HomeMy WebLinkAboutKenaiWinds-AEA_Round2_Supplemental Kenai Winds LLC
C/O BQ Energy
20 Jon Barrett Rd. Suite 2
Patterson, NY 12563
845.228.3477 phone
paul.curran@bqenergy.com
March 5, 2009
Grant Manager: Butch White
Alaska Energy Authority
813 West Northern Lights Blvd.
Anchorage, AK 99503
Dear Mr White,
As communicated during a meeting to Messrs Peter Crimp and James Jensen on February 25
at AEA, there have been several developments on the Kenai Winds project since our November
2008 Round 2 Renewable Energy Grant application submittal that we feel are important for your
consideration of the project. It was agreed in the meeting that we would submit a Supplement to
the November application that would detail the areas of change. The supplemental filing is
attached. In our view, all of the areas are positive progress and should make the project more
attractive as a grant recipient. Among the changes:
1- The project has received all of its environmental permits. The Alaska Department of
Natural Resources (DNR) Division of Coastal Management notified us that no further
action is required for construction and we have now received a similar notification from
the US Federal Aviation Administration. The project is now “shovel ready”.
2- After review of the concerns of the AEA and after consultation with Homer Electric
Association, it was decided to limit the size of the project to less than 10 MW.
Accordingly, the size of our project in this application is now 9 MW, which will consist of
5-6 turbines depending on the selected wind turbine vendor.
3- We have agreed with Homer Electric Association that they will be the direct customer for
all electric power and the facility will connect to the HEA grid.
4- Consistent with the reduction in project size and drop in market prices in wind turbines,
the project capital cost is now less. We estimate it to be approximately $21 Million. We
have also reduced our grant request from $11.7 Million to $5.85 Million. This retains our
strong financial match score of almost 3:1, where the vast majority of the project costs
are being paid for by Kenai Winds. This financial match (identified as a key scoring
criteria by AEA) is far in excess of any other construction applicant.
5- As we are “shovel ready” at this point, we are seeking to construct the wind turbines in
2009. All major stakeholders have been advised of this desire to erect the project this
year and all are supportive of this direction.
We hope that AEA will be able to respond favorably to this Renewable Energy Grant request
and facilitate the construction of Alaska’s first utility scale wind farm in 2009.
Please contact us at any time to discuss this information further if required
Kenai Winds
Supplemental Information
Request for Grant Applications
AEA-09-004
Round 2
March 6, 2009
Introduction
Kenai Winds LLC has applied for funding for the Kenai Winds Project under
Round 2 of the Alaska Energy Authority Request for Grant Applications AEA-09-
004. We were notified that the project would be funded under Round 1 for
$80,000 to complete its development activities. The application for Round 2 was
submitted in November 2008 as per the AEA Instructions. From that date, Kenai
Winds has continued development activities in advance of funding decisions
under Round 1 and Round 2. The following supplement to the Round 2
application is to inform the Alaska Energy Authority (AEA) of changes to the
project that have occurred since the November 2008 application data. In a
meeting on February 25,2009 with Mr Peter Crimp and Mr James Jensen, they
recommended that we provide this information in supplemental form to the AEA
so that it could be considered in the Round 2 Evaluation.
Above and beyond the continuing development work by Kenai Winds, the
Federal Government has acted to strongly promote renewable energy. Several
key provisions in The American Recovery and Reinvestment Act have improved
the economics of the Kenai Winds Project. With a timely funding decision by the
Alaska Energy Authority, the Kenai Winds Project can be operational in 2009 and
provide the maximum benefit to the State of Alaska.
Overview of Significant March 2009 Updated Information:
Project Size
On December 29, 2008, the AEA released on its website a revised evaluation
recommendation that any renewable energy project over 10 MW in the Railbelt
not be approved for construction funding until after the AEA Integrated Resource
Plan (IRP) Study was completed and the results could be considered. We
understand that the IRP work is getting under way soon and information could be
completed later this. However, we have also been cautioned by many
stakeholders that finalization and discussion and acceptance of the IRP could
take a longer amount of time.
In considering the question of schedule, Kenai Winds factored in many aspects
of the project. First, as will be discussed later, the project has received it
environmental approvals from the Alaska Coastal Zone Management Bureau,
and has also received its approvals from the US Federal Aviation Administration.
These two factors have combined to make the project (at any size up to 10
turbines) “shovel ready” from a permit point of view.
A second aspect in considering project size has been our ongoing dialogue with
Homer Electric. Homer supports the use of wind energy as a power generation
resource. As they have a mandate to ensure that safe and reliable electric power
is always supplied to their customers, they also have concern about their need to
learn the operational aspects of having wind energy as part of their resource
base. They have voiced to us on several occasions that 15-18 MW was an
important amount of their generational mix. When we inquired about the idea of
starting with a smaller amount of wind energy (say 9 MW), HEA preferred that
level as an initial phase, with perhaps an additional 9 MW coming at a later date.
