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Home My WebLink AboutTerror Lake Unit 3 Hydroelectric Project (KEA) Appr,,ALASKA Renewable Energy Fund Round 3 ENERGYAUTHORITY Grant Application SECTION 1 — APPLICANT INFORMATION Name (Name of utility, IPP, or govemment entity submitting proposal) Kodiak Electric Association,, Inc. (KEA) Type of Entity: Member owned not -for -profit rural electric cooperative providing generation, transmission and distribution services to the residents of Kodiak Island. Mailing Address Physical Address PO Box 787 515 East Marine Way Kodiak, AK 99615 Kodiak AK 99615 Telephone Fax Email 907.486.7700 907.486.7720 dscott@kodiak.coop 1.1 APPLICANT POINT OF CONTACT Name Title Darron Scott President/CEO Mailing Address PO Box 787 Kodiak, AK 99615 Telephone Fax Email 907.486.7707 907.486.7720 dscott@kodiak.coop 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. 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. AEA 10-015 Application Page 1 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 SECTION 2 — PROJECT SUMMARY This is intended to be no more than a 1-2 page overview of your project. 2.1 Project Title Terror Lake Unit 3 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. Kodiak Electric Association's (KEA's) Terror Lake Hydroelectric Facility is located on Kodiak Island, approximately 25 miles southwest of the City of Kodiak within the Kodiak National Wildlife Refuge. Terror Lake is the primary generation source for the community of Kodiak. KEA's service territory includes approximately 5,800 meters in and surrounding the City of Kodiak, the Coast Guard Support Center, Chiniak, Pasagshak and Port Lions. 2.3 PROJECT TYPE 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 Feasibility X Construction and Commissioning Conceptual Design 2.4 PROJECT DESCRIPTION Provide a brief one paragraph description of your proposed project. The Terror Lake Unit 3 Hydroelectric Project would install a third turbine capable of producing an additional 10 MW in the existing Terror Lake plant. The original engineers of the Terror Lake facility had the foresight to design the facility for the expansion to three turbines. The original design assumed the day would arrive when additional capacity would be required. That day has arrived. Kodiak's growing demand has surpassed the current capacity of Terror Lake. Expanding the capacity at Terror Lake by 10 megawatts (MW) with a third turbine generator will enhance the stability of KEA's isolated grid system allowing additional forms of renewable energy to be integrated and reduce KEA's dependence on diesel fuel. The third turbine at Terror Lake is the cornerstone necessary for KEA to achieve its' Vision Statement: Endeavor to produce 95°0 of energy sales with cost effective renewable power solutions by the year 2020. 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.) AEA10-015 Grant Application Page 2 of 26 10/7/2009 rW�ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 As KEA strives to implement more renewable resources, the future must include a generation source that increases our capacity and system stability. Hydropower is a unique form of renewable energy in that it is dispatchable base load that can respond quickly to system demand. It is this key attribute of hydropower that would allow KEA to integrate more variable sources of renewable energy onto its isolated grid. The Terror lake reservoir acts like a battery for KEA's future renewable energy projects, as well as the recently completed Pillar Mountain Wind Project. An energy storage system is necessary for the variability of wind energy. The reliability of wind energy on a minute -to -minute basis is uncertain because winds could be gusting one minute and then suddenly calm. This unpredictability requires KEA to have sufficient capacity available to meet load requirements. Currently, diesel generation is utilized to meet increased demand, which is neither economical nor environmentally friendly. To demonstrate the need for additional hydroelectric capacity and its impact on the integration of future renewable energy sources, the table below compares the dispatching sequence for KEA's generating sources to meet a 21 MW load with two versus three turbines at Terror Lake. The example assumes the Pillar Mountain Wind Farm is supplying 3.0 MW of wind energy to the grid. A two -turbine configuration at Terror Lake is only able to provide 20 MW of capacity, while a three - turbine configuration at Terror Lake would be able to provide 30 MW of capacity. With only 20 MW of hydropower capacity, a 21 MW load on the KEA system would require 3.5 MW diesel generation, despite the contribution of Pillar Mountain's wind energy. Even though the load could be supplied with 100% renewable power, a diesel generator would be required for backup capacity to the variable wind energy. If the winds were to diminish and no wind energy was supplied to the grid, Terror Lake would not be able to supply the full 21 MW of load, requiring a diesel to be running and ready to supply that load at any given moment. Given the operational efficiencies of a diesel engine, it would not be practical to run the generator at a limited 1 MW load to maximize hydropower's potential capacity. Running a diesel generator at 3.5 MW is the most efficient dispatching sequence for these conditions; yet it is far from being the most efficient for KEA's grid. Not utilizing hydropower could lead to a future situation where the lake is spilling over the dam while diesel engines are running. Due to grid stability, the contributions of renewable energy resources are currently maximized. An additional 10 MW of hydro would provide the capacity needed for more variable renewable power. Thus, Terror Lake is the cornerstone for additional renewable energy. Without the expanded capacity, the addition of future renewable energy on KEA's system will not be feasible. The expanded capacity from the third turbine would also cover peak loads. Over the past decade, peak loads on the system have averaged 24 MW. Diesel generation is currently required for these periods of high demand and the need for diesel powered supplemental capacity will continue to grow into the future as peak loads increase. Increasing Terror Lake's capacity to 30 MW would mitigate the use of diesel fuel by maximizing the use of wind power and covering the remaining peak AEA10-015 Grant Application Page 3 of 26 10/7/2009 rW�ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 loads with hydropower. (Refer to Exhibit I Excerpt from Power Generation Study for additional information.) A third turbine would also provide backup capacity at Terror Lake when the two existing generating units are offline for maintenance or repairs. The two existing turbines at Terror Lake are 1984 model generators. The amount of outage time required for annual and quarterly maintenance on these turbine generator units can be up to four weeks. Losing 10 MW of power from offline turbine generators during maintenance requires KEA to run diesel generators continuously to meet system demand, requiring approximately 430,410 gallons of diesel fuel annually. In addition to normal maintenance, it should be noted that in 2015 an extensive outage will be necessary for Terror Lake's two generators' re -wind process. This process can last up to three months per unit. Based on these same operating assumptions, a three month outage for one Terror Lake turbine generator would require approximately 1,300,000 gallons of diesel fuel to cover the systems loads. If the Terror Lake hydroelectric powerhouse contained a third turbine generator, the facility would be able to continuously produce 20 MW of hydropower while one unit was offline. This redundancy in generating capacity would reduce the need to run diesel generation. As these turbines continue to age, they will likely require more extensive maintenance. A modern third turbine will be more reliable and will not require as much outage time as the 25-year old units. By providing significant cost savings during the maintenance outages through the offset of diesel backup, a new unit changes the cost -benefit risk associated with taking the current turbines offline for repair. The enhanced stability to KEA's grid resulting from additional hydro capacity also delays additional distribution infrastructure costs. The two turbines at Terror Lake cannot tolerate more than approximately 3 MW of instability on the grid without tripping. This imposes a 3 MW limit on the system's distribution feeders. Taking future projections of load growth into account, there will be five feeders on the KEA system that will likely exceed this 3 MW limit. Without a third turbine at Terror Lake, the overloading problem on these five feeders will need to be resolved potentially by building a new 10 megavolt-ampere (MVA) substation and reconfiguring the distribution system through a series of switches that move loads to different feeders. Expanding Terror Lake's capacity by 10 MW. This would potentially raise the limit on the system distribution feeders to 4.5 MW. A third turbine would therefore postpone the impact of load growth on the distribution system by allowing more capacity on the distribution lines. (Refer to Exhibit J Excerpt from Long Range Plan for additional information.) KEA's integrated wind -hydro generation system is a unique renewable energy solution for the many communities of Alaska that are powered by hydroelectricity. The lessons learned on this project will provide valuable information for other Alaskan utilities to use as a model for similar projects so that they too can maximize their renewable resources and work toward the State Energy Policy Goals. 