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HomeMy WebLinkAboutUpper Tanana AEA Round IV GRANT APPLICATION9 FINAL ALASKA POWER & TELEPHONE COMPANY Upper Tanana Biomass CHP Project Renewable Energy Fund Grant Recommendation Program Round IV Grant Application to Alaska Energy Authority RFA AEA 11-005 Submitted September 15, 2010 Renewable Energy Fund Round IV Grant Application AEA 11-005 Application Page 1 of 25 7/21/2010 Application Forms and Instructions The following forms and instructions are provided to assist you in preparing your application for a Renewable Energy Fund Grant. An electronic version of the Request for Applications (RFA) and the forms are available online at: http://www.akenergyauthority.org/RE_Fund-IV.html Grant Application Form GrantApp4.doc Application form in MS Word that includes an outline of information required to submit a complete application. Applicants should use the form to assure all information is provided and attach additional information as required. Application Cost Worksheet Costworksheet4.doc Summary of Cost information that should be addressed by applicants in preparing their application. Grant Budget Form GrantBudget4.doc A detailed grant budget that includes a breakdown of costs by milestone and a summary of funds available and requested to complete the work for which funds are being requested. Grant Budget Form Instructions GrantBudgetInstructions4.pdf Instructions for completing the above grant budget form.  If you are applying for grants for more than one project, provide separate application forms for each project.  Multiple phases for the same project may be submitted as one application.  If you are applying for grant funding for more than one phase of a project, provide milestones and grant budget for completion of each phase.  If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted.  If you have additional information or reports you would like the Authority to consider in reviewing your application, either provide an electronic version of the document with your submission or reference a web link where it can be downloaded or reviewed. REMINDER:  Alaska Energy Authority is subject to the Public Records Act AS 40.25, and materials submitted to the Authority may be subject to disclosure requirements under the act if no statutory exemptions apply.  All applications received will be posted on the Authority web site after final recommendations are made to the legislature.  In accordance with 3 AAC 107.630 (b) Applicants may request trade secrets or proprietary company data be kept confidential subject to review and approval by the Authority. If you want information is to be kept confidential the applicant must: o Request the information be kept confidential. o Clearly identify the information that is the trade secret or proprietary in their application. o Receive concurrence from the Authority that the information will be kept confidential. If the Authority determines it is not confidential it will be treated as a public record in accordance with AS 40.25 or returned to the applicant upon request. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 2 of 25 7/21/2010 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Alaska Power & Telephone Company Type of Entity: Utility Mailing Address P.O. Box 3222 Port Townsend, WA 98368 Physical Address 193 Otto Street Port Townsend, WA 98368 Telephone 360-385-1733 Fax 360-385-5175 Email 1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER Name Robert S. Grimm Title CEO Mailing Address Alaska Power and Telephone Company P.O. Box 3222 Port Townsend, WA 98368 Telephone 360-385-1733 x 120 Fax 360-385-7538 Email bob.g@aptalaska.com 1.2 APPLICANT MINIMUM REQUIREMENTS Please check as appropriate. If you do not to meet the minimum applicant requirements, your application will be rejected. 1.2.1 As an Applicant, we are: (put an X in the appropriate box) X An electric utility holding a certificate of public convenience and necessity under AS 42.05, or 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. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 3 of 25 7/21/2010 SECTION 2 – PROJECT SUMMARY This is intended to be no more than a 1-2 page overview of your project. 2.1 Project Title – (Provide a 4 to 5 word title for your project) Type in your answer here and follow same format for rest of the application. Upper Tanana Biomass CHP Project 2.2 Project Location – Include the physical location of your project and name(s) of the community or communities that will benefit from your project. The Upper Tanana Biomass CHP (Combined Heat & Power) Project will be located in the Alaska Interior community of Tok (pop. 1,429), at the junction of the Alaska Highway and the Tok Cutoff to the Glenn Highway, 200 miles southeast of Fairbanks, 93 miles from the Canadian border. This project will serve an isolated power grid that connects the communities of Tok, Tanacross, Tetlin and Dot Lake (combined population estimate 1,830). 2.3 PROJECT TYPE Put X in boxes as appropriate 2.3.1 Renewable Resource Type Wind X Biomass or Biofuels Hydro, including run of river Transmission of Renewable Energy Geothermal, including Heat Pumps Small Natural Gas Heat Recovery from existing sources Hydrokinetic Solar Storage of Renewable Other (Describe) 2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply) Reconnaissance Design and Permitting X Feasibility Construction and Commissioning X Conceptual Design 2.4 PROJECT DESCRIPTION Provide a brief one paragraph description of your proposed project. Alaska Power & Telephone (AP&T) proposes to conduct a Phase II project that will complete the Feasibility Analysis, (Biomass) Resource Assessment and Conceptual Design for a 2MWe biomass gasification CHP (combined heat and power) system. AP&T, in partnership with Nexterra Systems, and with support from GE Energy, the Upper Tanana communities of Tok, Tetlin, Dot Lake and Tanacross, the State of Alaska Department of Natural Resources (DNR), Contracted Consultants, Foresters and Economists, will collaborate to assess the feasibility of a system utilizing locally sourced woody biomass as fuel. The project will thoroughly assess the long-term sustainability and projected costs of the biomass resource. The project will also develop the conceptual design, assess the project site, and identify any remaining technical and operational barriers. This will refine the Benefit/Cost Ratio projections and better define public benefits. Most of the detail in this grant application is from pre-feasibility work previously done by AP&T. All the data presented herein will be thoroughly assessed for confirmation or adjustment in the proposed analysis. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 4 of 25 7/21/2010 2.5 PROJECT BENEFIT Briefly discuss the financial and public benefits that will result from this project, (such as reduced fuel costs, lower energy costs, etc.) The primary financial benefit from this Phase II project would be to determine whether the proposed CHP system is suited to provide a reliable alternative source of demand power to the subject communities and to prepare a conceptual design of the system. AP&T strongly believes that the objectives of this project are essential to the development and replication of renewable community-scale CHP generation in other rural and urban communities as well as the establishment of Alaskan leadership in adopting and replicating renewable energy technology. When the CHP Project is fully deployed, it will provide financial and public benefits to the local (isolated) power grid of the Upper Tanana, including the Communities of Tok, Tanacross, Tetlin and Dot Lake, now fueled by diesel generators. This project would set a new standard for renewable small-scale (2-10MWe) heat and power generation for rural communities, and industrial and institutional facilities, while supporting sustainable forest practices that focus on utilizing small volumes of local woody biomass. The 1,830 residents of the Upper Tanana will directly benefit from this project through lower-cost and stabilized-cost power. If replicated, this project has the potential to benefit the 24 communities throughout Alaska that Alaska Power & Telephone (AP&T) serves, representing 13,000 energy consumers. It also has the potential to be a model for small-scale renewable energy systems for rural and urban communities throughout the state of Alaska. Many of this region’s residents supplement their electrical use with kerosene, oil and gas for generators, as well as for heating. Many also use propane for cooking, clothes dryers, hot water heaters, etc. When electric rates are reduced and stabilized, these other non-renewable fuel usages will likely decline, which would help clean the air and reduce toxic spills, as well as help localize the economy of the region. Energy demand is expected to grow for this area. Stable power costs are attractive to manufacturers and businesses comparing locations. Healthy local economies, based on local natural and human resources can become more self-sustaining. Anticipated benefits of installation of the CHP System would be to stabilize electric rates for AP&T’s ratepayers by offsetting diesel. Rates may be reduced as system feedstock costs stabilize and are projected to be at least as much as 25% lower than current prices. Since diesel costs are expected to remain volatile, this is a major improvement in energy cost predictability for AP&T’s customers. The addition of other renewable energy sources (seasonal hydro) could result in further rate reductions, but until diesel generation can be eliminated, electric rates will continue to have fluctuations. Additional benefits anticipated for Alaskans:  Energy produced by the System will displace about 12,800 MWh of diesel-generated electricity per year, resulting in energy cost savings, and cost stability  The system will create a valuable use for biomass from wildfire risk-reduction projects  The System will generate meaningful reductions in Greenhouse Gases (GHGs), with each MWh offsetting approximately 1,300 tons of GHGs annually.  