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HomeMy WebLinkAbout091116-TenakeeFeasStudy_FullResolution City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT I EXECUTIVE SUMMARY This study provides an analysis of the feasibility of constructing a hydroelectric project on Indian River to provide electricity for Tenakee Springs, Alaska. Of the seven project configurations analyzed, the recommended configuration is a 120-kW run-of-river hydroelectric project installed between the top of barrier falls #4 and the bottom of barrier falls #2 on Indian River. Technical and economic parameters for the recommended project are tabulated below: The recommended project will meet 100 percent of the cityʹs existing electrical demand about 85 to 90 percent of the time in an average year. During periods of low water flow in the mid- summer and winter, the diesels will sometimes need to operate to meet system load. The project offers a significant amount of excess energy that can be used by the community. The recommended project is located on State of Alaska lands, with a portion of the power line located on city lands. FERC licensing is not required for the recommended project. The recommended project can enhance the existing fish ladder at barrier falls #4 by increasing flow into the fish ladder during periods of low flow in Indian River and by improving access and bringing power and communications to the ladder to aid with fish monitoring activities. The projectʹs schedule hinges on the time required to obtain permission to use state land that the project will occupy. If this can be completed in a timely manner and construction funding can be secured, other project permits can be obtained and design completed in time for construction in 2011. Securing leases to state lands could delay construction to 2012 or 2013. TECHNICAL PARAMETERS Static Head 60 feet Design Flow 41.0 cubic feet per second Penstock 1,550ʹ of 30ʺ HDPE Total Dynamic Head 50 feet Turbine Type Ossberger Cross-flow Installed Capacity 120 kW Capacity Factor 87.1% Estimated Annual Energy Generation 839,000 kWh Existing Utility Energy Generation 433,000 kWh Transmission 4,500 feet of Three-phase 7.2kV buried cable Estimated Direct Construction Cost $1,752,000 Estimated Installed Cost $2,590,000 Annual Displaced Diesel Fuel 44,400 gallons Continuing Diesel Consumption for Electrical Generation 4,400 gallons Benefit – Cost Ratio 1.33 City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT II TABLE OF CONTENTS EXECUTIVE SUMMARY.........................................................................................................................................I TABLE OF CONTENTS ..........................................................................................................................................II ACRONYMS AND TERMINOLOGY..................................................................................................................V 1.0 INTRODUCTION.......................................................................................................................................1 1.1 PROJECT AUTHORIZATION AND PURPOSE ................................................................................................1 1.2 PROPOSED ENERGY RESOURCE..................................................................................................................1 1.3 COMMUNITY BACKGROUND .....................................................................................................................3 1.4 SUMMARY OF PREVIOUS STUDIES ..............................................................................................................4 1.4.1 1979 U.S. Army Corps of Engineers Study ..........................................................................................4 1.4.2 1984 U.S. Army Corps of Engineers Study ..........................................................................................4 1.4.3 1993 Polarconsult Feasibility Study......................................................................................................4 1.4.4 2004 Alaska Energy and Engineering, Inc. Project Review..................................................................4 2.0 EXISTING ENERGY SYSTEM .................................................................................................................6 2.1 COMMUNITY ENERGY PROFILE .................................................................................................................6 2.2 ELECTRIC UTILITY ORGANIZATION...........................................................................................................6 2.3 GENERATION SYSTEM ................................................................................................................................7 2.4 ELECTRICAL DISTRIBUTION SYSTEM..........................................................................................................7 2.5 EXISTING AND PROJECTED FUTURE LOAD PROFILE..................................................................................7 2.6 PLANNED UPGRADES.................................................................................................................................9 2.7 ENERGY MARKET .....................................................................................................................................10 3.0 PROPOSED ENERGY RESOURCES.....................................................................................................11 3.1 RESOURCE DESCRIPTION .........................................................................................................................11 3.2 HYDROLOGY ............................................................................................................................................11 3.2.1 Available Hydrology Data...................................................................................................................11 3.2.2 Analysis of Hydrology Data................................................................................................................12 3.2.3 In-Stream Flow Requirements.............................................................................................................16 3.2.4 Maximum Probable Flood....................................................................................................................17 3.2.5 Review of Climate Effects on Hydrology.............................................................................................17 3.3 GEOTECHNICAL .......................................................................................................................................19 3.4 PROJECT LANDS .......................................................................................................................................20 3.4.1 Site Control Requirements...................................................................................................................20 4.0 PROPOSED PROJECT DESIGN............................................................................................................22 4.1 ANALYSIS OF PROJECT ALTERNATIVES ...................................................................................................22 4.2 RECOMMENDED PROJECT ........................................................................................................................23 4.2.1 Recommended Resource Development.................................................................................................23 4.2.2 Recommended Capacity.......................................................................................................................23 4.3 ANNUAL ENERGY PRODUCTION .............................................................................................................26 4.4 CONCEPTUAL SYSTEM DESIGN ................................................................................................................29 4.4.1 Intake...................................................................................................................................................29 4.4.2 Penstock...............................................................................................................................................30 4.4.3 Powerhouse..........................................................................................................................................30 4.4.4 Power Line...........................................................................................................................................31 4.4.5 Site Access...........................................................................................................................................31 4.4.6 Construction Methods.........................................................................................................................31 4.5 CONCEPTUAL INTEGRATION DESIGN......................................................................................................32 City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT III 5.0 ECONOMIC ANALYSIS.........................................................................................................................33 5.1 ESTIMATED PROJECT INSTALLED COST ...................................................................................................33 5.2 ANNUAL PROJECT COSTS ........................................................................................................................33 5.2.1 Operation and Maintenance................................................................................................................34 5.2.2 Repair and Replacement......................................................................................................................34 5.2.3 Property...............................................................................................................................................35 5.2.4 Taxes....................................................................................................................................................35 5.2.5 Insurance.............................................................................................................................................35 5.2.6 Financing.............................................................................................................................................35 5.3 PROJECT REVENUES AND SAVINGS..........................................................................................................37 5.3.1 Fuel Displacement...............................................................................................................................37 5.3.2 Excess Energy......................................................................................................................................37 5.3.3 Environmental Attributes...................................................................................................................38 5.4 INDIRECT AND NON-MONETARY BENEFITS............................................................................................38 5.5 LIFE-CYCLE COST AND BENEFIT–COST RATIO .......................................................................................39 5.6 SENSITIVITY ANALYSIS.............................................................................................................................40 6.0 PERMITS ....................................................................................................................................................41 6.1 FEDERAL PERMITS ....................................................................................................................................41 6.1.1 FERC...................................................................................................................................................41 6.1.2 U.S. Forest Service ..............................................................................................................................42 6.1.3 U.S. Army Corps of Engineers Permits ..............................................................................................42 6.1.4 U.S. Environmental Protection Agency..............................................................................................43 6.1.5 Federal Aviation Administration ........................................................................................................43 6.2 STATE OF ALASKA PERMITS .....................................................................................................................43 6.2.1 Department of Natural Resources Permits..........................................................................................43 6.2.2 Department of Fish and Game Permits...............................................................................................44 6.2.3 Department of Transportation Permits...............................................................................................44 6.2.4 Department of Environmental Conservation Permits.........................................................................44 6.3 LOCAL PERMITS .......................................................................................................................................44 7.0 ENVIRONMENTAL CONSIDERATIONS..........................................................................................45 7.1 THREATENED AND ENDANGERED SPECIES .............................................................................................45 7.2 FISHERIES AND WILDLIFE ........................................................................................................................45 7.3 WATER AND AIR QUALITY ......................................................................................................................46 7.4 WETLAND AND PROTECTED AREAS ........................................................................................................46 7.5 ARCHAEOLOGICAL AND HISTORICAL RESOURCES .................................................................................46 7.6 TELECOMMUNICATIONS AND AVIATION ................................................................................................46 7.7 VISUAL AND AESTHETIC RESOURCES ......................................................................................................47 7.8 MITIGATION MEASURES ..........................................................................................................................47 8.0 CONCLUSIONS AND RECOMMENDATIONS ...............................................................................48 8.1 DEVELOPMENT PLAN & SCHEDULE ........................................................................................................48 APPENDIX A – COST ESTIMATES OF PROJECT ALTERNATIVES............................................................1 City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT IV LIST OF FIGURES Figure 1-1: Project Overview and Location Map..................................................................................2 Figure 1-2: Overview of Project Options ...............................................................................................5 Figure 1-2: Overview of Project Options ...............................................................................................5 Figure 2-1: Recent Electric System Demand..........................................................................................9 Figure 2-2: Past Fuel and Electricity Costs ..........................................................................................10 Figure 3-1: Location of Relevant Hydrology Basins near Indian River...........................................13 Figure 3-2: Actual and Model Daily Discharge for Indian River.....................................................15 Figure 3-3: Error Distribution for Indian River Discharge Model ...................................................16 Figure 3-4: Average Tonalite Creek Discharge During Negative and Positive Phase PDO.........18 Figure 4-1: Recommended Project Layout ..........................................................................................25 Figure 4-2: Annual Energy Demand, Diesel and Hydro Generation, and Hydro Surplus..........26 Figure 4-3: Daily System Demand and Generation by Source for 1982 (Low Water Year)..........28 Figure 4-4: Daily System Demand and Generation by Source for 1970 (Average Water Year)......................................................................................................................................28 Figure 5-1: Electric Utility Rates for Different Project Grant Funding Levels................................36 Figure 8-1: Project Development Schedule..........................................................................................49 LIST OF TABLES Table 2-1: Existing Utility Generation Equipment ...............................................................................7 Table 2-2: Tenakee Springs Population Data ........................................................................................8 Table 2-3: Comparative Median Household Incomes ..........................................................................8 Table 2-4: Past and Recent Electric System Statistics...........................................................................9 Table 3-1: Summary of Hydrology Basins...........................................................................................12 Table 3-2: Basin Hydrology Correlation Results ................................................................................12 Table 3-3: Fitted Equations for Indian River Discharge Model........................................................14 Table 4-1: Technical Summary of Project Alternatives......................................................................23 Table 4-2: TSEUD Actual and Modeled System Electrical Demand Statistics ...............................26 Table 4-3: Annual Energy Demand, Diesel and Hydro Generation, and Hydro Surplus............27 Table 5-1: Estimated Installed Cost for Indian River Hydroelectric Project...................................33 Table 5-2: Annual Project Costs for Indian River Hydroelectric Project.........................................33 Table 5-3: Estimated Annual Project Revenues and Savings............................................................37 Table 5-4: Life Cycle Costs and Benefit-Cost Ratio ............................................................................39 Table 5-5: Sensitivity Analysis of Key Project Economic Parameters..............................................40 Table 6-1: Major Permits Required for the Recommended Hydro Project.....................................41 Table A-1: Estimated Installed Cost of Project Alternatives...............................................................1 Table A-2: Annual Project Costs for Project Alternatives....................................................................2 Table A-3: Estimated Annual Revenues and Savings for Project Alternatives................................3 Table A-4: Life Cycle Costs and Benefit-Cost Ratios for Project Alternatives..................................4 City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT V ACRONYMS AND TERMINOLOGY ADCED Alaska Department of Community and Economic Development ADEC Alaska Department of Environmental Conservation ADFG Alaska Department of Fish and Game ADNR Alaska Department of Natural Resources AEA Alaska Energy Authority AEA / REG Alaska Energy Authority Rural Energy Group AEE Alaska Energy and Engineering, Inc. BLM Bureau of Land Management cfs cubic feet per second coanda effect The tendency of a fluid jet to stay attached to a smoothly convex solid obstruction. A common example is the way a stream of water, as from a faucet, will wrap around a cylindrical object held under the faucet (such as the barrel of a drinking glass). COE U.S. Army Corps of Engineers City City of Tenakee Springs CPCN Certificate of Public Convenience and Necessity Environmental attributes The term environmental attributes is used by the green power industry to describe the desirable aspects of electricity that is generated by environmentally benign and/or renewable sources. Environmental attributes are tracked, marketed, bought and sold separately from the physical energy. Separating the environmental attributes enables customers on a given utility system to elect to buy sustainable or ‘green’ energy even if it is unavailable from their utility. ft foot, feet FY fiscal year HDPE high-density polyethylene City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT VI HDR HDR, Inc. in inch, inches kV kilovolt, or 1,000 volts kVA kilovolt-amp kW kilowatt, or 1,000 watts. One kW is the power consumed by ten 100-watt incandescent light bulbs. kWh kilowatt-hour. The quantity of energy equal to one kilowatt (kW) expended for one hour. LIDAR Light Detection and Ranging mi mile, miles MW megawatt, or 1,000 kilowatts NEC National Electric Code NESC National Electric Safety Code PCE Power Cost Equalization Program PDO pacific decadal oscillation Polarconsult Polarconsult Alaska, Inc. RCA Regulatory Commission of Alaska SDR strength-dimension ratio. TSEUD Tenakee Springs Electric Utility Department USFS U.S. Forest Service USGS U.S. Geological Survey V volt City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 1 1.0 INTRODUCTION 1.1 PROJECT AUTHORIZATION AND PURPOSE In June 2008, the Denali Commission awarded the City of Tenakee Springs (City) funds for a feasibility study and conceptual design of a run-of-river hydroelectric project on Indian River The funds were awarded under the Commissionʹs alternative energy project solicitation dated December 6, 2007. This award is managed by the Alaska Energy Authorityʹs Rural Energy Group (AEA/REG). In May 2009, the City of Tenakee Springs authorized Polarconsult Alaska, Inc. (Polarconsult) to complete a feasibility study and conceptual design for the hydroelectric project. This report is the Phase I deliverable (Feasibility Study) under this authorization, and presents a recommended development alternative for the hydroelectric resource. With the Cityʹs approval, Polarconsult will complete a conceptual design and initiate permit processes for the preferred project alternative based upon the findings and recommendations presented in this report. As described in Section 1.4, hydroelectric development of Indian River has been extensively studied in the past. In particular, a 1993 Polarconsult feasibility study identified the project as economical. Work completed for AEA in 2004 included limited review of the 1993 feasibility study, but an opinion on the project’s feasibility was not given. Because significant time has passed since 1993, renewed evaluation of the feasibility of this project is appropriate. This feasibility study focuses on changes that occurred over the past 16 years which justify a different configuration than recommended in 1993. Project configuration, construction methods, resource reservations and availability, and community load requirements are all reviewed to arrive at a recommended project configuration and render an opinion on project feasibility. Polarconsult engineers Joel Groves, PE and Mike Dahl, PE traveled to Tenakee Springs June 1 through 3, 2009 to collect data about the existing utility system and review the proposed hydroelectric site. All 5 barrier falls on Indian River were inspected, penstock routes and access routes were reviewed, and overland power line routes between the potential powerhouse sites and Tenakee Springs were walked. 1.2 PROPOSED ENERGY RESOURCE The proposed energy resource is a run-of-river hydroelectric development on Indian River. The proposed energy resource is shown in Figure 1-1. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 2 Figure 1-1: Project Overview and Location Map City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 3 Aerial view of Tenakee Springs, looking east-southeast. June 2009. Indian River is located less than a mile beyond the harbor (at the far end of town in this view). 1.3 COMMUNITY BACKGROUND Tenakee Springs is located on the east side of Chichagof Island, on the north shore of Tenakee Inlet. It lies 45 miles southwest of Juneau and 50 miles northeast of Sitka. It lies at approximately 57.78° north latitude and 135.22° west longitude (Section 21, Township 47 south, Range 63 east, Copper River Meridian). The city encompasses 13.8 square miles of land and 5.3 square miles of marine waters. Tenakee Springs has a maritime climate with cool summers and mild winters. Normal summer temperatures range from 45 to 65 degrees and normal winter temperatures range from 25 to 40 degrees. The highest recorded temperature is 84 degrees, and the lowest recorded temperature is 3 degrees. Total precipitation averages 69 inches a year, with 62 inches of snow. Tenakee Springs is a second-class city and is not a federally recognized Native village. Tenakee Springs is located in the Sitka Recording District and the Chatham School District. 1 1 This community profile is compiled from background data in previous energy studies for Tenakee Springs and community data on the Alaska Department of Community and Economic Development (DCCED) website. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 4 1.4 SUMMARY OF PREVIOUS STUDIES Development of hydropower resources for Tenakee Springs has been under consideration for over 30 years. Previous studies have identified Indian River as the best resource for the community. These studies are briefly summarized below. Key features of Indian River and the various project configurations are presented in Figure 1-2. 1.4.1 1979 U.S. Army Corps of Engineers Study Hydropower resources for Tenakee Springs were investigated as part of a regional reconnaissance study completed for the U.S. Army Corps of Engineers (COE) by CH2M Hill in October 1979. The COE reconnaissance study identified the following potential projects: 1. A 700-kW run-of-river project at Indian River, about 1.1 miles east of Tenakee Springs. 2. A 325-kW run-of-river project at Harley Creek, about 4.5 miles east of Tenakee Springs 1.4.2 1984 U.S. Army Corps of Engineers Study In 1984, the COE completed a more detailed feasibility study and environmental assessment of Indian Riverʹs hydropower potential. The COE selected a 265-kW run-of-river project built on the west side of Indian River between the head of barrier falls 5 and the toe of barrier falls 3 as the most cost-effective project. The COE estimated an installed cost for the project of $3.259 million (1984 $), and a benefit-cost ratio of 0.71. Based on these estimates, the COE did not recommend that the project be constructed. 