HomeMy WebLinkAboutJarvis Creek Natural Gas State RE Fund Grant Application
Renewable Energy Fund Round 3
Grant Application
AEA 10-015 Application Page 1 of 23 10/7/2009
Renewable Energy Fund Grant Application
Third Round, November 10, 2009
Jarvis Creek Natural Gas Project
Resource Assessment
PROJECT: Jarvis Creek Natural Gas Project
LOCATION: Jarvis Creek Area, Alaska
OWNER: Alaska Wind Power LLC, a company owned by
Alaska Power & Telephone Company and LAPP
Resources, Inc.
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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-III.html
Grant Application
Form
GrantApp3.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
Costworksheet3
.doc
Summary of Cost information that should be addressed by
applicants in preparing their application.
Grant Budget
Form
GrantBudget3.d
oc
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
GrantBudgetInst
ructions3.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.
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SECTION 1 – APPLICANT INFORMATION
Name (Name of utility, IPP, or government entity submitting proposal)
Alaska Wind Power LLC
Type of Entity:
Private Energy Developer, Independent Power Producer
Mailing Address
10600 Prospect Drive
Anchorage AK 99507
Physical Address
10600 Prospect Drive
Anchorage AK 99507
Telephone
907 248-7188
Fax
907 248-7278
Email
lapres@gci.net
1.1 APPLICANT POINT OF CONTACT
Name
David W. Lappi
Title
Member
Mailing Address
10600 Prospect Drive
Anchorage AK 99507
Telephone
907 248-7188
Fax
907 248-7278
Email
lapres@gci.net
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)
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.
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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)
Jarvis Creek Natural Gas 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.
About 30 miles south of Delta Junction Alaska, near the end of Coal Mine Road.
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 X 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)
X 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.
This Phase II project will investigate, evaluate, and provide a conceptual design for partially
stabilizing wind-generated power at the Delta Wind Farm with locally-produced natural gas. It is
intended to address the technical, economic, financial, and operational viability of producing
natural gas from the Jarvis Creek area 30 miles south of Delta Junction. If sufficient natural gas
is present, the conceptual design will include piping that gas to Delta Junction for use within the
community for space heat and stationary power uses.
Stabilizing wind power with a rapidly controllable natural gas generator will allow the wind
project to better serve its customers with a more stable power supply. Rapid variations in the
amount of wind energy available can be smoothed using natural gas generation, and operational
procedures involving anticipatory wind turbine shutdowns, or sequential wind turbine startups,
as well as wind forecasting.
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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.)
This Grant:
If this project is successful in identifying a commercial source of natural gas, it could be
developed to make the Delta Wind Project a dispatchable energy source by providing electricity
when the wind varies or is not blowing. For the purpose of these grant application calculations,
we assume that the wind farm is 50 MW while the gas generators could provide 25 MW. If a
larger source of natural gas is discovered, it could be piped to Delta Junction to supply space
heating and stationary power for the community, the Fort Greely military base, and the Alyeska
Pipeline Pump Station No. 9, as well as adding reliability to the electric supply from the Delta
Wind Project.
If successful, this project will allow Golden Valley Electric Association to finally be able to
access a secure source of natural gas-fired electricity from the Interior region, rather than
importing it from South-central Alaska. The combination of wind and natural gas generation
sources means that, depending on carbon taxes and the relative costs of electricity from each
source, the appropriate sources can be emphasized for use on the system. Flexibility in
generation options and fuels is desirable.
The Delta Wind Project Generally:
GVEA is currently producing about one-third of their power from liquid hydrocarbons, one-third
from coal, and purchasing another third from South-central Alaska utilities through the Northern
Intertie. The Delta Wind Project will likely displace GVEA’s most expensive power, which is
peaking power made from liquid hydrocarbons. Delta Wind Project electric power generation at
the far end of GVEA’s transmission system will diversify their sources of supply geographically
so they are not so heavily dependent on the integrity of the Northern Intertie.
With dynamic VAR support associated with the wind farm, GVEA’s grid could be strengthened
by regulating and stabilizing voltage levels. Our generation will provide an additional source of
local power for consumers in Delta Junction, reducing line losses of a few percent from North
Pole to Delta Junction. Several large loads exist in the Delta Junction area: the Pogo Gold Mine,
the Fort Greely Missile Defense site, and the Alyeska Pipeline Pump Station 9. Just the pump
station electrification and the new missile site have increased the electric load by 30 MW within
the last few years.
All GVEA consumers could benefit from the Delta Wind Project due to the fact that wind has no
fuel cost and so can be sold at a known price. This could lower fuel supply cost volatility that is
present with oil and imported natural gas.
