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HomeMy WebLinkAboutHomer Kachemak Bay Tidal Power Round III AEA grant app Renewable Energy Fund Round 3 Grant Application AEA 10-015 Application Page 1 of 28 10/7/2009 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. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 2 of 28 10/7/2009 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) City of Homer Type of Entity: Municipal government Mailing Address 491 E. Pioneer Avenue Homer, AK 99603 Physical Address 491 E. Pioneer Avenue Homer, AK 99603 Telephone 907-235-8121 Fax 907-235-3148 Email wwrede@ci.homer.ak.us 1.1 APPLICANT POINT OF CONTACT Name Carey Meyer Title Public Works Director, City of Homer Mailing Address 3575 Heath Street Homer, AK 99603 Telephone 907-235-3170 Fax 907-235-3145 Email cmeyer@ci.homer.ak.us 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 An independent power producer in accordance with 3 AAC 107.695 (a) (1), or X A local government, or A governmental entity (which includes tribal councils and housing authorities); Yes or No 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 or No 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 or No 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.) N/A 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. We are seeking grant funds for feasibility/conceptual design (not for construction). Application for construction funds will likely come from an IPP, assuming feasibility work is accomplished first. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 3 of 28 10/7/2009 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. Kachemak Bay Tidal Power – Feasibility and Conceptual Design 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. Answer here. The proposed project will center on Kachemak Bay, part of lower Cook Inlet. Communities that will benefit from the project are Homer, Seldovia, Port Graham, and Nanwalek, as well as other Kenai Peninsula Borough residents in small communities around Kachemak Bay. 2.3 PROJECT TYPE Put X in boxes as appropriate 2.3.1 Renewable Resource Type Wind Biomass or Biofuels Hydro, including run of river Transmission of Renewable Energy Geothermal, including Heat Pumps Small Natural Gas Heat Recovery from existing sources X Hydrokinetic Solar Storage of Renewable Other (Describe) 2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply) 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. The proposed project will assess the tidal energy potential and development feasibility of four sites within Kachemak Bay. With assistance from the National Oceanic and Atmos- pheric Administration (NOAA), the project will utilize historical water level and current data, recent sea floor mapping data, and new ocean current measurements to construct a comprehensive ocean circulation model of the entire Kachemak Bay region. The model and tidal current data analyses will provide detailed information on tidal energy potential throughout Kachemak Bay. With this tidal power information, four sites will be selected and power production costs, output, and availability, as well as potential environmental issues, will be assessed to determine initial feasibility of tidal energy projects. For all feasible sites, a conceptual design to optimize tidal energy production will be produced, along with a construction cost estimate for that design. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 4 of 28 10/7/2009 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.) According to estimates of future avoided cost of electricity, HEA will be paying at least $.109 per kWh in 2012 (stated by Chugach Electric). For a 250 kW system in a current peaking at 6 knots, this would lead to $71,613 in annual revenue less $5,748 in annual parts and supplies. Over the 20 year lifetime of this project this will come to $1,317,300 in net revenue. This is likely a very conservative estimate because if the tidal resource is determined to be viable, then it is probable that systems and projects larger than 250 kW would be installed. If this is the case, then the cost of this single feasibility study, which could lead to multiple installations in Kachemak Bay, would be spread over more revenue than what is generated by a single 250 kW installation and the project economics would be much improved. Additional public benefits will include $114,376 in contracts to Alaskan businesses in the feasibility study. Through project construction an additional estimated $336,062 in contracts to Alaskan businesses will be expected. The operation and maintenance of the 250 kW turbine is expected to cost $22,995 annually ($0.035/kWh and 30% capacity factor for production). Of these operation and maintenance costs, an estimated 25% will be for parts and supplies and the remaining 75% will be in contractual costs to Alaskan marine service companies, amounting to $17,246 annually. Over the 20-year lifetime of the project this will total $344,925. It is assumed that the parts and supply costs will not be spent in Alaska (and thus, are not included as public benefits), but the contractual costs will go to an Alaskan company, and are considered public benefits. Additional public benefits associated with this project include ancillary uses of the tidal circulation flow model developed by NOAA, which will cover all of Cook Inlet. Beyond the tidal energy assessment, the model will support oyster mariculture, fisheries management, oil spill response, local coastal planning, and coastal climate change research. Kachemak Bay is world-renowned for its oysters. This mariculture industry is valued at approximately $1 million annually and the bay also supports extensive recreational and subsistence clam harvest. Water currents carry the plankton that provide food to oysters and clams, and a better understanding of circulation will improve management of these species. We estimate that improved management associated with this model will result in increased value of $25,000 annually. Over a 20-year lifecycle of the installed project, this would amount to $500,000. In terms of improved spill response, Kachemak Bay is considered a port of refuge for damaged vessels in Cook Inlet. This was dramatically demonstrated three years ago when an oil tanker docked in Nikiski suffered damage and required towing to Homer. This situation did not result in any oil spilled but publicly highlighted the need for improved spill response, including better understanding of the tides and currents in Kachemak Bay. Given the increased interest in oil exploration in the region, it is expected that an improved understanding of tides and currents in Kachemak Bay could result in improved spill response and reduced harm to existing natural resources. Assuming even one fairly large spill during the 20-year lifetime of the proposed project, this can be reasonably estimated to provide $100,000 of additional public benefit. Circulation information will support local planning, including the proposed Homer Harbor Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 5 of 28 10/7/2009 expansion and Seldovia fast ferry project. State, federal, and university researchers also need Kachemak Bay water current information for scientific studies that seek to improvement resource management and understanding of climate change impacts on coastal environments. Many public resource management and science agencies, including the Alaska Department of Fish & Game, Alaska Department of Natural Resources, and NOAA, will benefit from the circulation model information, which individual agencies would have been unlikely to develop on their own. It is widely recognized that Alaska has some of the best potential for generating tidal energy of anywhere in the world. This proposed Kachemak Bay project, in combination with other nearby initiatives such as those in upper Cook Inlet, could help to establish an Alaska-based industry and global leadership in tidal power. In addition to the tidal energy potential offered by Kachemak Bay’s large tides, the feasibility of this project is enhanced by having a location near population centers and the electrical grid. Access to the road system will also help reduce early development costs. Finally, an initial investment of less than $550,000 by AEA in this project will allow a leveraging an additional $711,324 through direct project cost-share. This is a substantial public benefit that will be made possible with AEA’s support for this project. 