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 installing the third turbine generator in Terror Lake's powerhouse is estimated at $15,,907,,950. Fortunately, the original engineers of Terror Lake had the foresight to design the facility for the expansion to three units. The powerhouse contains an empty bay for the third turbine generator unit and the power tunnel, penstock, and tailrace are large enough to accommodate a flow corresponding to 30 MW of capacity without modification. The original design AEA10-015 Grant Application Page 4 of 26 10/7/2009 rW�ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 assumed that the day would arrive when additional capacity would be required. The photographs of the facility (attached as Exhibit C) show the available space and infrastructure for the third turbine generator. KEA applied for and was allocated $500,000 in matching grant funds from the Alaska Energy Authority Renewable Energy Fund Round II to complete the initial feasibility analysis, engineering and regulatory assessment, and FERC Licensing Amendment phases of the project (KEA Application # 215). Based on the studies conducted to date the feasibility and constructability of the third unit is a "go" decision. The report completed by Hatch Acres Corporation (HAQ indicates no fatal flaws are associated with the installation of the third turbine. (Refer to Exhibit E Third Unit Addition Pre - Feasibility Analysis, Engineering and Regulatory Assessment.) This grant application is for the construction phases of this project. Devine Tarbell Associates provided KEA a preliminary design and construction cost estimate for installing the third turbine. (attached as Exhibit F.) In addition to powerhouse construction costs, substation construction will also be required to transform the third turbine's generated power at 138 kilovolts (kV) to the existing 69 kV transmission line. There is sufficient room in the existing Terror Lake substation for this transformer and associated equipment. Section 4.4.1 Project Development Cost includes a table that itemizes all the costs associated to complete the Terror Lake Unit 3 Hydroelectric Project. The KEA Board of Directors is aware of the total cost estimate for the third turbine installation project, and has expressed their formal endorsement of the project through Resolution 654-09 Authorization for President/CEo to Represent KEA and Apply for a Renewable Energy Fund Round 111 Grant though the Alaska Energy Authority, dated October 22, 2009, attached as Exhibit B. Grant support for the construction phases of this project will help offset the cost borne by the KEA membership. KEA has also just recently been allocated by the IRS a New CREB (Clean Renewable Energy Bond) for this project. 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. $ 7,500,000 2.7.2 Other Funds to be provided (Project match) $ 8,407,950 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $ 15,9071950 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 $ 15,907,950 including estimates through construction) 2.7.5 Estimated Direct Financial Benefit (Savings) $ 1,214,071(Base year) $ 71,244,498 NPV over 50 years (life of the project) 2.7.6 Other Public Benefit (If you can calculate the benefit in $ 2,067,690 (annually) terms of dollars please provide that number here and $103,384,500 (50 years) explain how you calculated that number in your application (Section 5.) AEA10-015 Grant Application Page 5 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 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 reference's 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. Darron Scott, President/CEO Darron Scott is the President and Chief Executive Officer (CEO) of KEA. Darron earned his bachelor's degree in Mechanical Engineering from Texas A&M in 1990, and began his career in 1987 as an electrical cooperative engineer at Ingersoll-Rand Pump Group of Texas. He worked his way up through the ranks and was promoted to production superintendent at Texas Utilities/TU Electric, a steam production plant in Monahans, Texas. After nine years with Texas Utilities, Darron and his wife Carol looked north to Alaska, and Darron was chosen by the KEA Board of Directors to oversee KEA's employees and stand-alone generation, transmission and distribution electrical grid. Darron was on board for a year before the State of Alaska divested the Four Dam Pool projects to the communities they serve. He served as a Director on the Joint Action Agency governing body for these four hydroelectric projects, and was a driving force in accomplishing KEA's long-term goal of purchasing the Terror Lake Hydroelectric Project that generates the majority of our cooperative's power, with ownership finalized in February of 2009. In 2007, Darron was instrumental in creating KEA's vision statement: KEA shall endeavor to produce 95°0 of energy sales with cost effective renewable power solutions by the year 2020, and in bringing this vision statement to fruition by planning, developing, and building a state of the art wind farm in Kodiak, which began operating in July of 2009. Darron has been KEA's President/CEO for the past nine years and has been recognized as a leader by the Alaskan utility industry with the Alaska's Top 40 under 40 Award by the Anchorage Chamber of Commerce and the Director's Corporate Stewardship Award by the U.S. Fish and Wildlife Service. Alice Job, Manager of Finance and Administration Alice Job is the Manager of Finance and Administration for KEA, a position she has held for over six years. Alice and her husband Mark relocated to Kodiak in 2003 from Black Hills Electric Cooperative in Custer, South Dakota, where she was the Manager of Office Services. Her background includes 25 years of experience with rural electric cooperatives, numerous NRECA and USDA financial courses, and most recently, a bachelor's degree in Business Administration from the University of Alaska Southeast. Her comprehensive knowledge of accounting, financial planning, risk management, internal auditing, procurement, and resource allocation, as well as extensive governmental and financial institution compliance, has firmly established her proven track record in maximizing the effective and efficient utilization of financial resources. Alice is firmly committed to the cooperative philosophy, and she has developed and maintains outstanding relationships with CFC, RUS, NISC, and other electric industry affiliations. Bob Coates, Manager of Operations and Engineering Bob Coates is the Manager of Operations and Engineering for KEA, a position he has held for two years. He and his wife Teresa relocated to Kodiak from Prineville, Oregon, where he was the Operations Manager for Pacific Power. Bob "grew up" in substations, and brought 36 years of experience managing electric utility systems to KEA, including his previous positions as the Account Executive/Principle Consultant for Computer Sciences Corporation, Senior Director for Enron Energy Services, Vice President of Technical Services for Si% and Project Manager of Special Projects for AEA10-015 Grant Application Page 6 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 Portland General Electric. Bob's exemplary focus on safety embraces all facets of utility work and is an outstanding complement to his expertise in technical areas, including the line department, substation construction and maintenance, switching operations, revenue metering systems, automatic meter reading systems, fixed network communication systems, and customer service projects. Jennifer Richcreek, Environmental Coordination Jennifer Richcreek is the Environmental Coordinator for KEA, a position she has held for a year. She earned a bachelor's degree in Earth Sciences from Johns Hopkins University in 2000 and a master's degree in Environmental Soil Science from Oregon State University in 2005. Jennifer's background also includes fisheries resource management as the Assistant Field Operations Officer aboard the NOAA research trawl ship Miller Freeman, and as a Fisheries Analyst with Alaska Groundfish Data Bank, Inc. As KEA's Environmental Coordinator, she is responsible for ensuring KEA's compliance with all federal, state, and local environmental and safety regulatory requirements for dam safety, land use, air emissions, and hazardous materials. Jennifer is dedicated to the advancement of KEA's culture of safety and environmental stewardship. KEA does not expect project management assistance from AEA or another government entity. 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.) Terror Lake Unit 3 Hydroelectric Project DATE CONSTRUCTION PHASE (Round III Grant Application) Engineering Design Development and Release of Bid Documents Vendor Selection and Purchase of Equipment Contractor Selection and Award Acceptance of Equipment Delivery On -Site Equipment Installation Commissioning and Testing April 2012 June 2012 August 2012 June 2013 August 2013 October 2013 November 2013 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 manaae the voiect cash flow. (See Section 2 of the RFA or the Budaet Form.) The construction phase of this project will begin upon FERC's issuance of a license capacity amendment for the Terror Lake Hydroelectric Facility. Based upon the estimated permitting schedule provided in the HAC report (Exhibit E), the FERC license amendment process is expected to be completed by January 2012. The seven (7) milestones identified in the above Project Schedule section under "Construction Phase" are detailed below: • Milestone #1: Engineering Design AEA10-015 Grant Application Page 7 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 This portion of the project is anticipated to begin in January 2012 scheduled for completion in April 2012. This is the final design for the third turbine and all of the associated equipment. At this point in the project we will also have an actual benefit to cost for this project. • Milestone #2: Development and Release of Bid Documents At this milestone of the project the final engineering design will be utilized to complete the vendor Request for Proposals for all associated equipment. This process is anticipated to begin in April 2012 and be completed in June 2012. • Milestone #3: Vendor Selection and Purchase of Equipment This phase of the project will be to review'the Requests for Proposals and then select and purchase the most appropriate equipment utilizing an engineering and economic analysis. It is anticipated that this milestone will be completed in August 2012 • Milestone #4: Contractor Selection and Award The various installation/construction Requests for Proposals will be completed and the most appropriate contractors will be selected to install all associated equipment. This portion of the project is scheduled for completion in June 2013. • Milestone #5: Acceptance of Equipment Delivery On -Site It is anticipated that KEA will accept delivery of all associated equipment at the construction sites in August 2013 in preparation for construction. • Milestone #6: Equipment Installation It is projected that the construction/installation phase of this project will take approximately three months, depending on weather conditions. The completion date is anticipated to be October 2013. • Milestone #7: Commissioning and Testing In November 2013 the final test and commissioning of all equipment will be completed. Once all equipment passes the testing process the third turbine will be released for operation. 