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HomeMy WebLinkAboutConnelly_Lake_Grant Application Renewable Energy Fund Round 3 Grant Application AEA 10-015 Application Page 1 of 19 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 19 10/7/2009 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) ALASKA POWER COMPANY (a subsidiary of ALASKA POWER & TELEPHONE COMPANY) Type of Entity: Utility Mailing Address P.O. Box 3222, Port Townsend, WA 98368 Physical Address 193 Otto Street, Port Townsend, WA 98368 Telephone 360-385-1733 Fax 360-385-7538 Email glen.m@aptalaska.com 1.1 APPLICANT POINT OF CONTACT Name Glen Martin Title Permitting & Licensing Manager Mailing Address Alaska Power & Telephone Company P.O. Box 3222 Port Townsend, WA 98368 Telephone 360-385-1733 x122 Fax 360-385-7538 Email glen.m@aptalaska.com 1.2 APPLICANT MINIMUM REQUIREMENTS Please check as appropriate. If you do not to meet the minimum applicant requirements, your application will be rejected. 1.2.1 As an Applicant, we are: (put an X in the appropriate box) X An electric utility holding a certificate of public convenience and necessity under AS 42.05, or An independent power producer in accordance with 3 AAC 107.695 (a) (1), or A local government, or A governmental entity (which includes tribal councils and housing authorities); Yes 1.2.2. Attached to this application is formal approval and endorsement for its project by its board of directors, executive management, or other governing authority. If the applicant is a collaborative grouping, a formal approval from each participant’s governing authority is necessary. (Indicate Yes or No in the box ) Yes 1.2.3. As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement. Yes 1.2.4. If awarded the grant, we can comply with all terms and conditions of the attached grant form. (Any exceptions should be clearly noted and submitted with the application.) Yes 1.2.5 We intend to own and operate any project that may be constructed with grant funds for the benefit of the general public. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 3 of 19 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) Connelly Lake Hydroelectric Project 2.2 Project Location – Include the physical location of your project and name(s) of the community or communities that will benefit from your project. This project is located in Southeast Alaska, approximately 14 miles northeast of the City of Haines and 10 miles southwest of the City of Skagway. Both communities were intertied by APC in 1998 with a 15 mile, 34.5 kV submarine cable. This project would provide power to both communities. 2.3 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 Design and Permitting Feasibility Construction and Commissioning Conceptual Design 2.4 PROJECT DESCRIPTION Provide a brief one paragraph description of your proposed project. The Connelly Lake Hydroelectric Project (Project) will be located in Southeast Alaska, approximately 14 miles northeast of the City of Haines and 10 miles southwest of the City of Skagway. Connelly Lake (formerly known as Upper Chilkoot Lake) is an 85 acre alpine lake, and drains into the Chilkoot River. The project will be on state and private land, including the Haines State Forest and Chilkat Bald Eagle Preserve. The project facilities will include a dam at the lake outlet, a penstock about 6,200 feet long, a 12.0 MW powerhouse with two generating units, a 14-mile-long 34.5 kV transmission line and a 14-mile long access road. Final dimensions and capacities of these facilities will be determined by optimization studies to be conducted during Phase II. The Project will be developed by AP&T to provide additional generation to its interconnected Haines and Skagway electrical systems. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 4 of 19 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.) This Project will provide additional hydroelectric generation to AP&T’s Upper Lynn Canal (ULC) system, which includes Haines, Skagway, and other nearby communities. AP&T also supplies power to Inland Passage Electric Cooperative from the ULC system. The Project will be a long-term resource to offset diesel generation. Currently, diesel generation is necessary during low water periods. Diesel generation during the last 8 years has averaged about 0.7 GWh, but was double that average amount during two of the years. Continuing load growth will make diesel generation more frequent. The potential generation of a 12.0 MW project is estimated to be 45 GWh, which should be sufficient to meet increasing loads for many years to come, although generation during the early years of the Project’s life would likely be fairly limited. To provide revenue in the early years of Project operation, AP&T will sell power during the summer months to cruise ships docked at either Haines or Skagway. The estimated annual load from supplying one ship is estimated to be 9,000 MWh, with a peak of 11 MW. AP&T estimates that a power sales rate of $0.20/kWh would be attractive to the cruise lines, and that revenue would be sufficient to offset AP&T’s debt service and O&M costs, assuming the construction is 80% grant funded by the State. Any excess revenue could be assigned to the State to offset the cost of the grant funding and provide an additional revenue source to the State. Installation of a larger capacity to supply two cruise ships is possible, which would increase the revenue to the State at little additional cost. Another benefit of the Project would be an increase in reliability. Currently, the primary hydroelectric generators in the ULC system are near Skagway, with only diesel generation and two small run-of-river hydros located near Haines. If the submarine cable between Haines and Skagway were to be damaged, nearly all generation for Haines would need to be from diesel units. The Project will connect into the system near Haines, and so in the event of a submarine cable outage Haines would still be fully supplied with hydro generation. It should also be noted that the Project could supply power to new industrial loads if they occurred. Currently, mineral explorations are being conducted in the Klukwan area, and there is discussion that a mine on the order of the Greens Creek Mine near Juneau could be developed. 