HomeMy WebLinkAboutFourth of July Creek Hydro Application
Prepared by:
INDEPENDENCE POWER, LLC
1503 West 33rd Avenue, #211A
Anchorage, Alaska 99503
Tel: (907) 258-2420
Fax: (907) 258-2419
FOURTH OF JULY CREEK HYDROELECTRIC PROJECT
AEA-10-015 - RENEWABLE ENERGY GRANT APPLICATION
ROUND III – FY 2011
NOVEMBER 10, 2009
INDEPENDENCE POWER, LLC RENEWABLE ENERGY FUND GRANT APPLICATION
FOURTH OF JULY CREEK HYDROELECTRIC PROJECT
NOVEMBER 10, 2009 PAGE i
Table of Contents
SECTION 1. - APPLICANT INFORMATION .........................................................................3
1.1. Applicant point of contact ................................................................................................3
1.2. Applicant Minimum Requirements ...................................................................................3
SECTION 2. - PROJECT SUMMARY .....................................................................................4
2.1. Project Title .....................................................................................................................4
2.2. Project Location ...............................................................................................................4
2.3. Project Type .....................................................................................................................4
2.4. Project Description ...........................................................................................................4
2.5. Project Benefit .................................................................................................................5
2.6. Project Budget Overview .................................................................................................5
2.7. Costs and Benefits ............................................................................................................5
SECTION 3. - PROJECT MANAGEMENT PLAN ..................................................................6
3.1. Project Manager ...............................................................................................................6
3.2. Project Schedule ...............................................................................................................6
3.3. Project Milestones ............................................................................................................6
3.4. Project Resources .............................................................................................................6
3.5. Project Communications ..................................................................................................7
3.6. Project Risk ......................................................................................................................7
SECTION 4. - PROJECT DESCRIPTION AND TASKS .........................................................8
4.1. Proposed Energy Resource ...............................................................................................8
4.2. Existing Energy System ...................................................................................................9
4.2.1. Basic configuration of Existing Energy System .........................................................9
4.2.2. Existing Energy Resources Used ...............................................................................9
4.2.3. Existing Energy Market .............................................................................................9
4.3. Proposed System ............................................................................................................10
4.3.1. System Design.........................................................................................................10
4.3.2. Land Ownership ......................................................................................................11
4.3.3. Permits ....................................................................................................................11
4.3.4. Environmental .........................................................................................................11
4.4. Proposed New System Costs (Total Estimated Costs and proposed Revenues)...............13
4.4.1. Project Development Cost ......................................................................................13
4.4.2. Project Operating and Maintenance Costs................................................................13
4.4.3. Power Purchase/Sale ...............................................................................................13
4.4.4. Cost Worksheet .......................................................................................................14
SECTION 5. - PROJECT BENEFIT.......................................................................................15
5.1. Financial Benefits ..........................................................................................................15
5.2. Other Public Benefits .....................................................................................................15
5.3. Estimated Fuel Displacement .........................................................................................16
5.4. Estimated Annual Revenue .............................................................................................17
5.5. Other Annual Revenue Streams ......................................................................................17
5.6. Indirect Project Benefits .................................................................................................17
SECTION 6. - SUSTAINABILITY ........................................................................................18
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SECTION 7. - READINESS & COMPLIANCE WITH OTHER GRANTS............................19
SECTION 8. - LOCAL SUPPORT .........................................................................................19
SECTION 9. - GRANT BUDGET ..........................................................................................19
SECTION 10. - ADDITIONAL DOCUMENTATION AND CERTIFICATION ...................20
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SECTION 1. - APPLICANT INFORMATION
Name : Independence Power, LLC
Type of Entity: Independent Power Producer
Mailing/Physical
Address:
1503 West 33rd Avenue, Suite 211A
Anchorage, AK 99503
Telephone: 258-2420
Fax: 258-2419
Emai:l joel@polarconsult.net
1.1. Applicant point of contact
Name : Joel Groves, PE
Title: Project Manager
Mailing Address: 1503 West 33rd Avenue, Suite 211A
Anchorage, AK 99503
Telephone: 258-2420
Fax: 258-2419
Email: joel@polarconsult.net
1.2. Applicant Minimum Requirements
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, or
A local government, or
A governmental entity (which includes tribal councils and housing authorities);
Endorsements:
Yes Attached to this application is formal approval and endorsement for its project by its
board of directors, executive management, or other governing authority. If a
collaborative grouping, a formal approval from each participant’s governing authority is
necessary.
Yes 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 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 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
2.1. Project Title
FOURTH OF JULY CREEK HYDROELECTRIC PROJECT
2.2. Project Location
The proposed project is located on Fourth of July Creek near Seward, Alaska. The project and
appurtenances would occupy portions of Sections 7, 8, 9, 16, 17, 18 of Township 1S, Range 1E,
Seward Meridian (USGS quad map Seward D7SE). The project powerhouse would be located at
approximately 60805'24" N, 149816'41" W.
The project would most directly benefit Seward, Alaska, and surrounding communities. More
generally, the project would benefit railbelt communities.
