Loading...
HomeMy WebLinkAboutORPC AEA13-006. REF Round 6Renewable Energy Fund Round 6 Grant Application AEA 13-006 Application Page 1 of 37 7/3/2011 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) ORPC Alaska 2, LLC Type of Entity: Independent Power Producer Fiscal Year End December 31, 2012 Tax ID # 27-3373017 Tax Status: X For-profit or non-profit ( check one) Mailing Address ORPC Alaska 2, LLC 725 Christensen Dr., Suite 6 Anchorage, AK 99501 Physical Address Same Telephone 907-339-7939 Fax 207-772-7708 Email mworthington@orpc.co 1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER Name Genetta McLean Title Grants and Licensing Manager Mailing Address 120 Exchange St., Suite 508 Portland, ME 04101 Telephone 207-221-0961 Fax 207-772-7708 Email gmclean@orpc.co 1.2 APPLICANT MINIMUM REQUIREMENTS 1.2.1 As an Applicant, we are: (put an X in the appropriate box) An electric utility holding a certificate of public convenience and necessity under AS 42.05, or X An independent power producer in accordance with 3 AAC 107.695 (a) (1), or A local government, or A governmental entity (which includes tribal councils and housing authorities); Yes 1.2.2 Attached to this application is formal approval and endorsement for its project by its board of directors, executive management, or other governing authority. If the applicant is a collaborative grouping, a formal approval from each participant’s governing authority is necessary. (Indicate Yes or No in the box ) Yes 1.2.3 As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement. Yes 1.2.4 If awarded the grant, we can comply with all terms and conditions of the attached grant form. (Any exceptions should be clearly noted and submitted with the application.) Yes 1.2.5 We intend to own and operate any project that may be constructed with grant funds for the benefit of the general public. If no please describe the nature of the project and who will be the primary beneficiaries. Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 2 of 37 7/3//2012 SECTION 2 – PROJECT SUMMARY 2.1 Project Title TidGen™ Array Project 2.2 Project Location The TidGen™ Array Project, part of a larger commercial project at East Foreland, near Nikiski, Alaska, is a pilot project to test the effectiveness of Ocean Renewable Power Company’s TidGen™ Power System in Cook Inlet. The energy produced will be delivered to the Railbelt Grid via interconnect to the Homer Electric Association (HEA) distribution system in the early stages of the project, and ultimately via a dedicated transmission line to the Bernice Lake Substation. From there, it can be delivered to any of the Railbelt utilities and associated communities. 2.2.1 Location of Project The project will be located at and near 60.722092° -151.413974° near Nikiski, Alaska. 2.2.2 Community benefiting This Project will be interconnected to the HEA service area at Nikiski, Alaska. The electricity from this Project will benefit the community of Nikiski and all of the rate payers in the HEA service area, including the communities of Homer, Kenai, Kasilof, Seldovia, Soldotna, Ninilchik and Anchor Point. Specific to the local community, the Project’s job creation and enhancement will benefit the communities of Nikiski, Kenai and Soldotna. 2.3 PROJECT TYPE Put X in boxes as appropriate 2.3.1 Renewable Resource Type Wind Biomass or Biofuels Hydro, including run of river Transmission of Renewable Energy Geothermal, including Heat Pumps Small Natural Gas Heat Recovery from existing sources X Hydrokinetic Solar Storage of Renewable Other (Describe) 2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply) Pre-Construction Construction Reconnaissance Design and Permitting Feasibility X Construction and Commissioning Conceptual Design Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 3 of 37 7/3//2012 2.4 PROJECT DESCRIPTION ORPC Alaska 2, LLC, a wholly-owned subsidiary of Ocean Renewable Power Company, LLC, (collectively, ORPC), is a global leader in the development of hydrokinetic power systems and eco- conscious projects that harness the power of ocean and river currents to create clean, predictable renewable energy. ORPC works in partnership with coastal and river communities to create and sustain local jobs while promoting energy independence and protecting the environment. Its technology includes the proprietary TidGen™ Power System, which includes one or more TidGen™ devices connected to an on-shore station with power and data cables. In ORPC’s TidGen™ Array Project, ORPC will install a four-device TidGen™ Power System in Cook Inlet with a rated generating capacity of 600 kW in a 6- knot current. ORPC’s REF Round 4 grant (award document signed) will help fund the first device of what eventually will be a four device TidGen™ Power System. REF Round 6 funding will help fund the TidGen™ Array Project to expand to a four-device system by adding an array of three TidGen™ devices. 2.5 PROJECT BENEFIT REF Round 6 funding for the TidGen™ Array Project will allow ORPC to advance the commercialization of the TidGen™ Power System by increasing the number of TidGen™ devices in the system from one to four. In subsequent stages of a much larger project at East Foreland called the Cook Inlet Tidal Energy Project (not in the scope of this application), ORPC plans to deploy its proprietary OCGen™ Power System to achieve a rated capacity of 1.2 MW by the end of 2016 and of 5 MW by the end of 2018. Based on success in preceding phases of the project, ORPC will gradually increase its rated capacity to up to 100 MW under an operating license from the Federal Energy Regulatory Commission (FERC) by the end of 2022. Once in operation, the 600 kW TidGen™ Array Project will displace approximately 17.9 million cubic feet of natural gas annually, corresponding to $120,431 in cost savings and 948 tons of avoided CO2 emissions for the state of Alaska. Once the subsequent stages of the Cook Inlet Tidal Energy Project have been completed, the 100 MW project will successfully displace approximately 4.2 billion cubic feet of natural gas each year, saving the state $30.2 million in fuel costs and avoiding 221,205 tons of CO2 emissions annually. On a present value basis (at a 3% discount rate), the fuel costs savings for the 600 kW TidGen™ Array Project would be $1,593,876 and for the expanded 100 MW project would be $302,593,118, before considering the social costs of carbon inherent in natural gas-based generation. Anticipating a power purchase agreement that takes the externalities of avoided fossil fuels as well as future avoided costs into account, ORPC projects that by the end of 2015, the 600 kW TidGen™ Array Project will generate annual revenues of approximately $419,747 from electricity sales and potentially more from carbon offset sales, and other tax credits. From 2015 to 2022 and beyond, ORPC anticipates that its various projects in Alaska will generate revenues in the tens of millions of dollars, which will in turn create significant tax revenues for the state. The TidGen™ Array Project will also create a significant number of high quality jobs in Alaska. ORPC will support between 25 and 30 new and existing jobs in the state during the TidGen™ Array Project’s 18-month peak construction period, and support four to five long-term jobs during the operating period. Between 2015 and 2022, as the 100 MW Cook Inlet Tidal Energy Project grows to full generating capacity, ORPC anticipates supporting up to 680 green economy jobs during peak construction and up to 155 green economy and maritime industry jobs over the long term in Alaska. Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 4 of 37 7/3//2012 2.6 PROJECT BUDGET OVERVIEW ORPC has begun project development at East Foreland, and is funding all pre-deployment development work, which will amount to $1,412,716 through 2013. Completion of the TidGen™ Array Project will require a total of $8,696,494, to be funded as follows: (1) $4,696,494 by ORPC; (2) $2 million from the REF Round 4 award; and (3) $2 million from the REF Round 6 award. For the TidGen™ Array Project, the Round 6 funding request will cover 23% of project costs; AEA Round 4 funding will cover 23% and ORPC funding will provide the remaining 54%. ORPC’s funding commitment will count as cost share toward AEA funding. 2.7 COST AND BENEFIT SUMARY Grant Costs (Summary of funds requested) 2.7.1 Grant Funds Requested in this application. $2,000,000 2.7.2 Cash match to be provided $4,696,494 2.7.3 In-kind match to be provided $ 2.7.4 Other grant applications not yet approved $2,000,000 (AEA REF Round 4) 2.7.5 Total Grant Costs (sum of 2.7.1 through 2.7.3) $8,696,494 Project Costs & Benefits (Summary of total project costs including work to date and future cost estimates to get to a fully operational project) 2.7.6 Total Project Cost (Summary from Cost Worksheet including estimates through construction) $8,696,494 2.7.7 Estimated Direct Financial Benefit (Savings) $-1,087,080 2.7.8 Other Public Benefit (If you can calculate the benefit in terms of dollars please provide that number here and explain how you calculated that number in your application (Section 5.) $ 14,805,000 SECTION 3 – PROJECT MANAGEMENT PLAN 3.1 Project Manager Monty Worthington ORPC Alaska 2, LLC 725 Christensen Dr., Suite 6 Anchorage, AK 99501 Telephone: (907) 339-7939 Email: mworthington@orpc.co Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 5 of 37 7/3//2012 Resume and references attached (Appendix A). 3.2 Project Schedule and Milestones Milestones Tasks Start Date End Date TidGen™ Array Project feasibility report completed and submitted to AEA Confirm that all milestones under Round 4 funding are complete Jan. 2015 Hold meeting with AEA to evaluate performance of single-device TidGen™ Power System and finalize design of the four-device TidGen™ Power System before release of components for manufacture and procurement Jan. 2015 Complete feasibility report for TidGen™ Array Project Jan. 2015 Components for three TidGen™ devices released for manufacture If need be (ORPC hopes to retain contractors from initial work), bid packages will be developed and new contractors selected on a competitive basis. Jan. 2015 Bids received for components for the three new TidGen™ devices Feb. 2015 Components for three additional TidGen™ devices released for manufacture Feb. 2015 Components for three TidGen™ devices procured and prepared for shipment to laydown site Three bottom support frames fabricated in Alaska May 2015 Three TGUs and power electronics manufactured and prepared for shipment to Alaska May 2015 Three TidGen™ devices assembled at East Foreland laydown site Device components arrive at East Foreland laydown site June 2015 Three TidGen™ devices assembled June 2015 Three TidGen™ devices added to existing single-device TidGen™ Power System; four-device TidGen™ Power System commissioned Three bottom support frames installed July 2015 Power transmission system installed and connected for the three new devices July 2015 Three TidGen™ TGUs installed July 2015 4-device TidGen™ Power System interconnected to grid and commissioned July 2015 First quarterly report on TidGen™ Power System operation and performance completed Collect sufficient data to report on TidGen™ Power System operation Dec. 2015 Finalize reports on operation of TidGen™ Power System and disseminate to agencies, AEA, and stakeholders. Evaluate economics of project for deployment of OCGen™ Power System Jan. 2016 Annual inspections and maintenance of TidGen™ Power TidGen™ device raised and inspected; annual maintenance performed June 2016 Sept. 2016 Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 6 of 37 7/3//2012 System performed Annual report on TidGen™ Power System operation and performance completed Collect sufficient data to report on operation of TidGen™ Power System Nov. 2016 Finalize reports on operation of TidGen™ Power System and disseminate to agencies, AEA and stakeholders Dec. 2016 Evaluate economics of project for future installation of OCGen™ Power System Dec. 2016 3.3 Project Resources As a hydrokinetic industry pioneer, ORPC has gained unmatched multi-seasonal marine operations experience over the past several years in deploying, testing and monitoring first-of-a-kind tidal in-stream energy conversion devices in the Bay of Fundy’s adverse marine and weather environments. This included the successful design, fabrication, installation, and commissioning of the Cobscook Bay Tidal Energy Project, the first commercial tidal energy project in the U.S., on September 13, 2012. The key to ORPC’s success has been the collective experience, technical expertise, dedication, commitment, and leadership of the company’s professional team. ORPC’s management team, Advisory Board, Management Committee, and partner, Caithness Development, include professionals with extensive experience and proven track records in developing, permitting, financing, constructing, operating and managing cogeneration, independent power and renewable energy facilities, as well as forming, funding and managing startup and technology development companies. The extended ORPC team includes highly respected firms and individuals with extensive experience in turbines, generators, submersible vessels, composite manufacturing, power electronics, control systems, power plant licensing, environmental permitting, community outreach, project management, construction and operations, and legal services. ORPC is committed to recruiting and retaining contractors and partners for the TidGen™ Array Project from within Alaska whenever possible, encouraging businesses to establish a presence in the state and advancing the industry through executed contracts with technical and project support resources. ORPC has sought to employ local companies and contractors whenever the required work capacity is available or can be developed within a local organization. ORPC has contracts with Alaskan private companies and public institutions, including TerraSond, LGL, Benthic Geosciences, Marsh Creek, Aquacoustics, PND Engineering, Stephen Braund and Associates, the University of Alaska Anchorage, and the Alaska Center for Energy and Power to build the capacity to support tidal energy project development in Alaska (please see various letters of support attached in Appendix B). In the East Foreland area, ORPC began working with HEA early in project development. ORPC has since signed a letter of intent and a joint development agreement with HEA in a step towards a Power Sales Agreement. ORPC has also begun working with local marine service companies such as Arctic Slope Regional Corporation (ASRC) Rig Tenders’ Dock and Peak Oilfield Service Company, offering opportunities for local contractors to become involved in the project design and implementation. When local companies and research institutions are not able to fill certain project roles, ORPC recruits experts from outside the state, primarily focusing on companies with previous experience in Alaska. Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 7 of 37 7/3//2012 For major equipment purchases and contracts, ORPC makes every attempt to competitively quote all subcontractor needs. The company also seeks input from contractors about technology designs to ensure ease of manufacturability. When selecting contractors, ORPC does a cost/benefit analysis based on price, available assets, manpower, timing and quality of work on previous projects. The lowest cost does not always ensure a contract. As ORPC continues to grow, so does the company’s contract base, whose performance is continually evaluated. ORPC Alaska Key Personnel (Detailed resumes in Appendix A) • Monty Worthington – Director of Project Development, Alaska, and Project Manager Mr. Worthington has over 10 years of experience designing and implementing renewable energy systems in Alaska, the Pacific Northwest and Asia. He has managed renewable energy projects for both private companies and nonprofit organizations and also has extensive experience in the design, installation and maintenance of marine electrical systems. Mr. Worthington manages ORPC’s commercialization of the RivGen™ Power System and will serve as the Project Manager of this Project. • Doug Johnson – Director of Projects, Alaska Mr. Johnson has over 30 years of project development experience in Alaska, having worked as an investor, a business owner, an entrepreneur, a professional manager and a business consultant. He has developed projects ranging from the launch of Alaska’s first biotech company to the planning and execution of a $2 billion hospital in Abu Dhabi. He is responsible for developing present and future business opportunities for the ORPC in Alaska. ORPC Management Team (Detailed resumes in Appendix A) • Christopher R. Sauer – President and CEO Mr. Sauer provides overall management and leadership to all of the technical and commercial activities required to commercialize ORPC’s technology and develop, finance and build ORPC’s projects. He is a former energy entrepreneur and strategic development consultant with more than 35 years of experience in the project development, electricity, cogeneration, renewable energy and energy efficiency industries. Mr. Sauer has a proven track record in developing new energy facilities and energy and environmental technologies, structuring complex transactions and starting up and managing new organizations. He has held senior management positions with two major U.S. corporations – Wheelabrator Technologies and PG&E National Energy Group – and has been president and CEO of two previous startup energy/environmental technology companies. He has been in the energy transaction business since 1977, and since that time, has played an instrumental role in the business plan development, financing and executive management of two startup technology companies and the development of more than $2 billion in energy assets. Mr. Sauer is a founding member of ORPC Holdings. • Brenda LeMay –Chief Financial Officer & Vice President of Finance and Administrations Ms. LeMay manages all financial and administrative matters for ORPC, including contract negotiations, business management, strategic planning, financial analysis, budgeting and reporting. She has more than 15 years of development experience in the energy industry, including negotiating commercial transactions, permitting, structuring policy, financial analysis and management. Most recently she held senior management positions at EDP Renewables, the third largest wind energy company in the world, where she was responsible for energy management across Europe and project development throughout the U.S. Pacific Southwest. • Jarlath McEntee, M.S., P.E., Vice President of Engineering & Chief Technology Officer Mr. McEntee is responsible for all of the technology development and engineering efforts of ORPC, directly managing engineering teams and processes and directing technology strategy. As ORPC technology leader, Mr. McEntee will direct the design, engineering and specification development for Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 8 of 37 7/3//2012 the TidGen™ Array Project. Mr. McEntee has specialties in engineering management, complex systems design, dynamics, fluid mechanics and thermodynamics as well as 20 years of experience in the testing, design and manufacture of alternative energy systems. • John Ferland, Vice President – Project Development Mr. Ferland is responsible for ORPC’s international project development and environmental permitting activities. He is also responsible for fostering collaborative relationships with project communities and other stakeholders. He has over 30 years of experience encompassing technology commercialization, port emergency response operations, coastal resources management, communications, and public policy. Advisors to ORPC (Detailed resumes in Appendix A) • Millard S. Firebaugh, Sc.D, Chairman of the Advisory Board Dr. Firebaugh, a retired rear admiral in the U.S. Navy, a former chief engineer of Electric Boat Corp., and a former CEO of SatCon Technologies, is a recognized leader in the engineering and production of advanced technology, including R&D, ship design, shipbuilding, power systems and electronics, and executive management. Dr. Firebaugh is a member of the ORPC Technical Advisory Board and Management Committee. • Ernest K. Hauser, Senior Advisor – Projects Mr. Hauser advises ORPC on development, licensing and permitting, project engineering and management. He is ORPC’s former Senior Vice President of Projects, and has more than 35 years of experience in business and project development, management, operations, finance and construction in the energy and petrochemical industries. • John R. Cooper, Senior Advisory – Finance Mr. Cooper has retired from active management of all financial matters for ORPC, investor relations, raising additional capital, and grant compliance. He is a member of the Management Committee, representing the investors of ORPC Holdings, LLC, and is a co-founder of ORPC. He has more than 30 years of experience in project finance and development, corporate finance, transaction structuring and execution, raising capital, executive management, consulting and public board of directors representation. For 15 years, Mr. Cooper was senior vice president and chief financial officer of PG&E National Energy Group and its predecessor, U.S. Generating Company (a developer, owner and operator of 10,000 MW of electric generation, gas pipeline and energy trading facilities), where he raised over $10 billion of debt and equity capital. • Dr. Brandon Southall, Environmental Advisor Dr. Southall completed graduate studies in 2002 on hearing and the effects of noise on seals and sea lions. He continues fieldwork on northern elephant seal acoustic communication. Recently, he was a fisheries research biologist and director of NOAA's Ocean Acoustics Program. He was involved in the development of acoustic exposure criteria for marine mammals, organized symposia on shipping noise and marine mammals and was centrally involved in the formation of correspondence group on the shipping noise issue within the International Maritime Organization. He provides technical advice on regulatory policies and mitigation strategies for minimizing noise impacts. • Peter R. Betzer, Ph.D., Ocean Advisor Dr. Betzer, a former dean of the School of Marine Science at the University of South Florida and a world-renowned authority in his field of geochemistry, provides ORPC with input and direction in oceanography and marine engineering. • Patrick J. McGinnis, P.E., Technical Advisor Mr. McGinnis has more than 20 years of experience with major engineering firms including GE, Lockheed Martin, Ford Aerospace and the Naval Surface Warfare Center managing R&D projects in Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 9 of 37 7/3//2012 advanced machinery. Consultants and Contractors (Detailed resumes in Appendix A) • TerraSond LTD Recent work with TerraSond has focused on the development of in-stream hydrokinetic and tidal renewable energy feasibility programs. • Department of Civil Engineering, University of Alaska, Anchorage (UAA) ORPC partners with high-quality university programs and researchers whenever possible. Associate Professor Tom Ravens, Ph.D., has over 15 years of experience in hydrodynamic (wave and current) and sediment transport modeling and analysis, and has published widely in this field. Dr. Ravens is currently developing flow, wave, and sediment transport models for Cook Inlet and the Beaufort Sea. • LGL Alaska Research Associates Inc. The current project manager and principal investigator for LGL studies of Cook Inlet beluga whales is Tamara McGuire, Ph.D. Dr. McGuire, also lead scientist at LGL, has 19 years of experience as a wildlife biologist and a marine mammal scientist and has conducted land- and boat-based research on Cook Inlet beluga whales. She has logged over 500 hours monitoring and theodolite tracking whales and vessels around the Port of Anchorage in Upper Cook Inlet. • PND Engineers, Inc. PND has many years of experience providing innovative solutions to clients in the remote and arctic regions of Alaska. Jim Campbell, the principal/senior engineer for ORPC projects, has more than 20 years of experience in geotechnical and civil engineering, surface and subsurface hydrology, hydrogeology and environmental investigations. He has performed extensive geotechnical investigation and design work, both on and offshore, for assessment and design of roadway, building, tank farm and marine structure foundations. • Marsh Creek Marsh Creek is an Alaskan company jointly owned by Kaktovik Inupiat Corporation and Solsten XP, with offices in Anchorage, Deadhorse and Kaktovik, Alaska. ORPC contracted Marsh Creek for the fabrication and deployment for components of the RivGen™ Power System. On March 22, 2012 the companies signed a Joint Development Agreement to further their collaboration. • Benthic GeoSciences, LLC Benthic GeoScience provides professional geophysical and hydrographic surveying services throughout the world. They have a strong geophysical and oceanographic staff, including geophysicist David Oliver who has over 18 years of technical experience in the geotechnical and geophysical industry, including resource assessment, site selection, and hazard assessment. Mr. Oliver is an expert at program design and field data collection, as well as the precise management and spatial analysis of remotely sensed data. Benthic GeoSciences also has a geophysical department that specializes in measuring the Earth's energies especially in the quantification and spatial location of these energies for Renewable Energy project planning. 3.4 Project Communications ORPC will develop a communication plan for the TidGen™ Array Project that best matches the information needs of AEA. From its permanent office in Anchorage, ORPC will report to AEA on the TidGen™ Array Project’s timeline and performance. ORPC and AEA have already established a working relationship through ORPC’s award REF Round 4 award and will continue to enhance this relationship to better meet the communication needs of ORPC and AEA. ORPC’s project management practices are Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 10 of 37 7/3//2012 geared towards carefully monitoring scope, schedule and budget to ensure the project is tracking as planned. Any significant changes to any of these aspects of the project will be promptly reported to AEA. To ensure that the project management team is thoroughly informed on the Project’s progress, ORPC will establish monthly meetings to provide updates with the project manager, contractors, and key ORPC personnel as they have for their other grant funded projects. ORPC will submit regular quarterly progress reports to AEA, and will schedule meetings as necessary or as requested to update AEA staff on the project. 3.5 Project Risk As a developer of leading edge technology and projects ORPC as a company is attuned to the inherent risks in these endeavors, and is committed to proactively managing these risks and planning projects such that risk is continually reduced as project implementation approaches, and through the deployment and operation of pilot projects, such as the TidGen™ Array Project. While many of the risks encountered in the first Alaskan projects are well understood from the experience gained through implementation of first- of-a-kind projects in Maine, some are unique to Alaskan projects and must be adapted and managed accordingly. ORPC intends to mitigate the following key risk areas through the project development process in Cook Inlet: Financial: For the TidGen ™ Array Project to be successful, ORPC must continue to secure funding beyond its current cash reserves for the various phases of the Project. To this end, ORPC is pursuing funding from diversified sources including state and federal grants, and private capital sources. Over the past four years, ORPC has successfully raised more than $39 million in private and public financing, including $20.75 million in private equity and equity bridge financing and more than $20 million in state and federal government awards to develop its proprietary technology and permitting. Financial risks to the project include the following: • Delivered Cost of Energy – The delivered cost of energy from a tidal generation project is the solution to a formula the variables of which include capital costs to construct and install the project, its operations, management, long-term maintenance and environmental monitoring costs, and its useful life, the amount of energy available in the tidal stream (min/max current speeds), and the efficiency of the energy devices in extracting the mechanical energy from the tidal stream, converting it to electrical energy and transmitting it to the on-shore transmission grid. Risks arise from estimating each of these variables, and assuming changes over time from inflation, improvements in technology, reduced or increased costs of materials and services, output degradation, etc. Based on ORPC’s experience to date in building, installing and operating the Cobscook Bay Tidal Energy Project(see details in Section 4.4.3 below) , and evaluation of the Cook Inlet tidal resources, etc., ORPC has developed the financial projections for the project, as well as sensitivities to variations in these project parameters. • Revenue Assumptions – Revenues to be earned from sale of electrical energy, capacity and various renewable energy attributes and tax policy must be estimated far into the future based on current market conditions and expectations on how these will change. There is an inherent risk that these assumptions about future prices may be different from what is expected as a result of changes in supply and demand, as well as political and other economic factors. Permitting and Environmental Risks: Agencies and stakeholders are generally enthusiastic about helping tidal energy projects succeed. However, since these projects involve new technology and a new energy source, the limitations of existing regulations can cause permitting delays. At the federal level, tidal Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 11 of 37 7/3//2012 energy projects fall under the jurisdiction of FERC and are treated as traditional hydropower projects. However, FERC has implemented an expedited pilot license process that allows short-term projects to be installed and tested before full long-term operating licenses are issued. Over the last several years, ORPC has gained unparalleled experience in the FERC pilot licensing process through its development of pilot projects in Maine and Alaska. ORPC has also catalyzed a collaborative relationship between FERC and other federal and state agency personnel that will help ensure the development of a licensing process that is reasonable in scope while remaining protective of the environment. Potential environmental risks for the project include: • Marine life – ORPC is aware of project risks associated with potential negative interactions between the TidGen™ Power System and marine life. However, environmental monitoring efforts to date show that these risks are low, and ORPC will continue to work with relevant agencies and researchers to ensure the power systems do not pose a significant risk to marine life. o Of particular focus for ORPC in the Cook Inlet area is the local population of beluga whales, which are now protected under the Endangered Species Act (ESA). It is vital that the TidGen™ Power System does no harm to this whale population, and that it fully complies with all ESA restrictions. ORPC recently submitted a draft report to National Marine Fisheries Service (NMFS) on ORPC’s DOE funded effort to evaluate Passive Acoustic Monitoring of beluga whales in Cook Inlet, and received support for ORPC’s plan to collect baseline data at the East Foreland site. On September 23, 2012 ORPC deployed the first Passive Acoustic Monitoring device a Directional autonomous Seafloor Acoustic Recerder (DASAR) at the East Foreland to begin collecting baseline data. Consultations with NMFS will continue to ensure that all ORPC monitoring efforts address any agency concerns and that the TidGen™ Array Project does not negatively affect the beluga whales. In this regard, NMFS has expressed support for ORPC’s relocation of the TidGen™ Array Project to the East Foreland site (see Appendix F). o ORPC has been in consultation with NMFS as well as the U.S. Fish and Wildlife Service (USFWS) to ensure that fish populations are likewise considered during project development. Environmental monitoring and fish studies performed during ORPC’s Beta TidGen™ Project, in conjunction with the University of Maine’s School of Marine Sciences, provided ORPC with an understanding of the power system’s interaction with the marine environment. Thus far, these studies have shown that fish have either avoided the power system, or have swum through it unharmed. Notably one of the researchers at the