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HomeMy WebLinkAboutORPC Cook Inlet Tidal AppRenewable Energy Fund Grant Application Application Forms and Instructions The following forms and instructions are provided for 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.html The following application forms are required to be submitted for a grant recommendation: Grant Application Form GrantApp.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 Costworksheet.doc Summary of Cost information that should be addressed by applicants in preparing their application. Grant Budget Form GrantBudget.xls A detailed grant budget that includes a breakdown of costs by task and a summary of funds available and requested to complete the work for which funds are being requested. Grant Budget Form Instructions GrantBudgetInstr.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 a plan 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. AEA 09-004 Grant Application Page 1 of 26 9/2/2008 Renewable Energy Fund Grant Application SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) ORPC Alaska LLC (“ORPC”) Type of Entity: Independent Power Producer Mailing Address 811 West 8th Avenue, Suite 205 Anchorage, AK 99501 Physical Address SAME Telephone 907-250-7269 Fax 907-276=4419 Email djohnson@oceanrenewablepower.com 1.1 APPLICANT POINT OF CONTACT Name D. Douglas Johnson Title Director of Projects Mailing Address 811 West 8th Avenue, Suite 205 Anchorage, AK 99501 Telephone 907-250-7269 Fax 907-276-4419 Email djohnson@oceanrenewablepower.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) An electric utility holding a certificate of public convenience and necessity under AS 42.05, or X An independent power producer, 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 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.) AEA 09-004 Grant Application Page 2 of 26 9/3/2008 Renewable Energy Fund Grant Application SECTION 2 – PROJECT SUMMARY Provide a brief 1-2 page overview of your project. 2.1 PROJECT TYPE Describe the type of project you are proposing, (Reconnaissance; Resource Assessment/ Feasibility Analysis/Conceptual Design; Final Design and Permitting; and/or Construction) as well as the kind of renewable energy you intend to use. Refer to Section 1.5 of RFA. ORPC proposes to complete reconnaissance work and conduct feasibility studies and conceptual design for its Cook Inlet tidal energy project (FERC permit No. P-12679) in preparation for a 2011 installation of a 1MW tidal generation device (OCGen™ module). 2.2 PROJECT DESCRIPTION Provide a one paragraph description of your project. At a minimum include the project location, communities to be served, and who will be involved in the grant project. ORPC has obtained a FERC Preliminary Permit for a tidal energy site in a portion of Cook Inlet and Knik Arm adjacent to the waterfront of Anchorage for the purpose of deploying a commercial scale tidal energy project. The project will involve the deployment of ORPC's proprietary ocean current generation (OCGen™) modules consisting of four turbine-generator units (TGUs). Each TGU consists of a proprietary underwater permanent magnet generator with four (2 per side) advanced design cross flow (ADCF) turbines attached to and rotating on a common shaft. OCGen™ technology is deployed well below the water surface and held in place with a deep sea mooring system so as to be operable beneath the winter ice and avoid any conflicts with marine navigation. It will be licensed under the FERC hydrokinetic Pilot Project License program and initially installed at a capacity of 1MW (a single OCGen™ module) for testing and monitoring of its operation, including any potential environmental impacts. After the initial OCGen™ module has been operated for a year, additional OCGen™ modules will be installed to bring the generating capacity of the project up to the limit of 5 MW allowed under the Pilot Project License. Full build out of the project will occur after a long term FERC Operating License has been obtained, estimated to be in 2012 or 2013. The project will be interconnected to the railbelt power grid through either Chugach Electric or ML&P and the electricity generated will be sold to the railbelt utilities. Preliminary site bathymetric and current surveys have been performed, reporting and compliance required under FERC rules for the existing Preliminary Permit have been completed, meetings with regulatory and environmental agencies and project stakeholders have been held, strong relationships with the local communities have been established and the application for the Pilot Project License is well underway. The next phase of development of the project involves significant field studies and data collection, including a detailed analysis of the tidal currents within the site boundary to identify the optimal locations for turbine deployment and provide information pertinent to the engineering of the OCGen™ modules, mooring system, and power transmission system. The information gathered from these studies will be used to complete the conceptual design of the mooring system, the power transmission system, the grid interconnect system, the deployment plan, and to refine the design of the OCGen™ module specifically for the Cook Inlet environment. Environmental impact studies will also be designed in this phase that will include potential impacts to marine life and sediment transport. This project work will be completed with the assistance and cooperation of Terrasond LTD, Devine Tarbell and Associates, The University of Alaska Anchorage, LGL Alaska Research Associates Inc., Aquacoustics, PND engineering, Port McKenzie, and the Matanuska-Susitna Borough. AEA 09-004 Grant Application Page 3 of 26 9/3/2008 Renewable Energy Fund Grant Application 2.3 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. Include a project cost summary that includes an estimated total cost through construction. From April 1, 2009 through construction and installation of the initial 1 MW OCGen™ module for the Cook Inlet Tidal Project, the cost will be approximately $7,858,177. ORPC is requesting funding from AEA for the feasibility and conceptual design of the project. For this portion of the project, ORPC is requesting $1,787,476. The majority of these funds will be expended through sub awards to Alaska contractors retained to perform the site and environmental studies, assessments and designs necessary to move forward with the project. Phase 1 – Reconnaissance: Most of the work for the reconnaissance phase of this project has already been completed or is currently in progress and has been funded solely by ORPC. Areas that will still need additional work are completing the design of environmental and biological site characterization studies, the interconnect study, and research on contractors for project deployment and engineering. A total of $250,000 has been spent on this phase of the project. Phase 2 - Feasibility/Conceptual Design/Pilot Project Licensing: $2,428,302 The total budget for phase 2 of this project will be $2,428,302. ORPC is committed to providing a cost share of $595,825 this amounts to 24.5% of the phase 2 budget. The budget for the feasibility assessment and permitting of this project will total $1,719,131 and include work subcontracted to: Terrasond LTD for the amount of $429,906 in field studies and data collection for site characterization, LGL, Alaska research Associates INC., who will be contracted to conduct a beluga whale baseline study for $338,500, LGL and Aquacoustics for implementing a baseline fish study for $282,300, and to Devine Tarbell and Associates for overseeing all of these activities as well as managing permitting issues for $175,000. In addition, the project will support a University of Alaska Anchorage research project to create a dynamic 3D model of the project area to provide necessary information on current distribution and sediment transfer and enhance their ongoing modeling of Cook Inlet. The budget for this work is $82,600 and includes a cost share from the University of $45,000. The conceptual design portion of the project will require a total budget of $709,171. PND Engineers, INC. will provide consultation and design on the mooring system for $24,000. Additional funds of $30,000 will be budgeted to contract for preliminary designs of the power transmission systems. Technical contractors will account for $304,500 while the ORPC technical team salaries will amount to $214,400 with the remainder being ORPC corporate and project management funding . Phase 2 will conclude with ORPC obtaining the Pilot Project License for the Cook Inlet site and completion of the conceptual design for the project. Phase 3 - Final Design/Engineering: $1,681,718 The final design and engineering