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. The total project budget proposed here for the reconnaissance and feasibility stages is $1,243,335. This total includes $576,711 requested from AEA and confirmed $712,524 in cost-share contributed by NOAA, Re Vision consulting, Ocean Renewable Power Company– Alaska (ORPC), and the City of Homer. These contributions amount to a 56% match. Total Phase 1 (Milestone 1) requested funds are $161,071 and matching funds are $60,120. Total Phase 2 (Milestones 2A and 2B) requested funds are $403,740 and matching funds are $652,404. The total project cost through construction of a hypothetical 250 kW tidal turbine is based on assumptions of future installed cost per kW from published industry data, namely a recent 1.2 MW project in the United Kingdom by Marine Current Turbines, which stated a $5,377/kW installed figure. This leads to a total project cost of $2,617,585, which includes the proposed budget through the feasibility phase of $1,258,935, and a design and construction budget of $1,358,650. It should be noted that a 250 kW project is of relatively small size, but given the early stage of development of the technology, we are assuming a project of this size as a “proof of concept” that, if successful, would likely lead to more and larger projects. The feasibility study proposed here would have application for other and larger projects as well, and thus would be even more cost effective in leveraging these funds for additional renewable energy development. Furthermore, this feasibility study will be applied to four distinct sites, so a project at any one site would have a more favorable cost benefit analysis if one were to look at the expenditures for this specific site. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 6 of 28 10/7/2009 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. $ 547,611 2.7.2 Other Funds to be provided (Project match) $ 711,324 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $ 1,258,935 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) $ 2,617,585 2.7.5 Estimated Direct Financial Benefit (Savings) $ 1,317,300 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.) $ 1,395,358 Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 7 of 28 10/7/2009 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. The project manager for the Kachemak Bay tidal power feasibility project will be Carey Meyer. Mr. Meyer, a professional engineer, has been the Public Works Director for the City of Homer since 1999. His resume and references are attached. We have established a team of City and Tribal staff, contracted technical experts, and government agency personnel who will all contribute to the project. This team is described in more detail below. 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 schedule below corresponds to project milestones and tasks. 1. Site reconnaissance (Phase 1) - Begin 7/10; Complete 9/10 a. Project partner kick-off meeting; coordinate data needs and establish data transition plans – 7/10 b. Identify all existing relevant data such as bathymetry, ownership maps, biological data, possible electrical grid interconnection points and other existing infrastructure, navigational information, current flows, traditional knowledge, etc. – 8/10 c. Develop the NOAA (CSDL) Cook Inlet model to incorporate historical current and water level information and new Kachemak Bay bathymetry –9/10 d. Determine what data is necessary but does not yet exist, such as water currents, land ownership, etc. – 9/10 e. Establish detailed monitoring plan to collect additional data to determine current speeds, power density, biological and navigational impacts – 9/10 2. Feasibility Study (Phase 2) – Begin 8/10; Complete 5/11 a. Deploy current meters (acoustic Doppler current profilers—ADCPs) for at least 35 days to determine the tidal current signal at up to five sites – 12/10 b. Synthesize Kachemak Bay biological information to identify potential environmental issues for tidal energy projects – 2/11 c. Update Cook Inlet/Kachemak Bay circulation model with current meter and other data. Process data to determine power densities over time and space; generate report, model, and graphical overlays – 3/11 d. Based on 2.d above, select optimal site(s); conduct technical and economic analysis under various assumptions to determine power production costs, output, and availability – 6/11 e. Identify necessary permits – 6/11 Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 8 of 28 10/7/2009 f. Determine feasibility of overall project. If “not feasible,” terminate the project. If “feasible,” continue with next step – 6/11 3. Conceptual Design (Phase 2) – Begin 6/11; Complete 11/11 a. Select an optimal design and system to harness tidal energy – 7/11 b. Develop a more precise construction budget – 9/11 c. Examine and select preferred institutional configuration(s) – 10/11 d. Draft and distribute final report – 11/11 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.) See attached budget worksheet for more information on expected cash flow. Milestone 1: Site reconnaissance – Begin 7/10; Complete 9/10 1. Project partner kick-off meeting; coordinate data needs and establish data transition plans – 7/10 2. Collect all existing relevant data such as bathymetry, ownership maps, biological data, possible electrical grid interconnection points and other existing infrastructure, navigational information, current flows, traditional knowledge, etc. – 8/10 3. Develop NOAA Cook Inlet model to incorporate historical current and water level information and new Kachemak Bay bathymetry – 9/10 4. Determine what data is necessary but does not yet exist, such as additional bathymetric maps, current flows, land ownership, etc. – 9/10 5. Establish detailed monitoring plan to collect additional data to determine current speeds, power density, biological and navigational impacts – 9/10 Milestone 2A: Feasibility Study – Begin 8/10; Complete 5/11 1. Deploy Acoustic Doppler Current Profiling (ADCP) devices (stationary and mobile) to determine tidal flows and current speeds over a range of time and selected areas – 12/10 2. Conduct necessary biological studies to determine potential conflicts and preliminary impacts to biota from tidal energy development – 2/11 3. Update circulation models. Process data to determine power densities over time and space; generate report, model, and graphical overlays – 3/11 4. Based on 4. above, select optimal site(s); conduct technical and economic analysis under various assumptions to determine power production costs, output, and availability – 6/11 5. Identify necessary permits – 5/11 6. Determine feasibility of overall project. If “not feasible,” terminate the project. If “feasible,” continue with next step – 6/11 Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 9 of 28 10/7/2009 Milestone 2B: Conceptual Design – Begin 6/11; Complete 11/11 1. Select an optimal design and system to harness tidal energy – 7/11 2. Develop a more precise construction budget – 9/11 3. Examine and select preferred institutional configuration(s) – 10/11 4. Draft and distribute final report – 11/11 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. The City of Homer will provide overall project management. To ensure that the project proceeds as smoothly as possible, the City will contract out project coordination activities. In its management role, the City will be working closely with representatives from other government agencies (e.g., Alaska Department of Fish and Game and the National Oceanic and Atmospheric Administration), along with leaders from Kachemak Bay tribal organiza- tions (Seldovia Village Tribe and Port Graham Village Council), and with private contractors (Re Vision Consulting, Terrasond, and Ocean Renewable Power Company). This project team combines high-level national expertise and tremendous local knowledge in this collaborative effort, and demonstrates how renewable energy can bring together diverse and unique interests. While Homer is the largest community on Kachemak Bay and connected by the main road system, both Seldovia and Port Graham on the south shore of the Bay are not connected by road, but are connected by power lines. Both of these smaller, more remote communities are participating in this project and will provide local personnel, traditional