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 cost of the Project is estimated to be $33,235,000, not including costs incurred by Haines Light & Power Co. (HL&P) in the 1990s for a preliminary design of the project. No reconnaissance level studies (i.e. Phase I) are necessary because of the previous HL&P work, however, AP&T proposes to conduct additional resource assessment/feasibility analysis/conceptual design studies (Phase II) to update and possibly revise the HL&P work. Also during Phase II, AP&T will contract with various entities to conduct environmental studies and data collection as necessary for obtaining state and federal permits. Note that AP&T purchased HL&P in 1998, including assets associated with the Project. If the Phase II studies indicate a feasible project can be developed as expected, AP&T will immediately begin the Phase III work to obtain the necessary permits and final design. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 5 of 19 10/7/2009 AP&T request with this application grant funding of $988,000 which is 80% of the estimated costs of Phases II and III. AP&T will provide $247,000 in matching funds (20% match) from its normal operating funds. The total estimated costs for each phase, including construction, are shown below:  Phase II: Feasibility Analysis/Conceptual Design ....................................$535,000  Phase III: Final Design and Permitting ....................................................$700,000  Phase IV: Construction ..........................................................................$32,000,000 2.7 COST AND BENEFIT SUMARY Include a summary of grant request and your project’s total costs and benefits below. Grant Costs (Summary of funds requested) 2.7.1 Grant Funds Requested in this application. $988,000 2.7.2 Other Funds to be provided (Project match) $247,000 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $1,235,000 Project Costs & Benefits (Summary of total project costs including work to date and future cost estimates to get to a fully operational project) 2.7.4 Total Project Cost (Summary from Cost Worksheet including estimates through construction) $33,235,000 2.7.5 Estimated Direct Financial Benefit (Savings) $1,050,000,000 (1) $187,000,000 (2) 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.) Other benefits due to reduction in cruise ship emissions. (1) Potential savings in diesel fuel costs over 50 years with full utilization of Project output. (2) Estimated revenue from sale of 9,000 MWh/year to cruise ships over 50 years. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 6 of 19 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. Vern Neitzer, AP&T’s Chief Engineer, will be the Project Manager. Mr. Neitzer is located in Skagway near the Project location, and has extensive experience in managing hydroelectric development. A resume for Mr. Neitzer is included in Section 10. 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.) A bar schedule of the expected design and construction sequence is provided in Section 10. The following summarizes key activities and dates of the schedule assuming no FERC license is required (a jurisdictional determination should be forthcoming shortly). Phase II: Feasibility Analysis/Conceptual Design: Conceptual design/optimization........................ December, 2010 Stream gage installation ...................................... October, 2010 Geotechnical investigations ................................. October, 2011 Environmental studies ....................................... December, 2011 Phase III: Permitting and Final Design: Permit application preparation and processing ......... July, 2012 Stream gaging (data collection for 2 years) ........ October, 2012 Penstock alignment survey ................................... October, 2011 Final design ...................................................... December, 2012 Phase IV: Construction: 2013 –2015 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.) The key tasks and decision points for Phases II and III are as follows:  Selection of an installed capacity and optimum project arrangement by the end of 2010, so that environmental and geotechnical studies to be conducted in 2011 can be focused appropriately.  Installation of stream gages in summer 2010 to provide at least one full water year of data for analysis prior to applying for permits.  Submittal of permit applications by the end of 2011 so that construction can be authorized for 2013.  Completion of final design by the end of 2012 so that construction can proceed in 2013. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 7 of 19 10/7/2009 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. Key AP&T involved in the project development and their roles will be:  Vern Neitzer, Project Manager  Bob Berreth, Electrical Design  Ben Beste, Mechanical Design  Larry Coupe, Civil Design  Glen Martin, Resource Assessment and Permits Phase II: Resource Assessment/Feasibility Analysis/Conceptual Design In this phase AP&T will conduct the environmental and engineering/conceptual design studies listed below. Most of the environmental studies will be by contractors; the contractors listed below are those AP&T has used on similar tasks. The actual contractors used may vary from those shown, depending on workloads and proposed budgets.  