HomeMy WebLinkAboutGlacier Fork Hydro Grant App
Prepared by:
GLACIER FORK HYDROPOWER, LLC
1503 West 33rd Avenue, #310
Anchorage, Alaska 99503
Tel: (907) 258-2420
Fax: (907) 258-2419
GLACIER FORK HYDROELECTRIC PROJECT
AEA-09-004 - RENEWABLE ENERGY GRANT APPLICATION
FY 2010
NOVEMBER 10, 2008
GLACIER FORK HYDROPOWER, LLC RENEWABLE ENERGY FUND GRANT APPLICATION (AEA-09-004)
GLACIER FORK HYDROELECTRIC PROJECT
NOVEMBER 10, 2008 PAGE i
Table of Contents
SECTION 1. - APPLICANT INFORMATION ...........................................................................2
1.1. Applicant point of contact.................................................................................................2
1.2. Applicant minimum requirements.....................................................................................2
SECTION 2. - PROJECT SUMMARY .......................................................................................3
2.1. Project Type .....................................................................................................................3
2.2. Project Description ...........................................................................................................3
2.3. Project Budget Overview ..................................................................................................3
2.4. Project Benefit ..................................................................................................................3
2.5. Project Cost and Benefit Summary ...................................................................................4
SECTION 3. - PROJECT MANAGEMENT PLAN ....................................................................4
3.1. Project Manager ...............................................................................................................4
3.2. Project Schedule ...............................................................................................................5
3.3. Project Milestones ............................................................................................................5
3.4. Project Resources .............................................................................................................5
3.5. Project Communications ...................................................................................................6
3.6. Project Risk ......................................................................................................................6
SECTION 4. - PROJECT DESCRIPTION AND TASKS ............................................................7
4.1. Proposed Energy Resource ...............................................................................................7
4.2. Existing Energy System....................................................................................................7
4.2.1. Basic Configuration of Existing Energy System.........................................................7
4.2.2. Existing Energy Resources Used ................................................................................7
4.2.3. Existing Energy Market .............................................................................................8
4.3. Proposed System ..............................................................................................................8
4.3.1. System Design ...........................................................................................................8
4.3.2. Land Ownership ........................................................................................................9
4.3.3. Permits ......................................................................................................................9
4.3.4. Environmental .........................................................................................................10
4.4. Proposed New System Costs (Total Estimated Costs and proposed Revenues)................11
4.4.1. Project Development Cost .......................................................................................11
4.4.2. Project Operating and Maintenance Costs ................................................................11
4.4.3. Power Purchase/Sale ................................................................................................12
4.4.4. Cost Worksheet .......................................................................................................12
4.4.5. Business Plan ...........................................................................................................13
4.4.6. Analysis and Recommendations ...............................................................................13
SECTION 5. - PROJECT BENEFIT .........................................................................................13
5.1. Estimated Fuel Displacement ..........................................................................................13
5.2. Estimated Annual Revenue .............................................................................................14
5.3. Other Annual Revenue Streams ......................................................................................14
5.4. Project Benefit from Direct Cost Savings........................................................................14
5.5. Indirect Project Benefits .................................................................................................16
SECTION 6. - GRANT BUDGET ............................................................................................17
SECTION 7. - ADDITIONAL DOCUMENTATION AND CERTIFICATION ........................18
GLACIER FORK HYDROPOWER, LLC RENEWABLE ENERGY FUND GRANT APPLICATION (AEA-09-004)
GLACIER FORK HYDROELECTRIC PROJECT
NOVEMBER 10, 2008 PAGE 2 OF 24
SECTION 1. - APPLICANT INFORMATION
Name Glacier Fork Hydropower, LLC
Type of Entity: Independent Power Producer / Electric Utility 1
Mailing/Physical
Address
1503 West 33rd Avenue, Suite 310
Anchorage, AK 99503
Telephone 258-2420
Fax 258-2419
Email joel@polarconsult.net
1.1. Applicant point of contact
Name Joel D. Groves, PE
Title: Project Manager
Mailing Address 1503 West 33rd Avenue, Suite 310
Anchorage, AK 99503
Telephone 258-2420
Fax 258-2419
Email joel@polarconsult.net
1.2. Applicant minimum requirements
As an Applicant, we are: (put an X in the appropriate box)
X1 An electric utility holding a certificate of public convenience and necessity under
AS 42.05, or
X1 An independent power producer, or
A local government, or
A governmental entity (which includes tribal councils and housing authorities);
Endorsements:
Yes Attached to this application is formal approval and endorsement for its project by its
board of directors, executive management, or other governing authority. If a
collaborative grouping, a formal approval from each participant’s governing authority is
necessary. (Indicate Yes or No in the box )
Yes As an applicant, we have administrative and financial management systems and follow
procurement standards that comply with the standards set forth in the grant agreement.