of the project is estimated to cost $ 1,681,718. This will include final design and detailed engineering of the OCGen™ module specifically for Cook Inlet, final designs of the power transmission system, mooring system, and deployment plan, implementing project monitoring equipment in compliance with the FERC Pilot Project License, and securing of all the necessary permits and approvals required for installation of the first OCGen™ module. Phase 4 – Construction/Installation/Operation/Monitoring: $3,748,157 AEA 09-004 Grant Application Page 4 of 26 9/3/2008 Renewable Energy Fund Grant Application The construction phase of the project is expected to cost $3,748,157. It will include procurement, manufacturing and fabrication of all the OCGen™ module components, shipping of those components to Port McKenzie, assembly and shop testing of the OCGen™ module at Port McKenzie, deployment of the 1-module system, operation and monitoring of the project, and analysis and reporting on data collected from the project. .2 4 PROJECT BENEFIT Briefly discuss the financial benefits that will result from this project, including an estimate of economic benefits(such as reduced fuel costs) and a description of other benefits to the Alaskan public. ORPC's Cook Inlet Tidal Project promises to bring wide ranging benefits to the state of Alaska and its people. The direct benefit will be felt not only through the emission-free electricity produced and supplied to the local railbelt grid, but also through the jobs and other economic benefits that will be created and enhanced through this project. By leading the way in the development of this new industry in Alaska, this project will be instrumental in developing the hydrokinetic energy industry that will one day be a significant contributor to the energy production portfolio of both urban and remote rural areas. Alaska is situated to be a central figure in the world's tidal industry as it not only has the second highest tidal range in the world in Cook Inlet, but also has 95% of the total tidal power potential of the entire United States - estimated to be an astounding 109TWh per year. This project will help to develop the expertise of local engineering and research firms to become world leaders in this field. It will also bring the University of Alaska into the tidal energy field and provide research opportunities for professors and graduate students, and educational opportunities that will lead students to cutting edge jobs in this exciting and ground breaking field. The initial direct economical benefit of this project will depend on the power purchase agreement that will be resolved in the feasibility phase of this project, however, the anticipated output of the 1MW OCGen™ module in a current peaking at 6 knots should be 2.628 GWh annually. At an all-in power sales rate of $.108 per kWh (Chugach Electiric's predicted avoided cost in 2011) this would amount to $283,824 of annual revenue. Additionally the Federal Production Tax Credit of $.01 per kWh will generate $26280 annually. ORPC has a staffed office in Anchorage and has already begun to expand staffing levels with development of the first Alaskan projects. The jobs created during this installation will include full time project management and technical positions. In addition local marine service companies will be contracted for deployment and maintenance, local scientific companies will be used for site analysis and environmental impact assessments, local engineering firms will be contracted for design of mooring and power transmission systems, and the local ports will be contracted for project support. The final assembly of the OCGen™ modules for the Cook Inlet and subsequent projects will be done at Port Mackenzie with Alaskan labor. The financial benefits of these jobs and contracts through the project construction will be $ 2,788,774 . Within the timeframe of the feasibility and conceptual design of this project these benefits will total $1,321,094. These contracts and jobs include contracts with Alaskan companies such as Terrasond LTD, LGL – Alaskan Research Associates, INC., Aquacoustics, PND engineers, INC., local marine service companies, local ports, the University of Alaska Anchorage, and Alaskans directly employed by ORPC-Alaska, LLC. In addition the University of Alaska and its Alaska Center for Energy and Power will be engaged as partners in the project to bring a tidal energy focus to the university system creating opportunities for educators, researchers and students alike. Once the OCGen™ technology is commercially proven and in mass production, many areas of rural Alaska with high energy costs will be a new market for this technology at a price point that will be attractive in comparison to existing means of electrical generation. Many sites in the Aleutian Islands and Southeast Alaska have already been proven to have exceptional tidal AEA 09-004 Grant Application Page 5 of 26 9/3/2008 Renewable Energy Fund Grant Application energy potential. The ongoing repair and maintenance of the OCGen™ equipment will be done by Alaskans. As ORPC develops this industry and capacity within the state of Alaska, we will be situated to expand and monetize our expertise in the development of new projects as they are identified and implemented around the world. In this way this project will help to make Alaska the center for tidal expertise and development that it is naturally endowed to become. 2.5 PROJECT COST AND BENEFIT SUMARY Include a summary of your project’s total costs and benefits below. 2.5.1 Total Project Cost (Including estimates through construction.) $7,858,177 2.5.2 Grant Funds Requested in this application.$1,787,476 2.5.3 Other Funds to be provided (Project match)$640,825 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3)$2,428,301 2.5.5 Estimated Benefit (Savings)$283,824 2.5.6 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.) $ 2,788,774* *This number was derived from the actual amount of money that will be spent on contracts with Alaskan businesses, and in the direct employment of Alaskans. AEA 09-004 Grant Application Page 6 of 26 9/3/2008 Renewable Energy Fund Grant Application 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. Project Manager – Monty Worthington **resume and references attached** 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.) **SEE ATTATCHED PROJECT SCHEDULE** Reconnaissance - 10/2009 – Completion date Feasibility - 09/2009 - Site assessment work completed 09/2010 - Utility interconnect study/power purchase agreement finalized Conceptual Design - 05/2010 - Conceptual design of component systems completed Final Design - 12/2010 - Detailed design/engineering of component systems completed Construction - 04/2011 - OCGen™ Module construction completed 07/2011 - OCGen™ Module deployment completed 12/2011 - Data collection and project report completed 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. Apply 03/2009 / Secure 03/2010 - Apply for and secure FERC Pilot Project License. 09/2009 - Develop and conduct comprehensive marine mammal (beluga whale) and other marine species studies to confirm technology is environmentally benign. 09/2009 - Perform feasibility study on Cook Inlet Site and analyze data. Confirm that adequate energy density exists for power production. AEA 09-004 Grant Application Page 7 of 26 9/3/2008 Renewable Energy Fund Grant Application 05/2010 - Perform conceptual design on component systems and confirm that no insurmountable or economically unfeasible challenges exist. 05/2010 - Budget for final design and permitting of project and secure needed funds. 09/2010 - Do final site assessment with special attention to sub-bottom characteristics for final mooring and power transmission design. 10/2010 - Complete final design and release components for manufacture and procurement. 04/2011 - Finalize and secure power purchase agreement with utility. 04/2011 - Receive components for Installation at Port Mackenzie and begin assembly. 06/2011 - Deploy OCGen Module in Cook Inlet. 12/2011 - Collect sufficient data and report on performance of OCGen module and evaluate economics of project for future expansion. 