Air quality in the vicinity of power plants supplying GVEA’s energy will also improve as we
will be displacing hydrocarbon combustion with clean renewable energy on windy days. This
will also reduce the significant exposure GVEA’s customers have to carbon tax or CO2 cap and
trade proposals likely to pass in the near future. Some of the proposals Congress has considered
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recently could add up to two cents per kWh or 15% to the price of fossil fueled electricity ($0.25
per gallon of diesel burned. Wind-generated electricity could save consumers this money through
long-term electricity supply contracts.
Development of the wind resource will benefit not just Alaska, but the entire nation. Liquid
hydrocarbons that Alaskans do not use can be exported, reducing our reliance on oil imported
from countries in less secure parts of the world, and reducing the outflow of wealth from our
country.
Alaska’s consultants and contractors will likely benefit from wind farm construction activities,
and the ongoing operation of the wind farm could generate several full-time employment
opportunities for local residents.
Wind farm tourism opportunities may also exist, and the Delta Wind Project could attract
students, teachers, and other visitors. Subject to safety requirements, after completion of
construction of the Delta Wind Project tourists and other visitors will still be able to use the land
around the wind farm for a variety of uses.
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.
This Grant
This grant application is for $300,000 which, together with our private funds of $100,000, will
fund the following items:
Drilling Permits $10,000
Core Rig, Mob and Demob 160,000
Accommodation 20,000
Wireline Logging 70,000
Geological and Lab Services 80,000
Plug & Abandonment 10,000
BOP Rental 0,000
Supervision, Analysis, Reporting 20,000
Total $400,000
The above estimated total cost to permit and drill exploration holes at Jarvis Creek is $400,000.
The project sponsors will directly finance $100,000 (25%) of the project cost and cover any
additional project cost. Applying public grant financing will allow the project to proceed
rapidly, to quickly benefit power consumers in the GVEA service area.
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. $ 300,000
2.7.2 Other Funds to be provided (Project match) $ 100,000
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2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $ 400,000
Project Costs & Benefits
(Summary of total project costs including work to date and future cost estimates to get to a ful ly
operational project)
2.7.4 Total Project Cost (Summary from Cost Worksheet
including estimates through construction)
$ 160 million (50 MW wind
and 25 MW gas)
2.7.5 Estimated Direct Financial Benefit (Savings) $ 95.4 million (20 yrs)
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.)
$ difficult to quantify, see
Public Benefits 3 thru 7
below.
Estimated Direct Financial Benefit (Savings): Assuming about 1 cent in savings over other electric
sources, and a 1.5 cent savings in carbon taxes:
Public Benefit No 1: Our power purchase agreement is not yet negotiated with GVEA, however
entering into a long-term contract to sell power at a fixed price will allow the utility to hedge their fuel
price risk. If we save consumers just one cent per kWh over the price of generating electricity using other
fuels:
Wind: 50 MW Wind Farm X 30% Capacity Factor X 8,760 hours per year =
131 million kW hours per year X $0.01 per kWh, or more than
$1.31 million per year in savings, or more than $26 million over 20 years, plus:
Natural Gas: 25 MW Gas Turbines X 70% utilization X 8,760 hours per year=
153 million kW hours per year X $0.01 per kWh, or more than
$1.53 million per year in savings, or more than $30 million over 20 years.
Public Benefit No. 2: If carbon taxes or cap and trade schemes are implemented, this wind
farm will avoid payment of those costs for each kWh of wind energy generated. For this area,
those costs could be several cents per kWh. If we assume the carbon cost is 3 cents per kWh
and we have half our power coming from wind (saving 1.5 cents per kWh):
50 MW Wind Farm X 30% Capacity Factor X 8,760 hours per year =
About 131 million kW hours per year X $0.015 per kWh, or more than
$1.97million per year in savings, or more than $39 million over 20 years
Total Direct 20-Year Financial Benefit at 1 cent per kWh savings:
Wind $26 million + Gas $30 million + Carbon $39 million = $95.4 million
Public Benefit No 3: If the price of heating oil increases significantly, local residents may find it
cheaper to heat with wind-generated electricity, rather than oil. Electric heaters are now available to store
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heat for up to several days, to be used when the wind is not blowing. This savings could be large, if
heating oil costs rise and wind energy is available.
Public Benefit No 4: The State of Alaska will receive royalties on the wind generation at rates still to
be negotiated in the land lease.
Public Benefit No 5: Air quality in the region of GVEA’s current generation facilities (North Pole) will
improve (including a reduction in winter ice fog) proportional to the amount of fossil fuel combustion that
we displace. The dollar value of reduced health care costs is hard to calculate, but it will be a public
benefit.