University of Maine recently published a Master’s thesis on the interaction of fish with ORPC’s turbines in Cobscook Bay, Maine (H. Viehman, 2012. Fish in a tidally dynamic region in Maine: hydroacoustic assessments in relation to tidal power development. Unpublished master’s thesis. University of Maine, School of Marine Sciences, Orono, ME). This thesis provided baseline knowledge of where fish are in the water column with knowledge of how they behave in close proximity to an operating tidal device. Please contact ORPC for a copy of these extensive studies. ORPC has also conducted pre-deployment fish studies at Fire Island and reported on them in consultation with USFWS and NMFS. Based on this experience and through further consultation, ORPC will scope both pre deployment studies and post deployment monitoring to satisfy the concerns of agency personnel and stakeholders. • Sediment Transport – There are two potential risks associated with sediment transport. The first is the possibility that due to the slowing of natural currents by the TidGen™ Power System, sediment will be deposited and will create shoals in shipping channels. The second is the possibility that natural sediment transport will adversely affect the bottom support frames and/or buried transmission lines. ORPC has developed a plan with the University of Alaska to model sediment transport prior to installation, and will use the TidGen™ Array Project to monitor and Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 12 of 37 7/3//2012 predict the future effects of the TidGen™ Power System on sediment patterns. Furthermore, the recent decision by AEA to partner with the National Oceanic and Atmospheric Administration on circulation modeling of Cook Inlet with a focus on tidal energy extraction will offer another modeling tool to address sediment transport impacts. ORPC will use the data generated from these modeling efforts to plan installations that are not likely to create undesirable changes to sediment transport processes in Cook Inlet. • Ice – There are concerns over the potential effects of surface ice, beach ice (large agglomerated blocks of ice and sediment), and frazil ice on the TidGen™ Power System. Initial conversations with University of Alaska experts indicate that surface and beach ice are unlikely to penetrate to a depth where it will interact with the power system, which will be installed 40' below the surface. Frazil ice is also unlikely to penetrate this deeply. There is, however, the possibility of ice agglomerated with rock or sediment being suspended in the water column in the area of the TidGen™ Power System. ORPC will conduct studies utilizing a Shallow Water Ice Profiler to determine the extent, if any, of this ice at the planned deployment depths, and implement any necessary modifications to the design to accommodate ice in this portion of the water column. The main concern with ice in Cook Inlet will be the effect of surface ice on maintenance activities. ORPC can avoid this potential constraint by adjusting project maintenance schedules accordingly. Technical Feasibility Risks: While there may be project risks associated with the technical feasibility of ORPC’s power systems, the probability of this is low. ORPC has proven the technical viability of its power systems through the successful installation and commissioning of the Cobscook Bay Tidal Energy Project on September 13, 2012. This is the first power from any ocean energy project including offshore wind, wave and tidal, to be delivered to an electric utility grid in the United States, and it is the only ocean energy project, other than one using a dam, that delivers power to a utility grid anywhere in North, Central and South America. The unique water environment of Cook Inlet will present new technical challenges not encountered in the Maine projects. These challenges include: • Foundation/mooring system design - ORPC will consider the difficulty of mooring in the challenging environment of Cook Inlet. Local engineering firm PND Engineers, Inc. (PND) has already begun devising conceptual designs for ORPC’s mooring systems and continues to assist with the design of the bottom support and mooring systems. PND has extensive experience in oil and gas industry mooring systems in Cook Inlet and is a primary contractor on the Port of Anchorage expansion. As part of an ORPC grant from the U.S. Department of Energy (DOE), Benthic Geo Sciences collected data on geophysical characteristics of ORPC’s East Foreland site in June 2012 to provide the necessary information to complete the design of TidGen™ Power System’s bottom support frames and the OCGen™ Power System’s mooring system. Any additional geotechnical data required for the project will be collected over the 2013 field season. • Silt Abrasion - Due to the influence of several large glacially fed rivers, Upper Cook Inlet has extremely high concentrations (typically 2 gm/L) of suspended sediment. The abrasive qualities of this sediment have already proven to be a challenge for machinery and vessels in the offshore oil and gas and marine service industries that operate in this environment. In assessing the vulnerability of the components of ORPC’s technology to sediment-induced abrasion, one of the greatest concerns is the effect of the sediment on the bearings and seals, since failures of these components could lead to loss of efficiency, increased maintenance and, potentially, component failures. In the TidGen™ TGU, fluid power is transferred from the turbines to the underwater sealed permanent magnet generator via a rotating shaft that passes through a seal, excluding water Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 13 of 37 7/3//2012 from the generator. Seal failure could lead to water intrusion and generator failure. Bearing wear could lead to excess energy loss and could transfer excessive load to the seals, causing their premature failure or increasing the frequency of costly maintenance operations. To address this issue, ORPC and the University of Alaska Anchorage (UAA) have partnered on a DOE-awarded grant to test combinations of bearings and seals being considered for use in the TidGen™ TGU. These tests are being conducted in a flume designed to circulate samples of Cook Inlet water. This laboratory testing will be completed prior to the selection of components for the TidGen™ TGU so they can be chosen based on their resistance to abrasion from Cook Inlet sediments and their necessary maintenance cycles can be quantified. • Power Transmission - The power transmission system must be safe and reliable. Local contractors with relevant experience in this area and outside companies with extensive knowledge in this field will be engaged to design and deploy the system to ensure its safety and effectiveness. The relocation of the TidGen™ Array Project to the East Foreland site has greatly reduced technical risk in the power transmission system. As HEA has industrial scale power distribution and transmission capacity in the East Foreland area to service the natural gas facilities there, there is ample opportunity to interconnect the power from the project to HEA’s existing infrastructure. For the TidGen™ Array Project, this may include connection to distribution systems or a direct line to the Bernice Lake Substation, which has an open breaker. SECTION 4 – PROJECT DESCRIPTION AND TASKS 4.1 Proposed Energy Resource HEA is currently under contract to purchase its power from Chugach Electric through 2013. After this, HEA plans to transition to generating its own power for distribution to its customers through its Independent Light program. Through this program HEA is investing in upgrades to its generation infrastructure, primarily focused on two projects, one to enhance an existing natural gas turbine in Nikiski by adding a steam turbine to increase its efficiency and output from 40 MW to 80 MW and another project to add a 48 MW natural gas turbine (LM 6000) in Soldotna; in the meantime, the power purchased from Chugach Electric is produced from natural gas turbines and HEA’s share of the Bradley Lake Hydro plant. Currently all of the natural gas used in the Railbelt area is supplied from the Cook Inlet natural gas fields. Recent estimates from the United States Geological Service suggest that large yet-untapped supplies of Cook Inlet gas that may be available; exploration for these reserves is planned in coming years. However, forecasts predict that currently tapped resources will be depleted as soon as 2020. Thus, as soon as 2014, new gas supplies or other electrical generation capacity will be required to meet peak Railbelt energy demands. Other alternatives include a proposed in-state gas line or High Voltage DC (HVDC) transmission line from the North Slope, wind projects at Fire Island and Eva Creek, and the Susitna- Watana Hydroelectric Project. One of the distinct advantages of tidal energy is that it is predictable and thus easily and economically integrated with the generation and transmission infrastructure of HEA and the greater Railbelt grid. Tidal power will thus prove to be a valuable and diversified asset to the Railbelt regardless of future energy infrastructure decisions. The TidGen™ Array Project will offer an emission-free source of power that will serve to extend existing gas reserves in Cook Inlet, extend the viability of any new discoveries, and offer a long- term flat priced power source that will be easily integrated with natural gas, hydropower, or other renewable or non-renewable energy resources. Since the TidGen™ Array Project will produce no greenhouse gases, it will also be protected from the future carbon taxes that will likely be applied to electricity produced by natural gas; this will further improve the project’s economic benefits to the local Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 14 of 37 7/3//2012 energy market. Below are some examples of future energy resources under consideration. Figure 1. East Foreland bathymetry Figure 2. East Foreland bathymetry Traditional hydropower plants, including the Bradley Lake plant, already exist on the Railbelt grid, and others, such as the proposed 600 MW Susitna Watana Project or the 330 MW Lake Chakachamna Project, are being investigated for possible development. While these traditional projects offer reliable power that is also economical, upfront costs are quite high. These projects tend to couple well with renewable projects whose output varies periodically, since modern hydro turbine controls allow them to ramp up and down with the availability of other resources, thereby conserving and effectively utilizing reservoir capacity. When contractual arrangements allow for hydropower plants to operate as resource following generation assets, these plants already balance wind resources well in this manner, and the predictable nature of tidal energy will make this kind of integration easier and even more efficient. Environmentally, hydropower has created longstanding concerns about its impact on fish habitat, since its turbines are potentially harmful to fish that pass through them, and since the intakes often funnel fish into them. Where anadromous fish like salmon spawn, hydropower plants often encounter resistance from environmental and community interest groups. With tidal power, however, there is no ducting and no strong pressure gradient funneling fish into the turbines; moreover, the slow speed (40 rpm) of the turbine foils poses minimal risk to the fish. Subsequent ORPC project monitoring will verify these fundamentals. Within the HEA service area, another proposed hydro project is the Grant Lake Project, a small (3 MW) project. This project would couple perfectly with the TidGen™ Array Project, as it would provide an opportunity to integrate a traditional hydro power facility with tidal energy much like a larger tidal energy project would be integrated with a future large hydro facility on the Railbelt. Cook Inlet Region Incorporated’s Fire Island Wind Project, originally a 54 MW-capacity project has now been installed at a reduced 17.6 MW capacity. This project offers a welcome diversification to the Railbelt Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 15 of 37 7/3//2012 generation assets, while serving as a trailblazing project that integrates commercial scale variable output renewable energy resources into the Railbelt grid. This project makes an excellent complement to ORPC’s potential Cook Inlet projects, since the transmission line from Fire Island to Point Woronzof has additional capacity to accommodate both the wind and a tidal power project. ORPC has already spent over $1 million developing a tidal energy project at Fire Island that would complement the TidGen™ Array Project, as the staggered phase of the tides in Cook Inlet would allow for power to be continually between the East Foreland site and Fire Island. The power generated by ORPC’s TidGen™ Array Project will be more predictable and reliable than wind power, and will be able to be dispatched more easily, thus curbing the oscillations in power output inevitably produced by wind energy. Right now, since wind technology is much more developed than tidal technology, it is more economical. However, because tidal energy has the added advantage of predictability, it promises to be a comparably more reliable and cost-effective resource once the industry reaches its commercialization phase. HEA engineers in fact value tidal power at approximately 3 times the capacity value of wind power due primarily to its predictability, thus ORPC’s 600 kW TidGen™ Project would compare in their estimation to a 1.8 MW wind project. There is potential for future geothermal development in Alaska, particularly at Mount Spurr near the Beluga Power Plant infrastructure. Geothermal energy promises to be a clean, stable, renewable energy source, although there are technical challenges in implementing it in seismically active and glacially dynamic areas such as Mount Spurr and a viable resource there has yet to be identified. Any geothermal project installed there would also integrate well with tidal power (as with hydropower) by acting as a system balance. Another alternative being investigated by local Railbelt utilities is coal-fired power plants. Tidal energy has significant environmental advantages over coal-fired power, as well as the potential to be more economically competitive, as economies of scale drive costs down and the fully embedded cost of coal continues to rise. Coal-fired power produces not only CO2, which adds to the effects of global warming, but also mercury, a toxic contaminant that accumulates in the food chain and has become a recent concern in wild Alaskan salmon. Tidal power has none of these disadvantages, as it is a totally clean, renewable energy resource. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System This is a Railbelt Energy Project – N/A. 4.2.2 Existing Energy Resources Used The Railbelt grid, including the HEA service area, is largely dependent on natural gas for energy production. In the short term, the TidGen™ Array Project will displace modest amounts of natural gas usage, thus extending the resource’s viability. In the long term, as ORPC’s projects in Cook Inlet expand, benefits will accrue from the introduction of a renewable energy source that integrates well with natural gas powered plants, existing hydro plants such as Eklutna and Bradley lakes, and future development of other energy resources such as the Fire Island Wind Project, Railbelt Large Hydro projects or the Mount Spurr geothermal project. Tidal energy is appealing to HEA and other Railbelt utilities that must negotiate annual bulk natural gas contracts largely because of its predictability. As these utilities attempt to forecast their gas needs, having a resource that is predictable will allow them to more accurately estimate their power supply and avoid costly over- or under-estimation of these bulk contracts. The predictability and gradual nature of the tidal energy as it ramps up and down will also make the integration of the power technically manageable, and will ultimately lead to economical integration costs regardless of the future Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 16 of 37 7/3//2012 energy portfolio of the purchasing utility. 