HomeMy WebLinkAboutAPPLICATION - REF Round 15 Application - Augustine Island Geothermal FinalRenewable Energy Fund Round 15
Grant Application – Standard Form
AEA 23046 Page 1 of 32 10/04/2022
SECTION 1 – APPLICANT INFORMATION
Please specify the legal grantee that will own, operate, and maintain the project upon completion.
Name (Name of utility, IPP, local government, or other government entity)
Alaska Electric & Energy Cooperative, Inc.
Tax ID # 92-0177236
Date of last financial statement audit: December 31, 2021
Mailing Address: Physical Address:
3977 Lake Street, Homer, AK 99603 Same
Telephone: Fax: Email:
907-283-2375 msalzetti@homerelectric.com
1.1 Applicant Point of Contact / Grants Coordinator
Name: Mike Salzetti Title: Manager of Renewable Energy
Development
Mailing Address:
3977 Lake Street, Homer, AK 99603
Telephone: Fax: Email:
907-283-2375 msalzetti@homerelectric.com
1.1.1 Applicant Signatory Authority Contact Information
Name: Bradley P. Janorschke Title: General Manager
Mailing Address: 3977 Lake Street, Homer, AK 99603
Telephone: Fax: Email:
907-283-2312 907-283-7122 bjanorschke@homerelectric.com
1.1.2 Applicant Alternate Points of Contact
Name Telephone: Fax: Email:
David Thomas 907-283-2364 dthomas@homerelectric.com
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1.2 Applicant Minimum Requirements
Please check as appropriate. If applicants do not meet the minimum requirements, the application
will be rejected.
1.2.1 Applicant Type
☒ An electric utility holding a certificate of public convenience and necessity under AS 42.05
CPCN # 640 , or
☐ An independent power producer in accordance with 3 AAC 107.695 (a) (1)
CPCN #______, or
☐ A local government, or
☐ A governmental entity (which includes tribal councils and housing authorities)
Additional minimum requirements
☒ 1.2.2 Attached to this application is formal approval and endorsement for the project by the
applicant’s board of directors, executive management, or other governing authority. If the
applicant is a collaborative grouping, a formal approval from each participant’s governing
authority is necessary. (Indicate yes by checking the box)
☒ 1.2.3 As an applicant, we have administrative and financial management systems and follow
procurement standards that comply with the standards set forth in the grant agreement
(Section 3 of the RFA). (Indicate yes by checking the box)
☒ 1.2.4 If awarded the grant, we can comply with all terms and conditions of the award as
identified in the Standard Grant Agreement template at
https://www.akenergyauthority.org/What-We-Do/Grants-Loans/Renewable-Energy-
Fund/2022-REF-Application (Any exceptions should be clearly noted and submitted with the
application.) (Indicate yes by checking the box)
☐ 1.2.5 We intend to own and operate any project that may be constructed with grant funds for
the benefit of the general public. If no, please describe the nature of the project and who will
be the primary beneficiaries. (Indicate yes by checking the box)
Beneficiaries will be the Homer Electric Association’s member-owners, however the
ownership model of a project (AEEC, GeoAlaska, or another IPP) will be determined in a
future phase, based on available of federal tax incentives, grants, financing costs, project
economics, and operations & maintenance considerations.
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Grant Application – Standard Form
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SECTION 2 – PROJECT SUMMARY
2.1 Project Title
Provide a 4-to-7-word title for your project. Type in the space below.
Augustine Island Geothermal
2.2 Project Location
2.2.1 Location of Project – Latitude and longitude (preferred), street address, or
community name.
Latitude and longitude coordinates may be obtained from Google Maps by finding you project’s
location on the map and then right clicking with the mouse and selecting “What is here? The
coordinates will be displayed in the Google search window above the map in a format as follows:
61.195676.-149.898663. If you would like assistance obtaining this information, please contact
AEA’s Grants Coordinator by email at grants@akenergyauthority.org or by phone at (907) 771-
3081.
Latitude 59.342333 Longitude -153.433333
This phase of the proposed project is a feasibility effort to develop economic costs of
interconnecting a new geothermal power generation plant to the Railbelt transmission grid.
2.2.2 Community benefiting – Name(s) of the community or communities that will be the
beneficiaries of the project.
The member-owners of Homer Electric Association will benefit from these grant funds. Homer
Electric’s certificated territory encompasses a vast majority of the population and communities on
the Kenai Peninsula and essentially all the populated portions of the central and western Kenai
Peninsula including the incorporated cities of Kenai, Soldotna, and Homer and the
villages/communities of Nikiski, Salamatof, Sterling, Kasilof, Clam Gulch, Ninilchik, Anchor Point,
Kachemak City, Halibut Cove, Seldovia, Port Graham and Nanwalek.
Depending on the eventual size of the final geothermal project, other entities, such as other
Railbelt Electric Cooperatives might also opt to receive energy from the project.
2.3 Project Type
Please check as appropriate.
2.3.1 Renewable Resource Type
☐ Wind ☐ Biomass or Biofuels (excluding heat-only)
☐ Hydro, Including Run of River ☐ Hydrokinetic
☒ Geothermal, Excluding Heat Pumps ☐ Transmission of Renewable Energy
☐ Solar Photovoltaic ☐ Storage of Renewable
☐ Other (Describe) ☐ Small Natural Gas
2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply)
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Pre-Construction Construction
☐ Reconnaissance ☐ Final Design and Permitting
☒ Feasibility and Conceptual Design ☐ Construction
2.4 Project Description
Provide a brief, one-paragraph description of the proposed project.
Homer Electric Association, Inc. (HEA) through its generation subsidiary Alaska Electric & Energy
Cooperative, Inc. (AEEC), plans to study the interconnection of approximately 70-MWs of
geothermal energy generation located on Augustine Island. The proposed effort will evaluate the
preferred method of bringing power onshore to AEEC’s existing 115,000-volt transmission lines
along the western shore of the Kenai Peninsula in the vicinity of Anchor Point, Alaska. The
proposed project is a feasibility level effort to develop costs of sufficient accuracy to assess project
economics.
2.5 Scope of Work
Provide a short narrative for the scope of work detailing the tasks to be performed under this
funding request. This should include work paid for by grant funds and matching funds or performed
as in-kind match.
This funding request is for a feasibility-level effort to assess the interconnection of a proposed
geothermal prospect currently being pursued by GeoAlaska, LLC but would be applicable to any
similar such project on Augustine Island. The Scope of Work will include:
Phase 2 – Feasibility Scope of Work:
1. Preliminary Engineering Analysis
a. Electrical engineering consultants with experience on the Railbelt grid or the ability to
analyze the grid, will be retained to assess the most economic method of bringing
power ashore.
b. Approximately routing of an undersea cable will be developed as an input to cable
specifications, depths, installation costs and permitting requirements.
c. DC conversion stations on each end (or reactive elements to correct capacitance
effects) will be specified, and costs estimates developed for their acquisition, installation
and commissioning.
d. A conceptual-level design will be developed
e. The result of the engineering analysis will be compiled and presented in the Feasibility
Report.
2. Project Costs and Economic Evaluation
a. Budgetary quotes for appropriately sized grid interconnections, step-up/step-down
transformers and/or AC/DC conversion stations will be obtained.
b. A projected project cost estimate will be completed.
c. An investigation of possible financial incentives such as Investment Tax Credits,
Production Tax Credits, grants or loan programs will be completed.
d. Evaluation of financing options and available interest rates.
e. Analysis of possible ownership scenarios.
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f. The results of the cost and economic analyses will be provided in the final Feasibility
Report along with an overall simple economic analysis of the project.
3. Energy System Modeling
a. The proposed geothermal generation will be added to HEA’s existing power production
model(s).
b. Several model iterations will be run at anticipated capacity factors and power levels at
various costs to assist in establishing project economic thresholds.
c. The modeling results will be incorporated into the final Feasibility Report.
d. The model will predict natural gas fuel displacement associated with the proposed
project.
e. The model will optimize existing HEA generation, optimally dispatch HEA’s Battery
Energy Storage System (BESS) to establish system project economic thresholds and
impacts to the balance of the system.
4. Permitting and Licensing Evaluation
a. Investigate land leasing requirements for the route of the proposed undersea cable.
b. Interface with government agencies such as the U.S. Coast Guard, NOAA and others to
establish a preliminary list of permitting requirements.
c. The final Feasibility Report will present the findings of this evaluation.
5. Environmental Screening
a. A screening will be conducted to identify potential environmental impacts that the
proposed project may have as a result of installing undersea cables.
b. The results of the screening and any environmental barriers will be compiled and
presented in the Feasibility Report.
6. Analysis and Recommendations
a. As noted previously, the information, analysis, and modeling results from this scope of
work will be compiled and presented in the Feasibility Report.
b. The final Report will include a recommendation on whether to continue the pursuit of
this project and if so, what the recommended next steps should be.