Public Benefit No. 6: A portion of the money that formerly left the Interior (and Alaska) each year to
buy fuel will now circulate within the local community and Alaska generally, strengthening the local
economy. If we consider the “multiplier effect”, this benefit could be significant.
Public Benefit No. 7: Security of Supply. Another non-economic benefit is having distributed
sources of generation in diverse geographic areas. A generation or transmission disruption in
one area is less likely to cause a long-lasting outage if generation resources are separated on
different parts of the transmission system. This becomes much more important during this
region’s very cold winter weather.
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 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.
Alaska Wind Power LLC will be the lead manager of the project, assisted as needed by the
parent companies of the project proponents; Alaska Power & Telephone Company, and Lapp
Resources, Inc.
Alaska Wind Power LLC is managed by its members, Alaska Power & Telephone Company
(AP&T), a certificated Alaska utility specializing in renewable energy (mainly hydropower), and
LAPP Resources, Inc. (LRI), an Alaska-owned private resource development company. Both
AP&T and LRI are employee-owned. AP&T’s CEO is Mr. Bob Grimm and LRI’s CEO is Mr.
David Lappi. Both have significant project management experience.
AP&T’s web site (see http://www.aptalaska.com/index.php) describes the company as follows:
Recognized as one of the most progressive utilities in Alaska, the keys to AP&T's
continued success lay primarily in its willingness to promote and develop long-term
reliable energy and communication solutions while capitalizing on the innovation and
technical expertise of its skilled and dedicated employees.
AP&T currently provides service to communities located above the Arctic Circle, deep in
the Wrangell Mountains, and throughout the islands of Southeast Alaska. We travel by
boat, floatplane, snow machine, riverboat, helicopter, and all terrain vehicles.
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We maintain systems on windswept mountaintops and storm-battered islands. Our power
and telecommunications lines cross rainforest, taiga, and tundra. We operate facilities in
places that are among the wettest, driest, windiest, coldest, and most remote regions on
earth. We live and work in Alaska. [The low temperature in Tok last winter was -70° F,
and the lights stayed on.]
Alaska Power & Telephone Company proudly marks 2007 as its 50th year of growth,
innovation, and leadership in the utility industry. AP&T serves over 30 communities
stretching from the Arctic Circle to the southernmost tip of Southeast Alaska. In five
decades, AP&T moved from humble beginnings to take a leadership role in the
development of renewable resource energy in Alaska. Through a combination of low
impact hydro, wind, and experimental underwater river turbine projects, AP&T’s 134
employee-owners work to further minimize our environmental footprint while ensuring
the availability of energy resources necessary for future years.
LAPP Resources, Inc. has been involved in the Alaska energy business since 1991. During the
last 17 years, LRI has been instrumental in exploring new energy sources for both the rail belt
and rural Alaska, from wind energy, to remote sensing for geothermal exploration on the Alaska
Peninsula, to shallow gas and coalbed methane exploration in the Cook Inlet basin and Interior
(see http://home.gci.net/~lapres/index.html).
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.)
The following project schedule is proposed:
Task Time Period
Drilling Permits February 2010
Mobilization June 2010
Drilling and Casing July 2010
Wireline Logging July 2010
Demobilization August 2010
Analysis and Evaluation September 2010
Reporting October 2010
3.3 Project Milestones
Define key tasks and decision points in your project and a schedule for achieving them.
Successful Permitting – by June 2010.
Drilling completed July 2010.
Demobilization August 2010
Reporting Complete October 2010
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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.
Alaska Wind Power LLC will be the lead manager of the project. Their experience is listed
above under 3.1 Project Manager. LAPP Resources Inc. has drilling experience ranging from
engineering drilling on the Trans Alaska Pipeline construction, mineral core drilling, water well,
coalbed methane, and conventional oil and gas drilling, both in Alaska and overseas.
Contractors have not been selected to carry out any of the Project tasks, but the tasks will be
completed using optimal industry practices. The tasks may include:
Mob/Demob and core drilling, and
Geological Services.
For the wind project generally:
Mapping contractors to complete topographic and wetlands mapping.
Engineering contractor to complete final road right-of-way alignment and design.
Contractors to construct the following:
access road and transmission line,
intra wind farm roads
turbine foundations
turbines and towers assembled
transformer substation
power collection system
electrical hookup of all components
testing and commissioning
For the gasfield :
Well completions and testing
Gas gathering systems and hookups
For the gas generation:
Engineering services
Construction contracting
3.5 Project Communications
Discuss how you plan to monitor the project and keep the Authority informed of the status.
