure . . 3-10 3.4 — Simplified Drawing Village SWGR Stepdown (Rerminally yy aercsssthoc Held fof SEGRE RRC RE ORCS 3-13 SECTION 4- SWGR INTERIM POWER SUPPLY ALTERNATIVES 4.1— Introduction’. \\) (scscesisnnst seecieesssasdiaseses 4-1 4.2 -Economic Evaluation of Alternatives. ................ 4-1 42-1 SB uel Oil PHCE]S sopoeiei si pe teshe aici Siem ores ves} o1cxsrsncicicicssvess 4-1 4.2.2 — Alternative 1: Nuvista Purchases Power Directly from Bethel Utilities). sas isuenwsuacuncsaoses 4-4 4.2.3 — Alternative 2: Nuvista Constructs 10 MW Combined-Cycle Plant at Bethel..................4 4-6 4.3 — General Parameters Used to Evaluate Interim Power, Supply Altematives .)5/)1a2:0:0s1eyo0 1 eens woes 4-9 4.4- Conclusions and Recommendations. .................. 4-11 FIGURES 4.1 — Average Cost of Diesel Fuel for Wears 1994-2000 soot ice cy eo ololeieietererststeretoteiowoie 4-2 42— Village Power Costs o../5.<.5.2:6.0.0 5010 Sie) 0/4/8101 ores e101 6 4-6 4.3 — Bethel Utilities Busbar Cost Comparison. ........ 4-7 4.4 — Accumulated Present Worth Power Costs........ 4-8 TABLES 4.1- Fuel Oil Prices Historical and Projected ......... 4-3 SECTION 5 — POWER SUPPLY ALTERNATIVES STAGE 1 MINE DEVELOPMENT 5:1 <Introduction: ss soso iccces#iecctcee es eemeee sss sits 5-1 5.2 — Economic Evaluation of Alternatives................ 5-1 S21 UCL Oil Pricesnenwn te lacitee rete recielie soa 5-1 5.2.2 — Alternative 1: Power Plant Constructed at Mine Site . . . 5-3 5.2.3 - Alternative 2: Power Plant Constructed at Crooked Creek: «fos (etco os oto tieeis s wore rererrersiets 5-3 5\2'4.— Comparison ofA ltematives )<.....-/i..e oewcewedce. 5-4 5.3 - General Parameters Used to Evaluate Power Supply Alternatives sic: saccceeanccdaaanaes 5-7 5.4 — Conclusions and Recommendations ................- 5-8 FIGURES 5\1— Power Cost Comparison ..3.4 6 095142. +seeenees 5-4 52 — PowerPlant. Costs | selves aa ciciel seteetoletelscie isle sie 5-5 5.3 — Power Cost vs. Efficiency and Fuel Oil Costs... ... 5-6 Table of Contents ii Final Report 07/01/02 Table of Contents iii SECTION 1 —- INTRODUCTION Final Report 07/01/02 ECTION 1 — ODU! IN 1.1 — Purpose of Study Nuvista Light & Power Company, a non-profit corporation, is conducting an energy needs study to identify and investigate alternatives that demonstrate the potential for lowering energy costs in the Calista region. Nuvista Light & Power Company will function as a regional Generation and Transmission (G&T) utility to develop, construct, own and operate any generation facilities or transmission interties recommended by this study. Nuvista will sell power directly to the Donlin Creek gold mine project and wholesale power to existing utilities for resale to their existing customers. A map of the Calista Region is shown in Figure 1.1 The study is being conducted in two parts. Part I of the study has been completed and it has identified one preferred alternative to satisfy the electrical power needs of the region, absent the development of the Donlin Creek gold mine project and a second preferred alternative to satisfy the region’s power needs assuming development of the mine project. The mine project is presently under exploration by NovaGold Resources, Inc. In order to economically develop and mine the gold resources, NovaGold anticipates a staged development of its mining effort. Based on new information NovaGold anticipates Stage 1 will be operational on or about the summer of 2006. At Stage 1, the mine will process 8000 tons per day of ore and will require between 25-35 megawatts of power. Stage 2 of the project, estimated to begin in 2011-2012, will increase throughput to 16,000 tons per day and increase power demand to between 40-50 megawatts. The final stage, estimated to commence in 2015-2016, would raise throughput to 20,000 tons per day and increase power demand to between 60-80 megawatts. 1.2 — Preferred Power Supply Alternatives Part I of the study concludes that for either preferred alternative integration of wind generation on the coast with coal-fired generation at Bethel and combined-cycle combustion turbine generation along with construction of a region-wide transmission grid Part II Section 1 — Introduction 1-1 Final Report 07/01/02 Part II Section I — Introduction 1-2 Figure 1.1 Final Report 07/01/02 will provide the lowest power cost to the region. This regional grid would consist of a SWGR transmission lines to provide power to the regional villages and a three-phase 138 kV transmission line to provide power to the Donlin Creek gold mine, assuming the gold mine project is developed. The transmission system would be constructed using a conductor that contains a fiber optic bundle. The use of such a conductor will provide enormous benefits to the operating utility and region. It will provide Nuvista with the ability to readily monitor and control the entire transmission and generation system as well as provide the region with access to high quality and high-speed telecommunications. The two preferred alternatives are described below: e Preferred Alternative Absent Development of Donlin Creek Mine Project (15 MW Coal Plant + SWGR Transmission System + Wind Generation): This preferred alternative provides power to Bethel and the regional villages. This alternative combines combustion turbine power generation with coal-fired power generation at Bethel plus wind turbine generation on the coast. It presumes 859 miles of SWGR transmission lines will be constructed to form a regional transmission grid. The SWGR transmission system for this alternative is shown in Figure 1.2. Phase 1: Construct 10 megawatts of combined-cycle turbine generation at Bethel and construct SWGR transmission lines to interconnect villages near Bethel to the combined-cycle plant. Scheduled completion year 2005. Phase 2: Begin construction of a 15 MW coal-fired plant at Bethel and continue with build-out of 859 miles of Single Wire Ground Return (SWGR) transmission power lines to interconnect regional villages to the centralized power plant located at Bethel. Increase capacity of combustion turbine capacity to 20 megawatts if construction of coal plant is delayed. Construct 1.5 MW wind turbine farms at Sheldon’s Point, Newtok and Kipnuk as SWGR transmission system is expanded to these areas. Increase wind turbine generation to total of 10.5 megawatts by the year 2020. e Capture waste heat from the centralized power plant located in Bethel and distribute waste heat throughout the community via a district heating system. Part II Section 1 — Introduction 1-3 Final Report 07/01/02 It is estimated that each of the three wind turbine farms will initially generate over eight million kWhs per year, increasing to over 18 million kWhs by the year 2020. In addition, wind turbine farms installed at Sheldon’s Point, Newtok and Calista Region Boundary Village ‘SWGR Transmission Line Routing with Approximate Line Miles Calista Region is located in southwestem ‘Alaska in the Yukon-Kuskokwim area, and encompasses 56,000 square miles. SWVGR Transmission System Absent Donlin Mine Development with 4.5 - 10.5 MW Wind Turbine Generation Kipnuk will significantly enhance the performance of the SWGR transmission system by reducing both voltage drop and line losses on the SWGR feeders supplying these three areas. e Preferred Alternative if Donlin Creek Mine Project is developed (Bethel + Mine Site + 18 MW Wind Generation Alternative): This preferred alternative provides power to the mine site, Bethel and the regional villages. This alternative combines combustion turbine power generation at the Part II Section 1 — Introduction 1-4 Final Report 07/01/02 mine site with coal-fired power generation at Bethel and wind turbine generation on the coast. It also integrates the 138 kV transmission line from Bethel to the mine site with the SWGR transmission system to provide a regional transmission grid. This scenario presumes construction of 6 MW wind turbine farms on the coast, at Sheldon’s Point, Newtok and Kipnuk. Construction of a 138 kV transmission line between Bethel and the mine site would reduce the number of required SWGR transmission line miles by 100 miles, from 859 to 759 miles, as 8 villages located between Bethel and Crooked Creek would be provided power from the 138 kV power line. Villages distant from the 138 kV line would receive power from the SWGR transmission system. The regional transmission system for this alternative is shown in Figure 1.3. This alternative assumes the Donlin Creek mine project will be developed in three stages. Stage 1 would require twenty-five to thirty-five megawatts of power and is assumed operational in 2006; Stage 2, forty-fifty megawatts and is assumed operational in 2011-2012; and Stage 3, sixty-eighty megawatts with an operational date of 2015-2016. A description of the installed generation and transmission facilities for this alternative is as follows: Stage 1: Construct 30-40 megawatts of combined-cycle combustion turbine generation at or near mine site to supply initial mine load. Construct 10 megawatts of combined-cycle turbine generation at Bethel and construct SWGR transmission lines to interconnect villages near Bethel to the combined-cycle plant. Continue with build-out of SWGR system. Construct 1.5 MW wind turbine farms at Sheldon’s Point, Newtok and Kipnuk as SWGR transmission system is expanded to these areas. Stage 2: In addition to generation outlined in Stage 1, construct 40-50 megawatts of coal-fired generation at Bethel to provide base load power for mine site and regional villages. Construct 138 kV transmission line from Bethel to the mine site. Increase capacity of wind turbine farms at Sheldon’s Point, Newtok and Kipnuk to 6 MWs. Stage 3: Increase coal-fired generation at Bethel to 60-80 megawatts. e Capture waste heat from the centralized power plant located in Bethel and distribute waste heat throughout the community via a district heating system, all stages. Part II Section 1 — Introduction 1-5 Final Report 07/01/02 The Donlin Creek gold deposit is one of the largest undeveloped gold resources in the world, with over 13 million ounces of gold resources identified to date. With the recent rise in gold prices NovaGold is aggressively pursuing a strategy that will allow it to begin mining 8000 tons of ore per day by the summer of 2006. Therefore, it appears likely the Bethelt+Mine+18 MW Wind Generation alternative is the alternative that will be implemented. Calista Region Boundary Village SWGR Transmission Line Routing with Approximate Line Miles 138 kV 3-Phase Transmission Line Calista Region is located in southwestern Alaska in the Yukon-Kuskokwim area, and encompasses 56,000 square miles. Regional Transmission System with Donlin Mine Development and 18 MW Wind Turbine Generation Part I of the study has recommended Nuvista immediately proceed with additional analysis of those projects that must be constructed by Nuvista within the next 3-5 year period so that it can supply electrical power for the Stage 1 mine load and to the villages surrounding Bethel. These projects include: Part II Section 1 — Introduction 1-6 Final Report 07/01/02 A. Construction of an “On-Site” combustion turbine power plant, located at or near the Donlin Creek mine site, to provide power for the initial mine load, now estimated at 25-35 megawatts.! B. Construction of a Single Wire Ground Return (SWGR) transmission system to serve the electrical power requirements of villages located