Loading...
HomeMy WebLinkAboutTlingit Haida Central Council Mobile Biodiesel Processing Plant App Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 1 of 21 9/2/2008 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. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 2 of 21 9/3/2008 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Tlingit Haida Central Council Type of Entity: Tribal Government Mailing Address 9097 Glacier Highway Physical Address 9097 Glacier Highway Telephone (907) 463-7356 Fax (907) 463-7356 Email pfrisby@ccthita.org 1.1 APPLICANT POINT OF CONTACT Name Percy Frisby Title Tribal Energy Director Mailing Address 9097 Glacier Highway Telephone (907) 463-7356 Fax (907) 463-7356 Email pfrisby@ccthita.org 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 An independent power producer, or A local government, or X 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.) Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 3 of 21 9/3/2008 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. Final design and Permitting, Construction. Production of biodiesel for use as Home Heating Oil, using locally procured and imported feedstock. 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. Tlingit Haida Central Council (CCTHIA) will construct two containerized mobile biodiesel processing plants to be operated in tandem to take advantage of available feedstock, while also servicing distinct geographical regions in Alaska. As the relative isolation of the Southeast and Southcentral regions of the state make prices of feedstock and finished biodiesel dependent upon transportation, we expect to use lower-cost local production and local feedstocks, in addition to imported feedstocks, to bring down the overall costs of the final wholesale and retail costs of Bioheat, a blended Home Heating Oil that can be used in virtually any existing fuel oil stove for residential and public space heating. The operations will be conducted by AlaskaSmart Eco-fuels as per a memorandum of agreement. 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. It is anticipated that the total cost of the project through construction will be $230,000 with 15% to engineering services such as final design, fire protection, and process configuration. 85% will be dedicated to equipment purchasing and construction costs. Project Cost Summary In-Kind donations have been contributed through the Reconnaissance and Feasibility phases in the manner of consulting, investigations, travel to research feedstocks and development of relationships for distribution and siting of plants. Additionally, engineering services have been provided, and equipment has been procured. CCTHIA has provided- $3,250 in-kind research and in house accounting. Bio Concepts has provided- $4,500 of in-kind engineering services. AlaskaSmart has provided- $20,000 Cash for Operations $18,800 in-kind labor of investigation work for the reconnaissance and feasibility stages in addition to $3,000 travel (flights, taxis, meals) $5,000 office rent, internet, office supplies Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 4 of 21 9/3/2008 $15,000 equipment (pumps, motors, oil separation units) Ocean State Energy Resources has provided- $2,500 in-kind consulting services 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. Using existing agreements and current negotiation, CCTHIA expects expand the current expectations of approximately 296,000 gallons of 100% Biodiesel (B-100) which would provide approximately 1,000,000 gallons of B-30, or a 30% blend of Biodiesel. Last year, it was estimated that Native homes in Southeast Alaska with the exception of Juneau and Sitka burned 896,000 gallons of fuel oil to heat their homes, according to Tlingit Haida Regional Housing Authority. As the maximum output of one of our plants is over one million gallons annually each, the combined operations could easily displace the 268,800 gallons to achieve a 30% blend, while leaving the remainder for Juneau residents and expansion into other markets, such as public and commercial transport which would assist in reducing carbon impacts and reduced emissions overall. Biodiesel has been approved by the Environmental Protection Agency as a registered Alternative Fuel. Biodiesel is the only alternative fuel to have fully completed the health effects testing requirements of the Clean Air Act. The use of biodiesel in a conventional diesel engine results in substantial reduction of unburned hydrocarbons, carbon monoxide, and particulate matter compared to emissions from diesel fuel. In addition, the exhaust emissions of sulfur oxides and sulfates (major components of acid rain) from biodiesel are essentially eliminated compared to diesel. Of the major exhaust pollutants, both unburned hydrocarbons and nitrogen oxides are ozone or smog forming precursors. The use of biodiesel results in a substantial reduction of unburned hydrocarbons. Emissions of nitrogen oxides are either slightly reduced or slightly increased depending on the duty cycle of the engine and testing methods used. Based on engine testing, using the most stringent emissions testing protocols required by EPA for certification of fuels or fuel additives in the US, the overall ozone forming potential of the speciated hydrocarbon emissions from biodiesel was nearly 50 percent less than that measured for diesel fuel. Additionally, Biodiesel increases lubricity of diesel fuel when blended even in small percentages- a concern for fleet managers with the recent switch to Ultra-Low Sulfur Diesel. CCTHIA is committed to reducing the negative impact upon the environment, while raising the standard of living for our members. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 5 of 21 9/3/2008 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.) $323,466 2.5.2 Grant Funds Requested in this application. $1,500,000 2.5.3 Other Funds to be provided (Project match) $72,050 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $1,572,050 2.5.5 Estimated Benefit (Savings) $296,000 annually 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.) $296,000 savings annually The expectation is that the public will benefit directly from lower cost fuel. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 6 of 21 9/3/2008 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. Percy Frisby, Tribal Energy Director, will be the designated Project Manager, assisted by Anthony Distefano of AlaskaSmart, and William Smith of Bio Concepts. 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 Section 3.3 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. November-December Purchase of containers for plant and feedstock transport, painting, and continuation of design refinement Seek in-kind mechanical engineering assistance January-February Contract Mechanical Engineering firm licensed and insured in Alaska for Final Design Final pricing of equipment Contract Fire Protection Engineer for methods of Methanol storage and fire plans. Take findings to Local and State agencies, get final approval Purchase of equipment and installation February-March Begin refinement of production protocols Import materials (feedstock, methanol, catalysts) Testing of finished product Begin pilot program, testing production values, assessment of logistical issues March-April Begin production Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 7 of 21 9/3/2008 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. We have contracted a South Carolina biodiesel design engineering firm with a proven track record of design and production, with their company's production values of 20,000 gallon daily. Final design will be contracted with an Alaska engineering firm with proper licensing and insurance. Construction will be overseen by Southeast Biodiesel and AlaskaSmart, with budgetary oversight provided by CCTHIA. Additionally other consulting services have been contributed to this project already and have been listed below. Their cost and other considerations have been listed where applicable. Tlingit Haida Central Council (CCTHIA)- Budgetary oversight of construction of plants. Ownership of plants for purpose of contracting a management company to provide lower cost Biodiesel for Alaskan residents. Providing in-kind consulting and labor. Southeast Biodiesel/Bio Concepts Engineering- Contracted Engineering firm for design of two biodiesel production plants, overseeing construction, and consulting for production protocols and training of production engineers. They will work with an Alaskan Licensed engineering firm for final design and technical assistance. To date, they have provided $4,500 of in-kind engineering and design. Ocean State Energy Resources- Consulting on biodiesel regulatory issues and infrastructure requirements. To date, they have provided $2,500 in-kind consulting. AlaskaSmart- A majority Native owned Limited Liability Corporation contracted to operate the biodiesel plants as per the Memorandum of Agreement (Appendix A). Contribution over $15,000 in pumps, separation centrifuges, and motors, in addition to in-kind labor, travel, and office expenses totaling Alaska Mill and Feed- Established contract for a majority of waste vegetable oil (WVO) that is collected in Anchorage. Alaska Mill and Feed is the primary collector of WVO in Anchorage and the surrounding communities- AlaskaSmart is to be the exclusive purchaser of WVO, in return for addressing the alternative fuel community of Southcentral Alaska, a current problem and cost for their company. Additionally AlaskaSmart will assist in infrastructure improvements and contract procurement for more WVO from area restaurants and institutions. Shoreside Petroleum- Registered distributor of Biodiesel. Agreement to distribute AlaskaSmart’s biodiesel produced, in addition to hosting CCTHITA's production plant in Anchorage, easing the transport costs for distribution and methanol storage. Westmark Baranof- Established agreement to take over existing collection of the majority of waste vegetable oil (WVO) in Juneau. As a current user of WVO for the purpose of burning in the hotel's boiler system, they have used alternative fuels to lower their operating costs, as per a request from Holland America to all their subsidiaries. For two years, the program has been Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 8 of 21 9/3/2008 marked as a success, lowering costs associated with heating the hotel, while also addressing a city wide disposal problem of WVO, as the city of Juneau has no disposal program in place. It has been indicated that people wishing to dispose of WVO would freeze it before transport to the landfill, as it would be classified as a solid. It has been indicated through conversations and internal efforts within Holland America, and through involvement with the project by the Baranof's Chief Engineer Andy Krone, that the current WVO in Juneau is available to AlaskaSmart for use as a feedstock, in return for access to biodiesel for the purposes of burning in their boilers. As a registered fuel by the EPA, there are benefits available and tax implications that would prove to be advantageous for their operations, advantages not seen through merely burning WVO, as it is not a registered Alternative Fuel per the EPA. Additionally, Holland America's Vice President of Operations for North America Bill Sharpe has indicated that the WVO on their cruise ships would be available as well. National Biodiesel Board- As a member, AlaskaSmart will have access to the Tier II Health Effects Study required for EPA registration as a Alternative Fuel Producer. Alaska Biodiesel and SVO Network- Community outreach and training for biodiesel usage in Southcentral Alaska. SEAK Solutions- Community outreach and training for biodiesel usage in Southeast Alaska. Alaska Pump- Sales and service agreements for pumps and associated equipment such as motors and control electronics, valves, and specialty pipes.. Southeastern Fire Supply- Design, installation, and service provider of fire suppression systems and portable fire extinguishers. Lynden Shipping- Provider of shipping services via barge lines and trucking in Seattle WA of feedstock and supplies. Alaska Marine Highway- Transportation provider of biodiesel to local Villages and cities in Southeast Alaska. Potential source of WVO as a feedstock. Carlysle Trucking- Transport of WVO from Alaska Mill and Feed to production plant. As they are already contracted for WVO transport for Alaska Mill and Feed there is a logistical understanding in place. -Equipment considerations include specialty pumps and explosion proof motors. As Alaska Pump is a major supplier to the petroleum industry these considerations are standard. All other equipment and supplies are either industry specific and there is clear choice, or available with local vendors in Alaska. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 9 of 21 9/3/2008 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. Communications will be maintained through the appointed Grant Manager of the Alaska Energy Authority (AEA) and the provided forms from the Tribal Energy Office of CCTHITA. It is also expected to seek assistance and advice through all phases of the construction, final permitting, and initial operations; this will afford ample opportunity for communications and updates of the progress. 3.6 Project Risk Discuss potential problems and how you would address them. Feedstock price fluctuation will affect the price of production. In the past years, feedstock prices when considering yellow grease, soy, and other commodities have generally risen and fallen in tandem with petroleum prices (Appendix H). As we have secured a contract with the only commercial collection companies in Anchorage and Juneau respectively, we feel that our feedstock sources are as secure as could be possible. By having these various stocks available at a lower rate than importing, we are able to stabilize fluctuations in price. Additionally, with the Volumetric Blenders Credit of $1.00 a gallon available (Appendix F), this adds to keeping prices down. However, if prices for one reason or another surpass the cost of petroleum fuels, Biodiesel is a premium fuel, able to meet EPACT standards for federally funded fleets, and able to lower emissions profiles in certain pollution applications where environmental sensitivity is a concern. A portion could be sold at a higher, premium rate to cover costs, in order to keep other costs down for Heating Oil Customers. As this will require new tax implications and a newer business model, this is not under consideration at this time, though we have the information available and are filing the necessary paperwork in anticipation, if this unlikely event occurs. However, in consideration of the historical parity that commodity prices have shared with petroleum prices, we expect to have a reasonable expectation of our wholesale price to always be below Home Heating Oil. Additionally, in consideration of potential risks associated with commodity fluctuation, we have contacted FC Stone, a risk management firm focused on Renewable Fuels. They have indicated their willingness to enter in a relationship if the need arises to help mitigate any potential shortfalls in feedstock. Appendix X Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 10 of 21 9/3/2008 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. Feedstock Sources: Alaska