knowledge for siting and potential impacts, and local support for data collection. Based on a cursory assessment of tidal flows in the region, it is also expected that these locations may have some of the strongest currents, and thus, best opportunities for tidal power generation. The NOAA National Ocean Service (NOS) Center for Operational Oceanographic Products and Services (CO-OPS) will be the technical lead on producing the tidal energy information for this project. COO-OPS produces tide and current tables for the nation and is the leading authority in the country on tides and tidal currents. CO-OPS and its predecessors have been providing tidal predictions to promote safe and efficient navigation since 1807. The CO-OPS National Current Observation Program (NCOP) meets the nation's needs for current observations, tidal current predictions, and other tidal current products. The products from this program primarily support safe, efficient and environmentally sound marine commerce, hazardous material response, research, and recreational users. NCOP has recently completed a survey of tidal currents and calculated updated predictions for inclusion in the US Tidal Current Tables at over 30 locations in Cook Inlet including the entrance to Kachemak Bay. CO-OPS will work with the NOS Coast Survey Development Laboratory (CSDL) to develop and implement the Cook Inlet/Kachemak Bay circulation modeling efforts of this project. With local coordination from the NOAA Kasitsna Bay Laboratory, NOAA ships recently completed a high-resolution sea-floor mapping survey for Kachemak Bay under the “Hydropalooza” project (www.hydropalooza.noaa.gov). This survey provides the detailed bathymetry needed to develop an accurate ocean circulation model for the complex Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 10 of 28 10/7/2009 Kachemak Bay sea floor. CO-OPS will synthesize and analyze historical water level and current data for the region, as well as make additional tidal current measurements with acoustic Doppler current profilers (ADCPs). CSDL has done preliminary work on a Cook Inlet circulation model that includes Kachemak Bay. This model will be further developed with historical water level and current data, and then run to determine the additional current measurements needed to produce the comprehensive, high-resolution circulation model for the tidal energy assessment. The new model will provide the information needed to determine site specific tidal power densities for all of Kachemak Bay. The model results will guide site selection for further feasibility analyses. As a substantial additional benefit of this project, the new circulation model will also be useful for other purposes, including spill response, mariculture, fisheries management, local coastal planning and coastal ocean research. NOAA/CO-OPS will be providing $650,000 of in-kind contributions to this effort and have stated a strong interest in expanding their contribution to this type of work throughout Alaska and nationally, with Kachemak Bay serving as a pilot project. The NOAA Kasitsna Bay Laboratory, located near Seldovia on Kachemak Bay, will be contributing staff time and facility support to assist with local coordination of NOAA field work and modeling efforts for this project. The KBL will provide staff expertise in physical oceanography and coordination with NOAA offices outside of Alaska. Terrasond, a private consulting firm who works closely with NOAA on similar projects in other locations, will provide technical assistance on the tidal energy characterization, both in data analysis and application of the new circulation model to tidal energy assessment. Terrasond is the technical lead on a similar tidal characterizations in upper Cook Inlet. Terrasond, a private consulting firm who works closely with NOAA on similar projects in other locations, and is the technical lead on a similar tidal characterization effort in upper Cook Inlet, will also provide technical assistance on this effort to ensure consistency and smooth transition for feasibility analysis of the data and application of the new model. The Kachemak Bay Research Reserve, a state/federal partnership between NOAA and the Alaska Department of Fish & Game—Sport Fish Division, will synthesize current data available in Kachemak Bay and identify biological issues relevant to the project. KBRR staff will be contributing vast expertise, credibility, and previous site-specific data collection and processing from other projects, such as the proposed expansion of the Homer Harbor, that will inform the technical reviews. Re Vision Consulting will be involved in the feasibility analysis based on the data output and model generated by NOAA. Re Vision is a nationally recognized firm on ocean energy issues, working with the Electric Power Research Institute and many utilities throughout the US, and will be the technical lead on the feasibility component of the project. ORPC, a company that has been working in the emerging field of hydrokinetic energy since 2004, including a project in Cook Inlet, will provide valuable local knowledge and expertise in permitting analysis and other issues. Homer Electric Association, the electric utility provider in the area, has expressed strong interest in the proposed study and support for this grant application. Based on the outcome of the feasibility study, we expect to have more substantive discussions with HEA to conduct a system integration study and determine how this power can best fit on their grid. See attached resumes and/or statements of work provided by possible project partners and consultants. All of these individuals have assisted in the preparation of this application. It should be noted, however, that no contracts have been offered or will be offered other Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 11 of 28 10/7/2009 than in accordance with City of Homer procurement policies. The City’s procurement policies will also be followed in purchasing major equipment. Key procurement policy provisions are included in this application as an attachment. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. The City of Homer will comply with all AEA reporting requirements should a grant be awarded. This will include providing monthly and quarterly status reports by email to the AEA Project Manager to update the Authority on the project’s progress, regulatory and compliance issues, possible delays, and grant expenditures during the month; summarize the progress made on grant tasks during the month; and identify any difficulties in completing tasks or meeting goals or deadlines. We will include copies of any work products due to the Authority during the reporting period. Should questions, concerns, or issues arise during the implementation of the project that would benefit from consultation with AEA, project staff will contact the AEA Project Manager by phone or email. Site visits will be welcome. Because of the complex nature and diverse entities involved in this project, we have explicitly identified a “project coordina- tion” role that will involve both intra-project communications among participants as well as external communications with AEA and others such as Homer, Seldovia, and Port Graham residents and the general public. 3.6 Project Risk Discuss potential problems and how you would address them. There are three types of potential problems that we have identified: 1) Technical, 2) Institutional, and 3) Environmental. Regarding technical challenges, we will have the most experienced and informed group in the industry conducting the data collection effort, and have built in redundancy with Terrasond providing back-up to NOAA where necessary. Both Terrasond and NOAA have experience in the region doing precisely this type of work, so we believe we have addressed this challenge by working with the best people in the field. By conducting a data recon- naissance with multiple experts before a complete collection plan is developed and implemented, we will provide checks and balances and create a more robust data collection regimen that meets everyone’s needs, thus addressing the technical challenges by antici- pating and thinking them through before we are out in the field. As well, collaboration with the tribal governments in Seldovia and Port Graham will provide local knowledge and support for the data operations that should help minimize technical challenges related to working in the more remote and energetically dynamic parts of the Bay. In the long run, past the feasibility stage proposed here, the technical challenges are essentially beyond the scope of the project. The tidal energy industry is progressing significantly, with full-scale projects now producing electricity in other parts of the world, and our assumption is that if Kachemak Bay current speeds are within the range of expectations, the technology will continue to improve and we will be able to effectively and efficiently produce power. In fact, the construction cost estimates used here are based on other projects that are expected to reduce their costs over time. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 12 of 28 10/7/2009 Institutional problems could emerge as a result of the diverse interests and entities involved in the project. As stated above, we have tried to anticipate and address this challenge by explicitly planning for a project coordination role, starting with a project kick- off meeting to bring all the participants together and develop a broad implementation plan agreed to by all. We will continue to include Homer Electric in these discussions to keep them informed of our progress and seek opportunities for collaboration. Finally, we will explicitly address institutional options for development of tidal power in the feasibility study to further anticipate and address any challenges this project may confront. Environmental problems, if any, are not anticipated to occur during the reconnaissance and feasibility study proposed here. However, in order to identify potential issues as early as possible, we are working with the Kachemak Bay Research Reserve. During the proposed project period, this will include a synthesis of current biological data for the impact region and a report that will identify potential biological issues in the footprint of the potential project areas assessed for feasibility. Any project recommended for construction would require a full assessment of impacts on fish, marine mammals, sea birds, and other biological resources during the final design phase. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 13 of 28 10/7/2009 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 tidal power potential of Kachemak Bay is a little understood or studied resource. To date there has been one study of the tidal potential, but only in the area of the Seldovia harbor. This study was limited to looking at the resource from the perspective of a potential tidal barrage or impoundment style installation. The purpose of this proposed study is to examine the resource potential of tidal currents adjacent to Kachemak Bay communities and then to analyze the technical and economic feasibility of the development of a tidal project in these areas using modern hydrokinetic devices. Cook Inlet has one of the highest tidal ranges in the world, with an extreme tidal range in Kachemak Bay of up to 8.7 meters (28 feet). The high tides in the region generate exceptional currents both within the bay and at the mouth of the bay near the villages of Port Graham and Nanwalek. The extent, peak velocity, and average power densities of this area are not known, but it is likely that there exist adequate currents for tidal power generation near the Homer Spit, Seldovia Bay, Port Graham and Nanwalek, as well as in other locations in the bay. The point of this feasibility study is to quantify that potential and determine if viable currents exist in areas that have the necessary components for an economically viable tidal power installation. The components needed to assess tidal power project feasibility include adequate tidal current energy, construction issues (depth, substrate, etc.), lack of conflicts with other uses, and reasonable transmission distances to existing power infrastructure. The feasibility study will identify realistic boundaries for the generation potential within the region and in specific sites. While this project will focus on four specific sites, it should be noted that NOAA’s data collection and modeling effort will cover all of Kachemak Bay and the model information could be applied in the future to assess tidal energy at virtually any specific site within the Bay. This will provide accurate information for any future efforts to quantify the tidal power potential of additional sites in the region. Currently natural gas (with some conventional hydropower) is the main fuel source for the generation of power purchased by Homer Electric Association and sold to its members. While natural gas has offered a stable price in the past, the contract for natural gas that supplies HEA's electricity is set to expire in 2010, at which point prices for this power will increase an unknown amount and other alternatives will be needed. Natural gas fired power Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 14 of 28 10/7/2009 plants also emit CO2 which may make the technology subject to future carbon taxes and thus higher prices. Bradley Lake Hydro, situated just above Kachemak Bay, is the largest hydroelectric plant in Alaska. This facility is run by HEA, which owns 12% of the power it produces. As a hydro plant, Bradley Lake has the potential to be a “resource following” generation facility, ramping power up and down with (precisely predicted) tidal resource availability, thus reserving the capacity of the reservoir over a longer period of time and allowing wind and tidal projects to be efficiently absorbed and utilized by the local grid infrastructure. Wind projects are also being studied on the lower Kenai Peninsula, including in the area near the tip of the peninsula and the Gulf of Alaska near Nanwalek. Wind energy projects would provide a resource that is clean like tidal power, but not as predictable. While wind power can be economical, lack of predictable output minimizes its value in terms of energy capacity. Tidal power, due to its predictable nature, can be used not only to offset energy use, but also to offset capacity for a given utility and thus is potentially much more valuable as a resource than wind power. As the technology commercializes, tidal power promises to become price competitive with wind power as well. 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. Railbelt Energy Project – N/A 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 the energy used in the Homer Electric Association service area is purchased by contract from Chugach Electric. HEA is contractually obligated to purchase Chugach power until December 31, 2013. Chugach Electric's energy comes primarily from the Beluga natural gas plant and the gas that supplies this plant comes by contract from Marathon Oil. The contract for this natural gas will expire in 2010, at which time Chugach will be renegotiating its contracts to purchase gas and HEA’s electricity purchase price will also be impacted. HEA has stated that this dynamic is among the factors leading them to pursue additional resources for electricity generation. Both Chugach and HEA also receive some power from the state-owned Bradley Lake hydro facility on the south side of Kachemak Bay. The feasibility phase of this project will preliminarily address potential interconnection issues to integrate tidal power onto the Railbelt grid. Currently there is a 25KV transmission line that crosses Kachemak Bay from the end of the Homer Spit to McKewan flats and on to Seldovia. Tying into this transmission line would allow for energy on the scale of this project and perhaps larger to be transmitted onto the local grids. From Seldovia to Port Graham and Nanwalek there is only a single-phase transmission line. This line would need to be upgraded to a 3-hase line in order to accommodate more significant power transmission. HEA is already looking into funding for such an upgrade to allow for commercial interests that require three phase power. This transmission line would also be essential for the transmission of power from a tidal installation in this area. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 15 of 28 10/7/2009 As well, if a three-phase transmission line is not constructed on the south side of Kachemak Bay, it may make more sense for the communities to generate tidal power for local consumption to replace both electricity and heating fuel that is currently “imported.” Heating fuel especially is quite expensive because these communities are not on the road system, so the value of locally produced electricity used for heat that replaced fuel oil and propane would be substantial. We have not explicitly included this option in our economic analysis but if the tides prove feasible, this could improve the project economics for both the smaller Kachemak Bay communities. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. Homer, Seldovia, Port Graham and Nanwalek all fall within the Homer Electric Association service area. The majority of power sold here is purchased by HEA from Chugach Electric, whose current natural gas contracts are set to expire in 2010. At that time both the price and availability of power for HEA members will be less certain. While HEA is investigating small scale hydro power and wind projects, there is a need for more project development to provide stable and economical electrical service for HEA customers into the future. This tidal project could provide an economical, stable, and flat priced alternative power source for this market. Additionally, it is possible that tidal generation in the selected areas could be smaller scale for primarily local use. Especially for the more remote communities on the south side of Kachemak Bay (Seldovia, Port Graham, and Nanwalek), where the unit price of electricity is higher (per HEA tariff) and diesel fuel is much more expensive because of no road access, it may be possible for tidal energy to replace electricity and heat currently purchased by the communities. For example, transmission constraints may make it difficult and too expensive for large scale tidal development in, say, Port Graham, but perhaps the locally available resource could be developed to power and heat the entire village, including the Tribal fish hatchery and other commercial applications. A village-scale (as compared to utility-scale) hydrokinetic device and construction project may be the most appropriate in certain locations to minimize ecological impact and shorten the development timeline. 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 At this time there are several companies developing tidal hydrokinetic technologies for the tidal energy market. These include axial flow turbines such as those under development by Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 16 of 28 10/7/2009 Verdant Power, Lunar Energy, Open Hydro, Voith Hydro, and Marine Current Turbines (MCT), as well as cross flow turbines being developed by Ocean Renewable Power Company and New Energy Corporation, among others. New Energy Corporation currently has an in-stream hydrokinetic device installed on the Yukon River in interior Alaska, while ORPC is developing two Alaska projects, one in Northern Cook Inlet and one on the Tanana River at Nenana, both slated for installation in 2011. At this stage, this proposed project is not committed to a particular technology but will study the development and commercialization of these tidal technologies as part of the feasibility study. For purposes of economic feasibility, we will select a particular technology and apply power curves and related information to determine projected production costs. We will also consider site specific issues that may assist in choosing a particular turbine and installation system at each of the four selected locations. For example, different depths at selected locations may lead to different turbines and system designs, or similarly, differential ease and cost of access to on-shore transmission lines may dictate turbine selection and system design. One of the ongoing questions along these lines is if Kachemak Bay—or specific locations within the Bay—are sufficiently ice-free to consider a floating pontoon structure, or if it will be necessary to submerge the device. It is anticipated that by the time this project has moved into a Final Design phase in 2011–2012, significant advances, modifications, and proving out of these various technologies will have taken place, which will make for more prudent decisions in technology selection. The optimum installed capacity of tidal systems will be determined in the feasibility phase based on resource availability, and the ability of the nearby power infrastructure to utilize or transmit the energy. It is anticipated that individual units ranging in size from 250kW to 1MW will be feasible in this area with possible build-outs to 5MW or more being conceivable. As these tidal systems increase in size, this will significantly improve the project economics from the calculations here. For example, MCT’s projected capital costs per kW installed are reduced by 50% when expanding from a 1.2 MW project installed in 2007 and a 10 MW project currently under installation and slated for commissioning in 2009. The anticipated capacity factor will depend on the final technology selection but capacity factors of around 30% in a 6 knot current are typical of tidal technologies under development. It should be noted that while 30% capacity factor is similar to wind energy, tidal energy has the distinct advantage of being predictable and thus, can serve as a component of baseload energy. At this capacity factor a 250KW turbine would produce 657MWh per year. A 1MW turbine would produce 2,628 MWh per year. For economic calculation purposes here, we have selected a single 250 kW turbine for simplicity, but it is expected that if this “proof of concept” project was successful, there would be additional projects installed in Kachemak Bay over time. Anticipated barriers:  Confirming adequate current velocities exist in the project areas.  Confirming that it is possible to economically develop the sites that have adequate currents.  Assuring that these tidal installations will not interfere with current uses including subsistence and commercial fisheries and marine navigation.  Assessing the local environmental impact of potential tidal technologies in respect to their effects on marine life including fish and marine mammals. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 17 of 28 10/7/2009 Basic Integration Concept: The power produced by this tidal project would be integrated into the local grid via the 25KV transmission line at the end of the Homer spit or in Seldovia. In Port Graham or Nanwalek integration of the power would currently be limited to single phase transmission capacity. As mentioned earlier there is the potential for this service to also be upgraded to a three phase 25KV transmission line in the near future that would allow additional power to be fed north into the railbelt grid. The power would be integrated into the grid at a capacity that is manageable and dispatchable in accordance with the interconnect study to be completed in this feasibility study phase of the project. If a three-phase transmission line is not constructed to Port Graham and Nanwalek, it may make more sense for the communities to generate tidal power for local consumption to replace both electricity and heating fuel that is currently “imported.” Heating fuel especially is quite expensive because these communities are not on the road system, so the value of locally produced electricity used for heat that replaced fuel oil and propane would be substantial, and system integration costs would be much reduced. This would also limit the amount of power generated but also reduce the cost. These trade-offs will be examined in the feasibility study. Delivery Methods: Being on the road system and having a deep water port, Homer is capable of receiving system components via overland or marine shipping. From there items can be either shipped or put on the regular Alaska Marine Highway ferry service to Seldovia. Port Graham and Nanwalek would require utilizing local marine freight companies to ship items from Homer. Local marine service companies would also be used for system deployment. It is anticipated that the power itself would be delivered from the hydrokinetic marine installation—either near surface or submerged—to shore via underwater cable. This is a well understood technology that is already deployed in the area with local expertise to support such installation. 