The System features very low emissions with expected particulate of less than 5mg/SCM (milligrams/standard cubic meter)  The System will also include heat recovery equipment that will make thermal energy available, further offsetting fossil fuel usage for heating buildings. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 5 of 25 7/21/2010 2.6 PROJECT BUDGET OVERVIEW Briefly discuss the amount of funds needed, the anticipated sources of funds, and the nature and source of other contributions to the project. Funding is needed to perform a thorough feasibility analysis for the CHP system, thoroughly assess the biomass resources, long-term sustainability and delivered/processed costs, and to develop the conceptual design, which will establish the costs for building the facility and system. AP&T contributions will include in-kind costs of project support for administrative needs, local transportation, meeting space, and expertise of AP&T’s staff. The total cost for the project is $425,000, of which $380,000 is requested in grant funds. The remaining $45,000 will be matched in cash and in-kind by AP&T. AP&T has already contributed approximately $120,000 to research the technology, do a pre-feasibility study of the project, and to work with State of Alaska DNR Forestry on creating a long-term biomass fuel harvest contract. Total project costs through construction and deployment will depend on the outcome of Phase II completion and results. Estimated Phase II –Feasibility Analysis, Resource Assessment & Conceptual Design $425,000 Estimated Phase III -Final Design and Permitting Requirements: $2,780,000 Estimated Phase IV –Construction: $14,800,000 Estimated Project Total (including Phase II, III, IV): $18,000,000 2.7 COST AND BENEFIT SUMARY Include a summary of grant request and your project’s total costs and benefits below. Grant Costs (Summary of funds requested) 2.7.1 Grant Funds Requested in this application. $380,000 2.7.2 Other Funds to be provided (Project match) $45,000 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $425,000 Project Costs & Benefits (Summary of total project costs including work to date and future cost estimates to get to a fully operational project) 2.7.4 Total Project Cost (Summary from Cost Worksheet including estimates through construction) $18,000,000 2.7.5 Estimated Direct Financial Benefit (Savings) $21,560,000 20 year fuel cost savings 2.7.6 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.) $1,125,000/yr spent locally on biomass feedstock Economic localization is often defined as sourcing the needs of a community, as much as possible, from within the community or nearby. The multiplier effect of locally sourced food, fuel and other essentials is well known. Money spent in the community cycles through the community several times before leaving, supporting other community businesses. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 6 of 25 7/21/2010 SECTION 3 – PROJECT MANAGEMENT PLAN Describe who will be responsible for managing the project and provide a plan for successfully completing the project within the scope, schedule and budget proposed in the application. 3.1 Project Manager Tell us who will be managing the project for the Grantee and include contact information, a resume and references for the manager(s). If the applicant does not have a project manager indicate how you intend to solicit project management support. If the applicant expects project management assistance from AEA or another government entity, state that in this section. Robert Grimm, AP&T CEO 360-385-1733 Fax 360-385-5175 B.grimm@aptalaska.com Larry D. Coupe, AP&T Project Manager. 907-883-5198 email: L.Coupe@aptalaska.com 3.2 Project Schedule Include a schedule for the proposed work that will be funded by this grant. (You may include a chart or table attachment with a summary of dates below.) Once the grant has been awarded, AP&T will orient its project staff and contractors to the objectives of the AEA project; the work will begin immediately thereafter. Biomass Resource Assessment will be immediately contracted to an experienced and reliable Forestry Company, Forest & Land Management, Inc. (Clare Doig, President) Conceptual Design work has been outlined in a proposal from Nexterra, called a PDA (project development agreement), with assistance from GE Jenbacher. Feasibility Analysis will be contracted to Northern Economics, Inc. These timelines are estimates, and subject to timing of grant award. 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. The Milestones must also be included on your budget worksheet to demonstrate how you propose to manage the project cash flow. (See Section 2 of the RFA or the Budget Form.) Milestones to be Completed AEA Request AP&T Share Total 1. Project scoping and contractor orientation $15,000 $5,000 $20,000 2. Detailed energy resource assessment $50,000 $5,000 $60,000 3. Identification of land and regulatory issues $10,000 $4,000 $14,000 4. Permitting and environmental analysis $40,000 $5,000 $45,000 5. Detailed analysis of current cost of energy & future market $10,000 $5,000 $15,000 6. Assessment of alternatives completed $20,000 $3,000 $23,000 7. Conceptual design and costs estimate $130,000 $4,000 $134,000 8. Detailed economic and financial analyses $45,000 $5,000 $50,000 9. Conceptual business & operations plan $30,000 $5,000 $35,000 10. Final report and recommendations $30,000 $5,000 $35,000 Total Project Cost $380,000 $45,000 $425,000 Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 7 of 25 7/21/2010  Biomass Resource Analysis - The Contractor will review available data and mapping of biomass resources from State of Alaska DNR. Additional biomass resource data collection will be required, and will be part of the Forestry Resource Assessment & Feasibility Analysis, to be conducted by Clare Doig of Forest & Land Management, Inc.  Site Selection and Load Evaluation - The most promising option for the location of a CHP System will be determined by these criteria: Integration to the existing grid, and biomass fuel delivery logistics and costs. Final analysis will be completed for a site that presents the most favorable economic and strategic benefit.  Technology Evaluation – Confirmation of previous technology investigation will be required. A thorough review of alternative options will be included, as well as re- confirmation of data used in initial decision to choose gasification to IC engine technology.  Engineering Economic Analysis - An engineering economic feasibility analysis will be completed. The environmental permitting aspect of the project will be completed under this task. The analysis will be based on savings from current fossil fuel-generated electricity costs. Forecasts for future costs will be based on escalation rates provided by EISR and other sources. The analysis will include estimates for labor, operation, and maintenance.  Conceptual design will include buildings and system cost estimates, as well as detailed outline of development steps from permitting to commissioning  Reporting - A final report including all the items listed above will be generated and delivered. 