4.2.3 Existing Energy Market The energy market on the Railbelt grid will require significant alternative power production as currently developed Cook Inlet natural gas supplies decline. While initially producing modest amounts of power that will not significantly affect the cost of electricity to ratepayers, the TidGen™ Array Project will provide predictable, economical power. In the HEA service area, where the TidGen™ Array Project will be interconnected, the majority of the power is currently purchased from Chugach Electric Association under a contract that will expire in 2013. The power produced by the TidGen™ Array Project will come on line after this contract has expired, at which time HEA will be generating its own power, primarily through natural gas fueled facilities, but also through hydro power from Bradley Lake. As described in sections 4.1 and 4.2.2 above, the power generated from the TidGen™ Array Project will be easily integrated into the HEA system without significantly affecting operations or incurring large integration costs. The data collected through this project will be essential to understanding the predictability and schedule of the tidal energy produced by later phases of the project and the maintenance costs and ultimate cost of power produced from the Project, and will thus be essential to understanding the economic and technical feasibility of future project build-outs in Cook Inlet. This will in turn inform future energy infrastructure choices by HEA and other utilities, allowing them to understand the positive or negative effects to ratepayers’ cost of energy before undertaking larger tidal energy projects. In addition, commercializing ORPC’s proprietary technology in Cook Inlet will allow it to expand into the rural energy market in Alaska, where it will offer customers relief from the high cost of power associated with diesel generation facilities. 4.3 Proposed System 4.3.1 System Design ORPC Technology Overview The core technology component and “engine” for all of ORPC’s hydrokinetic power systems is the patented turbine generator unit (TGU). The TGU uses proprietary advanced design cross flow turbines to power an underwater permanent magnet generator mounted at its center on a single driveshaft. It is constructed primarily of composite materials that will not corrode, and has a gearless, direct-drive design that requires no lubricants and so leaks nothing into the surrounding water. The TGU produces zero emissions, including greenhouse gases. ORPC is developing three distinct hydrokinetic power systems based on the proprietary TGU, each designed for commercial deployment in specific applications and water depths: The TidGen™ Power System, the OCGen™ Power System and the RivGen™ Power System (see Appendix G). ORPC has filed several U.S. PCT and individual country patent applications for its advanced design cross flow turbine, its underwater permanent magnet generator, and its TGU. System Design The Cook Inlet TidGen™ Project will begin with the installation of a single-device TidGen™ Power System in 2014. The power from this single-device system will be transmitted to shore as Medium Voltage DC (MVDC) power, and conditioned at the on-shore station to grid-compatible 3-phase power at the specified voltage of the interconnect location. The performance of the single-device TidGen™ Power System will be monitored through the winter. Provided sound performance and environmental compatibility, the TidGen™ Array Project will then be implemented to install three additional TidGen™ Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 17 of 37 7/3//2012 devices in the summer of 2015, to create a four-device TidGen™ Power System. Prior to the deployment of the additional three devices, a decision will be made with HEA power engineers as to whether a dedicated power feed to the Bernice Lake Substation is required or if the full TidGen™ Power System can be interconnected through the distribution system. The appropriate terrestrial power transmission system and switch gear will be installed. Through 2018, ORPC will continue to gradually expand the Cook Inlet Tidal Energy Project to 5 MW, which it will operate through its expected eight-year FERC pilot project license term. According to the project site’s characteristics (depth, bottom composition and existing navigational uses), this expansion will be accomplished by installing an OCGen™ Power System and perhaps additional TidGen™ devices. Each module in the OCGen™ Power System will consist of two to four 150 kW TGUs, giving the module a rated capacity of 300 - 600 kW (345- 690 kW peak). This will increase the site’s rated generating capacity to 1.2 MW by the end of 2016, 5.05 MW by the end of 2018, and eventually to commercial scale (100 MW) by 2022. Peak generating capacity will be approximately 115% of rated generating capacity and will be reached when current flow exceeds 5.4 knots. OCGen™ modules (consisting of stacked, buoyant TGUs) will be deployed in moored, underwater arrays on the same site. The inherent flexibility of this type of stacked, arrayed deployment allows ORPC to adapt its technology to a wide variety of sites, eliminating the need to develop site-specific devices and to rapidly and economically build out a site once the lengthy licensing/permitting process is completed. The ultimate generating potential of tidal energy in the entire Cook Inlet has not yet been determined. However, a recent study jointly funded by NOAA and AEA will provide an estimate of the power potential of Cook Inlet which will likely be in the hundreds of megawatts. Based on the relatively small footprint of the 3 MW project planned at Fire Island, it is apparent that ORPC’s East Foreland site alone may have the potential for 100 to 200 MW of generating capacity. Based on ORPC’s ADCP data collected at East Foreland, in the tidal currents at the East Foreland site it is estimated that ORPC technology will produce at least 2,798 MWh per 1 MW of installed nameplate capacity in the early years, and 3,439 MWh per 1 MW of installed nameplate capacity once the technology is fully commercial (in 2016 and beyond). For the 600 kW TidGen™ Array Project, ORPC anticipates at least 1,679 MWh electricity production per year. The electricity produced by this installation will be transmitted to ORPC’s on-shore station at the East Foreland come-ashore location via a submarine cable. Initial reconnaissance has identified potential come- ashore sites both north and south of East Foreland. There, the electricity will be power-conditioned in the on-shore station to grid-compatible three-phase power, and will be connected to the HEA power distribution or transmission infrastructure, ultimately tying into the Bernice Lake Substation. The Cook Inlet environment presents challenges that must be overcome, including ensuring that ice, particularly frazil ice, does not interfere with the TidGen™ Array Project. Initial investigations, however, suggest that the project’s deployment will be well below the range of either frazil ice or conglomerated surface ice. Another site-specific challenge is the heavy silt content of the Cook Inlet waters. It will be essential to ensure that this does not affect the design life of the TGUs, but since the TGU has very few moving parts, this should not be a major concern. UAA will complete materials testing of various technology components to identify and appropriately modify any materials showing vulnerability to silt erosion. ORPC, in partnership with UAA, was recently awarded a $240,000 U.S. Department of Energy award to fund this study. Mooring and foundations in the Cook Inlet environment will be another technical challenge. Alaskan companies such as PND Engineers, Inc., who have extensive experience in dealing with mooring issues in Cook Inlet oil and gas developments, will help overcome this challenge. See section 3.5 for further discussion of potential project risks and barriers. 4.3.2 Land Ownership Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 18 of 37 7/3//2012 The subsurface lands that will be used for mooring and power transmission systems are state property, and will thus be subject to appropriate Alaska Department of Natural Resources (DNR) land use permitting requirements. ORPC recently received its first submerged land use permit (valid until March 2014) from DNR for the deployment of scientific monitoring equipment at the East Foreland site. ORPC has already begun researching potential Right of Ways (ROWs) for the terrestrial portion of the power transmission system and has identified routes using either existing utility corridors or willing private landowners to transmit the power from the come-ashore location to the HEA distribution system or directly to the Bernice Lake Substation. 4.3.3 Permits Permits will be required for installation of the single-device TidGen™ Power System (funded through Round 4), and ORPC will reapply as needed to begin the TidGen™ Array Project. ORPC has the following permits for the East Foreland site: • DNR Submerged Land Use Permit: Required for deployment of scientific monitoring equipment; obtained in June 2011. No. LAS 280046. • FERC preliminary permit: Secures site for ORPC Alaska; applied for in July 2010 and officially noticed by FERC on March 11, 2011. The following additional permits will be applied for and received following submittal of this application, as they are necessary for work included in Round 4 funding: • FERC pilot project license: Allows for initial testing of hydrokinetic device in preliminary site area; the draft application will be filed by March 2013; the final pilot license application will be filed by January 1, 2014 with receipt of the license anticipated by June 2014. • Fish Habitat Permit (Alaska Department of Fish & Game): This permit requires a 50-day review period that includes a public notice and comment period coinciding with the Coastal Zone Management review. This permit will be applied for by February 2013 and procured by June 2013. • Army Corps of Engineers (ACOE) Title 10 permit: Requires 60-90 days for approval and Coastal Zone consistency for final authorization; permit will be applied for by January 2013 and procured by June 2013. • Alaska Department of Natural Resources (ADNR) Water Rights: Waived; only necessary for freshwater. • U.S. Coast Guard Notification: The U.S. Coast Guard will conduct a waterways assessment in conjunction with the ACOE permitting process and will recommend approval/disapproval. • ADNR submerged land use permit. This permit will allow use of submerged lands for the project works and will ultimately be transitioned into a submerged land lease to provide long term site control. 4.3.4 Environmental Threatened or Endangered Species and Habitat Of prime importance to the success of the TidGen™ Array Project is ensuring that it has no adverse impact on the Cook Inlet beluga whale population, which has recently been added to the endangered species list. To address the beluga issue, ORPC will continue to consult with NMFS to guarantee that the TidGen™ Array Project does not further compromise the recovery chances of the beluga population and to ensure that the project complies with the Endangered Species Act. ORPC initially located its pilot project, largely due to consultation with NMFS, to an area off of Fire Island known for its low beluga usage. Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 19 of 37 7/3//2012 NMFS was further encouraged by the relocation of the project to the East Foreland Area, and has continually suggested that an initial Cook Inlet pilot project would be more appropriate in this area (see Appendix F). ORPC has been proactively working to develop monitoring technology to ensure that any interactions between the beluga whales and the project are observed. In pursuing funding for this necessary technology development, in 2010 ORPC secured a $600,000 grant from the U.S. DOE to monitor beluga whale activity pre- and post-deployment with advanced passive acoustic monitoring (PAM) technology. Deployment and testing of these PAM devices in conjunction with continued visual monitoring at the Fire Island site began in August 2010. Over the winter of 2010-2011, the DOE-funded PAM devices and an additional PAM array deployed by the ADF&G led Team Cook Inlet Beluga Acoustics (Team CIBA) were deployed at the Fire Island site. ORPC recently completed a report comparing the various PAM devices used at Fire Island and presented the draft report to NMFS. NMFS concurred with the findings of the report that concluded that the Directional Autonomous Seafloor Acoustic Recorders (DASARs) purchased by ORPC under the DOE project provided rigorous PAM data to establish seasonal presence and absence of beluga whales at ORPC’s project sites in Cook Inlet. ORPC will thus be deploying two DASARs at the East Foreland site for the overwinter period from October 2012 to April 2013. On September 23, 2012 ORPC deployed the first DASAR at the East Foreland; this will be a short term four – week deployment to test the deployment, mooring, and retrieval systems, prior to the overwienter deployment exercise. Concurrently, as part of ORPC’s testing in Maine, ORPC and Scientific Solutions, Inc are experimenting with state-of-the-art Active Acoustic Monitoring (AAM) technology that promises to offer real-time project monitoring to document interactions between marine mammals such as the Cook Inlet beluga whales and the TidGen™ Array Project. Through the combination of these PAM and AAM devices, ORPC intends to positively monitor the project to provide both agency personnel and the general public with data on the interactions, if any, of beluga whales with the power system, a crucial step to ensuring the project is environmentally compatible with the Cook Inlet environment. ORPC has also engaged the guidance of Dr. Brandon Southall to provide insight on how best to collect data, monitor the Project, and interface with agencies to ensure the Project is compatible with the hopeful recovery of the Cook Inlet beluga whale population. Habitat Critical beluga habitat and salmon habitat are also of concern. ORPC’s East Foreland project is situated in Type 2 Critical Habitat for the Cook Inlet beluga whale population. Studies on this habitats will be conducted as required through consultation with NMFS and the USFWS. These will be included in a biological Assessment (BA) on the project that will be submitted prior to receipt of a license for the project. Information on beluga use of the habitat will be gathered through ORPC’s pre deployment monitoring efforts using PAM technology and focused and incidental visual observation techniques. Archaeological and Historical Resources ORPC will be in consultation with the State Historic Preservation Office (SHPO) to determine whether there are any archaeological or historical sites that will be impacted by the TidGen™ Array Project and will perform any necessary surveys. Wetlands There is no expected impact on or use of wetlands, since ORPC devices will be mounted underwater in the deepest Cook Inlet channels. All of the come ashore points as well as terrestrial power transmission system options currently under consideration avoid wetlands as well. Land Development Constraints Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 20 of 37 7/3//2012 The main land development constraints will involve the use of state subsurface lands, which will be addressed through the Alaska Department of Natural Resources land use permit, and the use of surface land to transmit power once it is delivered to shore. ORPC has already begun researching potential Right of Way (ROW) issues and has identified several possible overland routes that will utilize existing utility ROW corridors and willing private landowners for the terrestrial power transmission infrastructure that will tie the TidGen™ Array Project into the HEA grid. Telecommunications Interference There is no anticipated telecommunications interference as ORPC will design the project to have no impact on the Kenai Kodiak Cable Company’s fiber optic cable or any terrestrial transmission lines Aviation Considerations There are no aviation concerns. Visual and Aesthetic Impacts Because ORPC power systems are fully submerged underwater, they are completely invisible from the surface, and have no effect on natural water landscapes. 