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. Hatch Acres Corporation (HAC) has provided KEA with consulting services for the feasibility analysis and regulatory aspects of the project. KEA does not have any partnerships or commitment with any entities to complete the construction phase of this project. When selecting consulting services, contractors and equipment vendors, KEA will emphasize the use of local contractors whenever possible. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. To monitor the project's budget, a project accounting system will assign tracking numbers to the costs associated with each component of the project. As the project manager, Darron Scott will provide milestone reports to the Engineering and Technology Committee of the KEA Board of Directors. These milestone reports will also be forwarded to AEA. KEA will provide updates to their membership through the KEA website (www.kodiakelectric.com) and the monthly KEA NewsLine newsletter. KEA will follow all provisions outlined by AEA in the Renewable Energy Fund Grant Agreement and provide quarterly updates on the project's status. AEA10-015 Grant Application Page 8 of 26 10/7/2009 ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 3.6 Project Risk Discuss potential problems and how you would address them. Many of the project risks have been investigated by HAC in the initial Feasibility Analysis. (Attached as Exhibit E.) The fatal flaw analysis indicates on a scale of 1 to 10, with 10 being the most difficult, the potential difficulty of pursuing the FERC license amendment for the third turbine is rated as a 1. No fatal flaws were identified associated with the installation of the third unit. The location of Terror Lake within the Kodiak National Wildlife Refuge incurs significant interest from the public regarding multiple uses of the land and the project's impact on wildlife. During the initial construction of Terror Lake in 1981, the FERC licensing process included an agreement amongst KEA, the US Department of the Interior, State of Alaska, Sierra Club, National Audubon Society, and National Wildlife Federation on mitigation efforts for the projects' perceived impact on wildlife habitat. Investigation into the 1978 application for License by HAC has indicated that there is nothing in the proposed installation of the Third Unit that is expected to affect the Offer of Settlement made part of Terror Lake's FERC license, and no major requests for studies from the resource agencies is expected. KEA will work diligently with all interested parties to ensure that the public's interest in this unique environment is protected, and will communicate the significant environmental benefits of the project in terms of its contribution to KEA's renewable energy vision and the goals of the State Energy Policy. From an engineering perspective, it has been determined that the powerhouse can accommodate a third unit with slight variations in turbine dimension. The new model Pelton turbines have slight variations in dimension, but offer increased efficiencies as compared to the 1980's design of the existing two turbines. Minor changes within the control room will be necessary, and the Supervisory Control and Data Acquisition (SCADA) equipment and protective relays will need to be upgraded. As anticipated, it is recommended that KEA install additional circuit switches to the 138 kV generators' step-up transformers to allow for rapid isolation. Extreme caution will be required during construction activities to avoid disrupting the operation of the other two turbines. Minimal disruption to Terror Lake operations is essential. Terror Lake is the cornerstone to KEA's generation and an excessive outage during construction would require extensive usage of costly diesel -powered generation. Outage management will be an important factor for KEA to consider when scheduling the turbine installation. From a power distribution perspective, KEA is exposed to a risk in system reliability due to having a single transformer for the power supplied by Terror Lake to town. This choke point is a 24-year old 20 MVA, 138/67 kV transformer located at Swampy Acres Substation. This transformer operates well, but it provides the only point where power can be moved from Terror Lake to town. KEA is already moving forward with a solution by installing a redundant transformer at the Airport Substation that will operate in parallel with the existing transformer. This new transformer will be large enough to handle the 30 MW of power from a three -turbine Terror Lake system. As mentioned previously in this application, expanding Terror Lake's capacity by 10 MW with a third turbine could raise the limit on KEA's system's distribution feeders to 4.5 MW; however, until a detailed engineering analysis of KEA's system -wide distribution infrastructure is conducted, KEA cannot be sure how much of a benefit a third turbine generator will have on its distribution system. The results of an engineering analysis on KEA's distribution system will provide information necessary to develop appropriate plans for improving KEA's distribution infrastructure according to projected AEA10-015 Grant Application Page 9 of 26 10/7/2009 rW�ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 load growth. 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 Proiect. Terror Lake is the cornerstone to KEA's renewable energy vision. The lake acts like a battery to store energy generated by the Pillar Mountain Wind Farm. For example, when winds are plentiful, water can be conserved within the lake reservoir. When winds diminish, the hydropower's capacity can be dispatched to generate the power necessary without the use of diesel generation. Hydropower is a unique form of renewable energy in that it is dispatchable base load that can respond quickly to changes in system demand. The current capacity at Terror Lake has been surpassed by the growing load demand. Without increased hydropower capacity, the synergistic relationship of more wind and water as described cannot be fully realized. A solution to this limit on renewable energy integration would be to expand the capacity of Terror Lake by 10 MW. An expanded hydroelectric facility would provide ample backup capacity to develop additional renewable energy resources. The Terror Lake powerhouse currently contains two turbine generator units with space and provisions available for the installation of a third unit. Diesel generation is also able to provide additional capacity for renewable energy resources; however, use of diesel generation is counterproductive to KEA's efforts to expand its use of renewable sources of energy. Diesel generation is still relied upon because, like hydropower, it provides dispatchable base load that can respond quickly to system demand. KEA is striving to reduce the use of diesel generation because of its high cost, both financially and environmentally. Another capacity alternative is a battery bank. Conceptually, a battery bank should also be able to store excess wind energy and respond quickly to changes in wind energy output according to system demand. The disadvantage to a battery bank is that it can only provide supplemental load for a relatively short period of time. While hydropower can be dispatched over many months, a battery bank can only be dispatched for hours. KEA is researching how a battery bank can compliment a third turbine at Terror Lake to determine the most optimum renewable energy/grid stability mix. 