Yes If awarded the grant, we can comply with all terms and conditions of the attached grant
form. (Any exceptions should be clearly noted and submitted with the application.)
1 Under State Law (AS42.05.221), IPPs selling wholesale energy to a public utility are subject to
RCA jurisdiction. To provide the public service proposed, GFH will become a certificated public
utility.
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SECTION 2. - PROJECT SUMMARY
2.1. Project Type
The proposed project is for reconnaissance study, feasibility st udy, permitting, design and
construction of a proposed hydroelectric project on the Glacier Fork of the Knik River.
2.2. Project Description
The Glacier Fork Hydroelectric Project is an approximately 75 MW storage project proposed for
the Glacier Fork of the Knik River near the mouth of Metal Creek, located approximately 20
miles east of the Eklutna Hydroelectric Project powerhouse and 25 miles southeast of Palmer,
Alaska. Electricity from the project would be delivered into the railbelt transmission grid via a
new approximately 20-mile transmission line to existing transmission infrastructure in the
vicinity of the Old Glenn Highway bridge over the Knik River. A map of the project is included
at the end of the application before Attachment A.
Glacier Fork Hydropower, LLC (GFH) would be the project owner, and would contribute
funding, develop, own, and operate the project. GFH is currently owned by the five engineers of
Polarconsult Alaska, Inc., an engineering consulting firm based in Anchorage, Alaska that
specializes in hydroelectric project development throughout Alaska. GFH is currently in
discussions with Chugach Electric Association (CEA) regarding the project. GFH, jointly with
CEA, intends to work with other Railbelt utilities and the State to develop the project.
2.3. Project Budget Overview
GFH estimates the required budget to complete reconnaissance and feasibility studies,
permitting, and conceptual design of the Glacier Fork project to be $5,000,000. GFH is
requesting 100% of the pre-development funding in the amount of $5,000,000 from the
Renewable Energy Grant Program funds. If the project is feasible, GFH in association with
participating Railbelt utilities will seek financing for the entire project similar to the existing
Bradley Lake Hydroelectric project outside the Renewable Energy Grant Program.
Preliminary est imates of the total cost of the project are summarized in the following table.
2.4. Project Benefit
The anticipated benefits to the public from the proposed project are summarized below.
Assumptions used to estimate these benefits are discussed in Section 5 of this application.
The direct benefits of the project include the following:
Project Phase Requested Grant Funds
RECONNAISSANCE STUDY (FY 2009) $500,000
FEASIBILITY STUDY (FY 2010) $1,000,000
CONCEPT. DESIGN & PERMITTING (FY 2011) $3,500,000
DESIGN & CONSTRUCTION (FY 2012/13) $325,000,000
TOTAL CAPITAL COST $330,000,000
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1. The project will provide additional generating capacity to the railbelt, and in particular to
the Anchorage – Mat-Su populations. In the long term, this project offers the potential to
significantly lower energy costs for railbelt ratepayers.
2. The project will provide approximately 330,000 MWh of renewable energy annually to
the railbelt and ratepayers.
3. The project is located closer to electrical loads than other existing generation assets. As a
result, the project will increase efficiency of the energy grid in the southcentral region.
The project is also expected to have the following indirect benefits to the public:
1. Increased reliability and stability of the local power grid. Also, increased diversity of
fuel sources for the railbelt grid.
2. Reduced demand for Cook Inlet natural gas. This project will offset natural-gas fired
power generation, reducing natural gas consumption and incrementally extending the life
of the existing Cook Inlet fields, to the benefit of the public that relies upon these fields
for electricity and space heating needs.
3. The creation of local jobs and economic benefit. A significant portion of the project
funding will go towards hiring local construction firms to perform the work and will
create local jobs to own and operate the project, boosting the local economy.
4. The development of technical expertise in Alaska through the use of local firms to
perform the design and development. This benefits Alaska by promoting local
experience and can be used to develop additional future projects thus providing even
more economic development and jobs for Alaskans.
2.5. Project Cost and Benefit Summary
PROJECT COST AND BENEFIT SUMMARY
2.5.1 Total Project Cost
(Including estimates through construction.) $330,000,000
2.5.2 Grant Funds Requested in this application. $5,000,000
2.5.3 Other Funds to be provided (Project match) $0
2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $5,000,000
2.5.5 Estimated Benefit (Savings) $0
2.5.6 Public Benefit
(See section 5 for discussion) $310,459,934
SECTION 3. - PROJECT MANAGEMENT PLAN
3.1. Project Manager
The Project Manager is Joel D. Groves, PE. Mr. Groves has considerable experience evaluating,
designing, permitting, and operating hydroelectric projects similar to the proposed project
GLACIER FORK HYDROPOWER, LLC RENEWABLE ENERGY FUND GRANT APPLICATION (AEA-09-004)
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throughout Alaska. Resumes and references for Mr. Groves and other GFH Members are
attached to this proposal.