3.4 Project Resources Describe the personnel, contractors, equipment, and services you will use to accomplish the project. Include any partnerships or commitments with other entities you have or anticipate will be needed to complete your project. Describe any existing contracts and the selection process you may use for major equipment purchases or contracts. Include brief resumes and references for known, key personnel, contractors, and suppliers as an attachment to your application. This Project represents a unique and broad based collaboration between a regulated Utility (AP&T); Industry (Nexterra and GE Energy); Rural Alaskan Communities (Tok, Tetlin, Tanacross & Dot Lake, Alaska); Forest Industry (Supplier of biomass); State Government – Department of Natural Resources; and Federal Government. If awarded, AP&T will be the sole recipient of the grant funding and will be responsible for overall management of the project, operating the energy system including fuel supply, consumables and qualified labor. Through a business agreement, the subcontractor (Nexterra) will provide equipment and technical and operational support to AP&T for the proposed system. AP&T facilities personnel will be responsible for operating the energy system including fuel supply, consumables and qualified manpower, while Nexterra and GE Energy will provide equipment, technical and operational support. Following is a summary description of each entity involved in the proposed project: AP & T Alaska Power & Telephone will manage the grant. AP&T has been generating electricity with hydroelectric and diesel power plants throughout Alaska since 1957. Now serving 24 communities, AP&T has personnel certified as electrical, civil, and mechanical engineers who maintain the facilities to the highest professional standards. AP&T has a consistent history of excellent performance in reliability, customer service, and a long-standing reputation for being a low cost provider of electric service. Additionally, AP&T is committed to transitioning from fossil fuel power generation to renewable energy. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 8 of 25 7/21/2010 AP&T’s budgets include several 50% grant funded projects for installation of transmission lines on Prince of Wales Island, and three RUS (Rural Utilities Service) 100% grants for the installation of transmission lines to Tetlin, Lutak, and communities along the Haines Highway. AP&T’s engineering staff has been involved in the design, construction and operation of hydroelectric projects since the 1980’s. AP&T currently maintains over 250 miles of transmission line and has seasoned staff to maintain diesel generators and hydro power plants. AP&T has administrators responsible for multi-million dollar budgets, including the management of 60+ employees, equipment, and all generation and distribution resources. AP&T has a proven record of accomplishment as an electrical utility as well as a developer of hydroelectric and other renewable energy projects. AP&T currently operates five hydroelectric projects, with an additional project currently under construction. Since 2001, AP&T has installed over 75 miles of 34.5 kV transmission line on Prince of Wales Island, Alaska, all with in-house personnel. Many additional miles of transmission lines, substations, and transformers have been constructed since then. During 2005-2006, AP&T designed, engineered, permitted, and constructed the 2MWe run-of-river South Fork Hydroelectric Project. Several of these projects were funded by grants, demonstrating significant grant administration experience.. Key AP&T Project Personnel: Larry D. Coupe, (employed by AP&T) will be the Project Manager for the Alaska Biomass Combined Heat & Power Project. He holds a Masters degree in Civil Engineering and has been the lead civil engineer for numerous planning studies and design work over the past 30 years. During the construction phase of the project, the company’s Interior Regional Manager for AP&T Operations, Eric K. Hannon, will be the senior manager of the project. He will personally supervise the construction crews. He is located in Tok, and is an electrical engineer with extensive experience in project management and electrical generation, transmission and distribution. He will also work closely with Mr. Coupe for the feasibility analysis and conceptual plan for the CHP System. AP&T’s CEO, Robert Grimm, has had a 37-year career with the company where he has been responsible for management, supervision, operating functions and financial performance. His breadth of experience within the company encompasses general management, accounting, purchasing and billing, regulatory affairs, and tariff conformance and development. Please refer to the attached resumes for a thorough review of the Project Managers’ credentials. Nexterra Energy Corporation Nexterra Energy Corp. (Nexterra) will be the principal technology vendor for the CHP project. Nexterra is a privately held, Vancouver-based energy technology company incorporated in 2003 in British Columbia. The company is majority owned and financed by Calgary-based ARC Financial. ARC is Canada’s largest financial management company focused on the energy sector with over $1.8 billion under management and investments in more than 100 energy firms. Nexterra is well capitalized with $20MM of invested equity. In addition to equity funding, Nexterra has also received over $10MM from Sustainable Development Canada, National Research Council, NRCan and Ethanol BC to support R&D and early commercial technology applications. Nexterra has established strategic relationships with Johnson Controls, Honeywell, McKinstry, Andritz, GE Energy, and other American strategic partners. Nexterra has a demonstrated history of developing and commercializing biomass gasification technology. Nexterra operates an 8MMBtu/hr biomass CHP system at its Product Development Center (―PDC‖) in Kamloops, British Columbia for R&D and product development work. The PDC was commissioned in 2004 and is staffed by twelve product development engineers and operators for 24/7 operations. The PDC has been the principal site for the development of current and planned future gasification applications. A history of application development activity carried out at the PDC is provided below: Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 9 of 25 7/21/2010 o Indirect Fire (Development Status – Commercial) – Indirect-fired gasification system such as those located at the University of South Carolina, a Kamloops plywood mill, Dockside Green (Victoria, BC) and the DOE’s Oakridge National Labs (ORNL) fully combust syngas in a closely coupled oxidizer. The resulting, clean, high temperature flue gas is directed to heat recovery equipment for delivering heat to boilers, dryers and traditional thermal applications. o Direct-Fired (Development Status – Demonstration) – With a direct-fired syngas application, such as the New Westminster BC Kruger paper mill project, a gasifier similar to that used in indirect fire systems provides the basic gasification platform minus the closely coupled oxidizer which is not required. Rather than combusting the syngas in an oxidizer, the clean, low temperature syngas is conveyed via ducting, and then directly combusted in a dual fuel syngas/natural gas combustion nozzle into a power/steam boiler or a limekiln. o IC Engine – The basis for this Project, Nexterra’s IC engine program has successfully demonstrated Nexterra’s proprietary thermal cracking technology that produces ―warranty grade‖ syngas for use in GE Jenbacher IC engines. Nexterra is currently conducting syngas slipstream testing and is pilot testing a 239kw pilot scale IC engine in support of the AP&T Project. Catawba County, North Carolina, and the University of British Columbia, Vancouver BC have both contracted to deploy this system. Nexterra’s Vice President/Chief Engineer, Dejan Sparica, P.Eng., has over 10 years experience designing and implementing industrial-scale combustion systems and over 18 years engineering experience. Prior to joining Nexterra, Mr. Sparica was Contract Department Manager at Salton Fabrication Ltd., Western Canada’s largest manufacturer of wood-fired energy systems and lumber dry kilns. At Salton, Mr. Sparica was responsible for design and project management of turnkey energy system projects for customers in the forest products industry. GE Energy GE has been collaborating with Nexterra on the IC engine application since early 2007. GE serves customers in more than 100 countries and employs more than 300,000 people worldwide. GE Energy is one of the world's leading suppliers of power generation and energy delivery technologies, with a 2007 revenue of $22 billion. Based in Atlanta, Georgia, GE Energy works in all areas of the energy industry. GE’s Jenbacher engine division conducted a worldwide search for the most suitable gasifier manufacturer for their gas engines. They chose Nexterra. This Feasibility Analysis will seek to confirm the earlier conclusions from pre-feasibility work that identified Nexterra and GE Jenbacher as the best commercial Biomass CHP system vendor available. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. The project manager will be responsible for overseeing the day-to-day tasks associated with the study. The project manager will keep detailed records and report on the progress made on important project milestones and will form the basis of reports to AEA. The reports will show progress made on the various tasks/milestones, the work to be accomplished in the ensuing quarter, and potential problems and corrective actions to be considered or implemented. Updating of the management files will be on a monthly basis. All transactions will be approved and processed according to AP&T’s standard policies and procedures. Progress reports will also be submitted to the Alaska Energy Authority that includes the status of the project, the funds expended, and the funds remaining in the budget. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 10 of 25 7/21/2010 3.6 Project Risk Discuss potential problems and how you would address them. Potential risks expected to be encountered and the risk mitigation plans are as follows: Identified Risk: Public Support Risk Mitigation: The Project will follow the initial local public consultation sessions and PR work that has been done to inform the local communities about details and progress of the project. The intention of these sessions is to present project information, hear all questions and concerns, and build public trust and support. SECTION 4 – PROJECT DESCRIPTION AND TASKS  Tell us what the project is and how you will meet the requirements outlined in Section 2 of the RFA.  The level of information will vary according to phase(s) of the project you propose to undertake with grant funds.  If you are applying for grant funding for more than one phase of a project provide a plan and grant budget form for completion of each phase.  If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. 4.1 Proposed Energy Resource Describe the potential extent/amount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. AP&T proposes to assess available (woody biomass) energy resources using industry standards including field measurements, negotiations with land owners (including the State of Alaska), and other onsite activities as outlined below. * * * Biomass Resource Sustainability Analysis for Upper Tanana Biomass CHP project Assess current forest resource situation: Tok, Tetlin Village, Tanacross, Dot Lake Identify local wood manufacturing facilities and identify equipment, manufacturing capacity, products, employment, and potential for expansion. Identify contractors in the Tok vicinity with the capability and equipment for harvesting wood biomass fuel and sawlogs/house logs. Identify local use of wood fuel products (firewood, pellets, etc.) Identify use of or current markets for locally manufactured lumber, house logs, timbers, etc. Identify potential competition for wood biomass fuel Identify sustainable sources of woody biomass: State of Alaska – Tanana Valley State Forest Tanacross Incorporated Tetlin Native Corporation Tetlin Village Private landowners Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 11 of 25 7/21/2010 Develop logging plans for most likely local sources of wood biomass: Detailed economic analysis of harvest options from each local source Estimate delivered costs of biomass from various sources over the life of the project Identify options for long term supply - timber sale contract - (25 years). Identify costs of harvesting and delivering logs/chips to specified locations Appraisal of wood biomass/standing timber (payment to landowner) Identification of wildfire abatement benefits Identification of higher value products that may be harvested with wood biomass sawlogs, houselogs, etc. Identify landowner issues - potential public concerns with long term, timber harvest on a larger scale than has historically been experienced (except for fire) in the area. Identify requirements of potential projects at different levels of biomass usage: AP&T CHP Generation School District Biomass system Combined AP&T and School District Combined AP&T and School District and Fuel Densification project Note: all could assume sale of sawlogs/houselogs to local markets Identify and quantify markets for all products (to include potential for shipping some products to other areas of the State): Electricity Heat Firewood Densified fuel products (pellets, pucks, bricks) Saw-logs / House-logs Develop recommendation for long-term management of the project: Develop analysis of factors involved in the management and operation of an integrated woody biomass energy project in the Tok area. SUMMARY: The resource sustainability assessment of the wood biomass supply portion of the project will start from the source of wood - local landowners, including State land, and identify: 1) all projected costs (including stumpage, production, and management costs) 2) planning and contracts necessary to secure a long term supply, and 3) the operational and management factors necessary for production and delivery of woody biomass fuel to a specific project site in the Tok area. * * * Additionally, The State of Alaska Department of Natural Resources (DNR) Tok Area Forestry has been negotiating with AP&T toward completion of an agreement for a 25-year biomass fuel harvest contract, encompassing approximately 27,000 acres of State forestland in the Upper Tanana. 27,000 acres is more than sufficient resources for the required system feedstock. The proposed system will convert approximately 25,000 green tons of woody biomass per year to heat and power. This will use approximately 300 acres per year (at 40 tons per acre), or a total of 6,000 acres over 20 years. This amounts to about 25% of the biomass available from the leased parcel of state forestland. This does not take into consideration additional feedstock of standing dead trees from the 2010 wildfire that will likely be added to the acreage available for removal. Tok Area DNR Forester, Jeffrey Herrmanns states that State of Alaska forestlands near the Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 12 of 25 7/21/2010 project area could provide much more woody biomass on a sustainable basis. He also states that the wildfire risk is an ongoing danger to communities in the Upper Tanana, and that harvest for energy production will avoid some wildfire fighting costs, while providing compensation to the State for the removed biomass fuel. These suppositions will be confirmed by a thorough forest resource analysis, conducted by an independent Certified Forester. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. The existing electrical energy market in the Upper Tanana area consists of a local isolated power grid serving the communities of Tok, Tetlin, Dot Lake and Tanacross, as well as the other rural residents of the area. All four communities are on the same local grid and are therefore supplied by the existing diesel power plant. Peak demand has been approximately 1,800 kW, in both winter and summer. Production by the diesel power plant has averaged about 12,000 MWh/yr for the last ten years, with minor fluctuations corresponding to diesel price fluctuations. The completed project, if confirmed as feasible and sustainable, is expected to lower and stabilize electric rates for AP&T’s customers by offsetting diesel. Rates may be reduced as system feedstock costs stabilize and are projected to be 25% or more reduction from current prices. These projections will be thoroughly examined and confirmed with the latest available data from ISER projections and the results of AP&T’s Forest Resource Analysis. Since diesel costs are expected to remain volatile, this is a major improvement in energy cost and predictability for AP&T’s customers. The addition of other renewable energy sources could result in further rate reductions, but until diesel generation can be eliminated, electric rates will continue to have fluctuations. Many customers supplement their electrical use with kerosene, oil and gas for generators, as well as for heating. Several customers also use propane for cooking, clothes dryers, hot water heaters, etc. When electric rates stabilize, these other non-renewable fuel sources usage may decline, which would help clean the air and reduce toxic spills, as well as help localize the economy of the region. Energy demand is expected to grow for this area. Stable power costs are attractive to manufacturers and businesses looking to locate in this area. Healthy local economies, based on local natural and human resources can become more self-sustaining. There are 6 gensets in the Tok diesel power plant that supply electricity to all four communities, as follows: Unit #3 = CAT Model D3516, 1320 kW, Purchased / Installed 1999 Unit #4 = CAT/KATO Model 3516, 1135 kW, Purchased / Installed 1989 Unit #5 = CAT/KATO Model 3516, 1135 kW, Purchased / Installed 1995 Unit #7 = CAT Model C175-16, 1800 kW, Installed 2007 (is on loan from CAT as a test unit) Unit #8 = CAT/KATO Model D3508, 440 kW, Purchased / Installed 1985 Unit #9 = CAT/KATO Model 3512C, 1050 kW, Purchased / Installation in progress 2008 The project will reduce the cost of generation by AP&T, and the savings would be passed on to AP&T’s customers in Tetlin, Tok, Tanacross and Dot Lake who currently pay $0.47 per kWh (excluding PCE). The cost savings to customers is estimated to be at least 25%, when current diesel costs, projected biomass costs and other factors are taken into consideration. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 13 of 25 7/21/2010 4.2.2 Existing Energy Resources Used Briefly discuss your understanding of the existing energy resources. Include a brief discussion of any impact the project may have on existing energy infrastructure and resources. Currently much of the power and heat generated in Alaska is from fossil fuel, including coal, diesel, natural gas or nuclear fuels. The need to move away from fossil fuel energy is painfully apparent in Alaska with high and escalating costs exacerbated by transportation challenges in rural communities that are not accessible by road. Diesel deliveries by river barge or airplane are not only expensive, but potential environmental disasters. It is anticipated that the current momentum in r egulatory direction toward establishing arbitrary values in carbon markets will continue. As the carbon cycle benefits of renewable energy are inherently superior to fossil fuel energy, accounting of cost/benefit ratios for renewables will become more accurate as carbon values are quantified. Biomass is a readily accessible local fuel source that is grossly underutilized for lack of adequate and proper technology. The proposed Project will use this renewable and clean fuel source, thus minimizing dependence on fossil fuels and demonstrating community-energy sustainability and independence. Recent trends in biomass power production are focusing on smaller (<20MWe), distributed power generation facilities due to the increasing biomass transportation costs and logistical difficulties involved in securing large quantities of biomass feedstock on a long -term price-certain basis; the proposed CHP system is ideally suited to addressing this demand for smaller scale power. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The existing energy market for the Upper Tanana Biomass CHP Project is the isolated power grid serving the Upper Tanana region, including the communities of Dot Lake, Tetlin, Tanacross, Tok and surrounding areas. The communities are supplied by the Tok diesel power plant. Peak demand is about 1,800 kW. The project does not intend to eliminate the existing diesel generating capacity, but to put it in reserve as backup, rather than primary status. We expect the direct impact on energy customers to be negligible in practical terms, and beneficial in economic and cultural terms. The same reliable electricity grid with a cleaner air shed, more stable energy costs, more local economic stimulation, and lower wildfire risk. The completed project will utilize local biomass woodchips to fuel the system. Biomass fuel is not only a readily accessible local fuel source that creates local jobs to harvest and process; it is also a resource that is called hazardous fuels by DNR, representing a severe wildfire risk unless managed. Alaska’s seventy-year average annual loss to wildfire is approximately 1,000,000 acres burned annually. The cost of fighting wildfires, calculated from recent (2010) wildfires was up to $10,000 per acre. The environmental cost of a million acres of wildfires per year is virtually incalculable. The CHP System will create direct local employment through the harvest, transportation and processing of the woody biomass required for the System and in operating/maintaining the equipment. On replication, the System has the capacity to result in the construction of multiple Systems throughout Alaska. Each individual System will create up to 35 FTE (full time employee) positions (engineering, fabrication and mechanical/electrical installation) in addition to approximately 2-3 full time System Operator positions and other indirect jobs related to biomass harvesting and System maintenance. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 14 of 25 7/21/2010 Long-term fossil fuel prices are widely expected to rise. IN 2013, Ultra Low Sulfur Diesel will be mandated for power generators, which is projected to be a 20% fuel cost increase. The rise in overall costs of delivered fossil fuels will result in escalating conventional power production costs, and this enhances the urgency of the search for stable cost alternatives. Energy from woody biomass fuel is an ideal stable cost alternative, and has the additional benefit of being ―demand power,‖ available as needed, as opposed to solar and wind power. Currently, the cost per unit of thermal energy derived from fossil fuels is higher (by approximately $4/GJ and rising) than woody biomass-derived heat. A principle reason that the technology used in this Project has developed to its current state is the amount of Interest in this method. The ―Market Pull‖ comes from the following principal sources:  Communities – urban waste and energy security issues have prompted communities to seek out technologies such as this Project to enable smarter thinking about waste, biomass resources and energy. As evidence of this, the Tok Area DNR Forester is an enthusiastic advocate of the Project.  Universities – Universities are perhaps the largest initial market for the sale of renewable energy systems due to the large carbon footprint that typically exist on campus. Universities are eager to reduce their carbon footprint though technologies such as are represented by the Project. The School of Natural Resources at University of Alaska Fairbanks (UAF) is also supporting this project (see reference letter).  Industry – Many industrial processes require thermal energy and or large amounts of electrical energy. The Project has the potential to supply industry with both enabling industries to substantially reduce their carbon footprint and lower cost of production through lower cost biomass energy production.  Utilities – Many utilities face the prospect of addressing State Renewable Portfolio Standards whereby a stated percentage of energy production must come from renewable sources by a certain point in time. In addition, the cost of remote community and industry power servicing are simply not economic for new businesses.  Energy Service Companies – Nexterra, a packager of the technology, currently has strategic alliances to market commercial product offerings throughout North America with Johnson Controls Inc and Honeywell Inc.  Nexterra Systems Corp. – As indicated above, Nexterra is a developer of the gasification and gas cleanup technology that will form the basis for energy production in this Project.  GE Energy – As a participant in the Project, GE Energy views this Project as an Ecomagination Breakthrough within the GE world, acknowledging that the Project is a priority for GE and that the outcome could have a material effect on GE’s renewable energy portfolio.  Forest Industry – The forest industry views the emergence of distributed renewable power production as essential to the evolution of its industry, independent of mill closures, the cyclical building industry and the economy as a whole.  IPP’s – Independent Power Producers are eager for the development of biomass based renewable power production. Stand-alone financing for these projects must be predicated by demonstrations to the satisfaction of rating engineering firms. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 15 of 25 7/21/2010 4.3 Proposed System Include information necessary to describe the system you are intending to develop and address potential system design, land ownership, permits, and environmental issues. 