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Home My WebLink AboutAEA REF 15 Letter 01092023 - CORRECTION TO APPLICATION AEA REF 15 Review Team 1/9/2023 C/O Connor T. Erickson & Karin T. St.Clair Alaska Energy Authority 813 W. Northern Lights Blvd. Anchorage, AK 99503 RE: Tidal Energy Corp AEA REF 15 Application Dear AEA REF 15 Review Team, Happy New Year, and hope you had a great holiday season, I am writing because I have found a major error in my AEA REF 15 application. In the project cost calculations, I use the estimate of $15M per MW installed times 678MW for a total cost of $1,017,000,000. Unfortunately, I should have checked my math a few more times, because that number should actually be $10,170,000,000. The knock on effect is that this changes not just the project cost but the tax credit estimates as well. Attached is an addendum to the application correcting this mistake. More importantly, I’d like to assuage the fears that this number might cause, as in making it seem completely unrealistic to pursue this energy source due to the cost of technology. The $15M/MW installed ﬁgure is for current tidal energy extraction prototypes, and prototypes are inherently very expensive. Each part of these devices has to be designed, manufactured or sourced, modiﬁed for underwater duty, and then assembled. They are basically bespoke, hand made, one of a kind machines, and also one quarter of the size (or less) they will eventually have to be. A simple order of ten of these devices will bring the price per MW installed down signiﬁcantly. At one hundred devices, supply chains and manufacturing efﬁciencies will quickly drive the price down even further. And as the devices inevitably get larger, the price will continue to come down very signiﬁcantly. By the last phase of turbine installation phase of this this project, the price per MW installed will have dropped by at least 80 to 90%. This cost curve has even proven out in the solar and wind industries, which have both seen their costs per MW installed drop by 90+% over the last decade. In the attached revision/addendum I have listed estimates to reﬂect this expected decline in cost of the hydro kinetic power turbines. The total estimated project cost is $2,694,680,000 for 687MW capacity, or $3.9M per MW installed. This includes the costs bringing the current turbine solutions from prototypes into commercial viability as well as the electrolysers required to make hydrogen. Future tidal ﬁelds’ are estimated to be less than $2M/MW installed. 821 N St., Suite 207 Anchorage, AK, 99501 lee@tidalenergycorp.com Cell: (504) 875-8223 Office: (907) 274-7571 For comparison’s sake, new nuclear power plants, including advanced Small Modular Reactors, are currently estimated at $5M/MW installed, without hydrogen generation. Multiple tidal devices globally are at Technology Readiness Level 8/9 and ready for commercialization. Current data underscores the benign nature of these devices with zero adverse affects to marine life in millions of interactions. Furthermore, Alaska stands to reap an outsized proportion of the rewards for exploiting this technology as 47GW of the estimated 50GW of estimated tidal power in America are in state waters. Another change has been added regarding the ‘Domestic Content’ portion of the Infrastructure Act. The domestic content bonus is 10%, not 3%. A change has been added as federal guidelines have now clariﬁed that the PTC or ITC can be ‘stacked’ with the green hydrogen production subsidy. Thank you for the opportunity to amend the above referenced application. Attached to this letter are the updated numbers. Sincerely, Chris Lee 821 N St., Suite 207 Anchorage, AK, 99501 lee@tidalenergycorp.com Cell: (504) 875-8223 Office: (907) 274-7571 Renewable Energy Fund Round 15 Grant Application – Standard Form 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. 