2.3. Project Type
PROJECT TYPE
Put X in boxes as appropriate
2.3.1 Renewable Resource Type
Wind Biomass or Biofuels
X Hydro, including run of river Transmission of Renewable Energy
Geothermal, including Heat Pumps Small Natural Gas
Heat Recovery from existing sources Hydrokinetic
Solar Storage of Renewable
Other (Describe)
2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply)
Reconnaissance X Design and Permitting
X Feasibility Construction and Commissioning
X Conceptual Design
2.4. Project Description
The Fourth of July Creek Hydroelectric Project is a low-impact run-of-river renewable energy
project proposed near Seward, Alaska. The project would be located east of the Spring Creek
Correctional Facility and Fourth of July Creek Industrial Park, across Resurrection Bay from the
City of Seward. The project is anticipated to have an installed capacity of 5.4 MW and provide
an estimated 21,700 MWh of energy annually. The project would supply approximately 1/3rd of
Seward Electric System's annual energy requirements.
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2.5. Project Benefit
This project would provide the following financial benefits:
Item Value
Displaced Fuel (Cook Inlet Natural Gas / Diesel Fuel)
Est. Annual Value of Displaced Fuel ($ / year) $1.68 million
Estimated Present Value of Displaced Fuel (50 years) $43.0 million
Increased SES / CEA Grid Efficiency
Estimated Annual Value of Grid Efficiency $66,300
Estimated Present Value of Grid Efficiency (50 years) $1.7 million
Environmental Attributes
Estimated Annual Value of Environmental Attributes $200,000
Estimated Present Value of EAs (50 years) $3.9 million
Capacity
Estimated Present Value of Capacity $1.6 million
TOTAL ESTIMATED PROJECT BENEFITS $50.2 million
The project would provide the following public benefits:
1. Local jobs and economic activity from project construction and operations.
2. Improved reliability and stability of the local power grid.
3. Increased diversity of energy sources in Seward and on the railbelt.
4. Reduced demand for Cook Inlet natural gas.
5. Additional local capacity to enable SES to take on new industrial loads, such as
furnishing shore power to cruise ships.
6. Opportunity for educational curriculum with AVTEC.
2.6. Project Budget Overview
IP requests FY11 grant funds to complete the feasibility study phase of the project. The total
budget for the feasib ility phase is $198,000. IP requests $136,500 in grant funds (69%), and will
provide the remaining $61,500 as cash and/or in-kind services.
2.7. Costs and Benefits
Grant Costs
(Summary of funds requested)
2.7.1 Grant Funds Requested in this application. $ 136,500
2.7.2 Other Funds to be provided (Project match) $ 61,500
2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $ 198,000
Project benefits are summarized below.
2.7.4 Total Project Cost (Summary from Cost
Worksheet including estimates through
construction)
$16,700,000
2.7.5 Estimated Direct Financial Benefit (Savings) $50,380,000
2.7.6 Other Public Benefit See Narrative
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SECTION 3. - PROJECT MANAGEMENT PLAN
3.1. Project Manager
The Project Manager is Joel D. Groves, PE. Mr. Groves has experience evaluating, designing,
permitting, and operating hydroelectric projects similar to the proposed project in southcentral
Alaska. Resumes and references are included in Attachment A.
No project management assistance from AEA or other government entit ies is expected for this
project.
3.2. Project Schedule
IP has completed a reconnaissance study and initial feasibility assessment of the project.
Feasibility studies would be completed in 2011; permitting, design, and power sales negotiations
would be completed by 2012; and construction would be completed by 2013.
3.3. Project Milestones
IP will continue to evaluate the viability of the project throughout the upcoming feasibility
phase. Key factors such as hydrology, expected power generation, power sales, construction
cost, construction feasibility, and similar issues will be reviewed and refined to validate that the
project is feasible. Key project milestones are summarized in the table below.
Milestone Scheduled Completion
Reconnaissance Phase
Year 1 Hydrology Report Completed October 2009
Initial Feasibility Assessment Completed October 2009
Major Permit Applications Completed October 2008
Reconnaissance Study Completed October 2009
Feasibility Phase July 2011
Year 2/Year 3 Hydrology November 2010
Geotech investigations November 2010
Topographic survey December 2010
Land and regulatory issues March 2011
Permitting and environmental issues March 2011
Conceptual Design & Cost Estimate May 2011
Economic / Financial Analysis June 2011
Concept Business / Operating Plans June 2011
Final Report / Recommendations July 2011
Permitting / Design / Contracting July 2012
Construction Fall 2013
Project Commissioning Winter 2013
3.4. Project Resources
IP's members are all professional civil engineers with extensive experience in designing,
constructing, and operating small run-of-river hydroelectric projects in Alaska, such as the
Fourth of July project. IP will manage and/or conduct all pre-construction activities, such as the
feasibility study, conceptual design and final design. Some activities may be completed by
appropriately qualified entities under subcontract to IP.
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In the construction phase of the project, IP will retain bids from multiple vendors/contractors for
construction and major equipment supply. IP will select vendors/contractors based upon the best
interests of the project.
3.5. Project Communications
IP will keep AEA apprised of pre-construction project status by issuing quarterly project status
reports that conform with AEA’s standard reporting templates. The reports will include a brief
(1 page) report including a narrative of current project status, activities in the current quarter,
problems encountered, and anticipated activities in the following quarter. The report will also
include a budget status summary.
As warranted, IP may also advise the AEA grant manager of upcoming events such as field visits
on an as-needed basis.
3.6. Project Risk
Major project risk items that IP has identified to date are listed and discussed below:
1) Resource Hydrology. Fourth of July Creek has a significant bed load, and is prone to
frequent flooding. The intake structure will be designed to reliably handle frequent
flooding and high-volume sediment transport. IP has already collected one year of
discharge data for Fourth of July Creek, capturing one significant flood event in July
2009. This hydrology data will enable IP to better characterize flood hazards and
appropriate design parameters for the project. Review of the project site and available
information indicates this risk can be addressed by proper project design.