4.4 Proposed New System Costs and Projected Revenues (Total Estimated Costs and Projected Revenues) 4.4.1 Project Development Cost The complete Cook Inlet TidGen™ Project through construction and the first year of operation is anticipated to cost $8,696,494. Of this, $4,673,404 is attributed to the addition of an array of three TidGen™ devices and one year operation of the TidGen™ Power System. ORPC is requesting $2 million from AEA to complete the TidGen™ Array Project and has already been awarded $2 million from AEA Round 4 to complete the installation and operation of the single-device TidGen™ Power System. ORPC’s matching funds will amount to a total of $4,696,494 towards the entire project. The projected capital cost of the TidGen™ Array Project is anticipated to be $7,283,777. ORPC anticipates spending $1,412,717 on the project development costs. 4.4.2 Project Operating and Maintenance Costs The annual maintenance will require raising each TidGen™ device in the power system to the surface for cleaning and inspection. Major maintenance will involve towing the devices to shore to do a generator overhaul, general tune up, and bearing and seal replacement. ORPC also anticipates incurring significant environmental monitoring expenses, especially in the early years of the project. Based on recent experience with the Cobscook Bay Tidal Energy Project, ORPC has carefully projected O&M costs for the TidGen™ Array Project. Initially the annual O&M budget, with environmental monitoring costs levelized (in 2012$), will be $600,000 for the 600 kW TidGen™ Array Project, however as ORPC gains experience in operation and Cook Inlet and environmental monitoring costs are reduced with continued operation this is forecast to fall to $208,000 by 2018, approximately 12 cents per KWh, with virtually all of these expenses incurred in Alaska for parts, supplies, labor, and service contracts to local marine service companies. Once the project is expanded to 5 MW, annual O&M costs are projected to be $1.4 million per year (in 2012$), approximately 9 cents per KWh. At 100 MW, these costs will increase in absolute terms to $13.5 million (in 2011$), decreasing on a per KWh basis to approximately 6.5 cents per KWh. ORPC is not anticipating applying for grant funding for this portion of the project but rather plans to support these Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 21 of 37 7/3//2012 costs through power sales, and other funding sources. 4.4.3 Power Purchase/Sale The potential buyers for the electricity generated by the TidGen™ Array Project and the larger Cook Inlet Tidal Energy Project include all the local Railbelt utilities. At this point, however, Homer Electric Association is the primary utility being considered, as they own the nearby electrical infrastructure. A power purchase agreement (PPA) will be negotiated in the feasibility phase of the TidGen™ Array Project. Currently avoided costs, the benchmarks for PPA’s in Alaska, for Railbelt utilities range from $0.05 per kWh to $0.135 per kWh. For the Project to be economically attractive to potential investors, the electricity generated needs to be sold at rates above the current avoided cost of fossil fuel based generation in Alaska. The cost competitiveness of ORPC’s tidal energy generation relies initially on federal and state subsidies, tax rebates, waivers, and incentives available to ORPC or to the utilities distributing ORPC’s renewable energy. Currently, the cost of electricity generated from ORPC’s systems exceeds the wholesale price of electricity in most markets in the U.S., especially those heavily dependent on fossil fuels, such as Alaska; therefore, without incentives, ORPC’s power systems may not produce electricity at rates that make economic sense to utilities that purchase or distribute the electricity. In Maine ORPC’s Project received a $0.215/KWh hour rate to be escalated 2% annually. This rate allowed ORPC’s project to receive a reasonable rate of return to attract private investment into the project. Since the Cook Inlet Tidal Energy Project will be built out in stages over a multi-year period, different phases of the project will attract varying returns as certain common costs can be amortized over a larger base, and high power prices and sales of renewable energy attributes will likely become available for later project stages, enhancing project returns. Based on a cash flow analysis of the 5 MW Cook Inlet Tidal Energy Project, ORPC has determined an internal rate of return on pre-tax cash flow of 12.5% to be a reasonable goal to attract private investment capital to fund the capital requirements of the expanded project. As a result the power sales rate would need to be set at an initial price of $0.271 per kWh in 2012 dollars. With further up front grant funding this power sales rate would be reduced: for instance if the REF Round 6 funding is secured the rate would fall to $0.257 per kWh. This rate is currently in excess of HEA’s avoided cost or electricity and is well above the $0.099/kWh negotiated in the long term contract for the Fire Island Wind Project. However, it is very near to HEA’s projected retail rate of power. ORPC’s project is much smaller than the Fire Island Wind Project and would require only a relatively modest annual amount to fund an incentive to make up the difference between market rates and the Cost of Power from the Project. ORPC is thus considering pursuing a similar power incentive to what was approved in Maine. Even at 5 MW, extrapolated over the customer base in Maine ORPC’s project had only a $0.15 annual impact on rate payer bills. In Alaska it would be beneficial for the State to consider a fund to offer long term power premiums to emerging energy industries such as tidal to provide an incubator environment while the technologies achieve commercial scale and grid parity. ORPC anticipates power from ORPC Power Systems to be competitive with any new generation sources by 2020. ORPC and HEA have also signed a Joint Development agreement to agree to work in good faith towards a mutually agreeable power purchase agreement by 2014. 4.4.4 Project Cost Worksheet Please fill out the form provided below Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 22 of 37 7/3//2012 Renewable Energy Source The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. Annual average resource availability. 95% average annual availability Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel) Existing Energy Generation and Usage a) Basic configuration (if system is part of the Railbelt 1 i. Number of generators/boilers/other grid, leave this section blank) ii. Rated capacity of generators/boilers/other iii. Generator/boilers/other type iv. Age of generators/boilers/other v. Efficiency of generators/boilers/other b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank) i. Annual O&M cost for labor ii. Annual O&M cost for non-labor c) Annual electricity production and fuel usage (fill in as applicable) (if system is part of the Railbelt grid, leave this section blank) i. Electricity [kWh] ii. Fuel usage Diesel [gal] Other iii. Peak Load iv. Average Load v. Minimum Load vi. Efficiency vii. Future trends d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] ii. Electricity [kWh] iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other Proposed System Design Capacity and Fuel Usage 1 The Railbelt grid connects all customers of Chugach Electric Association, Homer Electric Association, Golden Valley Electric Association, the City of Seward Electric Department, Matanuska Electric Association and Anchorage Municipal Light and Power. Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 23 of 37 7/3//2012 (Include any projections for continued use of non-renewable fuels) a) Proposed renewable capacity (Wind, Hydro, Biomass, other) [kW or MMBtu/hr] 600kW (Scope to expand to 5 MW by end of 2016, to 20 MW b) Proposed annual electricity or heat production (fill in as applicable) i. Electricity [kWh] 1,679,000 kWh ii. Heat [MMBtu] c) Proposed annual fuel usage (fill in as applicable) i. Propane [gal or MMBtu] ii. Coal [tons or MMBtu] iii. Wood [cords, green tons, dry tons] iv. Other Project Cost a) Total capital cost of new system $7,283,777 b) Development cost $1,412,717 c) Annual O&M cost of new system $208,000 d) Annual fuel cost Project Benefits a) Amount of fuel displaced for i. Electricity 17,864 Mcf Natural Gas per Year for the 600 KW Project (growing to 4. million Mcf at 100 MW stage of the expanded project) ii. Heat iii. Transportation b) Current price of displaced fuel $120,431 in 2015 or $1,593,876 on an NPV basis (Based on 6.74 per Mcf – 2015 value of 2009 CEA/CP Gas Contract using PACI) (NPV Calculations are performed using a life of 15 years and a discount rate of 3%) c) Other economic benefits Social Cost of Carbon Avoided: $24,268 in 2015 or 367,071 on an NPV basis (948 metric tons of CO2 avoided divided by 0.05306 metric tons of CO2 per M of Natural Gas Multiplied by 1.36 $/Mcf, which is the 2015 carbon price supplied in the ISER 2012_07 Fue Pricing Model) (NPV Calculations are performed using Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 24 of 37 7/3//2012 a life of 15 years and a discount rate of 3%) (2) O&M Component of Alaska Utility’s Generation Cost: $8,395 in 2015 or $105,355 on an NPV basis (Based on 0.005 $ per kWh – 2015 value of 2009 CEA/CP Gas Contract using PACI) (NPV Calculations are performed using a life of 15 years and a discount rate of 3%) d) Alaska public benefits $14.805 million. The project will result in 28 construction period jobs to be created and sustained during the 18- month construction period. This results in $2.52 million of direct earnings and $3.402 million of induced output. The project will also result in 4 operating period jobs to be created and sustained for the life of the Project. This results in $3.78 million of direct earnings and $5.103 million of induced output over an assumed 15-year project life. (The job numbers were derived using Marine and Hydrokinetic Jobs and Economic Development Impact Model, designed in 2010 by Marshall Goldberg of MRG & Associates under contract to the National Renewable Energy Laboratory. Direct earnings were calculated using an annual average salary level of $60,000, which is ORPC’s recent experience, and the induced output was derived using a 1.35 multiplier for rural Alaska, the midpoint of a range. (ORPC obtained from the Institute of Social and Economic Research, University of Alaska, Anchorage) Power Purchase/Sales Price a) Price for power purchase/sale $0.271 per KWh in 2011 dollars (Calculated on a 5 MW Project Basis) (Should Round 6 funds be awarded to the project, the power purchase rate would be reduced to $0.257 per KWh) Project Analysis a) Basic Economic Analysis Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 25 of 37 7/3//2012 Project benefit/cost ratio Ratio of Generation Benefits to Project Costs: -0.13
 Ratio of Generation Benefits Plus Alaska Jobs Induced Benefits: +1.58 Payback (years) NA for 600kW Project, but if expanded to 100MW 11.15 years 4.4.5 Proposed Biomass System Information Please address the following items, if know. (For Biomass Projects Only) • What woody biomass technology will be installed (cord wood, pellets, chips, briquettes, pucks). • Efficiency of the biomass technology. • Thermal or electric application. • Boiler efficiency. • Displaced fuel type and amount. • Estimated tons of wood pellets or chips (specify) to be used per year, and average moisture percentage. • Estimated cords of wood to be used per year, specify whether dry or green and the moisture percentage. • Ownership/Accessibility. Who owns the land and are their limitations and restrictions to accessing the biomass resource? • Inventory data. How much biomass is available on an annual basis and what types (species) are there, if known? SECTION 5– PROJECT BENEFIT ORPC's Cook Inlet Tidal Energy Project promises to bring long term, diversified benefits to the state of Alaska and its people. Through the TidGen™ Array Project, ORPC will develop and install a power system that produces clean, reliable, schedulable and reasonably priced electrical energy from locally available hydrokinetic resources, replacing environmentally unsound, volatile priced fossil fuels. Significant, far-reaching benefits include: (1) developing Alaska’s world-class tidal energy resources using the most environmentally benign form of electricity generation utilizing U.S. technology—and by doing so, attracting hundreds of millions of dollars of new investment to the state; (2) creating new high-paying technical jobs; (3) bringing in significant new tax revenues; and (4) creating numerous non-economic public benefits for Alaskans. Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 26 of 37 7/3//2012 Table 1 below summarizes the numerous quantifiable benefits of the 600 kW TidGen™ Array Project and subsequent expansion of the Cook Inlet Tidal Energy Project. As an initial stage of a much larger project, the TidGen™ Array Project should be viewed as a pilot project. On a dollars-per-MW basis, the pilot will be extremely expensive compared to the local utility’s existing generation options, primarily due to the high costs of permitting and licensing (which must be amortized over a very small project), environmental monitoring, and other economies of scale, which will come with future project installations. In addition, at fuel prices published in AEA’s Renewable Energy Fund Round 5 Model, in the foreseeable future, no hydrokinetic project would be able to compete with Alaska’s existing natural gas based generation options. However, when the external environmental cost of fossil fuels, avoidance of carbon offset payments, job creation, ORPC’s investment, and the Alaskan content of the project’s O&M expenditures are taken into account, even the 600 kW TidGen™ Array Project becomes economically attractive. Moreover, as Table 1 illustrates, once ORPC expands the generating capacity of the Cook Inlet Tidal Energy Project to 100 MW, the project’s advantages are more than considerable. Generation costs avoided by Alaskan utilities calculated in Table 1 are the product of electricity generated by the proposed project (in kWh) and natural gas costs, social costs of carbon, and O&M costs on a per- kWh basis found in AEA’s Renewable Energy Fund Round 5 Model (Railbelt south of Alaska Range). These values are calculated annually for a 15-year project life for the pilot (600 kW and 5 MW) phases of the Project and for a 25-year project life for the commercial phases. A net present value calculation at a 3% discount rate is then performed. For a 600 kW facility, the NPV of the generation costs for Alaskan utilities is calculated to be $2,066,302. The generation costs of the proposed TidGenTM Array Project are restricted to O&M costs, as ORPC’s hydrokinetic projects use no fossil fuels. For a project of this size (600 kW) and for the stage of commercialization of this project, O&M costs are quite high, at $0.016 per kWh. The NPV of these costs over a 15-year project life at 3% is $3,153,383. The net benefit of the proposed project is thus -$1,087,080 (Section 2.7.5). As Table 1 illustrates, “Generation Benefits” gradually increase to +$270,741,427 as the Cook Inlet Tidal Energy Project expands to 100 MW. ORPC conducted its own internal economic impact analysis to assess the effect of the project on the Alaska economy. It then verified its analysis using the Marine and Hydrokinetic (MHK) Jobs and Economic Development Impact Model (JEDI), designed in 2010 by Marshall Goldberg of MRG & Associates under contract to the National Renewable Energy Laboratory (NREL). Using NREL’s MHK JEDI model, ORPC has quantified the number of jobs that each stage of the project would generate. The TidGen™ Array Project is expected to generate 28 construction period jobs. Based on its recent hiring experience, ORPC forecasts that jobs in this sector will pay an average of $60,000 per year, resulting in an aggregate payroll of approximately $2.52 million during the 18- month construction, fabrication and installation. During operation, the project would generate four permanent jobs, resulting in $3,780,000 of direct earnings over a 15 year period. The recipients of these direct earnings will in turn spend money, creating multiplier effects that will bring even more economic benefits and induced output to the region, leading to additional new jobs, increased wages, and more personal disposable income. The Institute of Social and Economic Research (ISER), part of UAA, states that for rural Alaska, this multiplier effect is between 1.3 and 1.45 (please see http://www.iser.uaa.alaska.edu/publications/client/afnjobs/ecmulti.pdf). Table 1 assumes a multiplier of 1.35, resulting in construction period induced output of $3.4 million and operating