3.2.2 Cost Overruns Describe the plan to cover potential cost increases or shortfalls in funding. As the proposed costs are part of bids by established companies, who are both leaders in their field with long and stellar reputations, the expectation is that the work will be completed on time and under budget. If, however, it is determined the subs will not be able to complete their work under budget, proactive adaptive management will allow TEC will foresee this and begin cutting portions of tasks in their bids to keep the project under budget. The cuts will come from less desirable areas of site discovery and off loading of tasks from the subs to TEC. 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. Grant funds requested in this application $1,400,000 Cash match to be provideda $0 In-kind match to be provideda In-kind Project Management/Project Development services. $280,000 Energy efficiency match providedb N/A Total costs for project phase(s) covered in application (sum of above) $1,680,000 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. No matching funds will be provided for this phase of the project. However, Tidal Energy Corp is an experienced project development and management firm and will contribute these functions in- kind to the efforts. Tidal Energy Corp values the functions of project management (5% of total project cost) and project development (15%) together at 20% of total project costs: .20 X $1,400,000 = $280,000. a 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. Reconnaissance Estimated $. 3,000,000 Feasibility and Conceptual Design Estimated $ 15,000,000 AEA 23046 Page of 10/04/20221141 Renewable Energy Fund Round 15 Grant Application – Standard Form 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) As the entirety of current efforts are in the Reconnaissance Phase, future funding will be necessary for the Feasibility and Conceptual Design, Final Design and Permitting, and Construction phases. Anticipated sources of funding include: Federal Funding Opportunity Announcements from the Department of Energy’s Waterpower Technology Office (DOE WTPO) and Office of Clean Energy Demonstrations (DOE OCED). Private capital. DOE Loan Program. In 2021, the Bipartisan Infrastructure Act recognized marine energy development as eligible for the Production Tax Credit and Investment Tax Credit. This has finally given marine energy the same tax credits that the solar and wind industries have enjoyed since 2008, and which have been THE major factor in the meteoric rise of those industries. Developers can select the PTC or the ITC, and ‘stack’ either with the green hydrogen subsidy. Final Design and Permitting ***Permitting for the entire project will be covered by this cost. Engineering for the or 1st 50MW installed is ($75,000,000 + $450,000,000) X .04) = $21,000,000 Another $20,000,000 is estimated for design and engineering of infrastructure associated with connecting the turbine field to the electrolyzer plant and the local grid(s). Further engineering to refine the turbines and installation solutions will be required for future phases.*** Estimated $ 41,000,000 Construction Estimated $ 2,635,680,000 Total Project Costs (sum of above)Estimated $ 2,694,680,000 Metering/Tracking Equipment [not included in project cost] Ongoing environmental and biological monitoring is expected to be required for the duration of the project. Est. $1,000,000/yr X 30 years+ Estimated $ 30,000,000 AEA 23046 Page of 10/04/20221241 Renewable Energy Fund Round 15 Grant Application – Standard Form Production Tax Credits (PTC) of $0.025/kWh, or $25.00/MWh + 10% Domestic Content bonus = $27.50/MWh Low end estimated electricity production at 547,500 MWh/yr* X $27.5/MWh = $15,056,200/yr High end estimated electricity production at 3,723,000 MWh/yr* X $27.5/MWh = $102,382,500/yr OR Investment Tax Credits (ITC) of 30% of total project costs: Total project cost of $2,694,680,000 ^ X .30= $808,404,000 +10% ITC bonus for Domestic Content = $269,468,000 ITC Potential Total @ 40% = $ 1,077,872,000 PLUS Federal guidance states that the PTC or ITC and the $3/kg H2 subsidy can be ‘stacked’. $3/kg green hydrogen subsidy from USG. Low end: 547,000 MWh/yr*/~50kWh per 1kg of H2 = 10,940,000kg H2/yr X $3 = $32,820,000/yr High end: 3,723,000 MWh/yr*/~50kWh per 1kg of H2 = 74,460,000kg H2/yr X $3 = $223,380,000/yr Energy sales via direct connection to AK Railbelt Grid and hydrogen production as feedstock for