2) Overall project cost and economic feasibility. IP will develop a project cost estimate as
part of the feasibility study. The feasibility-phase field investigations will allow
preparation of a detailed cost estimate to evaluate project cost and economic feasibility.
3) Permit Risk. Initial consultations and permit application review with resource agencies
have not identified any resource issues that may jeopardize project viability.
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0
1,000
2,000
3,000
4,000
5,000
6,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
DateDaily Average Power Generation (kW)Expected Power Generation
(From Hydrology Model)
Expected Power Generation
(From 2008-09 Discharge Data)
SECTION 4. - PROJECT DESCRIPTION AND TASKS
4.1. Proposed Energy Resource
The proposed energy resource is a run-of-river hydropower resource located along Fourth of July
Creek near Seward. Development of the resource would consist of:
Ø An intake structure, which may include a dam up to 40 feet tall, located on Fourth of July
Creek at an elevation of about 750 feet (dam spillway elevation of 790 feet), which is at
the head of a prominent canyon located about three river-miles from tidewater;
Ø A 6,100 foot long, 48-inch diameter penstock to convey 120 cubic feet per second (cfs) of
water;
Ø A powerhouse with 5.4 MW of installed generating capacity located at an elevation of
about 120 feet, located near the outlet of the same canyon;
Ø A tailrace to return project waters to Fourth of July Creek;
Ø A transmission line to connect the powerhouse to the City of Seward’s electrical system;
Ø Access roads and trails; and
Ø Appurtenant facilities.
Based on one year of hydrology data on Fourth of July Creek and analysis of long term
hydrology data for adjacent basins, the resource is estimated to provide approximately 21,700
megawatt-hours (MWh) of energy in a typical water year. This equates to roughly 1/3rd of the
Seward Electric System (SES)’s annual energy requirements. Power output from the project
calculated from 2008-09 hydrology and expected hydrology based on hydrology data for nearby
basins are presented in the figure below.
Expected Fourth of July Creek Power Generation
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Alternative energy resources available to this market include all alternatives available to the
railbelt energy grid, which principally include: natural gas, diesel/oil, coal, storage hydro, run-of-
river hydro, hydrokinetic, wind, geothermal, and tidal. Many of these resources are not in the
immediate Seward vicinity. Currently, local generation in Seward is limited to diesel generation.
There is a small hydro project just west of town that is not operational.
Overall, this project is competitive with other renewable and nonrenewable generation options
available to the railbelt.
4.2. Existing Energy System
4.2.1. Basic configuration of Existing Energy System
The project would be connected to the SES grid, which is interconnected with the railbelt energy
grid. Seward has diesel generators located in town to provide firm capacity for the town during
episodes when the transmission line is down or CEA interrupts service to SES.
4.2.2. Existing Energy Resources Used
Under normal operating conditions, SES purchases wholesale power from Chugach Electric
Association (CEA) and through CEA the Alaska Energy Authority (AEA, Bradley Lake
Hydroelectric Plant). Seward receives one percent of the output from Bradley Lake, and the
balance of its power is normally provided by CEA. SES' supply contract with CEA allows CEA
to interrupt service under certain conditions. When energy is not provided by CEA, SES relies
100% on local diesel generation.
The project would not significantly impact existing energy infrast ructure. The project would
interconnect with the SES grid at a point where that system is capable of receiving the full
project output. This project is expected to improve voltage and frequency stability on the SES
system.
Under normal operating conditions, the project would offset natural gas-fired generation in the
Cook Inlet basin. This would incrementally reduce the demand for Cook Inlet natural gas,
extending the life of the Cook Inlet gas fields. This would directly benefit the residents of the
railbelt, which rely on that gas supply for affordable electricity and heating requirements. The
volume of natural gas offset by this project is a significant benefit to the public.
When the transmission line to CEA is out of service (outage), this project would displace diesel
fuel burned by SES's diesel generators. During the summer months, this project could serve
approximately 30 to 50% of SES average system load. During the winter months, the project
could serve approximately 5 to 20% of SES average system load. The actual load that could be
served would depend on the size of the system load, installed project capacity, and water
availability at the time of the outage.
4.2.3. Existing Energy Market
The existing energy market is the six railbelt utilities, SES, CEA, Homer Electric Association
(HEA), Matanuska Electric Association (MEA), Municipal Light & Power (MLP), and Golden
Valley Electric Association (GVEA). SES is the logical customer for the electrical output of this
project. Sale to other railbelt utilities is possible, but would need to consider (1) wheeling costs
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over SES, CEA, and other transmission lines, (2) capacity limitations on certain transmission
lines within the railbelt grid, and (3) transmission interruptions.
4.3. Proposed System
4.3.1. System Design
Technical parameters of the Fourth of July Creek Project are summarized and discussed below.
Parameter Value
Intake Elevation (ft) 790'
Powerhouse Elevation (ft) 120'
Gross Head (ft) 670'
Net Head (ft) 636'
Penstock Length (ft)
and diameter (inches)
6,100’ of
48” pipe
Design Flow (cfs) 120
Installed Capacity (kW) 5,400 kW
Plant Capacity Factor 47%
Minimum Annual Output (kW) 240 kW
Net Annual Energy Generation (kWh) 21,700,000 kWh
Transmission Length (mi) 2 miles
Ø Intake structure. The intake structure will be located at about the 750’ elevation on
Fourth of July Creek. The structure will be 40 feet tall and will divert water from the
creek up to the design flow of 120 cfs. Water will pass through a settling basin, screens,
and other apparatus to remove deleterious materials from the water and discharge clean
water to the penstock. Filtered materials would be returned to the creek below the intake
structure. The intake structure will be designed to handle the significant bed loads and
frequent flooding characteristic of Fourth of July Creek.