period induced output of $5.1 million over a 15 year period. In total, the Alaska Jobs Induced Benefits for the 600 kW project are $14,805,000. Generation Benefits (-$1,087,080) and Alaska Jobs Induced Benefits (+$14,805,000) result in $13,717,920 total benefits for the project. Compared to total project costs of $8,696,494, the benefits to costs ratio of the project is 1.58. As the project expands, the number of jobs created and sustained grows accordingly. By the time it approaches 20 MW, the project will have created hundreds of jobs and hundreds of millions of dollars of jobs related benefits for Alaska. Table 1 Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 27 of 37 7/3//2012 shows the number of jobs created in each phase of the project as it expands to 100 MW and the corresponding benefits. Table 1. Cook Inlet Tidal Energy Project Benefits and Costs Project Size 600 KW 5.05 MW 20.45 MW 100.15 MW Project Life Assumed 15 15 25 25 Project Benefits Generation Benefits (NPV @ 3%) Generation Cost Avoided by Alaskan Utilities $2,066,302 $14,833,394 $102,484,692 $407,704,316 Less: Generation Costs of Proposed Project $3,153,383 $12,137,682 $45,495,275 $136,962,889 Generation Benefits -$1,087,080 $2,695,712 $56,989,417 $270,741,427 Alaska Jobs Induced Benefits Construction Period Jobs Created 28 95 135 677 Earnings During Construction 2,520,000 14,265,000 24,210,000 121,851,000 Output Induced by Construction Period Jobs 3,402,000 19,257,750 32,683,500 164,498,850 Operating Period Jobs Created/Sustained per Year 4 16 33 155 NPV of Annual Earnings During Operation 3,780,000 14,310,000 49,000,000 233,033,333 NPV of Annual Output Induced by Operating Period Jobs 5,103,000 19,318,500 66,150,000 314,595,000 Alaska Jobs Induced Benefits $14,805,000 $67,151,250 $172,043,500 $833,978,183 TOTAL PROJECT BENEFITS $13,717,920 $69,846,962 $229,032,917 $1,104,719,610 Project Costs Capital Cost $7,283,777 $38,197,329 $138,104,760 $592,316,388 Development Costs $1,412,716 $2,239,927 $3,550,247 $4,948,964 TOTAL PROJECT COSTS $8,696,494 $40,437,256 $141,655,007 $597,265,352 Benefit to Cost Ratios Generation Benefits / Cost Ratio -0.13 0.07 0.40 0.45 All Benefits/Cost Ratio 1.58 1.73 1.62 1.85 The capital and development costs for each stage of the ORPC project include all expenditures that occurred for the prior stage of the project. Utility Generation is calculated using Railbelt South of Alaska Range prices supplied by AEA, which include fuel costs, social cost of carbon and local O&M costs. Cost of ORPC generation consists of ORPC's O&M Costs which start at 12 cents per KWh for the 600 KW project, declining to 6.5 cts/KWh (2011$) for the 100.15 MW and larger projects. The numbers for construction and operating period jobs for the 600 KW case and the 5.05 MW case were calculated using the Marine and Hydrokinetic Jobs and Economic Development Impact Model designed in 2010 by Marshall Goldberg of MRG & Associates under contract to the National Renewable Energy Laboratory. For the 20.45 MW and 100.15 MW cases the jobs numbers are ORPC estimates. Earnings are assumed to be $60,000 on average per employee, which is ORPC's recent experience. Output induced by the jobs is calculated using a 1.35 multiplier (source: ISER, referenced on p. 21), Fossil Fuel Displacement ORPC’s proprietary technology can contribute significantly to reducing the use of fossil fuels and their associated polluting greenhouse gas and other emissions (NOx, SOx). Table 2 illustrates the annual Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 28 of 37 7/3//2012 amounts and costs of natural gas displaced and the amount of CO2 emissions avoided over the next ten years as the first and subsequent stages of the Cook Inlet Tidal Energy Project progress. By the end of 2015, as Table 2 illustrates, the TidGen™ Array Project will displace almost 18 million cubic feet of natural gas, corresponding to $120,431 of cost savings and 948 tons of avoided CO2 emissions for the state. By 2023, the subsequent stages of the Cook Inlet Tidal Energy Project will successfully displace approximately 4.2 billion cubic feet of natural gas each year, saving the state $30.2 million in fuel costs and avoiding 221,205 tons of CO2 emissions annually. This analysis uses Alaska Energy Authority’s projections for natural gas costs (2009 CEA/CP Gas Contract using PACI), but because natural gas costs have been historically volatile, the cost savings over time may be substantially greater, since ORPC’s proprietary technology uses absolutely no fossil fuels. The relatively rapid increase in capacity shown in Table 2 is possible because ORPC’s proprietary technology is scaled up through replication, rather than by building increasingly larger or distinctly different units. The core of the technology is always the TGU. Once ORPC installs the first successful TidGen™ Array Project and obtains its FERC operating licenses for full development of the site, expanding beyond 5 MW will incur limited additional development costs or permitting delays. Table 2. Fossil Fuel Displacement, Fuel Cost Savings, CO₂ Emissions Avoided, and Carbon Costs Avoided as a Result of ORPC's Cook Inlet Tidal Energy Project Year 2014 2015 2017 2020 2023 Megawatts of Installed Capacity in Operation 0.15 0.6 5.05 20.45 100.15 Kilowatt-hours Generated by ORPC 337,768 1,678,988 17,364,984 82,837,225 391,819,299 Natural Gas Use Avoided by AK Utility (Using AEA's 10,640 Btu/Kwh) (Mcf) 3,594 17,864 184,763 881,388 4,168,957 2009 cea/cp Gas Contract using PACI (Source: ISER 2012 07 fuel price projection($/Mcf) $6.64 $6.74 $6.91 $7.10 $7.24 Natural Gas Cost Avoided $23,873 $120,431 $1,276,755 $6,259,815 $30,178,484 20 Yr NPV of Natural Gas Cost Avoided @ 3% Not Calculated $1,593,876 $18,222,741 $76,626,874 $302,593,118 Avoided Metric Tons of CO₂ Emissions 191 948 9,804 46,766 221,205 Carbon Price (Source: ISER 2012 07 Fuel price Projection SSC mid) ($/Metric ton) 25.64 26.41 28.02 30.62 33.64 Carbon Costs Avoided $4,897 $25,037 $274,708 $1,431,975 $7,441,336 20 Yr NPV of Carbon Costs Avoided @ 3% Not Calculated $367,071 $4,837,565 $20,906,915 $85,665,488 Job Creation and Capital Investment The TidGen™ Array Project is an essential part of the commercialization of ORPC’s proprietary technology at the most robust tidal sites in the United States. From 2013 through 2022, ORPC anticipates installing 100 MW of capacity through the various stages of the Cook Inlet Tidal Energy Project, which at a cost of approximately $30,000 for the first kilowatt to $6,000 for the 100,000th kilowatt will correspond to approximately $597 million of capital investment in Alaska (Table 1). ORPC’s investment in Alaska will also result in substantial job creation and support. The success of the ORPC’s project development subsidiaries has depended heavily on its ongoing dialogue with the local communities at all of its project sites. ORPC first proved its positive economic impact on local communities in Maine through its 2008 prototype TGU project, which at its height employed 37 direct hire and local subcontractors. Next, the fabrication, assembly, installation and testing of the Beta TidGen™ Project supported 40 to 60 jobs, and has introduced several million dollars into the local Maine economy. Data from ORPC’s commercial TidGen™ Power System installation in Maine will further inform economic benefits from the TidGen™ Array Project. Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 29 of 37 7/3//2012 Using the Marine and Hydrokinetic Jobs and Economic Development Impact Model designed in 2010 by Marshall Goldberg of MRG & Associates under contract to the National Renewable Energy Laboratory, ORPC estimates that in Alaska within 18 months, at the peak of fabrication and installation, the TidGen™ Array Project will support 25 to 30 new and existing jobs across a variety of skill levels – scientific/engineering R&D, manufacturing and assembly, and marine services sectors – driven by R&D; the procurement of components; the assembly, and deployment and ongoing monitoring of equipment. Over the long-term operating period, the TidGenTM Array Project should result in four to five new jobs. Based on its recent hiring experience, ORPC forecasts that jobs in this sector will pay an average of $60,000 per year, resulting in an aggregate payroll of approximately $2.25 to $2.70 million during the 18-month construction, fabrication, and installation period, and an average of $240,000 annually during long-term operation. The recipients of this income will in turn spend money, creating multiplier effects that will bring even more economic benefits to the region, leading to additional new jobs, increased wages, and more personal disposable income. By 2023, ORPC will have invested hundreds of million dollars of capital in Alaska, resulting in 670 jobs at the peak of project construction and 155 jobs over the long term. ORPC currently has a staffed office in Anchorage and has already begun expanding staff with the development of the first Alaskan projects (Cook Inlet, Igiugig, and Nenana), which are currently being permitted and have retained local contractors for much of this activity. ORPC intends to hire local fabricators, assembly and deployment contractors, a full time project manager, and technical personnel. In addition, local marine service companies will be contracted for deployment and maintenance; local scientific companies will be used for site analysis and environmental impact assessments; local engineering firms will be contracted for design of mooring and power transmission systems, and the local ports will be contracted for TidGen™ Array Project support. Final assembly of TidGen™ and OCGen™ Power Systems for Cook Inlet and subsequent projects will be done at the Port of Anchorage and Port MacKenzie with Alaskan labor. Local ports and marine service industries will secure significant long term contracts in the installation, operation, and maintenance of the TidGen™ and OCGen™ systems, and local scientific companies will be utilized to continually monitor and refine the installations. ORPC has partnered with many Alaskan companies and institutions, such as TerraSond LTD, LGL Alaska Research Associates, Inc., Aquacoustics, PND Engineers, Inc., March Creek, local marine service companies, and local ports (various letters of support are in Appendix B). In addition, the University of Alaska, Anchorage and the Alaska Center for Energy and Power are engaged as partners in the Cook Inlet TidGen™ Project, creating opportunities for educators, researchers and students alike by bringing a tidal energy focus to the university system. Operation and Maintenance: ORPC has carefully projected O&M costs for the TidGenTM Array Project. After the initial years of operation the annual O&M budget will be $208,000 for the TidGenTM Array Project, (approximately 12 cents per KWh), increasing to approximately $1.4 million once the Cook Inlet Tidal Energy Project expands to 5 MW (approximately 9 cents per KWh ) and $13.5 million (2011 dollars) for the 100 MW project (approximately 6.5 cents per KWh). Essentially all of the O&M budget for the Cook Inlet Tidal Energy Project will be spent locally in Alaska. Revenues The TidGen™ Array Project will be interconnected to the Railbelt Grid through HEA, and the electricity generated will be delivered to their customers. As the Cook Inlet Tidal Energy Project expands, electricity could be delivered to other Railbelt utilities as well. For the Project to be economically attractive to potential investors, ORPC will need revenue support above the current “avoided cost” by the State of Alaska and Alaska’s local utilities to establish a power purchase/sales price that takes the externalities of fossil fuels and utilization of a local renewable source into account. Assuming a power purchase agreement for the 5 MW Project, the Project will need to sell its power at an initial price of at least $0.271per kWh (in 2011 dollars) to provide the minimum rates of return and cash flows to attract private investment capital and debt to fund the project’s capital requirements. If the Round 5 grant funds are awarded this power purchase rate would be reduced to $0.257 per kWh. Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 30 of 37 7/3//2012 This tariff level does not include additional premia, prevalent in other parts of the country, for the renewable, emission free attributes of the energy sold and may be below what would be needed if additional renewable energy attributes do not become available. If Alaska or the nation adopts a Renewable Portfolio Standard, then the additional revenue from the sale of renewable energy credits could enhance the revenue stream to ORPC and economic appeal of the TidGenTM Array Project. Table 3 below shows ORPC’s forecast for revenues from electricity sales as the Cook Inlet Tidal Energy Project progresses, growing from $419,747 in 2015 to $47 million in 2024 and beyond. Table 3. Revenues from the Multi-Stage Cook Inlet Tidal Energy Project Year of Operation 2014 2015 2018 2020 2024 Megawatts of Installed Capacity in Operation (1 yr after Installation) 0.15 0.6 5.05 20.45 100.15 Kilowatt-hours Generated by ORPC 337,768 1,678,988 17,364,984 82,837,225 391,819,299 Power Price to be Negotiated ($/kWh) 0.27 0.25 0.21 0.18 0.12 Electricity Sales Revenues $91,197 $419,747 $3,646,647 $14,910,701 $47,018,316 Production Tax Credit ($/KWh) 0.011 0.011 0.011 0.011 0.011 PTC Revenues $3,715 $18,469 $191,015 $911,209 $4,310,012 TOTAL REVENUES $94,913 $438,216 $3,837,661 $15,821,910 $51,328,328 Potential Additional Annual Incentives (i.e. tax credits) Marine and hydrokinetic energy production with a minimum capacity of 150 kW is eligible for federal renewable electricity production tax credits (PTC) of $0.01 per kWh. Table 3 above shows the PTC contributing an additional annual incentive of $18,469 in 2015, growing to about $4.3 million by 2023. ORPC anticipates that future tax credits will increase to match the $0.02 per kWh currently offered for wind and biomass projects, leading to higher all-in sales revenues to ORPC and shorter payback periods. Potential Additional Annual Revenue Streams (i.e. green tag sales or other renewable energy subsidies or programs that might be available) Carbon Offset Payments: As shown in Table 2, the 600 kW TidGenTM Array Project results in the avoidance of fossil fuel based generation of 1,678,988 KWh of electricity by Alaskan utilities. Accordingly, using ISER’s 2012_07 fuel price projection model, ORPC calculates the social cost of carbon avoided by these utilities to be $24,268, increasing to $7,174,286 for the expanded 100 MW project. On a present value basis (at a 3% discount rate), these savings correspond to $367,071 for the TidGenTM Array Project and to $85,665,488 for the expanded 100 MW project. Investment Tax Credits: On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009. Section 1603 of the Act’s tax title appropriates payments to qualified applicants in an amount generally equal to 10% or 30% (depending on property type) of a property’s basis. To qualify, an energy property must be placed in service during 2009 or 2010 (or after 2010 if construction was begun on the property during 2009 or 2010). On July 20, 2011, twenty-four state governors, members of the bipartisan Governors’ Wind Energy Coalition, asked the Obama Administration to extend the investment tax credits and production tax credits for renewable energy for seven years. It is likely therefore that these deadlines will be extended, as they Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 31 of 37 7/3//2012 have been for other renewable energy technologies in the past. ORPC expects to take advantage of this benefit, reducing the capital investment required in the project and enhancing the economic returns to project investors. Renewable Energy Credits: Along with carbon offsets and other incentive programs, Renewable Energy Credits (REC) are part of a growing movement. Also called Green Tags or Tradable Renewable Certificates, RECs are certificates issued by a government agency to a power company (such as ORPC) that utilizes environmentally friendly methods of generating electricity. Potential RECs on the order of $0.04 per kWh would add $67,160 of annual revenues for the TidGenTM Array Project and $15.7 million annually for the 100 MW expanded project. Since ORPC has already taken PTCs (in lieu of investment tax credits) of $0.011 per kWh into account, to be conservative, no RECs are shown in Table 1. Payback