Finally, the US federal stimulus package was recently enacted. This gives any
shovel ready project the potential to receive DOE Grants (presumably through
the AEA). Additionally, the package also gives fiscal flexibility to projects which
are ready to start construction in 2009 or 2010. Such flexibility is not available
beyond that point.
These factors combined to lead us to the decision that it was in the interest of all
stakeholders for Kenai Winds to amend its rated output to 9 MW and to adjust
the schedule to allow for near term implementation and construction.
Capital Cost
As a result of the reduction in size and global economic factors which have
reduced the price of steel and other metals, Kenai Winds has realized that the
likely capital cost is approximately $21 Million. This is approximately $2,333/kW;
a reduction of 10% per kW as compared with our earlier cost estimates from the
Fall. This reduction is even greater when it is noted that the project size has been
cut in half. One of the reasons that our capital has such elasticity (ie lack of dis-
economy of scale) is that there is very little supporting infrastructure required.
Kenai Winds does not require new power lines (other than our local collection
system) and does not require new roads, ports, nor aircraft access facilities.
Energy Production
Kenai Winds started its onsite meteorological program in the Fall of 2007 and
has now completed a full year of measurement. This full year of meteorological
data is now available, and thorough review is pending. Based on a preliminary
review, the net capacity factor from the project is now expected to be 28% with a
net annual generation of 22,075 MWh, based upon a 9 MW capacity.
Power Offtaker
Kenai Winds had originally proposed to connect to the public grid through the
Tesoro Refinery in Nikiski. AEA personnel had initially encouraged a direct power
sales structure noting that it would facilitate advancement of the project. In the
Round 1 evaluation, it became clear that AEA prefers that our power be sold
directly to Homer Electric as opposed to Tesoro. There are several possible
points of delivery in the area of the wind farm. We have not selected the optimum
location among those choices, but HEA has agreed to purchase the full output of
the Kenai Winds project.
Grant Request
In our November submittal, we requested an AEA Renewable Energy Grant in
the amount of $11.7 Million out of an estimated project cost of $46.8 Million. The
AEA had indicated that “match” was a critical component of evaluation so we
sought to maximize our match and in fact in Round 1 had the one of the highest
match percentage of any applicant. We seek to retain a high “match” percentage
and have reduced the requested grant amount by 50% in accordance with the
drop in generating capacity from 18 to 9 MW Accordingly, the grant request is
revised to $5.85 million. This represents a 3:1 matching ratio and is the highest of
any project applying for construction funding under Round 2. An updated cost
worksheet is included in Appendix A. Kenai Winds has updated the AEA Grant
Evaluation worksheet with the new project information. This is included in
Appendix A.
Details of Significant March 2009 Updated Information:
PROJECT COST AND BENEFIT SUMARY
Total Project Cost
(Including estimates through construction.)
$21,000,000
Grant Funds Requested in this application. $5,850,000
Other Funds to be provided (Project match) $15,150,000
Total Grant Costs (sum of 2.5.2 and 2.5.3) $21,000,000
Estimated Benefit (Savings) $25,641,495
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.)
$15,700,000
Permits
As discussed in the Round 1 and Round 2 applications, there is only one
applicable permitting agency for this project. The Alaska Department of Natural
Resources (DNR) Division of Coastal Management is responsible for
administering the Alaska Coastal Management Program. A completed Coastal
Zone Consistency Questionnaire was included in the Round 1 and Round 2
applications.
On February 6, 2009, the DNR sent an official response to the Kenai Winds
Questionnaire. This official response is included in Appendix B of this document.
The response, in letter format from Peter Boyer of the DNR, states that review by
the Alaska Coastal Management Program (ACMP) is not required. Specifically,
the project does not require a State review for consistency with the ACMP,
because it does not require permits subject to the ACMP.
Kenai Winds filed a site plan with the Federal Aviation Administration (FAA) for
Obstruction Evaluation under Aeronautical Study No. 2009-WTW-847-OE. On
February 18, 2009, the FAA sent an official response. The FAA typically sends a
single determination letter for each turbine. The determination letter for all turbine
possibilities is included in Appendix B of this document (note we have not yet
determined which of the ten approved locations will be built first). For each of the
10 turbines in the Kenai Winds Project, the FAA issued a Determination of No
Hazard to Air Navigation. Each turbine must be marked and/or lighted in
accordance with FAA Advisory Circular 70/7460-1K Change 2, Obstruction
Marking and Lighting, white paint/synchronized red lights – Chapters 4, 12, & 13
(turbines). Additionally, within 5 days of completion of construction FAA Form
7460-2 Part II must be completed for each turbine.