2.6 Previous REF Applications for the Project
See Section 1.15 of the RFA for the maximum per project cumulative grant award amount
Round
Submitted
Title of application Application
#, if known
Did you
receive a
grant? Y/N
Amount of REF
grant awarded
($)
NA
Renewable Energy Fund Round 15
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SECTION 3 – Project Management, Development, and Operation
3.1 Schedule and Milestones
Please fill out the schedule below (or attach a similar sheet) for the work covered by this funding
request. Be sure to identify key tasks and decision points, including go/no go decisions, in your
project along with estimated start and end dates for each of the milestones and tasks. Please
clearly identify the beginning and ending of all phases (I. Reconnaissance, II. Feasibility and
Conceptual Design, III. Final Design and Permitting, and IV. Construction) of your proposed
project. See the RFA, Sections 2.3-2.6 for the recommended milestones for each phase. Add
additional rows as needed.
Task
# Milestones Tasks
Start
Date
End
Date Deliverables
P2-all Contractor
Solicitation
Develop and issue
RFPs for consulting
services and award
contracts
9/23 12/23 Contracts Awarded
P2-1 Preliminary
Engineering
Analysis
Gather data and
develop conceptual
design.
1/24 2/24 Conceptual Design portion of
Feasibility Report
P2-2 Project Costs and
Economics
Develop project costs
and assessing project
financing and tax
incentives.
2/24 4/24 Economic Analysis portion of
Feasibility Report
P2-3 Energy System
Modeling
Energy System
Modeling per Scope
of Work
2/24 5/24 Model Results
P2-4 Permitting and
Licensing
Evaluation
Permitting and
Licensing Evaluation
per Scope of Work
1/24 5/24 Permitting and Licensing
Evaluation
P2-5 Environmental
Screening
Environmental
Screening per Scope
of Work
1/24 4/24 Preliminary Screening Results
P2-6 Final
Reconnaissance
Report
Final Reconnaissance
Report per Scope of
Work
5/24 7/24 Final Feasibility Report
3.2 Budget
3.2.1 Funding Sources
Indicate the funding sources for the phase(s) of the project applied for in this funding request.
Grant funds requested in this application $68,000
Cash match to be provideda $15,200
In-kind match to be provideda $26,940
Energy efficiency match provided $0
Total costs for project phase(s) covered in application (sum of
above)
$110,140
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Describe your financial commitment to the project and the source(s) of match. Indicate whether
these matching funds are secured or pending future approvals. Describe the impact, if any, that
the timing of additional funds would have on the ability to proceed with the grant.
HEA’s generation subsidiary’s (AEEC’s) Board of Directors has passed Resolution 01.2022.13,
“Grant Funding Authorization for a Geothermal Project located on the West Side of Cook Inlet.”
which is attached. Also attached is a certification by the AEEC General Manager, Bradley P.
Janorschke, that the Cooperative will honor the match amounts and is in a financial condition to do
so.
Both documents are included as Attachment C.
an Attach documentation for proof (see Section 1.18 of the Request for Applications)
b See Section 8.2 of this application and Section 1.18 of the RFA for requirements for Energy Efficiency
Match.
3.2.2 Cost Overruns
Describe the plan to cover potential cost increases or shortfalls in funding.
HEA/AEEC would cover any cost overruns required to complete the Scope of Work described in
Section 2.5 of this grant application.
3.2.3 Total Project Costs
Indicate the anticipated total cost by phase of the project (including all funding sources). Use actual
costs for completed phases. Indicate if the costs were actual or estimated.
Reconnaissance [Actual/Estimated] $0
Feasibility and Conceptual Design [Actual/Estimated] $110,140
Final Design and Permitting [Actual/Estimated] $9,600,000
Construction [Actual/Estimated] $167,500,000
Total Project Costs (sum of above) Estimated $177,210,140
Metering/Tracking Equipment [not included in project
cost]
Estimated $
Note that AEEC estimates the construction cost to be $335,000,000. With the passage of the
Inflation Reduction Act (IRA), that provides for direct pay of Investment Tax Credits (ITC) to non-
profit entities such as AEEC, we believe that the project qualifies for a 50% ITC. We therefore
estimate our construction costs for this project to be $167,500,000 and have entered that value as
the Construction Cost.
3.2.4 Funding Subsequent Phases
If subsequent phases are required beyond the phases being applied for in this application,
describe the anticipated sources of funding and the likelihood of receipt of those funds.
• State and/or federal grants
• Loans, bonds, or other financing options
• Additional incentives (i.e., tax credits)
• Additional revenue streams (i.e., green tag sales or other renewable energy subsidies or
programs that might be available)
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Grant Application – Standard Form
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Ownership of the electrical interconnection from any geothermal project to the existing
transmission grid has not been determined. Should HEA/AEEC determine AEEC ownership is to
HEA’s members’ advantage, the following funding sources would be sought for the Balance of the
Design phase AEEC would seek future grant opportunities, explore partnership potentials and / or
self fund this phase of the work.
For design and construction phases, AEEC would seek applicable state or federal grant and
funding opportunities. HEA/AEEC is working with McAllister & Quinn and Strategies 360 to identify
and pursue federal funding opportunities to implement all of HEA’s renewable energy goals.
HEA/AEEC is also working with McAllister & Quinn and Strategies 360 on gaining an
understanding of the direct pay ITCs made possible by the IRA. As noted above AEEC believes
that it will qualify for a 50% ITC for this project.
HEA/AEEC would examine current interest rates and loan terms from its two primary lenders
National Rural Utilities Cooperative Finance Corporation (CFC) – a not-for-profit lender set up by
its member electrical utilities and the USDA Rural Utilities Service (RUS). AEEC would also
contact the Alaska Industrial Development and Export Authority (AIDEA) to explore other financing
options and opportunities through that organization.
Renewable Energy Certificates would be obtained for all energy eventually put onto the grid (as
CEA already does with Fire Island wind energy) and monetized, although that has historically
yielded less than $1/MWh. Should a mandatory Renewable Portfolio Standard (RPS) be enacted in
Alaska, HEA would diligently monetize any excess RECs (beyond HEA’s own statutory
requirements) for resale to other utilities at rates of potentially $10-20/MWh which is a significant
portion of the energy cost.
HEA/AEEC has been successful in the past in obtaining grant funding and securing attractive
financing terms for its capital projects and anticipates it will continue to do so for future projects.
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3.2.3 Budget Forms
Applications MUST include a separate worksheet for each project phase that was identified in
Section 2.3.2 of this application — I. Reconnaissance, II. Feasibility and Conceptual Design, III.
Final Design and Permitting, and IV. Construction. Please use the tables provided below to detail
your proposed project’s total budget. Be sure to use one table for each phase of your project and
delete any unnecessary tables. The milestones and tasks should match those listed in 3.1 above.
If you have any question regarding how to prepare these tables or if you need assistance preparing
the application please feel free to contact AEA’s Grants Coordinator by email at
grants@akenergyauthority.org or by phone at (907) 771-3081.
Phase 2 — Feasibility and Conceptual Design
Milestone or Task
Anticipated
Completion
Date
RE- Fund
Grant Funds
Grantee
Matching
Funds
Source of
Matching
Funds:
Cash/In-
kind/Federal
Grants/Other
State
Grants/Other
TOTALS
(List milestones based on
phase and type of project. See
Sections 2.3 thru 2.6 of the
RFA)
$ $ $
Contractor Solicitation
12/23 $0 $2,500 In-Kind $2500
Preliminary Engineering
Analysis
2/24 $22,300 $5,900 Cash&In-Kind $28,200
Project Cost and
Economic Evaluation 4/24 $32,500 $9,550 Cash&In-Kind $42,050
Energy System Modeling
5/24 $0 $7,240 In-Kind $7,240
Permitting and Licensing
Evaluation 5/24 $6,800 $5,225 Cash&In-Kind $12,025
Environmental Screening
4/24 $3,400 $3,700 Cash&In-Kind $7,100
Final Reconnaissance
Report 7/24 $3,000 $8,025 Cash&In-Kind $11,025
TOTALS $68,000 $50,565 $110,140
Budget Categories:
Direct Labor & Benefits $0 $26,940 In-Kind $26,940
Travel & Per Diem $0 $0 $0
Equipment $0 $0 $0
Materials & Supplies $0 $0 $0
Contractual Services $68,000 $15,200 Cash $83,200
Construction Services $0 $0 $0
Other $0 $0 $0
TOTALS $68,000
$42,140
$110,140
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3.2.4 Cost Justification
Indicate the source(s) of the cost estimates used for the project budget, including costs for future
phases not included in this application.
This is a Feasibility Study proposed to develop more refined costs, so the cost estimates are
preliminary at this point. Part of the proposed work scope is the development of a high-level
project cost estimate. The cost estimates do incorporate verbal estimates from potential
consultants as well as the team’s experience in project development and knowledge of prudent
industry practices.
Costs for the generation assets themselves come from GeoAlaska materials prepared for their
investors.