Ø Penstock. The penstock will be approximately 48 inches in diameter, and will convey
water from the intake 6,100 feet to the powerhouse. The penstock will be constructed
above ground, partially buried, or fu lly buried depending on geotechnical conditions
along the penstock route. Power and communications between the intake and
powerhouse will be co-located with the penstock. The penstock alignment will generally
serve as the access route to the intake for construction, maintenance and operations.
Ø Powerhouse. The powerhouse will accommodate the turbines, generators, switchgear,
controls, and associated equipment for the project. It will be located at an elevation of
approximately 120 feet near Fourth of July Cr eek.
Ø Generation equipment. The project would have two 2.7 MW two -jet pelton turbines.
Each turbine would drive a synchronous generator.
Ø Tailrace. Water from the powerhouse will be discharged via a short tailrace back into
Fourth of July Creek.
Ø Transmission Line. Power generated by the project will be transmitted via a new
transmission line approximately two miles to SES’s existing substation at the
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intersection of Nash Road and Jellison Avenue. The point of interconnection with the
SES system will be at the end of this transmission line.
Ø Access. Access to the project will be via approximately one mile of new unpaved road
extending east from either the Correctional Center or City Quarry.
The project will have an installed capacity of 5.4 MW. The installed capacity may be adjusted as
additional hydrology data is collected and project feasibility studies are completed. Final
installed capacity will depend largely on the outcome of hydrology studies, final gross head,
economic evaluation to optimize project cost and resource utilization, and efficiency of the
selected turbine-generator package.
Based on existing hydrology information, a 5.4 MW project on Fourth of July Creek will have a
capacity factor of 0.47.
4.3.2. Land Ownership
The project intake, penstock, and powerhouse are all located entirely on state lands. Most of the
access road and transmission line would be located on land owned by the City of Seward.
IP has filed applications with the Alaska Department of Natural Resources for land easements for
the linear features of the project (access roads, power line, penstock), and land leases for the
powerhouse and intake locations. IP has held informal discussions with the Seward City
Manager regarding an access agreement for the project, and does not anticipate that the access
agreement will be problematic. Formal discussions for the access agreement would be advanced
as part of the feasibility study.
4.3.3. Permits
The following permits and approvals have been identified as being required for this project:
Ø Water Use Permit / Water Rights (ADNR)
Ø Land Lease/easement (ADNR)
Ø Fish Habitat Permit (ADFG)
Ø Corps of Engineers wetlands permit
Ø Alaska Coastal Management Program Consistency Review (ACMP)
Ø Utility certification or exemption (RCA)
Ø Finding of non-jurisdiction (FERC)
Ø Archeological consultation (SHPO)
Permit applications for key permits have been submitted by IP.
4.3.4. Environmental
Compatibility of the project with environmental considerations has been reviewed. Key initial
findings are summarized below.
Ø Fish Habitat. The project is located above fish habitat as designated on the Atlas of
Waters Important to the Rearing and Spawning of Anadromous Fishes. ADFG has
not yet made a fish habitat determination on this project, but IP's site reconnaissance
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indicates that the project is unlikely to have any adverse impact on anadromous fish
habitat. IP is working with ADFG to schedule a site visit to the project.
Ø Threatened or Endangered Species. U.S. Fish and Wildlife Service and National
Marine Fisheries Service were contacted as part of completing the Coastal Project
Questionnaire. Neither agency has designated the project vicinity as critical habitat
for threatened or endangered species.
Ø Aesthetics. The project will have negligible if any adverse aesthetic impact. The
project’s most visible feature will be roads and power lines, which are common sights
in the general vicinity. The project is located in a part of Seward that is used for
industrial and institutional (correctional facility) purposes. The project would be
mostly located in an undeveloped area in the mountains east of the state prison. The
project would not be visible from the city of Seward or from Resurrection Bay. The
project would be visible from the air in the project’s immediate vicinity.
Ø The project is not expected to fill a significant area of wetlands. The project would
be permitted either under a nationwide permit #17 or an individual permit.
Ø No archeological or cultural resources are known to be in the project vicinity. SHPO
will be consulted as part of the feasibility study.
Ø Land development constraints. None known.
Ø Telecommunications Interference. None known.
Ø Aviation Considerations. None known.
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4.4. Proposed New System Costs (Total Estimated Costs and
proposed Revenues)
Insufficient information exists to prepare a detailed cost estimate for the project. Unknown cost
related items on the project hydrology, geology, permit conditions, financing arrangements,
contractual arrangements, operating costs, and other factors preclude developing a meaningful
cost estimate at this time. The next step in development of this project is a feasibility study to
provide answers for these unknowns.
4.4.1. Project Development Cost
IP has prepared an opinion of probable cost for the project of $16.7 million, or $3,100 per kW of
installed capacity.
4.4.2. Project Operating and Maintenance Costs
Project operation and maintenance costs are projected to be approximately $300,000 annually. A
detailed financial management plan would be part of the business plan that would be developed
in the design phase of the project.
No grant funding is requested for operatio ns and maintenance costs.
4.4.3. Power Purchase/Sale
Formal negotiations for a power purchase contract have not been initiated. The most logical
purchaser would be the local utility, SES. If a contract cannot be negotiated with SES, CEA
would be the next most logical utility to purchase the project's output.