These two approvals conclude all of the major permitting process for the Kenai
Winds Project. A letter from the Anchorage office of Ecology and Environment
(E&E) attesting to this fact is included in Appendix B. E&E is a world-renowned
environmental engineering firm with extensive experience working in the wind
energy industry nationwide and in permitting industrial applications in the Alaska
Coastal Zone. From a construction point of view, the project could be built at any
time without further review from any government agency. The project is shovel-
ready and with a timely decision on the part of the Alaska Energy Authority, could
be completed in 2009.
Interconnection
As discussed in the Round 1 and Round 2 applications, the Kenai Winds Project
is required to undergo an Interconnection Requirements Study (IRS) with Homer
Electric (HEA). Negotiation of the study scope was completed in December 2008,
and the IRS is currently underway, with estimated completion in April, 2009.
HEA has contracted with Electric Power Systems Inc. (EPS) to perform an
assessment of HEA’s generation expansion plans with regards to transmission
reliability and control responsibilities. As part of this study, EPS will evaluate the
Kenai Winds project and its impact on the HEA transmission system.
EPS will complete a base case analysis of the HEA system using the most recent
Railbelt database being developed by the IOC in the underfrequency load
shedding study and updated to HEA supplied loads for 2015. Generation
additions at other utilities will be estimated based on the best information HEA
has available.
EPS will evaluate the implementation of the Kenai Winds project and its impact
on the HEA system. The output of the wind farm will be modeled at three
different levels to estimate the impact of the intermittency of wind energy on the
HEA system.
The analysis will include power flow and transient stability analysis of each
generation level. The analysis will include power flow and transient stability
simulations of the HEA / Railbelt system at the winter peak, summer valley, and
summer peak loading conditions. For each load condition, up to three different
dispatch scenarios will be analyzed. The analysis will include simulations of
transmission faults in the Kenai area transmission system and key locations in
the Anchorage area. These simulations will include islanded and interconnected
operations for the Kenai. The analysis will include simulations for loss of
generation both in interconnected and Kenai islanded conditions for each load
and dispatch scenario. EPS will evaluate the control and integration requirements
for each generation level and provide HEA with a list of services required for
each generation option (if differences exist between the options).
Following the study, EPS will present its findings to Kenai Winds and HEA for
concurrence with the study assumptions and results. Kenai Winds, HEA, and
EPS will use these findings to evaluate alternative points of interconnection near
the Tesoro Alaska Refinery. Multiple substations serving generation and load
exist in the area. Assuming no need for restudy, EPS will develop interconnection
costs, control area costs, and prepare an Interconnection Requirements Study
Report (IRS). The conclusions of this report will be the basis for any upgrades to
the HEA system required for interconnection of the wind farm.
This work is currently underway, but as it is an optimization of which
interconnection alternative to select, is not on the critical path for project
execution.
Power Sales
Kenai Winds has submitted a power sales term sheet to HEA and discussions
around those terms are underway. HEA has committed to purchasing the full
output of the Kenai Winds project, and power purchase negotiations are
progressing. Kenai Winds intends to self certify as a qualifying facility (QF) and
sell energy to HEA at an agreed upon market price. The Kenai Winds schedule
anticipates finishing power purchase negotiations in April 2009, and obtaining
regulatory approval by June 2009. A letter from HEA attesting to their intention to
purchase the energy is included in Appendix C. The AEA has made power sales
to a public utility a pre-requisite for funding under Round 1 and Round 2. Kenai
Winds is now fulfilling that requirement by selling electric energy to HEA.
We understand that the power sales agreement and other project aspects will be
reviewed by the Regulatory Commission of Alaska (RCA). We have already been
in contact with the RCA, and Kenai Winds will cooperate fully with any required
initial review of the project.
Regulatory Approval
As a prerequisite for funding under Round 1 and Round 2, the AEA has
requested that Kenai Winds submit a detailed plan to obtain regulatory approval
of power purchase agreements and certification. In February 2009, Kenai Winds
met with James Keen and David Lawrence of the RCA. As a result of this
meeting, Kenai Winds will use the following steps to satisfy the regulatory
requirements.
First Kenai Winds will self-certify as a Qualifying Facility (QF) under the Public
Utility Regulatory Policy Act (PURPA). As a qualifying facility, it is our
understanding the Kenai Winds will not be considered a utility under Alaska law,
and will not require a Certificate of Public Convenience and Need.
Kenai Winds will then petition the RCA for exemption from the requirements of
AS 42.05, in accordance with AS 42.05.711(d). HEA will submit a letter to the
RCA supporting this petition. Fishhook Renewable Energy, LLC and South Fork
Hydro, LLC have recently petitioned the RCA and been granted exemption.
These are both small independent power producers (IPP’s) that will sell electric
energy directly to a Matanuska Electric Association (MEA). MEA submitted a
supporting letter for that petition. Both are also respondents to the AEA’s
renewable energy grant program. The main determining factor in granting the
exemption from regulation was the power purchase agreement (PPA) between
MEA and South Fork Hydro. The power purchase agreement is subject to
approval by the RCA under AS 42.05.361(a), so regulation of the IPP’s is
unnecessary, superfluous, and places an undue burden on a small independent
power producer. Kenai Winds will make a similar argument in its petition to the
RCA. A copy of the order in Docket U-08-102 is included in Appendix D.