3.3 Project Communications
3.3.1 Project Progress Reporting
Describe how you plan to monitor the progress of the project and keep AEA informed of the status.
Who will be responsible for tracking the progress? What tools and methods will be used to track
progress?
The Project Manager will conduct regularly scheduled meetings with the contractors providing the
feasibility work for this Project to track progress, schedule, and budget.
Project management and financial control will issue reports to AEA on a mutually agreeable
schedule throughout the life of the grant. These reports can be customized to meet AEA needs.
3.3.2 Financial Reporting
Describe the controls that will be utilized to ensure that only costs that are reasonable, ordinary,
and necessary will be allocated to this project. Also discuss the controls in place that will ensure
that no expenses for overhead, or any other unallowable costs will be requested for reimbursement
from the REF Grant Program.
HEA has a dedicated financial controller. Ms. Clymer, HEA’s Controller has acted as financial
control for several other AEA awarded grants. HEA uses Southeastern Data Corporation (SEDC)
for our financial services software to assist with accounting and financial control systems. Every
year, HEA’s and AEEC’s financial statements and accounting procedures are audited by an
outside firm (which in recent years has been BDO USA, Inc).
Financial control of the project will be done at no cost to the project, and it is not included or
claimed in any of the in-kind matching labor funds outlined in this grant application.
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SECTION 4 – QUALIFICATIONS AND EXPERIENCE
4.1 Project Team
Include resumes for known key personnel and contractors, including all functions below, as an
attachment to your application. In the electronic submittal, please submit resumes as separate
PDFs if the applicant would like those excluded from the web posting of this application.
4.1.1 Project Manager
Indicate who will be managing the project for the Grantee and include contact information. If the
applicant does not have a project manager indicate how you intend to solicit project management
support. If the applicant expects project management assistance from AEA or another government
entity, state that in this section.
HEA’s Manager of Renewable Energy Development, Mike Salzetti, will be the Project Manager for
this Project. He has 32 years of engineering experience with 22 of those years including Project
Management responsibilities.
Mr. Salzetti’s contact information in shown in Section 1.1 of this application and his professional
qualifications are included in Attachment A.
4.1.2 Project Accountant
Indicate who will be performing the accounting of this project for the grantee. If the applicant does
not have a project accountant indicate how you intend to solicit financial accounting support.
Katheryn Parke, HEA’s Plant Accounting Supervisor will be performing the accounting for this
Project.
Accounting work for the project will be done at no cost to the project, and it is not included or
claimed in any of the in-kind matching labor funds outlined in this grant application.
4.1.3 Expertise and Resources
Describe the project team including the applicant, partners, and contractors.
For each member of the project team, indicate:
• the milestones/tasks in 3.1 they will be responsible for.
• the knowledge, skills, and experience that will be used to successfully deliver the tasks.
• how time and other resource conflicts will be managed to successfully complete the task.
If contractors have not been selected to complete the work, provide reviewers with sufficient detail
to understand the applicant’s capacity to successfully select contractors and manage complex
contracts.
HEA’s Manager of Renewable Energy Development, Mike Salzetti, will be the Project Manager for
this Project. Mike has over 32 years of engineering experience with 22 of those years including
Project Management responsibilities. Mr. Salzetti played an integral role in the design of Homer
Electric’s new generation facilities and successfully shepherded the Grant Lake Hydroelectric
Project through an original FERC licensing process.
Mr. Salzetti has the guidance, support, staffing, and resources of Homer Electric Association to
support him in all phases of this project. The professional biographies of HEA’s Executive
Management Team are included as part of Attachment A to this application.
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HEA is working with GeoAlaska on this project who has obtained permits for the geothermal
resource on Augustine Island associated with this Project study. GeoAlaska’s experience in
assessing such prospects have provided a basis for the preliminary estimates of project size and
cost.
4.2 Local Workforce
Describe how the project will use local labor or train a local labor workforce.
HEA Management Directives governing contracting and procurement include considerations for
such things as material procurement from pre-qualified businesses operating on the Kenai
Peninsula, possession of an Alaska Business license, maintenance of an office and staff within
Alaska and advertisements in general circulation publications as defined by Alaska State Statutes
that promote local contracting and procurement.
Pursuit to Board Policy 401 – Contracting and Purchasing, Section II, part H, HEA and AEEC give
a 5% preference to vendors maintaining an office or place of business in the cooperative’s service
area (unless prohibited by statute, regulation or grant).
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SECTION 5 – TECHNICAL FEASIBILITY
5.1 Resource Availability
5.1.1 Assessment of Proposed Energy Resource
Describe the potential extent/amount of the energy resource that is available, including average
resource availability on an annual basis. For pre-construction applications, describe the resource to
the extent known. For design and permitting or construction projects, please provide feasibility
documents, design documents, and permitting documents (if applicable) as attachments to this
application (See Section 11). Likelihood of the resource being available over the life of the project.
See the “Resource Assessment” section of the appropriate Best Practice Checklist for additional
guidance.
AEEC plans to assess the interconnection of approximately 70-MWs of geothermal energy
generation located on Augustine Island. The proposed project would consist of two modular plants
of 35 MW each located on the southern end of Augustine Island and electrically interconnected to
the HEA/AEEC’s transmission system near Anchor Point, Alaska.
This grant application is to develop refined costs for the interconnection of this geothermal
prospect to HEA’s system and the Railbelt. The resulting public Feasibility Report can be used by
any party – IPPs or energy off-takers such as Railbelt Electric Cooperatives to more quickly and
accurate assess the economics of this project and similar such projects, but also related work such
as off-shore wind, or redundant transmission off the Kenai Peninsula across Cook Inlet through a
DC transmission line. We believe that these conceptual designs and cost estimates would
meaningfully add to the State’s body of knowledge for future renewable energy projects.
5.1.2 Alternatives to Proposed Energy Resource
Describe the pros and cons of your proposed energy resource vs. other alternatives that may be
available for the market to be served by your project.
Homer Electric Association’s Board of Directors has developed a Board Policy (505 - Renewable
Portfolio Goal) that states, “It is the policy of the Cooperative to use best efforts to meet a
renewable portfolio goal of 50% of its annual energy needs by the end of 2025.” HEA staff is in the
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process of analyzing and developing a suite of firm and non-firm renewable energy projects to
meet this goal. It is anticipated that a mix of renewable energy projects will be needed to cost
effectively achieve this goal.
HEA is evaluating and in some cases actively pursuing additional hydro, wind, solar, landfill gas,
tidal, and geothermal resources.
Augustine Island Geothermal Project Pros:
1. It is forecast to provide an excellent capacity factor in excess of 90% and as such can be used
as base-loaded energy.
2. Compared to non-firm renewables wind and solar with much lower capacity factors, the
integration costs of base-loaded power are much lower (and will be assessed further in Phase 2-3).
3. An anticipated cost of energy comparable to the cost of avoided gas consumption.
4. There exist in Cook Inlet significant industrial support for the offshore oil & gas industry which
may reduce the “Alaska factor” involved in many energy projects.
5. AEEC already possesses a BESS which can and already does function as spinning reserves for
other generation assets with no additional fuel use or cost.
6. The project is likely to qualify for a 50% ITC
7. As a not-for-profit entity, should HEA opt to build any portions of the interconnection, HEA has
the following advantages over an IPP executing a similar project:
a. No profit margin required
b. Access to lower financing rates
c. No property taxes
d. Access to an existing work force and remote dispatch system
This project would be beneficial for HEA owner-members, citizens of the Kenai Peninsula Borough,
and the environment.
Augustine Island Geothermal Project Cons:
1. While above-grade geothermal equipment is an increasingly known technology, used
throughout the world, the particulars of the underground resources is unique to its location and
requires careful study, design and robust construction.
2. Any remote, offshore work is more expensive than onshore.
3. The project will connect to generation in an active volcanic area that is potentially subject to
volcanic ash, fumes, debris or lava flows.
4. AEECs generation assets will have to be realigned to accept a significant fraction of its
energy from this new source. To the extent that a geothermal project is base-loaded, AEEC’s
other assets will have to be varied, as a percentage of their output, more than currently to meet
load. For AEEC’s thermal generation, more variable operation will increase operating and
maintenance costs.
5.1.3 Permits
Provide the following information as it may relate to permitting and how you intend to address
outstanding permit issues. See the “Environmental and Permitting Risks” section of the appropriate
Best Practice Checklist for additional guidance.
• List of applicable permits
• Anticipated permitting timeline
• Identify and describe potential barriers including potential permit timing issues, public
opposition that may result in difficulty obtaining permits, and other permitting barriers
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Permit Name Permit Trigger
Unknown Unknown
For this scope of work – a engineering feasibility study, no permitting will be required. Part of the
feasibility study will be to identify future permitting requirements and their impact on project costs.
This proposed work scope includes developing and reporting on a preliminary list of permitting
requirements.