1.4.3 1993 Polarconsult Feasibility Study In 1992, the City of Tenakee Springs retained Polarconsult to review the Indian River resource and determine if cost-effective development of the resource was feasible. Polarconsult devised a 125-kW project built on the east side of Indian River between the head of barrier falls 4 and the toe of barrier falls 2. This configuration reduced costs by avoiding the steeper cliffs along the west side of the river and by avoiding the need to obtain a FERC license for the project. Polarconsult estimated the direct construction cost of this project at $612,171 (1993 $). 1.4.4 2004 Alaska Energy and Engineering, Inc. Project Review In 2004, Alaska Energy and Engineering, Inc. (AEE) retained HDR, Inc. (HDR) to conduct a review of the proposed Indian River project as part of electrical system upgrades completed for Tenakee Springs by the Alaska Energy Authorityʹs Rural Energy Group (AEA/REG). AEE/HDR reviewed the 1993 Polarconsult project configuration, made a number of limited modifications to the proposed design and development plan, and generated an updated estimated direct construction cost of $1,400,000 and an estimated installed cost of $2,229,975 (2004 $). AEE/HDR did not offer an updated opinion of the projectʹs feasibility. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 5 Figure 1-2: Overview of Project Options City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 6 2.0 EXISTING ENERGY SYSTEM 2.1 COMMUNITY ENERGY PROFILE Like most remote Alaska communities, Tenakee Springs has an isolated electrical system that does not have any transmission interconnections to other communities. Tenakee Springs relies 100 percent on diesel generation for electricity. Diesel fuel is imported via barge several times annually. Other local energy usage includes diesel and gasoline fuels for transportation, wood and fuel oil for space and water heating, and some use of propane gas for cooking. Tenakeeʹs energy infrastructure is relatively new. A new bulk fuel facility and diesel power plant were constructed in 2006. The cityʹs electrical distribution system was upgraded at the same time. AEE completed a survey of the city’s total annual petroleum fuel consumption in 2004 for the bulk fuel upgrade Concept Design Report. AEE reported a total annual fuel usage (for electricity generation, transportation, marine sales, heating, etc.) of 141,800 gallons, and estimated future total fuel usage at 144,000 gallons annually.2 Of this total, diesel fuel for power generation is approximately 32,500 gallons annually. 2.2 ELECTRIC UTILITY ORGANIZATION Electrical service in Tenakee Springs is provided by the Tenakee Springs Electric Utility Department (TSEUD), which is owned and managed by the City of Tenakee Springs. The City holds Certificate of Public Convenience and Necessity (CPCN) No. 363, issued in 1986, authorizing it to operate a public utility providing electrical service in and around Tenakee Springs. Because the TSEUD is owned and managed by a political subdivision of the state, the Regulatory Commission of Alaska (RCA) has exempted the TSEUD from regulation as allowed by AS 42.05.711(b). TSEUD participates in the State of Alaska’s Power Cost Equalization (PCE) program, which subsidizes electricity rates for residential and community facilities served by eligible Alaska utilities. 2 Tenakee Springs Energy Infrastructure Upgrades Concept Design Report. AEE, Inc. August 2004. Tenakeeʹs new diesel powerplant. June 2009. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 7 2.3 GENERATION SYSTEM Tenakeeʹs power plant is located on a hillside above the center of the community. The plant has three generators controlled by four sections of switchgear. The switchgear is fully automatic with paralleling capability, and uses a programmable logic controller to match the generator(s) to system load. The plant generates at 480V three phase. The generation assets are generally in good condition - all major assets were installed new in 2006. Installed utility generation equipment in Tenakee Springs is listed in Table 2-1. 3 Table 2-1: Existing Utility Generation Equipment No. Equipment Prime Power (kW) Commissioned Date Designated Use 1 John Deere Engine / Marathon Generator 88 kW 2006 Normal peak 2 John Deere Engine / Marathon Generator 88 kW 2006 Normal peak 3 John Deere Engine / Marathon Generator 64 kW 2006 Nighttime load 2.4 ELECTRICAL DISTRIBUTION SYSTEM The Tenakee Springs distribution system was upgraded in 2006. The system is a 7,200V grounded wye three-phase system without loop feed. The 7,200V system is entirely overhead on wooden poles. 480 V generated at the power plant is run down to the main street in above- ground conduit and stepped up to distribution voltage with a single 112.5 kVA pad-mount transformer. 3 2.5 EXISTING AND PROJECTED FUTURE LOAD PROFILE Community electrical demand is a function of population, electricity cost, and available income. Commercial, industrial, and transient loads such as the harbor can also be major factors in total system demand. Tenakeeʹs population, listed in Table 2-2, has fluctuated over the past century between 86 and 210. In recent decades, the population has varied between 90 and 120. The long-term population trend appears stable. 3 Tenakee Springs Power System Upgrade Record Drawings Sheet E-2, AEE, Inc., 2007. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 8 Table 2-2: Tenakee Springs Population Data Year Population 1909 126 1920 174 1929 210 1939 188 1950 140 1960 109 1970 86 1980 138 1990 94 1992 123 2000 104 2004 105 2008 99 Future 90 - 120 Median household income in Tenakee Springs over the past several years is presented in Table 2-3. Household income in Tenakee Springs has been increasing relative to state and national income over the past several years. As is typical in remote Alaskan communities, median household income does not reflect the fact that many residents supplement their incomes by subsistence-type activities such as gathering food and resources from the local environment. Table 2-3: Comparative Median Household Incomes Population 1990 2000 2006-07 Tenakee Springs Median Household Income as percentage of Alaska Median Household Income 44% 64% 72% Tenakee Springs $18,125 $33,125 $43,636 Alaska $41,193 $51,571 $60,506 United States $30,056 $41,994 $49,901 Data compiled from Alaska Department of Labor and U.S. Census Bureau. Values not adjusted for inflation. Total system electrical demand over the past several years is presented in Figure 2-1 and Table 2-4. System demand has increased 20 to 30 percent since the 1993 feasibility study and in recent years has been in the range of 400,000 to 450,000 kWh generated annually. Total generation has been declining very slightly since FY 2003, which can be attributed to a combination of new, more efficient generation equipment, distribution system upgrades in 2006, and consumer conservation measures due to cost increases since 2002. If electricity is available at a stable price from a hydro plant, it is probable that system demand will increase back to 2003 – 2005 levels. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 9 (records unavailable) 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 1984 1988 1992 1996 2000 2004 2008 2012Annual Energy Demand (kWh)Total kWh Generated Total kWh Sold Figure 2-1: Recent Electric System Demand Note: Data is for PCE program fiscal years (July 1 through June 30). Table 2-4: Past and Recent Electric System Statistics FY 84 FY 92 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 KWh generated 182,703 344,956 436,660 456,500 444,960 439,360 432,480 431,740 387,311 430,200 KWh sold 165,024 311,094 382,049 407,537 394,727 380,375 377,449 365,767 325,532 364,831 Fuel Price $1.25 $1.18 $1.41 $1.54 $1.71 $2.73 $2.06 $3.30 $3.60 $4.30 Fuel Used 27,728 31,042 35,510 36,280 36,239 35,192 34,894 33,125 30,542 32,587 Total Fuel Cost $34,750 $36,625 $50,152 $55,815 $61,920 $96,129 $122,283 $109,150 $110,045 $140,854 Total Non- Fuel Cost $14,654 $57,547 $41,977 $51,553 $56,936 $47,778 $48,983 $62,312 $46,456 $64,300 Total Power Production Cost $49,704 $93,830 $92,129 $107,368 $118,856 $143,907 $171,266 $171,462 $156,501 $205,154 Power Cost per kWh $0.299 $0.303 $0.241 $0.263 $0.301 $0.378 $0.454 $0.469 $0.481 $0.562 System Losses 10.8% 9.8% 12.5% 10.7% 11.3% 13.4% 12.7% 15.3% 16.0% 15.2% Efficiency (kWh/gal) 6.6 11.1 12.3 12.6 12.3 12.5 12.4 13.0 12.7 13.2 FY 1984 and 1992 data is from the 1993 Polarconsult study. FY 2002 – 2009 data is from PCE annual reports and program database, with supplemental information for FY 2006 from TSEUD. 2.6 PLANNED UPGRADES The bulk fuel, electrical generation, and distribution systems have all been recently upgraded. No additional upgrades are planned. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 10 0 10 20 30 40 50 60 70 2002 2003 2004 2005 2006 2007 2008 2009Electricity Cost (cents/kWh)0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 Fuel Cost ($/gallon)Effective Residential Rate w/ PCE Subsidy (cents/kWh) Full Residential Rate (cents/kWh) Fuel Cost ($/gal) 2.7 ENERGY MARKET Energy from a local hydroelectric project would be fed into the TSEUD system to offset the need for diesel power generation. Also, the hydroelectric project would often generate energy in excess of electrical demand, which would be available to offset other energy consumption such as space heating or water heating. Supplying discretionary commercial/industrial loads, such as an ice plant to support local commercial fisheries, is also possible. The cost of electricity for residential and community accounts is reduced by the Power Cost Equalization program. Subject to authorized annual state funding, this program partially subsidizes residential energy usage up to 500 kWh monthly. Households pay the full rate for consumption above 500 kWh monthly. Fuel costs have increased 317% from 2002 to 2009, and unsubsidized residential energy rates have increased 200%. PCE-subsidized residential energy rates have increased 169% from 2002 to 2009. Past electricity costs in Tenakee Springs are presented in Figure 2-2. The primary direct economic values of the hydro project are (1) reduced expenditures on diesel fuel and (2) additional affordable energy available for the community. These amounts can be estimated for a given hydroelectric project and used to determine the value of the hydro. Analysis of these values is presented in Section 5.0. Figure 2-2: Past Fuel and Electricity Costs Note: Data is for PCE program fiscal years (July 1 through June 30). City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 11 3.0 PROPOSED ENERGY RESOURCES 3.1 RESOURCE DESCRIPTION Indian River is located approximately one mile east of Tenakee Springs. Indian River has a series of 5 barrier falls occurring between river miles 0.6 and 1.3 above tidewater. The gross head over these five barriers is 100 feet. The mean annual flow in Indian River through these barriers is about 137 cfs. Extreme minimum flows of down to 8 cfs can occur during late summer dry spells (July – August) and the winter months (December – February). Below barrier 5, Indian River is incised into a canyon about 50 to 100 feet deep. The canyon walls are generally steeper along the west bank (the Tenakee Springs side), and less steep along the east bank, although rock outcroppings are common along both banks through this canyon. Recommended development of Indian River’s hydropower potential is with a run-of-river hydroelectric project built along the east side of the river from the top of barrier 4 to the bottom of barrier 2. 3.2 HYDROLOGY 3.2.1 Available Hydrology Data Discharge on the Indian River was measured by the USGS (gauges #15107910 and #15107920) from 10/1/1975 through 9/30/1982, providing seven years of discharge data. While the seven years of discharge data for Indian River is useful to project performance of a hydroelectric project on Indian River, the confidence of these projections can be increased by expanding this dataset. Synthesizing discharge data for Indian River beyond the seven years of actual data is best achieved by correlating Indian River discharge to that of other basins with longer periods of record. Synthetic data can also be generated using precipitation data. However, correlating discharge from comparable basins typically yields superior results if suitable data exists – as it does for Indian River. The USGS has recorded discharge at numerous streams in the vicinity of Indian River. Polarconsult reviewed USGS gauge data for streams along the northern panhandle for potential correlation candidates in order to extend the period of record for Indian River. Gauges at Kadashan River, Pavlof River, and Tonalite Creek met these criteria. Kadashan River and Tonalite Creek are located directly across Tenakee Inlet from the Indian River basin. The Pavlof River basin is located directly east of and adjacent to the Indian River basin. USGS data and characteristics of these basins are summarized in Table 3-1. The basins are shown in Figure 3-1. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 12 Table 3-1: Summary of Hydrology Basins Location USGS Gauge ID Basin Size (sq mi) Site Elevation (ft) Site Latitude (DMS) Site Longitude (DMS) Record Begin Date Record End Date Daily Records Indian River (falls 5 intake site) - 20.7 140 5747ʹ18ʺ 13511ʹ33ʺ - - - Indian River (falls 4 intake site) - 22.1 110 5747ʹ12ʺ 13511ʹ38ʺ - - - Indian River at falls 15107910 3.02 490 5751ʹ58ʺ 13519ʹ31ʺ 7/18/79 9/30/81 806 Indian River 15107920 12.9 330 5749ʹ50ʺ 13516ʹ00ʺ 10/1/75 9/30/82 2,556 Kadashan River 15107000 37.7 3 5741ʹ43ʺ 13512ʹ59ʺ 9/1/64 9/30/79 5,507 Tonalite Creek 15106980 14.5 50 5740ʹ42ʺ 13513ʹ17ʺ 6/1/68 9/30/88 7,426 Pavlof River 15108000 24.3 20 5750ʹ30ʺ 13502ʹ09ʺ 6/1/57 9/30/81 8,888 Green’s Creek 15101500 22.8 50 5805ʹ18ʺ 13444ʹ49ʺ 10/1/78 9/30/92 5,114 Green’s Creek 15101490 8.62 - 5805ʹ00ʺ 13437ʹ54ʺ 8/18/89 9/30/08 6,894 3.2.2 Analysis of Hydrology Data A correlation analysis was performed on the daily discharge records between Indian River at gauge #15107920 and the three nearby basins (Kadashan River, Tonalite Creek, and Pavlof River) for their common periods of record. All three basins produced good correlation coefficients, which are summarized in Table 3-2. Correlation coefficients were also calculated for the two Indian River data sets and for Green’s Creek, located about 30 miles northeast of Indian River. Table 3-2: Basin Hydrology Correlation Results Correlation Basin (Correlation with Indian River) USGS Gauge ID Correlation Coefficient Begin of Record Overlap End of Record Overlap Count of Correlated Records Indian River at falls 15107910 0.946 7/18/79 9/30/81 805 Kadashan River 15107000 0.834 10/1/75 9/30/79 1,460 Tonalite Creek 15106980 0.846 10/1/75 9/30/82 2,556 Pavlof River 15108000 0.851 10/1/75 9/30/81 2,191 Green’s Creek 15101500 0.785 10/1/78 9/30/82 1,460 Green’s Creek 1 15101490 0.731 8/18/89 9/30/92 1,139 Note 1: Correlation results are between Green’s Creek gauges #15101500 and #15101490. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 13 Figure 3-1: Location of Relevant Hydrology Basins near Indian River City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 14 The correlation coefficient for the two gauges on the Indian River is very high at 0.946 - perfectly correlated basins would have a coefficient of 1.00. For comparison, the two gauges on Green’s Creek are also both located in the same drainage, but have a correlation coefficient of only 0.731. With these correlation results, the seven years of data for Indian River (October 1975 to September 1982) can be extended back to June 1957 via the Pavlof River dataset and forward to September 1988 via the Tonalite Creek dataset for a synthetic record spanning 31 years. Second-order polynomial functions were used to separately fit each of the three nearby basin datasets to the Indian River dataset for the common periods of record. These functions were fitted to provide greatest accuracy in the 0 to 50 cfs range (on Indian River), and reasonable accuracy at higher flows. These fitted equations were then used to generate synthetic Indian River flows from recorded flows in the nearby basins. This approach provides a model with greater accuracy at lower flows, which provides more accurate modeling of energy generation and the impacts of in-stream flow reservations. The resulting synthetic flows were scaled by basin area from the Indian River gauge to the various hydro project intake sites. The fitted equations for the hydrology model are presented in Table 3-3. Because the data sets for the three nearby basins have overlapping periods of record, there are times when synthesized discharge data from multiple basins are available. Different approaches for selecting between these models were evaluated, and averaging all of the model outputs was found to best predict actual discharge in Indian River. The resulting model was compared with the seven years of actual discharge data with Indian River, and had a correlation coefficient of 0.865. Table 3-3: Fitted Equations for Indian River Discharge Model USGS Gauge Dataset Fitted 2nd –Order Polynomial Equation Pavlof River QI = -.000075 QP2 + 0.44 QP + 0.31 Tonalite Creek QI = -.00040 QT2 + 1.00 QT – 5.00 Kadashan River QI = -.00005 QK2 + 0.24 QK + 40.0 QI = Modeled flow in Indian River (at USGS gauge #15107920). QK = Recorded flow in Kadashan River by USGS. QT = Recorded flow in Tonalite Creek by USGS. QP = Recorded flow in Pavlof River by USGS. The resulting daily discharge model data is compared with measured daily flows in Figure 3-2. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 15 Figure 3-2: Actual and Model Daily Discharge for Indian River City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 16 0% 5% 10% 15% 20% 25% 30% 35% -200 -150 -100 -50 0 50 100 150 200 Model Error in cfsPercentage of all RecordsModel Error for Daily Flows Under 50 cfs Model Error for All Daily Flows To evaluate the accuracy of the synthetic discharge data, the error between the synthetic daily discharge and actual daily discharge for the Indian River was reviewed for the October 1975 through September 1982 period, and is plotted on Figure 3-3. Observations from Figure 3-3: ¾ At flows less than 50 cfs, the model was accurate to within +/-10 cfs 75% of the time. ¾ At flows less than 50 cfs, the model is about equally likely to over or under estimate discharge, so over long periods of time, model errors will tend to time-shift hydro (or diesel) energy production rather than over- or under-forecast energy production. ¾ The model has larger errors over the entire range of discharge. Because the recommended project flow combined with fish ladder flows totals only 51 cfs, the accuracy of the model at higher flows is relatively unimportant for economic analysis purposes. Thus, the accuracy of the hydrology model is considered adequate for economic modeling of the hydroelectric project. Figure 3-3: Error Distribution for Indian River Discharge Model 3.2.3 In-Stream Flow Requirements All of the considered project configurations would have the potential to dewater the USFS fish ladder at barrier 4. Excessive dewatering of the fish ladder would impair its functionality, which is not desired. To maintain functionality of the fish ladder, minimum flows need to be maintained in Indian River at the top of the ladder during fish migration seasons. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 17 USFS personnel measured flows at the top of the ladder in August 2004 to determine the minimum flow requirement for the ladder. They visited at a period of low flow – measured flow above the ladder was 9.0 cfs, which has a greater than 98% exceedance level for the Indian River in August. Based on their field measurements, a minimum flow requirement for the ladder of 10 cfs was determined. 4 Review of photographs in the 2004 USFS trip report indicates that at 9 cfs, a significant amount of water was not entering the ladder and still flowing down the natural falls. This suggests that the fish ladder needs less than 10 cfs to function, but it takes 10 cfs of flow in Indian River to deliver sufficient water to the fish ladder inlet with the existing inlet configuration. If the hydro intake improves existing inlet conditions to preferentially direct low flows to the fish ladder, it may be possible to both improve low-flow fish passage and reduce the in-stream flow reservation. This would benefit both fish passage and hydropower generation potential. This possibility warrants investigation in the permitting and design phase of the project. As part of HDRʹs 2004 review of the project, Ken Coffin with USFS was contacted regarding fish requirements on Indian River. Based on this conversation, the critical season for fish migration via the fish ladder is late August through early December. 5 3.2.4 Maximum Probable Flood The 1984 COE study of Indian River included analysis of the maximum probable flood for Indian River. This analysis is considered adequate for feasibility assessment purposes. The maximum probable flood, with a 100-year expected recurrence interval, is 5,670 cfs. 3.2.5 Review of Climate Effects on Hydrology Long term climate trends can affect the amount of discharge in Indian River and therefore the amount of energy that a hydro project can generate. Two climate fluctuation phenomena are of interest for this project: 1. The Pacific Decadal Oscillation (PDO). 6 The PDO has been demonstrated to measurably affect the energy generation potential of Alaska run-of-river hydropower resources. 7 2. Global warming climate change. 4 USFS Trip Report, Martin Becker and Dan Kelliher, USFS Sitka Supervisorʹs Office, August 24, 2004. 5 HDR Final Project Memo on Indian River Hydroelectric Project, August 4, 2004. 6 The PDO is a climate fluctuation phenomenon similar to the ʹEl Nino / La Ninaʹ oscillations in the tropical and southern parts of the Pacific Ocean. The PDO and its effects on Alaska’s climate are discussed at http://jisao.washington.edu/pdo/. 7 Polarconsult has evaluated other Alaska hydropower resources for PDO effects. Annual average energy generation for run-of-river resources in southcentral Alaska has been found to vary by about 5% due to the PDO. Other long-term climate trends have not been evident in Polarconsult’s analyses. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 18 3.2.5.1 Analysis of Effects from PDO The synthesized 31-year discharge record for Indian River is derived from different basin discharge data collected over different time intervals. Because of this, caution must be used in interpreting perceived long-term climate effects from this dataset. Detected artifacts can be attributed to either climate trends or underlying basin-discharge differences. Analysis of energy generation calculated using the synthetic Indian River discharge dataset reveals that annual energy generation is about 5.5% higher on average during the positive- phase PDO than it is during the negative-phase PDO. This 5.5% fluctuation is not a large enough effect to significant impact the feasibility of the hydro project. The 20-year Tonalite Creek hydrology dataset spans the 1976-77 PDO shift, and is therefore the best single discharge record to evaluate PDO effects on basin discharges near Tenakee Springs. Review of this dataset shows that winter discharge is significantly higher during the positive- phase PDO, suggesting that the 5.5% annual energy variation observed from analysis of the synthetic Indian River hydrology may be due to the PDO. Figure 3-4: Average Tonalite Creek Discharge During Negative and Positive Phase PDO 0 50 100 150 200 250 300 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month15-day Moving Average of Average Daily Discharge in Tonalite Creek(cfs)Average daily discharge for 1968-1976 (Negative Phase PDO) Average daily discharge for 1977-1988 (Positive Phase PDO) City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 19 3.2.5.2 Analysis of Affects from Global Warming Analysis of energy generation calculated using the synthetic Indian River discharge dataset reveals a very slight increase in annual energy generation over the 31-year period. The effect, if real and not an artifact of the synthesized data, is equal to about a 0.07% annual increase which is insignificant in terms of project feasibility. 3.3 GEOTECHNICAL The project area is recently glaciated, and is characterized by thin organic soils over a mantle of inorganic granular glacial deposits of varying depths. Bedrock is exposed in many areas, and is likely shallow over much of the project area. Exposed bedrock is evident at the potential intake sites at barriers 4 and 5. Occasional bedrock outcrops are visible along the penstock route along the east bank of the river. According to USFS data, these rock outcrops are kennel creek limestones of Devonian and Silurian age. 8 Depressions or level areas in the terrain, in particular along the power line routes, are generally unforested wetlands with a significant layer of organic soil. Other level areas, such as on the east side of Indian River between the logging road and canyon rim, are mature old-growth conifer forest with a relatively dry and open understory. Exposed bedrock at the recommended intake site at barrier 4 will facilitate construction of an intake structure. The powerhouse site, located at the toe of the canyon sideslopes, may be complicated by the presence of unconsolidated deposits. Bedrock should be shallow at these areas and finding a good powerhouse site founded on rock is likely. The canyon walls on the west side of Indian River are very steep and in some areas consist of unvegetated active slide zones. Routing a penstock on this side of the canyon would require major civil works that would be prohibitively expensive to both construct and maintain. 8 Figure 1-2 and accompanying text, Indian River Watershed Analysis, Sitka Ranger District, USFS, 1996. View of rock outcrop looking downstream from proposed intake location at Falls 4. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 20 The canyon walls on the east side of Indian River are less steep and are generally vegetated. Construction of a penstock down this side is feasible, although this penstock corridor still presents the most significant geotechnical challenges for the project. Some blasting of rock outcrops will likely be necessary. In other areas, construction must either consist of a relatively high impact bench, which has the potential to destabilize the side slopes, or a more minimalist structure, such as a timber structure supporting a penstock, which can be keyed into bedrock and keep most of the vegetation in the canyon intact. Careful design and construction of the penstock will be necessary to control costs and prevent undesirable mass wasting or soil slides. 