HEA will submit the PPA with Kenai Winds for approval by the RCA. As Kenai
Winds is a small project, selling electric energy to HEA at its avoided cost, with
balancing energy supplied by HEA, we do not foresee any delays in the project
schedule for approval of the PPA.
Project Schedule
An updated project schedule is included in Appendix E. Some of the major
milestones are as follows:
1. Permitting: Already Complete
2. Interconnection Requirements Study Complete: April, 2009
3. Power Purchase Agreement Signed: April, 2009
4. Turbine Down-payment: May, 2009
5. Bid Engineering/Procurement/Construction: May, 2009
6. Financing Complete: June, 2009
7. Detailed Engineering: July, 2009
8. Construction Start: August, 2009
9. Turbine On-Site: September, 2009
10. Civil Work Complete: October, 2009
11. Collection System Complete: October, 2009
12. Turbines Erected: November, 2009
13. Guaranteed Infrastructure Completion: December, 2009
14. Commercial Operations: December, 2009
Project Budget
An updated project budget is included in Appendix F. As discussed above, based
on the reduced project size and current market conditions, the project is
budgeted at $21.0million. A $5.85 million capital grant is requested from the AEA.
In formulating our Round 1 submittal, Kenai Winds determined that an optimum
grant match level would be 3:1, whereby private money would cover 75% of the
costs of the project. While the percentage of project matching funds was not
used as a scoring criteria for Round 1 funding, Kenai Winds believes it should be
a significant factor in deciding the feasibility, benefit, and readiness of a project.
With this in mind, Kenai Winds is keeping its matching ratio at 3:1, even with the
reduction in project capital cost.
In reviewing all the projects which submitted applications under Round 2, the
Kenai Winds project has the highest matching ratio of any project. On this basis,
Kenai Winds is the most likely to progress to commercial operations with funding
from the AEA, as it is best situated to deal with cost overruns due to economic
uncertainties.
Project Economics
The economic factors driving wind energy development have changed due the
American Recovery and Reinvestment Act (ARRA) enacted by Congress. First of
all, wind projects no longer need to rely on tax equity financing through the
Production Tax Credit (PTC). In lieu of a PTC, a project developer can claim an
Investment Tax Credit (ITC) worth 30% of the project capital cost.
For projects entering construction in 2009 and 2010, the Department of Energy
(DOE) is offering grants equivalent to the value of the ITC. The DOE has not yet
issued guidelines on how to apply for the grant. Additionally, projects entering
construction in 2009 and 2010 grants bonus depreciation benefits to the project,
allowing up to 85% of the capital cost to be depreciated.
Finally, ARRA repeals the penalty for subsidized renewable energy financing,
allowing projects to qualify for the full amount of the tax credits, even if the
project receives funding from a state or local government. In the Round 1 and
Round 2 submittals, this was of significant concern to Kenai Winds as it reduced
the value of an AEA grant 25%. Under the new law, Kenai Winds is not penalized
for receiving support from the state of Alaska. This has allowed Kenai Winds to
request less in funding for the Kenai Winds project than it otherwise would have.
On a final note, a bill being discussed in the Alaska State Senate may provide
additional incentives for renewable energy. Senate Bill No. 31 would establish a
production tax credit in the amount of $0.021 per kWh of electricity generated
from wind and other alternative energy sources. As this bill is still in committee
and is not under discussion in the Alaska State House of Representatives, the
impact is not included in the economic evaluation of the Kenai Winds project.
However, Kenai Winds clearly supports this type of progressive legislation by the
Alaska State Legislature.
Local Support
As part of its Round 1 and Round 2 submittals, Kenai Winds included the
following letters of support:
• Homer Electric Association – the local electric utility
• Mayor John Williams – Kenai Peninsula Borough Mayor
• Representative Mike Chenault – District 34 Representative and Speaker
of the Alaska House of Representatives
• Tesoro Alaska Company – 2nd largest employer in the area
These four letters, included in Appendix G, indicate a large level of local support
for the Kenai Winds project. An additional letter from HEA, regarding power sales
is included in Appendix C.
As Mayor Williams has been replaced recently by Mayor David Carey, we
thought it important to seek the advice of Mayor Carey. In fact Mayor Carey
served as the Chairman of the Board of the Homer Electric Association for many
years and has as his Chief of Staff, Mr. Scooter Chumley, who also was an HEA
Board Member for many years. Both resigned to assume their governmental
positions. Mayor Williams and his staff were strongly in favor of the project and
the local development that it would bring to Nikiski. Mayor Carey offered to have
the Kenai Borough Assembly consider a resolution in explicit support of the
Kenai Winds Project in support of this application. We did not indicate that such a
move was required, but can do so if the AEA would value such an endorsement.