5.2 Project Site
Describe the availability of the site and its suitability for the proposed energy system. Identify
potential land ownership issues, including whether site owners have agreed to the project or how
you intend to approach land ownership and access issues. See the “Site control” section of the
appropriate Best Practice Checklist for additional guidance.
The owner of existing geothermal permits, GeoAlaska, LLC is highly supportive of this study effort
and is cooperating and assisting with the study. This particular scope involves no field work so we
see no issue with the availability of the site.
5.3 Project Technical & Environmental Risk
5.3.1 Technical Risk
Describe potential technical risks and how you would address them.
• Which tasks are expected to be most challenging?
• How will the project team reduce the risk of these tasks?
• What internal controls will be put in place to limit and deal with technical risks?
See the “Common Planning Risks” section of the appropriate Best Practice Checklist for additional
guidance.
The largest unknowns at this time are 1) the depth and temperature of the geothermal resource
and 2) the cost to interconnect any generation project to the existing electrical transmission grid.
This scope of work will define the later.
While another possible sequence would be to assess the geothermal resource itself first, that is a
much more costly endeavor with all the financial, environmental and human risks of any remote
field work. We believe that firmer costs for a conceptual design of the electrical interconnection
may either rule out such a project of this size should it be very high or, if a reasonable
interconnection design and cost be developed, empower the permit holder or others pursuing
similar projects to proceed with more confidence regarding the total costs of such a project.
This scope of work is straight forward and without technical risks – it is office-based work by
experienced electrical engineering consultants assisted by HEA’s technical and financial staff.
Likewise, there are not environmental risks to this proposed scope of work.
Looking ahead to development of a geothermal resource; the subsurface temperatures,
permeability, depth of production wells, water chemistry, steam quality, and geologic stability are all
risks to be identified, measured, and minimized.
Should the proposed project progress through futures development phases, HEA will include
contingency planning for critical milestones throughout the design and construction phases of the
project.
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We are not aware of any opposition to the proposed project. Considering public advocacy in favor
of renewable resources voiced at several HEA Board meetings and during public forums we
anticipate public support for the project.
5.3.2 Environmental Risk
Explain whether the following environmental and land use issues apply, and if so, which project
team members will be involved and how the issues will be addressed. See the “Environmental and
Permitting Risks” section of the appropriate Best Practice Checklist for additional guidance.
• Threatened or endangered species
• Habitat issues
• Wetlands and other protected areas
• Archaeological and historical resources
• Land development constraints
• Telecommunications interference
• Aviation considerations
• Visual, aesthetics impacts
• Identify and describe other potential barriers
Species Name Scientific Name Status Presence
Eskimo Curlew Numenius borealis Endangered May Occur
Short-Tailed Albatross Phoebastria albatrus Endangered May Occur
Steller Sea Lion Eumetopias jubatus Endangered May Occur
Beluga Whale Delphinapterus leucas Endangered May Occur
Green Sturgeon Acipenser medirostris Threatened May Occur
Steller's Eider Polysticta stelleri Threatened Not Likely to Occur
Habitat issues
The species identified above may occur within or around the project footprint. However the below
water infrastructure currently exists, there should be no new impact to the marine mammals listed
above.
Wetlands and other protected areas
Being an offshore project there should be no wetlands impact.
Archaeological and historical resources
The project site is an uninhabited island so no archaeological and historical impacts are
anticipated.
Land development constraints
The owner of the geothermal permits from the State of Alaska is highly supportive of this study
effort and is cooperating and assisting with the study. This scope requires no access, but in the
future, we see no issue with the availability of the site.
Telecommunications interference
No telecommunication interference analysis has been conducted to-date.
Aviation considerations
No aviation analysis has been conducted to date, but none is expected.
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Visual, aesthetics impacts
No visual or aesthetic analysis has been conducted to-date.
5.4 Technical Feasibility of Proposed Energy System
In this section you will describe and give details of the existing and proposed systems. The
information for existing system will be used as the baseline the proposal is compared to and also
used to make sure that proposed system can be integrated.
Only complete sections applicable to your proposal. If your proposal only generates electricity, you
can remove the sections for thermal (heat) generation.
5.4.1 Basic Operation of Existing Energy System
Describe the basic operation of the existing energy system including description of control system;
spinning reserve needs and variability in generation (any high loads brought on quickly); and
current voltage, frequency, and outage issues across system. See the “Understanding the Existing
System” section of the appropriate Best Practice Checklist for additional guidance.
AEEC owns and operates three plants that are fueled by natural gas. The Nikiski Plant is an 80
MW baseload generating plant fueled by natural gas and recovered heat. HEA has two backup
generating plants: the Soldotna Plant, a 48 MW generating plant; and the Bernice Lake Plant, a 73
MW generating plant that are used for backup, peaking, and reserve capacity. Additionally, AEEC
has access to 14 MW of purchased power capacity at the State’s Bradley Lake Hydroelectric
facility.
5.4.2.1 Existing Power Generation Units
Include for each unit include resource/fuel, make/model, design capacity (kW), minimum
operational load (kW), RPM, electronic/mechanical fuel injection, make/model of genset
controllers, hours on genset
Unit 1: Nikiski Combined Cycle Plant: Natural Gas/ Steam, CT GE Frame 6B Combustion
Turbine, 40-MW ST GE SC2-22, HRSG Deltak Dino 4128 Heat Recovery Steam Generator,
40-MW, NCC design capacity 80 MW, NCC minimum operational load 20 MW, CT RPM
5105, ST RPM 3600, Emerson Ovation DCS
Unit 2: Soldotna Combustion Turbine Plant: Natural Gas, GE LM6000 Combustion Turbine
Generator, design capacity 48 MW, minimum operational load 3 MW, RPM 3600, Emerson
Ovation DCS
Unit 3: Bernice Lake Combustion Turbine Plant: Natural Gas, GE Frame 5 Combustion
Turbine, design capacity 19 MW, design capacity 27 MW, design capacity 27 MW, minimum
operational load 3 MW, minimum operational load 6 MW, minimum operational load 6 MW,
RPM 3600, Emerson Ovation DCS
Unit 4: Bradley Lake Hydroelectric Project (Hydro), Fuji generators, Andritz hydro runners,
design capacity 64 MW per unit (HEA 14 MW share), no minimum operational load, RPM
300, Emerson Ovation DCS
Unit 5:
Unit 6:
5.4.2 Existing Energy Generation Infrastructure and Production
In the following tables, only fill in areas below applicable to your project. You can remove extra
tables. If you have the data below in other formats, you can attach them to the application (see
Section 11).
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5.4.2.2 Existing Distribution System
Describe the basic elements of the distribution system. Include the capacity of the step-up
transformer at the powerhouse, the distribution voltage(s) across the community, any transmission
voltages, and other elements that will be affected by the proposed project.
The HEA system has a total of 2,499 miles of energized line that distributes power to 35,865 meters
in a 3,166 square-mile service area on the Kenai Peninsula.
At 70 MW, this project will need to tie into the transmission system at transmission voltages, not
distribution lines and voltages, hence the proposal to bring power ashore in Anchor Point. Part of the
conceptual design would be the details of that interconnection.
5.4.2.3 Existing Thermal Generation Units (if applicable to your project)
Generation
unit
Resource/
Fuel type
Design
capacity
(MMBtu/hr)
Make Model Average
annual
efficiency
Year
Installed
Hours
Nikiski
Combined
Cycle Plant
Natural
Gas/Steam
CT 40 MW,
ST 40 MW CT
GE, ST
GE
HRSG
Deltak
CT frame
6B
Combustion
Turbine, ST
SC2-22,
HRSG Dino
4128 Heat
Recovery
Steam
Generator
CT 35-
42%
NCC
60%
CT
1986,
HRSG
2001,
ST 2014
CT
168,983
Hours (as
Of EOY
2019)
Soldotna
Combustion
Turbine
Plant
Natural
Gas
CT 48 MW CT GE CT LM6000
Combustion
Turbine
Generator
Peak CT
2014
CT
13,326
Hours
(as of
EOY
2019)
Bernice
Lake
Combustion
Turbine
Plant
Natural
Gas
Soldotna
Combustion
Turbine
Plant
CT GE CT Frame 5
Combustion
Turbine
Peak CT
1971,
CT
1978,
CT
1981
Is there operational heat recovery? (Y/N) If yes estimated
annual displaced heating fuel (gallons)
5.4.2.4 O&M and
replacement
costs for
existing
units
Power Generation
i. Annual O&M
cost for labor
AEEC does not track labor &
non-labor separately so O&M cost are below. This
excludes natural gas costs.