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. AEA10-015 Grant Application Page 10 of 26 10/7/2009 r&�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 KEA operates an isolated electrical grid system. The main power source comes from the two hydroelectric turbine generators at Terror Lake. KEA also operates and maintains four independent diesel generation facilities (Kodiak Generating Station, Nyman Power Plant, Swampy Acres Plant and Port Lions) which are a mixture of diesel reciprocating engines and a diesel -fired combined cycle generation unit. KEA brought 4.5 MW of wind on line in July of 2009 with the completion of the Pillar Mountain Wind Project. The table below details KEA's generation resources. The capacity numbers listed are high -end nominal values for the machines. This is a point where the machines can be operated on a high end for a period of time, but does not reflect total potential due to the detrimental effects of full load operations on diesel engines. Note that the efficiencies are for the load points mentioned at ideal conditions. KEA carries a large amount of generation capacity as an emergency precaution to operate the isolated system in case the two turbines at Terror Lake are unavailable. The additional capacity provided by the Pillar Mountain Wind and the third turbine at Terror Lake are both generation projects designed to mitigate the use of diesel generation. AEA10-015 Grant Application Page 11 of 26 10/7/2009 rW�ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 12.2 kWh/gal Energy Generation Unit DeLaval DSRS-12-3 installationKEA Date 1976 CapacityEfficiency 1.80 MW 15.6 kWh/gal Caterpillar 3616 2005 5.00 MW 15.6 kWh/gal Caterpillar 3616 2005 5.00 MW 14.4 kWh/ga I De Lava I DSRS-16-4 1980 5.80 MW Kodiak Generating Station Total 17.60 MW 13.8 kWh/gal De Laval DS R-48 1978 2.50 MW 14.2 kWh/gal Solar Taurus 60-T7301S, SoLoNOx 1999 6.50 MW Nyman Power Plant Total 9.00 MW 10.5 kWh/gal Fairbanks Morse 38TD-8 1/8 1968 1.50 MW 10.5 kWh/gal Fairbanks Morse 38TD-8 1/8 1968 1.50 MW 13.2 kWh/gal Caterpillar 3516B 2002 1.80 MW 13.2 kWh/gal Caterpillar 3516B 2002 1.80 MW Swampy Acres Plant Total 6.60 MW Fuji VT1R6N Turbine with Mitsubishi Generator 1984 10.0 MW Fuji VT1R6N Turbine with Mitsubishi Generator 1984 10.0 MW Terror Lake Hydroelectric Facility Total 20.00 MW GE 1.5sle Wind Turbine 2009 1.5 MW GE 1.5sle Wind Turbine 2009 1.5 MW GE 1.5sle Wind Turbine 2009 1.5 MW Pillar Mountain Wind Total 4.5 MW 11.3 kWh/gal Waukesha 28950 1968 0.24 MW 11.5 kWh/gal Waukesha 28950 1979 0.24 MW 11.5 kWh/gal Caterpillar 3406 1970 0.14 MW 11.5 kWh/gal Caterpillar 343 1970 0.14 MW Port Lions Total .75 MW KEA Generating Capacity Total 58.45 MW AEA10-015 Grant Application Page 12 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 KEA has over 32 miles of transmission lines and 337 miles of distribution lines. KEA has six substation facilities as itemized below: SubstationKEA Substation- Terror Lake Substation . Voltage 11.25 MVA 13.8 kV/138 kV 11.25 MVA 13.8 kV/138 kV 750 KVA 13.8 kV/12.47 kV Airport Substation 10 MVA 138 kV/12.47 kV Swampy Acres 20 MVA 138 kV/67 kV/12.47 kV 7.5 MVA 67 kV/12.47 winding 7.5 MVA 4.16 kV/67 kV Hartman Substation 10 MVA 4.16 kV/12.47 kV/67 kV 10 MVA 4.16 kV/12.47 kV/67 kV High Substation 10 MVA 67 kV/2.4 kV/12.47 kV Nyman Substation 10 MVA 67 kV/12.47 kV/13.8 kV 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. The existing energy resources for KEA are itemized in Section 4.2.1 Basic configuration of Existing Energy System. The Terror lake Hydroelectric Facility is limited by the amount of water available. Historically, the facility provides our community with a high average of 117 million kilowatt-hours (kWh) annually. Extreme rain and/or high snow runoff can increase the total generation capabilities. The third turbine at Terror Lake will increase capacity, but will not generate additional hydro kWh. This project is the cornerstone for additional renewable energy solutions, and to meet full potential it must work in tangent with other variable renewable energy resources. The enhanced stability to KEA's grid resulting from this additional hydro capacity also forestalls distribution infrastructure costs, and allows for future integration of additional renewable sources of energy (i.e., Phase II of Pillar Mountain Wind Project, potential tidal or wave). The two turbines at Terror Lake alone cannot tolerate more than approximately 3 MW of instability on the grid without tripping. This imposes a 3 MW limit on the system's distribution feeders. Taking future projections of load growth into account, there will be five feeders on the KEA system that will likely become loaded over this 3 MW limit. Without a third turbine at Terror Lake, the overloading problem on these feeders will need to be resolved by building a new 10 MVA substation and reconfiguring the distribution system through a series of switches that move the loads to different feeders. Expanding Terror Lakes capacity by 50% with the third turbine generator will raise the limit on the system distribution feeders to 4.5 MW. A third turbine would therefore postpone the impact of load growth on the distribution system by allowing more capacity on the distribution lines. This would save KEA $7.55 million in substation construction costs. (Refer to Exhibit J Excerpt from Long Range Plan for additional information.) AEA10-015 Grant Application Page 13 of 26 10/7/2009 r&�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The community of Kodiak utilizes approximately 138 million kWh of electric energy annually. The membership base consists of 4,670 residential services that consume approximately 7,072 kWh each per year. KEA historically experiences a small annual growth in the number of residential services. The residential services also continue to show a slight increase in usage each year. The total annual energy usage of the large power consumers, and subsequently the energy usage of the entire system as a whole, is largely dependent on the fishing industry, which can be volatile. Seafood -processing accounts for approximately 20% of KEA's electric consumption annually. KEA completed a 10-year load forecast in January of 2009 (attached as Exhibit H). This forecast predicts a continual increase in peak loads (i.e., capacity) and total sales (i.e., energy). The continual growth of the Kodiak community will put pressure on KEA's existing capacity to cover peak loads. This growth will result in increased price and environmental pressure if diesel fuel continues to be utilized to keep up with total sales. Mitigating the use of highly unpredictable diesel fuel cost in our energy generating portfolio stabilizes KEA's cost of power, thereby allowing customers to plan and budget their power costs. Diesel cost volatility from month to month makes it difficult for the Kodiak business community to plan future development or predict cost of future operations. Expanding Terror Lake's hydroelectric capacity would bring KEA much closer to its renewable energy vision and stabilize the cost of power for the Kodiak community. 4.3 Proposed System Include information necessary to describe the system you are intending to develop and address potential system design, land ownership, permits, and environmental issues. 4.3.1 System Design Provide the following information for the proposed renewable energy system: • A description of renewable energy technology specific to project location • Optimum installed capacity • Anticipated capacity factor • Anticipated annual generation • Anticipated barriers • Basic integration concept • Delivery methods The Terror Lake powerhouse currently contains two turbine generator units with space and provisions available for the installation of a third unit. The -power will be delivered via an existing 138 kV transmission line that runs from the hydro facility to the Airport Substation and is then distributed to the KEA membership. The third turbine will provide increased capacity, which can be visualized as water flowing though the facility through a wider drinking straw; the same amount of water will be utilized, but the release method is now modified and much quicker. Year-round wind generation will help maintain high water levels in the lake to increase the hydro facility's efficiency and make KEA's overall operations more stable and efficient. An expanded hydroelectric facility would be able to provide ample backup capacity to the Pillar Mountain Wind without the use of diesel generation. A third turbine generator would provide an AEA10-015 Grant Application Page 14 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 optimum installed capacity of 10 MW, with an anticipated capacity factor of 42%. KEA is currently in the process of conducting a third unit optimization analysis to address the hydraulic dynamic issues of the facility to identify any potential limits on the full extent of this design. 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. KEA is the sole owner of the Terror Lake facility and no potential land ownership issues are anticipated. Installation of a third turbine at the facility will not require any additional land. The established project boundaries for the Terror Lake facility will not be changed. 4.3.3 Permits Provide the following information as it may relate to permitting and how you intend to address outstanding permit issues. • List of applicable permits • Anticipated permitting timeline • Identify and discussion of potential barriers The licenses and permits that were transferred to KEA upon the purchase of the Terror Lake facility from the Four Dam Pool Power Agency (FDPPA) include FERC Permit Number 2743, Army Corps of Engineers Nationwide Permits, Alaska Department of Fish and Game Habitat Permits, and Federal Communications Commission (FCC) Licenses. Refer to Exhibit G for the FERC License and an inventory of all of the licenses and permits associated with the Terror Lake facility that were transferred to KEA in February 2009. Installing a third turbine -generator to the facility will require a capacity amendment to the FERC license. Given the location of Terror Lake within the Kodiak National Wildlife Refuge, KEA expects significant interest from the public regarding the project's impact on wildlife, particularly salmon and brown bear habitat. The application process for a FERC capacity amendment will involve consultation with all interested parties, including the public, and local, state, and federal agencies. According to the regulatory review conducted by HAC, there are no major concerns or issues regarding the FERC capacity amendment process. KEA will ensure that all of the necessary permits are acquired before any of the field work in the area is conducted. Refer to Exhibit E for detailed information on the FERC license amendment procedure. 