It is anticipated that the power purchase price would be a fixed price based on cost -of-service.
This would provide adequate revenue to cover debt service, annual operating, maintenance,
repair, and replacement costs, and a reasonable return on equity for the project owners and
investors.
The cost -of-service-based power purchase price will depend on several factors that remain
unknown. These include:
Ø Equity level and allowed return on equity
Ø Grant level
Ø Debt term and rate
Ø Installed cost of the project
Ø Annual project costs
Based on what are believed to be a reasonable range of assumptions for the above parameters,
the power purchase price is estimated to be in the range of $0.05 to $0.12 per kWh.
Based upon existing estimates and available information, the estimated return on equity for the
project would be in the range of 10 to 15% annually. The project would not earn a return on
grant funds.
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4.4.4. Cost Worksheet
Assumptions used in completing the attached AEA cost worksheet are summarized below.
N/A
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SECTION 5. - PROJECT BENEFIT
5.1. Financial Benefits
1. Avoided fuel costs. The project will predominately displace energy generated by burning
Cook Inlet natural gas. Using an assumed long term railbelt average turbine heat rate of
8,500 btu/kWh and long term natural gas cost of $9.00 per MCF, the financial benefit of
avoided natural gas costs is estimated at $1,650,000 annually.
SES is assumed to rely on diesel generation for an average of one week per year fo r the
long term. This is due to transmission outages and/or CEA interruptions. At a diesel
generation efficiency of 14 kWh per gallon and fuel cost of $3.50 per gallon, the avoided
diesel costs are $23,100 annually.
The total avoided fuel cost is $1,673,100 annually.
2. Increased railbelt grid efficiency. CEA tariff filings with the RCA indicate that CEA's
system losses for energy delivered to SES are about 3%. Local generation near Seward
will displace these losses. Additionally, losses on the SES system for energy purchased
from CEA are estimated at 1.5%. Comparable losses for energy delivered from the
Fourth of July Creek project are estimated at 0.5%, for an estimated 1% net gain in
efficiency on the SES system. The estimated total net gain in railbelt grid efficiency is
4.0%. Using the same assumptions in (1) above, this is worth $66,300 annually.
3. Environmental Attributes. The environmental attributes of this low-impact, renewable,
and sustainable energy resource can be marketed to generate additional revenue. Markets
for environmental attributes remain uncertain, subject to expected federal or state
environmental legislation that may impose new regulations upon these markets. The
environmental attributes from the project are valued at $0.009 per kWh, or $200,000
annually.
4. Capacity. The project will provide 5,400 kW of additional capacity to the SES system.
At an installed cost of $300 per kW for diesel generation, this capacity is estimated to be
worth $1,620,000. Prorated over the project's 50-year life, this capacity has an equivalent
annual value of $13,500.
5.2. Other Public Benefits
1. A significant portion of the project funding will go towards hiring local residents and
businesses to perform the work, thus boosting the local economy.
2. The project will help to improve reliability and stability of the local power grid.
3. The project will increase the diversity of fuel sources in the Seward vicinity, as well as on
the railbelt energy grid.
4. Reduced demand for Cook Inlet natural gas. This project will offset natural-gas fired
power generation, reducing natural gas consumption and incrementally extending the life
of the existing Cook Inlet gas fields, to the benefit of the substantial population that relies
upon these gas fields for electricity and heating needs.
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5. The project's summertime capacity and energy may be helpful in enabling SES to provide
shore power for cruise ships when in port, and would reduce air quality impacts from
cruise ships that self-generate electricity while in port.
6. The project will present an opportunity for the Alaska Vocational Technical Center
(AVTEC) to develop a curriculum around hydroelectric power. This would benefit
AVTEC, the City of Seward, and the state at large, by developing a workforce that is
proficie nt in the special skills required to build, operate, maintain, and repair
hydroelectric systems.
5.3. Estimated Fuel Displacement
The project would primarily displace Cook Inlet natural gas burned by Chugach Electric for
power generation. The project would also offset some diesel fuel burned during transmission
outages. Estimated fuel displacement and assumptions used to generate the estimates are
summarized in the following table.
Fuel Type Natural Gas
Annual Displaced Energy 21,607,600 kWh
Displacement 100%
Efficiency of Displaced Generation (Heat Rate) 8,500 btu/kWh
Average Annual Displaced Fuel (Natural Gas) 184 MMCF
Displaced Fuel over 50 Years 9,200 MMCF
Average Market Value of Displaced Fuel $9.00/MCF
Annual Value of Displaced Fuel $1,650,000
Inflation Rate 2%
Discount Rate 5%
Present Value of Displaced Natural Gas Fuel over 50 years $42,500,000
Fuel Type Diesel
Annual Displaced Energy 92,400 kWh
Displacement 100%
Efficiency of Displaced Generation 14 kWh/gal
Average Annual Displaced Fuel (diesel) 6,600 gal
Displaced Fuel over 50 Years 330,000 gal
Average Market Value of Displaced Fuel $3.50/gal
Present Value of Displaced Diesel over 50 years $594,400
TOTAL PRESENT VALUE OF DISPLACED FUEL $43,094,400
INDEPENDENCE POWER, LLC RENEWABLE ENERGY FUND GRANT APPLICATION
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NOVEMBER 10, 2009 PAGE 17 OF 28
5.4. Estimated Annual Revenue
Estimated annual revenue from power sales and assumptions used to generate the estimates are
summarized in the following table.