Wetlands delineation - - HDR Alaska Inc.  Threatened and endangered plant species survey - - HDR Alaska Inc.  Fish surveys - - Romey Associates, Inc.  Water quality sampling - - Analytica Group, Inc.  Cultural resource surveys - - Browne Research;  Geotechnical investigations - - GeoEngineers, Inc.  Conceptual design - - AP&T staff engineers  Feasibility analysis - - AP&T staff engineers Phase III: Final Design & Permitting AP&T expects to receive in 2009 a determination that the Federal Energy Regulatory Commission (FERC) will not have jurisdiction over the Project, since no federal lands or interstate commerce will be affected by Project development. Therefore a FERC license will not be required, and only the following permits will be acquired during Phase III:  404 permit (Corps of Engineers)  Fish habitat permit (ADF&G)  Land leases or easements (ADNR, private landowners)  Coastal zone consistency review (ADNR)  Water right (ADNR)  SHPO review AP&T permitting specialists will compile the environment information obtained in Phase II into resource assessment documents as required by the various permitting agencies. AP&T will prepare the final design documents in-house using its staff civil, mechanical, and electrical engineers, who all have extensive experience in hydroelectric development. These engineers designed AP&T’s South Fork Hydroelectric Project which entered service in 2005, as well as AP&T’s Kasidaya Creek Hydroelectric Project which entered service in October 2008. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 8 of 19 10/7/2009 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. During Phases II and III, AP&T proposes to provide quarterly reports to AEA regarding the status of the work and use of the grant funds. AP&T has provided similar reports to AEA and other grant funding agencies in the past several years on other projects, and has established the necessary procedures for producing the reports expeditiously. 3.6 Project Risk Discuss potential problems and how you would address them. Site Control – AP&T does not yet have development rights on land to be occupied by part of the transmission line and access road. We are working with the private land owners to negotiate leases, easements, or sales. Seismic – Project components will be designed appropriately for seismic activity, since the Project will be located in a moderate-risk seismic zone. Structures will be buried as much as possible to minimize seismic impacts. Underground Construction – The Project does not include a significant amount of underground construction, which can be fraught with cost overrun potential. Geotechnical investigations will be conducted at the dam and powerhouse areas to provide an adequate level of knowledge about ground conditions at those sites. Inclement Weather – Working conditions in the dam area are very harsh during the winter. The proposed schedule assumes no work on the dam and upper portions of the penstock during the December-March period. Environmental Opposition – AP&T is aware that some Haines area resident may oppose Project development, primarily because the proposed road could increase access into the Chilkoot valley, and because of perceived impacts from the minor flow modifications that would occur in the Chilkoot River. AP&T believes the environmental impacts will be insignificant or can be prevented or adequately mitigated. AP&T will meet regularly with concerned citizens to address any issues with the Project, with the intent of reaching a favorable concensus. In our meetings to date, some Haines citizens have asked us to consider development of Schubee Lake as an alternative; AP&T conducted a site visit to Schubee Lake in 2009, and will conduct a reconnaissance study of that sites potential as indicated in a separate grant application. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 9 of 19 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. Potential Energy Resource: HL&P’s investigations of the Project in the 1990s were for a development to supply power only to Haines. They ultimately selected a preliminary design with an installed capacity of 6 MW and a potential annual generation of 35 GWh. AP&T believes the arrangement proposed by HL&P could be undersized with regard to the available water resource and the current load conditions. With the HL&P arrangement, there would be a large amount of water spilled during the summer months. AP&T believes that it may be economical to utilize the spilled water, either by a larger installed capacity, a larger reservoir, or both. AP&T estimates the largest practical reservoir would have a storage capacity of 9,000 acre-feet and a maximum water level at El 2325, which could support an installed capacity of 15 MW and an annual generation of about 50 GWh. AP&T proposes to conduct an economic sizing of the project as part of its Phase II work. The Project construction cost indicated in this application is based on an installed capacity of 12.0 MW. Pros: This project has enough storage and head for a resource that will provide for future load growth in ULC for many years to come. This would eliminate diesel use except for outages and possibly shutdown for maintenance of the hydro project. Other potential hydro sites in the area have much less generation potential. AP&T is not aware of any feasible wind, tidal, wave, geothermal or other renewable energy sites in the area. Compared to diesel generation, the Project will have the following advantages:  less expensive to operate than diesel (lower O&M);  no need to purchase fuel;  no air emissions;  fewer hazardous substances;  no particulate matter emissions;  can come on-line after a power outage almost immediately, but diesel can’t;  lower and more stable electric rates for customers Cons: As with all hydroelectric projects, the initial cost of development is much higher than for diesel generation. In addition, there may be environmental impacts associated with the Project, such as the access and transmission route through a portion of the Chilkat Bald Eagle Preserve and minor modifications of the flow in the Chilkoot River. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 10 of 19 10/7/2009 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. The existing ULC energy system configuration is as follows: Unit Type Capacity, kW Efficiency, kWh/gal Age, years Goat Lake Hydro (storage) 4,000 N.A. 11 Dewey Lakes Hydro (storage) 943 N.A. 106 Lutak Hydro (run of river) 285 N.A. 9 10-Mile(1) Hydro (run of river) 600 N.A. 8 Kasidaya Hydro (run of river) 3,000 N.A. 0 Skagway #6 Diesel 855 14.69 22 Skagway #7 Diesel 1,100 14.80 12 Skagway #8 Diesel 500 14.89 17 Skagway #9 Diesel (refurbished) 930 ? 0 Haines #1 Diesel 800 12.64 39 Haines #2 Diesel 1265 12.93 25 Haines #3 Diesel 1600 14.92 19 Haines #4 Diesel 2865 12.83 13 (1) AP&T purchased power from Southern Energy’s 10-Mile hydro project until 2002. Purchases resumed in 2008. Haines and Skagway are interconnected by a 15-mile-long, 34.5-kV submarine cable with a capacity of approximately 20 MW. Skagway and Dyea are connected by a 7.3-mile long 7.2-kV distribution line, and Haines and the IPEC system are connected by a 10-mile long 12.47-kV distribution line. 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. AP&T’s ULC system is primarily hydroelectric generation with diesel backup. In recent years diesel has been needed for peaking operations and at the end of some long winters. AP&T is evaluating another hydroelectric project near Haines (Connelly Lake Hydro) to supplement the ULC resources to eliminate the current diesel generation. That project should also allow for significant load growth in the ULC system. The Project is intended to provide power to the cruise ships that visit Skagway each year from May through September. This project would not have an impact on the existing energy (AP&T) resources which are solely dedicated to providing power for the residential and commercial customers of ULC. The existing energy resources can in no way handle even one cruise ship at this time. The Project would not replace or share the load with any existing generating resources. The Project could provide backup renewable energy for the ULC system in the event of an emergency, e.g. an extended outage of the Goat Lake hydro project. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The Project will be able to supply loads in any of the interconnected communities in the ULC Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 11 of 19 10/7/2009 system, as well as IPEC loads in the Chilkat valley. Currently, it is sometimes ne cessary for AP&T to use diesel generation to supplement the hydro generation, either due to low streamflows or outages. Load increases and expansion of the system have exacerbated this situation. When diesel generation is required, electric rates increase and cause fluctuations in customer energy bills that can be difficult to anticipate or adjust for. Adding more hydro capacity to the ULC grid will alleviate fluctuating electric rates for customers. If the Project is configured to provide shore power to cruise ships docked at Haines or Skagway, the cruise lines would see their operating costs decrease, which would be beneficial for that industry, which in turn would help the communities because the local economy is currently so dependent on tourism. The Project could provide in the near-term an incentive for additional economic development in the Haines and Skagway areas because there would be a surplus of economical power available. 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 Renewable energy technology specific to location – The Project will be a conventional hydroelectric project. Hydroelectric technology is well developed, and provides most of the renewable energy generated in the world in general, and Southeast Alaska in particular. The Project will utilize the abundant rainfall and steep topography afforded by the Connelly Lake basin to generate renewable energy. Other hydro sites may exist in the area but are much smaller than the Project and would have significantly less energy potential. Tidal generating technology may be applicable to the area but is considered too experimental and expensive to compete with the Project. Wind, biomass, wave, and other renewable technologies are not suitable to the area. Optimum installed capacity – The optimum installed capacity is estimated to be 6.0-15 MW. An economic sizing of the installed capacity will be accomplished during the proposed Phase II studies. Anticipated capacity factor – The potential capacity factor is estimated to be from 38% (at 15 MW) to 67% (at 6.0 MW). Anticipated annual generation – The potential annual generation is estimated to be from 35 GWh (at 6.0 MW) to 50 GWh (at 15 MW). Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 12 of 19 10/7/2009 Anticipated barriers – There are no known technological barriers to development of the Project. Basic integration concept – The ULC system is already a hydro-based system with diesel backup. Integrating another hydro project to the system will not present any difficulties. The run-of-river hydros in the system (Lutak, Kasidaya) will be dispatched first, followed by storage hydros (Goat Lake and Connelly Lake). Generally, the storage hydros will be dispatched based on their then - current storage levels and operating characteristics. In addition, one or both of the storage hydros will always be on-line to provide system stability. Delivery methods – The Project will be interconnected to the ULC grid at Lutak Inlet by a 14- mile long, 34.5 kV transmission line that is considered part of the Project and included in Project costs. 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 project is primarily on State of Alaska Lands (Haines State Forest, Chilkat Bald Eagle Preserve), with some small private landholdings along the access road/transmission line route. A land lease has been applied for from DNR and from the Haines State Forest. Private land owners are currently being negotiated with. 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 Applicable Permits:  404 permit (Corps of Engineers)  Water right (ADNR),  State land easement (ADNR)  Coastal zone consistency review (ADNR-DCOM)  Fish habitat permit (ADF&G)  State Parks Permit  SHPO review. Permitting Timeline: Permit applications will be filed with the various agencies in Phase III after completion of the necessary resource assessments in Phase II. We currently estimate that permits applications will be filed in late 2010 and the permits will be received by fall 2011. Potential Permitting Barriers: AP&T is not currently aware of any permitting issues that would preclude development of the Project. Permitting barriers may become known as the Phase II and Phase III work progresses. 4.3.4 Environmental Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 13 of 19 10/7/2009 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 Threatened and endangered species: AP&T is not aware of any threatened and endangered species in the Project area. AP&T expects to conduct field studies during Phase II regarding threatened and endangered species, but impacts are not anticipated. Habitat Issues: Habitat surveys were conducted by ADF&G in the 1990’s for fish in Connelly Lake and in the Chilkoot River near the lake outlet stream’s confluence with the river. No fish were found in the lake or using the outlet stream. The Chilkoot River provides anadromous rearing and spawning habitat, and fish surveys and analyses are planned during Phase II to assess any impacts from varying flows due to the project; AP&T believes the impacts will be minor because the flow fluctuations in the summer will be small compared to the natural flow in the Chilkoot River. In the winter, the project will likely increase the natural flow of the Chilkoot River, which could be beneficial. Wildlife surveys during Phase II will be condu cted to assess the current use of the area, particularly by mountain goats; significant impacts are not expected. Wetlands: The Project will affect some wetlands, including Connelly Lake and possibly small muskeg areas along the penstock route. However, no significant impacts are expected. Archaeological Resources: Archeological surveys will be conducted during Phase II. No significant impacts to archeological or cultural resources are expected. Land Development Constraints: No land development constraints are known at this time. Lease agreements with the state will specify any necessary mitigation requirements for the Project features. AP&T would expect to provide gates on the access road to limit unauthorized access. Telecommunications Interference: The 34.5 kV transmission line will not create interference with telecommunications. Aviation Considerations: The project does not pass by an airport and the wood poles will only be about 45 feet in height, well below any flight pattern. The ROW for the transmission line is bordered by forest on both sides, and trees in the area are generally at least as tall as the poles. Visual, Aesthetic Impacts: Wood poles will be placed approximately 300 feet apart. Much of the route was cleared for a logging road (RS 2477) into the valley and can still be used after some repairs and tree trimming. The area is not easily accessed so that the project would not be visible from Chilkoot Lake or other publicly accessible areas. This project will not be in a visually or aesthetically special viewshed. Other Potential Barriers: No other potential barriers are known at this time. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 14 of 19 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 Anticipated Project costs: Phase I ........................................... $0 Phase II .............................. $535,000 Phase III ............................. $700,000 Phase IV ........................ $32,000,000 Total .............................. $33,235,000 Requested Grant Funding: $988,000 (80% of total cost for Phase II and Phase III) Applicant Matching Funds: $247,000 (20% of total cost for Phase II and Phase III) Other Funding Sources: Other funding sources have not been identified at this time. AP&T will provide the $247,000 in matching funds for Phase II and Phase III from its normal operating funds. Projected Capital Cost of Renewable Energy System: $32,000,000 (assumed to be the cost of Phase IV Construction) Projected Development Cost of Proposed Renewable Energy System: $1,235,000 (assumed to be the sum of Phase I, II, and III costs). These estimated costs, reflect the applicant’s knowledge and experience at building hydroelectric projects. Phase II: Project Costs for Resource Assessment/Feasibility Analysis/Conceptual Design Conceptual Design and Optimization ....................................................... $125,000 Stream Gaging (Chilkoot River by USGS, Connelly Creek by AP&T) ....... $75,000 Geotechnical Investigations ...................................................................... $100,000 Fish Surveys & Analysis .............................................................................