3.4 PROJECT LANDS Land ownership in the project vicinity is indicated on Figure 1-2. With the exception of a city- owned campground site near the mouth of Indian River, the lower reach of Indian River from its mouth to the Tongass National Forest boundary is located on state land. The USFS holds a lease for the fish ladder at barrier 4. There is also a public-access easement from the logging road to the fish ladder site (ADL 106204). The Tongass National Forest boundary runs east- west between barrier 4 and barrier 5. Land north of this line are part of the Tongass National Forest. For the recommended project, with an intake above barrier 4 and powerhouse below barrier 2, the project works and access routes will be located on state land. Projects with an intake at barrier 5 would be located partially on federal (U.S. Forest Service) land. Power line routes from the hydro powerhouse to Tenakee Springs would cross state land near Indian River and near Tenakee Springs. In between, they would be located on city land. There are existing city land or platted streets that provide access for the power line to connect from the uplands behind town to the existing distribution system. 3.4.1 Site Control Requirements Any hydroelectric project will require clear title to the land it occupies. This includes the land associated with the intake/diversion structure footprint, penstock alignment, powerhouse and tailrace footprint, transmission line alignment, and access trails or roads. Title to this land can take a variety of forms. Some typical methods are listed below: ¾ Land transfer or purchase. The City approached USFS in 2002 regarding a potential land swap for a hydro project utilizing barrier 5, and USFS was not interested. The land along Indian River downstream of the current Tongass boundary was included in the State’s conveyance to the City. However, the State retained title to this land for a variety of purposes as set forth in the 1981 settlement agreement between the City and the State. This settlement agreement anticipated a future hydroelectric project along Indian River, and indicated that the State’s normal right-of-way procedures be used to secure title to City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 21 land necessary for the project. The City could approach the State regarding a land swap for the project, or work with ADNR’s procedures to lease the project lands. 9 ¾ Easements. Property rights for the projectʹs linear features, such as access routes, power lines, and penstocks, can be secured by easements. For this project, access routes could occupy public-access easements (as already exist to the fish ladder at barrier 4), and the power line and penstock could occupy utility easements. ¾ Leases. If land purchase or transfer is not possible for the powerhouse and intake sites, these can be leased on a long term basis from the State of Alaska. ADNR has a non- competitive charitable-use lease process that TSEUD would likely use. 9 ADNR land leases have a maximum term of 55 years. Based on similar recent leases ADNR has completed, a lease term of 30 to 50 years is expected for this project. 9 ADNRʹs land disposal (lease or sale) processes for public and charitable uses are described in AS 38.05.810. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 22 4.0 PROPOSED PROJECT DESIGN 4.1 ANALYSIS OF PROJECT ALTERNATIVES Five general project configurations along Indian River were considered: ¾ Top of barrier 4 to bottom of barrier 2 ¾ Top of barrier 4 to bottom of barrier 1 ¾ Top of barrier 5 to bottom of barrier 3 ¾ Top of barrier 5 to bottom of barrier 2 ¾ Top of barrier 5 to bottom of barrier 1 Projects with an intake at barrier 5 would be located partially on USFS land, and would therefore require either a FERC license or a FERC license exemption. Projects with a powerhouse located below barrier 2 would dewater higher-grade habitat located between barrier 2 and barrier 1, and could therefore be subject to higher in-stream flow reservations. Technical aspects of these four configurations are summarized in Table 4-1. View of barrier 5 looking upstream (left) View of barrier 4 and USFS fish ladder looking upstream (right) City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 23 Table 4-1: Technical Summary of Project Alternatives Parameter Barrier 4 to 2 Barrier 4 to 1 Barrier 5 to 3 Barrier 5 to 2 Barrier 5 to 1 Gross Head (ft) 60 80 65 90 110 Design Flow (cfs) 41.0 31.0 38.0 27.0 20.5 Penstock 1,550ʹ of 30ʺ HDPE 2,500ʹ of 28ʺ HDPE 2,750’ of 32ʺ HDPE 3,350ʹ of 28ʺ HDPE 4,400ʹ of 28ʺ HDPE Net Head (ft) 50 66 53 75 98 Turbine Type Ossberger Cross-flow Ossberger Cross-flow Ossberger Cross-flow Ossberger Cross-flow Ossberger Cross-flow Capacity (kW) 120 120 120 120 120 Capacity Factor (%) 1 87.1% 90.3% 86.9% 90.1% 91.1% FERC Licensing or Exemption Required No No Yes Yes Yes Higher In-Stream Flow requirement No Possible 2 No No Possible 2 1. Capacity factor is the amount of energy the project is expected to produce divided by the theoretical energy that could be produced if adequate water was available year-round. Calculations are based on the average model water year for Indian River with a 10 cfs year-round in-stream flow reservation for fish passage. 2. Maintaining fish habitat between barrier 2 and barrier 1 may require more than the 10 cfs minimum in-stream flows necessary for other project configurations. 4.2 RECOMMENDED PROJECT 4.2.1 Recommended Resource Development Of the five resource configurations considered, the barrier 4 to barrier 2 project is recommended. All five projects have substantially similar energy generation potential, especially when measured against TSEUD’s existing electrical demand. Most of the difference in generation potential is in how much excess energy the projects would produce. All five project configurations offer more total energy than TSEUD’s total current annual generation. Since the energy potential is about the same, the recommended project was selected based largely on cost. The three projects with an intake at barrier 5 would require a FERC license exemption, increasing pre-construction costs. The other projects each have significantly longer penstocks, which would increase construction costs relative to the recommended option. 4.2.2 Recommended Capacity The best sized project to build at Indian River depends on the project cost and ability of the community to use the energy. For the relatively small projects considered at Indian River, cost does not vary much with installed capacity – the costs are similar if 60, 120 or 180 kW is installed. This is due to many of the project features being largely independent of capacity, such as: City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 24 ¾ Access corridors ¾ Power and communications lines ¾ Permitting and design ¾ Intake structure ¾ Controls Other cost items do vary with the size of the project, but they do not change dollar for dollar. For example, if the capacity is halved from 120 kW to 60 kW, the turbine cost does not drop in half, nor can the power house be half the size. Such cost items include: ¾ Penstock ¾ Turbine / generator / switchgear ¾ Powerhouse Construction of 60 kW and 180 kW projects at the recommended site were considered. The 60 kW option would only achieve a 10 to 20 percent installed cost savings relative to the recommended 120 kW project. This project would be unable to supply enough power to meet TSEUD’s existing peaks, so diesels would have to run significantly more often, reducing the fuel savings. Also, this project would generate comparatively little excess energy for Tenakee – about 72,000 kWh annually, compared with 447,000 kWh of excess energy from the recommended 120 kW project. A 180 kW project is estimated to be only 10 to 20 percent more costly than the recommended 120 kW project. Since crossflow turbines require at least 25 percent of their design flow to operate, this project actually meets slightly less of TSEUD’s existing energy demand because the larger turbine is shut down more often during low flow periods. Thus, the value of the 180 kW project lies in the excess energy it offers to the community. If the community is unable to use all of this energy, the additional cost of the 180 kW project is not justified. If the utilization rate of excess energy drops from 90 percent for a 120 kW project to 80 percent for a 180 kW project, the larger project has a lower benefit – cost ratio (see section 5). Because it may be difficult for Tenakee Springs to absorb all of the energy from a 180 kW project, the 120 kW project is recommended. The project layout is shown in Figure 4-1. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 25 Figure 4-1: Recommended Project Layout City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 26 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 195819601962196419661968197019721974197619781980198219841986YearAnnual Energy Demand and Supply (kWh per year)Energy Supplied by Hydro Excess Energy available from Hydro Energy Supplied by Diesels Current Utility Demand 4.3 ANNUAL ENERGY PRODUCTION An analysis of the recommended project was performed using the 31 years of synthetic discharge data, a continuous year-round 10 cfs bypass for fish passage, and an hourly load model for TSEUD. The load model was developed from TSEUD’s monthly peak demand data, monthly energy usage data, and annual energy usage data. Hourly demand was synthesized using a program developed by the National Renewable Energy Laboratory (NREL) based upon data for Alaska villages. 10 Load model and actual TSEUD system statistics are compared in Table 4-2. Simulated annual energy production is summarized in Figure 4-2 and Table 4-3. Table 4-2: TSEUD Actual and Modeled System Electrical Demand Statistics Parameter Actual TSEUD Data Load Model Peak Load (kW) 120 1 120 Average Monthly Load (kW) 50 50 Total Annual Energy Demand (kWh) 440,000 438,500 TSEUD data is complied from utility records and PCE reports from 2002 – 2009. Note 1: several peaks in the 120 – 180 kW range occurred in 2006. These are inconsistent with the record from 2002 – 2009, and are attributed to the system upgrades that occurred that year. Figure 4-2: Annual Energy Demand, Diesel and Hydro Generation, and Hydro Surplus 10 The Alaska Village Electric Load Calculator, NREL/TP-500-36824, NREL, Golden Colorado, Sept. 2004. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 27 Table 4-3: Annual Energy Demand, Diesel and Hydro Generation, and Hydro Surplus Annual Energy Minimum Hydro Years (’66, ’69, ‘82) Average Maximum Hydro Years (’60, ‘81, ’84) System Demand (kWh) - 438,800 - Demand Met by Hydro (kWh) (percent of demand by hydro) 323,700 74% 392,100 89% 438,800 100% Demand Met by Diesels (kWh) (percent of demand by diesels) 115,100 26% 46,700 11% 0 0% Excess Hydro Energy Available (kWh) (excess hydro as percent of total demand) 347,200 79% 472,000 108% 545,000 124% On average, diesel generation would still be necessary to supply about 11% of TSEUDʹs annual energy demand. Diesel generation would typically be necessary in the late summer (July and August) and late winter / early spring (January to March) when flows are lowest. Figures 4-3 and 4-4 show daily demand and generation for 1982, a low water year, and 1970, an average water year. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 28 Figure 4-3: Daily System Demand and Generation by Source for 1982 (Low Water Year) Figure 4-4: Daily System Demand and Generation by Source for 1970 (Average Water Year) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 1982Daily Energy Demand and Supply (kWh/day)Excess Energy available from Hydro Energy Supplied by Diesel Energy Supplied by Hydro Total System Demand Energy Supplied by Hydro Excess Energy available from Hydro Energy Supplied by Diesels Current Utility Demand 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 1970Daily Energy Demand and Supply (kWh/day)Excess Energy available from Hydro Energy Supplied by Diesel Energy Supplied by Hydro Total System Demand Energy Supplied by Hydro Excess Energy available from Hydro Energy Supplied by Diesels Current Utility Demand City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 29 4.4 CONCEPTUAL SYSTEM DESIGN 4.4.1 Intake The intake would be located at the top of barrier 4, adjacent to the existing head wall for the fish ladder. The intake structure would consist of a concrete or grouted steel frame set perpendicular to the flow of the water at the head of the falls. This frame would measure approximately 30 feet long by 3 feet wide, and it would be designed so the top dropped at about a 45-degree angle in the direction of flow. A series of metal screens would be set into the top of this frame. These screens would use the coanda effect to pull water from Indian River as it passed over the frame and screens. The slot opening in the screens would be approximately 0.05 to 0.10 inch. This slot size would reject fish and most debris in the water. The frame would include gates to allow the area beneath the screens to be flushed out when necessary. These gates could be automated or manual. The orientation of the screens downstream and below the frame would help to protect them from damage from water-borne debris. The frame would be designed so the screens could be readily removed and replaced in manageable sections. The hydro intake structure could include a number of features to aid in maintenance of both the intake and the adjacent fish ladder: ¾ Posts or piers to allow placement of a removable gangway to access the fish ladder. ¾ Sill height set to direct low flows into the fish ladder. Possibly slots to allow for installation of stop logs to direct low flows. ¾ Power and low bandwidth communications to aid in monitoring performance of the fish ladder. Recommended intake location at the top of barrier 4, looking downstream. The headwall of the existing USFS fish ladder is visible at the far right. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 30 4.4.2 Penstock The penstock would be a 30-inch pipe surface mounted along the east bank of Indian River. Where possible, a narrow bench would be dug into the hillside and the penstock secured to on- grade timbers. In steeper or unstable areas, timber supports would be installed at 10- to 15-foot intervals and secured to bedrock via rock bolts. The penstock would be able to self-span across such supports. If longer spans are necessary, a timber frame and intermediate cradles would be used to support the penstock. The penstock design would need to accommodate thermal expansion of the pipe. Power and communications cables from the powerhouse to the intake would be installed adjacent to the penstock in conduit. Variations of this design approach, such as complete use of benching or timber supports, are possible. Some blasting would likely be necessary immediately below the intake site to form a bench for the penstock. Additional blasting may be necessary in other areas along the route. The penstock would likely be constructed of steel or high-density polyethylene (HDPE) pipe. Benefits of using steel would include the ability of the pipe to self support for much longer spans, and easier repair of the penstock in the event of major damage (such as a direct hit from a tree fall). Downsides of steel relative to HDPE include greater likelihood of damage from tree falls, increased construction difficultly, and decreased useful life. The material selection for the penstock will be determined in the design phase. 4.4.3 Powerhouse The powerhouse would be approximately 24 feet by 20 feet, and would house the turbine, generator, controls, and switchgear. A 150-kVA transformer would be located adjacent to the powerhouse. The powerhouse foundation would be concrete or steel. The turbine would be an Ossberger crossflow turbine. These turbines have fairly flat efficiency curves down to about 50% of their design flow. As available flow decreases from 50% to 25%, turbine efficiency decreases about 10%. Below approximately 25% of the design flow, these turbines cannot function. The turbine would be equipped with a draft tube to increase output. The draft tube is fitted below the turbine, and uses the head between the turbine and the tail water surface to pull a slight suction on the turbine, increasing its power generation. The turbine would be coupled to a generator via a belt-drive speed increaser. These are preferred over gear boxes because they have similar power transfer efficiency, good life on the belts, and are much simpler to maintain and replace. The generator would be a three-phase synchronous generator with a speed of 1200 or 1800 rpm. Estimated full-flow water-to-wire efficiency at the generator leads would be about 70%. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 31 4.4.4 Power Line The power line connecting the powerhouse to the TSEUD distribution system will be a three- phase 7.2 kV line. It will be overhead leaving the power house to cross Indian River. On the other side of the river, the power line will be installed in conduit and buried to protect it from falling trees and limbs. An overhead line, either on poles or on tree cable, was considered. While a buried power line will have a higher initial cost, the buried line will be more reliable, because it will be less prone to damage from falling trees or limbs in ice and wind storms. The cost of outages and line maintenance over the life of the project is about the same as the additional cost of the buried line. The buried line is also used because it is expected to have greater reliability and superior aesthetics. 4.4.5 Site Access Access trails for small vehicles will be built from the logging road to the powerhouse and intake sites and, where possible, along the penstock route. In the design phase, the need for these access trails will be scrutinized to determine if less-costly construction is possible with decreased use of trails and increased use of other methods such as helicopters. 4.4.6 Construction Methods The use of force account labor methods is assumed to maintain better control over labor productivity and cost. Labor housing is assumed to be provided by a temporary camp along the logging road. Housing in Tenakee may be logistically simpler and/or less costly. All construction materials would be offloaded from barges at the log dump site. Materials would be staged at the construction sites either by land vehicles or by helicopter. Some items, View looking southeast of forested terrain typical of the proposed power line routes between hydro powerhouse and Tenakee Springs. Tenakee Springs is located to the right of this view. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 32 such as the powerhouse structure, could possibly be prefabricated and delivered to the site by helicopter. Penstock pipe would be shipped in 40-foot segments. If HDPE pipe is used, a fusion machine would need to be rented and shipped to the site to fuse the pipe into three approximately 500- foot long segments. These segments would then be carefully dragged and/or winched into their final locations in the canyon. Each segment would weigh about 20,000 pounds. Properly protected, this can be dragged by a D-4 or similar small tractor. 4.5 CONCEPTUAL INTEGRATION DESIGN The hydroelectric generator will be a 480-volt synchronous machine and transformer connected to the TSEUD 7.2 kV distribution system via a dedicated power line. A manual disconnect and fuse will be located in town at the point of interconnection. A separate dedicated controls wire will be installed between the hydro powerhouse and the diesel powerhouse to coordinate operations between the various generator sets. Because this is a high-penetration renewable energy resource, the town’s diesels can be turned off for a significant amount of the time. This will help to extend the life of the diesel engines, reduce usage of consumables, and conserve fuel. The hydro project switchgear will be integrated with the diesel plant switchgear to optimize and automate operations. When the hydro project’s energy output is close to or less than the system’s load, the switchgear will start diesel genset(s) as necessary to parallel with or replace the hydro depending on water availability and system load. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 33 5.0 ECONOMIC ANALYSIS 5.1 ESTIMATED PROJECT INSTALLED COST The estimated installed cost for the recommended Indian River hydro project is $2,590,000. This is presented in Table 5-1. A more detailed estimate is presented in Appendix B. Table 5-1: Estimated Installed Cost for Indian River Hydroelectric Project Item Estimate Pre-Construction Activities $208,000 Construction (labor, equipment, materials) Power Line $342,000 Powerhouse / Generation Equipment $396,000 Project Access $145,000 Penstock Sitework / Access $431,000 Penstock Construction $106,000 Intake Structure $52,000 Construction Equipment $142,000 Shipping $137,000 Direct Construction Cost $1,752,000 Project Administration / Management $102,000 Construction Engineering / Inspections / Commissioning $102,000 Contingency (20%) $350,000 Financing (3%) $75,000 Installed Cost $2,590,000 5.2 ANNUAL PROJECT COSTS Annual project costs are summarized in Table 5-2 and discussed in the following sections. Table 5-2: Annual Project Costs for Indian River Hydroelectric Project Cost Item Annualized Cost Hydroelectric Project Hydro Operations & Maintenance $15,200 Diesel Operations and Maintenance -$7,700 Hydro Repair & Replacement $10,800 State Lease Royalties $3,900 Annual Project Operations Costs $22,200 Debt Service (for 100% financed project) $132,200 Total Annual Project Costs $154,400 City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 34 5.2.1 Operation and Maintenance Total non-fuel O&M costs for TSEUD have averaged about $51,000 annually over the past several years.11 This annual expense includes activities such as meter reading, customer service, managing customer accounts, etc. These costs will not change if the means of energy generation changes from diesel to hydroelectric or a combination of both. This annual expense also includes the costs of lube oils, filters, and other consumables for the diesel generators, maintenance labor, and similar costs that are directly tied to the running time or energy generation of the diesel power plant. Some of these costs will be avoided with a hydroelectric project. Because the diesels would be run less often and would be run at a lighter loading with the hydroelectric project in service, they would use fewer consumables and would require less- frequent overhauls. These are assumed to be worth 15 percent of total annual non-fuel expenses, or $8,000 annually. The hydroelectric project will have operation and maintenance costs. Based on experience with similar projects, annual O&M costs are estimated to be $15,000 annually. This includes additional labor costs for monitoring and maintaining the hydro as well as direct expenses for parts and consumables. 5.2.2 Repair and Replacement Low frequency natural events such as wind storms and floods may periodically damage portions of the hydroelectric project. Damage might occur to the intake (flood debris damaging the screens), power line (tree roots ripping up conduit), penstock (flood induced erosion, falling trees and limbs), and powerhouse (wind storms or falling trees and limbs). The estimated annual cost to repair such damage is listed in Table 5-2. Most of the hydroelectric project systems and components have a very long useful life. The intake, penstock, powerhouse, switchgear, turbine/generator, and power line all have useful lives of at least 30 years. Some portions of the project will require periodic repair or replacement. Portions of the penstock trail that are constructed with timbers may start to require replacement at 15 years. Similarly, the intake screens are assumed to have a 15-year useful life. Some minor electric components, such as the hydraulic pumps, control sensors, and similar devices, are assumed to have a useful life of five years. 11 See Table 2-4. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 35 5.2.3 Property The recommended hydroelectric project is located on state land. On recent renewable energy leases, the Alaska Department of Natural Resources (ADNR) has required annual lease payments of either $1,000 per acre or 2.5% of gross revenue to the leaseholder. These lease fees have been levied against publicly owned utilities such as Kodiak Electric Association, Inc. (organized as a rural electric cooperative) so it is probable that they would be levied against TSEUD. 12 Because of the modest size of a lease for the powerhouse and intake sites (about an acre combined), it is assumed that ADNR would levy the 2.5% gross revenue royalty against the TSEUD. This is consistent with ADNRʹs management directive to encourage development of state lands for maximum benefit of the stateʹs citizens. This royalty payment is estimated to be approximately $4,000 per year. 5.2.4 Taxes Because TSEUD is a department of a local government, it will not need to pay any taxes. 5.2.5 Insurance It is assumed that the City of Tenakeeʹs and TSEUDʹs existing insurance coverages would cover the hydroelectric project. No annual cost is allocated for insurance. 5.2.6 Financing The costs of financing will depend on the type of financing used for the project. Financing options vary from government grants or loans to commercial financing options such as bonding. Commercial finance for the project is assumed to consist of a 30-year bond at a nominal interest rate of 6%. Adjusted for inflation (assumed at 3% average over 30 years), this is a real interest rate of approximately 3%. In addition, the cost of preparing and issuing the bond adds about 3% to the cost of the project (for items such as loan guarantee fees, origination fees, etc). This cost is included in considering the cost of financing options for the project. With these assumptions, the annual costs of debt servicing for a fully-bonded project is $132,140. There are costs associated with government grants, but they are generally modest and vary with the specific type of grant and granting agency used. 12 See ADNRʹs preliminary decision for the lease of state land to Kodiak Electric Association, Inc. for the Pillar Mountain Wind Farm, ADL 229859, issued February 2009. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 36 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 $0.40 $0.45 $0.50 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Capital Cost Provided by GrantsUtility Rate ($ per kWh)Utility Rate Requirement with Hydro Project at Various Grant Funding Levels Existing Utility Rate Requirement (2004 - 2008 average) Figure 5-1 presents the utility rates ($/kWh) needed to finance the project at various grant levels. Lowest rates occur with 100 percent government grants (electric rates need only cover annual operating costs), and highest rates occur with 100 percent commercial financing (electric rates need to cover annual operating costs and debt service). Figure 5-1 reflects the full utility costs, and has not been adjusted for PCE subsidies. Figure 5-1: Electric Utility Rates for Different Project Grant Funding Levels City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 37 5.3 PROJECT REVENUES AND SAVINGS Table 5-3 presents annual project revenues and savings achieved with the recommended hydro project. These items are discussed in the following sections. Table 5-3: Estimated Annual Project Revenues and Savings Revenue Item Estimated Annual Value Displaced Power Plant Fuel Costs Diesel kWh Displaced by Hydro Project 392,200 kWh Amount of Fuel Displaced by Hydro Project 31,400 gallons Fuel Costs Displaced by Hydro Project (at $3.50 per gallon) $109,800 Fuel Displaced by Excess Energy Gross Excess Energy Available from Hydro Project 446,800 kWh Net Excess Hydro Energy Dispatched and Metered 1 347,000 kWh Amount of Fuel Displaced by Excess Hydro Energy 2 13,000 gallons Fuel Costs Displaced by Excess Hydro Energy (at $3.50 per gallon) $45,600 Revenue from Sale of Environmental Attributes on Voluntary Market Annual kWh of energy from project 839,000 kWh Percentage of available environmental attributes sold 100% Sales Price for environmental attributes $0.01 per kWh Revenue from Sale of Environmental Attributes on Voluntary Market $8,400 TOTAL ANNUAL REVENUES AND SAVINGS $163,800 Note 1: Assumes 90% utilization of excess energy, and 13.6% losses over TSEUD system. Note 2: Assumes excess energy displaces oil used by space and water heating systems with an average efficiency of 65%. 5.3.1 Fuel Displacement Based on modeling results, the recommended hydro project will displace an average of 392,125 kWh annually that are currently generated with diesel fuel. Using TSEUD’s existing generation efficiency of 12.5 kWh/gallon, this equals 31,370 gallons of displaced diesel annually. At a price of $3.50 per gallon, this represents a direct annual savings of $109,800 to TSEUD. 5.3.2 Excess Energy In addition to the diesel electric generation that the hydro displaces, it also generates an annual average of 447,000 kWh of excess energy that is available for the community to use. For economic analysis purposes, 10% of this gross excess energy is assumed to be consumed by the hydro load governor system, and 90% is assumed to be made available to discretionary system loads such as space heating and water heating uses. Of this 90%, 13.6% is assumed to be consumed by losses on TSEUD’s distribution system. The balance (77.8% of gross excess energy generation) is metered to TSEUD’s accounts. All of this excess energy is assumed to completely displace heating fuel being consumed in boilers, furnaces, and hot water makers with an City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 38 average efficiency of 65%. With these assumptions, this excess energy displaces an average of 13,035 gallons of heating fuel annually. At $3.50 per gallon, this is worth $45,623 annually. 5.3.3 Environmental Attributes As a small, low-impact, run-of-river hydroelectric project, this hydro project would have the ability to market its environmental attributes nation-wide. The market for environmental attributes is still developing, and as a result is subject to considerable uncertainty. There is federal and state legislation pending that could influence this market, transforming it from the existing patchwork of state compliance markets and national and regional voluntary markets into a more uniform and regulated national market. A reasonable range for the value of the environmental attributes from this project is $0.005 to 0.020 per kWh on the voluntary market, equal to $4,200 to $16,800 annually. Tenakee Springs has the potential to market its picturesque Alaska setting and the fisheries enhancements on Indian River to command a premium for it environmental attributes. For the economic analysis, they are valued at $0.010 per kWh, which equates to $8,400 of revenue annually. 5.4 INDIRECT AND NON-MONETARY BENEFITS The recommended hydroelectric project offers significant indirect and non-monetary benefits in addition to direct economic benefits. These other benefits include: ¾ Reduced air pollution (NOx, SOx, particulates, and hydrocarbons) due to decreased operation of the diesel power plant. ¾ Reduced noise when the diesel plant is turned off. Because the diesel power plant is somewhat removed from the rest of the community, this is a minor benefit. ¾ Reduced risk of oil spills due to decreased throughput and handling of fuel. ¾ More stable energy prices. With the hydro, TSEUD’s electricity rates will be largely insulated from increasingly volatile world oil prices. ¾ Secondary benefits arising from the availability of plentiful hydropower with a stable price. This will increase the affordability of living and doing business in Tenakee Springs, and will increase the long-term viability of the community. Secondary benefits could include an increase in the population of school-age children, ensuring that school enrollment exceeds district and state thresholds for state funding year-to-year. ¾ Economic multipliers due to the fact that a greater percentage of the utilityʹs revenues will be retained in the local community for labor instead of paying external entities such as fuel suppliers. ¾ Local training and experience with small hydroelectric projects. To the extent that locals choose to be involved in construction, maintenance, and operation of the hydro, they City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 39 will learn a unique set of skills. These skills will become increasingly useful as Alaska in general and southeast in particular continues to develop local hydropower resources. 5.5 LIFE-CYCLE COST AND BENEFIT–COST RATIO Table 5-4 presents life cycle costs and benefit to cost ratio for the recommended project. Table 5-4: Life Cycle Costs and Benefit-Cost Ratio Item Estimate PROJECT COSTS Installed Cost of Project $2,590,000 Annual Operations Costs (50 years) $22,200 Debt Servicing (100% financed project, 30 years) $132,200 Project salvage value at year 50 $0 Total Annual Costs $154,400 PRESENT WORTH OF PROJECT COSTS $3,161,000 PROJECT REVENUES / SAVINGS Avoided Utility Fuel Costs (50 years) $109,800 Avoided Fuel Costs from Use of Excess Energy (50 years) $45,600 Revenue from Environmental Attributes (50 years) $8,400 Total Annual Savings / Revenues $163,800 PRESENT WORTH OF PROJECT REVENUES / SAVINGS $4,215,000 BENEFIT TO COST RATIO 1.33 Notes: A real discount rate of 3% is used for time value of money for all calculations. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 40 5.6 SENSITIVITY ANALYSIS Inputs to the economic analysis were varied to evaluate the effect they have on the projectʹs economic feasibility. Inputs evaluated are summarized in Table 5-5. Results are discussed in the following sections. Table 5-5: Sensitivity Analysis of Key Project Economic Parameters Parameter Base Value Range Considered Range of Resulting Benefit-Cost Ratio Value for Benefit-Cost Ratio of 1.00 Capital Cost $2,590,000 +/- 25% 1.11 to 1.68 $3,650,000 (41% over cost estimate) Annual Operations Costs $22,200/yr +/- 50% 1.22 to 1.47 $63,000/yr (284% over cost estimate) Real Financing Rate 1 3% 0 to 7% 0.90 to 1.86 6% Cost of Avoided Fuel $3.50 per gallon $1.50 to $5.50 0.62 to 2.02 $2.55/gal Percent Utilization of Excess Energy 90% 0% to 100% 0.97 to 1.37 6% Environmental Attributes Sales Price $0.01 per kWh $0.00 to $0.03 1.27 to 1.47 N/A Note 1: The real financing rate is the nominal rate less the rate of inflation. So if the project is financed at 6%, and inflation over the life of the bonds averages 3%, then the real interest rate on the debt is 3%. The project is most sensitive to two parameters: ¾ Avoided cost of fuel. ¾ Financing cost. The project is sensitive to the price of fuel used for diesel generation and space heating. Under the 100 percent debt-financed base scenario for the project, the benefit-cost ratio is 1.00 at a fuel price in Tenakee Springs of $2.55 per gallon. TSEUD paid less than this price as recently as 2004. While the long-term fuel cost is considered unlikely to be below $2.55 per gallon delivered in Tenakee Springs, temporary decreases below this price are possible. A 100 percent debt-financed project is not viable if real interest rates for project financing are greater than 6 percent. Using a long-term inflation forecast of 3 percent, this equates to a 9 percent nominal interest rate. Government loan programs such as the State of Alaskaʹs Power Project Fund offer rates well under 9 percent. Government grants would also help to lower this threshold for the city. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 41 6.0 PERMITS Permits required for the recommended project are summarized in Table 6-1. Permit requirements and agency involvement are discussed in greater detail in the following sections. Table 6-1: Major Permits Required for the Recommended Hydro Project Agency / Entity Permit / Finding / Action Comments Federal Energy Regulatory Commission Finding of Non-Jurisdiction - U.S. Army Corps of Engineers Wetlands Permit, NWP 17 - U.S. EPA Stormwater Pollution Prevention Plan - ADNR Coastal Zone Program Coastal Management Consistency Review Starts after COE process ADNR Property Rights Transfer / Lease / Easement Authorizations - ADNR Water Rights Water Use Permit / Water Rights Requires ‘possessory interest’ in property before issuance. ADFG Fish Habitat Permit Starts after Coastal Review 6.1 FEDERAL PERMITS 6.1.1 FERC A hydropower development generally falls under the jurisdiction of the Federal Energy Regulatory Commission (FERC) if it meets one of three criteria: ¾ Occupies in whole or part federal lands. ¾ Is located on navigable waters. ¾ Is connected to an interstate electrical grid. If a project is under FERC jurisdiction, it must obtain a FERC license or exemption from FERC licensing. Normally, all of the state and federal permits required for a FERC hydroelectric project are obtained through the formal FERC licensing process. This process typically takes three or more years to complete, and requires extensive consultations with resource agencies, site investigations, and analysis. The recommended project would not occupy federal lands or connect to an interstate power grid. Indian River is not believed to meet navigability criteria, therefore this project is non- jurisdictional. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 42 FERC jurisdiction is determined by filing a declaration of intention with FERC. If FERC concurs that the project is non-jurisdictional and this finding is not contested, then FERC licensing is not required for this project. 6.1.1.1 FERC Licensing If FERC determines that the Indian River is navigable, then the City must proceed with the FERC process to develop this project. In this event, it is recommended that the City pursue an exemption from FERC licensing. 6.1.1.2 Exemptions from FERC Licensing FERC regulations provide for eligible projects under 5 MW in capacity to be exempted from the licensing process. The 5 MW exemption allows a project that utilizes a ʹnatural water featureʹ to go through an abbreviated process that results in a permanent exemption from FERC licensing. To use this exemption process: ¾ The project must utilize a ʹnatural water featureʹ. ¾ The project must own all lands and facilities other than federal lands. 6.1.2 U.S. Forest Service No USFS permits are required for the proposed project. However, the USFS has substantial investments in fish-passage structures on Indian River. Project design should be coordinated with the USFS to insure that the functionality and integrity of these structures is preserved or enhanced. The USFS holds a lease with the state of Alaska for their fish ladder constructed at barrier 4 in 1998. The intake for the recommended project would be located adjacent to and possibly integrated with the top of this fish ladder structure. Accordingly, the intake structure for the hydro project will probably lie within the USFS’ fish ladder lease site. 13 6.1.3 U.S. Army Corps of Engineers Permits The project intake and tailrace will be located within wetlands, therefore a wetlands permit from the COE will be required. Other project features such as the power line may also be located partially in wetlands. The project is likely eligible for a Nationwide Permit #17 for small hydroelectric development. 13 ADNR was contacted to obtain an as-built of the fish ladder lease. They do not have as as-built in their records. (September 15, 2009). City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 43 6.1.4 U.S. Environmental Protection Agency A stormwater pollution prevention plan (SWPPP) will be required for project construction. 6.1.5 Federal Aviation Administration The project is not located within five miles of any airport. The project will not have any features likely to present a hazard to aviation. No FAA approvals are necessary. 6.2 STATE OF ALASKA PERMITS 6.2.1 Department of Natural Resources Permits 6.2.1.1 Coastal Zone Consistency Review The recommended project is located within the State’s Coastal Zone. Coastal zone consistency review will be required. This process is initiated by completing a coastal project questionnaire and submitting it to ADNR’s Division of Coastal and Ocean Management (DCOM). 6.2.1.2 Land Authorizations The project would occupy state land. Land easements or leases, or land purchase / transfer, will be necessary to construct the project. 6.2.1.3 Tidelands Permits Not applicable. 6.2.1.4 Material Sale Agreement An existing quarry is located on state land about one mile down the logging road from the intake / powerhouse access points. ADNR Mineral Order (MO) 1045 closed lands within sections 15, 21, 22, and 23 to mining in 2006. MO 1045 included this quarry. It is unknown if the state would reopen this quarry for material for the project. Alternate material sources could be beach run or imported aggregates. Beach run aggregates would need to be washed before used for concrete work to flush out chlorides. Local material sources would require a material sale agreement from ADNR. 6.2.1.5 Water Use Permit / Water Rights The project would need to obtain water rights from the ADNR. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 44 6.2.2 Department of Fish and Game Permits 6.2.2.1 Fish Habitat Permit The project would need to obtain a fish habitat permit from the ADFG. 6.2.3 Department of Transportation Permits Not applicable. 6.2.4 Department of Environmental Conservation Permits 6.2.4.1 DEC Wastewater or Potable Water Permits Not applicable. 6.2.4.2 Solid Waste Disposal Permit It may be desirable to dispose of bulky inert construction wastes from the project in an on-site monofill. This would require an ADEC monofill permit and approval of the land owner, ADNR. 6.2.4.3 Air Quality Permit& Bulk Fuel Permit Not applicable. 6.3 LOCAL PERMITS The project is not located within the limits of a borough. The project is located with the city limits of Tenakee Springs. No local permits or approvals are required. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 45 7.0 ENVIRONMENTAL CONSIDERATIONS 7.1 THREATENED AND ENDANGERED SPECIES The project is not located within any designated critical habitat areas for threatened or endangered species. 7.2 FISHERIES AND WILDLIFE Development of a hydroelectric project at Indian River is not likely to have any significant impact on wildlife in the area. Development of a hydroelectric project at Indian River has the potential to affect fish habitat and fish passage on Indian River. The reach of Indian River that would be dewatered by the project is not good fish habitat. It is, however, an important fish passage to good habitat areas upstream. The USFS has built a substantial fish ladder at barrier 4 and step pools at barrier 5 to make it easier for salmon to reach these upstream spawning and rearing areas. USFS has determined that minimum flows necessary for the fish ladder at barrier 4 is 10 cfs. 14 The project would therefore need to maintain minimum flows at this ladder during critical fish migration periods. The project has the opportunity to improve function and monitoring capabilities at the fish ladder. These opportunities include: ¾ Proper design of the intake structure can increase flow into the fish ladder at extreme low flows, improving fish passage around barrier 4. ¾ The intake structure can incorporate a creek crossing, improving access to the fish ladder for maintenance and monitoring. 14 If the hydro project intake is properly designed, a lesser minimum flow for the fish ladder may be possible. See discussion of this issue at Section 3.2.3). View of the top of the existing USFS fish ladder at barrier 4. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 46 ¾ The project will include communications to the intake site for head level control. Communications bandwidth can be provided at modest additional cost for real-time monitoring of data such as flow or fish counts at the fish ladder. ¾ If the project extends power to the intake site, it can be made available for improved fish monitoring at the fish ladder. 7.3 WATER AND AIR QUALITY By reducing the amount of diesel fuel burned in Tenakee Springs for electricity generation, this project will tend to improve air quality by reducing local NOX, SOX, hydrocarbon, and particulate emissions. If excess energy available from the project is dispatched to space or water heating purposes, additional combustion of heating fuel and/or wood is possible, further reducing local airborne emissions. The project is a run-of-river project and does not store or detain water. As a result, the project does not significantly change the physical or chemical properties of the water. 7.4 WETLAND AND PROTECTED AREAS The project intake and tailrace structures will be located in wetlands (Indian River). In addition, the penstock, project access trails, and power line to Tenakee Springs may cross wetlands and involve some fill of wetlands. These impacts are expected to be minimal and should not significantly affect the natural environment. 7.5 ARCHAEOLOGICAL AND HISTORICAL RESOURCES COE archeologists spent three man-days investigating the project area in the early 1980s investigating the presence of archeological and historical resources. No new significant resources were identified. 15 Two known cemeteries in the general vicinity of the project were identified and determined to not be impacted by the project. 7.6 TELECOMMUNICATIONS AND AVIATION None. 15 Appendix B – Tenakee Springs Cultural Resources Report. Small Hydropower and Related Purposes Letter Report, COE, 1984. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 47 7.7 VISUAL AND AESTHETIC RESOURCES Due to the heavy old-growth forest cover in the project vicinity, the project would not be prominently visible from any vantage point on land, at sea, or from the air. The project would be visible principally on the ground standing on or near the project works. The construction materials and methods proposed are considered to be consistent with and aesthetically complementary to the natural setting of the project. 7.8 MITIGATION MEASURES No mitigation measures are necessary or recommended. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 48 8.0 CONCLUSIONS AND RECOMMENDATIONS Based upon the analyses presented in this report, a hydroelectric project between the top of barrier 4 and the bottom of barrier 2 is technically and economically feasible at Indian River. The recommended hydro project is economically superior to continued diesel generation under all likely scenarios. The project has a benefit-cost ratio of 1.33 under the base economic assumptions. Benefit-cost is most sensitive to fuel costs (BCR of 1.00 at $2.55/gallon) and project financing interest rates (BCR of 1.00 at real 6%, nominal 9%). Government grants or low-interest loans can help to reduce the communityʹs exposure to these factors and move forward with the project. 8.1 DEVELOPMENT PLAN & SCHEDULE The next major steps to advance a hydro project on Indian River are: 1. Prepare and submit permit applications for the project. 2. Complete designs for the project. 3. Obtain all permits required for the project. 4. Secure construction funding. 5. Construction. The longest potential lead times are securing the leases on state land. Depending on their backlog and staffing levels, it takes ADNR up to three years to process a lease application. It is recommended that the preparation and submittal of lease applications occur as soon as possible to start this process. With the exception of the ADNR lease, it is expected that all permits for the project could be issued in time for construction in 2011. The ADNR land lease could delay project construction to 2012 or possibly 2013. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT 49 Figure 8-1: Project Development Schedule 2009 2010 2011 2012 ACTIVITY Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Feasibility Study Prepare and File Permit Applications FERC DOI COE Wetlands Permit ADNR Coastal Zone Consistency Review ADNR Property Rights ADNR Water Rights ADFG Fish Habitat Permit Process / Recieve Permit Authorizations FERC DOI COE Wetlands Permit ADNR Coastal Zone Consistency Review ADNR Property Rights (secure EEA) ADNR Water Rights ADFG Fish Habitat Permit Project Design Conceptual Design 100% Design Construction Plan Arrange Financing Construction Post Construction Activities As-Built Survey Finalize Lease Documents APPENDIX A – COST ESTIMATES OF ALTERNATIVES City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT A-1 APPENDIX A – COST ESTIMATES OF PROJECT ALTERNATIVES Cost estimates were developed for the recommended project and alternative project configurations. Tables A-1 through A-4 present economic data for all of the project configurations considered in this study. Table A-1: Estimated Installed Cost of Project Alternatives Item 4 to 2 180 kW 4 to 2 120 kW 4 to 2 60 kW 4 to 1 120 kW 5 to 3 120 kW 5 to 2 120 kW 5 to 1 120 kW Pre-Construction Activities $208,000 $208,000 $198,000 $223,000 $268,000 $276,000 $288,000 Construction Power Line $350,000 $342,000 $339,000 $461,000 $342,000 $342,000 $378,000 Powerhouse $576,000 $396,000 $259,000 $416,000 $416,000 $384,000 $394,000 Project Access $145,000 $145,000 $145,000 $145,000 $84,000 $128,000 $128,000 Penstock Sitework $485,000 $431,000 $419,000 $785,000 $721,000 $866,000 $675,000 Penstock Construction $138,000 $106,000 $94,000 $183,000 $161,000 $171,000 $211,000 Intake Structure $73,000 $52,000 $38,000 $72,000 $53,000 $50,000 $48,000 Construction Equipment $144,000 $142,000 $83,000 $122,000 $89,000 $89,000 $105,000 Shipping $171,000 $137,000 $111,000 $180,000 $197,000 $214,000 $257,000 Direct Construction Cost $2,082,000 $1,752,000 $1,490,000 $2,364,000 $2,062,000 $2,243,000 $2,195,000 Project Administration $115,000 $102,000 $93,000 $142,000 $134,000 $146,000 $136,000 Construction Engineering $115,000 $102,000 $93,000 $142,000 $134,000 $146,000 $136,000 Contingency (20%) $416,000 $350,000 $298,000 $473,000 $412,000 $449,000 $439,000 Financing (3%) $88,000 $75,000 $65,000 $100,000 $90,000 $98,000 $96,000 Installed Cost $2,936,000 $2,590,000 $2,171,000 $3,344,000 $3,010,000 $3,260,000 $3,194,000 City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT A-2 Table A-2: Annual Project Costs for Project Alternatives Cost Item 4 to 2 180 kW 4 to 2 120 kW 4 to 2 60 kW 4 to 1 120 kW 5 to 3 120 kW 5 to 2 120 kW 5 to 1 120 kW Hydro Operations & Maintenance $15,200 $15,200 $12,700 $17,000 $16,700 $18,100 $20,000 Diesel Operations and Maintenance -$7,400 -$7,700 -$7,800 -$7,900 -$7,700 -$7,900 -$8,000 Hydro Repair & Replacement $11,000 $10,800 $10,600 $12,800 $12,500 $14,100 $16,300 State Lease Royalties $4,300 $3,900 $3,000 $4,000 $3,900 $4,100 $4,200 Annual Project Operations Costs $23,000 $22,200 $18,000 $26,000 $26,000 $28,000 $33,000 Debt Service (for 100% financed project) $149,800 $132,100 $110,800 $170,600 $153,600 $166,300 $162,900 Total Annual Project Costs $172,800 $154,400 $128,800 $196,600 $179,600 $194,300 $195,900 City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT A-3 Table A-3: Estimated Annual Revenues and Savings for Project Alternatives Revenue Item 4 to 2 180 kW 4 to 2 120 kW 4 to 2 60 kW 4 to 1 120 kW 5 to 3 120 kW 5 to 2 120 kW 5 to 1 120 kW SAVINGS FROM DISPLACED POWER PLANT FUEL Diesel kWh Displaced by Hydro Project (kWh) 378,000 392,200 399,000 403,000 395,000 407,000 412,000 Amount of Fuel Displaced by Hydro Project (gallons) 30,000 31,400 32,000 32,000 32,000 33,000 33,000 Fuel Costs Displaced by Hydro Project (at $3.50 per gallon) $106,000 $109,800 $112,000 $113,000 $111,000 $114,000 $115,000 SAVINGS FROM FUEL DISPLACED BY EXCESS HYDRO ENERGY Gross Excess Energy Available from Hydro Project (kWh) 791,000 446,800 72,000 482,000 454,000 494,000 512,000 Net Excess Hydro Energy Dispatched and Metered 1 (kWh) 478,000 3 347,000 56,000 375,000 353,000 384,000 398,000 Amount of Fuel Displaced by Excess Hydro Energy 2 (gal.) 17,900 13,000 2,000 14,000 13,000 14,000 15,000 Fuel Costs Displaced by Excess Hydro Energy (at $3.50 per gallon) $63,000 $45,600 $7,000 $49,000 $46,000 $50,000 $52,000 REVENUE FROM SALE OF ENVIRONMENTAL ATTRIBUTES Annual kWh of energy from project 1,169,000 839,000 471,000 885,000 848,000 900,000 924,000 Revenue from Sale of Environmental Attributes on Voluntary Market $11,700 $8,400 $4,700 $8,900 $8,500 $9,000 $9,200 TOTAL ANNUAL REVENUES AND SAVINGS $180,700 $163,800 $124,000 $171,000 $165,000 $173,000 $177,000 Note 1: Assumes 90% utilization of excess energy, and 13.6% losses over TSEUD system. Note 2: Assumes excess energy displaces oil used by space/water heating systems with an average efficiency of 65%. Note 3: Assumes Tenakee Springs can only absorb 70% of excess energy from larger project vs. 90% for others. City of Tenakee Springs Indian River Hydroelectric Project Feasibility Study Polarconsult Alaska, Inc. NOVEMBER 2009 – FINAL REPORT A-4 Table A-4: Life Cycle Costs and Benefit-Cost Ratios for Project Alternatives Item 4 to 2 180 kW 4 to 2 120 kW 4 to 2 60 kW 4 to 1 120 kW 5 to 3 120 kW 5 to 2 120 kW 5 to 1 120 kW PROJECT COSTS Installed Cost of Project $2,936,000 $2,590,000 $2,171,000 $3,344,000 $3,010,000 $3,260,000 $3,194,000 Annual Operations Costs (50 years) $23,000 $22,200 $18,000 $26,000 $26,000 $28,000 $33,000 Debt Servicing (100% financed project, 30 years) $149,800 $132,100 $110,800 $170,600 $153,600 $166,300 $162,900 Project salvage value at Year 50 $0 $0 $0 $0 $0 $0 $0 Total Annual Costs $172,800 $154,300 $128,800 $196,600 $179,600 $194,300 $195,900 PRESENT WORTH OF PROJECT COSTS $3,527,000 $3,161,000 $2,646,000 $4,013,000 $3,666,000 $3,989,000 $4,031,000 PROJECT REVENUES / SAVINGS Avoided Utility Fuel Costs (50 years) $106,000 $109,800 $112,000 $113,000 $111,000 $114,000 $115,000 Avoided Fuel Costs from Use of Excess Energy (50 years) $62,800 $45,600 $7,000 $49,000 $46,000 $50,000 $52,000 Revenue from Environmental Attributes (50 years) $11,700 $8,400 $4,700 $8,900 $8,500 $9,000 $9,200 Total Annual Savings / Revenues $180,400 $163,800 $124,000 $171,000 $165,000 $173,000 $177,000 PRESENT WORTH OF PROJECT REVENUES / SAVINGS $4,642,000 $4,215,000 $3,184,000 $4,395,000 $4,254,000 $4,459,000 $4,552,000 BENEFIT TO COST RATIO 1.32 1.33 1.20 1.10 1.16 1.12 1.13 Notes: A real discount rate of 3% is used for the time value of money for all calculations.