Mill & Feed has become over the last thirty years the largest collector of yellow grease and WVO. Mark Goodman has entered into an agreement to provide ALASKASMART with exclusive rights to most (approximately 80%) of their processed dewatered, and filtered oil at market rates less transport to Seattle markets, about $0.50 a gallon less. This will equate to approximately 150,000-180,000 gallons a year Alaska Marine Highway has expressed interest in providing ALASKASMART with its oil from its on-board restaurants. In addition, we will utilize their extensive network to procure feedstock from locales and provide cost effective shipping from Seattle, Prince Rupert, and Whittier. Baranof Hotel in Juneau has had experience with alternative fuels as they have been running their boilers on up to 50% Waste Vegetable Oil collected from the surrounding restaurants for the past two years. They have managed to secure a network of collection in Juneau, getting at least 80% of WVO available, between 10-12,000 gallons available annually. Andy Krone, the chief engineer there and architect of the collection set-up and alternative energy program has handed over the process, agreeing to purchasing processed biodiesel to run in the boilers, as the process is time consuming. This allows us to stabilize costs for importing feedstock. In addition, as the Baranof is owned by Holland America Cruise Lines, we expect to have a special consideration for collection of their WVO, as they have expressed interest to further the programs that Andy has established. Having him as our Juneau Plant Manager ties our project to a successful foray into alternative fuels for Holland America, and we expect they will be anxious to duplicate. Andy has indicated that based upon an open and functioning business, they will be inclined to offload their WVO here in Alaska to a company able to handle their needs, as opposed to transporting and offloading down in Seattle or Vancouver. Prince Rupert has embarked on a two-year, $170 million expansion of their port, opening opportunities for feedstock from the Canadian provinces, the American Midwest, and Asia. We are in communication with various commodities brokerages. As markets fluctuate we will take advantage of international and Lower 48 trade opportunities. Cruise Lines Cruise ships in Alaska, though a financial boon for many towns, have sometimes left unfavorable impressions on Alaska, often being associated with pollution through waste discharge and emissions of their engines. They have an active campaign to Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 11 of 21 9/3/2008 "green" their image, most recently through a partnership between Imperium Biofuels, based in Seattle and Royal Caribbean. During July of 2008, Royal Caribbean sold it's shares of Imperium and withdrew its contract for 18 million gallons of biodiesel, presumably intended to meet clean air agreements with local, state, and federal governments. This leaves a vast opportunity for ALASKASMART, as we intend to fill a portion of their desire for renewable fuels. Our approach is to use our in-house connections to secure contracts to dispose of their WVO here in Alaska, while selling processed biodiesel back to them for use in their extensive ground transportation sector. As we intend to provide biodiesel to offset and stabilize the rising heating costs for Native Alaskans and other at-need families, the Cruise Industry stands to benefit from extremely positive exposure, as we are willing to assist them in promoting their contributions to this growing and alarming problem. There are about 50,000-60,000 gallons available annually in Juneau, based upon conversations with Holland America's Vice President, Bill Sharpe. We have entered into talks and have had very positive reception thus far. Market yellow grease in Seattle is available to ship up using barge lines. We have calculated our shipping cost to equal about $0.50 a gallon.. Refer to Section 4.2.2 of this grant for an explanation of cost mitigation strategies. 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. Currently, fuel is generally barged up from Seattle and distributed to the communities and villages with a secondary barge and trucking system, resulting in escalated costs. The range of age, efficiency for home heating oil furnaces ranges far and wide, though it can be expected that most will be able to handle the blended fuel as they are built to withstand a high tolerance and flexibility in quality of fuel. The general estimate we drew off of in derived from Tlingit Haida Regional Housing Authority who estimated that approximately 1400 homes received emergency fuel subsidies in 2007 for home heating oil in all communities in Southeast Alaska, excepting Juneau and Sitka. 