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. ORPC is committed to recruiting and retaining contractors and partners for this project from within Alaska whenever possible, or when not encouraging businesses we work with to establish a presence here. Our goal is to grow and industry through the contracts we execute with technical and project support resources. This will support and create infrastructure for future tidal and hydrokinetic expertise to develop here in Alaska. To this point, ORPC’s key partners for this project include: Terrasond LTD., The University of Alaska Anchorage, LGL Alaska Research Associates, Inc., Devine Tarbell and Associates(DTA), PND engineering, Aquacoustics, ACEP, Port Mckenzie, the Anchorage Economic Development Corporation, and the Matanuska-Susitna Borough. ORPC-Alaska's key personnel are: Doug Johnson – Director of Projects Alaska Mr. Johnson has over 30 years of project development experience in Alaska. As an Investor, business owner, entrepreneur, professional manager and business consultant Mr. Johnson has a comprehensive background in business development. He has worked through ought Alaska on many diverse projects and has a firsthand appreciation of what it takes to make projects successful in Alaska. Mr. Johnson’s project development experience is comprehensive with a range of projects from the launch of Alaska’s first biotech company to the planning and development of a $2,000,000,000 hospital in Abu Dhabi. Developing Alaska’s renewable energy potential is one of Mr. Johnson’s a passions and one he brings his unique abilities to. Monty Worthington – Alaska Projects Manager AEA 09-004 Grant Application Page 8 of 26 9/3/2008 Renewable Energy Fund Grant Application Mr. Worthington has over 10 years of experience designing and implementing renewable energy systems in Alaska, including Alaska's first successful hydrokinetic project in Ruby, Alaska in the summer of 2008 with the Yukon River Inter-Tribal Watershed Council. He also has extensive experience in design, installation, and maintenance of marine electrical systems. The ORPC team includes experienced professionals with successful track records in all the areas of expertise needed for a renewable energy technology and project development company to be successful. Brief bios of the key ORPC senior management and technical team professionals are given below. Christopher R. Sauer, P.E., President and CEO – Mr. Sauer provides overall management and leadership in all of ORPC’s technical and commercial activities. Mr. Sauer is a professional engineer, energy entrepreneur, and strategic development consultant with more than 30 years of experience in engineering, project development, electricity, cogeneration, renewable energy, and energy efficiency industries. Mr. Sauer is a founding member of ORPC and uniquely qualified to lead the Pilot Project into commercialization. John R. Cooper, Senior Vice President and CFO – Mr. Cooper manages all administrative and financial matters for ORPC, including budget management, reporting, contract administration, financial operations, and accounting. He has more than 30 years of experience as a senior finance executive in the energy industry involved in project finance and development, corporate finance, transaction structuring and execution, raising capital, executive management, consulting, and public Board of Directors representation. Mr. Cooper is a founding member of ORPC. Ernest K. Hauser, Vice President, Project Development – Mr. Hauser has overall management responsibilities for the development of all OCGen™ projects, including directing and managing the environmental permitting, community relations, vendor relations and negotiations, commercial contracts and cost estimates. Mr. Hauser has over 35 years experience in business development, management, project development, operations, finance, and construction for the energy and petrochemical industries. Patrick J. McGinnis, P.E., Director of Engineering, TGU Systems – Mr. McGinnis directs the ORPC engineering effort required to design and specify the TGU sub assemblies and manage the integration of these components into the TGU and OCGen™ modules. Mr. McGinnis has more than 20 years experience with major engineering firms including General Electric, Lockheed Martin, and Ford Aerospace, and more recently with management of R&D projects at the Naval Surface Warfare Center. Jarlath McEntee, M.S., P.E., Director of Engineering, ADCF Turbines – Mr. McEntee directs analysis, subscale prototyping, construction and testing of the ORPC ADCF turbines, including scale model and full scale testing. Mr. McEntee has 20 years experience in testing, design, and manufacture of alternative energy systems. Millard S. Firebaugh, Sc.D., Senior Technical Advisor, Technical Advisory Board – Dr. Firebaugh plays a key role as senior technical advisor to ORPC and provides direction and input to the design optimization efforts as well as testing protocols. Dr. Firebaugh, a retired Rear Admiral in the U.S. Navy, a former Chief Engineer of Electric Boat Corp., and a former CEO of SatCon Technologies, is a recognized leader in engineering and production of advanced technology, including R&D, ship design, shipbuilding, power systems and electronics, and executive management. AEA 09-004 Grant Application Page 9 of 26 9/3/2008 Renewable Energy Fund Grant Application The following are brief Bios for chief contractors' personnel ●Mary McCann, Senior Aquatic Scientist and Manager of Environmental Services for Devine Tarbell and Associates. Ms McCann has over 20 years of experience in fisheries and aquatic habitat studies, fish passage studies, aquatic resources and RTE surveys, water quality studies, general environmental impact analysis and assessments, and federal and state licensing and permitting activities. ●David Oliver, Geophysicist Terrasond LTD. Mr. Oliver has over 18 years of technical experience in the geotechnical and geophysical industry. Recent work has been focused upon the development of in-stream hydrokinetic and tidal renewable energy feasibility programs. These investigations have initially included resource assessment, site selection, and hazard assessment. He is expert at program design, field data collection, as well as the precise management and spatial analysis of remotely sensed data. Mr. Oliver has knowledge of a wide variety of geophysical tools, investigative techniques, and an in-depth understanding of physical science as applied to the Earth and its surface/subsurface. ●Tom Ravens PhD., Associate Professor, Dept. of Civil Engineering University of Alaska, Anchorage. Dr. Tom Ravens is Associate Professor in the Department of Civil Engineering at the University of Alaska Anchorage. Dr. Ravens has about 15 years of experience in hydrodynamic (wave and current) and sediment transport modeling and analysis, and has published widely in this field. Dr. Ravens is currently developing flow, wave, and sediment transport models for Cook Inlet and the Beaufort Sea. ●Tamara McGuire PhD., Lead Scientist, LGL Alaska Research Associates Inc . Dr. Tamara McGuire has 19 years experience as wildlife biologist and marine mammal scientist and is the project manager and principal investigator for current LGL studies of Cook Inlet beluga whales. Dr. McGuire has conducted land- and boat-based research on Cook Inlet beluga whales and has logged over 500 hours monitoring and theodolite tracking beluga whales and vessels around the Port of Anchorage in Upper Cook Inlet. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. ORPC will develop a project management communications approach that best matches the information needs of AEA utilizing the effective communications ability of ORPC, similar to the development meetings we engaged with AEA during the inception of the Nenana Hydrokinetic test site. ORPC maintains an office in Anchorage and thus will be able to report regularly to AEA on the project performance and timeline. Regular quarterly reports on the project's progress will be submitted to AEA via email and meetings will be scheduled as necessary to update AEA staff on the project. 