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5.4.2.5 Annual Electricity Production and Fuel Consumption (Existing System)
Use most recent year. Replace the section (Type 1), (Type 2), and (Type 3) with generation
sources
Month Generation
Nikiski
Combined
Cycle Plant
(kWh)
Generation
Soldotna
Combustion
Turbine
Plant
(kWh)
Generation
Bernice
Lake
Combustion
Plant
(kWh)
Fuel
Consumption
(Diesel-
Gallons)
Fuel
Consumption
Natural Gas
(MCF)
Peak
Load
MWh
Minimum
Load
January 41,899,405 2,097 1,256 2306 368,042 1,553 1,319
February 37,527,357
109,052 1,526 415 334,878 1,563 1,351
March 39,406,815 1,000,229 203,136 2601 365,365 1,572 1,323
April 35,481,301 2,767 151,421 16 319,225 1,456 1,201
May 17,186,990 13,800,750 344,021 9 305,346 1,303 1,182
June 26,701,127 4,402,566 200,985 1036 292,899 1,288 1,071
July 32,859,596 0 3 1182 298,043 1,386 1,209
August 32,356,522 14,203 1,764 44 296,783 1,388 1,044
September 20,007,288 10,537,928 321,433 453 286,838 1,443 1,182
October 39,997,133 2,714,565 10,067 15 392,830 1,437 1,277
November 42,267,368 18,194 2,385 1974 380,941 1,683 1,348
December 41,720,850 685,731 1,376 8904 380,057 1,810 1,479
Total 407,501,750 33,288,083 1,239373 18955 4,021,248
5.4.2.6 Annual Heating Fuel Consumption (Existing System)
Use most recent year. Include only if your project affects the recovered heat off the diesel
genset or will include electric heat loads. Only include heat loads affected by the project.
Month Diesel
(Gallons)
Electricity Propane
(Gallons)
Coal
(Tons)
Wood
(Cords,
green tons,
dry tons)
Other
January
February
March
April
May
June
July
August
September
October
November
December
Total
ii. Annual O&M
cost for non-labor
$7,975,397
iii. Replacement
schedule and
cost for existing
units
NCC retirement 2043,
SCT retirement 2054,
BCT retirement 2034
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5.4.3 Future Trends
Describe the anticipated energy demand in the community, or whatever will be affected by the
project, over the life of the project. Explain how the forecast was developed and provide year by
year forecasts. As appropriate, include expected changes to energy demand, peak load, seasonal
variations, etc. that will affect the project.
HEA has 25,077 member-owners and provides power to 35,865 meters located throughout
the Kenai Peninsula. HEA sold 452 million kilowatt-hours of electricity in 2020. HEA’S latest
published Equity Management Plan indicates a 1% per year growth rate over the next 15 years but
actual results indicate flat to a slight decline in load due to member efficiency and conservation
efforts. A significant portion of that decline was the shuttering of the LNG and fertilizer-production
facilities on our systems after the rising price of natural gas made them uneconomic.
Predicting the future is difficult but HEA is hopeful that the adoption of electric vehicles along with
other beneficial electrification technologies will result in a return to a 1% per year load growth for the
life of this project.
Additionally, HEA is interconnected to a regional Alaskan grid known as the “Railbelt” via a three
phase, 115 kV transmission line. The Railbelt is generally defined as the service areas of five
regulated public utilities: Chugach Electric Association (Chugach), Golden Valley Electric
Association (GVEA), HEA, Matanuska Electric Association (MEA), and the City of Seward Electric
System (SES). This region grid covers a significant area of the state and contains the majority of the
state’s population and economic activity; it extends from Homer to Fairbanks and includes areas
such as Anchorage, Fairbanks, and the Matanuska-Susitna Valley. HEA can and has regularly
provided power to Alaskan residents from Anchorage to Fairbanks via wholesale and economy
energy sales to the other four interconnected electric utilities.
5.4.4 Proposed System Design
Provide the following information for the proposed renewable energy system:
• A description of renewable energy technology specific to project location
• The total proposed capacity and a description of how the capacity was determined
• Integration plan, including upgrades needed to existing system(s) to integrate renewable
energy system: Include a description of the controls, storage, secondary loads, distribution
upgrades that will be included in the project
• Civil infrastructure that will be completed as part of the project—buildings, roads, etc.
• Include what backup and/or supplemental system will be in place
See the “Proposed System Design” section of the appropriate Best Practice Checklist for additional
guidance.
This scope of work is to develop costs for interconnection to a potential geothermal generation and
not to study the resource itself. However, the generation project itself is envisioned as two 35-MW
modular geothermal generation plants either using geothermal steam directly, depending on its
temperature and chemical characteristics, or a secondary fluid after heat exchange with geothermal
fluids which would, in either case, be reinjected.
The energy modeling effort associated with scope of work described in Section 2.5 of this grant
application will model the effects of both 35 MW and 70 MW onto the HEA system. The project will
be integrated to the regional electric grid through the existing Western Segment, owned by HEA.
This will permit delivery of electricity to the bulk power system.
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The geothermal generation will be backed up by HEA’s other generation assets and our BESS.
5.4.4.1 Proposed Power Generation Units
Unit # Resource/
Fuel type
Design
capacity
(kW)
Make Model Expected
capacity
factor
Expected
life
(years)
Expected
Availability
2 Geothermal 35,000 100 30 95%
5.4.4.2 Proposed Thermal Generation Units (if applicable)
Generation
unit
Resource/
Fuel type
Design
capacity
(MMBtu/hr)
Make Model Expected
Average
annual
efficiency
Expected
life
5.4.5 Basic Operation of Proposed Energy System
• To the best extent possible, describe how the proposed energy system will operate: When will
the system operate, how will the system integrate with the existing system, how will the
control systems be used, etc.
• When and how will the backup system(s) be expected to be used
See the “Proposed System Design” section of the appropriate Best Practice Checklist for additional
guidance.
HEA would most likely by itself or in conjunction with other Railbelt utilities, enter into a Power
Purchase Agreement with an Independent Power Producer such as GeoAlaska. Because
geothermal is a base-loaded resource, the generation would be operated near peak capacity and
coordinate any scheduled outages for maintenance with HEA and other Railbelt utilities as is
already done for combustion turbines and Bradley Lake. Unscheduled outages would also be
addressed as they are for combustion units currently with all interconnected utilities providing
sufficient spinning reserves to maintain grid stability should any one unit trip off.
If project economics allow for 70 MWs, it would be a very large fraction of HEAs current load, at
times in excess of local demand. During short periods when HEA’s load was less than 70 MW, our
existing BESS would be utilized to store excess energy and short- or longer-term contractual
arrangements made with other Railbelt utilities for off-system sales. Sized at 46.5 MW, the BESS
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has the ability to inject into (or absorb from) the system more than any projected excess or shortfall
while HEA’s combustion turbines can be started within 15 minutes to make up multi-hour shortfalls.
Part of the scope of this effort is to model such a large baseload generation and refine the
economics of such operations.
* All HEA load and energy figures presented are for HEA’s current customer/member base, but
should HEA’s offer to purchase Seward’s electrical system come to fruition, then an additional 4-9
MW of demand would be needed in HEA’s annual energy production.
5.4.3.1 Expected Capacity
Factor
100%
A geothermal plant is expected to operate continuously at its rated output with an availability in the
order of 95%. For cost estimating purposes, the 5% downtime has been assumed to occur in one of
HEA’s shoulder-season month, specifically May, in the chart in Section 5.4.5.2, below.
5.4.5.2 Annual Electricity Production and Fuel Consumption (Proposed System)
Month Generation
(Proposed
System)
(kWh)
Generation
(Type 2)
(kWh)
Generation
(Type 3)
(kWh)
Fuel
Consumption
(Diesel-
Gallons)
Fuel
Consumption
[Other]
Secondary
load
(kWh)
Storage
(kWh)
January 52,080,000
February 52,080,000
March 52,080,000
April 50,400,000
May 21,420,000
June 50,400,000
July 52,080,000
August 52,080,000
September 50,400,000
October 52,080,000
November 50,400,000
December 52,080,000
Total 587,580,000
5.4.5.3 Annual Heating Fuel Consumption (Proposed System)
Month Diesel
(Gallons)
Electricity Propane
(Gallons)
Coal
(Tons)
Wood
(Cords,
green tons,
dry tons)
Other
January
February
March
April
May
June
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July
August
September
October
November
December
Total
5.4.6 Proposed System Operating and Maintenance (O&M) Costs
O&M costs can be estimated in two ways for the standard application. Most proposed renewable
energy projects will fall under Option 1 because the new resource will not allow for diesel
generation to be turned off. Some projects may allow for diesel generation to be turned off for
periods of time; these projects should choose Option 2 for estimating O&M.
Option 1: Diesel generation ON
For projects that do not result in shutting down
diesel generation there is assumed to be no
impact on the base case O&M. Please indicate
the estimated annual O&M cost associated with
the proposed renewable project.
$
Option 2: Diesel generation OFF
For projects that will result in shutting down
diesel generation please estimate:
1. Annual non-fuel savings of shutting off
diesel generation
2. Estimated hours that diesel generation
will be off per year.
3. Annual O&M costs associated with the
proposed renewable project.