We do enclose two recent resolutions from the Kenai Borough Assembly
endorsing the greater use of renewable energy. These resolutions are also
contained in Appendix G.
Kenai Winds was confused by the Round 1 evaluation of its demonstrated local
support. Despite having the letters listed above and no unresolved local issues,
the score was shown as “0”. Based on the published AEA scoring criteria, the
point total should have been a “5”. We assume the scoring was in error. We ask
that it be corrected in the Round 2 evaluation.
Reporting to Alaska Energy Authority
The reporting methods in the Round 1 and Round 2 submittals were not
completely elucidated. They are described in detail below.
Kenai Winds’s Project Manager shall submit monthly reports to the AEA Project
Manager and other parties designated by the AEA Project Manager by the 15th
of the month following the reporting period and be organized by task on the
project. Periodic reports shall be in a letter format and shall include the following
subjects in the order indicated, with appropriate explanation and discussion:
a. Title of project,
b. Agreement number,
c. Period of this report,
d. Progress for this period,
e. Planned progress in the future,
f. Identification of problems,
g. Planned Solutions,
h. Ability to meet schedule, reasons for slippage in schedule,
i. Schedule - percentage completed and projected percentage
of completion of performance by months - could be a bar
chart or milestone chart, and
j. Analysis of actual cost incurred in relation to budget.
Reports shall summarize progress and report on difficulties/set-backs having the
potential to impact the prospects for success on the project. To the extent
difficulties are experienced, the report should present plans to resolve problems,
restore project progress or recommend abandoning activities.
Reports shall include all data, studies, notes and/or other evidence related to the
performance of deliverables as required by, and identified in, the subsequent
Tasks referred to herein. The Reports should clearly present evidence of the
degree of completion of each deliverable by designated Task. Any information
presented to AEA that is used in the production of, or is a part of, a deliverable
that is considered proprietary, confidential trade secret should be so designated
pursuant to AEA regulations.
Kenai Winds shall prepare a draft Final Report that includes a description of all
methods, analyses, and results within two months of the commercial operations
of the project. Following AEA’s review of the draft Final Report, Kenai Winds
shall submit a revised Draft Final Report, after which another round of review
comments may be provided by AEA. Following final review, the Final Report
shall be prepared and submitted.
The content of the Final Report shall include a description or summary of all
activities undertaken in carrying out the tasks and present a compendium of
information/data produced in completing the project.
All other communication between the AEA and Kenai Winds will be via the Kenai
Winds and AEA designated Project Managers.
Self Evaluation Using Published Criteria
Using the criteria and guidelines issued with the initial Request for Grant
Applications, and the specific guidelines issued by the AEA during the Round 1
evaluations, Kenai Winds has self-evaluated its Round 2 application.
The AEA used the following 7 criteria to score the projects: Cost of Energy,
Funding Resources, Feasibility, Readiness, Benefits, Local Support, and
Sustainability. Kenai Winds has self-scored as shown below:
Maximum: 30 25 20 5 10 5 5 100
Category: Cost of Energy Funding Resources Feasibility Readiness Benefits Local Support Sustainability Total
Kenai Winds Project: 5 25 18 5 6 5 5 69
As is shown, the main areas of deficiency are the local cost of energy and project
benefits. Project benefits, as calculated by AEA, is highly dependent on local cost
of energy. This is a factor over which any applicant has no control. Among the
“controllable” aspects of the AEA scoring matrix, Kenai Winds is appropriately
scored with over 90% of the available quality points.
Cost of Energy: 5 out of 30
Energy forecasting is an inexact science at best, and Kenai Winds agrees that
the cost of energy in Homer Electric service territory is less than some other
parts of Alaska. Consistent with the AEA’s power price projections from Round 1,
Kenai Winds agrees that the Kenai Winds project should score 5 out of 30.
Funding Resources: 25 out of 25
The grant funds requested for the Kenai Winds project now total $5.85 million.
With a capital cost of $21 million, this represents a roughly 1:3 matching ratio,
with private funds handling 75% of the project costs. This represents the highest
matching ratio of any project requesting funding under Round 2. Kenai Winds
has an experienced financier, Tim Ryan, as part of its project team (see resume
in original submittal). Consistent with the AEA’s evaluation in Round 1, Kenai
Winds agrees that the Kenai Winds project should score 25 out of 25. We frankly
question why other projects with a much, much lower match were scored as
highly as they were in Round 1.
Feasibility: 18 out of 20
Criteria Weight Score
1. Project Management, Development, and Operation 20 30
a. The proposed schedule is clear, realistic, and describe in
adequate detail 10
b. project development, operation, maintenance, fuel, and other cost
and savings estimates are realistic 10
c. the project team's method of communicating, monitoring, and
reporting development progress is described in adequate detail
5
d. logistical, business, and financial arrangements for operating and
selling energy from the completed project are reasonable and
described in adequate detail
5
2. Qualifications and experience 20 35
a. applicant, partners, and contractors have sufficient knowledge
and experience to successfully complete, and operate the project
10
b. The project team has staffing, time, and other resources to
successfully complete and operate the project.