within a 30-mile radius of Bethel. This would include installation of 10 MW combined-cycle turbine at Bethel to supply electric energy requirements of Bethel and surrounding villages. These projects are of course simply portions of those projects associated with the Bethelt+Mine+18 MW Wind Generation alternative, Stage 1 build-out phase, as previously described. These projects will be the focus of Part II of this study. Figure 1.4 is a copy of the report cover taken from the report titled, “Single Wire Ground Return Transmission System Phase II Report, State of Alaska Division of Energy and Power Development, February 1982.” That report was prepared subsequent to the construction of Bethel to Napakiak SWGR power line and it summarizes information concerning the final design, general construction methods developed and field observations made during the construction of the SWGR power line. The report cover is a collection of photographs taken during construction of the SWGR power line and it includes an enlarged picture of a wood pole tangent A-frame structure used to construct the power line. Newly constructed SWGR power lines would use a similar A-Frame structure, except the wood poles will be replaced by tubular aluminum or fiberglass poles. The entire SWGR power line was erected using a helicopter and snow machines. The helicopter was used to deliver structures assembled at a staging area and lift the structures to a vertical position once the conductor had been attached. The snow machines were used to transport men, materials, hand tools and a small drill used to auger anchor holes. It is worthy of mention, that in 1982, this SWGR project won an Honorable Recognition Award when entered in the Engineering Excellence Awards Competition sponsored by the Consulting Engineers’ of California. ' Donlin Creek mine Power requirements have been increased subsequent to the release of Part I to reflect new information provided by NovaGold Resources, Inc Part II Section 1 — Introduction 1-7 Final Report 07/01/02 State Of Alaska Division Of Energy And Power Development Figure 1.4 Part II Section 1 — Introduction 1-8 SECTION 2 - EXECUTIVE SUMMARY Final Report 07/01/02 SECTION 2 —~EXECUTIVE SUMMARY Section 2.1 - Introduction Part II of this study has further evaluated the feasibility of Nuvista constructing a power plant at or near the Donlin Creek gold mine site to supply the Stage 1 power requirements of the mine. Additionally Part II also examined the practicability of Nuvista installing 10 megawatts of generation at Bethel to supply power to a limited SWGR transmission system and the community of Bethel during the years 2005-2010. It is presumed that beginning in 2011 the power requirements of the Calista region and mine will be supplied by a coal plant built at Bethel and wind turbine farms installed on the coast via a regional transmission infrastructure. Section 2.2 — Findings and Conclusions As a result of this ongoing study the following conclusions have been establish: (1) Mine-Site Generation’ - The results of this evaluation have determined that at Stage 1 of the mine development the projected busbar cost of power delivered to the mine will be 9.5 cents per kWh in year 2002 dollars. Assuming Nuvista adds one-half cent to the busbar cost as a profit margin, power cost to the mine will average 10 cents per kWh. “Mine-Site” generation provides the lowest cost power at Stage 1 of the mine development. (See Part I, Section 6). For comparison purposes the Fort Knox gold mine located near Fairbanks, Alaska, with a load demand of 35 megawatts, purchases its power from Golden Valley Electric Association at a cost of approximately 6.8 cents per kWh. Fort Knox is supplied power over a 138 kV power line that is connected to the Anchorage-Fairbanks transmission grid system. (See Part I, Section 6). Considering the remoteness of the mine site, 10 cent per kWh power at Stage | of the mine development should : : 2 not be considered an excessive power cost. ' For the purpose of this study generating power at the mine site or generating power at a power plant located near Crooked Creek and delivering power to the mine site via a 15 mile long, 138 kV transmission line are considered “Mine-Site” generation. ? At Stage 3 of the mine development, power costs are expected to decrease to approximately 6.5 cents per kWh in year 2002 equivalent dollars. Part II Section 2 — Executive Summary 2-1 (2) Part Il Final Report 07/01/02 It may be possible to lower Stage 1 power cost by as much as ten percent if further investigation determines it is practical to substitute #4 diesel fuel for #2 diesel fuel. However, Nuvista cannot fully explore this option or other “Mine- Site” generation options that can potentially lower power costs because NovaGold has yet to identify its Stage 1 power requirements in sufficient accuracy or detail to allow Nuvista to focus in on a particular plan for providing power to the mine. There is little difference between the cost of generating power at the mine site and the cost of at generating power at a power plant located near Crooked Creek and delivering power to the mine site via a 15 mile long, 138 kV transmission line The cost of power supplied to the mine is 80% dependent on fuel cost and 20% dependent on capital costs. This study also suggests that the maximum practical upper limit to the size of the “Mine-Site” power plant that can be built to supply the Stage 1 mine load is approximately 30 megawatts. A 25 megawatt mine load will typically require a 30 megawatt power plant. It is logistically impractical to deliver and store the annual fuel oil requirements of a “Mine-Site” power plant larger than 30 megawatts. SWGR Transmission System - The preferred alternative for providing power to the 8 villages surrounding Bethel, for the years 2005-2010, is for Nuvista to construct a 10 MW combined-cycle turbine plant in Bethel to supply both the power requirements of Bethel Utilities, and the power requirements of the villages via a SWGR transmission system. Implementation of this alternative is expected to reduce power cost by 22.7 million dollars over the six-year period, between 2005-2010, as compared to the Continued Diesel Generation alternative. Continued diesel generation is defined as the village utilities and Bethel Utilities continuing to generate their respective power requirements using diesel generation in a manner consistent with their present generation practices. Section 2 — Executive Summary 2-2 Final Report 07/01/02 2.3 — Recommendations Based on the Findings and Conclusions determined during Part II of this study it is recommended Nuvista proceed as follows: (1) Nuvista shall perform a feasibility study to identify and develop a single preferred alternative for providing power to the Stage 1 mine load. The study will focus on the feasibility of using either combined-cycle turbines or slow speed diesels to provide Stage 1 power requirements. (a) Nuvista will work closely with NovaGold to accurately identify the power requirements for Stage | of the mine develop. (b) Nuvista will work with Nova Gold to identify mining methods that will minimize Stage 1 power requirements. (2) Nuvista shall perform a feasibility analysis to verify technical and economic feasibility of constructing a 10 MW combined-cycle turbine plant in Bethel to provide interim power to the community of Bethel and the 8 villages surrounding Bethel, during the years 2005 through 2010, with emphasis on constructing a SWGR demonstration project that connects the villages of Atmautluak, Nunapitchuk and Kasigluk with generation and telecommunication facilities in Bethel. (a) In addition Nuvista shall continue with a feasibility analysis to verify technical and economic feasibility of constructing regional SWGR transmission system. (b) Continue investigating the technical and economic feasibility of constructing a 15 MW coal-fired plant at Bethel and wind turbine farms on the region’s west coast to supply the power needs of the region in the event the Donlin Creek gold mine project is not developed. (c) Cconstruct a SWGR demonstration project that connects the villages of Atmautluak, Nunapitchuk and Kasigluk with generation and telecommunication facilities in Bethel. Part II Section 2 — Executive Summary 2-3 Final Report 07/01/02 Because of the long lead times involved with permitting and constructing the coal-fired plants and transmission lines outlined in the preferred alternatives identified in Section 1 of this study, Nuvista must aggressively pursue the development of these future projects so that they can be constructed in a timely manner. It is, therefore, recommended that Nuvista devote substantial efforts to conducting pre-feasibility analysis and/or a feasibility analysis of those power plant and transmission line projects that have been recommended by Part I of this report for construction by the year 2011. These projects include: a. Coal-fired generation at Bethel with and without development of the Donlin Creek mine. b. 138 kV transmission line along route D to mine. c. Regional SWGR transmission system. d. Wind turbine farms at Sheldon’s Point, Newtok and Kipnuk 2.4 — Project Financing The State of Alaska legislature has appropriated sufficient funds to Nuvista, in the year 2002 capital budget, to allow Nuvista to proceed with the feasibility studies outlined above in Section 2.3 paragraphs (1) and (2). Nuvista is also seeking 4.5 million dollars in grant funds from the federal government to design and construct a SWGR demonstration project to interconnect the villages of Atmautluak, Nunapitchuk and Kasigluk with generation and telecommunication facilities in Bethel. Long term financing for constructing the preferred alternative is expected to be provided by loans and grant funds provided by the federal government and State of Alaska. In addition it appears that power plant and transmission line projects, including the SWGR transmission system, identified in the preferred alternative would qualify for Rural Utilities Service (RUS) loans and perhaps Distance Learning and Telemedicine Program grant funding. Part II Section 2 — Executive Summary 2-4 Final Report 07/01/02 SECTION 3 ~ SINGLE WIRE GROUND RETURN TRANSMISSION SYSTEM 3.1 - Introduction Part II of this study will focus on further evaluating the feasibility of constructing an initial SWGR system to supply the electric energy needs of the villages located within a 30-mile radius of Bethel. Constructing these initial SWGR power lines will be the first step in implementing a region wide SWGR transmission system. It is proposed that the initial SWGR system serve the villages of Napakiak, Napaskiak, Kwethluk, Atmautluak, Nunapitchuk, Kasigluk, Akiak, Akiachak and Tuluksak. For the purposes of this study the villages of Nunapitchuk and Kasigluk are treated as a single community since they are interconnected by a distribution power line and power for the two villages is provided by a diesel power plant located in Nunapitchuk. The village of Oscarville located a few miles southeast of Bethel will not be served by the SWGR system. Oscarville presently obtains its power from Bethel Utilities over a single-phase overhead power line and there is no logical reason to alter this situation. Several years ago Napaskiak also obtained its power from Bethel Utilities via a submerged cable placed on the bottom of the Kuskokwim River that connected to the single-phase