3.6 Project Risk Discuss potential problems and how you would address them. Funding: AEA 09-004 Grant Application Page 10 of 26 9/3/2008 Renewable Energy Fund Grant Application In order for the project to be successful, additional funding must be secured for the various phases at the appropriate times. To this end, funding is being pursued with diversified funding sources from state and federal grants to private investment capital entities and individuals. If a project phase is not funded at the appropriate time, the project schedule will be adjusted accordingly. Environmental Concerns: The appropriate environmental studies and mitigations must be implemented to ensure compliance with permitting issues, and to ensure environmental impacts of the turbine are acceptable. Of particular concern to ORPC in the Cook Inlet area are the local beluga whales which have recently been added to the endangered species list. It is of utmost importance that the TGU's are monitored to ensure they do not further endanger this whale population and comply fully with any restrictions imposed by the Endangered Species Act. Consultations with the National Marine Fisheries Service will be undertaken as is required by any commercial operation in the vicinity of critical habitat for an endangered species. By October of 2009, NMFS will have identified critical habitat for the whales, and it will be important to ensure that this habitat is used appropriately. To achieve this ORPC will be contracting LGL to conduct beluga whale surveys to ensure there is minimal whale usage in the pilot project location, designing and implementing adequate monitoring methods to ensure there is no impact to the whales, and considering alternative locations for the pilot project deployment to minimize these concerns. Ice : There are concerns over the effects of surface ice, “beach ice” or large conglomerated blocks of ice, and frazzle ice affecting the turbine. Initial conversations with the experts at the University of Alaska indicate that surface and beach ice are unlikely to penetrate to a depth where they will interact with the TGU's which will be at a depth of 40' below the surface. Frazzle ice is also unlikely to penetrate this deep into the inlet waters as Coast Guard regulations only require a water intake depth of 10 feet for ships in the inlet to avoid frazzle ice in their engine water intakes. The possibility of ice conglomerated with rock or sediment and suspended in the water column still exists and adequate studies will be conducted to determine the extent, if any, of this that exists at the planned project depths . The main impact of the ice will thus be the effects it has on the service window for the OCGen module, and the project maintenance schedule will be planned accordingly. Sediment Transfer : There are two main concerns in regard to sediment transfer the first being the possibility of sediment being deposited and creating shoaling in shipping channels due to the slowing of natural currents caused by the OCGen™ modules. The second is the effect of natural sediment transport on mooring systems and particularly buried transmission lines which must be buried at a depth to ensure they are not uncovered by naturally migrating sand waves. To this end ORPC will be partnering with UAA to model the sediment transfer prior to installation, and to use the pilot project to monitor these effects and correlate the model to accurately predict future effects of the OCGen™ modules on sediment deposition and to plan the installation accordingly. Mooring system design : The difficulty of anchoring in the challenging Cook Inlet environment must be taken into consideration. Local engineering firm PND will be utilized in the design of the mooring system as they have significant experience in the oil and gas industries mooring systems in Cook Inlet. AEA 09-004 Grant Application Page 11 of 26 9/3/2008 Renewable Energy Fund Grant Application Power Transmission : The power transmission system must adequately address safety and reliability concerns. The design and deployment of this system will be undertaken by local contractors with experience in this area of work to ensure that it is robust and appropriately designed. 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 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 for completion of each phase. If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. 4.1 Proposed Energy Resource Describe the potential extent/amount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. The Cairn Point portion alone of ORPC's tidal permit near the mouth of Knik Arm has an average flow potential of 116MW as analyzed in the EPRI report on Cairn Point Tidal Potential from June 2006. Further feasibility studies on the resource will more accurately quantify this value as well as optimize the location of the deployment for maximum power extraction, as the existing data comes from transects done for the proposed Knik Arm bridge crossing and not with power generation in mind. The amount of extractable power in this resource also remains to be quantified but at a conservative 15% this would lead to 17.4MW average extractable power that varies from a 210MW peak to 0MW through the tidal cycles. The potential of the developable portion of the entire tidal site is yet to be determined, but will be completed in the feasibility phase of this project. It is anticipated that the potential power produced from this project area will offer a significant contribution to the railbelt grid. Currently most of the power for the Anchorage ML&P and Chugach service areas come from the Natural Gas fired generation. While this has been a reliable resource for power generation most railbelt utilities are approaching the end of their natural gas contracts and continued resource availability as well as price stability are a concern. Current estimates are that to the Cook Inlet natural gas resource could be depleted as soon as 2022. The possibility of a spur line from the proposed natural gas pipeline could alleviate this near term energy shortage, but would ensure that Alaska no longer enjoys stranded gas prices and would be forced to pay the world market values for natural gas, thus dramatically increasing the cost to electricity. This tidal project would offer power that would both decrease the usage of the natural gas, and offer a flat priced alternative if natural gas prices continue to rise. In addition as the tidal power would produce no greenhouse gases it would be protected from future carbon taxes that could be applied to electricity produced by natural gas, further improving its economic benefit to the local energy market. One project that is being considered in the Anchorage area is CIRI's Fire Island Wind Farm, currently planned for a capacity of 70MW. This would be an excellent resource to couple with the tidal resource of Cook Inlet, as the transmission line from Fire Island to Point Worenzof would open up areas off of Fire Island for tidal development as the power transmission line could be AEA 09-004 Grant Application Page 12 of 26 9/3/2008 Renewable Energy Fund Grant Application utilized for both resources. In addition the more stable and predictable power generated by the tidal project could be dispatched more easily than the wind power and used to dampen the wild oscillations in power output associated with wind energy. At the current time wind technology is much further along in its development than tidal technology, and thus more economical, but tidal energy promises to be a cost competitive resource once the industry reaches its commercialization phase. Hydropower plants already exist on the railbelt grid and larger scale projects such as the Lake Chakachamna project at 330MW are being investigated for possible development. These projects offer firm power that is also economical, though upfront costs are quite high. Hydro projects such as these couple well with renewables that vary periodically. Modern hydro turbine controls allow them to ramp up and down with the availability of other resources, thus allowing the reservoir capacity to be conserved and utilized more effectively. Hydro plants already incorporate wind resources well in this manner, and the predictable nature of tidally produced energy could be integrated even more easily and efficiently than wind power. Environmentally, hydro power has concerns in its impact to fish habitat as the turbines are lethal to fish that pass through them and the intakes often funnel fish into them. Tidal power faces similar concerns with fish, though there is no ducting to funnel fish into the turbines and the slow speed of the blades (40rpm) pose minimal risk to the fish, though this remains to be verified in subsequent project monitoring. One concern that is unique to traditional hydro power comes into play where andronomous fish spawn and Lake Chakachamna is no exception. Issues with returning salmon being diverted towards the turbines outflow rather than their natural spawning stream will have to be addressed for the Chakachamna project. There is potential for future geothermal development particularly at Mount Spurr near the Beluga power infrastructure. Geothermal energy holds promise for being a clean, stable, renewable source of energy, though there are technical challenges in implementing it in seismically active and glacially dynamic areas such as Mount Spurr. If this project were to happen, it would also integrate well with tidally generated power much in the same way the power would fit into a hydro system, allowing the geothermal resource to be reserved when it was periodically offset by tidal generation. Coal fired power plants are another alternative being looked into by local railbelt utilities. By comparison to coal power, tidal energy has significant environmental advantages, as well as having the potential to be economically competitive as economies of scale drive costs down and the cost of coal as a fuel source continues to rise. Coal fired power produces not only CO2 which adds to the effect of global warming, but also mercury, a contaminant the bioaccumulates in the food chain and has recently become a concern in wild Alaskan salmon. Tidal generated power would have none of these disadvantages as it is a totally clean renewable energy resource. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. Railbelt Energy Project - NA 4.2.2 Existing Energy Resources Used Briefly discuss your understanding of the existing energy resources. Include a brief discussion of any impact the project may have on existing energy infrastructure and resources. Currently most of the power utilized in the Anchorage area in both the ML&P and Chugach service areas comes from the Beluga natural gas field and power plant. While ML&P has a AEA 09-004 Grant Application Page 13 of 26 9/3/2008 Renewable Energy Fund Grant Application more stable supply of natural gas than other utilities, it is well known that these resources are dwindling and already businesses such as the Agrium fertilizer plant in Nikiski have had to shut down due to a scarcity of supply. It is estimated that the current reserves and known gas resources in Cook Inlet will be depleted by 2022, in addition if a spur from the proposed gas pipeline becomes a reality the gas in Alaska will no longer be considered stranded gas and thus be at the mercy of much higher world market prices. This tidal project would have a beneficial effect on these problems in both the short term as it would help to displace the use of gas and thus extend the resources viability as well as introducing a long term alternative energy source which will integrate well with either natural gas powered plants, existing hydro plants such as Eklutna and Bradley lakes, or the future development of other energy resources such as lake Chakachamna hydro, the Fire Island Wind Farm, or Mount Spurr geothermal. Depending on the siting of the build out for this project, an overbuild of existing transmission lines may be necessary to allow the transmission of the power generated. Currently the infrastructure maintained by ML&P on EAFB would be limited to a capacity of 37.5 MW but could be upgraded from 35KV to 115 KV to accommodate 120MW of power. Chugach Electric's infrastructure at Point Woronzof currently accommodates 200MW of capacity and could thus integrate a significant tidal resource with a less involved build up. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The energy market on the railbelt grid will be in need of significant alternative power production as natural gas supplies decline. This project will provide stable, predictable, economic, emission- free power to customers on the railbelt grid. In addition, commercializing the OCGen™ technology in Cook Inlet will allow tidal technology to expand into the rural energy market in Alaska, where it will offer relief to the high cost of power associated with diesel generation facilities. AEA 09-004 Grant Application Page 14 of 26 9/3/2008 Renewable Energy Fund Grant Application 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 ORPC plans to install its own OCGen™ TGU's at its Cook Inlet tidal site. To generate electricity from moving water, the OCGen™ TGU uses proprietary hydrokinetic advanced design cross-flow (“ADCF”) turbines to drive an underwater permanent magnet (“PM”) generator located between the turbines and mounted on the same shaft, as shown below. OCGen™ Tidal Turbine-Generator Unit (“TGU”) Approx.10 FeetApprox. 10 Feet Incoming (Flood) Current Approximately 78 Feet Front/Back Elevation Side Elevation TGU Modular Structural Frame ORPC Proprietary Permanent Magnet Underwater Generator ORPC Proprietary Advanced Cross Flow (ADCF) Turbines Outgoing (Ebb) Current ORPC has developed its own proprietary designs of the ADCF turbine and the PM generator for use in the TGU and has filed U.S. and Patent Cooperation Treaty utility patent applications for its ADCF turbine, PM generator and the TGU. For the Cook Inlet Tidal Project, a series of TGUs will be “stacked” (as shown in the views on the following page) and combined with modular power electronics and other components to create a much larger power generation platform (the “OCGen™ module”). OCGen™ modules will be submerged to a prescribed depth, with no components located or visible on the ocean surface, and will be held in place above the sea bottom with a deep sea mooring system. Each tidal OCGen™ module will have a generating capacity of 1 MW in a 6-knot tidal current. The two tidal OCGen™ module configurations are shown on the next page. AEA 09-004 Grant Application Page 15 of 26 9/3/2008 Renewable Energy Fund Grant Application 4~TGU 1MW OCGen™ Modules - Vertical and Horizontal Configurations Deployment Concept for Tidal OCGen™ Modules The final build out size of the Cook Inlet site is yet to be determined in the feasibility phase of the project, but preliminary estimates from the 2006 EPRI study suggest that a capacity of 17.4 MW is obtainable in the Cairn point area alone. The capacity factor of the OCGen Module in an area with peak current speeds of 6 knots, which are found within the site boundary is estimated at 30 to 35 percent. This would lead to an anticipated annual generation of at least 2.628 GWh per 1MW of installed nameplate peak capacity. On the technical side, there are no barriers that will involve breakthrough technological innovation, but several important challenges must be met. Firstly the OCGen module must be initially tested and refined in ORPC's Eastport, Maine tidal test site. The main technological challenges with the module will be addressed there before a commercialized unit is brought to Alaska. Additional issues that must be addressed in the Cook Inlet environment will include ensuring that ice, particularly frazzle ice, is not a concern, though initial investigations suggest the deployment will be well below the range of either frazzle ice or conglomerated surface ice. Another site specific challenge is the heavy silt content of the Cook Inlet waters. It will be essential to ensure that this does not effect the design life of the TGUs, though at this point this also seems to be a manageable problem due to the minimal moving parts of the TGU design. In addition the silty environment has advantages in terms of its contraceptive effect on marine growth which is a significant concern that must be addressed in other areas. Mooring in the Cook Inlet environment will be another technical challenge that will be approached with the assistance of local expertise in the issue. Alaskan companies such as PND engineers, INC. whose extensive experience in dealing with mooring issues in the oil and gas developments in Cook Inlet will help to ensure this hurdle is surmountable. AEA 09-004 Grant Application Page 16 of 26 9/3/2008 Renewable Energy Fund Grant Application Environmentally there are two main concerns at this point that stand out, the effect of the turbines on marine life, particularly beluga whales, but also salmon, and the effect the turbines will have on sediment transfer and subsequent deposition. In regards to the beluga issue, NMFS will be consulted to ensure that the project does not further endanger the cook inlet beluga population and to ensure that the project is compliant with respect to the Endangered Species Act and sensitive critical habitat. To address the habitat issue several locations within the large tidal site will be explored in the feasibility phase to be sure that if there is an issue with one location in respect to critical habitat issues, another can be used for the pilot project and monitoring to ensure the turbines will not interfere with the belugas in a negative way. LGL, a local scientific company, will be contracted to design and implement the necessary beluga studies and turbine monitoring, as well as addressing the same issues in regards to impacts on salmon. The main issue in regards to sediment transfer would be in regards to the possible siltation of navigable channels or ports due to the changes in local currents introduced by the OCGen™ modules. The University of Alaska has particular expertise in this issue, as they were contracted for similar studies on the Knik Arm bridge crossing study. From initial discussions it seems that a simple 1-D model can be made to assess the local impacts of a single module, and data collected for site characterization can be used to enhance and calibrate the University of Alaska's 3-D model that will allow simulations of larger installations. This will allow their effects on siltation to be understood, and thus the future build out planned accordingly to ensure there are will be no negative effects to either shipping channels or the local ports. Basic Integration Concept : The power will be transmitted to shore via a