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. Feedstock available for Biodiesel Production and Cost Mitigation Strategy: Biodiesel is made from mixing alcohol and a feedstock in the presents of a catalyst. The ones generally used are: - Animal fats (fish oil) - Recycled greases (used cooking oils, restaurant frying oils and yellow grease) - Degummed vegetable oils (soy, corn, canola, sunflower and cottonseed) Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 12 of 21 9/3/2008 In Alaska, our locally procured feedstocks are generally comprised of Waste Vegetable Oils (WVO). ALASKASMART has developed relationships with the largest collector of WVO in Anchorage Alaska, securing agreements to sell exclusively a majority of oil collected to us. As the market for yellow grease and WVO is based upon "getting it to the market" ie. Seattle, we have an inbuilt lower cost , amounting to at least $0.50 a gallon less than market costs, as per the back-haul rate of barging to Seattle. This allows us to ship up feedstock (WVO) from other markets, using the price break we have from local feedstock to counterbalance the shipping costs. Thus, for example using current September 2008 rates, if we procure 150,000 gallons of WVO from Alaska Mill and Feed at $1.68 (including transport) a gallon and ship up 100,000 gallons of WVO from Seattle at market price of $2.60 a gallon and $0.34 a gallon shipping, the average price is then $2.18- 16% lower than market while increasing production 66%! This allows us to increase our production capacity, thus keeping our margins stable while increasing our profitability and putting more biodiesel on the Alaskan market. In Juneau, we plan to exhibit the same cost reducing strategy utilizing locally procured feedstock to stabilize costs of importing feedstock.is In addition, we are in the process of collaborating in research with the Borough of Bristol Bay to explore the feasibility of pressing fish oil from waste in the processing done locally (Appendix E). As reported in a grant offered by the Alaska Energy Authority for the establishment of a mobile fish rendering plant "...The Alaska seafood industry processes approximately 4.4 billion pounds of fish annually, producing approximately 2.2 billion pounds of "waste," those portions of the fish not processed for human or industrial consumption. Of that waste, approximately 62 percent is discharged into state waters. The discharged fish waste contains an estimated 13 million gallons of unrecovered fish oil." (James Jensen, Alaska Energy Authority Appendix E). Currently there is development of Canola crops being grown in the Mat Su valley, and in consideration of transportation costs to markets in the lower 48 and abroad, our manufacturing plants have the best position available to utilize any potential oils available. Biodiesel can also be made from mustard seed oil, palm oil, coconut oil, peanut oil, olive oil, sesame seed oil, safflower oil, trap grease, and oils from algae, fungi, bacteria, molds and yeast. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. Home heating oil is transported to Southeast Alaska by barge exclusively, resulting in higher costs than other markets due to transportation costs. In remote villages, these costs are increased as there is 'double shipping', where fuel is shipped to a central location such as Juneau, and then is shipped again via another barge line or the Alaska Marine Highway ferry system. According to the report titled CURRENT COMMUNITY CONDITIONS: FUEL PRICES ACROSS Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 13 of 21 9/3/2008 SOUTHEAST conducted by the Alaska Department of Commerce, Community, and Economic Development, Division of Community & Regional Affairs (DCRA) “...In the eleven surveyed communities, the average heating fuel retail per gallon price increased from $3.24 in November 2005 to $5.18 in June 2008 (Table 1). This $1.94 per gallon increase represents a 60% increase in the average heating fuel per gallon price in the Southeast Region.” Additionally- “...Southeast prices have increased to the point where consumer behavior and lifestyles are being directly impacted. With the higher cost of fuel, residents in the Southeast Region have increased use of non-petroleum based means of home heating (e.g., wood and electric)” Juneau recently mirrored the plight of remote villages with the loss of Hydroelectric power for months, increasing utility costs upwards of 500%. It is felt that in these crisis situations, in addition to the general rise of energy costs, lower cost heating fuel will mitigate some of the far reaching economic effects of climbing fuel prices. Given these considerations, we expect to pass on $296,000 of savings to consumers to help alleviate some of these burdens using locally produced fuel to lower the economic impact of high cost heating oil. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 14 of 21 9/3/2008 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 AlaskaSmarts Biodiesel Process: Our process can be described as a batch/continuous reaction process. We take feedstock, test and pre-treat accordingly to our specifications, and then process the feedstock through the transesterification reaction. As we utilize a continuous reaction set-up, with the option of re-processing as necessary due to fluctuation in feedstock variability, we minimize the usage of large settling tanks and processing vats. What distinguishes ALASKASMART's process for creating biodiesel is the use of hydrodynamic cavitation, as opposed to traditional heating and stirring methods that are more energy intensive. The efficiency improvement is such "...that hydrodynamic cavitation is about 40 times more efficient compared to acoustic cavitation and 160 to 400 times more efficient compared to the conventional agitation/heating/refluxing method." (Parag R. Gogate, Rajiv K. Tayal, and Aniruddha B. Pandit -Appendix D) Hydrodynamic Cavitation can occur in any turbulent fluid. The turbulence produces an area of greatly reduced fluid pressure. The fluid vaporizes due to the low pressure, forming a cavity. At the edges of the cavity, small amounts of vapor break off. These form smaller cavities 100 nm to 3 mm in diameter. The smaller cavities implode under the high pressure surrounding them. This process of formation and collapse is called cavitation. Cavitation is an enormously powerful process. Conditions in the collapsing cavity can reach 5000°C and 1000 atmospheres. The implosion takes place during the cavitation process in milliseconds, releasing tremendous energy in the form of shockwaves. The power of these waves generated by the cavitation process disrupts anything in their path, enhancing mixing on a molecular level. Pre-treatment of feedstock in order to bring down the FFA's (free fatty acids) is an emerging reality in biodiesel production, sometimes raising the cost of production unexpectedly. As was stated in Biodiesel Magazine September 2008 (Appendix F)- Fatty acids are the main component of both fats and biodiesel. In virgin soy oil, three fatty acid molecules form an ester with glycerin. Transesterification breaks the fat molecule with sodium methoxide catalyst and creates three molecules of biodiesel. However, if the fat molecule has been broken, which happens when oils are used for frying, for example, and the fatty acid molecule is free in solution, the catalyst combines with the fatty acid to form soap. More soap formed in the biodiesel tanks means more washing and purification for the biodiesel producer. "During the transesterification process, the chemical reaction that occurs actually can't convert free fatty acids (FFAs)," says Doug Lindsey, a biodiesel application specialist Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 15 of 21 9/3/2008 with SRS Engineering Corp. of Murrieta, Calif. "Besides creating soaps, it impedes the reaction." High levels of free fatty acids also mean producers make less biodiesel from every gallon of oil they buy. That means a good deal on some cheap feedstock may be a raw deal for the biodiesel producer. "Most biodiesel plants on line today were designed to produce biodiesel from refined soy," Lindsey says. "I think 85 percent of the plants in the United States do that today. Those plants are not able to handle other feedstocks." In order to handle the variety of feedstocks available to ALASKASMART, we have incorporated a glycerin pre-treatment, bringing down FFA's in feedstock, thus ensuring a more homogenized process. In addition, as biodiesel production creates glycerin as a by- product, we have an in-built source, as well as a closed loop system. Excess glycerin can be burned in certain boiler systems, especially wood chip burners, where the added methanol content is appreciated as it adds BTU's to the fuel. As our facility is skid mounted and housed in a standard 40' container, our footprint is small allowing us a flexibility in site placement and also mobility as feedstocks become available. Though firmly established in its plans to work with Shoreside Petroleum and produce on site at its facility, as developments emerge, we have an ability to expand and reproduce our plant and take advantage of new feedstocks as they become available. For instance, as a fishery processes fish in different locales (Bristol Bay, Petersburg, Prince of Wales), an ALASKASMART plant can be just a ferry ride away, setting up and producing in a matter of days. Our plants are designed to be operated by a trained core of locals already familiar with engineering and also alternative fuels. In addition, we expect to hire at least five more employees at each plant; two full-time and three seasonal. Training will occur at the University of Idaho's Biodiesel training seminars for management, and local on-the-job training for operators and laborers. See section 6 above for the management structure. The support structure of transportation of feedstock and finished product in Anchorage will continue existing partnerships with Carlyle Trucking as established by Alaska Mill and Feed, though we will continue to seek competitive options. In addition, we plan to utilize the Alaska Marine Highway System for transportation of feedstock and plant relocation as needed. The Marine Highway system is unique in that it allows ALASKASMART to take advantage of cheaper shipping options than traditional barging, as well as have scheduled transport of finished biodiesel to outlying areas and villages. Throughput: The projected plants can produce over 2.5 million gallons a year of biodiesel each, though are constructed to be cost effective even at much lower rates of production. As our production is based upon seasonal fluctuations in feedstock, we have allowed for operations of 16 hours a week/ two shifts, to 112 hours a week/fourteen shifts, depending on the availability of feedstock. Our processing equates to around 10 gallons a minute, with time allotted for routine maintenance and seasonal shifts in employees. The expectation is to allow for 40 weeks of production a year, though operations may be scaled down or up with feedstock availability. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 16 of 21 9/3/2008 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. As the operations will be mobile, there is a wide variety of choices for land to set production on. Currently, there are verbal agreements to set up on Shoreside Petroleum property in Anchorage, along with discussions to mirror the arrangement with Petro Marine in Juneau. As they already store flammables we expect this to ease any permitting issues, as well as provide convenience for delivery of biodiesel post-production. 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 -As the plant will be contained in a 40' container, fire suppression will be simplified. All fire codes and environmental considerations will be met, as we have been in contact with the appropriate agencies and departments and working to meet their requirements. City and Borough of Juneau- Have had a Pre-Planning meeting where the concern was primarily with methanol storage. The Fire Marshall's office indicated that by hiring a Fire Protection Engineering firm that the needs would be met by their recommendations. As we have no wastewater discharge, no toxic emissions, and our plant is a mobile unit they have given indication that they will follow the Alaska Department of Environmental Conservations recommendations. Alaska Department of Environmental Conservation- Has indicated that as we are a mobile unit, with no waste discharge, and that there are no existing regulations on biodiesel that we should have to meet standard building considerations. Will assist them in determining the relevant information in consideration of any regulations and will work to exceed any imposed.. State of Alaska Department of Revenue- As we are wholesaling a product to be intended for use as Home Heating Oil, we have no particular tax implications. This will change if we intend to retail off-road or on-road fuels, but not applicable at this time. Environmental Protection Agency- Must register as an Alternative Fuel Producer. Must have access to Tier II Health Effects Study on Biodiesel. We will have access to this study as a member of the National Biodiesel Board, a trade association that has completed these studies and makes them available to its members. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 17 of 21 9/3/2008 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 − No Threatened or Endangered Species considerations − No Habitat issues − No Wetland or other protected areas − No Archaeological and historical resources − No Land development constraints as this is a light Industrial Process − No Telecommunications interference − No Aviation considerations − Visually this will conform to standard Industrial aesthetics, especially when sited at existing petroleum distribution sites. − The largest barrier present appears to be the storage of methanol in large quantities and this is being addressed by the contracting of a fire protection engineering firm; as this type of operation has been done hundreds of times all over the United States, it is accepted by the local fire marshal in Juneau that they accept that a methanol storage tank can be sited here with appropriate and acceptable methods and equipment. As the operations will be using nitrogen blanketing for flash suppression in all tanks, we allow that along with reasonable and accepted practices with flammables handling we will have reduced fire risk to an acceptable level, exceeding normal practices. 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 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 18 of 21 9/3/2008 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 • Total anticipated project cost for construction phase- $323,466 • Requested grant funding- $1,500,000 which includes operational costs for one year of $901,590 including maintenance. 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 customer will be a petroleum retailer, who will then re-sell blended fuel to its customers. We expect to have lowered the costs of 30% of blended home heating oil sold to villages in Southeast Alaska served by Juneau fuel distributors, in addition to local customers in the borough. In Anchorage, it is expected to lower home heating costs for customers as well. Regional petroleum distributors have faced a negative image due to raised costs they have to pass down to the consumers- having higher transportation costs increases their costs higher than what is the average nationally. Both Shoreside Petroleum and Petro Marine have indicated this is the primary reason to their involvement with the proposed biodiesel project. Additionally, they have indicated a secondary reason of being involved in progressive, environmentally sound technologies that can improve their overall impacts. The strategy is to produce biodiesel for sale to local petroleum distributors, where they will blend with home heating oil, collecting the Volumetric Blenders Credit of $0.01 per percentage of biodiesel blended with petroleum, up to $1.00 with B 99.9% (Biodiesel blended as example 1000 gallons of biodiesel with 1 gallon of petroleum diesel). This would then be blended with the appropriate percentages for reaching the B-30 blends accepted as able to be used in virtually all furnaces with no modifications. 