10
c. The project team is able to understand and address technical,
economic, and environmental barriers to successful project
completion and operation.
10
d. Use of local labor and training of local labor workforce. 5
3. Technical Feasibility 20 40
a. The renewable energy resource is available on a sustainable
basis and project permits and other authorizations can reasonably
be obtained.
10
b. A site is available and suitable for the proposed energy system. 10
c. Project technical and environmental risks are reasonable. 10
d. The proposed energy system can reliably produce and deliver
energy as planned. 10
e. If a demonstration project is being proposed: N/A
4. Economic Feasibility 20 20
a. The project is shown to be economically feasible 10
b. The project has an adequate financing plan for completion of the
grant-funded phase and has considered options for funding
subsequent phases of the project.
10
5. Benefits 20 10
a. Other benefits to the Alaska public are demonstrated. 10
Total 100 92.5
Score for Round 3: 18.5
The evaluation guidelines state that each sub-category is scored out of 10 points,
with a total weighting per category of 20% each. Kenai Winds has scored on this
basis.
1. Project Management, Development, and Operation
a. The proposed schedule is clear, realistic, and describe in adequate detail
An updated schedule is included in Appendix E. The schedule is clear,
realistic, and completely detailed. Based on current market conditions, the
status of the Interconnection Requirements Study, and the completion of all
major permits, Kenai Winds can be commercially operable by the end of
2009.
b. project development, operation, maintenance, fuel, and other cost and savings
estimates are realistic
Kenai Winds is in continual contact with bankers, financiers, other project
developers, energy service companies, and equipment vendors as part of
its development activities around the country. All costs are realistic to the
based on current market knowledge from our activities as project developer
nationwide. Savings are largely based on fuel price projections by Kenai
Winds and the AEA, and are as accurate as possible.
c. the project team's method of communicating, monitoring, and reporting
development progress is described in adequate detail
The AEA’s preferred communication methods have not been specified, and
are unknown to Kenai Winds. Kenai Winds has suggested a communication
method in this supplement to its Round 2 application. As clear guidelines
have not been established, we are scoring 5 out of 10.
d. logistical, business, and financial arrangements for operating and selling energy
from the completed project are reasonable and described in adequate detail
Kenai Winds and HEA are in negotiations over the terms of power sales and
dispatching. Kenai Winds has not hired operations personnel for the Kenai
Winds project, and will not do so until construction has commenced. As the
details of operating and selling energy are not fully known, we are scoring 5
out of 10. No project without a signed PPA approved by the RCA should
receive higher.
2. Qualifications and experience
a. applicant, partners, and contractors have sufficient knowledge and experience to
successfully complete, and operate the project
In its Round 1 and Round 2 submittals, Kenai Winds included resumes and
statements of qualifications for all parties then involved in the project. Kenai
Winds and its staff have extensive experience developing, owning, and
operating wind and other energy projects in the US and worldwide. Kenai
Winds currently has several hundred megawatts of wind and solar energy
projects under development, has developed and is currently operating the
20MW Steel Winds project in Lackawanna, NY.
b. The project team has staffing, time, and other resources to successfully
complete and operate the project.
Kenai Winds maintains a small full-time staff, and subcontracts on a project-
by-project basis to fill its technical staffing needs. To date, the project
schedule has not mandated a full-time position devoted solely to the project.
In the near-term, Kenai Winds will hire a project manager to work solely on
the Kenai Winds project. Kenai Winds’s qualifications are included in the
Round 2 submittal.
c. The project team is able to understand and address technical, economic, and
environmental barriers to successful project completion and operation.
Kenai Winds’s full-time staff comes from a diverse background of technical
and financial fields. They have extensive experience financing, developing,
owning, and operating energy projects. Kenai Winds sub-contracts for
technical work on a project-by-project basis. Kenai Winds’s qualifications
are included in the Round 2 submittal.
d. Use of local labor and training of local labor workforce.
Kenai Winds has not yet signed contracts for Engineering, Procurement,
and Construction (EPC). Every effort will be made to source construction
personnel locally. Due to the presence of offshore drilling platforms, oil
refining, and natural gas processing in the area, the entire construction staff
should be able to be sourced locally. As personnel have not yet been
sourced, we have scored 5 out of 10.
3. Technical Feasibility
a. The renewable energy resource is available on a sustainable basis and project
permits and other authorizations can reasonably be obtained.
As shown in the Round 2 submittal, the Kenai Winds project has an energy
production estimate from an industry standard meteorological firm. As
shown in Appendix B, the Kenai Winds project has all its permits in hand
and is shovel ready.
b. A site is available and suitable for the proposed energy system.