1. $
2. Hour’s diesel OFF/year:
3.$13,4000,000 annual estimate
(Includes projected, ongoing well
refurbishment)
5.4.7 Fuel Costs
Estimate annual costs for all applicable fuel(s) needed to run the proposed system (Year 1 of
operation)
Diesel
(Gallons)
Electricity Propane
(Gallons)
Coal
(Tons)
Wood
Other
Unit cost
($)
Annual
Units
Total
Annual
cost ($)
5.5 Performance and O&M Reporting
For construction projects only
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5.5.1 Metering Equipment
Please provide a short narrative, and cost estimate, identifying the metering equipment that will be
used to comply with the operations reporting requirement identified in Section 3.15 of the Request
for Applications.
N/A
5.5.2 O&M reporting
Please provide a short narrative about the methods that will be used to gather and store reliable
operations and maintenance data, including costs, to comply with the operations reporting
requirement identified in Section 3.15 of the Request for Applications
N/A
SECTION 6 – ECONOMIC FEASIBILITY AND BENEFITS
6.1 Economic Feasibility
6.1.1 Economic Benefit
Annual Lifetime
Anticipated Diesel Fuel Displaced for Power
Generation (gallons)
Anticipated Fuel Displaced for Heat
(gallons)
Total Fuel displaced (gallons)
Anticipated Diesel Fuel Displaced for Power
Generation ($)
Anticipated Fuel Displaced for Heat ($)
Anticipated Power Generation O&M Cost
Savings
Anticipated Thermal Generation O&M Cost
Savings
Total Other costs savings (taxes, insurance,
etc.)
Total Fuel, O&M, and Other Cost Savings $54,421,660
6.1.2 Economic Benefit
Explain the economic benefits of your project. Include direct cost savings and other economic
benefits, and how the people of Alaska will benefit from the project. Note that additional revenue
sources (such as tax credits or green tags) to pay for operations and/or financing, will not be
included as economic benefits of the project.
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Where appropriate, describe the anticipated energy cost in the community, or whatever will be
affected by the project, over the life of the project. Explain how the forecast was developed and
provide year-by-year forecasts.
To approximate costs savings, HEA has used its small-facility power producer rate, as approved by
the RCA for the current quarter of $0.09262/kWh. This is primarily the amount of natural gas
saved in our average use of our combustion-turbine fleet without considering integration costs and
comes to an amount more than HEA’s current natural gas costs. As stated elsewhere, if the
project is sized at 70 MW generation plant, HEA would have to 1) be providing power to the City of
Seward, 2) serving increased load possibly due to increase EV penetration and/or 3) have off-
system sales of energy to other Railbelt utilities. Additional savings would be realized should
AEEC’s combined cycle plant no longer be needed, and the labor costs at that facility were
reduced or eliminated.
The economic model used by AEA is available at https://www.akenergyauthority.org/What-We-
Do/Grants-Loans/Renewable-Energy-Fund/2022-REF-Application. This economic model may be
used by applicants but is not required. The final benefit/cost ratio used will be derived from the
AEA model to ensure a level playing field for all applicants. If used, please submit the model with
the application.
In addition to a lower cost of energy arising from HEA’s avoided cost for natural gas, this project
allows HEA to diversify their energy sources and be far less sensitive to increasing natural-gas prices
and less vulnerable to gas availability issues.
To the extent that HEA reduces their gas consumption, the life of finite gas resources in Cook Inlet
is extended for all users in the region and seasonal gas availability issues are diminished.
If financed by HEA, the debt service and depreciation costs would be nearly constant in 2026/2027
dollars and therefore decreasing, in real dollars, throughout the project projected 30-year life
meaning that in addition to an initial downward pressure on consumer rates, the project’s output
would continue to resist the inflationary pressure of HEA’s combustion assets.
6.1.3 Economic Risks
Discuss potential issues that could make the project uneconomic to operate and how the project
team will address the issues. Factors may include:
• Low prices for diesel and/or heating oil
• Other projects developed in community
• Reductions in expected energy demand: Is there a risk of an insufficient market for energy
produced over the life of the project.
• Deferred and/or inadequate facility maintenance
• Other factors
Note that this scope for office-based with very low risk of disruptions. However, should the project
proceed, the following logistical, supply-chain and tax policy risks are detailed in the table below:
Risk Importance Mitigation Strategy
Unexpected increase in generation
component or delivery costs
High Early coordination with turbine vendors to
protect against price volatility
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Labor shortages for construction or
operations phases
Medium Establish a labor resource plan in advance of
construction activities
Foreign exchange risk with
European or Asian based
manufacturers
Low Explore domestic content options
Lack of federal tax incentive
extension
Low Vigilant monitoring of developments in
Washington
Availability of Jones Act compliant
heavy lift and transportation vessels
Medium Proactive and early discussions with vessel
contractors
Availability of appropriate cable-
laying ship and tenders
Low Proactive and early discussions with vessel
contractors
6.1.4 Public Benefit for Projects with Direct Private Sector Sales
For projects that include direct sales of power to private sector businesses (sawmills, cruise ships,
mines, etc.), please provide a brief description of the direct and indirect public benefits derived from
the project as well as the private sector benefits and complete the table below. See Section 1.6 in
the Request for Applications for more information.
N/A
6.2 Other Public Benefit
Describe the non-economic public benefits to Alaskans over the lifetime of the project. For the
purpose of evaluating this criterion, public benefits are those benefits that would be considered
unique to a given project and not generic to any renewable resource. For example, decreased
greenhouse gas emission, stable pricing of fuel source, won’t be considered under this category.
Some examples of other public benefits include:
• The project will result in developing infrastructure (roads, trails, pipes, power lines, etc.) that can be used
for other purposes
• The project will result in a direct long-term increase in jobs (operating, supplying fuel, etc.)
• The project will solve other problems for the community (waste disposal, food security, etc.)
• The project will generate useful information that could be used by the public in other parts of the state
• The project will promote or sustain long-term commercial economic development for the community
This project will refine critical costs involved and any off-shore renewable energy development and
inform all IPPs and Load-Serving Entities of the interconnection costs early in their evaluation of
this and other off-shore projects.
The project could also act as a model for repurposing other oil platforms in the Cook Inlet and
elsewhere.
The project could help sustain the offshore oil & gas support industry in the area since it is likely
that some of the same services will be needed.
The project could provide offshore infrastructure for other renewable energy opportunities such as
tidal power development or off-shore wind
The interconnections costs developed in this Feasibility project would meaningfully add to the
State’s body of knowledge for future wind projects.
SECTION 7 – SUSTAINABILITY
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Describe your plan for operating the completed project so that it will be sustainable throughout its
economic life.
At a minimum for construction projects, a business and operations plan should be attached, and
the applicant should describe how it will be implemented. See Section 11.
7.1.1 Operation and Maintenance
Demonstrate the capacity to provide for the long-term operation and maintenance of the proposed
project for its expected life
• Provide examples of success with similar or related long-term operations
• Describe the key personnel that will be available for operating and maintaining the
infrastructure.
• Describe the training plan for existing and future employees to become proficient at operating
and maintaining the proposed system.
• Describe the systems that will be used to track necessary supplies
• Describe the system will be used to ensure that scheduled maintenance is performed
Should this generation facility be built, it would be remotely operated and monitored utilizing HEA’s
existing SCADA infrastructure from the existing HEA Dispatch Center, which is staffed 24 hours a
day, 7 days a week, 365 days a year.
Any onsite operations and maintenance activities will be cooperatively facilitated by HEA and the
IPP that develops the project.
HEA operates the Bradley Lake Hydro Facility for the State of Alaska and is experienced at
operating and maintaining equipment in remote areas.
Should HEA operate the generation facility, HEA would use its existing maintenance scheduling,
inventory control, outage scheduling, warehousing, and accounting procedures to coordinate and
track scheduled and unscheduled maintenance on these new assets. HEA’s existing staff would
supply support services such as accounting, HR, IT, engineering support, payroll, etc.
7.1.2 Financial Sustainability
• Describe the process used (or propose to use) to account for operational and capital costs.
• Describe how rates are determined (or will be determined). What process is required to set
rates?
• Describe how you ensure that revenue is collected.
• If you will not be selling energy, explain how you will ensure that the completed project will be
financially sustainable for its useful life.
It is anticipated that this transmission asset will be owned and operated by AEEC / HEA which will
use established and existing utility accounting practices, procedures, financial systems, accounting
personnel, and outside independent audits to account for operational and capital costs.
HEA rates are set by the member-elected Board of Directors on an annual basis (and modified
each mid-year). HEA develops its annual budget to cover all its operational expenses, debt
service, fuel costs, and margins required to comply with lender’s loan covenants, HEA’s own
capital-credits policy, and provide sufficient funds for system maintenance and upgrades. Those
rates (tariffs) are then reviewed and approved by the Regulatory Commission of Alaska.
As an AEEC / HEA asset, revenues would be collected through HEA’s existing monthly billing
process and systems.