Alaska Wind Power LLC will work closely with the selected contractors and keep the AEA
informed of progress by regular e-mail updates as components of the project are completed. The
contractor’s Interim and Final reports will be submitted promptly when completed. Further
details may be specified in the final Grant Agreement. Close liaison will be maintained with the
contractors throughout the project. Issues to be tracked include scope clarifications, progress
relative to budget, schedule, data recovery, and health and safety.
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3.6 Project Risk
Discuss potential problems and how you would address them.
This Project:
The permitting and drilling have a low completion risk associated with them; however, the larger
risk is associated with identifying a commercially-viable natural gas resource. This risk is
somewhat mitigated by the presence of previously discovered gas-bearing strata in shallow holes
drilled during exploration at the coal prospect at Jarvis Creek. Numerous conventional and
unconventional gas reservoirs could exist within this small sedimentary basin. Although the
basin is thought to be quite small, perhaps only two by eight miles in extent, it could contain
significant reserves of natural gas, likely enough to partly stabilize the power supply from the
Delta Wind Project.
The Delta Wind Project generally:
The wind farm construction carries a low completion risk since we will be using commonly-used
commercial wind turbines.
We believe that our power will prove attractive to GVEA and consumers, and they are likely to
be receptive to accepting our power at commercially-viable rates.
Another low-risk possibility is long-term climate (wind) change. Studies have shown that over a
25 year period, the variability in wind is generally less than five percent. Our commercial
contracts will be priced and adjusted to account for this risk. This variability could also prove
positive for the project.
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.
The wind energy resource of the Delta Wind Project has been continuously evaluated with one 50
meter meteorological tower since December 2006, and a second met tower since November 2007.
This monitoring has documented a resource which will support an economically viable 50 MW
wind farm considering the market and available alternatives to generate power. Modeling by
AWS Truewind shows a good wind resource. A 50 MW wind farm at our location is expected to
produce a minimum of 131 million kWh of clean, renewable energy every year. If wind energy
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proves to be a preferred source of power, new gas-fired generation can be added to the system in
the future. The wind site is not limited to 50 megawatts, but could easily accommodate hundreds
of megawatts.
Pros: The Delta Wind Project will allow more efficient use of fossil fuels where renewables are
less applicable, such as in transportation and/or to be exported to regions where wind generation
is not an option. The Delta Wind Project will improve air quality in the North Pole area by
reducing fossil fuel use at the existing liquid hydrocarbon power plants there.
There are really no other good large renewable energy options to replace wind energy for
wintertime use in the Interior. Other renewable sources include solar or in-stream hydro (Tanana
River), both of which are not available during high-demand winter months. The in-stream hydro
option is not likely to be economic within the near future. Geothermal energy could be available
in the region but no sources near the transmission grid are known at present and new, expensive
exploration of the potential sources (and new transmission lines) would be needed.
In the intermediate future, a gas pipeline may be built from the North Slope to Fairbanks and
southeast through Tok to the Lower-48, but neither the schedule for construction and completion,
nor the price of natural gas from this source is currently known. The recent worldwide decline in
the price of natural gas, and new technologies allowing for more economical recovery of natural
gas from Lower-48 unconventional resources may delay a North Slope gas line to the Lower-48
for an undetermined period.
All fossil fuel sources of electricity are likely to be governed by future “cap and trade” or “carbon
tax” regimes designed to reduce CO2 emissions growth or output. Wind power generation will
not be subject to these added costs, and may in-fact benefit wind power consumers by helping to
limit rate increases. Environmental attributes or “carbon credits” created by renewable wind
power generation will be sold to help reduce electric rates.
Cons: Except to the extent this grant can help identify natural gas to stabilize our wind resource,
wind energy is not dispatchable, as it is naturally an intermittent resource. Wind also has
environmental impacts such as avian mortality and visual impacts.
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.
Golden Valley Electric Association currently gets about one third of its power from each of the
following sources: Healy coal, power purchased from South-central Alaska utilities, and refinery
byproducts from the North Pole Oil Refinery. A recent GVEA peak system load was 223 MW at
5:00 pm on December 19, 2007. It was minus 33 degrees F at the time.
Coal: Healy coal is transported to six Interior Alaska electrical power plants - including three
military sites: Fort Wainwright (U.S. Army), Eielson Air Force Base and Clear Air Force Station;
Golden Valley Electric Association (Fairbanks' electric cooperative); Aurora Energy (a wholesale
supplier of electricity and provider of district heat in Fairbanks); and the University of Alaska
Fairbanks power plant. The 25 MW mine-mouth coal-fired power plant in Healy was built in
1967, and the adjacent and mothballed 50 MW Healy Clean Coal Plant was built in 1997.