$125,000 Wildlife Surveys ............................................................................................$25,000 Botanical Survey ......................................................................................... $25,000 Wetland Survey .............................................................................................$20,000 Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 15 of 19 10/7/2009 Archaeological Survey .................................................................................$30,000 Water Quality Testing ................................................................................. $10,000 Total For Phase II: ................................................................................... $535,000 Phase III: Project Costs for Final Design & Permitting Permit Applications and Processing ........................................................... $50,000 Stream Gaging (O&M for 2 years) ............................................................. $50,000 Penstock Alignment Survey ......................................................................... $50,000 Final Design Engineering ......................................................................... $550,000 Total For Phase III: .................................................................................$700,000 Phase IV: Project Costs for Construction Construction Management ........................................................................ $500,000 Mobilization ........................................................................................... $1,000,000 Access Roads and Bridges ..................................................................... $1,500,000 Dam and Reservoir ................................................................................ $8,000,000 Penstock ................................................................................................. $9,000,000 Powerhouse ............................................................................................ $7,000,000 Transmission .......................................................................................... $5,000,000 Total For Phase IV: ........................................................................................ $32,000,000 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.) The O&M cost for the Project is estimated to be approximately $500,000 per year (2009 cost level). AP&T is not requesting grant funding for O&M costs. 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 AP&T is developing this project to supply power to AP&T’s ULC system customers and to cruise lines that visit Haines and Skagway during the summer tourist season. AP&T expects that the rates to its commercial and residential customers would not increase due to Project development. AP&T projects that a sales price of $0.20/kWh would be attractive to the cruise lines and the revenue from those sales would provide a positive net income to AP&T and the State. 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Please see the attached Cost Worksheet. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 16 of 19 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 Potential annual fuel displacement: The potential Project generation is about 45 GWh per year, equivalent to 3,300,000 gallons of diesel fuel annually. Over a 50 year period the Project could potentially save 165 million gallons of diesel fuel. Actual fuel displacement will depend on future load growth. AP&T’s most recent purchase of diesel fuel for Haines was at a price of $2.61/gal, with an additional $0.14/gal in taxes. Current fuel prices may be unusually low because of the current global economic slowdown. AP&T’s economic analysis assumes that fuel prices will escalate at 3.75% per year for the next 20 years, then hold constant, which results in an average fuel price of $6.36/gal for the assumed 50 year life. Thus the potential lifetime fuel displacement is valued at $1,050,000,000 (not discounted for inflation). Anticipated annual revenue: Revenues would be from 1) sales to residential and commercial customers at AP&T’s regulated rates, and 2) sales to cruise ships docking in either Haines or Skagway. Power purchase agreements with cruise lines would be negotiated that would provide power to the cruise lines at a cost less than self-generation; sale of 9,000 MWh/year at a rate of $0.20/kWh in the first year is assumed for AP&T’s economic analysis. Note that this sale volume is much less than the potential generation. Even at that low volume, the cruise ship sales would provide a positive revenue stream. Over the 50-year life of the Project, the total revenue from sales to the cruise lines is estimated to be $187,000,000. Thus the Project has the potential to provide a positive return to the State on its grant investment, and could even be viewed as a revenue source for the State. Potential additional annual incentives: Not estimated. Potential additional revenue streams : Not estimated. Non-economic public benefits to Alaskans: A main non-economic benefit of the Project is the reduction of emissions from diesel generation by cruise ships while docked in Skagway. The potential Project generation is equivalent to a reduction in emissions of about 37,000 tons per year. These environmental benefits will maintain Haines