overhead power line at its terminus in Oscarville. However, this cable was severely damaged by large ice blocks that scour the river bottom during spring break-up when the thick ice covering the river fractures and flows out to sea. The cable was damaged beyond repair within two years of its installation. No additional efforts have been made to install a new cable. Napakiak presently purchases its power from Bethel Utilities and is supplied over an eight and one- half mile long SWGR power line operating at a voltage of 14,400 volts-to-ground. This SWGR power line was built as a demonstration project with a planned project life of ten years. It has, however, remained in service for over 21 years and it is now approaching the end of its useful life. It should be replaced within the next five years by anew SWGR power line that will form part of the region wide SWGR transmission system. The remaining villages generate their power using diesel power plants. Part II Section 3- Single Wire Ground Return Transmission System 3-1 Final Report 07/01/02 3.2 — Description of Initial SWGR Transmission System The initial SWGR transmission system would consist of approximately 88 miles of power line, eight village step-down terminals and one main step-up substation located south of Bethel. A map showing the routing of the power lines is included as Figure 3.1. The SWGR system would be designed and built to operate at 80 kV. It is recommended that the West Feeder be constructed first, followed by South Feeder 2, South Feeder 1 and finally the North Feeder. South Feeder 2 must span the Kuskokwim River. It is suggested this crossing occur at a location near a point on the west bank of the river known as Willie Petes. At this point the power line would span from the west bank of the river to the west bank of an island located near the middle of the river and then from the east bank of the island to the east river bank. The longest span, measuring approximately 2000 feet, is from the east bank of the island to the east river bank. A-Frame structures would not be used at this crossing, instead a multi-guyed steel pole structure, supported by a driven pile foundation would be used. The feeder will transition to A-Frame structures on the east bank of the river. As shown in Figure 3.1, the West and North feeders would parallel each other for a distance of approximately two miles. These conductors for these two feeders would be attached to single steel-pole structure, supported by driven pile foundation for these two miles. The West Feeder will then transition to A-Frame structures. These steel-pole structures will, in the future, also support the first two miles of the 138 kV transmission line serving the Donlin Creek gold mine. The construction of the North Feeder poses certain timing and design problems. If Donlin Mine is developed a 175 mile long, 138 kV transmission line will be constructed north from the Bethel area to serve the mine load. However, it is not anticipated that the 138 kV transmission line will be required until the year 2010-2011 time-period. The problem that must be addressed is how Nuvista can provide power to villages north of Bethel between the years 2005 and 2010-2011, the Part II Section 3- Single Wire Ground Return Transmission System 3-2 Final Report 07/01/02 J J i f hese Ahan oh : oes 5 4 a Akiachak 327 kW Legend SWGR Transmission System ‘Akiak 203 KW =e SWGR Power Line (88 total miles) Group 1 Villages Atmautluak 147 kw Kasigluk/ 786 . Nunapiatchuk Figure 3.1 Kwethluk 368 kW Napakiak 206 kW Napaskiak 240 kW Tuluksak 156 kW. Total for Villages 2,433 kW Bethel 9,580 kW Total with Bethel 12,013 kW Part Il Section 3 - Single Wire Ground Retum, 33 Transmission System Final Report 07/01/02 date the 138 kV line is expected to be completed.' The recommended solution is to construct the North SWGR feeder using single steel-pole structures, supported by driven pile foundations. These steel-pole structures would be designed to serve as one leg of a steel H-frame structure that will, in the future, support the three-phase 138 kV transmission line. The SWGR transmission line will use an Optical Ground Wire (OPGW), electrically equivalent to 336.4 ACSR as a conductor. This OPGW will serve as a shield wire for the 138 kV transmission line once it is constructed. 3.3 — Discussion of SWGR Transmission System Single Wire Ground Return (SWGR) transmission can best be described as single phase — single wire transmission of alternating current electricity that uses the earth as the return conductor. The SWGR transmission system or, single-wire-earth-return (SWER) as it is referred to in other countries, is not a new concept. Presently, well over 100,000 miles of SWER power lines are in used in Australia alone. SWER systems are also in use in New Zealand and countries in southern Africa. Since 1998, utilities located in southern Africa have connected over 250,000 consumers using SWER power lines.? SWGR transmission was first proposed for use in Alaska in 1975, by R.W. Retherford, as a means of interconnecting the regional villages to a centralized power generation facility® The SWGR transmission concept suggested, in this report, is a point-to-point system with a carefully established ground system at each point, operating at a voltage of 80 kV to ground. The substation established at each grounding point would connect to the village multi-grounded neutral through a step-down transformer. The SWGR transmission concept described in this study has evolved from a recognition of certain basic facts-of-life concerning electric energy in remote western and interior Alaska. It is anticipated that the year 2005 is the earliest date the initial SWGR system could be constructed and made operational. ? www.worldaware.org > A Regional Electric Power System for the Lower Kuskokwim Vicinity, Robert W. Retherford Associates, July 1975. Part II Section 3- Single Wire Ground Return Transmission System 3-4 Final Report 07/01/02 1. Relatively small electric loads and the geographical distribution of villages presently limit electrical energy supply to small diesel generating plants. 2. The benefits of interties to interconnect villages to a centralized power plant are well known. They allow transfer of lower cost energy to high cost areas and consolidate a large enough customer base to make it economically feasible to develop projects, which are capital-intensive to construct but produce lower cost electricity, such as a coal-fired generation plant or large-scale wind generation. 3. Conventional three-phase electric transmission/distribution systems to intertie outlying villages to a more efficient generating plant are mostly impractical because of high construction costs.* 4. A transmission system using a SWGR line can provide good electrical performance at a substantially lower capital cost. 5. The incentive to develop new, alternative energy sources is dependent on an economically viable electric transmission scheme that can deliver such energy to the villages at a reasonable cost. The SWGR transmission concept is one that proposes to deal with these realities. While the use of a single energized wire and earth return is unconventional in the sense that it is not currently used in the United States, it is an accepted system of proven use in many other countries of the world confronted with the problem of economically serving small electric loads, located at great geographical distances from power generation supplies. A SWGR transmission line demonstration project, operating at a voltage of 14,400 volts°- to-ground and using 7#8 alumoweld as the conductor, was constructed in 1981 in western Alaska to intertie the village of Napakiak with Bethel. The 8.5 miles of line interconnecting the two communities extends over tundra-covered terrain, which is underlain with permafrost, and dotted by numerous small lakes. This demonstration * The cost of constructing a three-phase power line is estimated at $290,000 per mile versus $100,000 per mile for an SWGR power line. ° This is a typical single-phase distribution voltage used in Alaska. Part II Section 3- Single Wire Ground Return Transmission System 3-5 Final Report 07/01/02 project has operated reliably for 20 years and has proven that a SWGR technology is both economical and technically feasible for use in Alaska. The SWGR system suggested in this study would operate at a proposed voltage of 80,000 volts-to-ground, which is the line-to-ground voltage of a standard 138,000-volt transmission line.® This voltage was selected because it provides satisfactory electrical performance’ and off-the-shelf equipment is readily available. The preliminary conductor selected for use on the SWGR transmission line is the Corning Starway Double Layer, twelve-fiber count, Optical Guy Wire (OPGW), D380-154/51-012E9.* According to the manufacture, the selected OPGW can be used as a SWGR power line conductor. ° The electrical and mechanical characteristics of this selected OPGW conductor is very similar to 336.4, 30/7 stranding ACSR, except that this OPGW conductor has a breaking strength approximately 38 percent greater than 336.4 ACSR.'° The use of OPGW conductor, with 12 fiber optic strands contained in the center of the conductor, will provide enormous benefits to the operating utility. It will provide Nuvista with the ability to readily monitor and control the regional transmission and generation system as well as provide the region with access to high quality and high-speed telecommunications. 3.4 — Advantages of SWGR System The primary advantage of a SWGR transmission system is that it can provide good electrical performance at a substantially lower initial capital cost than a conventional electric transmission/distribution system. Typically, in Alaska, an SWGR can be built for about one-third the cost of a conventional three-phase power line that can provide the ° Final voltage selection will be made during the project design phase. 7 A circuit voltage of 40 kV-to-ground was investigated but provided unsatisfactory performance for the extensive SWGR system proposed in this study. * Final conductor selection will be made during the project design phase. ° This OPGW will serve as a shield wire for the 138 kV transmission line once it is constructed. '° The selected OPGW conductor exceeds minimum conductor size recommended for used on a power line energized at 80 kV-to-ground. Part II Section 3- Single Wire Ground Return Transmission System 3-6 Final Report 07/01/02 equivalent electrical performance. In southern Africa SWER power lines are being built for approximately one-sixth the cost of three-phase power lines.'! A secondary advantage is that SWGR power lines can be constructed with minimum impact to the environment. The gravity stabilized A-Frame structures used to construct the SWGR line are not embedded in the earth. The feet of the structures simply set on top of the earth, thereby eliminating the need for heavy equipment to drive steel support piling or drill holes for the poles. The typical tangent A-Frame wood pole structure used in the Napakiak to Bethel SWGR power line is shown in Figure 3.2, while Figure 3.3 illustrates a conceptual design of a light-weight A-Frame structure constructed of tubular aluminum or fiberglass. The wood pole A-Frame structure weighs in excess of 1000 pounds and relies on its own weight to resist transverse forces produced by high winds. Longitudinal stability is obtained through the strength and normal tension of the line conductor. The largest piece of ground-traveling equipment used to construct the Bethel to Napakiak SWGR line was a double-track snow machine. The aluminum or fiberglass structure will weigh approximately 200 pounds and will rely on a combination of concrete shoes and one-inch diameter reinforcing bar driven or drilled into the permafrost & installed with light-weight equipment to resist overturn forces. This approach will allow standardization of structures that can be used in varying geographical regions with only the weight of the concrete shoe being altered for various wind regimes. 