Period Total payback period corresponds to the amount of time required for annual operating income to accrue sufficiently to cover the cumulative installed project costs of adding capacity to the system. Calculating with investment tax credits (ITC) rather than with PTC effectively reduces the capital cost by about 30%. Although the ITC is scheduled to expire in several years, it has been extended for eight years for the solar industry, and ORPC assumes that it will be similarly extended for the tidal energy industry. Assuming 30% ITC, the project payback period is 11.15 years (Table 4). Table 4. Cook Inlet Tidal Energy Project Payback Calculation ($000) End of Year: 2014 2016 2018 2020 2022 2024 2026 Operating Year Number: 1 2 & 3 4 & 5 6 & 7 8 & 9 10 & 11 12 & 13 Assumptions: MW Added 0.15 1.05 6.65 12.6 46.4 33.3 0 Total MW in Operation 0.15 1.2 7.85 20.45 66.85 100.15 100.15 Cost of New MW $4,023 $10,709 $43,640 $83,283 $271,099 $184,511 $0 Investment Tax Credit Assumed 30% MWH Produced 338 5,620 45,302 134,469 415,799 783,639 783,639 Sales Price per KWH $0.27 $0.25 $0.21 $0.18 $0.16 $0.14 $0.13 Operating Income Calculations ($000): Revenues from Electricity Sales $91 $1,405 $9,513 $24,204 $66,527 $109,709 $101,873 O&M, Environmental Monitoring, Insurance and Mgmt Costs 457 1,766 4,554 8,752 22,788 42,444 44,305 Operating Income (Excludes PTC) ($365.74) ($361) $4,959 $15,452 $43,740 $67,265 $57,568 Payback Calculations ($000): Beginning Project Costs 0 3,176 10,749 31,654 54,691 125,011 17,498 Plus: Incremental Project Costs 4,023 10,709 43,640 83,283 271,099 184,511 0 Less: Investment Tax Credit 1,207 3,213 13,092 24,985 81,330 55,353 0 Less: Operating Income ($365.74) ($361) $4,959 $15,452 $43,740 $67,265 $57,568 Ending Project Costs 3,182 11,033 36,338 74,500 200,720 186,904 -40,070 2014 2016 2018 2020 2022 2024 2026 Payback Years NA for the 600 KW TidGen Project Payback Years 11.15 for the Expanded 100.15 MW Cook Inlet Tidal Energy Project Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 32 of 37 7/3//2012 Non-Economic Public Benefits to Alaskans (Over the Lifetime of the Project) Tidal energy represents one of the most environmentally benign and potentially cost effective methods for generating electricity, and Alaska’s world-class tidal energy resources are as robust as any in the United States. Because these resources’ power density is so high, developing them is both technically and environmentally appealing. Working in collaboration with ORPC, the University of Alaska, already widely recognized for excellence in the fields of environmental science and power generation, will gain even more technical experience through its connection to a world class, first of its kind green power resource like the TidGen™ Array Project. In the long run, with the mass production of ORPC’s proprietary technology, many areas of rural Alaska with high energy costs will become new markets for this technology, at prices that will be attractive compared to those of existing power technologies. Numerous sites in the Gulf of Alaska, the Aleutian Islands and Southeast Alaska have already demonstrated exceptional tidal energy potential. As ORPC develops this industry and capacity within the state of Alaska, it will also expand and contribute its knowledge and skills toward the development of new projects around the world. In this way, the TidGen™ Array Project will help to make Alaska the center of tidal energy generation expertise. Alaska, which is located along major shipping and future circumpolar routes, and which possesses the second highest tidal range in the world (Cook Inlet) as well as an estimated 95% of the nation’s total tidal power potential (estimated at an astounding 109 TWh per year) is perfectly situated to become a central figure in the world's tidal energy industry. SECTION 6– SUSTAINABILITY Business Structure ORPC’s business plan includes the goal of developing tidal and hydrokinetic technology and projects to serve the Railbelt and rural Alaskan needs. To accomplish this, ORPC is pursuing a two pronged approach: 1) develop utility-scale technology that delivers emission-free, predictable, reliable electricity to the Railbelt energy grid at a price that is competitive with existing and future power generation options; and 2) concurrently develop a rural micro-gird scale technology that will be portable, easy to deploy and maintain with rural Alaskan infrastructure, and that will be price-competitive with existing diesel electrical generation systems as well as future energy options. The rural micro-grid technology is the RivGen™ Power System, which will be deployed through ORPC’s EETF funded demonstration at Igiugig and further technology development at ORPC’s Nenana site. The utility-scale development will take place in Cook Inlet beginning with the TidGen™ Array Project. ORPC through business discussions with HEA is currently exploring options for the business structure that will be best suited to the Cook Inlet Tidal Energy Projects. This will likely either be an IPP structure or a private industry/utility partnership, yet to be finalized as the two entities learn how best to collaborate on the project. In the early phases of the Cook Inlet projects, ORPC has focused on the preparation needed to develop the world-class tidal energy that exists there. During this period, company staffing consisted of two Alaskans. The Alaska Projects Director, Doug Johnson, continues to lead strategic development, developing and managing the relationships with communities, partners and agencies that are needed for successful business growth through new projects. The Alaska Director of Project Development, Monty Worthington, manages the day-to-day activities that ensure project success. Mr. Worthington has coordinated the work of many local firms under contract to assist with site assessment and permitting for the TidGen™ Array Project. ORPC has since hired two additional employees in Alaska to provide overall administrative support and supervise RivGen™ projects. A project manager for the Cook Inlet projects will be hired by 2014. Upon completion of the early phases of ORPC’s projects in Cook Inlet, a new organizational structure will be developed with a detailed staffing plan to support the assembly, deployment and operation of the Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 33 of 37 7/3//2012 TidGen™ Power System. TidGen™ Array Project testing will take place over a full year; upon its completion, ORPC will develop the pilot project at the East Foreland in stages to 5 MW, operate this for several years to collect the data necessary to inform a commercial project, and then develop the site to its full potential through a commercial project (100 MW or more). Several Alaska-based companies have contributed to the feasibility and reconnaissance work on the project, and will be contracted for deployment and maintenance of the system once it is in place. Power sales agreements with HEA and other local utilities will be developed and executed to assure the economic sustainability of ORPC’s projects in Cook Inlet. ORPC has entered into early conversations with HEA and other utilities and continues to provide them with periodic updates. Subsequent expansion of OCGen™ Power Systems within the Cook Inlet site will take place as funding is secured and production is ramped up. During this period, the business structure will change from a development company model to an operating company model. As Cook Inlet settles into a power production mode, ORPC will develop other tidal and river sites throughout the state and systematically bring them into production. Funding of Maintenance and Operation ORPC will fund TidGen™ Project maintenance by reinvesting revenue generated by the project back into its O&M. Revenue will be diverted to support this function before being utilized in any other aspect of ORPC’s business in Alaska. If needed, ORPC can also utilize funds from its parent company to subsidize any lack of internal revenue during the TidGen™ Array Project’s development. Operational Issues ORPC has developed the following table to address these potential issues, similar to operational issues in the marine industry, and the contingency plan associated with each: Contingency Probability Impact Mitigation Response TidGen™ TGU complete breakaway from bottom support frame Improbable TGU floats to the surface and becomes a navigation hazard High safety factor on attachment of TidGen™ TGU to bottom support frame and a pressure activated GPS beacon to notify control center and track position Recover TGU and repair TidGen™ TGU partial breakaway from bottom support frame Low Reduced TGU output and efficiency High safety factor on attachment to bottom support frame Recover TGU and repair Foreign object strikes TGU Low No impact on TGU - No loss of output Structural damage to TGU - No loss of output Structural failure of TGU- loss of TGU output Device operates at depths below floating objects and above the ocean floor Device is designed to operate at partial output None Recover and effect repairs Recover and replace while repairs are effected Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 34 of 37 7/3//2012 Flotsam and jetsam entangles TGU Low Loss of TGU output - reduced device output Device is designed to operate at partial output; notice to mariners of device deployment area Clear debris Loss of electrical power connection Low Loss of output power Connectors are protected by structural members from strikes by foreign objects Retrieve device and repair Loss of electrical data connection Low Loss of instrumentation data Connectors are protected by structural members from strikes by foreign objects Retrieve device and repair TGU generator failure Low Reduced output power Generator is sealed against water intrusion and designed to operate at the depths and temperatures contemplated Retrieve device and repair TGU mechanical failure-couplings, shaft, bearings, foils Low Reduced output power Materials and bearings will be lab tested in water with high silt content to ensure they can withstand Cook Inlet environmental conditions. Schedule maintenance at appropriate intervals indicated by materials testing Excessive vibration Low Increased wear Rigid design with high strength. Evaluate and repair if excessive Emergency shut down Moderate Loss of output power Power electronics will unload the generators and short all generator windings to electrically halt the TGUs Determine cause; restart when prudent or repair if necessary Operational costs Operational costs will include the ongoing annual maintenance described earlier, as well as continual TidGen™ Array Project monitoring to ensure it is operating within expected parameters with no operational issues. The bulk of this monitoring will be done automatically, but periodical manual checks of these parameters will also be performed. It is expected that this ongoing operation, combined with maintenance for the TidGen™ Array Project will cost $180,400 annually. Since the TidGen™ Array Project will utilize the Railbelt Grid for power distribution; there are no expected ongoing costs for back up. Reporting ORPC will collect data on the performance and ongoing costs of the TidGen™ Array Project throughout the duration of the FERC pilot license for the project. As this information will be critical in assessing the economics of a larger commercial-scale build out in Cook Inlet, it will be essential to ORPC that it is accurate and rigorously analyzed. ORPC will commit to share this data on energy produced, associated operating costs, and project benefits and savings with the Alaska Energy Authority and the public. SECTION 7 – READINESS & COMPLIANCE WITH OTHER GRANTS Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 35 of 37 7/3//2012 Readiness for Proposed Grant ORPC has demonstrated its readiness for this Project with the successful generation of power for the grid from its tidal energy turbine on the bottom of Cobscook Bay near Lubec, in easternmost Maine. It is the first commercial tidal energy project to do so in North America (Figure 3). Over the next four years, ORPC will expand the capacity of this TidGen™ Power System in Cobscook Bay, and add OCGen™ Power Systems at Western Passage to reach the pilot project limit of 5 MW. Figure 3. ORPC’s TidGen™ turbine generator unit in Eastport, Maine, July 24, 2012. Readiness for the proposed Project will be facilitated by the $2 million REF Round 4 funding awarded in 2012. Once Round 4 funding is received, ORPC is poised to install and operate the initial TidGen™ Power System and collect data necessary to inform the TidGen™ Array Project. ORPC has already begun project development at the East Foreland site in earnest with company funds. This has included contracts with UAA to perform circulation modeling, the deployment of an array of Acoustic Doppler Current Profilers by TerraSond in 2011, a multibeam bathymetric survey performed by Benthic Geosciences in June 2012, and will continue with the collection of geophysical, geotechnical and environmental data in 2012-2013. ORPC has begun staffing for the TidGen™ Project in advance of deployment, and now has a team of 24 engineers and staff distributed among its three offices in Anchorage, and Portland, and Eastport, Maine. ORPC has also entered into strategic partnerships with contractors, landowners, municipalities, utilities, and nonprofit organizations that will streamline the implementation of the Project as it progresses. Other Grants/Awards To date, ORPC has received commitments of more than $39 million in private and public financing, including $20.75 million in private equity and equity bridge financing and more than $20 million in state and federal government awards. SECTION 8– LOCAL SUPORT ORPC’s efforts in Alaska have received enthusiastic support from the public, private industry, and government organizations. From stakeholder meetings and personal visits, it is clear that Alaskan organizations and communities see the potential tidal energy has to help diversify the sources of our electricity. Letters of support from some of our partners, including Homer Electric Association, the utility for the East Foreland area, are included as appendices. ORPC is working carefully with scientists, fishers, and the National Marine Fisheries Service to ensure Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 36 of 37 7/3//2012 that adequate means are in place to both understand beluga whales and fishes’ use of the project area and monitor their interactions with any deployed devices. ORPC continues to consult with stakeholders, agencies, and the public through regular project update mailings and meetings, addressing any concerns in a collaborative, proactive manner. In these ways, ORPC maintains ongoing community involvement and public support of the project. SECTION 9 – GRANT BUDGET The budget for the TidGen™ Array Project including the project development and single-device TidGen™ Power System installation and operation amounts to $8,696,494. Of this $2,000,000 will be provided by ORPC’s AEA Round 4 funding and $2,000,000 by this Round 6 funding request, with the remaining $4,696,494 provided through ORPC cost share. ORPC’s funding request of $2,000,000 from the AEA REF Round 6 thus corresponds to 23% of the entire Cook Inlet TidGen™ Project’s funding requirements, with AEA Round 4 funds providing 23% and ORPC providing 54%. The Grant Budget Form (below following the Cost Worksheet) summarizes the Cook Inlet TidGen™ Project funding plans between August 2012 and November 2015 (the AEA Funding Period). ORPC has already begun investing significant resources into developing and permitting the Cook Inlet TidGen™ Project, which encompasses the TidGen™ Array Project. These efforts have been funded entirely by ORPC, and will total $1,412,716 by the end of 2014, and have included work on obtaining and complying with FERC permitting; site characterization work; environmental data collection; meetings with communities, agencies, stakeholders, contractors, public officials and others involved or affected by the project; and participation in organizations, conferences and industry meetings. Milestone or Task Anticipated Completion Date RE- Fund Grant Funds Grantee Matching Funds Source of Matching Funds: Cash/In- kind/Federal Grants/Other State Grants/Other TOTALS Initial 1 – device TidGen™ Power System installation and operation complete. $2,000,000 (Round IV funds) $2,023,089 $ 4,023,089 