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will be addressed: • Threatened or Endangered species • Habitat issues • Wetlands and other protected areas • Archaeological and historical resources • Land development constraints • Telecommunications interference • Aviation considerations • Visual, aesthetics impacts • Identify and discuss other potential barriers AEA10-015 Grant Application Page 15 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 Installing a third turbine generator to the facility will require a capacity amendment to the FERC permit. The application for a FERC capacity amendment will include a National Environmental Policy Act (NEPA) Environmental Assessment, and an Alaska Coastal Management Program (ACMP) Consistency Determination. Through these extensive evaluations in consultation with State and Federal agencies, the impact of the project on environmental and land use issues will be identified and mitigated. The location of Terror Lake within the Kodiak National Wildlife Refuge incurs significant interest from the public regarding multiple uses of the land and impact on wildlife. In consideration of this public interest, KEA has been a dedicated steward to the land in and surrounding the Terror Lake Hydroelectric Facility. KEA has been responsible for the operations and maintenance at the facility for the past 25 years, and our stewardship has been demonstrated on many occasions; for example, through the funding of the Kodiak Brown Bear Trust, and development of a water release program that supports the salmon spawning habitat in the Terror River. According to the regulatory review conducted by HAC, the application for a capacity amendment is not anticipated to result in any major requests by resource agencies for new environmental field studies. It is expected that the agencies will be interested in reviewing KEA's analysis regarding additional flow from the powerhouse during periods when all three units would be in operation and effect on the Terror Lake reservoir during such periods. 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 AEA10-015 Grant Application Page 16 of 26 . 10/7/2009 ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 The following table provides detailed information and cost estimates for the complete Terror Lake Unit 3 Hydroelectric Project. This cost estimate was provided by Devine Tarbell and Associates, included in this loan application as Exhibit F. KEA has received a $500,000 matching funds grant allocation from the AEA Renewable Energy Fund Round II for the FERC Licensing Amendment. This grant application is requesting matching funding for the Construction Phase of this project. The remaining "Construction Phase" of the project is estimated at $14,907,950. KEA is requesting grant funds in the amount of $7,500,000 for this phase of the project. KEA's matching funds for the construction phase are estimated at $7,407,950, this capital contribution may be funded through a new Clean Renewable Energy Bonds (CREBs) through Co -Bank. Terror Lake Unit 3 Hydroelectric Project Amount FERC LICENSING AMENDMENT Engineering and Regulatory Assessment $ 70,000 Third Unit Optimization $ 60,000 Agency Consultations and Public Scoping Meetings $ 250,000 Finalize Project Plan $ 80,000 Conduct Project Studies $ 420,000 FERC License Amendment Application $ 120,000 FERC Licensing Amendment Sub -Total $ 1,000,000 CONSTUCTION PHASE Power Plant Structures and Improvements $ 1,937,061 Reservoirs, Dams and Waterways $ 22,617 Reservoirs, Dams & Waterways Sub -Total $ 1,959,678 Turbines, Governors & Auxiliary $ 2,992,500 Generators, Auxiliary and Excitation $ 2,247,000 Turbine and Generator Testing $ 105,000 Water Wheels, Turbines & Generators Sub -Total $ 5,344,500 Connections, Supports and Structures $ 282,000 Switchgear and Control Equipment $ 514,500 Accessory Electrical Equipment Sub -Total $ 796,500 Miscellaneous Power Plant Equipment $ 262,500 Substation and Switching Station Structures and Improvements $ 1,720,000 KEA Personnel Labor and Overhead $ 2,750,000 Misc Power Plant Equipment - Substation/Switching Sub -Total $ 4,732,500 Terror Lake Unit 3 Project Sub -Total $ 13,833,178 15% Contingency $ 2,074,772 Total Terror Lake Unit 3 $ 15,907,950 AEA10-015 Grant Application Page 17 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 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.) KEA has been responsible for all the operation and maintenance at the Terror Lake facility since the inception of the project in 1984. KEA utilizes- specific accounts to monitor the operation and maintenance expenses per turbine. Historically, the average cost for the operation and maintenance per unit has been $43,012.89 annually. (No capital improvements are included in this number.) KEA does not anticipate any additional operational costs will be experienced at the hydro plant when unit #3 is installed. It is further anticipated that no additional personnel will be necessary to operate a third unit at the existing facility. KEA is not requesting any grant funds for the operation and maintenance costs associated to the Terror Lake Unit 3 Hydroelectric Project. 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following: • Identification of potential power buyers)/customer(s) • Potential power purchase/sales price - at a minimum indicate a price range • Proposed rate of return from grant -funded project KEA is the only electric utility in Kodiak and there will be no power purchase agreements. KEA is a generation, transmission and distribution not -for -profit rural electric cooperative. The power generated from the third hydroelectric turbine will go straight into the KEA grid. The project savings will also go straight to the members of the cooperative. The community will experience a lower cost of power from decreased diesel fuel consumption. The rate of return on this project is not an appropriate gauge for the overall benefit to the membership. 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. The completed Project Cost Worksheet form is found at the end of this grant application on pages 27- 33. AEA10-015 Grant Application Page 18 of 26 10/7/2009 ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 SECTION 5— PROJECT BENEFIT Explain the economic and public benefits of your project. Include direct cost savings, and how the people of Alaska will benefit from the project. The benefits information should include the following: • Potential annual fuel displacement (gal and $) over the lifetime of the evaluated renewable energy project • Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price, RCA tariff, or cost based rate) • Potential additional annual incentives (i.e. tax credits) • Potential additional annual revenue streams (i.e. green tag sales or other renewable energy subsidies or programs that might be available) • Discuss the non -economic public benefits to Alaskans over the lifetime of the project The major economic benefit of this project is the saving from fuel costs and emissions. As renewable solutions are developed and Terror Lake is expanded with a third unit to provide additional capacity and stability, more benefits will be realized by the Kodiak community. When all of the benefits from this project are realized, the total amount of diesel fuel displaced equals 827,076 gallons annually. Of this amount, 396,666 gallons of diesel is utilized annually for increased capacity situations, and an additional 430,410 gallons of diesel are utilized when the Terror Lake units go offline for quarterly maintenance requirements. At a price of $2.50 per gallon times 827,076 gallons, the total cost of fuel savings provided by the project equals $2,067,690 annually. The life of this project is estimated to be 50 years; therefore the total economic benefit is $2,067,690 times 50 years, which equals $103,384,500. This estimate does not inflate the cost of fuel. The volatility of fuel costs makes this project even more beneficial. Less than one year ago, KEA's cost of fuel exceeded $3.50 per gallon. The following economic analysis takes the complete cost of the project ($15,,907,,950),, less a total of $8,,000,,000 in grants at a 1% interest rate for 16 years (CREB repayment schedule), calculates the cost of debt and depreciation at 50 years and then provides a total annual cost for installing a third unit at the Terror Lake facility for comparison to generating with diesel fuel. Economic Analysis - Terror Lake Unit 3 Hydroelectric Project Principle $ 7,907,950 Grants Depreciation Interest 1.000% $ 8,0001000 7,907,950 Periods 16 50 Pmt $537,302.47 1% CREB Financing of $7.9M Total 50 Year Total Margin Year Depreciation Impact Principle Interest Cash 2012 $458,222.97 $79,079.50 $537,302.47 + $316,318.00 = $853,620.47 2013 $462,805.20 $74,497.27 $537,302.47 + $316,318.00 = $853,620.47 2014 $467,433.26 $69,869.22 $537,302.47 + $316,318.00 = $853,620.47 2015 $472,107.59 $65,194.89 $537,302.47 + $316,318.00 = $853,620.47 2016 $476,828.66 $60,473.81 $537,302.47 + $316,318.00 = $853,620.47 2017 $481,596.95 $55,705.52 $537,302.47 + $316,318.00 = $853,620.47 2018 $486,412.92 $50,889.55 $537,302.47 + $316,318.00 = $853,620.47 2019 $491,277.05 $46,025.42 $537,302.47 + $316,318.00 = $853,620.47 2020 $496,189.82 $41,112.65 $537,302.47 + $316,318.00 = $853,620.47 2021 $501,151.72 $36,150.76 $537,302.47 + $316,318.00 = $853,620.47 2022 $506,163.24 $31,139.24 $537,302.47 + $316,318.00 = $853,620.47 AEA10-015 Grant Application Page 19 of 26 10/7/2009 rW�ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 2023 $511,224.87 $26,077.61 $537,302.47 + $316,318.00 = $853,620.47 2024 $516,337.12 $20,965.36 $537,302.47 + $316,318.00 = $853,620.47 2025 $521,500.49 $15,801.99 $537,302.47 + $316,318.00 = $853,620.47 2026 $526,715.49 $10,586.98 $537,302.47 + $316,318.00 = $853,620.47 2027 $531,982.65 $5,319.83 $537,302.47 + $316318.00 = $853,620.47 2028 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2029 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2030 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2031 $0.00 $0.00 $0.00 + $316318.00 = $316,318.00 2032 $0.00 $0.00 $0.00 + $316318.00 = $316,318.00 2033 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2034 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2035 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2036 $0.00 $0.00 $0.00 + $316318.00 = $316,318.00 2037 $0.00 $0.00 $0.00 + $316318.00 = $316,318.00 2038 