No project management assistance from AEA or other government entities is expected for this
project.
3.2. Project Schedule
Primary efforts to date have focused on project reconnaissance, and formulating preliminary
opinions on the technical, regulatory, and economic viability of the project. GFH has completed
initial reconnaissance of the project, and submitted an application for a FERC Preliminary Permit
for the Glacier Fork project. Further reconnaissance activities are currently ongoing. The
proposed project schedule follows.
Year Activity
Hydrology
Surveys
Public Process
Reconnaissance study
Feasibility study
FERC permitting and licensing
Resource studies
Design studies
Project design
2009, 2010, 2011
Obtain permits, land, easements, right of ways
2012, 2013 Project Construction
3.3. Project Milestones
Key project milestones are summarized in the table below.
Milestone Scheduled Completion
Reconnaissance Study Report Fall 2009
Feasibility Study Report and Determination March 2011
Agency Approved Resource Study Plan Fall 2010
FERC License, Agency Permits Fall 2012
Construction Bid Process Winter 2012/2013
Project Commissioning Fall 2014
3.4. Project Resources
The Polarconsult team will provide the technical expertise, hydropower engineering knowledge,
and direct hydro project operational experience to perform all aspects of developing the Glacier
Fork project. CEA’s resource commitment depends upon the business relationship to be
developed with GFH and the State’s approval of the requested grant funds in this application for
project development.
Polarconsult and CEA anticipate that GFH and CEA will have business arrangements in place by
the first quarter of 2009.
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3.5. Project Communications
GFH will keep AEA informed of project status through the issuance of monthly or quarterly
project status reports as warranted. The reports will include a brief (1 page) report including a
narrative of current project status, activities in the current month, any problems encountered, and
the anticipated activities in following months. The report will also include a budget status
summary.
As warranted, GFH may also advise the AEA grant manager of upcoming events such as field
visits or other activities of specific interest on an as-needed basis.
3.6. Project Risk
To date, the reconnaissance studies on the Glacier Fork resource have been limited to review of
existing information. Collection of field data is necessary to identify and evaluate project risks,
and determine if identified risks can be mitigated or may influence project viability. Generally,
project risks include:
Ø Hydrolo gical risk. The available water in the Glacier Fork could be less than indicated by
existing hydrology data. This risk will be mitigated through the development of a
comprehensive hydrology study that will determine the water availability at this resource to
a high level of confidence. The project size will be adjusted as required in the feasibility
phase to optimally utilize the available water.
Ø Geotechnical risk. Geotechnical conditions at the proposed dam site, tunnel alignment, or at
other locatio ns on the project may present unanticipated engineering challenges. This is
primarily a cost/feasibility risk. Field work will identify those geotechnical conditions that
require special attention, and these will addressed during the design phase.
Ø Environmental risk. Existing information indicates that the Glacier Fork is not an
anadromous river, and that the upper Glacier Fork canyon and other areas that will be
inundated by the reservoir are not significant or important habitat for any listed species or
game in general. Field studies will be performed to confirm these initial findings.
Ø Permitting/Regulatory risk. The project is located within the Kink River Public Use Area.
The Alaska Department of Natural Resources (ADNR) published a management Plan for
this area earlier in 2008. This management plan has been reviewed, and the proposed
project is generally consistent with the plan.
Ø Glacial risk. The project's footprint is located adjacent to the Knik Glacier, and could be
affected by the glacier if the glacier were to advance into the project area. Such behavior is
not known to be in the historical record, but given the long design life of such a project,
appropriate field investigations will be undertaken to quantify any risks the glacier may pose
to the project. These risks will be mitigated by proper location of the project features.
Ø Cost risk. Cost estimates and economics of the project will be considered at the
reconnaissance, feasibility, and design stages of the project to confirm that the project's
economics are favorable for the railbelt. By monitoring the projected costs in an orderly
manner as more information becomes available throughout the reconnaissance and
feasibility phases of the project, exposure to cost risk will be minimized.
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SECTION 4. - PROJECT DESCRIPTION AND TASKS
4.1. Proposed Energy Resource
The proposed energy resource is the Glacier Fork of the Knik River. The Glacier Fork above the
proposed dam site drains 267 square miles of the Chugach Mountains northwest of Prince
William Sound, and is 23% by area of the total basin drained by the Knik River above the U.S.
Geological Survey (USGS) stream gage #15281000 located at the Old Glenn Highway bridge.