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Purchased Power: Power purchased from South-central utilities is imported through the Northern
Intertie. About 80 percent of it is generated using simple cycle natural gas turbines in several
locations, generally at efficiencies of about 35 to 40 percent. South-central is running short of
natural gas and this scarce resource could be used more efficiently for space heating of homes and
businesses (more than 90% efficiency in modern furnaces).
Liquid Hydrocarbon Generation: The GVEA generation plant at North Pole burns refinery
byproducts; HAGO (heavy atmospheric gas oil) for 120 MW, and naphtha for an additional 60
MW (built 2006).
Alaska Wind Power has undertaken an interconnection study with GVEA through their system
stability consultants, Power Engineers. This study identified the design, equipment, and operating
procedures required to ensure GVEA’s system stability when accepting power from the Delta
Wind renewable energy project.
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.
See 4.2.1 above. We have funded and completed an interconnection study through GVEA to
identify necessary measures to minimize the impact of wind power integration on their grid. This
study was competed during the first half of 2009 and identified no serious difficulties in
integrating our wind project into the GVEA system.. Our project will benefit air quality in
Fairbanks, North Pole, and Delta Junction, since less fossil fuel will need to be burned in existing
power plants in these locations to follow GVEA’s load.
4.2.3 Existing Energy Market
Discuss existing energy use and its market. Discuss impacts your project may have on energy
customers.
Fairbanks is a modern city of about 80,000 people in central Alaska. This city and a few outlying
connected communities will consume the electricity generated by this project. In addition to
Fairbanks, those cities are Delta Junction, Big Delta, Salcha, North Pole, Fox, Ester, Nenana, and
Healy. In addition, several large industrial users will benefit, e.g., Fort Knox Gold Mine, Pogo
Gold Mine, Fort Greely Missile Defense, and Alyeska Pump Station 9. We believe that the Delta
Wind Project will help shelter utility customers from the effects of carbon taxes or emissions
trading schemes that we believe are about to be implemented. These new taxes could cost Interior
consumers an additional 15% on their electrical bills. Railbelt utility customers are now 90%
exposed to the full brunt of those taxes since 90% of their generation is coming from fossil fuels.
Our power costs to rate payers would be no greater than other non-renewable new generation
which might be brought online in the future, and our power carries no risk from future carbon
taxes. Indeed, the Delta Wind Project has potential to reduce power costs to the rate payer,
depending on factors such as financing ultimately realized. Wind fuel is “free” and a long-term
tariff would be sought, so any potential rate increase(s) with time would be less likely than with
fossil fuel generation.
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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
The Delta Wind Project will generate renewable electricity from wind resources in the
Jarvis Creek region near Delta Junction, stabilized with natural gas from the same area.
The optimum installed capacity will be dependent on our power purchase contracts with
utilities, and is not limited by the wind resource available.
Based on meteorological monitoring to date, we anticipate a minimum capacity factor of
30 percent.
The project will generate about 131 million kW hours per year from 50 MW of nameplate
installed capacity, more capacity will be installed if power sales agreements allow.
Barriers include upfront environmental, engineering, and permitting studies; i.e.,
information required to achieve project permit approval. Other barriers include an
adequate power purchase agreement with the utility being negotiated, or unanticipated
wildlife or bird issues arising from our specific site.
Integration will be by step-up transformers and a 20 mile long 138 KV transmission line
built to get our power to the GVEA grid. A GVEA integration study in 2009 showed no
problematic grid integration issues.
The power will be sold wholesale to railbelt utilities and delivered to consumers by their
utilities as it is now.
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.
For the gas resource:
AP&T currently own a coal lease in the area, allowing them to apply for natural gas rights on the
land. An Exploration License application could also be undertaken if thought appropriate to
secure gas exploration rights to other parts of the area.
For the wind resource:
The access route and site are proposed to be located on vacant State land that is currently held
under a 36 square mile State Land Use Permit. The University of Alaska has selected (but has not
yet received) most of this area for ownership as part of its land grant from the 2005 State
Legislature. We have held a “pre-application meeting” with University and government
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stakeholders (US COE, F&WS, ADF&G, DNR, DEC, BLM) and we expect few impediments to
project completion. Completion of our avian and design studies is required to proceed to a State
land lease for the wind farm site and rights of way for the transmission line and construction
access road.
We hold another six square miles of adjacent Federal land as a three-year BLM Wind Right of
Way, allowing us to study the wind resource and propose a final development plan. At this time,
the State lands look like a better wind resource, so no development of BLM lands is now
proposed.