4.3.1 System Design Provide the following information for the proposed renewable energy system:  A description of renewable energy technology specific to project location  Optimum installed capacity  Anticipated capacity factor  Anticipated annual generation  Anticipated barriers  Basic integration concept  Delivery methods AP&T proposes to do a thorough feasibility analysis on the technology demonstrated and proposed by Nexterra and GE Jenbacher that is comprised of a 2MWe Biomass CHP System, including a biomass gasifer and proprietary tar-cracking system that delivers clean syngas to a GE Jenbacher internal combustion gas engine as the prime mover for an electrical generation system. System design is discussed below. The following contains proprietary information that Alaska Power and Telephone Company requests not be released to persons outside the Alaska Energy Authority, except for purposes of review and evaluation. This information also reflects the findings of pre-feasibility work already accomplished by AP&T staff and contractors. These findings will be investigated for re-confirmation through this proposed Feasibility Analysis and Conceptual Design Stage. The Nexterra gasification technology, which is the core of the System, is a commercial fixed bed, updraft gasification process. Fuel, sized to 3-inch minus and with a Higher Heating Value (HHV) of 8,000-9,000 BTU/lb (DB), is bottom-fed into the center of a cone-shaped, refractory lined primary gasification chamber. Combustion air is introduced into the base of the fuel pile and partial oxidation occurs at 650 - 850°C where the fuel is converted into ―syngas‖ and non- combustible ash. The ash migrates to the perimeter of the primary chamber and is removed mechanically by a rotating ash dropout system. Minimal fuel disturbance and low gas velocities in the gasifier promote low particulate entrainment and carry over. While operating on unprocessed bark fuel (hog fuel), Nexterra’s gasification system produces a low-btu combustible syngas with a HHV of 100 – 150 btu/ft3. The syngas exits the gasifier at a temperature of 400 – 900°F depending on the moisture content of the wood fuel. The syngas is composed primarily of CO, H2, CH4, N2, CO2 and H20. It contains very low levels of entrained particulate, which means that it meets most PM emissions reg ulations without requiring additional mechanical pollution control equipment such as multi-cones, bag-houses and/or electrostatic precipitators. The GE Jenbacher IC engine being proposed for use in the System is a mature, commercial method for generating power in small to medium scale applications with the advantage of high gross electrical efficiencies. Traditionally, IC engines have been run on fossil fuels (gasoline, diesel or natural gas) due to the lack of technology required to refine and produce tar-free syngas from biomass. Syngas derived from biomass contains non-condensable gases rich in heating value and which are generally well suited to IC engines. Gas compositions and heating value from the Nexterra gasifier are in an appropriate range to for use in an IC engine as validated by GE-Jenbacher. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 16 of 25 7/21/2010 However, syngas produced from biomass typically contains condensable and non-condensable impurities, primarily in the form of condensable organic compounds (pyrolitic tars) as well as inorganic constituents (ash). These impurities can cause premature IC engine failures in the operation of IC engines, if not treated, as has been demonstrated with other approaches to this technology. AP&T has identified the Nexterra biomass CHP technology for its robust, simple gas cleaning process, which relies on high efficiency thermal cracking to overcome fouling issues, (traditionally been the ―Achilles Heel‖ of biomass power systems). This system utilizes a thermal cracking approach to convert tars to usable combustion gases. The following review outlines additional advantages of the proposed gasification technology over other options, starting with the gasifier, and then the engine genset:  Ultra Low PM Emissions – One of the most significant innovations of this system is the Nexterra gasifier that produces extremely low particulate emissions (typically <50 mg/m 3 without air pollution control equipment or less than 3 mg/m3 with pollution control equipment) to exceed the most stringent air quality regulations. By comparison, the combustion of natural gas typically produces PM emissions in the 4-6 mg/m3 range, and diesel combustion emissions are higher yet. The system’s ultra-low third party verified emissions means the technology is well suited to both urban and rural applications.  Design Simplicity – the system gasifier technology is relatively simple in design with an emphasis on fewer moving parts compared to conventional combustion systems or other gasification processes. For example, Nexterra gasifiers use fixed, convection cooled grates, while others use moving, water-cooled grates that are higher cost and maintenance. A high level of ash is maintained in the gasifier with a very low volume of ash being discharged in the flue gas thereby reducing the requirement for excessively sized electrostatic precipitators or other cleanup equipment. The requirement for less equipment means lower capital, less power consumption, ease of operation and lower maintenance cost.  Low Refractory Maintenance Cost – Lower gas velocities and lower temperatures inside the gasifier means minimal wear and tear on refractory. Reduced particulate scouring means increased refractory life in the gasifier.  Better Operational Control – the system gasifier has excellent process control capabilities in terms of turndown (4:1), rapid shut down and start-up from idle mode, control over flue gas temperature and the ability to tune ash bed temperatures to eliminate ash melting and clinker formation.  Fuel Flexibility – The system’s gasification technology has been proven on bark and whitewood fuels between 15 – 55% moisture at a particle size of 3‖ minus.  Application Flexibility – Ultra low emission flue gas provides opportunities to use the system gasifier for a variety of current and future applications  IC Engine – GE Jenbacher CHP systems economically utilize the waste heat incurred during engine operation to generate overall plant efficiencies of up to 90%. This efficient form of energy conversion achieves primary energy savings of roughly 40% by using a IC engine cogeneration system instead of separate power and heat generation equipment. Transportation and distribution losses are also reduced by the proximity to feedstock and end-users of community-scale decentralized energy generation.  The manufacturer of the IC engine/genset used in this system is GE Energy, one of the world's leading suppliers of power generation and energy delivery technologies, with 2007 revenue of $22 billion. Based in Atlanta, Georgia, GE Energy works in all areas of the energy industry including conventional and renewable energy. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 17 of 25 7/21/2010 Despite the multitude of advantages to the chosen technology, some potential technology difficulties have been identified. Strategies have been developed to minimize impacts from the following issues:  Scale Limitations – Updraft gasification has several unique advantages but is also constrained in terms of scale-up potential. The size of the fuel bed is limited to the extent that air can readily penetrate the fuel pile to ensure even and rapid g asification. Typically, this constraint limits updraft gasification applications to total system sizing of under 15MWe.  Equipment Limitations – Nexterra’s core gasification technology is proven but the tar cracking system is newer, and in the process of being commercially proven. Nexterra has committed a significant amount of engineering and field trials to minimize the risks. These commercial CHP systems are being deployed in North Carolina and British Columbia.  Syngas quality – Generally, Downdraft gasifiers produce a syngas lower in tars than updraft or fluidized bed gasifiers. Although Nexterra’s tar cracking technology produces syngas with lower tar, the conversion efficiency of downdraft systems is slightly higher. Scaleabily of downdraft gasifiers is a significant barrier due to the very large number of gasifiers required to produce power in the MW range. The Nexterra solution trades off the addition of a cracking system over a large number of gasifier necessary for a downdraft solution.  Water Waste Streams – All biomass power IC Engine solutions produce waste, most commonly contaminated water from the biomass, which is not processed in the engines. This water stream is a technical barrier in terms of life cycle cost to remediate the water. Nexterra’s system will also produce waste-water but the contaminant levels are expected to be low enough to remediate with modest technical solutions. Additional information regarding the proposed System includes:  The proposed 2MW system would match the existing load with a small reserve. The technology includes a turndown ratio that allows load matching, and could be integrated with other power inputs from seasonal hydro and existing diesel-fired power. Biomass CHP is demand-power, available as needed, as opposed to wind or solar power that must include battery storage to be available as needed.  The proposed system would be scalable in 2MW increments. An increase of generating capacity to meet additional load could be easily accomplished to allow for growth by additional business, industrial or community power needs. The system would be designed to be scalable from 2MW to 10MW.  