As the Glacier Fork approaches the Knik River, it passes through a canyon to the north of the
Knik Glacier, near Metal Creek. A dam would be built within this canyon, with a power tunnel /
penstock diverting water west approximately 8,400 feet to a powerhouse near the mouth of the
Glacier Fork at the head of the Knik River flats. The project would have a gross head of
approximately 680 feet.
The Glacier Fork basin is the northerly and easterly portion of the Knik River basin. Based upon
the similar degree of glaciation in the Glacier Fork and Lake Fork basins of the Knik River, the
normalized runoff from each basin is believed to be similar. This assumption will be validated
by establishing a stream gauge and conducting a hydrology study for the Glacier Fork.
USGS gauge #15281000 has a period of record from 1959 to current . Based upon this data and a
maximum design flow of 1,700 cubic feet per second (cfs), an average annual energy generation
of 330,000 MWh is estimated from the project.
Alternative energy resources available to this market include all alternatives available to the
railbelt energy grid, which principally include: natural gas, diesel/oil, coal, storage hydro, run-of-
river hydro, hydrokinetic/tidal, wind and geothermal.
Overall, this project appears competitive with existing generation costs on the railbelt and has the
potential to lower railbelt energy costs. In the long term, this project offers the potential to
significantly lower energy costs for railbelt rate payers.
4.2. Existing Energy System
4.2.1. Basic Configuration of Existing Energy System
The proje ct would interconnect with the railbelt transmission grid in the vicinity of the 115 kV
transmission line at the Old Glenn Highway bridge over the Knik River. From there, power
would be directed either west to the Eklutna Powerhouse over this existing line, and then via a
double transmission circuit to Anchorage and beyond to the Kenai Peninsula; or north to serve
the loads in the Mat-Su valley and beyond to Fairbanks.
The energy and capacity offered by the Glacier Fork project would be managed in concert with
other existing and future generation resources on the railbelt.
4.2.2. Existing Energy Resources Used
The southern railbelt generally relies upon a combination of natural gas turbines and
hydroelectric power to generate electricity. Currently, natural gas combustion accounts for
approximately 85-90% of total energy projection, and the balance is from hydroelectric projects.
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The Glacier Fork project will provide local utilities considerably increased flexibility to more
efficiently operate their generation assets to meet system loads and spinning reserve
requirements. At up to a 75 MW installed capacity, the Glacier Fork Reservoir provides
sufficient water storage for approximately five days of electrical generation at full capacity.
During the summer months, the Glacier Fork project is capable of continuous output at its
installed capacity and could be used for base load generation. During the winter months, the
Glacier Fork project could be used for one or more of the following functions:
Ø Providing base load at a much lower level (approximately 5 to 7 MW continuous
generation),
Ø Daily peak shaving at up to its rated capacity, reducing the need for utilities to use lower
efficiency 'peaking' natural gas turbines.
Ø Providing spinning reserve up to the rated capacity of the project, reducing the need for
utilities to burn natural gas to provide spinning reserve.
Ø Operation in a coordinated manner with other hydroelectric resources to more optimally
utilize water storage at the Eklutna Lake, Cooper Lake, and Bradley Lake Hydroelectric
Projects.
4.2.3. Existing Energy Market
The existing energy market is generally the six railbelt utilities, Matanuska Electric Association
(MEA), Chugach Electric Association, Seward Electric System (SES), Homer Electric
Association (HEA), Municipal Light & Power (ML&P), and Golden Valley Electric Association
(GVEA). Various power sales contracts and transmission capacity bottlenecks limit the extent to
which GFH electricity could be freely marketed to some of these utilities.
4.3. Proposed System
4.3.1. System Design
The Project is located on the Glacier Fork of the Knik River, approximately 25 miles southeast
of the city of Palmer, Alaska, and 50 miles east -northeast of the city of Anchorage, Alaska. The
project site is accessible by small aircraft, river boat, or off-road vehicle. The location of the
dam is in section 35 of Township 16 north, Range 6 east of the Seward Meridian. The project is
generally located at latitude 618 26' north and longitude 1488 30' west.
The Project will consist of a dam, intake structure, power tunnel or penstock, powerhouse,
transmission line, and associated facilities. Detailed descriptions of these components follow.
Ø The dam will be located in the upper Glacier Fork Canyon, and will be approximately 430
feet tall and is of undetermined construction at this time. The dam will have a spillway
elevation at approximately 980 feet. There will be an associated intake structure to collect
up to 1700 cfs of water from the reservoir.
Ø The dam will create a reservoir in the Glacier Fork Canyon and lower Grasshopper
Valley. The reservoir will extend approximately 5 miles up the Glacier Fork and have a
maximum surface area of 390 acres. The reservoir will have approximately 75,000 acre-
feet of total st orage, with approximately 17,000 acre-feet for normal power generation
operations.