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
Exploration Drilling Permit – completed by June 2010
Wetlands Permit (if applicable) – June 2010
SHPO Review – June 2010
ADF&G fish passage permit - July 2011
DOTPF driveway and powerline easement – Aug 2011
State land lease - Sept 2011
Interconnection and Power Purchase Agreement – September 2011
BLM Wind ROW and NEPA issues – as required if BLM land is eventually developed,
but not on the critical path for initial State land development
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
For this drilling project:
Exploration Drilling permit from DNR and or AOGCC
Wetland Review if required
Air quality permit if required
For the wind farm proposal generally:
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No threatened or endangered species are known in the local area. The avian studies that
are already planned are a key element of our environmental study.
The area is used by moose and caribou (Macomb Herd). Few wind farms have been built
in caribou habitat. Discussions would be held with ADFG and USFWS on any needed
information to support permit decisions.
Small wetlands exist near kettle lakes along the proposed road ROW. Corps of Engineers
404 b(1) guidelines require developers to (1) avoid wetlands, (2) minimize impacts if
unavoidable, and (3) mitigate unavoidable impacts. The road will avoid wetlands
negating the need for 404 permitting.
Few archaeological and historical resources are known in the area. The area was glaciated
a few thousand years ago, so older resources are probably absent. Coal Mine Road goes to
an old coal prospect and some relict mining equipment remains. A SHPO 106 review
would be undertaken.
There are no known land development constraints, aside from winter winds that at times
exceed 100 mph, with drifting snow. Access is to our proposed site is via vacant public
land. No incompatible land use(s) affect wind farm development.
Telecommunication interference is unlikely. There are no businesses and few residences
within 20 miles of the site. We are not within line-of-sight paths for microwave
communications along the pipeline corridor.
The area under permit from the BLM is state selected, and development of a wind farm on
adjacent state land will help bolster the state’s claim to that selection.
Aviation use of the area is frequent, since it is near the Trans Alaska Pipeline, and
between the military Donnelly Training Area/Fort Greely and Black Rapids Training
Camp. Military airspace overlies the site, and civilian airmen often fly along the Delta
River Valley that contains the Richardson Highway. Notices to Airmen and obstruction
lights on met towers and turbines will alert the aviation community of the potential
hazard.
Aesthetic and visual impacts will be reduced by locating the wind farm several miles from
the Richardson Highway where the majority of travelers will not see it from close
quarters. Some find wind turbines graceful additions to the countryside, a reminder that
we can live well while reducing our use of fossil fuels. About half of the transmission line
will be adjacent to the Richardson Highway, and its southern half is along our proposed
access road. Most travelers will not see the southern half of the line, since it will be some
distance away from the Richardson Highway.
GVEA has a wind farm proposal at Eva Creek, near Healy, that could potentially compete
for market share with our proposed wind farm. Ideally, both farms could be
accommodated, since geographic diversification for this form of distributed generation
will make wind power more reliable and subject to fewer output swings. Our wind project
at 50 MW would constitute a six percent penetration of the railbelt peak load. Given the
flexibility of the railbelt generation system (gas/oil / hydro) this level of penetration is
conservative. A suitable power purchase agreement with a retail utility is a key element
of our project. Environmental studies could uncover unknown animal or bird issues that
could impact our proposal.
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,
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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 total project cost for the 50 MW Delta Wind Farm is estimated at $135.3 million.
The grant request for this phase is $300,000 (natural gas resource assessment).
Company capital contribution matching funds of $100,000 will be supplied as required to
complete this phase of the project.
If the gas resource is sufficient, a 25 MW gas-fired generator costing about $30 million
will be added to the wind project to stabilize power output from the wind resource.
Sufficient funds are required to complete entire project construction. We are proposing to
apply for construction loan funds required for the Delta Wind Project from the Alaska
Power Project Fund, or other available commercial loan. The Power Project Fund could be
used to build this and other railbelt energy developments using tax-free bond financing for
reduced loan costs. These savings could help reduce electric rates to consumers.
Construction financing could be sought from other funding sources including the Power
Project Fund and commercial loan funds.
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.)
For this grant application, there is no O&M cost associated with the drilling.
O&M costs will be required during the summer of 2012 during the construction phase of
the wind project, but that road O&M cost will be carried in the construction budget.
For the Delta Wind Project, direct O&M costs are estimated (based on industry
experience) at about one cent per kWh. More definitive numbers will be available as the
final design is settled.
This grant application has requested $300,000 on a $400,000 project. If additional monies
are required to complete the project the participants will supply the required capital.
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
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No wholesale power purchase agreement has been negotiated at this time with GVEA or
other utilities.
We expect that the sale of our power will be at rates close to GVEA’s actual avoided cost.