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2039 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2040 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2041 $0.00 $0.00 $0.00 + $316,318.00 $316,318.00 2042 $0.00 $0.00 $0.00 + $316318.00 $316,318.00 2043 $0.00 $0.00 $0.00 + $316,318.00 0 $316,318.00 2044 $0.00 $0.00 $0.00 + $316318.00 $316,318.00 2045 $0.00 $0.00 $0.00 + $316318.00 0 $316,318.00 2046 $0.00 $0.00 $0.00 + $316318.00 $316,318.00 2047 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2048 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2049 $0.00 $0.00 $0.00 + $316318.00 = $316,318.00 2050 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2051 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2052 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2053 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2054 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2055 $0.00 $0.00 $0.00 + $316318.00 m $316,318.00 2056 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2057 $0.00 $0.00 $0.00 + $316318.00 = $316,318.00 2058 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2059 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2060 $0.00 $0.00 $0.00 + $316,318.00 = $316,318.00 2061 1 $0.00 $0.00 1 $0.00 1 + $316,318.00 = $316,318.00 Year Unit #3 Capital Cost Operational Cost Cash Total Total Unit #3 Cost Total Diesel Cost Unit #3 versus Diesel Total Cost Savings 1 $0.069 $0.003 $0.047 $0.072 $0.170 -$0.098 -$1,214,071.192 2 $0.069 $0.004 $0.047 $0.072 $0.179 -$0.106 -$1,3171455.776 3 $0.069 $0.004 $0.047 $0.073 $0.188 -$0.115 -$11426,009.588 4 $0.069 $0.004 $0.047 $0.073 $0.197 -$0.124 -$11539,991.091 5 $0.069 $0.004 $0.048 $0.073 $0.207 -$0.134 -$1,659,671.669 6 $0.069 $0.004 $0.048 $0.073 $0.217 -$0.144 -$1,785,336.277 7 $0.069 $0.005 $0.048 $0.073 $0.228 -$0.155 -$1,.917,284.114 8 $0.069 $0.005 $0.048 $0.074 $0.239 -$0.166 -$2,055,829.344 9 $0.069 $0.005 $0.048 $0.074 $0.251 -$0.177 -$2,201,301.835 AEA10-015 Grant Application Page 20 of 26 10/7/2009 rW�ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 10 $0.069 $0.005 $0.049 $0.074 $0.264 -$0.190 -$2,354,047.950 11 $0.069 $0.006 $0.049 $0.074 $0.277 -$0.203 -$2,514,431.371 12 $0.069 $0.006 $0.049 $0.075 $0.291 -$0.216 -$2,682,833.964 13 $0.069 $0.006 $0.050 $0.075 $0.306 -$0.231 -$2,859,656.685 14 $0.069 $0.007 $0.050 $0.075 $0.321 -$0.245 -$3,045,320.543 15 $0.069 $0.007 $0.050 $0.076 $0.337 -$0.261 -$3,240,267.594 16 $0.069 $0.007 $0.051 $0.076 $0.354 -$0.278 -$3,444,961.998 17 $0.025 $0.008 $0.008 $0.033 $0.371 -$0.338 -$4,197,193.596 18 $0.025 $0.008 $0.008 $0.033 $0.390 -$0.357 -$4,422,869.176 19 $0.025 $0.008 $0.008 $0.034 $0.409 -$0.376 -$4,659,828.534 20 $0.025 $0.009 $0.009 $0.034 $0.430 -$0.396 -$4,908,635.861 21 $0.025 $0.009 $0.009 $0.035 $0.451 -$0.417 -$5,169,883.554 22 $0.025 $0.010 $0.010 $0.035 $0.474 -$0.439 -$5,444,193.632 23 $0.025 $0.010 $0.010 $0.036 $0.498 -$0.462 -$5,732,219.213 24 $0.025 $0.010 $0.010 $0.036 $0.498 -$0.462 -$5,732,219.213 25 $0.025 $0.011 $0.011 $0.036 $0.523 -$0.486 -$6,034,646.074 26 $0.025 $0.011 $0.011 $0.036 $0.523 -$0.486 -$6,034,646.074 27 $0.025 $0.011 $0.011 $0.037 $0.549 -$0.512 -$6,352,194.278 28 $0.025 $0.011 $0.011 $0.037 $0.549 -$0.512 -$6,352,194.278 29 $0.025 $0.012 $0.012 $0.037 $0.576 -$0.539 -$6,685,619.892 30 $0.025 $0.012 $0.012 $0.037 $0.576 -$0.539 -$6,685,619.892 31 $0.025 $0.012 $0.012 $0.038 $0.605 -$0.567 -$7,035,716.786 32 $0.025 $0.012 $0.012 $0.038 $0.605 -$0.567 -$7,035,716.786 33 $0.025 $0.013 $0.013 $0.038 $0.635 -$0.597 -$7,403,318.526 34 $0.025 $0.013 $0.013 $0.038 $0.635 -$0.597 -$7,4031318.526 35 $0.025 $0.014 $0.014 $0.039 $0.667 -$0.628 -$7,789,300.352 36 $0.025 $0.014 $0.014 $0.039 $0.667 -$0.628 -$7,789,300.352 37 $0.025 $0.014 $0.014 $0.040 $0.700 -$0.661 -$8,194,581.269 38 $0.025 $0.014 $0.014 $0.040 $0.700 -$0.661 -$8,194,581.269 39 $0.025 $0.015 $0.015 $0.040 $0.735 -$0.695 -$8,620,126.233 40 $0.025 $0.015 $0.015 $0.040 $0.735 -$0.695 -$8,620,126.233 41 $0.025 $0.016 $0.016 $0.041 $0.772 -$0.731 -$9,066,948.445 42 $0.025 $0.016 $0.016 $0.041 $0.772 -$0.731 -$9,066,948.445 43 $0.025 $0.017 $0.017 $0.042 $0.811 -$0.769 -$9,536,111.767 44 $0.025 $0.017 $0.017 $0.042 $0.811 -$0.769 -$9,536,111.767 45 $0.025 $0.017 $0.017 $0.043 $0.851 -$0.808 -$10,028,733.255 46 $0.025 $0.017 $0.017 $0.043 $0.851 -$0.808 -$101028,733.255 47 $0.025 $0.018 $0.018 $0.044 $0.894 -$0.850 -$101545,985.818 48 $0.025 $0.018 $0.018 $0.044 $0.894 -$0.850 -$10,545,985.818 49 $0.025 $0.019 $0.019 $0.045 $0.938 -$0.894 -$11,089,101.009 50 1 $0.025 1 $0.011 1 $0.011 1 $0.036 1 $0.523 -$0.486 -$6,034,646.074 Average: $0.0498 Total-$287,235,826.241 NPV ($71,244,497.60) Additional operation and maintenance (O&M) costs of $43,019.89 have been added to these fixed costs and 5% inflation was applied to the O&M costs annually. On an annual basis, diesel generation is dispatched 1,700 hours per year to cover system capacity needs. The Kodiak Generating Station diesel equipment is generally dispatched for quick response to capacity issues. The most efficient method to operate the diesel fired units is at 3.5 MW. %500 kW of generation for 1,700 hours equals 5,950,000 kWh per year. At efficiency rate of 15 kWh per gallon, that equals 396,666 gallons of diesel consumed annually for capacity issues only. AEA10-015 Grant Application Page 21 of 26 10/7/2009 .:� ALAS KA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 Also, to continue the quarterly and annual maintenance schedules required on the two Terror Lake turbines, 430,410 gallons of diesel fuel is consumed annually to compensate for taking these units offline for the necessary maintenance. 430,410 gallons of diesel fuel, at an efficiency rate of 15 kWh per gallon, equates to 6,456,150 kWh annually. Considering capacity and maintenance issues, the total annual kWh equals 12,406,150. The economic analysis utilizes this annual kWh wherein the cost of debt and O&M on the third unit is compared to fuel costs. The cost of fuel consumed utilized in this analysis is $2.50 per gallon which at an efficiency rate of 15 kWh per gallon equates to 0.16 cents per kWh. Fuel costs have been inflated at 5%, as have O&M costs. NPV Summary -Terror Lake Unit#3 Terror Lake Unit #3 $ 15,9071950 Capacity Factor 10 Availability Factor 0.96 Annual Generation - kWh 121406,150 O&M Base Costs $/kWh $ 0.00347 Interest Rate on Debt 1% Life of Project 50 Grants Received $ 8,000,000 Inflation Rate 5.0% Additional O&M Costs (Third Unit) $ 43,013 Base Fuel Cost $/gal $ 2.50 Base Year Differential Cost $/kWh $ (0.123) Base Year Savings $ 11214,071 Net Present Value $ 71,244,498 Today's Value - Distribution Plant $7.55 M Construction Delayed 10 years $ 2,915,055 Total Project Savings $74,159,553 The savings to our community resulting from this Terror Lake enhancement are enormous. It is estimated that over the 50 year life of this project the net present value (NPV) as compared to diesel power alone will be $71,244,498. An additional benefit of $2,915,055 has been added to this project benefit based on the advantage realized by postponing the need for an additional substation and distribution system upgrades necessary to provide for KEA's continued system growth. The full cost of the substation and distribution system upgrades are $7,550,000. This value has been discounted (5%) based on the present value to KEA for not having to expend these funds for another 10 years. It is anticipated in the future, this additional substation will still be needed to compensate for the continued growth within our community. KEA is not a taxable entity and will not be provided any tax credit incentives for this project. There are no additional revenue streams generated from this project. The KEA membership is the sole beneficiary of this project. The benefit is in the rate schedules. The current rate design allocates the full cost of diesel generation to the membership in a cost of power adjustment (COPA). There are also many non -economic benefits provided through this project. The Terror Lake Unit 3 Hydroelectric Project allows for further integration of wind and water, and possibly other types of renewable energy on KEA's isolated grid system. Integration challenges are a major issue faced by many other utilities within our State. Lessons learned on this project will benefit other electric utilities as additional renewable resources are designed and integrated into existing hydro facilities. As an AEA10-015 Grant Application Page 22 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 energy storage application, this project is a major asset to KEA's research and development into energy storage issues. Based on lessons learned throughout this project, KEA will be able to provide valuable assistance to other utilities exploring similar energy storage applications. This project will also provide Kodiak's fish processing industry with a lower cost of power through renewable energy resources, which will help entice additional fish processing within the State and/or help retain the current processors operating in Kodiak. The project also helps to reduce air pollution from diesel generation, which is a major benefit to Kodiak, Alaska and our nation. 