3.5 - SWGR Construction Procedure” Once structure locations are determined, structures can be assembled or delivered at these locations. The conductor is laid out on the ground between storm guyed double deadends, at typical intervals of 1 to 1-1/2 miles. This is accomplished by placing the conductor reel in a portable wire rack and pulling it out over the snow with a snow machine along the staked centerline. The conductor is then tensioned using a hoist and dynamometer while on the ground to the approximate stringing tension. The tensioning point should be "| Effective Rural Electrification, The Eskom Distribution (South African) experience, R. Stephen and I. Sokopo '2 Assumes winter construction. Part II Section 3- Single Wire Ground Return Transmission System 3-7 Final Report 07/01/02 Figure 3.2 Post Insulator Dywidag Anchor (optional) 1" dia. x Required Length, (10 ft. minimum depth) Use in high wind areas with or without Bog Shoe Wood Pole Bog Shoe (optional) Use in swampy soils and high f wind areas TTT Ground Line "A" FRAME WOOD POLE TANGENT STRUCTURE POST INSULATOR a 4 4 4 A a a a a a e Part II Section 3- Single Wire Ground Return Transmission System 3-8 Final Report 07/01/02 located midway between the deadends. Starting with the structure nearest one deadend the crew orients the structure perpendicular to the conductor (all lying on the ground) and attaches a single structure to the conductor (i.e., conductor is clamped to the post top insulator). Vibration dampers are then attached as necessary. A “J” shaped “lift-hook” is hooked to under side of top of the structure and the structure is then lifted clear of the ground using either a helicopter, a portable scissor lift or extension boom. Once the structure is lifted clear of the ground, the upright structure is rotated perpendicular to the conductor using “turning” ropes previously attached to the structure legs. Once the structure is oriented properly it is lowered to the ground. At this point it is important the structure is positioned properly with respect to the centerline survey. If the structure is offset from centerline it should be relifted and repositioned as necessary. With the structure properly positioned on the ground the lift hook is jerked free of the structure by a rope that has been attached for this purpose. This process is repeated at the opposite end of the section by a second crew, with both crews working from the ends of the section towards the center. A workman remains at the tensioning point to adjust and maintain appropriate tension as structures are erected. After all structures in a section except those on either side of the tensioning point are erected, the conductor is tightened to desired tension and the conductor and the fiber optic bundle are spliced. The remaining two structures (one on either side of the tensioning point) are then erected and all structures in the section are plumbed by “kicking” the pole butts to a vertical position below the conductor attachment. 3.6 — Electrical Performance 3.6.1 - Earth Electrode System The very heart of the SWGR transmission system is a low resistance connection through which the earth return current must flow. The obvious initial step in constructing any SWGR system is to locate an area at each village to install a suitable earthing or grounding electrode system. Without a low resistance connection to the earth a SWGR system will not perform satisfactory. Part II Section 3- Single Wire Ground Return Transmission System 3-9 Final Report 07/01/02 Figure 3.3 Post Insulator Aluminum or Fiberglass Tube Sections Dywidag Anchor - 2 to 4 per Bearing Plate as Required. 1" dia. x Required Length, (10 ft. minimum depth) Structure Bearing Plate, vary Weight and Dimensions to Accomodate Soil and wind Conditions Qe Ground Line ALUMINUM or FIBERGLASS TUBE TANGENT STRUCTURE POST INSULATOR (Conceptual Design) Part II Section 3- Single Wire Ground Return Transmission System 3-10 Final Report 07/01/02 To achieve desired performance the resistance-to-earth of each earthing electrode system should not exceed 5 ohms. In addition, the design of these grounding systems should insure compliance with presently accepted standards for limiting potential ground gradients. In permafrost areas of the north it is, however, not practicable using conventional earthing electrode system embedded directly in the permafrost soils to obtain the required low resistance earth connection for successful operation of a SWGR transmission system. This is because permafrost soil resistivities may average in excess of 100,000 ohm-centimeters as compared to 10,000 ohm-cm for thawed soils. An effective earth connection to the permafrost can, however, be obtained by locating sufficient large thaw bulbs (i.e. unfrozen zones or aquifers within the permafrost), normally located near rivers or large bodies of water and then constructing a conventional earth electrode system within this unfrozen area, where soil resistivity is one-tenth that of permafrost soils. The surface area of the unfrozen soils then provides the necessary surface contact area to the permafrost to provide a low resistance earth connection through which the earth return current must flow. A method for locating and mapping the boundaries of unfrozen soils located within permafrost is outlined in a paper titled “Prospecting for Low Resistance Electrical Grounds in Permafrost Regions” included in Appendix A. 3.6.2 - Power Flow and Voltage Drop Although the focus of Part II is to examine an SWGR system to provide power to villages located near Bethel, the power flow and voltage drop studies were conducted on the entire proposed regional transmission system by Electric Power Systems, Inc. This includes the region wide SWGR transmission system and the 138 kV transmission line from Bethel to proposed Donlin Creek gold mine site. The SWGR system was examined both with and without the mine load. The power flow study examined a mix of wind turbine, coal-fired and combustion turbine generation as described in the preferred power supply alternatives explained in Part II, Section 1. Load data for each village, and for the mine project were as projected in Part I of the study. Based on these loads, the maximum village load studied was modeled as 125% of the 2020 estimated KW demand. The Pawt I Section 3- Single Wire Ground Return Transmission System 3-11 Final Report 07/01/02 minimum village load was modeled as 50% of the 2010 KW demand. The load power factor was assumed to be 0.85 lagging for all village load. The mine load was estimated at 60 MW maximum, and 40 MW minimum, with a power factor of 0.95 lagging. The power flow study indicates that the 80 kV SWGR system will perform satisfactory with or without the development of the Donlin Creek gold mine project. Results of the power flow study performed by Electric Power Systems, Inc. can be found in Appendix A.'° 3.6.3 - Line Losses Line losses associated with the SWGR system appear to be a concern of many individuals when discussing SWGR transmission system. This concern is based on the present high losses associated with the Bethel to Napakiak SWGR power line, now averaging approximately 18-20 percent. This concern is, however, misplaced. The Napakiak to Bethel SWGR power line was built as a demonstration project in 1981 when the peak load demand at Napakiak was approximately 94 kilowatts. Measured line loss at that time was 5.9 percent. The peak load in Napakiak for the year 2001 is estimated at 172 kW or 1.8 times the peak load for 1981. Since line losses increase in proportion to the power squared, line losses would be expected to increase to (1.8) x 5.9 percent or 19 percent. These high line losses can be attributed to two factors. First the conductor used to construct the demonstration project was 7#8 alumoweld conductor. This conductor has a resistance of 2.4 ohms per mile. Second the demonstration project is energized at voltage of 14,400 volts-to-ground. The SWGR system proposed in this study would operate at a voltage of 80,000 volts-to-ground and would utilize Corning Starway Double Layer, twelve fiber count, Optical Guy Wire (OPGW), D380-154/51-012E9, which has a resistance of approximately 0.37 ohms per mile. If the proposed OPGW conductor were substituted for the 7#8 conductor, line losses would drop by a factor of 6.5 or to approximately 2.9 percent. If the Bethel to Napakiak SWGR power line was energized at 80 kV-to-ground and used the proposed OPGW conductor, line losses would decrease by a factor of approximately 36 or to 0.5 percent. Using the SWGR system proposed in this 8 The power flow study analyzed the SWGR transmission system using a slightly smaller diameter conductor than the OPGW conductor suggest for use in Section 3.3. As a result of the power flow study the conductor size has been increased to 336.4 ACSR equivalent. Part II Section 3- Single Wire Ground Return Transmission System 3-12 Final Report 07/01/02 study it has been calculated that it is possible to transmit 6 megawatts of power, one hundred miles, with less than a 5 percent line loss and 5 percent voltage drop. This is an acceptable line loss and voltage drop. It has further been calculated that it would require a three-phase circuit energized at 69 kV to provide similar electrical performance. 3.7— Supplying Three Phase Village Feeders from a Single-Phase Source It is anticipated that existing village distribution systems can readily be re-phased such that the majority of the village load can be supplied from single-phase power. All that is required is the addition of some switches at either the step-down substation or the village substation to physically connect all three-phase feeders to the single-phase SWGR source, applying single-phase line-to-neutral voltage on all three feeders. These switches would be closed when power is supplied from the SWGR system and opened when power is generated at the local village power plant. See Figure 3.4 for a simplified sketch showing a step-down terminal with such a switching scheme. Fiber Optics Bundle To Village a oo ead '20 KV SWGR Optical Phase Conductor 80 kV SWGR, 1 7.2kV, 7 ei ecent t Vacs Poner fiom Neste Locate SWGR Ground a Minimum of 600 ft. from Village Power System Ground Simplified Drawing Village SWGR Stepdown Terminal Part II Section 3- Single Wire Ground Return Transmission System 3-13 Final Report 07/01/02 3.7.1 - Three Phase Loads There are several manufactures that provide single-phase to three-phase conversion equipment. Phase conversion has been manufactured for many years to supply three- phase power from single-phase lines. The size of these converters range from a few kilowatts to several megawatts. It should be recognized, however, that there is very little three-phase load in a village. Typically the only significant three-phase loads in a village are the school and perhaps the village clean water and sewer systems. For comparison purposes, in 2001 Bethel Utilities served 2361 customers. Only 92 of these customers or approximately four percent required three-phase power.'