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Download the form, complete it, and submit it as an attachment. Document any conditions or sources your numbers are based on here. Worksheet Attached Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 19 of 21 9/3/2008 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. See Attached Business Plan Appendix N 4.4.6 Analysis and Recommendations Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. Please refer to the Spreadsheets provided for a breakdown of economics relating to savings passed to the public from this project. 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 It is expected to displace at least 306,000 gallons resulting in direct annual benefits of $296,000 to the public at large. Holding at a stable state, maintaining projected rates of production, it is expected to save the public $1,480,000 with the expectation to transition over to a premium fuel product in the transport sector, as the hope is for a new energy strategy is in place. Failing that, the plant cn operate in perpetuity until such a bridge is met. Though not a demonstration project as it will be a full-fledged production operation, the production of biodiesel will serve as a demonstration of the effectiveness of the Renewable Energy Program due to its immediate, visible impact. With the projected ‘dollar savings to dollar profit’ model, it is expected to have a healthy annual profit enough to re-invest and maintain its production levels. For every gallon of biodiesel, there is a dollar tax credit available for retailers and Blenders (as discussed in the business plan Appendix N), in addition to the potential of secondary industries as a potential ie. A soap manufacture from the waste glycerin by-product. Over the life of the project, by using waste vegetable oil, there is a displacement of petroleum fuel, which also reduces the overall carbon impact of living in Alaska. As global warming has become a reality, any steps taken are a positive net benefit. When considering the energy input to energy received ratio, it is measured at 8:1- for every one unit of ‘petroleum’ energy, you net eight units of ‘biodiesel’ energy when using waste vegetable oil as a feedstock. As biodiesel is less toxic than table salt, there is an appreciable environmental impact that in Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 20 of 21 9/3/2008 environmentally sensitive areas will be welcomed in case of a spill, such as a remote forest service cabin near a salmon stream. When considering health effects, as biodiesel has reduced particulate matter, reduced CO emissions, and no sulphur, there is an obvious benefit enjoyed by any who would otherwise be exposed to petroleum emissions otherwise. 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 The projected cost for the construction of two (2) biodiesel facilities is $323,466 with a capital construction cost of $278,850 and an estimated engineering cost of $44,616 (16% of construction costs). The expected operating costs for one (1) year is $901,590 including all labor and non-labor costs, in addition to 10% maintenance and depreciation costs. Currently, there is $72,050 of in- kind contributions (see Section 2.3 above for breakdown). Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 21 of 21 9/3/2008 SECTION 7 – ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION: A. Resumes of Applicant’s Project Manager, key staff, partners, consultants, and suppliers per application form Section 3.1 and 3.4 B. Cost Worksheet per application form Section 4.4.4 C. Grant Budget Form per application form Section 6. D. An electronic version of the entire application per RFA Section 1.6 E. Governing Body Resolution per RFA Section 1.4 Enclose a copy of the resolution or other formal action taken by the applicant’s governing body or management that: - authorizes this application for project funding at the match amounts indicated in the application - authorizes the individual named as point of contact to represent the applicant for purposes of this application - states the applicant is in compliance with all federal state, and local, laws including existing credit and federal tax obligations. F. CERTIFICATION The undersigned certifies that this application for a renewable energy grant is truthful and correct, and that the applicant is in compliance with, and will continue to comply with, all federal and state laws including existing credit and federal tax obligations. Print Name Signature Title Date