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Ø Water will be transported from the intake structure via a 12 to 15-foot diameter 8,400-foot
long combination power tunnel-penstock, with surge tanks and appurtenant facilities as
required to the powerhouse. Exact routing, lengths and configuration of the power tunnel
and penstock will be determined during the feasibility, field investigation, and design
phases of the project.
Ø The powerhouse will be located at approximately the 300 foot elevation near the mouth of
the Glacier Fork Canyon, where it emerges onto the Knik River flats. A tailrace will
return waters to the Glacier Fork approximately 7 river miles downstream from the dam
site. The size of the powerhouse and the type and number of turbine-generator sets to be
installed will be determined during the later phases of the project.
Ø Electricity generated by the project will be transmitted to south central markets via a new
approximately 20-mile long transmission line constructed for this project. The
transmission line will generally travel along the Knik River flats and connect to the
existing 115-kV line near the Old Glenn Highway at the bridge over the Knik River.
From there, existing transmission lines will deliver project electricity to railbelt energy
markets. The specific alignment for this new transmission line has not yet been
determined.
Ø The project will be accessed by a road to be constructed up to the project site from
existing roads in the area. The starting point and route of the access road have not been
determined. The road and transmission line are expected to follow the same alignment in
order to simplify property acquisition and maintenance of the transmission line.
Based on existing information, the gross head of the project is approximately 680 feet, and the
design flow is 1700 cubic feet per second (cfs). The project is estimated to have an installed
capacity of 75 MW and an annual average energy generation of approximately 330,000 MWh.
This capacity and energy would give the project a capacity factor of 0.52. Hydrology and
feasibility studies will confirm the optimal installed capacity and annual energy generation.
4.3.2. Land Ownership
The project works and reservoir are located entirely on lands owned by the State of Alaska and
within the Matanuska-Susitna Borough. A small portion of the reservoir is located within the
Municipality of Anchorage. Three privately held parcels and two mining claims are located in
the lower Glacier Fork Canyon in the general vicinity of the powerhouse.
The transmission and access routes to the project have not been determined, but would likely
cross lands under federal, state or private ownership. A major landholder in the area is Eklutna,
Inc. the ANSCA village corporation for the village of Eklutna. The project is located within the
limits of the Knik River Public Use Area.
4.3.3. Permits
The project boundary does not include any lands designated or recommended for designation as
wilderness area or wilderness study area; or any waters included in, designated for study, or
designated for inclusion in the National Wild and Scenic Rivers System.
Major permits and approvals required for the project are listed below.
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Ø Water Use Permit / Water Rights (ADNR)
Ø Land Lease/easement/purchase (BLM, ADNR, and/or private land owners)
Ø Fish Habitat Permit (ADFG)
Ø Army Corps of Engineers permits
Ø Utility certification (RCA)
Ø License for Major Hydropower Project (FERC)
Ø Archeological consultation (SHPO)
Ø Mat-Su Borough Building Permits
4.3.4. Environmental
Based upon review of available environmental data, there are no major environmental conflicts
identified for this project. Primary environmental considerations and assessments based upon
known information are listed below.
Ø Fish Habitat. The Atlas of Waters Important to the Spawning, Rearing, or Migration
of Anadromous Fishes, maintained by the Alaska Department of Fish and Game
(ADFG), identifies the Knik River below the project as anadromous fish habitat, but
does not identify any of the Glacier Fork as anadromous fish habitat. It is likely that
there is a barrier to anadromous fish in the lower canyon. The 2008 Knik River
Public Use Area Management Plan states that habitat for resident fish 'may occur' in
the Glacier Fork.
Even if the reservoir, dam, and dewatered reach of the Glacier Fork is not fish habitat,
the project has the potential to affect fish habitat by altering the thermal regime of
waters downstream of the project. Adverse thermal affects can be avoided through
proper design of the intake structure. By enabling the project to selectively draw
water from various depths within the reservoir, the project can modulate the tailrace
temperature to emulate or enhance natural conditions. The Glacier Fork accounts for
approximately 23% of the total flow in the Knik River. Waters from the project will
combine with the natural flows from Metal Creek and the Knik River.
Ø Game Habitat. The most significant project component likely to affect game habitat
is the reservoir . Most of the area inundated by the reservoir is steep canyon walls
below 1000 feet elevation, which is not expected to be prime habitat for game. The
upper part of the reservoir will inundate the very lower portion of the Grasshopper
Valley. The 2008 Knik River Public Use Area Management Plan characterized the
valley floor as 'sparsely vegetated', and identifies it has habitat for moose, bear, and
various small game.
Ø Threatened or Endangered Species. The U.S. Fish and Wildlife Guide indicates no
threatened or endangered species in the project vicinity.