* 3.8 — Safe The SWGR transmission concept suggested in this report is a point-to-point system, with a carefully established ground system at each point, operating at a voltage of 80 kV to ground. The substation established at each grounding point would connect to the village multi-grounded neutral through a step-down transformer. The SWGR system proposed herein would in no way create an operating system less safe than any “conventional” transmission system now in use throughout Alaska. 3.8.1 - Grounding Locations and Earth Return Currents Grounding points must be established at each village for proper operation of the SWGR system. As previously discussed, an effective earth connection to the permafrost can, however, be obtained by locating sufficient large thaw bulbs (i.e. unfrozen zones or aquifers within the permafrost), normally located near rivers or large bodies of water and then constructing a conventional earth electrode system within this frozen area, where soil resistivity is one-tenth that of permafrost soils. The surface area of the unfrozen soils then provides the necessary surface contact area to the permafrost to provide a low resistance earth connection through which the earth return current must flow. Since the vast majority of villages in the Calista region are located near rivers or large bodies of ' Bethel Utilities Corporation 2001 Annual Report. Part II Section 3- Single Wire Ground Return Transmission System 3-14 Final Report 07/01/02 water, obtaining a low resistance connection to the earth should not be a difficult. These earth connections or grounds would be designed in accordance with applicable codes and standards. Grounding locations and step-down substations would normally be located outside the village and will be surrounded by a fence to prevent unauthorized entry. Power will be delivered from the step-down substation to the existing village substation by a conventional single-phase power line. Earth return currents associated with SWGR transmission do not pose any hazard to citizens or property except at the grounding points, which as discussed in the preceding paragraph, will be designed in accordance with all applicable codes and standards and surrounded by a fence. Earth return currents do not return over or near the surface but instead the current returns through the earth at depths of several hundred to several thousands of feet below the surface of the earth. Do to the physical characteristics of alternating current electricity, these earth return currents follow the path of the power line back to the generation source(s). Calculations made using test measurements performed on the Bethel to Napakiak SWGR power line calculated the average resistivity of the earth return path at 10,000 ohm-cm. This relatively low resistivity indicates the earth return current is returning through thawed soils located beneath the permafrost.'° 3.8.2 - Fault Detection and Clearing One potential problem associated with using SWGR transmission is detecting a ground fault condition. A ground fault condition is a condition where the power line conductor has unintentionally come into contact with the ground or an object resting or attached to the ground. A ground fault condition could create an electrocution hazard to people and animals if not promptly detected and the power line de-energized. However, in order to detect the ground fault it is necessary to accurately distinguish between normal load current conditions and a ground fault condition. This can best be accomplished by measuring the sum of currents that flow into a conductor from the various generation 'S Single Wire Ground Return Transmission System Phase II Report, State of Alaska Division of Energy and Power Development, February 1982. Part II Section 3- Single Wire Ground Return Transmission System 3-15 Final Report 07/01/02 sources and comparing this quantity with the sum of the currents that flow out of the conductor to the various loads. If the sum of the currents into the conductor differs from the sum out, then a ground fault condition must exist and the power line is de-energized. This scheme is typically referred to as differential protection and by its nature requires the currents at all generation sources and loads attached to the power line be accurately measured and this information transmitted to a computer that continually monitors and sums the currents. If the currents do not sum to zero, the computer will not only detect this condition but it can determine which section of the power line is faulted and send a signal to open the appropriate device to de-energize the faulted section of power line. The acquisition and transmission of the necessary data to detect and clear ground faults can readily be accomplished by utilizing the fiber optic stranding contained within the proposed conductor. 3.9 — Unbalanced Generator Loading Three phase generators are designed for operation under balanced load conditions. That is, the electrical load on all three-phases is approximately equal. If the loading on all three phases is not equal, circuiting currents will flow within the generator windings that may cause the generator to overheat. When serving single-phase loads from three phase generators it is necessary to connect an equal amount of single-phase load to each of the three-phase to achieve a balanced loading condition. The initial SWGR system as shown in Figure 3.1 will consist of three feeders. The loads on these three feeders will be relatively equal. Using forecasted loads for the year 2010 as shown in table in Figure 3.1 the load demand on the North feeder is 686 kW, the South feeder 814 kW and the West feeder 933 kW. When these loads are combined with the total projected load demand for Bethel of 9,580 kW or 3193 kW per phase, a small unbalanced loading condition on the three-phase generators is created but the unbalanced loading condition is within acceptable limits. A problem arises, however, during the build-out of the SWGR system, if all three feeders are not constructed and energized simultaneously. For example, if the West feeder is constructed and energized, it will add 933 kW of single-phase load to the system. Such a large amount of single-phase load will create an unbalanced loading Part II Section 3- Single Wire Ground Return Transmission System 3-16 Final Report 07/01/02 condition that exceeds acceptable limits. The solution is to reconnect single-phase loads to different generator phases within the community of Bethel to rebalance the loads on the generator(s). Rebalancing the loads on the generator(s), as the initial SWGR system feeders are constructed and energized, is an unfortunate but necessary requirement associated with the build-out of the SWGR system. 3.10 — Permitting and Environmental Impacts Approximately 859 miles of SWGR power lines would be required to interconnect villages in the region to a centralized power plant located in Bethel and to wind generation located on the coast. This is reduced to 759 miles if a 138 kV power line is built between Bethel and the Donlin Creek gold mine, as several villages along the 138 kV three-phase power line can be served directly from the 138 kV line. Maps showing the general routing of the SWGR power lines with and without the development of the Donlin Creek gold mine are contained in Section 2. The vast majority of the SWGR power lines must be built through the Yukon Delta National Wildlife Refuge or village owned lands. To obtain approval to construct power lines in the Yukon Delta National Wildlife Refuge it would be necessary to file for a rights-of-way permits and obtain subsequent approval from U.S. Fish and Wildlife Service (USFWS). Title 11 to ANILCA provides a mechanism to file for and obtain the necessary rights-of-way permit. This will undoubtedly trigger the requirement to prepare an environmental impact statement (EIS). If it can be shown that there is no economically feasible and prudent alternative route for the transmission line, then USFWS must grant the permit. The Bureau of Land Management (BLM) will become involved should the route(s) cross any ANCSA selected lands, which have yet to be conveyed. If the route crosses and native allotment, the Bureau of Indian Affairs (BIA) will represent the interest of the native allotment owner. It is not anticipated that obtaining rights-of-way permit for the SWGR power lines will present any different problems than would be encountered to obtain a permit for a three-phase power line. In fact an SWGR transmission line is much more environmentally friendly than a three-phase power line. Part II Section 3- Single Wire Ground Return Transmission System 3-17 Final Report 07/01/02 The SWGR power line can be built using relatively light-weight equipment. The SWGR structures are not embedded in the earth but rather they sit on top of the soils. This eliminates the need for heavy equipment to drive piles or auger foundations need to support three phase power line structures. Also there is only one aerial conductor not three. This significantly reduces the potential to birds of flying into the aerial conductor. 3.11 — National Electric Safety Code The National Electric Safety Code, which is the code that governs the construction of power lines, does not allow the use of the earth as a return conductor.'® The fifth and prior editions of the NESC did not impose this restriction in rural areas. It appears this change was made to prevent interference to open wire telephone circuits that were in use at the time and that also used the earth as a return conductor. Therefore, in order to construct a SWGR system, in the Calista Region, it will be necessary to obtain a waiver of this restriction either from the State of Alaska Department of Labor, or from the Alaska legislature. Such a waiver was obtained from the Department of Labor to construct the Bethel to Napakiak SWGR system. Construction of SWGR systems within the State should not, however, be allowed to proceed in an uncontrolled manner. Use of SWGR systems should be limited to use in rural areas of the state. To prevent personal injury all other aspects of the SWGR construction should comply with applicable NESC requirements and/or other governing standards. '© Although the NESC does not allow the use of the earth as the sole return conductor, it is well recognized that a substantial part of load current actually returns through the earth in a multi-grounded distribution system. Part II Section 3- Single Wire Ground Return Transmission System 3-18 Final Report 07/01/02 SECTION 4—SW WER PLY ALT. ATIVES 4.1 — Introduction This section examines two interim power supply alternatives for providing power to the initial SWGR transmission system discussed in Section 3, for the years 2005 through 2010, while a coal-fired plant, wind turbine farms and the regional transmission system are constructed. It is presumed, that beginning in 2011, the power requirements of the Calista region including the Donlin Creek gold mine will be generated by a coal-fired plant built at Bethel and wind turbine farms installed on the coast. The two interim power supply alternatives examined to power the initial SWGR system are as follows: (1) Nuvista will purchase power directly from Bethel Utilities to supply the SWGR system, or (2) Nuvista will install a 10 MW combined-cycle combustion turbine plant at Bethel to supply the initial power requirements of the SWGR system and Bethel Utilities. 