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Grant Application – Standard Form
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7.1.2.1 Revenue Sources
Briefly explain what if any effect your project will have on electrical rates in the proposed benefit
area over the life of the project. If there is expected to be multiple rates for electricity, such as a
separate rate for intermittent heat, explain what the rates will be and how they will be determined
Collect sufficient revenue to cover operational and capital costs
• What is the expected cost-based rate (as consistent with RFA requirements)
• If you expect to have multiple rate classes, such as excess electricity for heat, explain what
those rates are expected to be and how those rates account for the costs of delivering the
energy (see AEA’s white paper on excess electricity for heat).
• Annual customer revenue sufficient to cover costs
• Additional incentives (i.e., tax credits)
• Additional revenue streams (i.e., green tag sales or other renewable energy subsidies or
programs that might be available)
HEA / AEEC hopes to add this environmentally friendly, beneficial, renewable-energy project to
AEEC’s generation portfolio without negatively impacting rates. This will depend on the final actual
cost of the project, any grants, direct pay tax incentives, legislative appropriations, power-
production-incentives, greenhouse-gas, and / or renewable-energy credits received and the capital
financing terms of the project.
Operational and capital costs or purchased power through a PPA will be covered through revenues
received from the sale of power to HEA’s members. The purchased-power rates are set by HEA’s
member elected Board of Directors and reviewed and approved by the Regulatory Commission of
Alaska.
Since HEA is a not-for-profit entity, no rate of return is incorporated into the rates that HEA charges
its members. HEA provides power at cost plus an allowed RCA specified operational margin. As
mentioned above it is HEA’s hope that this project will not increase HEA’s current rates
(https://www.homerelectric.com/member-services/my-bill/rates/) but will provide a downward
pressure on rates upon commissioning and into the future.
7.1.2.2 Power Purchase/Sale
The power purchase/sale information should include the following:
• Identification of potential power buyer(s)/customer(s)
• Potential power purchase/sales price - at a minimum indicate a price range (consistent with the
Section 3.16 of the RFA)
Identify the potential power buyer(s)/customer(s) and anticipated power purchase/sales price
range. Indicate the proposed rate of return from the grant-funded project. Include letters of support
or power purchase agreement from identified customers.
It is anticipated that this transmission asset will be owned and operated by AEEC / HEA. It is
anticipated that HEA would enter into a PPA with a IPP who develops the generation facility itself.
Such a PPA would be approved by the RCA and then the generation incorporated into AEEC’s
existing generation portfolio that provides power to HEA members. Since HEA is a not-for-profit
entity, no rate of return is incorporated into the rates that HEA charges its members. HEA provides
power at cost plus an allowed, RCA-specified operational margin.
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As noted in Section 2.5, part of the scope of work is to analyze possible ownership scenarios. If it
is more advantageous and economically beneficial for AEEC to own and operate the generation
facility, HEA/AEEC would work with the appropriate IPP to develop power purchase / power sales
agreements which include an option to purchase the generation asset at a reduced price at 5 or 10
years into the project life after the developers have realized the majority of their ITC, PTC and
depreciation benefits.
SECTION 8 – PROJECT READINESS
8.1 Project Preparation
Describe what you have done to prepare for this award and how quickly you intend to proceed with
work once your grant is approved.
Specifically address your progress towards or readiness to begin, at a minimum, the following:
• The phase(s) that must be completed prior to beginning the phase(s) proposed in this application
• The phase(s) proposed in this application
• Obtaining all necessary permits
• Securing land access and use for the project
• Procuring all necessary equipment and materials
Refer to the RFA and/or the pre-requisite checklists for the required activities and deliverables for
each project phase. Please describe below and attach any required documentation.
HEA/AEEC has existing RFPs for similar work that can be used as templates to quickly and
efficiently specify and solicit the consultants required to compete this Feasibility Study. AEEC will
work to select the engineering consultant soon after a grant is awarded.
8.2 Demand- or Supply-Side Efficiency Upgrades
If you have invested in energy efficiency projects that will have a positive impact on the proposed
project, and have chosen to not include them in the economic analysis, applicants should provide
as much documentation as possible including:
1. Explain how it will improve the success of the RE project
2. Energy efficiency pre and post audit reports, or other appropriate analysis,
3. Invoices for work completed,
4. Photos of the work performed, and/or
5. Any other available verification such as scopes of work, technical drawings, and payroll for
work completed internally.
HEA/AEEC has installed the largest Battery Energy Storage System (BESS) in Alaska. It has been
tested, found able to exceed the maximum discharge rates specified in procurement contracts, and
will allow more flexible, efficient operation of our current thermal and future renewable assets.
With capacities of 46.5 MW and 93 MWh, this $41M project was untaken to give HEA the ability to
bring large intermittent projects online without incurring the costs of rapidly cycling thermal units
and without adversely affecting the Railbelt grid.
SECTION 9 – LOCAL SUPPORT AND OPPOSITION
Describe local support and opposition, known or anticipated, for the project. Include letters,
resolutions, or other documentation of local support from the community that would benefit from
this project. Provide letters of support, memorandum of understandings, cooperative agreements
between the applicant, the utility, local government, and project partners. The documentation of
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Grant Application – Standard Form
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support must be dated within one year of the RFA date of October 4, 2022. Please note that letters
of support from legislators will not count toward this criterion.
Included as Attachment B are letters of support from the following:
Erin McKittrick, the Board President, Alaska Electric and Energy Cooperative.
Paul Craig, PhD, Manager, GeoAlaska, LLC.
Brentwood Higman, Ground Truth Alaska.
Tim Dillion, Executive Director, Kenai Peninsula Economic Development District.
SECTION 10 – COMPLIANCE WITH OTHER AWARDS
Identify other grants that may have been previously awarded to the Applicant by AEA for this or
any other project. Describe the degree you have been able to meet the requirements of previous
grants including project deadlines, reporting, and information requests.
Homer Electric Association through its wholly own subsidiary Kenai Hydro, completed some Phase
I Reconnaissance studies, which were completed in January 2009 and were partially funded by
a $100,000 AEA grant. Kenai Hydro received partial funding for Phase II activities in the amount of
$2,000,000 through two separate awards of $816,000 and of $1,184,400 through AEA Renewable
Energy Grants.
Kenai Hydro complied with all terms of the grant agreements from previously award grants, which
included timely quarterly progress reports, delivery of agreed upon deliverables, and closeout of
the grants.
HEA/AEEC was the recipient of four Phase II wind resource assessment feasibility grants and a
Phase III final design grant for a landfill gas project in the AEA REF Round 14 solicitation. The
finalized AEA grant agreements for the wind projects were received on 10/31/2022 and the
finalized landfill gas grant agreement was received on 11/14/2022 so we are just getting started on
the administration and compliance requirements of those grants but AEEC has the processes in
place to ensure compliance with these grants.
SECTION 11 – LIST OF SUPPORTING DOCUMENTATION FOR PRIOR PHASES
In the space below, please provide a list of additional documents attached to support completion of
prior phases.
NA
SECTION 12 – LIST OF ADDITIONAL DOCUMENTATION SUBMITTED FOR CONSIDERATION
In the space below, please provide a list of additional information submitted for consideration.
Attachment A: Resumes, submitted as a separate file
Attachment B: Letters of Support
Attachment C: Board Resolution & Authorization
SECTION 13 – AUTHORIZED SIGNERS FORM
Community/Grantee Name:
Regular Election is held:
Date:
Authorized Grant Signer(s):
Alaska Electric & Energy Cooperative, Inc.
Annually June
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Grant Application – Standard Form
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Printed Name Title Term Signature
I authorize the above person(s) to sign Grant Documents:
(Must be authorized by the highest-ranking organization/community/municipal official)
Printed Name Title Term Signature
Grantee Contact Information:
Mailing Address:
Phone Number:
Fax Number:
Email Address:
Federal Tax ID #:
Please submit an updated form whenever there is a change to the above information.
SECTION 14 – ADDITIONAL DOCUMENTATION AND CERTIFICATION
SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION:
A. Contact information and resumes of Applicant’s Project Manager, Project Accountant(s),
key staff, partners, consultants, and suppliers per application form Section 3.1, 3.4 and
3.6.
Applicants are asked to provide resumes submitted with applications in separate electronic
documents if the individuals do not want their resumes posted to the project web site.
B. Letters or resolutions demonstrating local support per application form Section 9.
C. For projects involving heat: Most recent invoice demonstrating the cost of heating fuel
for the building(s) impacted by the project.
Bradley P. Janorschke General Manager N/A
Bradley P. Janorschke General Manager N/A
3977 Lake Street, Homer, AK 99603
907-235-8551
907-235-3323
bjanorschke@homerelectric.com
92-0177236
Renewable Energy Fund Round 15
Grant Application – Standard Form
AEA 23046 Page 32 of 32 10/04/2022
D. Governing Body Resolution or other formal action taken by the applicant’s governing
body or management per RFA Section 1.4 that:
• Commits the organization to provide the matching resources for project at the match
amounts indicated in the application.