Anticipated capacity factor of 100% of historical load, with the existing diesel generators available if needed for peak loads beyond 2MW.  Anticipated annual generation of 12,000 kWh, matching historical power demand.  Anticipated barriers include the previously mentioned Scale Limitations, Equipment Limitations, Syngas quality, and Water Waste Streams.  Basic integration concept is as a separate and integrated primary generating system, tied into the existing grid, in parallel to the diesel generators that will assume secondary status.  The System would deliver power to the electrical grid in the same manner as the existing system. The primary difference would be the source of fuel for the generators will be local and renewable, rather than non-renewable non-local fossil fuels. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 18 of 25 7/21/2010 4.3.2 Land Ownership Identify potential land ownership issues, including whether site owners have agreed to the project or how you intend to approach land ownership and access issues. There are no potential land ownership issues for the system site, as AP&T owns the land upon which the project will be located. The 5 acres of land proposed is suited for industrial purposes and will be provided to the project as part of the matching contributions. The new construction portion of the project is an (estimated) 17,600 SF metal building for the CHP system and a 30,000 SF shed for woodchip storage. Biomass resource forestland ownership issues will be investigated in the Biomass Resource Analysis as outlined in 4.1 4.3.3 Permits Provide the following information as it may relate to permitting and how you intend to address outstanding permit issues.  List of applicable permits  Anticipated permitting timeline  Identify and discussion of potential barriers No permits are required for the feasibility study; however, permits will be required when construction activities begin. AP&T will be responsible for obtaining all permits and required inspections throughout the life of the project. These may include a development permit, emissions permit, and building permit. There are no anticipated barriers to obtaining any of the required permits and AP&T has a process in place that has previously been successful in securing necessary permits and authorizations for AP&T power projects. Nexterra has also previously successfully obtained permits for similar systems in other locations. 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will be addressed:  Threatened or Endangered species  Habitat issues  Wetlands and other protected areas  Archaeological and historical resources  Land development constraints  Telecommunications interference  Aviation considerations  Visual, aesthetics impacts  Identify and discuss other potential barriers This phase of the project only addresses the feasibility of the project; no construction will take place with this phase. The feasibility portion will investigate the potential impact on habitats of threatened or endangered species, any known archaeological or historical resources that may be affected and any potential aesthetic and visual impacts. The proposed Biomass CHP Demonstration Project will take place in the Upper Tanana region, in Tok. AP&T will adequately assess any potential environmental and/or land use issues that may arise from the project, as follows: Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 19 of 25 7/21/2010 T&E Species: Investigate if any threatened or endangered species could be affected by the proposed project. Habitat Issues: Investigate if any threatened or endangered species habitat could be affected by the proposed project, as well as any potential impact to migratory animal corridors. Wetlands: The study will investigate any potential affect on any existing body of water, floodplain or wetland. Archaeological Issues: The study would investigate potential effects to historical, archeological or cultural sites. Telecommunications Interference: The study would investigate potential effects regarding telecommunications interference. Aviation Considerations: This project is not near an airport nor typical flight pattern, nor will the infrastructure be more than 45 feet above ground, well below safe flying elevation. This will be confirmed. Visual & Aesthetic Impacts: The study would investigate potential effects to any visual resources or landscape alterations. 4.4 Proposed New System Costs and Projected Revenues (Total Estimated Costs and Projected Revenues) The level of cost information provided will vary according to the phase of funding requested and any previous work the applicant may have done on the project. Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer’s estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of the project. Cost information should include the following:  Total anticipated project cost, and cost for this phase  Requested grant funding  Applicant matching funds – loans, capital contributions, in-kind  Identification of other funding sources  Projected capital cost of proposed renewable energy system  Projected development cost of proposed renewable energy system The entire proposed Upper Tanana Biomass CHP Project is expected to cost $18,000,000, however that cost may change with the results of this feasibility analysis and conceptual design project. This AEA Phase II funding request includes the feasibility analysis, resource assessment and conceptual design for the system and construction of a building to house the CHP unit and a wood storage shed. AP&T will supply an in-kind match of $45,000 towards the feasibility phase of the project, which will include administrative costs, local transportation, meeting space, and expertise of AP&T’s staff. The total cost for this feasibility analysis, resource assessment and conceptual design project is $425,000, of which $380,000 is requested in grant funds. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 20 of 25 7/21/2010 4.4.2 Project Operating and Maintenance Costs Include anticipated O&M costs for new facilities constructed and how these would be funded by the applicant. (Note: Operational costs are not eligible for grant funds however grantees are required to meet ongoing reporting requirements for the purpose of reporting impacts of projects on the communities they serve.) There will be no new facilities constructed at this time. However the feasibility analysis, resource assessment and conceptual design process will address the operation and maintenance (O&M) costs associated with the proposed CHP facility. 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following:  Identification of potential power buyer(s)/customer(s)  Potential power purchase/sales price - at a minimum indicate a price range  Proposed rate of return from grant-funded project This will be addressed in the feasibility study. AP&T is a regulated Alaska power utility, and is proposing this CHP system for its Upper Tanana power grid. The revenues will be determined by the RCA (Regulatory Commission of Alaska). The RCA regulates the rates, services, and practices of utilities that meet the criteria for a certificate of public convenience and necessity to provide service to the public for compensation. 4.4.4 Project Cost Worksheet Complete the cost worksheet form, which provides summary information that will be considered in evaluating the project. Please see the attached completed cost worksheet. SECTION 5– PROJECT BENEFIT Explain the economic and public benefits of your project. Include direct cost savings, and how the people of Alaska will benefit from the project. The benefits information should include the following:  Potential annual fuel displacement (gal and $) over the lifetime of the evaluated renewable energy project  Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price, RCA tariff, or cost based rate)  Potential additional annual incentives (i.e. tax credits)  Potential additional annual revenue streams (i.e. green tag sales or other renewable energy subsidies or programs that might be available)  Discuss the non-economic public benefits to Alaskans over the lifetime of the project The potential benefits of the deployment of the first viable and replicable community-scale biomass CHP system in rural Alaska will be many and significant: Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 21 of 25 7/21/2010 These numbers updated on September 12, 2010:  CHP system offset of 95% of the 2009 consumption of 871,129 gallons of diesel fuel = 827,573 gallons saved annually  Potential fuel cost savings of $1,078,000/yr (at 2010 price of $2.662/gal diesel) 25,000 Tons Biomass Fuel @ $45/T=$1,125,000. vs. 827,573 gals diesel