4.2. Economic Evaluation of Alternatives In this section the cost of power associated with each of the two interim power supply alternatives is summarized and compared against the forecasted cost of power for the villages and/or Bethel Utilities. This study assumes the village utilities and Bethel Utilities will continue to generate their respective power requirements using diesel generation in a manner consistent with their present generation practices. Capital expenses are amortized over a 20-year period at an interest rate of five-percent. 4.2.1 — Fuel Oil Prices The factor that has the single greatest impact on the cost of power generated using diesel fuel is the cost of diesel fuel. Therefore, it is necessary to estimate the per gallon cost of fuel oil that will be paid by Bethel Utilities and Nuvista given the assumption that Alaska North Slope (ANS) crude will sell for $28.00 per barrel in the year 2005. This task was accomplished by comparing historical ANS prices with historical fuel oil prices paid in several villages and communities, for the fiscal years 1994-2000, to develop a relationship between the ANS per barrel price and the percent of ANS price paid for a gallon of diesel fuel oil. This relationship is summarized in Table 4.1. The data in Table Part II Section 4— SWGR Interim Power Supply Alternatives 4-1 Final Report 07/01/02 4.1 reveals some very interesting facts. The data reveals that over the seven-year period Bethel Utilities has paid more for its fuel oil than other communities in the region and significantly more for its fuel oil than the electric utility in Aniak, which is located on the Kuskokwim River over 100 miles upstream of Bethel, and Kotzebue Electric Association located over 400 miles north of Bethel on the Bearing Sea. This information is also graphically illustrated in Figure 4.1 Figure 4.1 Average Cost of Diesel Fuel for Years 1994-2000 $1.60 -——— $1.40 | $1.20 + < | 2 | = | © $1.00 i Napaskiak Utility a Akiachak Utility g Bethel Utilities S $0.80 8 ie Kotzebue Electric % @ Naknek Electric 8 $0.60 BAvg. of Naknek + Kotzebue 3 | nu | $0.40 + $0.20 $0.00 + During this seven-year period Bethel Utilities paid on average 8.28% of the average ANS price or $1.34 per gallon, Aniak paid 7.44% of the ANS price or $1.21 per gallon, while Kotzebue paid 5.63% of the ANS price or $0.91 per gallon. On a percentage basis Bethel Utilities paid 11% more per gallon than Aniak and 47% more than Kotzebue. Based on the average 8.28% of ANS prices Bethel Utilities has paid for fuel oil over the past seven-years, it is projected that Bethel will pay $2.32 per gallon for #1 diesel fuel oil given an ANS crude price of $28.00 per barrel. The primary reason Bethel Utilities fuel costs are significantly greater than fuel costs paid by other utilities is that Bethel Utilities (BU) lacks sufficient fuel storage capacity to store Part II Section 4— SWGR Interim Power Supply Alternatives 4-2 Final Report 07/01/02 Table 4.1 Fuel Oil Prices Historical and Projected Source: Statistical Reports of the Power Cost Equallizaton Program for Fiscal Years 1994-2000; Stat od Alaska. Community Average of Naknek March/April Avg. ANS [Akiachak Ut TAniak Ot Naknek Eleciic rere Fuel Costs _| Crude Cost $/Barrel ra Oil [Percent of [Fuel Oil [Percent of [Fuel Oil Percent of — [Fuel Oil [Percent of na Oil[Percent of [Fuel Oil [Percent of — [Fuel Oil [Percent of 2000 fe 1999 $12.28 : 7 i 1998 $19.30 $1.21 6.27% $1.14 $0.73 3.78% $0.84 4.33% 1997 $21.22 $1.35 6.36% “ $1.17 $0.79 3.72% $0.87 4.10% 1996 $17.83 $1.32 7.40% $1.10 $0.71 3.98% $0.78 4.37% 1995 $13.93 $1.14 - 8.18% $1.10 7.90% $1.33 9.55% $1.17 8.40% $0.86 6.17% $0.71 5.10% $0.79 5.64% 1994 $17.76 $1.29 7.26% $1.17 6.59% $1.39 7.83% $1.35 7.60% $0.93 $.24% $0.79 [ 4.45% | $0.86 4.84% Total 116.67 $8.72 53.71% $7.84 48.35% $9.40 57.94% $8.47 52.09% $6.37 39.40% $5.18 31.92% $5.78 35.66% Average $16.67 $1.25 7.67% $1.12 6.91% $1.34 8.28% $1.21 744% $0.91 5.63% $0.74 4.56% $0.83 5.09% Projected Fuel Costs 2001 $25.12 $1.93 $1.74 $2.08 $1.87 $1.41 $1.15 $1.28 | 2002 $23.86 $1.83 $1.65 $1.98 $1.78 $1.34 $1.09 $1.22 2005 $28.00 $2.15 $1.93 $2.32 $2.08 $1.58 $1.28 $1.43 2005 $24.00 $1.84 $1.66 $1.99 $1.79 $1.35 $1.09 $1.22 2005 $32.00 $2.46 $2.21 $2.65 $2.38 $1.80 $1.46 $1.63 Part II Section 4- SWGR Interim Power Supply Alternatives 4-3 Final Report 07/01/02 its annual fuel requirements. While Bethel Utilities uses approximately 3,000,000 gallons of fuel annually, it only has 50,000 gallons of fuel storage. It purchases its fuel from local fuel distributor(s) throughout the year as needed. Bethel Utilities pays a premium for its fuel by employing such an approach. In contrast to the high cost paid for fuel oil by Bethel Utilities, it is anticipated that Nuvista will be able to obtain its fuel oil at a significantly lower cost for several reasons. First, Nuvista will be purchasing in excess of 10 million gallons annually beginning in 2006, to supply 10 MWs of generation at Bethel and the 25-35 MW Donlin Creek mine site plant. Purchasing such a large quantity of fuel will allow Nuvista to obtain the lowest possible cost per gallon. (See Section 5 for a discussions of Donlin Creek generation alternatives.) Second, Nuvista will build sufficiently large tank farms at both Bethel and the mine site to store its total annual fuel requirements, eliminating the cost penalty associated with using a third party to store its fuel. It is estimated that Nuvista will be able to purchase its fuel, delivered to Bethel, at the average of the cost paid for fuel by Naknek Electric and Kotzebue Electric. Assuming ANS crude benchmark price of $28.00 per barrel, this will equate to a diesel fuel oil price of $1.43 per gallon for #1 diesel fuel oil, or $0.89 per gallon less per gallon than will be paid by Bethel Utilities. 4.2.2. - Alternative 1: Nuvista Purchases Power Directly from Bethel Utilities to Ss upply the SWGR System There are two scenarios examined under this alternative. The first scenario assumes Nuvista purchases power directly from Bethel Utilities at the lower of its single-phase or three-phase tariff rate. The second scenario assumes Nuvista will construct a three million gallon fuel oil storage facility at Bethel and will provide Bethel Utilities with fuel oil at ten cents per gallon over Nuvista’s costs. Nuvista will then purchase power from Bethel Utilities at the lower of its single-phase or three-phase tariff rate. Both scenarios ' Bethel Utilities total installed generation capacity is 12,600 kW. This is only 600 kW in excess of year 2010 total estimated peak demand of 12,013 kW. Part II Section 4 — SWGR Interim Power Supply Alternatives 4-4 Final Report 07/01/02 presume the West SWGR feeder will be constructed and placed in operation by the year 2005 to supply the villages of Atmautluak and Nunapitchuk/Kasigluk. This is followed by construction of the South Feeders 1&2 by the year 2006 to serve Napaskiak and Kwethluk and Napaskiak.” Finally the North Feeder is completed by the year 2007 to supply the villages of Akiachak, Akiak and Tuluksak. Village power cost associated with this alternative are shown in Figure 4.2. It is readily apparent from reviewing Figure 4.2 that there is no cost advantage to constructing a SWGR system and purchasing power from Bethel Utilities at its single- phase tariff rate over continued diesel generation in the villages. In fact, this option results in power cost approximately six cents per kWh greater than the continued diesel generation option. It is also apparent that under this alternative purchasing power from Bethel Utilities at its three-phase tariff rate, with Nuvista providing fuel to Bethel Utilities at ten cents over Nuvista projected fuel costs, results in the greatest reduction in village power cost as compared to continued diesel generation in the villages. This option reduces power cost by approximately six cents per kWh. Purchasing power from Bethel Utilities at its three-phase tariff rate, without Nuvista supplied fuel, will result in a lesser savings but this option does lower village power cost by an average of approximately two and one-half cents per kWh. ? It is assumed Napakiak will continue to receive power over the existing Bethel-Napkiak SWGR power line until it is replaced by a new SWGR power line in 2006. Part II Section 4— SWGR Interim Power Supply Alternatives 4-5 Final Report 07/01/02 4.2.3. - Alternative 2: Nuvista Constructs 10 MW Combined-Cycle Plant at Bethel and Supplies Power to Bethel Utilities and to the SWGR System’ This alternative assumes, that with the cooperation of Bethel Utilities, Nuvista will install a 10 MW combined-cycle turbine in Bethel. The combined-cycle turbine unit is expected to generate power with an efficiency of 17.5 kwh/gallon as compared to the 13.5 kWh/gallon achieved by Bethel Utilities diesel plant.’ The turbine will be installed at or near the Bethel Utilities existing diesel power plant.° Nuvista will contract with Bethel Utilities to maintain and operate the turbine. Nuvista will sell power to Bethel Utilities and the villages at approximately three-quarters of a cent above production costs and it Figure 4.2 Village Power Costs $0.600 $0.550 $0.500 $0.450 Dollars per kWh $0.400 $0.350 $0.300 r T T r 2005 2006 2007 2008 2009 2010 Year —*- BU Gen. -Nuvista Fuel Oil -#- Continued Diesel Gen —*- BU Gen. Single-Phase Rate ~ >< BU-Three-Phase Rates —®- Nuvista 10MW Turbine will provide Bethel Utilities (BU) with sufficient waste heat, at no cost, so that BU could continue to supply waste heat to its existing customers. Nuvista will install additional waste heat distribution facilities and sell the remaining waste heat to new customers. > This alternative has not been discussed with Bethel Utilities management. * This study presumes the combined-cycle turbine generates 90% of the annual energy requirements with the remaining 10% supplied by Bethel Utilities diesel generators. > The turbine, heat recovery boiler, steam turbine and appurtenances will be enclosed in modularized trailers to facilitate and reduce field installation. Part II Section 4 — SWGR Interim Power Supply Alternatives 4-6 Final Report 07/01/02 Waste heat sales by Nuvista to new customers are estimated to equal or exceed the amount of waste heat presently sold by BU. In addition Nuvista would construct a three million gallon fuel tank farm to store the annual fuel supply required by the turbine. This alternative also presumes BU will transport power over its existing distribution system to Figure 4.3 Bethel Utilities Busbar Cost Comparison $0.260 7 $0.240 $0.220 Ih " i iy =) oS $0.180 1 1 1 $0.160 _ = TH $0.140 $0.120 $0.100 r T + 2005 2006 2007 2008 2009 2010 Year —*- BU Busbar Cost w/o Nuvista Fuel —*- BU Busbar Cost w/Nuvista Fuel ~=- Busbar Cost, Nuvista 10MW Turbine _~ BU Avoided Power Costs the SWGR substation located on the southern edge of Bethel at no cost to Nuvista. This alternative will significantly lower power cost for both Bethel Utilities and the villages as shown in Figures 4.2 and 4.3. A review of Figure 4.2 discloses that the Nuvista 10 MW combined-cycle alternative provides the lowest cost power to the villages. Village power cost for this alternative is approximately two cents per kWh less than the alternative where Nuvista supplies fuel oil to Bethel Utilities and then purchasing power from Bethel at three-phase power rates. Figure 4.3 compares busbar cost for three alternatives. Busbar cost is defined as the cost of power at the generation substation. Figure 4.3 reveals that the Nuvista 10 MW turbine alternative results in slightly higher busbar power cost, by two cents per kWh on average, Part II Section 4— SWGR Interim Power Supply Alternatives 4-7 Final Report 07/01/02 than the alternative where Nuvista provides fuel oil to Bethel Utilities. Figure 4.3 also shows Bethel Utilities avoided power cost. The avoided power cost reflects only the fuel cost associated with generating a kWh of electricity.