As discussed in the Round 2 submittal, Tesoro Alaska Company has
committed to leasing the property to Kenai Winds for the Kenai Winds
project. The site is zoned industrial and has already been cleared of
vegetation and leveled for industrial purposes. It is adjacent to several
substations, a major highway, and a deep-water port. No other renewable
energy project in Alaska boasts this.
c. Project technical and environmental risks are reasonable.
The environmental risks have been thoroughly investigated through the
permitting process. The technical risks are no different than for any other
commercial wind project. There is no new technology involved in this
project.
d. The proposed energy system can reliably produce and deliver energy as
planned.
The Kenai Winds project has obtained an energy production estimate from
an industry standard meteorological firm. The Kenai Winds project will
employ wind turbines from an established vendor, that have already been
proven in the field.
4. Economic Feasibility
a. The project is shown to be economically feasible
Sufficient information has been included in the Round 1 and Round 2
submittals for the AEA to evaluate the economics of the project. For
commercial reasons, a detailed economic pro-forma has not been included.
The project is economically feasible.
b. The project has an adequate financing plan for completion of the grant-funded
phase and has considered options for funding subsequent phases of the project.
Kenai Winds will use a mixture of AEA grant money, Federal tax credits,
debt, and tax equity to finance the project. Wind projects do not typically
sign financing contracts until a power purchase contract is signed and all
permits are in hand. Kenai Winds has extensive experience in developing
and financing wind projects.
5. Benefits
a. Other benefits to the Alaska public are demonstrated.
As described in this supplement, tangible benefits to the Alaska public in the
amount of $15.7 million will be realized over the project lifetime. Those and
other benefits are described in detail in the Round 2 submittal.
Readiness: 5 out of 5
Included in this supplement in Appendix E is a clear and realistic schedule that
allows the Kenai Winds project to be commercially operable in December 2009.
Kenai Winds has all its permits in hand and is shovel ready. Few other projects
can realistically be operational in 2009. Kenai Winds has self-scored 5 out of 5.
Benefits: 6 out of 10
Kenai Winds has updated the AEA cost/benefit evaluation from Round 1, based
on the new information in this supplement to Round 2. The updated evaluation is
included in Appendix A. The benefit cost ratio as calculated using Kenai Winds’s
assumptions is 1.26. Using AEA’s assumptions, the benefit cost ratio is 1.6.
Based on the AEA’s published evaluation guidelines, Kenai Winds has self
scored 6 out of 10.
Local Support: 5 out of 5
In its Round 1 and Round 2 applications, Kenai Winds submitted letters of
support from the local utility, the local mayor, the local state representative, and
the largest employer in the area. These letters are included in this supplement in
Appendix G. Also included in Appendix G are resolutions from the Kenai
Peninsula Borough Assembly in support of renewable energy. Given the large
level of local support evidenced in its Round 1 and Round 2 submittals and in this
supplement, Kenai Winds has revised its score on Local Support from 0 to 5.
This is consistent with AEA evaluation guidelines where support demonstrated by
3 or more local entities other than the applicant yields a score of 5. We assume
the scoring on Round 1 was in error. We ask that it be corrected in the Round 2
evaluation.
Sustainability: 5 out of 5
Kenai Winds agrees wit the assessment by AEA that wind energy is a
sustainable, non-polluting form of energy production, and has self-scored 5 out of
5.
Total Score:
Kenai Winds’s self-score, consistent with the now published AEA review
guidelines, is 69 out of 100. We have reviewed the Round 1 scores, and the
Kenai Winds project would rank 2nd in the Railbelt, based on that overall score.
Based on the information available for the Round 2 applicants, the Kenai Winds
project would rank in the top 3 projects in the Railbelt.
Appendix A: AEA Grant Evaluation and Cost
Worksheets
ID 98
A Applicant Name
Project
Category
RE Technology
Applicant AEA
B Total Benefits $25,641,495 $32,556,709
Total Costs (PV of Project Cost) $20,388,350 $20,388,350
B/C Ratio 1.26 1.60
C Capital Costs Applicant AEA
Reconnaissance ‐$
Conceptual Design
Final Design ‐
Construction 21,000,000
‐
‐
‐
1 Total Capital Costs 21,000,000$ 21,000,000$
D Ave Annual Costs Applicant AEA
Fuel 2,324,999$ 2,621,640.29$
O&M (510,691)$ (323,589.50)$
Total Annual Costs 1,814,308$ 2,298,050.79$
2008 2009 2010
21,000,000$ ‐$
21,000,000$ ‐$
E Applicant
Project Capital Cost ‐‐ Applicant
Project Capital Cost ‐‐ AEA
Kenai Winds, LLC
Nikiski Wind (5 @ 1.8 MW)
Construction
Wind
Renewable Energy Fund
RFA AEA 09-004 Application Cost Worksheet Page 1
Application Cost Worksheet
Please note that some fields might not be applicable for all technologies or all project
phases. Level of information detail varies according to phase requirements.