and Skagway’s desirability as a cruise ship destination, which will provide indirect economic benefits to the people of Alaska. Another non-economic benefit is improving the reliability of the ULC system. Currently, Haines is supplied primarily by generation near Skagway that is transmitted over a 12-year old submarine cable. The cable is partially located in an area of loose marine sediment that is known to be unstable during seismic events. The Project would provide hydro generation to Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 17 of 19 10/7/2009 Haines in the event the submarine cable becomes unusable. Other benefits: In the short term the local economy would benefit due to local hire for construction labor, materials for construction, and lease or rental of equipment. In the long term, there would be employment for O&M of the Project. SECTION 6– SUSTAINABILITY Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum:  Proposed business structure(s) and concepts that may be considered.  How you propose to finance the maintenance and operations for the life of the project  Identification of operational issues that could arise.  A description of operational costs including on-going support for any back-up or existing systems that may be require to continue operation  Commitment to reporting the savings and benefits AP&T operates and maintains all of the existing ULC generation, transmission, and distribution system to provide a high degree of reliability. The Project will be integrated into the ULC system, and will be operated and maintained in a similar manner. With regular maintenance, a conventional hydroelectric project should have a minimum life of 50 years; there are many operating projects over 100 years old. Some components may need replacement or refurbishment during that time, but replacement of major items resulting in significant costs are not expected, since conventional hydroelectric equipment and materials are robust and commercialized. O&M costs are expected to be about $500,000 per year (2009 cost level). Operation and maintenance costs will be funded by revenues from the sale of power from the project. AP&T will provide whatever reporting of savings and benefits that AEA considers appropriate. SECTION 7 – READINESS & COMPLIANCE WITH OTHER GRANTS Discuss what you have done to prepare for this award and how quickly you intend to proceed with work once your grant is approved. Tell us what you may have already accomplished on the project to date and identify other grants that may have been previously awarded for this project and the degree you have been able to meet the requirements of previous grants. AP&T has considered development of the Connelly Lake site for many years. In fact, it was the main alternative to development of the Goat Lake site. Over the years, AP&T has conducted several site visits to Connelly Lake and other nearby potential hydro sites in order to confirm the technical and economic superiority of the Project. In the last couple of years, AP&T has been holding public meetings and one-on-one communications with Haines residents to provide information about the Project and develop local support. In 2009, AP&T filed a notice of intent with the Federal Energy Regulatory Commission (FERC), with the expectation that FERC would determine they do not have jurisdiction over the Project. In 2008, FERC in fact ruled they do have jurisdiction because some land had not yet been Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 18 of 19 10/7/2009 transferred to the State. That land has now been transferred, and AP&T refiled with FERC in May 2009. We expect a favorable jurisdictional determination in late 2009 or early 2010. AP&T intends to proceed with the proposed Phase II work in 2009 as scheduled. There have been no other State or Federal grants awarded to the Project. In REF Round 2, the Project was recommended for $428,000 in grant funding, but no grant funds were provided. 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. AP&T has conducted a several public meetings in Haines to explain our intent with this project. AP&T is aware that some Haines area resident may oppose Project development, primarily because the proposed road could increase access into the Chilkoot valley, and because of perceived impacts from the flow modifications that would occur in the Chilkoot River because of Project operation. AP&T believes the environmental impacts will be minor or can be prevented or adequately mitigated. AP&T will meet regularly with concerned citizens to address any issues with the Project, with the intent of reaching a favorable consensus. In our meetings to date, some Haines citizens have asked us to consider development of Schubee Lake as an alternative; AP&T conducted a site visit to Schubee Lake in 2009, and will conduct a reconnaissance study of that site’s potential as indicated in a separate grant application. 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 Investments to date: AP&T has conducted several sites visits over the years and has reconsidered the conceptual design for the project. The total cost for that work is estimated to be on the order of $10,000, paid out of AP&T’s general operating budget. Amount requested in grant funds: $988,000 (for Phase II & III work) Additional investment by AP&T: AP&T will provide matching funds in the amount of $247,000 for Phase II and III work (20% match). See the attached GrantBudget3.doc for a breakdown of the costs by milestones. Renewable Energy Fund Grant Application Round 3 AEA10-015 Grant Application Page 19 of 19 10/7/2009 SECTION 10 – 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 Signature Title Date