Ø Aesthetics. Public use of the area where the project works would be located is
primarily recreation and hunting. According to the Knik River Public Use Area
Management Plan, there is limited commercial recreation currently using the project
area. The dam and reservoir would be the most significant aesthetic changes caused
by the project. The reservoir would present a new recreational opportunity,
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potentially offering similar aquatic recreational opportunities as Eklutna Lake. The
penstock and powerhouse would have comparatively minor aesthetic affects, being
visible from a variety of vantage points in the area.
The project's most significant aesthetic effect is expected to be the transmission lines
connecting the project to the existing transmission grid. These lines would generally
follow the Knik River from the project to the vicinity of the Old Glenn Highway
bridge, either on or near the river flats, or on the hillsides to the north or south of the
flats. The lines would generally be visible to the public in this area, and would
generally be similar in appearance to existing transmission lines below the Old Glenn
Highway Bridge.
Ø Based on the scale of the project, some wetlands fill is likely. The quantity of
wetlands that will be filled by the project will not be known until specific alignments
and locations for the various project features have been selected and inventoried for
wetlands. Any required wetlands fill would be completed under a permit from the
Army Corps of Engineers.
Ø No archeological or cultural resources are known to be in the project vicinity. SHPO
will be consulted during the course of the project.
Ø The project is located within DNR's 2008 Knik River Public Use Area Management
Plan. The project is consistent with the Plan's designated management objectives for
the area, which are:
o Manage for low levels of public use and enhanced recreational opportunities.
o Manage to provide the full spectrum of public uses, while mit igating impacts to
habitats for fish and wildlife.
o Develop a single multiple use trail into Grasshopper Valley. The project access
road may be suitable for use as this access trail.
Ø Telecommunications Interference. None.
Ø Aviation Considerations. None.
4.4. Proposed New System Costs (Total Estimated Costs and
proposed Revenues)
4.4.1. Project Development Cost
Due to the magnitude of the project and the limited available technical data on the project site
and resource, a detailed cost estimate to develop the Glacier Fork project is premature. Based on
available data, a likely capital cost for the project works would be in the range of $260 to $400
million. This grant application projects a total development cost of $330 million.
4.4.2. Project Operating and Maintenance Costs
It is premature to provide detailed estimates for project operation and maintenance costs, but
such costs would likely be similar to the O&M costs for the nearby Eklutna Hydroelectric
Project. Adjusting Eklutna costs to the Glacier Fork project on an installed-capacity basis results
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in an estimated O&M budget of approximately $5 million annually. This budget would include
routine O&M activities and also less frequent activities such as equipment overhauls.
No grant funding is requested for operations and maintenance costs.
4.4.3. Power Purchase/Sale
The energy and capacity from the project would be sold to railbelt utilities. Power sales
negotiations have not been initiated at this time. Generally, power sales could be structured on
an avoided-cost basis, fixed-price basis or on a cost-plus basis. Other mechanisms are also
possible. More study of the project's integration with the utilities’ existing and future operations
would be necessary to determine the appropriate pricing structure for electricity from this
project.
Current projections are for the avoided cost of energy on the southern railbelt to run in the range
of 5 to 13 cents/kWh over the next 30 years.
Projecting a specific rate of return is not possible at this time because the project costs, business
structure, and power sales rates have not been determined. Given the scale of the project, it is
expected that the rate of return from the project would be regulated by the Regulatory
Commission of Alaska (RCA). The highest rate of return the RCA has approved for a regulated
utility is approximately 17% annually (RCA Docket U-97-44, Order #6). A rate of return of 10%
is assumed for analyses in this application.
4.4.4. Cost Worksheet
A preliminary economic feasibility analysis using an average annual energy production of
330,000 MWh, state grants for 50% of the $330 million total project cost, project financing at
5% on a 30-year note, and a 10% profit margin indicates that the project could provide energy at
a break-even cost of approximately $0.055/kWh. This is competitive with the expected long
term cost of energy from natural gas-fired generation on the railbelt grid.
For this preliminary analysis, renewable energy credits (RECs), capacity, increased grid
efficiency, and other items are offered to provide a direct public benefit from the project to
justify the 50% state grant for construction.
The specific assumptions used in completing the attached AEA cost worksheet are summarized
below.
Ø Sections 1 & 3. Resource availability, installed capacity, plant capacity factor, and annual
energy generation are based upon hydrology for the project estimated from the Knik River
USGS stream gage #15281000.
Ø Section 4. – Project capital, development, and O&M costs are opinions of probable cost
ba sed upon available information and estimates. These values would be refined as part of
the feasibility study phase of project development.
Ø Section 5. – Project Benefits. The amount of fuel displaced is based upon the estimated
annual energy generatio n, and an estimated future net heat rate for the natural gas fired
generation the project would offset. Project benefits are also calculated at a
reconnaissance level. Benefits have been calculated assuming that capacity value will be
a direct public benefit, and revenue from energy sales will be used to pay the projects debt
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service, O&M, and other costs. Depending on the eventual business structure, project
participants, and other factors, public benefit may be achieved by other means. See
section 5 for a more detailed explanation of these assumptions.