ammonia production. *= Figures are from ‘Estimate of Tidal Power’ in Attachments ^= Figure is from ‘Section 3.2.3, Phase Four Construction Estimate’ AEA 23046 Page of 10/04/20221341 Renewable Energy Fund Round 15 Grant Application – Standard Form Phase 3 — Final Design and Permitting Milestone or Task Anticipated Completion Date RE- Fund Grant Funds Grantee Matching Funds Source of Matchi ng Funds: TOTALS (List milestones based on phase and type of project. See Sections 2.3 thru 2.6 of the RFA ) $$$ Final Design and Permitting will be based on Reconnaissance and Feasibility and Conceptual Design phases. However, Permitting issues will likely be resolved via results from the PNNL Bio/Env study and Regulatory/Permitting Consulting. (Milestones 2 and 7 of the Reconnaissance Phase). A “ballpark” estimate can be made as Design costs are typically 3-4% of total project costs. We are using the higher end for our estimates due to the newness of the technologies. Total project cost can be roughly estimated by cost per MW installed of turbine power. At the average estimate of 678 MW installed (See Attachment ‘Estimate of Tidal Power’) X current estimate of $15,000,000/ MW installed = Total estimated project cost of $10,170,000,000 . $ HOWEVER - This number represents costs if the turbines are all Prototypes, which are inherently expensive. A cost estimate over time that reflects the dropping price of turbines as manufacturing supply chains are established is below. $$$ First 5MW @ $15M/MW installed = $75,000,000 $$ Design/Engineering @4%$$$ 3,000,000 Next 45MW @$10M/MW installed = $450,000,000 (Total 50 MW) $$ Design/Engineering @4%$$$ 18,000,000 Design and Engineering for project infrastructure, connections to electrolyzer plant and grid(s). $ 20,000,000 TOTALS $$$ 41,000,000 Budget Categories: Direct Labor & Benefits All in $$$ Travel & Per Diem All in $$$ AEA 23046 Page of 10/04/20221841 Renewable Energy Fund Round 15 Grant Application – Standard Form Equipment All in $$$ Materials & Supplies All in $$$ Contractual Services All in $$$ Construction Services All in $$$ Other N/A $$$ TOTALS $$$ 41,000,000 AEA 23046 Page of 10/04/20221941 Renewable Energy Fund Round 15 Grant Application – Standard Form Phase 4 — Construction Milestone or Task Anticipated Completion Date RE- Fund Grant Funds Grantee Matching Funds Source of Matching Funds: Cash/In-kind/ Federal Grants/Other State Grants/ Other TOTALS (List milestones based on phase and type of project. See Sections 2.3 thru 2.6 of the RFA ) $$$ First 5MW @ $15M/MW installed = $75,000,000 $$$ 75,000,000 Design/Engineering 75,000,000 @4% = $3,000,000 - Reflected in Phase 3 $$ Next 45MW @$10M/MW installed = $450,000,000 (Total 50 MW) $$$ 450,000,000 Design/ Engineering$450,000,000 @4% = $18,000,000 - Reflected in phase 3 $$ Next 50MW @ $8M/MW Installed (Total 100MW)$$$ 400,000,000 Design/Engineering @4%$$$ 16,000,000 Next 50MW @ $6M/MW Installed (Total 150MW installed) $$$ 300,000,000 Design/Engineering @4%$$$ 12,000,000 Next 50MW @ $4M/MW Installed (Total 200 MW Installed) $ 200,000,000 Design/Engineering @4%$ 8,000,000 Next 100 MW @ $2M/MW Installed (Total 300 MW Installed) $ 200,000,000 Design/Engineering @4%$$$ 8,000,000 Next 378 MW @ $1.5M/MW installed - TOTAL 678 MW INSTALLED $ 567,000,000 Design/Engineering @4%$ 22,680,000 500MW Hydrogen Electrolyzer Capacity X $550,000/MW Installed $$$ 275,000,000 AEA 23046 Page of 10/04/20222041 Renewable Energy Fund Round 15 Grant Application – Standard Form HVDC Cabling- 22 Miles to Anchorage and 38 Miles to Nikiski @ $2.5M/Mile = $$$ 95,000,000 Step Up Facilities in Nikiski and Anchorage for connection to AK Railbelt Grid $2M X 2 $$$ 4,000,000 Land for Electrolyzer facility and Step up facilities @ $3M $$$ 3,000,000 To reiterate these figures are ‘ballpark’ without the hard data to be collected in the Reconnaissance and Design phases. $$$ TOTALS $$$2,635,680,000 Budget Categories: Direct Labor & Benefits All In $$$ Travel & Per Diem All In $$$ Equipment All In $$$ Materials & Supplies All In $$$ Contractual Services All In $$$ Construction Services All In $$$ Other TBD $$$ TOTALS $$$2,635,680,000 AEA 23046 Page of 10/04/20222141