Contract Item Proposed Terms
Contract pricing Avoided Cost
Average avoided cost over 50 years (Power Sales Rate) $0.071/kWh
Average Annual Energy Sales 21,700,000 kWh
Average Annual Gross Revenue From Power Sales $1,540,700
5.5. Other Annual Revenue Streams
Additional annual revenues from sale of the project's environmental attributes (EAs) is possible.
At a sales rate of $0.009 per kWh, this would generate $200,000 in annual revenue.
Programs for tax credits and other revenues / tax benefits are proposed but none are yet in law.
Many of these proposed programs would discriminate against renewable hydroelectric resources,
so no additional benefits from these proposed programs is assumed. Additionally, it is unclear
that tax credits could be claimed without encumbering the project's renewable attributes
(effectively double counting the EAs), so only one revenue stream is considered.
5.6. Indirect Project Benefits
IP has identified several indirect public benefits that may result from the project. These are
summarized and briefly discussed below.
1. The project will be connected to the railbelt electrical grid. This provides desirable
operational enhancements to this transmission and distribution system. There is an
increase in stability, reliability, and redundancy. These gains can only be obtained by
providing multiple, distributed generation sources which is generally not feasible with
typical large utility generation facilities. This new generation asset also improves the
diversity of fuel sources powering the grid through the addition of renewable energy.
2. This new generation asset will offset generation from existing natural gas-burning
facilities in Southcentral Alaska. This will reduce consumption of Cook Inlet basin
natural gas. Cook Inlet gas production from existing developed fields is declining, and
shortages are already occurring during periods of peak gas demand. By offsetting natural
gas demand for electricity generation, this project will be extending the useful life of the
Cook Inlet gas fields to the benefit of the public.
3. A significant portion of the project funding will go towards hiring local construction
firms to perform the work, thus providing local jobs and experience in building a
hydroelectric project. Current unemployment in the area is at 6.5% compared with a state
average of 6.0%1.
1 August 2008, State of Alaska, Department of Labor and Workforce Development,
http://www.labor.state.ak.us/research/monthlyunemprate/sep08map.pdf
INDEPENDENCE POWER, LLC RENEWABLE ENERGY FUND GRANT APPLICATION
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NOVEMBER 10, 2009 PAGE 18 OF 28
4. A local firm is performing the design and development. This benefit s Alaska by
promoting local experience and can be used to develop additional future projects thus
providing even more economic development and jobs for Alaskans.
5. The project access road and penstock trail have the potential to be recreational resources
for non-motorized recreation. Such a use would need to be coordinated with the State
Department of Corrections, City of Seward, and ADNR, as the access route to this
potential recreational opportunity would pass closely to the state prison and city property,
and would affect lands managed by the City and ADNR.
6. City officials in Seward have expressed an interest in providing shore power to cruise
ships when they are in port. This is a large short duration load, typically on the order of
10 MWs for 24 hours or so per ship. The project’s summer capacity of up to 4.5 MW
would be available to help meet this large transient load and keep the grid stable as these
ships come on and off line, and could considerably improve the feasibility of providing
shore power to cruise ships.
7. The project can coordinate with the curriculum at AVTEC to educate Alaskans on
hydroelectric power, construction, operations, maintenance, repair, and similar aspects.
This would help grow a local workforce that is skilled and knowledgeable in working
with renewable energy systems. As Alaska builds more renewable energy projects, a
workforce well-trained with these unique mechanical and electrical systems will be
critical to reducing construction costs and maximizing operational life for these projects.
SECTION 6. - SUSTAINABILITY
Over 100 years of experience in Alaska have proven hydroelectric projects to be the most
sustainable power generation technology and investment available. No other generation
technology has come close to having the historical longevity and the future potential of
hydroelectric projects. Once the hurdle of the initial capital cost is overcome, the projects are
successfully maintained and renewed by all classes of communities in Alaska.
This project will be operated by IP. IP's members have the experience, capability, and
willingness to operate the project for the long term. Also, IP will explore potential economies or
synergies that may be possible by partnering or working with the City of Seward's electric and
public works utilities to reduce operating costs for the project.
Annual O,M,R & R costs for the project will be funded by project revenues. In the design phase,
a financial management plan will be developed to project long term cash flow requirements for
proje ct operations. This plan may include the following elements:
Ø An operating fund to pay for routine operating, maintenance, repair and replacement costs
on a sustainable basis from annual project revenues. The operating fund may be designed
to provide adequate cash reserves for annual cash flow fluctuations and also for low water
years and other causes of revenue volatility.
Ø Dedicated sinking fund(s) for certain large infrequent expenses, such as turbine overhauls.
Ø Contingency funds, lines of credit , and/or insurance policies to cover expenses from
infrequent events, such as floods or natural disasters.
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NOVEMBER 10, 2009 PAGE 19 OF 28
IP commits to reporting savings and benefits from the project for the project's economic life, or
shorter period as desired by the Alaska Energy Authority and its successor agencies.
SECTION 7. - READINESS & COMPLIANCE WITH OTHER GRANTS
IP has already demonstrated its commitment to this project by completing a reconnaissance study
and initial feasibility assessment for the project, which will be issued in November 2009. These
studies were funded mostly by IP, with a grant from State of Alaska under the Renewable
Energy Grant Program. IP will continue to advance the project so its benefits may be enjoyed by
the current and future residents of Seward and the railbelt population generally.
IP is in compliance with existing grants.