Ø Section 6. – Power Purchase Price. A long term energy purchase price of $0.055/kWh is
the preliminary estimate used for this project.
4.4.5. Business Plan
The business configuration and plan for the Glacier Fork project has not yet been formulated, but
it is anticipated that the project will be operated as a separate regulated utility or as a business
unit of an existing regulated utility or utilities.
It is anticipated that CEA will be directly involved in the project as an owner. CEA has a proven
track record of operating similar hydroelectric projects, including the FERC-licensed Cooper
Lake Hydroelectric Project and the Eklutna Hydroelectric Project. Also, the Polarconsult team
collectively has decades of experience in all aspects of developing, maintaining and operating
hydropower projects in Alaska.
GFH Members have direct experience in permitting, design, construction, and operation of
hydroelectric facilities. In addition to the numerous projects that the GFH team has worked on
as part of their regular course of business as engineering consultants for Polarconsult Alaska, the
Members also have experience owning, operating, and maintaining the McRoberts Creek
hydroelectric project.
All of GFH Members are employees of Polarconsult Alaska, Inc. Attachment A includes a
Statement of Qualifications for Polarconsult that highlights GFH Member capabilities.
4.4.6. Analysis and Recommendations
Based upon reconnaissance-level analyses to date, the Glacier Fork project appears to be
favorable from technical, financial, and regulatory perspectives, and continued investigations to
confirm these initial findings are warranted. Based upon preliminary estimates for energy,
capacity, capital cost, and requested grant funding levels, the project is competitive with existing
natural gas-fired generation on a cost-per-kWh basis.
The project has excellent potential for seasonally providing base load generation, peaking
capacity, or spinning reserve that could provid e regional utilities with considerable opportunities
for enhanced generation efficiencies. One opportunity is the potential to achieve economies by
using the Glacier Fork project to provide low-cost spinning reserve that will complement the Fire
Island or other local major wind projects.
It is recommended that funds be authorized to advance the project to the feasibility stage so that,
if favorable, the project can be advanced to construction in a timely manner.
SECTION 5. - PROJECT BENEFIT
5.1. Estimated Fuel Displacement
The project would primarily displace Cook Inlet natural gas burned for power generation.
Estimated fuel displacement and assumptions used to generate the estimates are summarized
below:
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Fuel Type Natural Gas
Annual Displaced Energy 331,982 MWh
Displacement 100%
Efficiency of Displaced Generation (Heat Rate) 9,800 btu/kWh
Average Annual Displaced Fuel 3.25 BCF
Displaced Fuel over 30 Years 97.6 BCF
Average Market Value of Displaced Fuel (assumed) $7.00/MCF
Annual Value of Displaced Fuel $22,773,935
Inflation Rate 2%
Discount Rate 5%
Present Value of Displaced Fuel over 30 years $446,379,171
5.2. Estimated Annual Revenue
Estimated annual revenue from power sales and assumptions used to generate the estimates are
summarized below:
Contract Item Proposed Terms
Contract price structure Avoided Cost
Average avoided cost over 30 years (Energy Rate) $55/MWh
Average Annual Energy Sales 331,982 MWh
Average Annual Gross Revenue From Power Sales $18,258,986
Average Annual Operating Expenses $15,382,839
Average Annual Net Revenue (before taxes, depreciation, etc.) $2,157,110
5.3. Other Annual Revenue Streams
State or federal tax credits may be available to the project over its life. Currently available
federal tax credits for renewable energy have very limited eligibility criteria for hydroelectricity,
and this project is not expected to qualify. Generally, the volatility in tax credit rules and
eligibility precludes forecasting any benefit from them over the project’s life. The project
ownership structure may also affect eligibility for tax credits.
5.4. Project Benefit from Direct Cost Savings
The following direct cost savings would result from this project.
Ø Green Tag / Renewable Energy Credits (RECs): The project may qualify for RECs.
RECs currently market in Alaska for $0.02/kWh (Denali Green Tags). The federal or
state government may enact new laws such as carbon taxes or renewable portfolio
standards that local utilities could be required to comply with. The renewable energy
from this project would not have any carbon emissions, potentially enabling the
purchasing utility/utilities to reduce the quantity of RECs or other carbon trading
instruments they could be required to purchase under any new federal or state programs.
The value of these RECs is considered to be part of the public benefit from the project.
Ø The project would provide significant capacity and energy value to the purchasing utility
or utilities. The requested grant funding level would enable GFH to pass on a combined
capacity/energy discount of approximately $0.02/kWh to the purchasing utility, which
would be a direct pass-through savings to the ratepayers and the public in general.