We expect that the majority, about 90%, of our project will be funded using project loans,
not grants. When commissioned, our project will help Alaska meet its increasing energy
requirement, stabilize power costs, and avoid a portion of future taxes on carbon fuels,
CO2 emissions, or carbon sequestration requirements.
4.4.4 Project Cost Worksheet
Complete the cost worksheet form which provides summary information that will be considered
in evaluating the project.
Download the form, complete it, and submit it as an attachment. Document any conditions or
sources your numbers are based on here.
GVEA’s 2007 Annual Report states that their original turbine at North Pole burns 4,300 gallons
of fuel each hour to make 60 megawatts of electricity. We assume that our wind generation would
replace generation from the most inefficient turbine on the system, saving nearly 4,300 gallons of
fuel each hour the wind farm runs at it rated 50 MW capacity.
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 annual fuel displacement is about 9.5 million gallons, based on published efficiencies
of turbines at GVEA’s North Pole facility. If we save the consumer just one cent on the
cost of power produced from liquid fuels, we will save GVEA customers more than $1.7
million per year, or more than $35 million over the 20 year life of the wind turbines (they
would be replaced by newer more efficient models at that time). If natural gas proves
commercial, the annual liquid fuel displacement from North Pole will increase
substantially.
The power purchase agreement will specify the price for the power from the Delta Wind
Project so the annual revenue is undetermined at this time, but we require a price
sufficient to justify the construction and operation of the Delta Wind Project. We are a
Qualifying Facility as defined by the Federal Energy Regulatory Commission, and thus
are able to sell our power to GVEA at their RCA published avoided cost, less the cost of
wind integration . For the portion of power generated by natural gas, the cost of power
should be lower than the cost of the refinery liquids being burned at North Pole now.
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Federal Tax Credits for wind include the two cent per kWh Production Tax Credit (PTC)
that was recently renewed by Congress. Our project will proceed even if this tax credit
fails to be extended, although it helps the project economics to have it.
Renewable attributes for our project will be sold, hopefully to the highest and best bidder,
to further assist with project economics. The value of these will increase substantially if
carbon taxes are imposed.
The State (or University if it receives title to the land) will receive millions of dollars in
electric production royalties over the life of the project.
The 20-mile long transmission line will eventually serve a part of the electric transmission
link between the railbelt and the Copper River basin grid.
Non-economic public benefits:
The project will improve access to state lands in the region of the wind farm.
We believe the Delta Wind Project will be an asset to the community of Delta Junction
and the Interior generally, and we expect that tourists, locals, and school children will
want to tour the wind farm and understand its operation
Another public benefit is the job creation for construction and operation of the wind farm.
This stable, long-term project could create local employment for a few people and many
temporary jobs during the construction phase.
The Delta Wind Project will displace about 9.5 million gallons of hydrocarbons per year
that are currently being burned in combustion turbines in North Pole to generate power.
This will allow the liquids to be exported through the Trans Alaska Pipeline system to the
Lower-48 to reduce their need to import oil from foreign countries in distant, unstable
parts of the world. We think that American energy self-sufficiency is a worthy goal, and
the Delta Wind Project is another step toward attainment of that goal. The locally-
produced natural gas would only aid in reducing our dependence on imported oil in the
USA.
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
Sustainability - We expect that the wind resource will continue to be available in the area
for the foreseeable future and at little to no change in cost. Minor variations in wind may
occur over the long term, and those can be anticipated in long-term pricing models for our
power sales agreements. Alaska Power & Telephone Company has been very aggressive in
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attempting to move the communities they serve off diesel fuel and onto renewable energy
resources to enable these communities to continue to grow instead of being held hostage to
the uncertainties of short-term fossil fuel pricing. This project could do the same for
Interior Alaska.
Alaska Wind Power LLC will operate this project as an independent power producer on
the GVEA’s grid, selling wholesale power to GVEA for distribution to their customers.
There should be little change in the way customers receive their power.
Our power purchase agreement will allow for adjustments to prices based on inflation and
other specific market conditions, allowing us to continue maintenance and operations for
the long term.
Operational issues could include excessive diesel costs required to stabilize the grid,
however we believe that these issues can be mitigated with operating procedures and
technology. If excessive wind turbine blade icing conditions exist at the site, heated blades
may be required – our wind resource assessment leads us to believe this will not be a major
issue at this site.
Operational costs include periodic preventive maintenance, and specific maintenance items
that arise. A trained local person is needed to help address these issues as they arise. AP&T
and APC build and maintain the local power lines already, so the addition of 20 miles of
line should not be a major issue. We will find it useful to have some real-time wind
prediction capability, in order to anticipate fluctuations in power requirements from other
power sources, for example natural gas.