fuel (saved) @ $2.66/gal = $2,203,000 = $1,078,000 annual fuel savings projected Diesel generators currently use #2 High Sulfur Diesel. In 2013, Ultra Low Sulfur Diesel will be mandated, at a 20% cost increase, in addition to any other cost increases. Over a 20 year system life: projected savings over diesel fuel is estimated to be 16.5M gallons projected fuel cost savings is estimated to be over $21.5M (at current diesel costs)  Possible Carbon Credit, Green Tag and/or other renewable energy incentive income  System appears to qualify for biomass fuel feedstock cost subsidy of $45/BDT from USDA Biomass Crop Assistance Program (BCAP, if applicable when system is operational) Non Economic Benefits This project will demonstrate the feasibility of gasification of woody biomass to generate power and heat. The potential benefit of replication in other Alaskan sites is obvious. An additional benefit will be from the realization of potential—Alaska has enormous natural resources and great potential to be a leader in renewable energy deployments. This project could be groundbreaking in demonstrating an alternative to fossil fuel demand power. The System to be operated by AP&T for the Upper Tanana power grid will have a significant net positive environmental impact and will be designed as a Biomass CHP showcase. The System is designed to operate at low PM emissions levels, with no discharges of wastewater or other pollutants. The System will be designed to deliver peak energy production of 30 MMBTU/hr (32 GJ/hr) using locally sourced wood fuel delivered to the site. The System will also include heat recovery equipment and which may be integrated into a district energy system, or sold to nearby manufacturing process users. The System will be installed as a turnkey operation and will operate in semi-automatic mode with moderate supervision, exceeding all local, state and federal emission requirements. This system will increase the potential viability for a biomass densification manufacturing plant, as well as other manufacturing and processing facilities. Stable priced power has been shown to catalyze further economic development and job creation. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 22 of 25 7/21/2010 SECTION 6– SUSTAINABILITY Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum:  Proposed business structure(s) and concepts that may be considered.  How you propose to finance the maintenance and operations for the life of the project  Identification of operational issues that could arise.  A description of operational costs including on-going support for any back-up or existing systems that may be require to continue operation  Commitment to reporting the savings and benefits AP&T proposes to use this feasibility study, resource assessment and conceptual plan project to identify the most viable business structure, and any potential changes from the existing power generation and distribution business structure. The current structure is sustainable as a power utility, with revenues from ratepayers covering fuel costs, O&M and regulated profit structure. As a regulated utility, AP&T is already required to report its revenues, O&M and power generation fuel costs. Savings and benefits will be directly experienced by the utility ratepayers. SECTION 7 – READINESS & COMPLIANCE WITH OTHER GRANTS Discuss what you have done to prepare for this award and how quickly you intend to proceed with work once your grant is approved. Tell us what you may have already accomplished on the project to date and identify other grants that may have been previously awarded for this project and the degree you have been able to meet the requirements of previous grants. AP&T has been the sole funder for project efforts to date. As this is a complex and large-scale project with multiple partners and entities involved, many steps have already been taken to move the project forward. These steps and actions include:  Strategic planning meetings to develop a project management plan, establish long-term feedstock sustainability and other elements of a pre-feasibility study of the project.  Initial research on the viability of renewable community-scale biomass combined heat & power systems in rural communities, specifically in the unique environment of Alaska  Established strategic partnerships with a variety of entities, including state, federal, and private entities that all have resources that are needed for the project  Initiate negotiations with State of Alaska DNR Forestry on a long -term biomass fuel harvest contract AP&T has a proven track record as an electrical utility as well as a developer of hydroelectric and other renewable energy projects. AP&T currently operates five hydroelectric projects, two storage and three run-of-river, with the Kasidaya Creek Hydro Project under construction. Since 2001 AP&T has installed over 75 miles of 34.5 kV transmission line on Prince of Wales Island, Alaska, all with in-house personnel. Many more miles of transmission lines, substations and transformers have been constructed since then. During 2005-2006, AP&T also designed, engineered, permitted, and constructed the 2MWe run-of-river South Fork Hydroelectric Project. Several of the projects were funded by grants, demonstrating significant grant administration experience. AP&T is familiar with and has successfully obtained AEA funding in the past, and has regularly successfully met funding requirements and reports. Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 23 of 25 7/21/2010 SECTION 8– LOCAL SUPORT Discuss what local support or possible opposition there may be regarding your project. Include letters of support from the community that would benefit from this project. Please see attached letters of support. This project enjoys widespread support in the Upper Tanana, and throughout Alaska. The letters included are from earlier grant applications for this same project. The names ―Alaska Biomass CHP Project‖ and ―Upper Tanana Biomass CHP Project‖ are interchangeable. This project has written support from: 1. Alaska Department of Natural Resources (DNR)– Forestry Division 2. Tok Umbrella Corporation 3. Alaska Center for Energy & Power (ACEP) 4. National Renewable Energy Lab (NREL) 5. University of Alaska Fairbanks (UAF) School of Natural Resources & Agricultural Sciences 6. Cold Climate Housing Research Center (CCHRC) No opposition has been identified, and the plan is to reach out to any potentially concerned citizens or groups to invite them to the public meetings and listen to their concerns. We believe that the demonstrable facts about this project will answer most concerns. We also feel that in many cases, genuine acknowledgment of all concerns and points of view can often ameliorate potential opposition. SECTION 9 – GRANT BUDGET Tell us how much you want in grant funds Include any investments to date and funding sources, how much is being requested in grant funds, and additional investments you will make as an applicant. Include an estimate of budget costs by milestones using the form – GrantBudget3.doc Provide a narrative summary regarding funding sources and your financial commitment to the project. Milestones to be Completed AEA Request AP&T Share Total 1. Project scoping and contractor orientation $15,000 $5,000 $20,000 2. Detailed energy resource assessment $50,000 $5,000 $60,000 3. Identification of land and regulatory issues $10,000 $4,000 $14,000 4. Permitting and environmental analysis $40,000 $5,000 $45,000 5. Detailed analysis of current cost of energy & future market $10,000 $5,000 $15,000 6. Assessment of alternatives completed $20,000 $3,000 $23,000 7. Conceptual design and costs estimate $130,000 $4,000 $134,000 8. Detailed economic and financial analyses $45,000 $5,000 $50,000 9. Conceptual business & operations plan $30,000 $5,000 $35,000 10. Final report and recommendations $30,000 $5,000 $35,000 Total Project Cost $380,000 $45,000 $425,000 Renewable Energy Fund Grant Application Round IV AEA11-005 Grant Application Page 24 of 25 7/21/2010 Alaska Power & Telephone has already invested over $120,000 and nearly 2 years in CHP technology research, pre-feasibility work, and negotiations for a long-term biomass feedstock contract for this project. The cumulative result of this effort is a high level of confidence that the project will prove ultimately viable, and an ―investment grade‖ assessment is now justified. The cost projections for the Feasibility Analysis, Resource Assessment and Conceptual Design phase of this project are $425,000, including AP&T’s cash and in-kind contributions for staff, facilities, offices, and administration. AP&T is committed to the long-term success of this project, as demonstrated by the time and expense already invested, and the ongoing dedication of staff and contractors.