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Ø Line Efficiency: By positioning generation closer to existing demand centers, it is
expected that the project would generally increase the efficiency of the region’s
transmission system. Increased efficiency would likely be observed on the CEA, MEA,
and ML&P systems to varying degrees. This would reduce costs for all three local
utilities.
Ø Annual Property Tax Revenue: The Mat-Su Borough will likely levy property taxes on
the project over the life of the project, although the project’s tax status and tax rate
would depend upon the business structure and tax status of the project owners. Annual
property tax payments will contribute to the tax base and economic activity in the
Borough.
Ø A capital financing term of 30 years is assumed, but the project’s design life would be in
excess of 100 years. After 30 years, the public would enjoy considerable benefits from
the project beyond 30 years. An example of these benefits is the Eklutna Lake
Hydroelectric Project, which provides energy to CEA, MEA, and ML&P for under
$0.005/kWh.
These annual public benefits are summarized, and their present value is estimated in the
following table. Assumptions used to generate the estimates are also stated.
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DIRECT ECONOMIC BENEFITS FROM PROJECT
Green Tags / RECs
Average annual generation: 331,981,555 kWh (assumed)
Market Value: 0.02 $/kWh
Annual Value: $6,639,631
Term: 30 years
Inflation Rate: 2%
Discount Rate: 5%
Present Value: $130,139,700
Increased Available Capacity
Installed Glacier Fork capacity 75,000 kW
Capacity Value $1,950 $/kW New CEA-MLP Plant
Present Value: $146,250,000
Line Efficiency
Line losses from CEA G&T to MEA 2.8% (CEA Tariff)
Line losses on MEA System (CEA delivery to Glacier Fork
load): 1.5% (assumed)
Line losses from Glacier Fork project to load center: 1.5% (assumed)
Power throughput avoided by project: 331,981,555 kWh (assumed)
Avoided energy losses (CEA): 9,325,362 kWh
Avoided energy losses (MEA): 0 kWh
Nominal value of energy: 0.050 $/kWh (projected over life)
Average annual savings from reduced energy losses: $466,268
Term: 30 years
Present Value: $9,139,060
Property Tax Revenue to Mat-Su Borough
Estimated annual tax obligation: $1,271,970
Term: 30 years
Present Value: $24,931,173
TOTAL DIRECT ECONOMIC BENEFITS FROM
PROJECT $310,459,934
5.5. Indirect Project Benefits
GFH has identified several indirect public benefits that may result from the project. These are
summarized and briefly discussed below.
1. The project will be connected to the railbelt electrical grid. This provides desirable
operational enhancements to this transmission and distribution system. There is an
increase in stability, reliability, and redundancy. These gains can only be obtained by
providing multiple, new distributed generation sources such as this project. This new
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generation asset also significantly improves the diversity of fuel sources powering the
grid through the addition of renewable energy.
2. This new generation asset will offset generation from existing natural gas-burning
facilities in Southcentral Alaska. This will reduce consumption of Cook Inlet basin
natural gas. Cook Inlet gas production from existing developed fields is declining, and
shortages are already occurring during periods of peak gas demand. By offsetting natural
gas demand for electricity generation, this project will be extending the useful life of the
Cook Inlet gas fields to the benefit of the public.
3. A significant portion of the project funding will go towards hiring local design and
construction firms to perform the work, thus providing local jobs and experience in
building a major hydroelectric project. Current unemployment in the area is at 7.0%
compared with a state average of 6.0%2.
4. With the concurrence of DNR and other applicable state agencies, the project access road
and other improvements may be available for public use. The project is in an existing
off-road motorized recreational area, and improving access presents opportunities to
improve public recreational opportunities in the area.
5. A local firm is performing the design and development. This benefits Alaska by
promoting local experience and can be used to develop additional future projects thus
providing even more economic development and jobs for Alaskans.
SECTION 6. - GRANT BUDGET
The opinion of probable cost for developing the Glacier Fork Hydroelectric Project is
$330,000,000.
GFH is requesting a grant totaling $5,000,000 for the feasibility studies of this project for FY
2010.
The grant budget is summarized on the attached Grant Budget Form.
2 August 2008, State of Alaska, Department of Labor and Workforce Development,
http://www.labor.state.ak.us/research/monthlyunemprate/sep08map.pdf
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SECTION 7. - ADDITIONAL DOCUMENTATION AND
CERTIFICATION
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 6.
D. An electronic version of the entire application per RFA Section 1.6
E. Governing Body Resolution per RFA Section 1.4
F. Fishhook Design, Hydrology, and Permitting Information
G. 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 Joel D. Groves, PE
Signature
Title Project Manager
Date November 10, 2008