submarine power cable from The OCGen™ module to the nearest landing, from there it will be power conditioned and transformed to acceptable line voltage. If deployed in the Cairn Point area of the tidal site, the system will likely be tied into the local Anchorage ML&P Grid on Elmendorf AFB. The maximum line voltage encountered there is 35kV which would allow transmission for power up to 37.5 MW. The capacity of this transmission infrastructure could potentially be upgraded to a 115kV line to allow up to 120MW to be transmitted from the array. If deployed near Fire Island or Point Woronzof, the power would be transmitted in a similar manner to the Chugach Electric infrastructure which currently handles a capacity of 200MW and can easily integrate the power produced from the initial 1MW pilot project and 5MW build out of this project. The power will be highly dispatchable and manageable due to its regular and predictable interval, much more so than proven renewable energy technologies such as wind or solar power. Delivery Methods: Whenever possible components of the project will be shipped directly to the Port of Anchorage or Port McKenzie. Larger parts of the system such as the TGU units will be shipped on skids as they will not fit into standard shipping containers. These parts will be assembled as an OCGen™ module at Port Mckenzie with local labor and equipment. After assembly they will be deployed with the assistance of local tug and barge companies. 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 subsurface lands that will be used for mooring and power transmission systems are property of the state and may be subject to appropriate ADNR land use permitting requirements. The land ownership encountered on the shore side of the power transmission system will be identified when a particular location has been chosen for the turbine in the conceptual design phase of the project. If the Cairn Point location in Knik Arm is chosen for the Pilot Project, the land on the shore side will likely be Elmendorf Air Force Base military land and the proper authority and AEA 09-004 Grant Application Page 17 of 26 9/3/2008 Renewable Energy Fund Grant Application rights for using this land will be sought. 4.3.3 Permits Provide the following informationas 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 FERC Preliminary Permit: Secures site for ORPC- Alaska. Obtained 04/2007 FERC Pilot Project License: Allows for initial testing of hydrokinetic device in preliminary site area. Draft Application due 3/09, Final Application due 04/10 Fish Habitat Permit (ADF&G): The Fish Habitat Permit requires a 50 day review period which includes a public notice and comment period coinciding with the Coastal Zone Management review. It will be applied for by March 2011, procured by May 2011. Army Corps Title 10 permit: Requires 60 -90 days for approval and Coastal Zone consistency for final authorization. Applied for by Feb. 2011, procured by May 2011. Coastal Zone Management: Requires 50 days within ACOE permitting timeline, Applied for with ACOE title 10 permit in Feb 2011, procured May 2011. ADNR Water Rights: Waived, not necessary for non-freshwater Coast Guard Notification: USCG will conduct a waterways assessment in conjunction with the ACOE permitting process and will recommend approval/disapproval. 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 Of prime concern to the success of this project is ensuring it has no adverse impact on the local beluga whale population, recently added to the endangered species list. To address the beluga issue, NMFS will be consulted to ensure that the project does not further endanger the beluga population and to ensure that the project is compliant with respect to the Endangered Species Act and sensitive critical habitat. To address the habitat issue several locations within the large tidal site will be explored in the feasibility phase to be sure that if there is an issue with one location in respect to critical habitat issues, another can be used for the pilot project and monitoring to ensure the turbines will not interfere with the Belugas in a negative way. LGL Alaska Research Associates, Inc in collaboration with Devine Tarbell and Associates will be contracted to design and implement the necessary baseline beluga studies and turbine monitoring to ensure there are no negative interactions with the belugas. AEA 09-004 Grant Application Page 18 of 26 9/3/2008 Renewable Energy Fund Grant Application Habitat concerns include those regarding the critical beluga habitat as well as salmon habitat. Studies concerning both of these will be conducted as required by NMFS and the conditions of the Alaska Department of Fish and Game Fisheries Habitat Permit. There is no expected impact on or use of wetlands as these units will be mounted subsurface in the deepest Cook Inlet channels, the same applies to the impacts on local archaeological sites, historical sites, telecommunications interference, and aviation considerations. The main land development constraints will involve the use of state subsurface lands, which will be addressed through the DNR land use permit, and the land used for power transmission once it is delivered to shore. The main concern in development constraints would be the possibility of needing to enlarge the size of local transmission lines, which may be necessary in the build out phase of the project. This could be a challenge with local landowners, but will be addressed as the need arises. One additional issue that will need to be addressed is the effect of the OCGen™ modules on sediment transfer in regards to the possible siltation of navigable channels or ports due to the changes in local currents introduced by the OCGen™ modules. The University of Alaska has particular expertise in this issue, as they were contracted for similar studies on the Knik Arm bridge crossing study. From initial discussions it seems that a simple 1-D model can be made to assess the local impacts of a single module and further 3-D modeling that will allow simulations of larger installations. This will allow their effects on siltation to be understood, and thus the future build out planned accordingly to ensure there are will be no negative effects to either shipping channels or the local ports. 4.4 Proposed New System Costs (Total Estimated Costs and proposed Revenues) The level of cost information provided will vary according to the phase of funding requested and any previous work the applicant may have done on the project. Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer’s estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of the project. Cost information should include the following: Total anticipated project cost, and cost for this phase Requested grant funding Applicant matching funds – loans, capital contributions, in-kind Identification of other funding sources Projected capital cost of proposed renewable energy system Projected development cost of proposed renewable energy system The total anticipated cost of this project through construction will be $7,858,177. To complete phase 2 of this project, including feasibility and conceptual design, will cost $2,428,302. ORPC is requesting $1,787,476 of AEA funding for this phase of the project and will supply $595,825 of its own funds, with a UAA cost share of $45,000 making up the balance. Through installation, the projected capital cost of this system will be $2,838,563 and the project development costs will be $5,019,614(. By the date of the start of Phase 2, ORPC will have invested approximately $250,000 in this project. ORPC funding sources include venture capital and angel investors who have funded the startup of ORPC to this point. ORPC has raised approximately $4.5 million to date and continues to seek diversified funding from federal and state funding sources in Washington, Maine, and Alaska. Significant funding from the DOE is anticipated in the near future and it will be a primary focus of ORPC’s funding efforts. AEA 09-004 Grant Application Page 19 of 26 9/3/2008 Renewable Energy Fund Grant Application 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. Total anticipated project cost for this phase Requested grant funding ORPC’s preliminary financial analyses of a 20MW OCGen™ project (in a tidal current peaking at 6 knots) projects total operation and maintenance costs of approximately $.025 per kWh produced, which includes annual maintenance and major maintenance every 6 years. The annual maintenance would require raising the unit to the surface for cleaning and inspection, while the major maintenance would involve towing the unit to shore to do a general tune up and replace bearings and seals. Parts and supplies would account for 20% of the budget while the remaining 80% would be in labor and service contracts to local marine service companies. Assuming a slightly higher O&M budget for this project of $.030/kWh would result in an annual O&M budget of $78,840 for the 1MW pilot project and approximately $394,200 for the 5MW project. We are not anticipating applying for grant funding for this portion of the project but would support these costs through internal funding sources. 