SECTION 8. - LOCAL SUPPORT
IP has actively engaged the local government and community in Seward to educate them about
the project. IP has given several presentations to the Ports and Commerce Advisory Board
(PACAB) and Seward City Council, and has also met with the City's elected officials and key
administration personnel on a number of occasions to discuss the project. Seward officials and
PACAB members have all expressed an interest in the project, and are very interested to learn
more about the project's details and probable costs. A resolutio n supporting continued study of
the project is on the PACAB’s agenda for their December 2, 2009 meeting.
Additionally, IP has kept Chugach Electric Association, Inc. (CEA) informed about the project.
As a potential customer for all or part of the project's output, CEA remains interested in the
project's continued progress.
The Seward Chamber of Commerce recently passed a resolution supporting continued study of
the Fourth of July Creek project. The resolution is attached.
SECTION 9. - GRANT BUDGET
To date, IP has invested over $30,000 in study of the Fourth of July Creek Project. Additionally,
the State of Alaska has invested $20,000 in grant funds under the Renewable Energy Grant
Program.
IP is requesting $136,500 in FY 2011 grant funds to complete the feasibility phase of study for
the project. IP will provide $61,500 in matching funds as cash and in-kind services.
As demonstrated in the recently completed reconnaissanc e phase, IP is committed to advancing
this project in an efficient and expeditious manner, and will cover additional costs that IP
considers necessary or appropriate to advance the project.
The Grant Budget Form is attached to this application.
INDEPENDENCE POWER, LLC RENEWABLE ENERGY FUND GRANT APPLICATION
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A. RESUMES OF APPLICANT’S PROJECT MANAGER, KEY STAFF,
PARTNERS, CONSULTANTS, AND SUPPLIERS PER
APPLICATION FORM SECTION 3.1 AND 3.4
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FOURTH OF JULY CREEK HYDROELECTRIC PROJECT
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B. COST WORKSHEET PER APPLICATION FORM SECTION 4.4.4
Renewable Energy Fund
Round 3
Project Cost/Benefit
Worksheet
RFA AEA10-015 Application Cost Worksheet Page 1 10-7-09
Please note that some fields might not be applicable for all technologies or
all project phases. The level of information detail varies according to phase
requirements.
1. Renewable Energy Source: Fourth of July Creek Hydroelectric
Project
The Applicant should demonstrate that the renewable energy resource is available on a
sustainable basis.
Annual average resource availability. 120 cfs at 47% availability = 21.7 GWh of net
energy output for average water year.
Unit depends on project type (e.g. windspeed, hydropower output, biomass fuel)
2. Existing Energy Generation and Usage
a) Basic configuration (if system is part of the Railbelt1 grid, leave this section blank)
i. Number of generators/boilers/other N/A – on railbelt
ii. Rated capacity of
generators/boilers/other
N/A – on railbelt
iii. Generator/boilers/other type N/A – on railbelt
iv. Age of generators/boilers/other N/A – on railbelt
v. Efficiency of generators/boilers/other N/A – on railbelt
b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank)
i. Annual O&M cost for labor N/A – on railbelt
ii. Annual O&M cost for non-
labor
N/A – on railbelt
c) Annual electricity production and fuel usage (fill in as applicable) (if system is part
of the Railbelt grid, leave this section blank)
i. Electricity [kWh] N/A – on railbelt
ii. Fuel usage
Diesel
[gal]
N/A – on railbelt
1 The Railbelt grid connects all customers of Chugach Electric Association, Homer Electric Association, Golden Valley Electric
Association, the City of Seward Electric Department, Matanuska Electric Association and Anchorage Municipal Light and Power.
Renewable Energy Fund
Round 3
Project Cost/Benefit
Worksheet
RFA AEA10-015 Application Cost Worksheet Page 2 10-7-09
NG/Hydro Other N/A – on railbelt
iii. Peak Load N/A – on railbelt
iv. Average Load N/A – on railbelt
v. Minimum Load N/A – on railbelt
vi. Efficiency N/A – on railbelt
vii. Future trends N/A – on railbelt
d) Annual heating fuel usage (fill in as applicable)
i. Diesel [gal or MMBtu] N/A – on railbelt
ii. Electricity [kWh] N/A – on railbelt
iii. Propane [gal or MMBtu] N/A – on railbelt
iv. Coal [tons or MMBtu] N/A – on railbelt
v. Wood [cords, green tons, dry
tons]
N/A – on railbelt
vi. Other N/A – on railbelt
3. Proposed System Design Capacity and Fuel Usage
(Include any projections for continued use of non-renewable fuels)
a) Proposed renewable capacity
(Wind, Hydro, Biomass, other)
[kWh or MMBtu/hr]
5.4 MW of installed capacity
Run-of-river hydroelectric installation
47% capacity factor
b) Proposed Annual electricity or heat production (fill in as applicable)
i. Electricity [kWh] 21,700,000 kWh/year
ii. Heat [MMBtu] -
c) Proposed Annual fuel Usage (fill in as applicable)
i. Propane [gal or MMBtu] N/A
ii. Coal [tons or MMBtu] N/A
iii. Wood [cords, green tons, dry
tons]
N/A
iv. Other N/A
4. Project Cost
Renewable Energy Fund
Round 3
Project Cost/Benefit
Worksheet
RFA AEA10-015 Application Cost Worksheet Page 3 10-7-09
a) Total capital cost of new system $16,700,000
b) Development cost $ 850,000
c) Annual O&M cost of new system $ 300,000
d) Annual fuel cost Zero
5. Project Benefits
a) Amount of fuel displaced for
i. Electricity 184,000 MCF of Natural Gas per year
ii. Heat N/A
iii. Transportation N/A
b) Price of displaced fuel $1,676,000 per year (at $9.00 per MCF)
c) Other economic benefits $ 280,000 per year
d) Amount of Alaska public
benefits
$0 in quantifiable economic terms
6. Power Purchase/Sales Price
a) Price for power purchase/sale $0.071/kWh
7. Project Analysis
a) Basic Economic Analysis
Project benefit/cost ratio 50,200,000 / 16,700,000 = 3.01
Payback 16,700,000 / 1,956,000 = 8.5 years
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C. GRANT BUDGET FORM PER APPLICATION FORM SECTION 9.