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. The City of Homer intends to utilize City property, utility easements, and rights-of-way whenever possible for this project. The City of Homer does have title to submerged lands adjacent to the Homer spit, which is a likely location for future development. If access is needed over private property, the City intends to work with willing landowners to secure the proper easements. At this level of feasibility study, there will not be much, if any, need to access private property. Similarly in the communities of Seldovia and Port Graham, it is not expected that we will need any access to private property. However, for placement of the stationary ADCP devices at the bottom of Kachemak Bay, we will likely need land use permits from the state (discussed below). Land ownership or access issues for any future project will be explicitly considered in site selection and more fully addressed in the feasibility study. Site selection for full feasibility analysis will likely be constrained, in part, by access to grid interconnection, which should minimize land ownership challenges. In general, because of the nature of the project, it is not land use-intensive and we do not expect to have problems or issues with this aspect. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 18 of 28 10/7/2009 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 The City of Homer has extensive experience permitting major public works projects, including those involving submerged lands, such as the Homer deep water dock facility. If the proposed tidal power project is determined to be feasible and the City pursues construction funding, we will undertake and complete all required permitting, in accordance with the Alaska Coastal Zone Management Act. For these reconnaissance and feasibility stages of the project, we anticipate needing to secure a land use permit from Alaska Department of Natural Resources to access the ocean floor. We have contacts with this agency and do not anticipate any problems securing this permit. The agency has previously indicated support for this type of project. An important part of the feasibility study will be to identify all necessary permits and the required path, timeline, and expected costs for securing them. We have explicitly budgeted time and money in the feasibility study to address these concerns. Primary among the permits we will need to acquire will be the Federal Energy Regulatory Commission (FERC) preliminary permit. The outcome of the feasibility study will provide the “go/no go” decision point for pursuing this permit, on which all else will depend. If a tidal energy project is determined feasible and worthy of pursuit, other permits we expect to need include the following:  Fish collection permit – Alaska Department of Fish & Game (ADF&F)  Fish habitat permit – ADF&G  Title 10 permit – US Army Corps of Engineers  Coastal Zone Management: local support will facilitate permit issuance if required  Coast Guard notification: Will be necessary to address potential navigational issues and inform waterway users of installation An Alaska DNR Water Rights permit should not be necessary, as the proposed project would be constructed in salt water rather than fresh water. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 19 of 28 10/7/2009 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 Because of the expected location of a tidal energy device, i.e., under the water in Kachemak Bay, minimal impact in regard to avian, telecommunications, archaeological, visual and aesthetic issues would be expected. It should be noted that the City of Homer has title to submerged lands near the Homer Spit that may be good sites for tidal energy production, which will simplify some of these potential land use issues. The primary concerns will likely be biological and habitat, as Kachemak Bay is a State critical habitat area and a designated National Estuarine Research Reserve. The bay supports significant marine, avian, and terrestrial wildlife species; therefore the proposed feasibility study will consider the potential environmental issues of concern to those species. Below is a list of species of importance in Kachemak Bay. SPECIES AND STATUS OCCURANCE RANGE IN ALASKA Endangered Blue whale (Balaenoptera musculus) Rare Bering Sea, Gulf of Alaska, N. Pacific Bowhead whale (Balaena mysticetus) Regular Chukchi Sea, Beaufort Sea Cook Inlet beluga whale (Delphinapterus leucas) Regular Cook Inlet Fin whale (Balaenoptera physalus) Regular Chukchi Sea, Bering Sea, Gulf of Alaska, N. Pacific Humpback whale (Megaptera novaeangliae) Regular Bering Sea, Gulf of Alaska, N. Pacific Leatherback sea turtle (Dermochelys coriacea) Rare Gulf of Alaska North Pacific right whale (Eubalaena japonica) Rare Bering Sea, Gulf of Alaska, N. Pacific Sei whale (Balaenoptera borealis) Rare Gulf of Alaska, N. Pacific Short-tailed albatross (Phoebastria albatrus) Rare Bering Sea, Aleutian Islands, Gulf of Alaska Sperm whale (Physeter macrocephalus) Regular Bering Sea, Gulf of Alaska, N. Pacific Steller sea lion (Eumetopias jubatus) west of 144° Regular Bering Sea, N. Pacific Threatened Green sea turtle (Chelonia mydas) (incl. agassizi) Rare Gulf of Alaska Loggerhead sea turtle (Caretta caretta) Rare Gulf of Alaska Northern sea otter (Enhydra lutris kenyoni) Regular Aleutian Islands, Alaska Peninsula, Kodiak Island Spectacled eider (Somateria fischeri) Rare Western and Northern Alaska (coastal) Steller sea lion (Eumetopias jubatus) east of 144° Regular Bering Sea, Gulf of Alaska, N. Pacific Steller's eider (Polysticta stelleri) Regular Southwestern, Western, and Northern Alaska Candidate Kittletz’s Murrelet (Brachyramphus brevirostris) Regular Southern, Northwestern Alaska (coastal) It is expected that additional biological studies, evaluations, and reviews will be necessary before full construction. Such activities will be clarified in the feasibility report, including identification of permits that may be required for the identified design. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 20 of 28 10/7/2009 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 total anticipated cost of this project through construction of a hypothetical 250 kW turbine is estimated to be $2,617,585. The cost for the first two phases of the project proposed here (reconnaissance and feasibility/conceptual design) is $1,258,935. The request for funding from AEA for this part of the project comes to $547,611. Applicant matching funds amount to $711,324 in in-kind contributions from NOAA, Re Vision Consulting, ORPC, and the City of Homer. Total anticipated costs through construction of a 250 kW turbine are based on published capital and development costs of a 1 MW project completed in 2007 by Marine Current Turbines in the United Kingdom (http://www.all-energy.co.uk/UserFiles/File/ 2007PeterFraenkel.pdf). Of the two phases proposed here, Phase 1 project costs are $161,071 (AEA requested) and $60,120 (matching) and Phase 2 project costs are $386,540 (AEA requested) and $651,204 (matching). If the resource assessment and feasibility study determine that there are viable tidal power projects in Kachemak Bay, there are several options for future funding. These options will depend in large part on who actually develops the projects, which could be the local utility (HEA), independent power producers, local governments, or a combination of the above. Certainly federal and state grants will be investigated, but other possibilities include local bonds, local dedicated revenue generation, conventional capital markets and/or venture capital. Federal production tax credits for renewable energy projects currently in place, as well as expected future green energy incentives and/or carbon taxes for fossil fuel generation, would also be incorporated into a funding package for project development and improved economic returns. The estimated capital cost of this project is based on actual installed costs of tidal pilot projects. These costs apply to installations in the 1MW range, but it is anticipated that reduced efficiencies from diseconomies of scale for smaller 250kW systems will be offset by overall costs being driven down by the commercialization of these technologies. Capital costs for a 250 kW system for this project are estimated to be approximately $816,417. This would make the balance of the project cost, including design, another $542,233 with the overall project development cost, including the feasibility study, totaling $1,801,168. With future and likely larger systems, it is expected that the development costs per unit energy would significantly decrease, both in absolute terms and in relation to per unit capital costs. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 21 of 28 10/7/2009 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.) While it is difficult to estimate O&M for the different technologies that will be considered for this project, based on industry expectations a very conservative value would be $.035 per kWh produced for small-scale projects such as a 250 kW turbine. This would likely include at least an annual inspection, servicing and replacement of worn parts. For a 250 kW system with a 30% capacity factor, this would result in $22,995 of annual O&M expenditures. It is reasonable to assume that as the size of the project and amount of energy generated increased, the per unit O&M cost would decline as well. Such costs would be incorporated into the power sales and system servicing agreements, which would vary depending on the institutional and business structure that eventually emerges to develop these projects. We are requesting no O&M costs for this resource assessment and feasibility project. 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 The potential buyers for the power purchased from this project include all of the Railbelt utilities. The most likely, however, would be Homer Electric Association since the power would be tied into the HEA service area. Current avoided cost rates for HEA are $0.04043 per kWh, though this is projected to increase in direct proportion to Chugach Electric's avoided cost which is forecast to reach $0.109 per kWh by 2012 when current contracts for natural gas purchase are no longer in place and both new fuel and new generation hardware will be necessary. This would be the more likely time frame for project implementation and the beginning of power sales to HEA. As stated several times above, it is also possible—and this will be considered explicitly in the feasibility study—that the more remote villages in Kachemak Bay may want to purchase the power for local use, and not sell back to HEA. This will likely replace not just conventional electricity use but heating fuel and eventually, if electric vehicles become more widespread, liquid transportation fuels as well. In these communities, because they are not road- connected, liquid fuels require expensive marine transport from Homer. If a relatively inexpensive energy source such as tidal power can be harnessed, there will likely be strong interest in maximizing local use of this energy, especially as a replacement for imported and expensive liquid fuels. Currently liquid fuels sell for over $5.50 per gallon for gasoline and more for diesel. Costs per kWh of power produced by tidal turbines are highly variable and in some cases theoretical for the various technologies. Manufacturers predict eventual commercialization and economies of scale from larger build outs bringing power into the realm of $0.08 per kWh. On the scale and timeframe of this project, which would likely be a smaller capacity installation due to existing energy infrastructures, the cost of power produced would be targeted around $.11-$.15 per kWh assuming a conservative 20 years of operation before major upgrades are needed. With any increase in projected avoided cost and renewable tax Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 22 of 28 10/7/2009 credits or green power incentives this will lead to a profitable energy source by the time of its installation in 2012 or soon thereafter. As well, once proven out, larger projects following on the heels of a pilot project such as that described here would likely realize increased efficiencies, improved economies of scale, and lower per unit production costs. 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. See attached cost worksheet. Capital cost based on Marine Current Turbines published figures ($5,377/kW installed). Annual O&M cost based on industry projections plus $0.01/kWh for conservative estimate of smaller system (assumed total of $0.035/kWh). Fuel displacement estimated based on 30% capacity factor of 250 kW turbine (657,000 kWh annually). Price of displaced fuel based on Chugach Electric projection of $0.109/kWh avoided cost in 2012. Alaska public benefits include value of Kachemak Bay tidal circulation flow model to oyster mariculture, fisheries management, oil spill response, local planning and coastal science; along with O&M service contracts to Alaska marine energy firms and the portion of the reconnaissance and feasibility study funds that will be awarded to Alaska firms. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 23 of 28 10/7/2009 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 project proposed here is essentially a resource assessment and feasibility study of Kachemak Bay’s tidal energy potential. The communities of Homer, Seldovia and Port Graham are collaborating on this effort, along with project partners NOAA, ADF&G, Terrasond, Re Vision Consulting, and ORPC. In-kind contributions to the project total $711,324. If the feasibility study determines positive project economics, we are proposing the construction of a 250 kW tidal turbine to demonstrate “proof of concept.” At 30% capacity factor with 6 knot peaking tidal currents, this amounts to 657 MW of electricity generated annually. Chugach Electric has stated their expected avoided cost in 2012, once current natural gas contracts run out, will be at least $0.109. The expected cost of replacing aging capital may increase this figure, but for conservative estimation of benefits, we have used this avoided cost value to calculate $71,613 in annual benefits derived from power sales and fuel displacement. We have reduced this value by $5,748 annually because of the assumed O&M component (25% of total) required to purchase parts and supplies. Assuming a 20-year lifetime of the project yields $1,317,300 in net revenue. If larger projects come on-line over time, the net revenues will be significantly more. Additional public benefits will include $114,376 in contracts to Alaskan businesses in the feasibility study. Through project construction an additional estimated $336,062 in contracts to Alaskan businesses will be expected. The operation and maintenance of the 250 kW turbine is expected to cost $22,995 annually ($0.035/kWh and 30% capacity factor for production). Of these operation and maintenance costs, an estimated 25% will be for parts and supplies and the remaining 75% of this will be in contractual costs to Alaskan marine service companies amounting to $17,246 annually. Over the 20 year lifetime of the project this will total $344,920. It is assumed that the parts and supply costs will not be spent in Alaska (and thus, are not included as public benefits), but the contractual costs will go to an Alaska company, and are considered public benefits. Additional public benefits associated with this project include ancillary uses of the tidal circulation flow model developed by NOAA, which will cover all of Cook Inlet. Beyond the tidal energy assessment, the model will support oyster mariculture, fisheries management, oil spill response, local coastal planning, and coastal climate change research. Kachemak Bay is world renowned for its oysters. This mariculture industry is valued at approximately $1 million annually and the Bay also supports extensive recreational and subsistence clam harvest. We estimate that improved management associated with this model will result in increased value of $25,000 annually. Over a 20-year lifecycle of the installed project, this Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 24 of 28 10/7/2009 would amount to $500,000. In terms of improved spill response, Kachemak Bay is considered a port of refuge for damaged vessels in Cook Inlet. This was dramatically demonstrated three years ago when an oil tanker docked in Nikiski suffered damage and required towing to Homer. This situation did not result in any oil spilled, but publicly highlighted the need for improved spill response, including better understanding of the tides and currents in Kachemak Bay. Given the increased interest in oil exploration in the region, it is expected that an improved understanding of tides and currents in Kachemak Bay could result in improved spill response and reduced harm to existing natural resources. Assuming even one fairly large spill during the 20 year lifetime of the proposed project, this can be reasonably estimated to provide $100,000 of additional public benefit. Circulation information will also support local planning and scientific studies in the region to improve resource management. It is widely recognized that Alaska has some of the best potential for generating tidal energy of anywhere in the world. This proposed Kachemak Bay project, in combination with other nearby initiatives such as those in upper Cook Inlet, could help to establish an Alaska-based industry and global leadership in tidal power. In addition to the tidal energy potential offered by Kachemak Bay’s large tides, the feasibility of this project is enhanced by having a location near population centers and the electrical grid. Access to the road system will also help reduce early development costs. An initial investment of less than $550,000 by AEA in this project will allow a leveraging of an additional $711,324 through direct project cost-share. This is a substantial public benefit that will be made possible with AEA’s support for this project. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 25 of 28 10/7/2009 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 Proposed business structure. If the proposed economic and technical analyses indicate that construction of tidal energy production devices merits further consideration, the feasibility study will examine institutional and business structures that best take advantage of the resource development opportunities. Possibilities include:  Collaboration with, or “hand-off” to Homer Electric Association;  Solicitation of independent power producers (IPP) and/or technology providers such as Ocean Renewable Power Company (who is engaged in a similar project in upper Cook Inlet and could perhaps generate synergies with this proposed effort);  Some combination of utility and IPP and local government;  Small-scale development, perhaps led by local government and/or other local entities, designed to meet local needs, perhaps including liquid fuel substitution, and avoid transmission upgrades. An important component of the feasibility study will be to more thoroughly investigate and compare these options. Because of the site specific nature of the resource and the unique infrastructure characteristics and location of each community, it is possible that different locations may require different institutional/business structures to best take advantage of the tidal development potential. For example, it may be preferable to consider large scale tidal development near Homer to “feed” the railbelt grid, while smaller scale projects that meet local needs may be preferable on the south side of Kachemak Bay where transmission constraints currently exist and both electricity and liquid fuels are incrementally more expensive. Finally, as discussed above, if the resource and technology to harness the resource proves viable, it is likely that much larger systems than the 250 kW turbine proposed here will emerge. This will improve the project economics, shorten the payback, increase competitiveness, and generally alter the dynamic and status quo of power generation in the region. At a larger scale, and in combination with similar projects in Cook Inlet, a tidal energy industry would develop and perhaps require different business models. Financing maintenance and operations. (Not applicable to this application) Operational issues that could arise. (Not applicable to this application) Operational costs/backup of existing systems. (Not applicable to this application) Commitment to reporting the savings and benefits. (Not applicable to this application) Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 26 of 28 10/7/2009 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. The City of Homer was pleased that our proposed Kachemak Bay tidal power feasibility project was recommended for funding by the Alaska Energy Authority for FY 2009. Despite the fact that the Legislature did not appropriate sufficient funds to cover all the projects that were approved, including this one, we have remained hopeful that our project ultimately would be funded. We have continued to discuss the project with potential partners (particularly NOAA) and are ready to proceed quickly if this application is approved. Assuming a grant award is announced before the end of June, we would hold the first meeting of partners in July 2010 to begin the site reconnaissance phase of the project. The feasibility study phase would begin in August 2009, beginning with collection of data from Acoustic Doppler Current Profiling devices. NOAA will take the lead in the data collection effort and has expressed strong commitment to do so. 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. The proposed Kachemak Bay tidal power feasibility project has been the subject of discussion in Homer and other Kachemak Bay communities for more than a year, since the City of Homer began work on our first AEA application in fall 2008. During this time, we have not heard any opposition expressed. While there are concerns about possible impacts on fish and other marine life from underwater turbines, this project will not be constructing turbines but will help to evaluate the risks involved. Clearly this information (feasibility study) will be of value in determining whether to proceed with a construction project. In general there is strong support in the Homer community for research and development in the realm of renewable energy. Evidence of this was seen in the high level of public involvement and testimony supporting adoption of the City of Homer Climate Action Plan in 2007 and in the recent approval of a wind energy ordinance (the first such local ordinance in Alaska) by the Homer City Council. Letters of support from project partners, including the communities of Seldovia, Port Graham, and Nanwalek, are attached. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 27 of 28 10/7/2009 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 See attached grant budget form. This proposal requests $161,071 for Phase 1/Milestone 1 and $386,540 in Phase 2/Milestones 2A and 2B, for a total of $547,611 from AEA. All project partners combined will be contributing $60,120 in Phase 1 and $651,204 in Phase 2, for a total of $711,324 of cost-share. This amounts to a total project cost of $1,258,935. Within Phase 1, requested funds include $22,875 for travel, meals, and per diem. This will be used to bring all project partners together for a project kick-off meeting in Homer, and for ongoing costs for the NOAA researchers who will remain in the area for data reconnaissance and background research. Phase 1 requested funds for direct labor include $16,980 for City of Homer personnel involved in project management and financial reporting. The remainder of the AEA requested funds for Phase 1 are for contractual expenses for NOAA’s information technology support ($75,000); Re Vision Consulting ($6,440); Seldovia and Port Graham personnel ($3,000 total); KBRR ($12,312); and Terrasond ($4,264). An additional $14,500 is allocated to the City of Homer to hire a project coordinator on a contract basis. Cost-share contributions in phase 1 include $50,000 of donated labor from NOAA personnel and $10,120 in donated labor from the City of Homer. Within Phase 2, AEA requested funds include $80,000 in travel, meals, and per diem for NOAA researchers to conduct 35 days of field work in Kachemak Bay; $75,000 for NOAA vessel support for field work and for NOAA IT support in data analysis; $124,348 in contractual for Re Vision Consulting; $9,000 in contractual for Seldovia and Port Graham personnel; $19,152 in contractual to KBRR; $5,400 in contractual for ORPC; and $3,764 in contractual for Terrasond. $47,300 is allocated to the City of Homer for a project coordinator (contract). The budget also includes $2,096 for materials and supplies. Cost-share contributions in phase 2 include $300,000 in equipment (ADCP devices) from NOAA; $200,000 to install and use the ADCP devices from NOAA; $130,000 in labor from NOAA personnel who will be collecting and processing the tidal data; $5,600 in donated labor from Re Vision Consulting; $1,800 in labor from ORPC; and $13,804 of labor from the City of Homer for project management. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 28 of 28 10/7/2009 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 Walt Wrede Signature Title City Manager, City of Homer Date November 10, 2009