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following: Identification of potential power buyer(s)/customer(s) Potential power purchase/sales price - at a minimum indicate a price range Proposed rate of return from grant-funded project The potential buyers for the electricity generated by this project include all the local railbelt utilities at this point, however, ML&P, Chugach Electric and Matanuska Electric Association are the primary utilities being considered as they own the nearby electrical infrastructure. The PPA will be negotiated in the feasibility phase of the project but initial estimates of power purchase rates for railbelt utilities range from $0.04 per kWh with local utility ML&P to $0.135 per kWh with Fairbanks utility GVEA. The current plan would call for intertieing to the Chugach Electric grid in 2011 at which time their avoided cost is predicted to be $0.108 per kWh. Based on a PPA rate $0.108 per kWh plus $0.01/kWh of Production Tax Credits, the estimated simple rate of return for the 1MW project is approximately 8.2%. This number is based on a breakeven cost of power for the project calculated at $0.10 per kWh assuming amortization of the capital at 5% a year over 20 years. 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. See Attachment AEA 09-004 Grant Application Page 20 of 26 9/3/2008 Renewable Energy Fund Grant Application 4.4.5 Business Plan 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. ORPC Alaska, LLC is the business entity that will commercialize Ocean Renewable Power Company’s OCGen™ technology in Cook Inlet. The business plan is very simple; to deliver emission-free, predictable, reliable electricity to the Anchorage Bowl and Rail Belt Energy Grid at a price point that is competitive with existing generation and is lower than new power generation options. Power purchase agreements will be developed and executed with local utilities to assure the sustainability of the project. Early conversations have begun with the utilities with periodic updates on the projects progress. In the early phases of the project, ORPC will be structured to focus on the preparation needed to develop Cook Inlet as a world class tidal energy site. During this period company staffing will consist of two Alaskans. The Alaska Projects Director, Doug Johnson, will continue to lead strategic development, developing and managing the relationships with communities, partners and agencies that are needed for successful business growth through new projects. The Alaska Projects Manager, Monty Worthington, will manage the day-to-day activities that ensure projects are successful. In the early phases of the Cook Inlet project he will be coordinating the work of many local firms under contract to assist with the site assessment and permitting work. At the completion of the early phases a new organizational structure will be developed with a detailed staffing plan to support the assembly, deployment and testing of the 1MW OCGen™ module for Cook Inlet. Testing of the module will take place over a full year and, at its completion, ORPC will immediately build out the Cook Inlet site to 5 MW, followed by full build out of the site, which could be over 100 MW. Subsequent expansion of OCGen™ module arrays within the Cook Inlet site will take place as funding is secured and module production is ramped up. During this period the business structure will change from a development company model to an operating company model, As Cook Inlet settles into a power production mode ORPC will be developing other tidal and river sites throughout the state, systematically bringing them into production. 4.4.6 Analysis and Recommendations Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. Commercial Installation Cost and Breakeven Cost of Electricity Estimates The ORPC team has extensive experience in commercial power project development and execution. This strength, together with the knowledge gained from the TGU Demo Project prototype fabrication and testing completed in 2008, and with input from numerous marine equipment and installation experts, has allowed ORPC to develop preliminary estimates for commercial installations and the breakeven cost of electricity. Since there are no commercial technologies yet available for the production of electricity from tidal currents, it is difficult to quantify how the ORPC OCGen™ technology will improve on the manufacturing and operating costs or efficiency of conversion of competing companies. It is possible, however, to demonstrate the competitiveness of the breakeven cost of electricity (“BCOE”) of the OCGen™ technology with that of other new potential sources of electricity, including fossil fuel and other renewables. The BCOE produced from any technology is a combination of amortization of the original constructed cost, operations and maintenance costs, fuel costs, and environmental externalities such as permitted air and water pollution, release of greenhouse gases, and the cost of AEA 09-004 Grant Application Page 21 of 26 9/3/2008 Renewable Energy Fund Grant Application mitigation of these that may be separately incurred. In each of these areas, the preliminary cost estimates for OCGen™ technology demonstrate superior economics, primarily for the following reasons: The TGU and other components will be built at a size and scale so that they can be shop fabricated, with multiple units assembled into OCGen™ modules on site. All components are robust and mechanically simple, designed for long-life and low maintenance underwater. There is only one moving part per TGU, with the twin turbines connected to a single shaft that drives the rotor in the generator. There are no gears or other mechanisms that are expensive to manufacture and maintain. The preliminary estimates of installed cost of a 20 MW peak capacity OCGen™ tidal project in a 6 knot peak tidal current is approximately $50 million or $2500 per peak KW. The capital investment for these larger OCGen™ projects compares favorably with new coal or wind generating capacity and is below solar, wave energy, combined-cycle coal gasification, and nuclear technologies. To the best ORPC can determine, it is also below the estimated cost for competing tidal energy technologies. The TGU can be assembled into OCGen modules in a variety of configurations to suit particular site requirements. The tidal OCGen™ modules will be floated to their mooring sites and moored using conventional deep sea moorings, without the need for offshore foundation or piling installations. This is a more cost effective deployment and installation method than other technologies being proposed and tested. The OCGen™ technology uses no fossil fuel; therefore, it is not subject to the current high cost of fuel nor, more importantly, to future escalation (and volatility) in the cost of fuel. Variable costs are therefore low, based on annual maintenance expenses and subject only to inflationary increases, not fuel price increases. At today’s prices, just the variable energy cost component of a new gas-fired combined cycle power plant will be approximately $0.07 per kWh of generation. OCGen™ technology installed in tidal currents of 5-6 knots in a project size of 10 MW or larger, based on current designs and cost estimates would be economical and commercially viable today. It will compete with new fossil or renewable energy installations, on both a capital cost and a BCOE basis; it will be considerably cheaper than most other new energy sources including wave, solar, combined cycle and coal fired power plant installations. The BCOE of a 10 MW OCGen™ project in a 6 knot current would be approximately $0.06/KwHr of electricity generated. The BCOE for other size projects in varying speeds of current are illustrated in the following graph. These BCOE values are calculated without consideration of any subsidies or incentives. AEA 09-004 Grant Application Page 22 of 26 9/3/2008 Renewable Energy Fund Grant Application Breakeven Cost of Power for Tidal Current Projects (Delivered to On-Shore Substation) 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 5.0 5.5 6.0 6 .5 7.0 7.5 8.0 Maximum Current Speed (knots)Cost of Power (cents/Kwh)2.5 MW Project 5 MW Project 10 MW Project 20 MW Project 50 MW Project Although first and foremost, ORPC sought to prove the technical feasibility of the TGU in the TGU Demo Project, lessons learned from