° Both the Nuvista 10MW alternative and Bethel generation with Nuvista supplied fuel alternative provide busbar power at a cost below the BU’s avoided cost. Figure 4.4 illustrated the accumulated present worth of power cost for the years 2005 through 2010 for three alternatives. The Continued Diesel Generation alternative assumes that the village utilities and Bethel Utilities will continue to purchase fuel and generate power in a manner consistent with their present practice. Figure 4.4 discloses very interesting information. First and foremost Figure 4.4 illustrates the preferred alternative Figure 4.4 Accumulated Present Worth Power Cost Years 2005-2010 $80,000,000 $70,000,000 $60,000,000 $50,000,000 + 2 Continued Diesel Gen 3 $40,000,000 + BU Gen, Nuvista Fuel a Nuvista 10 MW Turbine $30,000,000 + $20,000,000 + $10,000,000 + $0; Bethel 8 Villages Total ‘Continued Diesel Gen $51,394,979 $21,087,884 $72,482,863 BU Gen, Nuvista Fuel $35,026,957 $19,066,797 $54,093,754 ‘BNuvista 10 MW Turbine $35,267,519 $14,500,021 $49,767,540 for providing power to Bethel and the eight villages is the Nuvista 10 MW _ turbine alternative. Implementation of this alternative will reduce power cost by 22.7 million ° Assumes Bethel Utilities will purchase fuel oil and generate power in a manner consistent with its present practices. Part II Section 4— SWGR Interim Power Supply Alternatives 4-8 Final Report 07/01/02 dollars over the six-year period, 16.1 million dollars for Bethel and 6.6 million dollars for the 8 villages, as compared to the Continued Diesel Generation alternative. These savings are achieved as a result of lower fuel costs and higher generation efficiencies. Second, the charted data reveals that while the preferred alternative results in the lowest power cost for the villages, it results in slightly higher power costs for Bethel as compared to the Bethel Generation, Nuvista supplied fuel alternative. Village power costs are lower because the preferred alternative avoids the profit mark-up associated with purchasing power from Bethel Utilities. The alternative where Nuvista supplies fuel oil to Bethel Utilities and then purchasing power from Bethel at three-phase power rates also results in a power cost savings to the villages and Bethel, totaling 18.4 million dollars. However, this alternative favors the community of Bethel over the villages. Of this 18.4 million dollar savings, only 2 million dollars benefit the villages. 4.3 — General Parameters Used to Evaluate Interim Power Supply Alternatives All costs are in year 2000 dollars unless otherwise indicated. The common assumptions used to perform the economic evaluation of the various alternatives are listed below. Any specific assumptions used to evaluate a particular alternative are included on the first page of the spreadsheet analysis. Spreadsheets containing a detailed analysis of each alternative can be found in Appendix B. A. Inflation and Discount Rates General Inflation Rate — 3 % Petroleum and Natural Gas based fuel inflation rate — 4% Discount rate — 3.5% B. Heat Rate Combined-Cycle Combustion Turbine and Diesel Generation. 10 Mw Combined Cycle Combustion Units - Heat rate of 7,900 BTU per kWh utilizing Diesel #2 fuel. Bethel Utilities Diesel Generation - Heat rate of 10,200 BTU per kWh Part II Section 4— SWGR Interim Power Supply Alternatives 4-9 Final Report 07/01/02 C. Plant Costs - Year 2005 dollars 10 MW Combined-Cycle Combustion Turbines - $850 per kW (See Precision Energy Services report included in Appendix B), plus $100 per kW to cover substation, system interface and contingency costs. SWGR System Cost — Year 2005 dollars SWGR Transmission line $100,000 per mile (It is estimated the section of SWGR line from Bethel to Tuluksak will cost approximately $175,000 per mile to construct as this section of line will be constructed on steel-pole structures to serve as one leg of a steel H-frame structure that will in the future support the 3-phase 138 kV transmission line. However, only $100,000 of this cost will be allocated to the SWGR power line). Village Substation Costs - $250,000 Village Conversion Costs - $150,000 Single Phase to 3-Phase Conversion Equipment — $400/kW Fuel Storage Cost in $/Gallon $1.50 per gallon, year 2005 Costs (See LCMF report Appendix C.). Fuel Costs Fuel Oil Costs as described in Section 4.2.1. Fuel Oil Costs for based on $28 per barrel for ANS crude oil Purchased Power Costs Assumes firm power available from Bethel Utilities at its published single-phase and three-phase tariff rates. (Bethel Utilities tariff rate documents included in Appendix B). H. O&M Part II Turbine and Diesel - $0.015 per kWh Routine transmission line maintenance estimated at $0.015/kWh. District Heating - $0.005/kWh Tank Farm - $0.005/kWh Section 4 — SWGR Interim Power Supply Alternatives 4-10 Final Report 07/01/02 I. Administrative Costs SWGR system - $0.0075/kWh General Plant - $0.0075/kWh Bethel Utilities - $0.0075/kWh Village Admin - $0.08/kWh 4.4 Conclusion and Recommendations The results of this evaluation has determined that the preferred alternative, for providing power to the community of Bethel and the 8 villages surrounding Bethel via a SWGR transmission system, is for Nuvista to construct a 10 MW combined-cycle plant in Bethel. Implementation of this alternative will reduce power cost by 22.7 million dollars over the six-year period as compared to the Continued Diesel Generation alternative. It is, therefore, recommended that Nuvista pursue the following course of action: (1) Nuvista shall perform a feasibility analysis to verify technical and economic feasibility of constructing a 10 MW combined-cycle turbine plant in Bethel to provide interim power to the community of Bethel and the 8 villages surrounding Bethel, during the years 2005 through 2010, with emphasis on constructing a SWGR demonstration project that connects the villages of Atmautluak, Nunapitchuk and Kasiguk with generation and telecommunication facilities in Bethel. (a) In addition Nuvista shall continue with a feasibility analysis to verify technical and economic feasibility of constructing a regional SWGR transmission system. (b) Continue investigating the technical and economic feasibility of constructing a 15 MW coal-fired plant at Bethel and wind turbine farms on the region’s west coast to supply the power needs of the region in the event the Donlin Creek gold mine project is not developed Part II Section 4 — SWGR Interim Power Supply Alternatives 4-11 Final Report 07/01/02 SECTION 5 — DONLIN CREEK MINE SITE GENERATION ALTERNATIVES 5.1- Introduction NovaGold Resources, Inc. anticipates Stage 1 of its Donlin Creek gold mine development will be operational on or about the summer of 2006. At Stage 1, the mine will process 8000 tons of ore per day and will require between 25-35 megawatts of power. The only viable alternative that can be permitted and constructed by that date is construction of a power plant located at or near the mine site. This section of the study will examine two alternatives for providing the power to the mine site. Alternative 1 will evaluate the cost of power associated with constructing the power plant at the mine site. Alternative 2 will evaluate the cost of power associated with constructing the power plant on the Kuskokwim River near Crooked Creek and a fifteen mile long, 138 kV transmission line from the power plant to the mine site. It is presumed, that beginning in 2011, the power requirements of the mine will be generated by a coal-fired plant located at Bethel, wind turbine farms located on the coast and delivered to the mine site via a 138 kV transmission line constructed from Bethel to the mine site. 5.2 Economic Evaluation of Alternatives This section evaluates and summarizes each of the two power supply alternatives described above. Spreadsheets and backup data can be found in Appendix C. Capital expenses are amortized over a 20-year period at an interest rate of five-percent, unless otherwise noted. 5.2.1 — Fuel Oil Prices As discussed in Section 4.2.1, the single greatest factor that impacts the cost of power generated using diesel fuel is the cost of diesel fuel. As further discussed in Section 4.2.1, based on ANS crude price of $28.00 per barrel in the year 2005, it is estimated that Nuvista can purchase fuel oil for $1.43 per gallon, delivered to Bethel, for #1 diesel fuel. It is further estimated it will cost two-cents per pound, or fifteen-cents per gallon to transport fuel from Bethel to Crooked Creek resulting in a fuel price of $1.58 cents per gallon delivered to Crooked Creek. It is expected that any power plant supplying power Part II Section 5 — Donlin Creek Mine Site Generation Alternatives 5-1 Final Report 07/01/02 to the Stage 1 mine load will use #2 diesel rather than #1 diesel, which should lower fuel cost by an estimated five-cents per gallon to $1.53 per gallon. Delivery of fuel oil from Bethel to Crooked Creek will present major challenges. Assuming a generation efficiency of 45 percent, a twenty-five megawatt mine load will require an estimated 11,500,000 gallons of fuel oil and a thirty-five megawatt plant an estimated 16,000,000 gallons. Assuming the typical river barge can transport 200,000 gallons of fuel, it will require 58 round-trips to supply fuel for a twenty-five megawatt plant and 80 round-trips for a thirty-five megawatt plant. Each round-trip will require approximately 5 days, including loading and off-loading of fuel, or between 290 and 400 barge-days. With a typical delivery window of 120 days, extending from June 1 to September 30, it will require a minimum of three barges operating twenty-four hours a day, seven days a week, to deliver fuel for a 25 megawatt plant and 3-4 barges to deliver fuel for a 35 megawatt plant. If the power plant is constructed at the mine site, the fuel must be transported from temporary storage at Crooked Creek, the fifteen miles to the mine site. Transport will be accomplished by tanker trucks traveling over a single lane service road. Transporting the fuel by tanker truck is expected to add, at a minimum, two-cents per gallon to the cost of the fuel. Using a tanker truck with a 5,000 gallon capacity, it will require 2,300 round- trips between Crooked Creek and the mine site to transport the necessary fuel to supply a 25 megawatt plant and 3,200 round-trips to supply a 35 megawatt plant. Using a deliver window of 120 days, this will require 19 round-trips per day for a 25 megawatt plant and 27 round-trips per day for a 35 megawatt plant. Transporting fuel to the mine site using a pipeline was also investigated. However, this idea was abandoned because of the high capital cost associated with construction of the pipeline and the relatively short time period the pipeline would be in service. Budgetary cost estimates for constructing fuel storage facilities at Crooked Creek and at the mine site, including the cost of a pipeline from Crooked Creek to the mine site, were Part II Section 5 — Donlin Creek Mine Site Generation Alternatives 5-2 Final Report 07/01/02 prepared by LCMF Incorporated. The report prepared by LCMF, Inc. is included in Appendix C. Per gallon storage cost, in year 2006 dollars, is estimated at $1.25 per gallon at Crooked Creek and $1.40 per gallon at the mine site. 5.2.2. - Alternative 1: Power Plant Constructed at Mine Site This alternative examines the power costs associated with constructing a power plant at the mine site of sufficient capacity to supply either a 25 or 35 megawatt mine load. The required power will be supplied by combined-cycled combustion turbine generation plant. It is estimated that construction costs at the mine site will be 5% greater than at Crooked Creek. A power plant with an installed capacity of 30 megawatts will be required for a 25 megawatt load. A thirty-five megawatt load will require a power plant with a 40 megawatt capacity. In addition a one-megawatt battery storage system will be installed to absorb the large load swing associated with operation of the P&H 2800 or equivalent earth-moving shovel. 