• Authorizes the individual who signs the application has the authority to commit the
organization to the obligations under the grant.
• Provides as point of contact to represent the applicant for purposes of this
application.
• Certifies the applicant is in compliance with applicable federal, state, and local, laws
including existing credit and federal tax obligations.
E. An electronic version of the entire application on CD or other electronic media, per RFA
Section 1.7.
F. CERTIFICATION
The undersigned certifies that this application for a renewable energy grant is truthful and
correct, and that the applicant is in compliance with, and will continue to comply with, all
federal and state laws including existing credit and federal tax obligations and that they
can indeed commit the entity to these obligations.
Print Name
Signature
Title
Date
Bradley P. Janorschke
General Manager
December 5, 2022
AEEC Augustine Island Geothermal Project REF Round 15 Application
Attachment A: Resumes (attached as a separate file)
AEEC Augustine Island Geothermal Project REF Round 15 Application
Attachment B: Letters of Local Support
To whom it may concern,
Homer Electric Association (HEA) is a member-owned electric cooperative serving customers
on the Kenai Peninsula, governed by a nine-member board. As a democratically elected body,
our board represents the interests of HEA’s 25,000 members, and speaks on their behalf.
In our commitment to providing affordable and reliable electricity, we regularly review the
cooperative’s finances, analyzing cost drivers, risks, and opportunities. Natural gas costs are
responsible for around a third of members’ bills. This gas is only available from a single source,
and at the time of our last contract negotiation, only from a single provider. That provider has
stated that there is a strong likelihood of gas shortages in the future, and encouraged its
customers to reduce dependence on its natural gas. HEA’s gas contract will be the first to expire
in the Railbelt, in early 2024, making the need to reduce gas dependence particularly urgent for
our members. The board has determined that this reliance on a single energy source is a
substantial risk to our members. We have created an ambitious renewable energy policy to
address this issue, seeking 50% renewable energy by 2025.
We have determined that incorporating diverse renewable sources of energy into our energy
portfolio will benefit HEA members, reduce our vulnerability to price or supply shocks, and
reduce upward pressure on electric rates.
HEA considers all possible renewable energy projects with the potential to provide energy to our
cooperative. We have increased hydro production through our portion of the Battle Creek
Diversion and are proceeding on our Grant Lake Hydro and Landfill Gas projects. Meanwhile,
we have been exploring opportunities in wind and solar. Our board is interested in assessing the
economics of two geothermal prospects – Augustine Island and Mount Spurr. These are the
most promising geothermal energy sources in the Cook Inlet region, and there is a project
developer pursuing generation in each location. If either location proves viable, we need to
know the interconnection costs to determine the project’s value to our members.
The possibility of a large, base-loaded renewable like geothermal could, more than any other
single project, allow HEA to diversify away from natural gas for the majority of our energy. I
encourage AEA to fund this request to study interconnection costs at these two locations so that
we can incorporate those economic findings into our strategic plans.
Sincerely,
Erin McKittrick
Board President, Alaska Electric and Energy Cooperative
(Alaska Electric and Energy Cooperative is a generation and transmission cooperative with HEA
as its sole member, sharing a governing body. AEEC is responsible for generating and
providing all the energy to HEA)
GeoAlaska, LLC
2440 East Tudor Road, # 230 Phone +1-907- 830-1151
Anchorage, AK 99507 pcraig@geoalaska.com
November 19, 2022
Homer Electric Association, Inc.
280 Airport Way
Kenai, AK 99611
To whom it may concern:
The Members and management of GeoAlaska, LLC (“GeoAlaska”) hereby declare
GeoAlaska’s unanimous endorsement and support for Homer Electric Association’s
(“HEA”) efforts to secure financial resources pertaining to the development and delivery
of geothermal power to the benefit of Alaskans in general, and HEA’s customers in
particular.
GeoAlaska, LLC was established on May 1, 2000 for the purpose of identifying and
developing sustainable geothermal power that could supply green energy for use by
Alaskans. GeoAlaska was issued its first geothermal prospecting permit on Mt. Spurr
effective September 1, 2021. On September 1, 2022, GeoAlaska was issued its second
geothermal prospecting permit on Augustine Island. Both prospects are on the west side
of the Cook Inlet and were strategically selected by GeoAlaska for geological,
geographical, and geopolitical (e.g., State land reasonably proximate to existing
infrastructure) reasons.
GeoAlaska is actively negotiating with investors regarding the upstream development of
geothermal resources in each location.
HEA and GeoAlaska have entered into a letter agreement providing HEA with a first
right of refusal pertaining to a power purchase agreement at each location. As a
consideration for the first right of refusal, HEA has agreed to pursue funding to study grid
interconnection, including the size of resource that must be developed to assure economic
viability of geothermal power at Augustine Island and Mt. Spurr.
GeoAlaska is delighted to be working collaboratively with HEA toward the goal of
supplying Alaskans with sustainable geothermal power to help meet our State’s future
energy needs in a climate-sensitive manner. GeoAlaska fully supports HEA’s efforts in
this regard.
Sincerely,
Paul L. Craig, PhD
Manager, GeoAlaska, LLC
To Whom it may Concern:
I am a resident of the Kenai Peninsula, a Homer Electric Association ratepayer, and executive
director of Ground Truth Alaska, a local science education nonprofit. I'd like to express my
support for HEA's proposed study of two possible renewable energy projects in Cook Inlet:
Geothermal at Augustine Volcano, and wind generation on oil platforms in upper Cook Inlet.
The need for diverse renewable energy on our electric grid is urgent. Currently we rely almost
exclusively on natural gas, but we need to move away from this as quickly as possible. We need
this transition first because we have no other choice - the natural gas supply in Cook Inlet is
dwindling, and we are very likely to face increasingly dire shortages in the coming years and
decades. Additionally, we have to do our part in the face of a climate emergency - both the CO2
emissions from combustion, and fugitive methane that escapes from our aged and thinly spread
gas lines and distribution.
Wind generators atop abandoned platforms seems worth studying - available estimates of wind
energy show upper Cook Inlet as having excellent wind potential. The details of installation,
maintenance, transmission, and generation variability will all bear on whether this is a practical
source of electricity - exactly the analysis that the proposed study will attempt.
Geothermal production at Augustine Volcano is in some ways more speculative - the
transmission distances are long, and geologic hazards may doom a project here. However, this
very active volcano could be a major source of electricity, providing baseload or even balancing
generation to complement variable renewables such as wind and solar. The devil is in the
details, but I strongly support a careful study of the potential before we rule out this potentially
beneficial development. I would suggest that some consideration be given to combining
geothermal energy production at Augustine with offshore wind near Anchor Point, since they
might benefit from the same transmission infrastructure, and the geography appears favorable
for offshore wind in this area.
Thank you for your consideration,
Bretwood Higman, Executive Director
AEEC Augustine Island Geothermal Project REF Round 15 Application
Attachment C: Board Resolution & Authorizations
Alaska Electric and Energy Cooperative, Inc. 3977 Lake Street Homer, Alaska 99603 (907) 235-8551
RESOLUTION 01.2022.13
GRANT FUNDING AUTHORIZATION FOR A
GEOTHERMAL PROJECT LOCATED ON THE WEST SIDE OF COOK INLET
BE IT RESOLVED that Alaska Electric & Energy Cooperative, Inc. (AEEC) hereby
authorizes the General Manager to proceed with the Alaska Energy Authority (AEA) application
process to seek grant funding for a geothermal project located on the west side of Cook Inlet.
CERTIFICATION
I, Jim Duffield, do hereby certify that I am the Secretary/Treasurer of Alaska Electric &
Energy Cooperative, Inc., and that the foregoing resolution was adopted at a meeting of the
Directors of Alaska Electric & Energy Cooperative, Inc., held on November 15, 2022, at which
meeting a quorum was present.
Jim Duffield, Secretary/Treasurer
Alaska Electric and Energy Cooperative, Inc. 3977 Lake Street Homer, Alaska 99603 (907) 235-8551
CERTIFICATE OF GENERAL MANAGER OF ALASKA ELECTRIC AND ENERGY
COOPERATIVE, INC. (AEEC) IN SUPPORT OF A
GEOTHERMAL PROJECT LOCATED ON THE WEST SIDE OF COOK INLET GRANT
APPLICATION
I am the General Manager of Alaska Electric and Energy Cooperative, Inc. (the
“Cooperative”). I am authorized by the Board of Directors of the Cooperative pursuant to Board
Policy 203, and by formal action of the Board of Directors of the Cooperative at a meeting held
on November 15, 2022 to certify as follows:
1. The Board of Directors of the Cooperative has authorized the application for project
funding and agrees that the Cooperative will honor the match amounts contained in the
application to which this certificate is attached.
2. The Cooperative is in good standing with respect to any existing credit and federal tax
obligations.
Signed and dated in Homer, Alaska, on November 15, 2022.
____________________________________
Bradley P. Janorschke
General Manager