that project have allowed ORPC to refine its cost estimates. Although the estimates are not yet to the definitive estimate phase, as a result of the TGU Demo Project ORPC has developed much better reference costs for making the estimates. ORPC continues to advance the design of its cross flow turbine. Testing of a variety of turbine blade designs continues in Eastport, Maine and ORPC has contracted with the University of Maine – Orno, the University of Massachusetts – Dartmouth and Maine Maritime Academy to perform a computational fluid dynamic analysis and tank testing. ORPC reached agreement with SatCon for the development of a power conditioning system for interconnect compatibility. In addition, US Windblade will be designing and manufacturing turbine blades from marine composite materials. Harbor Technologies Inc. is presently designing the TGU support frame to be positively buoyant from marine composite materials. One potential market being pursued by ORPC is to utilize the existing oil and gas infrastructure in the Inlet to harness tidal power. Marathon Oil has already approached ORPC with the idea of mounting its TGU's onto Natural Gas Platforms that are slated to be decommissioned. It is fortuitous that the natural gas infrastructure in the inlet happens to be situated in an area of viable tidal currents and near enough to the Beluga Natural Gas Plant that power transmission to the railbelt grid is also possible. AEA 09-004 Grant Application Page 23 of 26 9/3/2008 Renewable Energy Fund Grant Application 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 avoided cost of ownership) 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 As the first tidal energy project being developed in Alaska, this project will bring diversified benefits to the state of Alaska through not only the energy it will produce and the potential for this technology to alleviate high energy costs in rural Alaska, but equally importantly will be the economic benefits created through the inception of a new industry in Alaska and the associated jobs and business opportunities it creates. Alaska is positioned to be a world leader in tidal energy development as it not only has one of the greatest tidal resources in the world, but is situated along major shipping routes and future circumpolar shipping routes to be an exporter of technology and expertise in this field. This is a crucial time in the development of tidal technologies and countries that will be leaders in this field are already defining themselves. It is critical that Alaska becomes recognized as a leader in tidal energy at this time, and this project will begin this development not only through the demonstration of a successful project, but through the development of the local university system's expertise in this field and the development of expertise in local scientific companies like Terrasond LTD, already a company of world renown in the area or bathymetric mapping. At this point ORPC has not negotiated a final PPA with any local utilities but preliminary studies suggest an agreement of $0.108 per kWh at the avoided cost rate for Chugach Electric at the time of installation in 2011. With an anticipated output for a 1MW OCGen module in a current peaking at 6 knots of 2.628GWh annually this would lead to $283,824 in annual revenue. Additionally the federal Production Tax Credit of $.01 per kWh would add $26,280 annually. It is anticipated that future tax credits will increase to match the $.02 per kWh currently offered for wind and biomass power and additional green power incentives will lead to a higher purchase price and shorter payback periods. For a future build out, this will prove economical as the preceding Breakeven Cost of Electricity (BCOE) analysis showed that in a resource with peak current speeds of around 6 knots, the BCOE would be from $.07 to $.06 per kWh as a project ranged in size from 2.5 to 50 MW. Thus at predicted power prices for the dates of project implementation the project build out will become profitable. ORPC has an office in Anchorage and has already begun to expand staffing levels with development of the first Alaskan projects and additional employment opportunities with ORPC- Alaska will be created through this project. ORPC plans to contract local marine service companies for deployment and maintenance, local scientific companies for site analysis and environmental impact assessments, local engineering firms for design of mooring and power transmission systems, and the local ports for project support. The final assembly of the OCGen™ modules for the Cook Inlet and subsequent projects will be done at Port McKenzie with Alaskan labor. In addition the University of Alaska and the Alaska Center for Energy and Power will be engaged as partners in the project to bring a tidal energy focus to the university system creating opportunities for educators, researchers and students alike. Over the lifetime of this project, the public benefit for Alaskans will be substantial. Having the first tidal project in the state located close to the largest population center will be significant as it will AEA 09-004 Grant Application Page 24 of 26 9/3/2008 Renewable Energy Fund Grant Application be a convenient tool for public education on tidal energy and as a demonstration to showcase the expertise that Alaska will hold in this exciting new field to local residents and visitors alike. It will be an ongoing research subject and tool for the local university system to utilize in the development of its own expertise and focus in tidal studies. As the project continues to prove out and develop it will offset significant energy usage on the local grid, and create jobs involved in the installation, operation, and maintenance of the OCGen™ modules. Local ports and marine service industries will secure significant long term contracts in the installation, operation, and maintenance of the OCGen™ modules, and local scientific companies will be utilized to continually monitor and refine the installations. In the long term this project will help to inspire young Alaskans as to the potential of their State, its natural resources, and the ingenuity of the people who live here, thus nurturing unknown and profound new innovations from the next generation of Alaskans. SECTION 6 – GRANT BUDGET Tell us how much your total project costs. Include any investments to date and funding sources, how much is requested in grant funds, and additional investments you will make as an applicant. Include an estimate of budget costs by tasks using the form - GrantBudget.xls Provide a narrative summary regarding funding sources and your financial commitment to the project. ORPC has already invested significant resources in the development and permitting of its Cook Inlet tidal site. These efforts have been funded entirely by ORPC at this point and they have included work on obtaining and complying with FERC permitting, site assessment and data collection, meetings with communities, agencies, stakeholders, contractors, public officials and others involved or affected by the project, participation in organizations, conferences and industry meetings, etc. and they will total as much as $250,000 by the time the AEA funding for this project would commence. In addition ORPC has already invested over $4 million in its own OCGen™ technology development that will later be taken advantage of in the Cook Inlet Tidal Project. This company funding has to date come from founder equity, “friends and family” investment, state funding from Maine and Massachusetts, individual angel investors and venture fund investment. The total budget for the Cook Inlet tidal Project is estimated at $7,858,177. ORPC is requesting $1,787,476 from AEA for Phase 2 to conduct the feasibility study and conceptual design of this project, The remaining funding for Phase 2 will be provided by ORPC in the amount of $595,825 and a University of Alaska in-kind of $45,000. During the execution of this phase of the project, additional funding will be sought from diversified funding sources, from private investment to Federal and State funding opportunities including future AEA and DOE grant opportunities to fund the remainder of the project. ORPC has developed a detailed budget for the installation through 2012 and its eventual 5MW build out reflecting ORPC's investment in this project. ORPC is committed to the Cook Inlet Tidal Project as its second tidal installation and full scale commercial build out utilizing the technology it is currently proving out at its Eastport, Maine site. From securing project funding to project implementation, Ocean Renewable Power Corporation will do all it possibly can to ensure a successful project in Cook Inlet AEA 09-004 Grant Application Page 25 of 26 9/3/2008