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 KEA is a not -for -profit rural electric cooperative. This project will not change KEA's current business structure. As previously stated, KEA has been operating this facility for the past 25 years. It is anticipated that operational and maintenance costs at the Terror Lake project will not increase when an additional turbine is installed. No additional support is required to continue operating this facility. This project is an expansion to an already successful operating facility. Operational issues such as lake level water management will be explored in the Third Unit Optimization analysis, which is scheduled for completion in January 2010. The project will be sustainable on a continual basis for the following reasons: • The Terror Lake Hydroelectric Facility is the cornerstone in developing future sustainable renewable energy for the long term benefit of the Kodiak community. • KEA has been responsible for the operations and maintenance at the Terror Lake Hydroelectric Facility for the past 25 years. The third turbine will not substantially change the operations or maintenance of this facility. • The Terror Lake Facility was initially designed and engineered for three 10 MW turbines and the foundation is built for the installation of the third turbine. The photographs of the facility in Exhibit C show the available space and infrastructure for the third turbine generator. • The evaluation of installing a third unit was initially performed in 1983 for the Alaska Power Authority (APA) now Alaska Energy Authority (AEA) and the study indicated that the Terror Lake facility should have a third turbine when KEA's system load warranted the installation. (This study is included in Exhibit D.) • The third turbine at Terror Lake will allow for a 50% increase in capacity and will cover KEA's peak loads for years to come. • A third unit at Terror Lake will provide continuous production. The redundancy in generating capacity would reduce the need to run diesel generation for scheduled maintenance on the turbines. AEA10-015 Grant Application Page 23 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 KEA will provide reports to the AEA on the savings and benefits realized from this project as required in the grant agreement. 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. KEA has been allocated $500,000 in matching funds from AEA - Renewable Energy Funds Round II (Application #215) for the feasibility analysis and FERC licensing process for the Terror Lake Unit 3 Hydroelectric Project. The grant agreement has not yet been issued. Since the submission of KEA Application #215 KEA has revised the milestone dates. Based on the revised dates provided to AEA in August 2009 the project is on schedule, and it is anticipated that it will remain on schedule for the remaining milestones associated with this grant application. The first step of this project, as explained in the Round II application, was to evaluate the viability of installing the third turbine generator by reviewing the regulatory and engineering requirements of the project. The purpose of the regulatory review was to identify any risks associated with opening up the FERC license, including the environmental terms .and conditions of the license. The purpose of the engineering review was to determine whether there are any major modifications to the existing facility that may be required to install the third unit, such as the tailrace's adequacy for accommodating a flow of water associated with 30 MW of hydroelectric capacity. As of the date of this application submittal, KEA has expended approximately $17,500 working with Hatch Acres to complete this Regulatory and Engineering Assessment. The final report is attached as Exhibit E. The Hatch Acres report concluded that the installation of the third unit will be accomplished within the exiting licensed facility boundary and that there were no activities identified that would result in negative environmental impact. The regulatory review found no major issues regarding the FERC amendment process and related permitting approvals associated with installation of the third unit. Further, the engineering review found no substantive reason that the Unit 3 addition would not be feasible with respect to electrical, protection, control, communications, and instrumentation. Based upon this favorable assessment, KEA intends to proceed with the project in accordance with the Round II milestone schedule. Upon approval of this Round III application, KEA would be ready to begin construction in January 2012. The starting date of construction is based upon the estimated amount of time FERC would require to issue the license capacity amendment after receiving KEA's completed amendment application. SECTION 8— LOCAL SUPORT Discuss what local support or possible opposition there may be regarding your project. Include letters of support from the community that would benefit from this project. The support provided by the local community of Kodiak and the statewide community of Alaska has been a major component to KEA's success with renewable energy solutions. The strong community support on the Terror Lake purchase as well as the Pillar Mountain Wind Project indicates both Kodiak AEA10-015 Grant Application Page 24 of 26 10/7/2009 ALAS KA Renewable Energy Fund ENERGY AUTHORITY Grant Application Round 3 and Alaska's commitment to move toward self-reliance obtained by reducing dependence on fossil fuels. As the enormous support of renewable energy within the community continues to grow, a renewed sense of pride has emerged for Kodiak's progress in sustainable living. KEA recently hosted the Alaska State Governor, Alaskan Senate Resource Committee, the U.S. Federal Energy Regulatory Commission and the U.S. Rural Utility Service with tours of KEA. KEA's efforts with wind and water have also drawn the attention of media outlets that traveled to Kodiak to learn how even a small rural electric cooperative like KEA could make a huge difference in our nation's efforts to develop its renewable energy resources. Letters and Resolutions from the Kodiak Island Borough, City of Kodiak, US Coast Guard Base, and Kodiak Chamber of Commerce expressing support for this project are included in Exhibit A. Below is a photograph demonstrating the resounding support of renewable energy development by the Kodiak community. This photograph was taken at a recent Sustainable Kodiak community gathering in observance of the International Day of Climate Change. 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 As itemized in section 4.4.1 Project Development Costs, the full cost of this project is anticipated to be $15,907,950. This grant application is requesting 50-50% matching funds for the Construction Phase costs ($14,907,950) in the amount of $7,500,000. A cost breakdown in the GrantBudget.xls form is included on page 34 of the application, and a detailed explanation of the seven project milestones is found in Section 3.3 Project Milestones. AEA10-015 Grant Application Page 25 of 26 10/7/2009 rW�ALASKA ENERGY AUTHORITY Renewable Energy Fund Grant Application Round 3 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 Darro Ott Signatures Title President/CEO Date November 5, 2009 AEA10-015 Grant Application Page 26 of 26 10/7/2009 rW�ALASKA Renewable Energy Fund Round 3 ENERGY AUTHORITY project Cost/Benefit Worksheet 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 The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. The Terror Lake Unit 3 Hydroelectric Project is to install a. 10 megawatt (MW) turbine at the current Terror Lake Facility. This project will increase the capacity at Terror Lake from 20 MW to 30 MW. The third turbine was not installed during the initial project construction because system loads at that time did not indicate a need for 30 MW of capacity. The project will be sustainable on a continual basis for the following reasons: • The Terror Lake Hydroelectric Facility is the cornerstone in developing future sustainable renewable energy for the long term benefit of the Kodiak community. • Kodiak Electric Association, Inc. (KEA) has been responsible for the operations and maintenance at the Terror Lake Hydroelectric Facility for the past 25 years. The third turbine will not substantially change the operations or maintenance of this facility. • The Terror Lake Facility was initially designed and engineered for three 10 MW turbines and the foundation is built for the installation of the third turbine. The photographs of the facility found on the cover and in Exhibit C show the available space and infrastructure for the third turbine generator. • The evaluation of installing a third unit was initially performed in 1983 for the Alaska Power Authority (APA) now Alaska Energy Authority (AEA) and the study indicated that the Terror Lake facility should have a third turbine when KEA's system load warranted the installation. (This study is included in Exhibit D.) • The third turbine at Terror Lake will allow for a 50% increase in capacity and will cover KEA's peak loads for years to come. • A third unit at Terror Lake will provide continuous production. The redundancy in generating capacity would reduce the need to run diesel generation for scheduled maintenance on the turbines. • The enhanced stability to KEA's grid resulting from this additional hydro capacity also forestalls substation and distribution infrastructure costs, and allows for additional renewable sources of energy (i.e., Phase II of Pillar Mountain Wind Project, potential tidal or wave) to be integrated onto the KEA system in the future. The integration of wind and hydro power is a great solution for the KEA membership. The Terror Lake Unit 3 Hydroelectric Project will allow KEA to maximize renewable energy solutions. This project will increase the system stability so that KEA can continue to move forward in its vision to produce 95% of its energy sales with cost effective renewable power solutions by the year 2020. Annual average resource availability. 