Feasibility of TidGen™ buildout complete, including analysis of initial TidGen™ performance. $ $ 50,000 Cash $ 50,000 Bids received for three additional TidGen™ device components. Components released for manufacture. Jan-14 $ 200,000 $ 269,141 Cash $ 469,141 Three Additional TidGen™ device components procured and prepared for shipment May-14 $1,150,000 $1,450,000 Cash $ 2,600,000 Three additional TidGen™ device components arrive at Port of Anchorage. Three May-14 $50,000 $252,845 Cash $ 402,845 Renewable Energy Fund Round 6 Grant Application AEA13-006 Grant Application Page 37 of 37 7/3//2012 additional bottom support frames complete. Report on continued operation of initial TidGen™ Power System with first TidGen™ device complete. Project development work for permitting complete. Deployment of three additional TidGen™ devices complete. Full 600 kW TidGen™ Power System brought online. Jul-14 $500,000 $ 423,964 Cash $ 923,964 600kW TidGen Power System operated for one year. Quarterly reports produced. Annual inspection performed. July-15 $0 $ 177,455 Cash $ 177,455 Report on operation and performance of complete 600 kW TidGen™ Power System . October-15 $0 $ 50,000 Cash $ 50,000 $ $ $ $ $ $ TOTALS $4,000,000 $4,696,494 $ 8,696,494 Budget Categories: Direct Labor & Benefits $0 $ 371,400 $ 371,400 Travel & Per Diem $0 $ 41,300 $ 41,300 Equipment $ 3,350,000 $ 1,698,128 $ 5,048,128 Materials & Supplies $0 $ 84,000 $ 84,000 Contractual Services $0 $ 1,196,017 $ 1,196,017 Construction Services $650,000 $ 1,305,649 $ 1,955,649 Other $0 $ $ TOTALS $ 4,000,000 $ 4,696,494 $ 8,696,494 SECTION 11.A: RESUMES • Hydrographer/ Marine Geologist/ Geophysicist Hydrographer/ Marine Geologist/ Geophysicist SECTION 11.B: LETTERS DEMONSTRATING LOCAL SUPPORT Alaska Center for Energy and Power • University of Alaska Fairbanks • 814 Alumni Drive P.O. Box 755910 • Fairbanks, Alaska 99775-5910 • Tel: (907) 474-5402 • Fax: (907) 474-5475 September 14, 2012 To: Renewable Energy Fund Review Committee From : Gwen Holdmann, Director, Alaska Center for Energy and Power Re: Ocean Renewable Power Co. (ORPC) Renewable Energy Fund Round 6 Proposal Dear Review Committee; I am writing this letter in support of the proposal submitted by ORPC entitled ‘ORPC Cook Inlet TidGen™ Array Project’. As you know, we are very excited about the opportunities for hydrokinetic devices in Alaska. Cook Inlet is one of the premier sites in the world for tidal energy, and we support the leadership role ORPC is playing in developing the technology to harness this resource. ACEP has followed the development of ORPC’s technology for several years, and we were extremely pleased to see a major milestone reached earlier this month, when ORPC installed a TidGen™ unit in Cobscook Bay in Maine, under a power purchase agreement with Maine Public Utilities Commission, and is now supplying commercial tidal energy to the utility. In addition to demonstrating the commercial viability of their technology, we appreciate ORPC’s longstanding commitment to community development in general and the Alaska market in particular. Sincerely, Gwen Holdmann, Director Alaska Center for Energy and Power University of Alaska Fairbanks Gwen.Holdmann@alaska.edu (907) 590-4577               Corporate Office Central Peninsula Service Center 3977 Lake Street 280 Airport Way Homer, Alaska 99603-7680 Kenai, Alaska 99611-5280 Phone (907) 235-8551 Phone (907) 283-5831 FAX (907) 235-3313 FAX (907) 283-7122  September 14, 2012 Alaska Energy Authority 813 West Northern Lights Blvd. Anchorage, AK 99503 To the Alaska Energy Authority’s REF Grant Review Committee: RE: Ocean Renewable Power Company’s “East Foreland TidGen ™ Array Project” application to Renewable Energy Fund (REF) Round 6 As you may know, Homer Electric Association, Inc. (HEA) has been supportive of Ocean Renewable Power Company’s (ORPC) efforts in Cook Inlet at the East Foreland site. We have signed a Letter of Intent with ORPC to move forward with the goal of installing a tidal power system that will provide clean, reliable energy to homes and businesses on HEA’s distribution grid. This letter is in support of ORPC’s application to Round 6 of the REF grant program. Homer Electric is confident in ORPC’s abilities to carry out the project in a safe, economic, and environmentally sound manner. The state of Alaska has provided substantial financial support to renewable energy projects through the REF program. HEA believes that significant public interest would be served by additional state funding for development of the East Foreland TidGen ™ Array Project. Sincerely, Bradley P. Janorschke General Manager Established in 1971 ALASKA • CALIFORNIA • LOUISIANA • TEXAS • WASHINGTON • BRITISH COLUMBIA • NEWFOUNDLAND • ONTARIO • RUSSIA LGL Alaska Research Associates, Inc. 2000 West International Airport Road, Suite C-1 Anchorage, Alaska 99502 USA Tel: (907) 562-3339 Fax: (907) 562-7223 e-mail: alaska@lgl.com web: www.lgl.com Alaska Energy Authority 813 West Northern Lights Blvd. Anchorage, AK 99503 September 17, 2012 Subject: Support to ORPC’s grant application to the Alaska Energy Authority Renewable Energy Fund (Round 6) for the Cook Inlet TidGen Array Project. To whom it may concern: The purpose of this letter is to express the support of LGL Alaska Research Associates, Inc. (LGL) for ORPC Alaska, LLC (ORPC) in their activities related to the pursuit of a tidal energy project in Cook Inlet at the East Foreland. Specifically, we support ORPC’s application for funding of their Cook Inlet TidGen™ Array Project with the Alaska Energy Authority’s Renewable Energy Fund Round 6. LGL is an international environmental research and consulting firm with offices around the world, including Anchorage, Alaska. LGL has performed beluga whale observations of the ORPC Tidal Project site in Upper Cook Inlet near Fire Island. The beluga whale study was funded entirely by ORPC. LGL has also partnered with ORPC, HDR/DTA, the University of Alaska, the Alaska Department of Fish and Game, and Greeneridge Sciences to conduct a Department of Energy-funded project to develop, implement, and compare acoustic and visual methods to monitor for beluga whales in and around the ORPC project sites. Our experience with ORPC as a client has been excellent; representatives we have worked with are technically competent and fiscally rigorous in all of their dealings. Sincerely, Michael R. Link President, LGL group of companies cc Monty Worthington, ORPC Septemb SUBJEC LETTER FUND RO To Whom TerraSon positionin Projects, TerraSon scientific interpreta TerraSon manner, Alaska, o has the p stakehold TerraSon demands have res and tidal good und project re We are lo these de Sincerely Thomas Presiden TerraSon ber 18, 2012 CT: OF COMMI OUND VI. m It May Con nd Limited is ng services a including th nd is prepare monitoring, ation, and tid nd has know has a comp owns the nec professional ders, and the nd has exten s for these p ulted in infor power forec derstanding esponsibilitie ooking forwa velopments y, Newman, P nt nd Limited ITMENT - P ncern: s submitting and geophys he Array proj ed to suppor remote sen dal power fo wledge and a prehensive u cessary stat licensing re e needs of p nsive experie projects. Our rmation pert casting, the p for how to b es. ard to workin evolve into LS, C.H. T 1 P + ROFESSION a Letter of C sical measu ject for whic rt the efforts nsing, geosp recasting. ability necess nderstandin te of the art e quired in ord permitting ag ence with O r previous co taining to pre permit proce best service t ng with ORP carbonless e TERRASOND LIMIT 617 S. Industrial W Palmer, Alaska 996 +1.907.745.7215 y NAL SERVIC Commitment rements for h ORPC is a of ORPC re atial acquisi sary to acco g of the com equipment (o der to fully s gencies. RPC and ha ontributions t eliminary site ess, and site the needs of PC and stren electric pow TED Way, Suite 3 645 USA y +1.907.745.7273 CES FOR A t to provide p ORPC Alas applying for egarding ma tion and ma omplish this w mplexities of or has acces support the g as a specific to the work e e reconnaiss e geologic ch f ORPC as t ngthening ou wer conversio 3 Fax y www.terra AEA RENEW professional ska’s Cook In Round 6 fun arine logistics apping, hydro work in a pro hydrograph ss to the tec goals of ORP understand effort initiate sance, resou haracterizati they move fo ur business r on projects. asond.com WABLE ENE l geodetic nlet TidGen™ nds. s, general okinetic ofessional hic surveying chnologies) a PC, the proje ding of the ed by ORPC urce assess on. We have orward with relationship RGY ™ g in and ect C ment e a their as Benthic GeoScience Inc. Measuring our Earth and Earth's Energies 1 September 23, 2012 Ocean Renewable Power Company (ORPC) Attn: Monty Worthington 725 Christensen Dr. Suite 508 Anchorage, AK 99501 Regarding: Letter of Support Alaska Renewable Energy Fund, Round 6 East Forelands Tidal Power Project Benthic GeoScience Inc. (Benthic) is pleased to continue our support of ORPC’s East Foreland Tidal Power Project. During the 2012 summer season Benthic acquired, processed, and interpreted acoustic seafloor measurements acquired by sonar at the project site. Benthic looks forward to continuing our support by providing marine geophysical surveys, operations, and studies as needed by additional phases in project development. Benthic has previously demonstrated a high success rate for the planning and execution of hydrographic, oceanographic, and geophysical studies in the Cook Inlet area. We are focused upon measuring, interpreting, and communicating the geology and natural energies of the Earth. Benthic is very pleased to be included in this hydrokinetic renewable energy project. Sincerely, David Oliver, Geophysicist Director of Operations doliver@BenthicGeo.com +1 (907) 715-8144 Benthic GeoScience PO Box 556 Sutton, AK 99674 USA Department of Civil Engineering 3211 Providence Dr., Anchorage, Alaska 99508 Tel 907-786-1951 * Fax 907-786-1079 www.engr.uaa.alask.edu/ September 21, 2012 To whom it may concern, Ocean Renewable Power Corporation (ORPC), specifically ORPC Alaska, is applying for RE Fund Round 6 funding for their Cook Inlet TidGen™ Array Project, the build out stage of the larger Cook Inlet Tidal Energy Project. This letter is being written in support of ORPC’s application for the Array Project. The University of Alaska, Anchorage (UAA) School of Engineering (PI Tom Ravens) has been working collaboratively with ORPC to design studies and to pursue funding to understand the environmental effects of the tidal installation and to ensure that ORPC’s hydrokinetic devices will be able to withstand the high suspended sediment concentrations. ORPC and UAA received a DOE award to conduct “Abrasion Testing of Critical Components of Hydrokinetic Devices”. These tests have begun and will ensure that ORPC uses the best possible materials to withstand the highly sedimented Cook Inlet waters. I have found the ORPC staff very conscientious in their efforts to develop renewable energy in Cook Inlet in an environmentally sound manner. Sincerely, Tom Ravens, Ph.D. Professor, Dept. of Civil Engineering University of Alaska, Anchorage (907) 786-1943 tmravens@uaa.alaska.edu SECTION 11.C: CD Copy of Application Enclosed with Application. SECTION 11.D: GOVERNING BODY RESOLUTION SECTION 11.E: CERTIFICATION SECTION 11.F: NOTICE OF INTERVENTION AND ENTRY APPEARANCE SECTION 11.G: OCEAN RENEWABLE POWER COMPANY POWER SYSTEMS 1 OCEAN RENEWABLE POWER COMPANY POWER SYSTEMS Turbine Generator Unit ORPC power systems generate clean, renewable electricity by harnessing the energy of the world’s oceans and rivers. Rather than relying on dams, which can be costly and detrimental to marine environments, ORPC power systems are designed around the proprietary turbine generator unit, or TGU (Figure 1). The TGU is made up of ORPC’s patented advanced design cross flow (ADCF) turbines, whose slowly rotating foils extract energy from moving water to power a central underwater permanent magnet generator. The ADCF turbines are built primarily with marine composite materials and resist corrosion in both fresh and salt water. The TGU is a gearless unit that requires no lubricants and emits absolutely nothing into the surrounding water. At tidal and river energy sites, one or more TGUs are incorporated into complete power systems that convert kinetic energy in moving water into grid-compatible power. The TGU has a modular design that makes it easy to adapt to the varying characteristics of different site environments, and it is configured differently depending on the application and location where it will be installed. TidGen™ Power System ORPC has designed the TidGen™ Power System to operate in water depths of 60 to 150 feet. This power system features the TidGen™ device, which is a four-turbine TGU mounted on a bottom support frame that secures it to the sea floor (Figure 2). A complete TidGen™ Power System includes one or more TidGen™ devices that are connected to underwater power consolidation module, which connects to an on-shore station through a single underwater power and data cable. The on-shore station is interconnected to the local power grid. Depending on market conditions, community needs, site characteristics and other considerations, a TidGen™ Power System can include up to several dozen TidGen™ devices, with each one generating up to 180 kilowatts (kW). The first grid-connected TidGen™ Power System was installed and operated at ORPC’s Cobscook Bay site in September 2012. Figure 1. ORPC's turbine generator unit (TGU) 2 Figure 2. TidGen™ device. (Photo courtesy of Jeffrey Hains) OCGen™ Power System The OCGen™ Power System is the largest and most powerful of ORPC’s modular power systems. It is designed to operate at tidal and offshore ocean current sites with water depths of 100 feet or more (Figure 3). This power system features the OCGen™ module, which is comprised of up to four stacked TGUs, each with a maximum design capacity of 180 kW. The unique OCGen™ module is designed to be positively buoyant, to provide dynamic lift to counteract mooring forces, and to be held at a specific water depth using a low-impact mooring system. Similar to TidGen™ Power Systems, the output from the individual OCGen™ modules is consolidated and transmitted to an on-shore station via a single underwater power and data cable. The prototype of an OCGen™ module (containing a single TGU) will be installed, tested and monitored at ORPC’s tidal energy test site in Eastport, Maine in 2013. Figure 3. OCGen™ module. RivGen™ Power System The RivGen™ Power System is designed to generate electricity at river sites with water depths of 15 feet or more (Figure 4). A distinctive feature of this power system is that it can be installed in remote communities with no centralized power grid. Many of these communities rely on micro-grids powered by diesel generators, which are expensive and often unreliable, and which leave a huge carbon footprint. The RivGen™ Power System can connect directly into an existing diesel-powered micro-grid and provide built-in fuel- 3 switching so that whenever the system is generating electricity, the diesel generator is automatically turned down or off. In this power system, which is similar to but smaller than the TidGen™ Power System, each TGU has a maximum design capacity of 30 kW, and is supported on the river bottom using a submersible pontoon support structure. Installation requires minimal local equipment, as the RivGen™ device (comprised of the TGU and pontoon support structure attached) is essentially self-deploying. It can be floated to the project site, held in place with one or more anchors, and then ballasted such that the RivGen™ device submerges and settles on the river bottom. Commonly available vessels can be used for the installations and no heavy construction equipment is needed. All components of the compact RivGen™ Power System are sized to be shipped to remote sites by standard intermodal shipping container, where they can easily be assembled. This design approach minimizes the time and local resources needed to install a RivGen™ Power System. Figure 4. RivGen™ device. The first RivGen™ pontoon support structure was built and tested in Alaska in the fall of 2011; the first RivGen™ TGU was built and tested at ORPC’s test site in Cobscook Bay, Maine in the summer of 2012 (Figure 5). ORPC intends to install and test the first complete RivGen™ Power System at a site in Alaska in 2013. Figure 5. RivGen™ TGU aboard ORPC’s research vessel, the Energy Tide 2.