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HomeMy WebLinkAboutLPBCoverLetter Chignik Bay • Chignik Lagoon• Chignik Lake• Egegik • Igiugig• Iliamna • Ivanof Bay• Kokhanok• Levelock • Newhalen • Nondalton• Pedro Bay• Perryville• Pilot Point• Pope Vannoy• Port Alsworth• Port Heiden• Ugashik Lake and Peninsula Borough P.O. Box 495 King Salmon, Alaska 99613 Telephone: (907) 246-3421 Fax: (907) 246-6602 September 22, 2014 Dear Sir or Madame: The cost of providing heat in the Lake and Peninsula Borough communities is a major contributor to the high cost of living in these communities. The goal of this grant application is to offset the heating fuel costs in three Borough communities by installing highly efficient wood boilers. The Borough is taking a systems approach to this project. The approach ensures that the project is appropriate, economically beneficial, and will be maintained in the long-run to continue the benefits of the project for many years. The total project cost to construct wood boilers in the four villages is $309,450. The borough is contributing 20% of the cost. Therefore, this grant is requesting $247,560. The Systems Approach to the Wood Boiler Project Step 1. A Borough-wide Energy Plan. In 2008, The Borough contracted with Mark Foster and Information Insights to review the energy situation in Lake and Peninsula Borough villages and recommend strategies to decrease energy costs in an economically efficient manner. The study, completed in October 2008, recommended a number of strategies including electric generation, wind projects, transportation improvements, energy conservation, and wood projects. Specifically with respect to wood projects, the study concluded that in seven communities there is potential to use wood resources to decrease the high cost of heating fuel. Step 2. Detailed Feasibility Analysis for Each Potential Project. The next step in the system is to contract to develop detailed feasibility and design information for the strategies recommended by the energy plan. The first best step is to develop the required information to determine whether projects are feasible. For example, for wind projects, the first step is usually a wind- resource assessment. In other cases where the support information is already available, it is possible to complete the more detailed feasibility information necessary for a design/build RFP. With respect to the wood boiler project, the Alaska Energy Authority, Renewable Energy Fund, provided a grant to the Borough to determine the feasibility of wood boilers to decrease heating costs, and to prepare analysis and design information for which to write an RFP to install such boilers. Through a competitive RFP, the Borough selected RBA Engineers, Inc to perform the study. RBA Engineers analyzed situations for seven villages in the region (and included a number of alternatives for each village). RBA determined that the simple payback (price divided by Chignik Bay • Chignik Lagoon• Chignik Lake• Egegik • Igiugig• Iliamna • Ivanof Bay• Kokhanok• Levelock • Newhalen • Nondalton• Pedro Bay• Perryville• Pilot Point• Pope Vannoy• Port Alsworth• Port Heiden• Ugashik savings/year) varied by alternative from 5 to 19 years, depending on the village and alternative. The up-front construction to install a wood boiler system ranged from $90,000 to $980,000 per site, depending on the village and alternative. A copy of the final report is an Appendix to this grant. In 2011, the Borough managed another AEA Renewable Energy Fund grant to install a wood boiler on a community facility in Kokhanok. In addition, the Borough installed a smaller wood boiler in a community facility in Igiugig. Both projects were completed on-time and are still operating successfully today. Based on community interest and economic feasibility, the Borough has selected three villages in this grant application to implement wood boiler systems: Port Alsworth, Nondalton, and Pedro Bay. In each of these communities, the Borough has commitments from organizations with expertise and history of successful maintenance of facilities to ensure that the wood boiler is used and maintained in the long run. The Borough also has support of land-owners who will provide a supply of long-term wood to the project. Step 3. The Subject of This Grant: Construction RFP to Construct the Project. After a project is proved economically and technically feasible, the next step is to build it. In building a project, the Borough’s approach is to implement the following principals: • Add technical expertise to help the Borough to evaluate proposed designs, and inspect construction. A wood boiler project is quite simple. However, it is still useful to contract with technical experts familiar with wood boilers will help evaluate the RFPs to ensure that the wood boiler designs are practical, appropriate, will meet EPA air emission standards, etc. For that reason, the Borough is including $15,000 to contract with an expert to sit in on the RFP evaluation and to inspect the finished projects to ensure that construction is code-compliant. • Construction RFP. The Borough then issues a construction RFP to solicit bidders. A competitive RFP also allows bidders to innovate to some extent. For example, the RBA’s feasibility analysis selected particular boiler, the E-classic 2400, to evaluate wood boiler feasibility. RBA’s report proves that a project is feasible, but the RFP expects to use a new boiler – the Garn Jr. to decrease cost, and increase efficiency (such as how frequently the boiler needs to be stoked), etc. In addition to encouraging competition on cost, making a construction RFP also simplifies the project and decreases opportunity cost overruns. The funding requested to complete the construction in the three villages is $309,450 as outlined in the table below: Village        Wood  Boiler  Project    Cost    Payback  (Yrs)   Port  Alsworth          Improvement  Center  &  Firehall        $98,150  12.4   Nondalton          City  Hall  &  Fire  Truck  Garage      $98,150  2.4   Pedro  Bay          Smokehouse  Bay  Annex      $98,150  20.9      Total:    $  294,450         Chignik Bay • Chignik Lagoon• Chignik Lake• Egegik • Igiugig• Iliamna • Ivanof Bay• Kokhanok• Levelock • Newhalen • Nondalton• Pedro Bay• Perryville• Pilot Point• Pope Vannoy• Port Alsworth• Port Heiden• Ugashik • Inspection. Once the project is constructed the technical expert outlined in the first step (to evaluate RFPs) will inspect the sites to ensure construction is as designed and is code- compliant. The $15,000 cost outlined in the first step includes these inspections. Step 4. Post-Project Use and Maintenance. Many bush projects fail because the villages fail to adequately use or maintain the project. The villages for the wood boiler project were selected based on economic feasibility, availability of wood, and community interest. In each case, a village organization with a history of follow-through and reliability has agreed to maintain and use the project. In each case, the owner of land that will be the long-term source of wood supports the project. A letter of support from the wood-owners has been included with the grant. There is no grant cost for this step in the project. Project Budget The project budget is below: Technical Expertise: $15,000 Project Construction:     Port Alsworth: $98,150 Nondalton: $98,150 Pedro Bay $98,150 Total Project Cost: $309,450 Borough Contribution @ 20% of total: $61,890 Grant Request: $247,560 Project Benefits The three Lake and Peninsula communities will realize $53,642.81 in annual fuel displacement, which is equivalent to 9,104 gallons of oil. Over the lifetime of the project, this will achieve displacing 182,080 gallons of oil. This is an average of 11.9 years investment payback for the overall project. Local jobs will also be generated to provide wood to the boilers. The grant forms are attached. If you have questions or need further information, please contact me. Thank you for your consideration. Sincerely, Nathan Hill Nathan Hill Borough Manager Chignik Bay • Chignik Lagoon• Chignik Lake• Egegik • Igiugig• Iliamna • Ivanof Bay• Kokhanok• Levelock • Newhalen • Nondalton• Pedro Bay• Perryville• Pilot Point• Pope Vannoy• Port Alsworth• Port Heiden• Ugashik