96% Unit depends on project type (e.g. windspeed, hydropower output, biomass fuel) RFA AEA10-015 Application Cost Worksheet Page 27 10-7-09 rW�ALASKA Renewable Energy Fund Round 3 ENERGY AUTHORITY project Cost/Benefit Worksheet 2. Existing Energy Generation and Usage The following table itemizes KEA's generation mix. The units have a mixture of age, some being very new while others are very old. The system is centered on supporting Terror Lake as the primary generation source. There is a large amount of backup in case the hydro facility is unavailable. Diesel reciprocating engines also cover peak loads and provide storm system protection. A combined cycle plant is also used for longer periods of generation for lake level augmentation. KEA operates an isolated electrical grid system and is not connected to any other gird or utility. The main power source comes from the two hydroelectric turbine generators at Terror Lake. Terror Lake controls KEA's system frequency. KEA also operates and maintains four independent diesel generation facilities (Kodiak Generating Station, Nyman Power Plant, Swampy Acres Plant and Port Lions) which are a mixture of diesel reciprocating engines and diesel -fired combined cycle generation units. KEA's Pillar Mountain Wind project consists of three GE 1.5 MW SLE (Super Large Extreme) wind turbines. This project was completed in September 2009. The wind turbines work in concert with the Terror Lake Hydro facility. Wind power is intermittent power. The Terror Lake Hydro facility acts as a large battery for the wind power. Unlike wind, hydro power is predictable and can be stored. The table below details KEA's generation resources. The capacity numbers used are high end nominal for the machines. This is a point where the machines can be operated on a high end for a period of time, but does not reflect total potential due to the detrimental effects of full load operations on diesel engines. Note that the efficiencies are for the load points mentioned at ideal conditions RFA AEA10-015 Application Cost Worksheet Page 28 10-7-09 rW�ALASKA Renewable Energy Fund Round 3 ENERGY AUTHORITY project Cost/Benefit Worksheet Efficiency 12.2 kWh/gal 1Energy Generation Unit DeLaval DSRS-12-3 Installation Date 1976 Capacity 1.80 MW 15.6 kWh/gal Caterpillar 3616 2005 5.00 MW 15.6 kWh/gal Caterpillar 3616 2005 5.00 MW 14.4 kWh/gal DeLaval DSRS-16-4 1980 5.80 MW Kodiak Generating Station Total 17.60 MW 13.8 kWh/gal DeLaval DSR-48 1978 2.50 MW 14.2 kWh/gal Solar Taurus 60-T7301S, SoLoNOx 1999 6.50 MW Nyman Power Plant Total 9.00 MW 10.5 kWh/gal Fairbanks Morse 38TD-81/8 1968 1.50 MW 10.5 kWh/gal Fairbanks Morse 38TD-81/8 1968 1.50 MW 13.2 kWh/gal Caterpillar 3516B 2002 1.80 MW 13.2 kWh/gal Caterpillar 3516B 2002 1.80 MW Swampy Acres Plant Total 6.60 MW Fuji VT1R6N Turbine with Mitsubishi Generator 1984 10.0 MW Fuji VT1R6N Turbine with Mitsubishi Generator 1984 10.0 MW Terror Lake Hydroelectric Facility Total 20.00 MW GE 1.5s1e Wind Turbine 2009 1.5 MW GE 1.5s1e Wind Turbine 2009 1.5 MW GE 1.5s1e Wind Turbine 2009 1.5 MW Pillar Mountain Wind Total 4.5 MW 11.3 kWh/gal Waukesha 28950 1968 0.24 MW 11.5 kWh/gal Waukesha 28950 1979 0.24 MW 11.5 kWh/gal Caterpillar 3406 1970 0.14 MW 11.5 kWh/gal Caterpillar 343 1970 0.14 MW Port Lions Total .75 MW KEA Generating Capacity Total 58.45 MW a) Basic configuration (if system is part of the Railbelt' grid, leave this section blank) i. Number of generators/boilers/other 19 ii. Rated capacity of generators/boilers/other 58.45 MW (Detail per unit listed in above table.) 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. RFA AEA10-015 Application Cost Worksheet Page 29 10-7-09 rW�ALASKA Renewable Energy Fund Round 3 ENERGY AUTHORITY project Cost/Benefit Worksheet iii. Generator/boilers/other type (Detail per unit listed in above table.) iv. Age of generators/boilers/other (Detail per unit listed in above table.) v. Efficiency of generators/boilers/other (Detail above for peak efficiency.) b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank) i. Annual O&M cost for labor $2,286.808.42 (2008 actual) ii. Annual O&M cost for non -labor $2,281,516.73 (2008 actual, does not include fuel costs) 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] 141,050,529 kWh (2008 actual) ii. Fuel usage Diesel [gal] 1,632,054 gallons consumed (2008 actual) Other iii. Peak Load iv. Average Load v. Minimum Load vi. Efficiency vii. Future trends 24.4 MW 17 MW 11 MW 12.97 kWh/gal for Nyman Combined Cycle Plant in Operations PEAK SYSTEM DEMAND 27 26 25 24 = 23 22 -�-- WV 21 - PREDICTION 4i 20 a 19 18 17 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Years The above chart reflects KEA's historical peak system demand and the predicted peak system demand through Year 2015. This forecast indicates a continual increase in peak loads and total sales. This growth will put pressure on KEA's existing capacity to cover peak loads. It will also cause increased price and environmental pressure from the increased utilization of diesel fuel to keep up with total sales. d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] N/A RFA AEA10-015 Application Cost Worksheet Page 30 10-7-09 /� ALASHORITYKAENERGY AUT ii. Electricity [kWh] iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other Renewable Energy Fund Round 3 Project Cost/Benefit Worksheet N/A N/A N/A N/A N/A 3. Proposed System Design Capacity and Fuel Usage (Include any projections for continued use of non-renewable fuels) a) Proposed renewable capacity (Wind, Hydro, 10 nnW Biomass, other) [kWh or MMBtu/hr] b) Proposed Annual electricity or heat production (fill in as applicable) i. Electricity [kWh] 12,406,150 kWh annually ii. Heat [MMBtu] c) Proposed Annual fuel Usage (fill in as applicable) i. Propane [gal or MMBtu] ii. Coal [tons or MMBtu] iii. Wood [cords, green tons, dry tons] iv. Other 4. Project Cost a) Total capital cost of new system b) Development cost c) Annual O&M cost of new system d) Annual fuel cost 5. Project Benefits $15,907,950 Development costs have been included in the total capital costs above $43,012.89 a) Amount of fuel displaced for i. Electricity 827,076 gallons annually (Plant life = 50 years). Total diesel fuel displaced during life of the project is equal to 41,353,800 gallons. ii. Heat iii. Transportation b) Price of displaced 827,076 gallons x $2.50 per gallon = $2,067,690 (annually) fuel RFA AEA10-015 Application Cost Worksheet Page 31 10-7-09 rW�ALASKA Renewable Energy Fund Round 3 ENERGY AUTHORITY project Cost/Benefit Worksheet c Other economic Other economic benefits of this project include the stepping stone that ' r renewable ower benefits this project provides to KEA s entire network of futurep solutions to be provided to the Kodiak community. Future renewable solutions will continue to displace diesel fuel consumption. The more fuel displaced with renewable solutions provides a tremendous savings to the community versus the variability of diesel fuel. For example, in June 2008 the membership paid $4.0416 per gallon of diesel fuel consumed, while in June 2009 the price per gallon of diesel consumed was $1.8644. This was a 54% reduction in a 12 month period. Fuel cost volatility is a continual challenge. The economic benefits provided by the Terror Lake Unit 3 Hydroelectric Project will not be realized until future renewable solutions are implemented. On average, Terror Lake is limited to 117 million kWh annually. Extreme rain conditions and snowmelt can impact the reservoir; as KEA experienced in 2004 when the facility generated over 130 million kWh. What is the price of: • reduced diesel emission; • a diversified generation portfolio; • progression toward more renewable energy; • Research and development on integration and stability for variable renewable power solutions and water for the benefit of many communities within the State of Alaska? While there is not a specific dollar amount associated with these benefits, they significantly enhance the value of this project. d) Amount of Alaska Alaska Public Benefit includes 827,076 gallons of diesel fuel not utilized for public benefits power generation annually. To quantify this benefit to Alaska: 827,076 gallons * $2.50 = 2 067 690 annually. Total project savings are 827,076 gallons * 50 years * $2.50 per gallon = $103384500. KEA is continuing to solve stability issues with variable renewable power solutions which is an enormous benefit to the entire State of Alaska in "developing energy resources in a responsible manner to sustain Alaska's economy and provide for the growth of Alaska's communities and industries. "[State Energy Policy Goal #2] and "Reduce the dependence of Alaskan communities on fossil fuels for electricity and heat by developing our renewable alternative energy resources..." [State Energy Policy Goal #4] and "Maintain a commitment to environmental stewardship and responsible resource development, anticipating the environmental effects of and regulatory response to climate change. "[State Energy Policy Goal #6] RFA AEA10-015 Application Cost Worksheet Page 32 10-7-09 /ZIF) ALASKA Renewable Energy Fund Round 3 GME)ENERGY AUTHORITY project Cost/Benefit Worksheet 6. Power Purchase/Sales Price a) Price for power purchase/sale N/A 7. Project Analysis a) Basic Economic Analysis Project benefit/cost ratio 36.32 (Details in the Renewable Energy Fund Application in the Economic Analysis Section 5 — Project Benefit where the total cost savings is divided by the total capital cost). Payback Simple payable on this project is just over 9 years. (Detailed explanations on all the assumptions used in the model can be found in the Renewal Energy Fund Application in the Economic Analysis Section 5 — Project Benefit). The summary below assumes $8,000,000 in grant funds have been applied to this project. NPV Summary - Terror Lake Unit #3 Terror Lake Unit #3 $ 15,907,950 Capacity Factor 10 Availability Factor 0.96 Annual Generation - kWh 121406,150 O&M Base Costs $/kWh $ 0.00347 Interest Rate on Debt 1% Life of Project 50 Grants Received $ 80000,000 Inflation Rate 5.0% Additional O&M Costs (Third Unit) $ 43,013 Base Fuel Cost $/ga I $ 2.50 Base Year Differential Cost $/kWh $ (0.123) Base Year Savings $ 1,214,071 Net Present Value $ 71,244,498 Today's Value - Distribution Plant $7.55 M Construction Delayed 10 years $ 21915,055 Total Project Savings $74,159,553 RFA AEA10-015 Application Cost Worksheet Page 33 10-7-09 0 U. LM 0 w LL Lo LLJ co ® ® m LO a-) 00 0 ®o 00 CY) LO C) m LO T- 0 LO Fl�- M P-- co 0) LO - J'�- 0 LO m C6 0') 6 LO T-7 co & 0 e N P.: C\f P.: 0 T m qt 00 00 0 0') C14 vi vi cc) N 69- Wx 61)- 61*17, 61!)- MOWN m m m m m m .E- co L- m -w 0 (J) 4) LU C. 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