Renewable Energy Fund Grant Round IIIGrant Budget FormFourth of July Creek Hydroelectric Project10-7-09RE- Fund Grantee MatchingSource of Matching Funds: Grant Funds FundsCash/In-kind/Federal Grants/Other State Grants/Other1. Subcontractor Solicitations (1)Aug-10$28,265 $12,735 Cash $41,0002. Feasibility Study Activities 2.1 Hydrology Study (Year 2, start Year 3)Nov-10$25,508 $11,492 Cash / In-Kind Services $37,000 2.2 Geotechnical InvestigationsNov-10$13,098 $5,902 Cash / In-Kind Services $19,000 2.3 Site Topographic SurveyDec-10$8,273 $3,727 Cash / In-Kind Services $12,000 2.4 Identify Land and Regulatory IssuesMar-11$11,720 $5,280 Cash / In-Kind Services $17,000 2.5 Permitting and Environmental IssuesMar-11$11,030 $4,970 Cash / In-Kind Services $16,000 2.6 Conceptual Design Analysis and Cost EstimateMay-11$17,235 $7,765 Cash / In-Kind Services $25,000 2.7 Detailed Economic and Financial AnalysisJun-11$4,826 $2,174 Cash / In-Kind Services $7,000 2.8 Conceptual Business and Operations PlansJun-11$8,273 $3,727 Cash / In-Kind Services $12,0003. Final Report and RecommendationsJul-11$8,273 $3,727 Cash / In-Kind Services $12,000TOTALS$136,500 $61,500 $198,000Direct Labor & Benefits$78,591 $35,409 In-Kind Services $114,000Travel & Per Diem$3,447 $1,553 Cash / In-Kind Services $5,000Equipment$2,068 $932 Cash / In-Kind Services $3,000Materials & Supplies$6,894 $3,106 Cash / In-Kind Services $10,000Contractual Services$28,265 $12,735 Cash $41,000Construction Services$0 $0 - $0Other$17,235 $7,765 Cash $25,000 TOTALS$136,500 $61,500 $198,000Budget Categories:Milestone or TaskAnticipated Completion DateTOTALSApplications should include a separate worksheet for each project phase (reconnaissance, feasibility, design permitting, and construction)Add additional pages as needed.
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D. LETTERS DEMONSTRATING LOCAL SUPPORT PER
APPLICATION FORM SECTION 8
ALSO SEE GRANT APPLICATION SECTION 8.
Date: October 22, 2009
Action: Passed
Vote: Unanimous
SEWARD CHAMBER OF COMMERCE, CVB
BOARD OF DIRECTORS
RESOLUTION 2009-02
A RESOLUTION TO SUPPORT CONTINUED STUDY OF THE LOW-IMPACT
RUN_OF_RIVER HYROELECTRIC FACILITY PROPOSED AT FOURTH OF JULY
CREEK.
WHEREAS, Independence Power, LLC, and Alaska corporation based in Anchorage and owned
by Alaskans, has proposed to construct a low-impact run-of-river hydroelectric facility on Fourth
of July Creek within the City of Seward; and
WHEREAS, Independence Power, LLC believes, based upon available information, that the
hydroelectric project would not negatively affect: 1. fish habitat in Fourth of July Creek; 2. public
drinking water supplies in the Fourth of July Creek vicinity; 3. aesthetics in the project vicinity;
or 4. flood hazards to existing developments in the Fourth of July Creek area; and
WHEREAS, Independence Power, LLC believes, based upon available information, that the
hydroelectric project would have an installed capacity of 4.0. to 5.0 megawatts, and produce
17,000 to 23,000 megawatt-hours of energy annually; equal to about 1/3rd of the community’s
current annual electrical energy needs; and
WHEREAS, the hydroelectric project would provide local renewable energy to the Seward
vicinity, reducing long-term energy costs, improving long-term price stability, and increasing
reliability of electrical service to the commity.
NOW THEREFORE, BE IT RESOLVED BY THE SEWARD CHAMBER OF
COMMERCE/CVB BOARD OF DIRECTORS, that:
The Seward Chamber of Commerce endorses and supports the continued study of the proposed
hydroelectric project on Fourth of July Creek, and recognizes that the project has potential to
provide numerous direct and indirect long-term benefits to the City of Seward and the railbelt
population generally.
PASSED AND APPROVED BY THE SEWARD CHAMBER OF COMMERCE/CVB
BOARD OF DIRECTORS THIS 22d DAY OF OCTOBER, 2009.
__________________________
President
ATTEST:
_________________________
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E. AN ELECTRONIC VERSION OF THE ENTIRE APPLICATION ON
CD PER RFA SECTION 1.6
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F. GOVERNING BODY RESOLUTION PER RFA SECTION 1.4
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H. PROJECT MAPS