5.2.3. - Alternative 2: Power Plant Constructed near Crooked Creek This alternative examines the power costs associated with constructing a power plant near Crooked Creek of sufficient capacity to supply either a 25 or 35 megawatt mine load. Power would be transmitted from the power plant to the mine site via a 15-mile long, 138 kV transmission line. The required power will be supplied by a combined-cycled combustion turbine generation plant. A power plant with an installed capacity of 30 megawatts is required for a 25 megawatt load. A thirty-five megawatt load will require a power plant with a 40 megawatt capacity. In addition a one-megawatt battery storage system will be installed at the mine site to absorb the large load swing associated with operation of the P&H 2800 or equivalent earth moving shovel. Part I Section 5 — Donlin Creek Mine Site Generation Alternatives 5-3 Final Report 07/01/02 5.2.4 — Comparison of Alternatives The cost of power associated with constructing a power plant and fuel storage facilities at Figure 5.1 Power Cost Comparison Assumes Combined-Cycle Genreation Efficiency of 45% $0.130 $0.125 8 3 Dollars per KWh $s a $ $ & 3 hl nll 1130 MW Combustion Turbine Plant at Crooked Creek 1130 MW Combustion Turbine Plant at Mine Site Crooked Creek and a 138 kV power line to the mine site versus constructing a power plant and fuel facilities at the mine site is shown in Figure 5.1. A review of the data displayed in Figure 5.1 reveals that the expected cost of power in the year 2006 in the range of 11 cents per kWh, which equates to a power cost of 9.5 cents per kWh in year 2002 dollarts. Power costs are based on using #2 diesel fuel and a combined-cycle combustion turbine generation operating with an efficiency of 45 percent. The difference in power costs associated with constructing a power plant at Crooked Creek and the mine site is approximately three-tenths of one cent. At this stage of the analysis, this small price difference is not significant and for any practical purposes the cost of power generated at either location can be considered identical. As shown in Figure 5.1, power costs continue to slowly increase between the years 2006 and 2010. This increase reflects the cost of inflation. Discounting the effect of inflation, power cost will remain relatively constant at 9.5 cents per kWh in year 2002 dollars. Part I Section 5 — Donlin Creek Mine Site Generation Alternatives 5-4 Final Report 07/01/02 Figure 5.2 compares the capital cost associated with constructing a power plant at Crooked Creek versus constructing a power plant at the mine site. Capital cost connected with building the power plant at Crooked Creek include the cost of the power plant, storage facilities, a 15 mile long transmission line into the mine site and a one-megawatt Figure 5.2 $60,000,000 — $50,000,000 $40,000,000 + $30,000,000 + $20,000,000 + $10,000,000 + so + Power Plant Costs 130 MW Combustion Turbine Plant at Crooked Creek 1130 MW Combustion Turbine Plant at Mine Site battery storage facility at the mine site. Capital cost associated with constructing a power plant at the mine site include the cost of constructing the power plant, fuel storage facilities at the mine and temporary fuel storage facilities at Crooked Creek and a one- megawatt battery storage facility at the mine site. Figure 5.3 reveals that constructing a power plant at the mine site is approximately nine million dollars less expensive than constructing the plant at Crooked Creek. However, as stated above, the cost of power supplied by either plant is, for all practical purposes, identical. This suggests that the overriding factor that determines power cost is the cost of fuel and not the capital cost connected with building the power plant facilities. The relationship between fuel cost and capital cost is further illustrated in Figure 5.3. The first significant item to observe is that there is only a two-cent reduction in the cost of power between funding the power plant project at 5% interest rate and construction of the power plant with grant funds. This indicates that the cost of fuel controls the cost of Part II Section 5 — Donlin Creek Mine Site Generation Alternatives 5-5 Final Report 07/01/02 power. Fuel cost represent eighty percent of the power cost. Since it is not possible to control world oil prices, this leaves two methods for reducing power cost: (1) increasing generation efficiency, and (2) using a lower cost fuel. Figure 5.3 demonstrates the relationship between generation efficiencies, fuel oil prices and power costs. The greater the generation efficiency and lower the fuel price the lower the cost of power. While a 45 percent generation efficiency is extremely high, it is possible to increase this to 50% by selecting appropriate generation technology such as aero-derivative combined-cycle turbines and extremely low-speed diesels. It is also possible to use lower grade fuel such such as No. 4 fuel to lower fuel cost. However, #4 fuel oil cannot be used in combustion turbines. In order to use #4 fuel oil and achieve generation efficiencies in the range of 45-50 percent it will be necessary to use large low speed diesel generation. Installation Figure 5.3 Power Cost vs. Efficiency and Fuel Oil Costs in $/Gal. $0.120 $0.110 KWh g 8 g 3 $0.080 + Dollars per $0.070 + $0.060 + 45%I$1.53 45%I$1.45 50%/$1.53 50%/$1.45 Generation Efficiency/Fuel Oil Cost per Gallon 5% Financing BGrants costs for low speed diesel generation are comparable to those for combined-cycle combustion turbine generation. In theory using a low speed diesel and #4 fuel oil could lower power cost to approximately 9.5 cents per kWh in year 2006 dollars, which equates to a power cost of 8.3 cents per gallon in year 2002 dollars. It should be observed that using #2 fuel oil and a combined-cycle turbine operating at a 50% efficiency will achieve the same fuel cost as using #4 fuel oil and a low speed diesel operating at a 45% efficiency. Part II Section 5 — Donlin Creek Mine Site Generation Alternatives 5-6 Final Report 07/01/02 The disadvantages of using low speed diesels are that low speed diesels are extremely heavy and large as compared to a turbine that can produce the same power and they are slightly more costly to operate than turbines. The disadvantage of using #4 fuel oil is that it congeals at a much higher temperature than #2 fuel oil and must be heated for 8-9 months of the year to prevent it from congealing in the storage tanks. No.2 fuel oil also needs to be heated but it will not require the quantity of waste heat as required by No. 4 fuel oil. Sufficient waste heat should be available from the power plant, at no additional cost, to heat the fuel storage tanks containing either #2 or #4 diesel. However, if #4 fuel oil is used it may be necessary to install a back-up oil-fired heating system to heat the fuel oil in the event the power plant is shut-down for emergency repair. 5.3 - General Parameters Used to Evaluate Power Supply Alternatives All costs are in year 2005 dollars unless otherwise noted. The common assumptions used to perform the economic evaluation of the various alternatives are listed below. Any specific assumptions used to evaluate a particular alternative will be included on the first page of the spreadsheet analysis. Spreadsheets containing a detailed analysis of each alternative can be found in Appendix C. A. Inflation and Discount Rates General Inflation Rate —3 % Petroleum and Natural Gas based fuel inflation rate — 4% Discount rate — 3.5% B. Combustion Turbine Hear Rates. Combined Cycle Combustion Units - Heat rate of 7,600 BTU per kWh utilizing Diesel #2 fuel C. Plant Costs $850 per KW for combined cycle generation at Crooked Creek. $890 per KW for combined cycle generation at mine site. Battery Storage System: $1000 per kW. Part II Section 5 — Donlin Creek Mine Site Generation Alternatives 5-7 Final Report 07/01/02 Transmission line cost at $525,000 per mile for 138 kV construction. Substations: Crooked Creek Power Plant - $2,000,000 x 2 for 30 megawatt plant $2,500,000 x 2 for 40 megawatt plant Mine Site: $1,000,000 D. Fuel Storage Requirements Assumes fuel storage capacity equal to 9 months usage. E. Fuel Storage Cost in $/Gallon $1.25 per gallon for storage at Crooked Creek. $1.40 per gallon for storage at mine site. F. Fuel Costs $1.53 per gallon Diesel #2 delivered to Crooked Creek $1.55 per gallon Diesel #2 at mine site G. O&M Combustion Turbines - $0.005 per kWh Routine transmission line maintenance estimated at $1000 per mile per year. 5.4 - Conclusions and Recommendations The results of this evaluation has determined that there is little difference between the cost of generating power at the mine site and generating power at Crooked Creek and delivering the power to the mine site via a 1Smile long, 138 kV transmission line. It has also determined that the cost of power is 80% dependent on fuel cost and only 20% dependent on capital costs. NovaGold has yet to identify Stage 1 power requirements in sufficient accuracy or detail to allow Nuvista to focus in on a particular plan for providing power to the mine site. It is, therefore, recommended that Nuvista pursue the following course of action to advance the design on a power plant to serve the Stage I mine load: Part II Section 5 — Donlin Creek Mine Site Generation Alternatives 5-8 Final Report 07/01/02 (1) Nuvista will perform a feasibility study to identify and develop a single preferred alternative for providing power to the Stage 1 mine load. The study will focus on the feasibility of using either combined-cycle turbines or slow speed diesels to provide Stage 1 power requirements. (2) Nuvista will work closely with NovaGold to accurately identify the power requirements for Stage 1 of the mine develop. (3) Nuvista will work with Nova Gold to identify mining methods that will mimimize Stage 1 power requirements. Part II Section 5 — Donlin Creek Mine Site Generation Alternatives 5-9