AP&T and APC are committed to keeping their customers informed on issues related to
the utility. Cost savings and benefits are routinely reported in AP&T’s annual reports.
Further reports will likely be required by the terms of the grant agreement for this project.
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.
For Natural Gas Drilling:
We have identified a potential gas resource in a small sedimentary basin in the vicinity of
our proposed wind farm that could be used to stabilize wind farm output and convert the
project into a dispatchable generation facility.
We have conceptualized a plan to convert this potential resource into a reliable source of
locally-produced electricity for the Delta region, tied to the railbelt electric grid.
We have scouted the area and selected the best site available, based on topography, land
ownership status, access to wind, and proximity to the road and transmission lines.
For the Wind Resource:
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We have applied for and been granted a Land Use Permit for the tower by the State
Department of Natural Resources.
We have purchased and installed two 50 meter meteorological towers, and are now in
possession of nearly three years of meteorological data from the site. This work is supported
by a pre-construction grant of $100,000 from the Alaska Energy Authority.
We have applied for and entered into a wind Right of Way with BLM on adjacent land for
the installation of additional met towers.
We have developed a conceptual design for the wind farm using commercially-available
turbines and towers, new access road that does not impact the Trans Alaska Pipeline, and
new transmission line to connect to the railbelt grid.
We have scouted and finished preliminary engineering on a new access road design, and
adjacent transmission line.
We have conducted an interconnection study with GVEA and it identified no serious
problems in interconnecting our 50 MW proposed wind farm with the grid.
We have nearly completed a study of bird use of the proposed winhd form area, and no
serious sources of concern were identified. A raptor nest site survey and spring waterfowl
migration survey will complete the avian study. This study is supported by a previous grant
from the Renewable Energy Fund of $105,000.
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.
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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.
The Delta Wind Project will consist of a 50 MW wind farm and a 20 mile long transmission line
to the end of the GVEA transmission system near Delta Junction. The project budget is $135.3
million, comprising $ 131.3 million for capital construction, and $4.0 million for development
studies, engineering, permitting, and financing. We have pursued this project for nearly three
years, using our own funds and labor ($205,000 in State grant funds have been awarded but grant
agreements are not yet in place), with two 50 meter meteorological towers on the site collecting
10-minute average wind resource data daily. We added a new data logger to one site to collect
more detailed one-minute average wind data to assist in our wind integration study. We have
completed preliminary design of the new proposed access road and have a turbine layout plan in
place.
On February 12, 2008 we applied for and were granted an AEA grant for $100,000 in “pre-
construction funding”, but the grant agreement is not in place and those funds are not yet
available.
On October 8, 2008 we applied for and were awarded an additional Renewable Energy Fund
grant of $105,000 to assist in conducting avian studies estimated to cost $131,250 at the
proposed wind farm site. Those studies will proceed during the spring, summer, and fall of 2009.
This application applies for $300,000 in Renewable Energy Funds to complete resource
assessment drill holes at Jarvis Creek to assess the prospects for natural gas development as an
adjunct to the proposed wind farm. We will use retained earnings to finance our portion of the
drilling project, projected to be $100,000.
We expect the project and other good railbelt projects will qualify for long-term project debt
financing and thus preserve the State Renewable Energy Fund grant monies for smaller-scale
projects in rural areas where long-term debt may be more difficult or impossible to get.
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SECTION 9 – ADDITIONAL DOCUMENTATION AND CERTIFICATION
SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION:
A. Resumes of Applicant’s Project Manager, key staff, partners, consultants, and
suppliers per application form Section 3.1 and 3.4.
B. Cost Worksheet per application form Section 4.4.4.
C. Grant Budget Form per application form Section 9.
D. Letters demonstrating local support per application form Section 8.
E. An electronic version of the entire application on CD per RFA Section 1.6.
F. Governing Body Resolution or other formal action taken by the applicant’s
governing body or management per RFA Section 1.4 that:
- Commits the organization to provide the matching resources for project at the
match amounts indicated in the application.
- Authorizes the individual who signs the application has the authority to
commit the organization to the obligations under the grant.
- Provides as point of contact to represent the applicant for purposes of this
application.
- Certifies the applicant is in compliance with applicable federal, state, and local,
laws including existing credit and federal tax obligations.
F. CERTIFICATION
The undersigned certifies that this application for a renewable energy grant is truthful
and correct, and that the applicant is in compliance with, and will continue to comply
with, all federal and state laws including existing credit and federal tax obligations.
Print Name David W. Lappi
Signature
Title Member
Date November 10, 2009