1. Renewable Energy Source
The Applicant should demonstrate that the renewable energy resource is available on a
sustainable basis.
Annual average resource availability. 98% (28% net capacity factor)
Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel)
2. Existing Energy Generation
a) Basic configuration (if system is part of the railbelt grid, leave this section blank)
i. Number of generators/boilers/other
ii. Rated capacity of generators/boilers/other
iii. Generator/boilers/other type
iv. Age of generators/boilers/other
v. Efficiency of generators/boilers/other
b) Annual O&M cost
i. Annual O&M cost for labor
ii. Annual O&M cost for non-labor
c) Annual electricity production and fuel usage (fill in as applicable)
i. Electricity [kWh]
ii. Fuel usage (if system is part of the Railbelt grid, leave this section blank
Diesel [gal]
Other
iii. Peak Load
iv. Average Load
v. Minimum Load
vi. Efficiency
vii. Future trends
d) Annual heating fuel usage (fill in as applicable)
i. Diesel [gal or MMBtu]
ii. Electricity [kWh]
iii. Propane [gal or MMBtu]
iv. Coal [tons or MMBtu]
v. Wood [cords, green tons, dry tons]
vi. Other
Renewable Energy Fund
RFA AEA 09-004 Application Cost Worksheet Page 2
3. Proposed System Design
a) Installed capacity 9 MW
b) Annual renewable electricity generation
i. Diesel [gal or MMBtu]
ii. Electricity [kWh] 22,075,200
iii. Propane [gal or MMBtu]
iv. Coal [tons or MMBtu]
v. Wood [cords, green tons, dry tons]
vi. Other
4. Project Cost
a) Total capital cost of new system $21,000,000
b) Development cost $400,000
c) Annual O&M cost of new system $510,691 (escalates 3% per year)
d) Annual fuel cost $0
5. Project Benefits
a) Amount of fuel displaced for
i. Electricity 16,052,056 mcf, natural gas (June 2010 – Dec. 2039)
ii. Heat
iii. Transportation
b) Price of displaced fuel $62,800,000 (NPV of June 2010 – Dec. 2039)
c) Other economic benefits
d) Amount of Alaska public benefits $15,700,000
6. Power Purchase/Sales Price
a) Price for power purchase/sale Avoided Cost
7. Project Analysis
a) Basic Economic Analysis
Project benefit/cost ratio 20yr NPV Basis: 1.26
Payback 6.18 years
Appendix B: Supporting Documents Regarding
Permitting
Kenai Winds, LLC
c/o BQ Energy
20 Jon Barrett Rd., Suite 2
Patterson, NY 12563
Attn: Josh Berkow
Re: ACMP Review and Permits for Kenai Winds Project
I have received from you, and have reviewed your submittal to the Division of Coastal
and Ocean Management (DCOM) of the State of Alaska DNR for determination of
consistency with the Alaska Coastal Zone Management Program (ACMP).
The response from the DCOM dated February 6, 2009 indicates that the project located
near the Tesoro Kenai refinery does not require a State review for consistency with the
ACMP because it does not require permits subject to the ACMP. I have reviewed your
submittal and the response to determine if any other permits may be required for this
project.
In our discussions I am aware that, although not a permit, the project must comply with
Federal Aviation Administration (FAA) requirements for adequate warning lights and
that you will seek required authorization for power generation from State Agencies
and/or the regulatory commission of Alaska.
You will require a right of way to cross the State right of way with the buried power line
and it will likely be prudent to contact the State Historic Preservation Office (SHPO)
even though the submittal indicated that it is very unlikely that in the disturbed form
industrial areas to be used by the project that there will be any issues.
You have informed us that the Kenai Peninsula Borough or Nikiski does not have a
building permit requirement for the area in question.
2
Overall; unless an issue is raised by one of the agencies copied by the DCOM, it would
appear that, other than the issues raised in this letter, no other permits will be required for
this project.
Sincerely,
ECOLOGY & ENVIRONMENT INC.
James D. Gill P.E.
Anchorage Manager
SARAH PALIN, GOVERNOR
DEPARTMENT OF NATURAL RESOURCES
DIVISION OF COASTAL AND OCEAN MANAGEMENT
http://www.a/askacoast.state.ak.us
o SOUTHCENTRAL REGIONAL OFFICE o CENTRAL OFFICE
550 W 7'h AVENUE SUITE 705 302 GOLD STREET, SUITE 202
ANCHORAGE, ALASKA 99501 P.O. Box 111030
PH: (907) 269-7470 FAX: (907) 269-3891 JUNEAU, ALASKA 99811-1030
PH: (907) 465-3562 FAX: (907) 465-3075
February 6, 2009
Kenai Winds, LLC
Attn: Josh Berkow
c/o BQ Energy
20 Jon Barrett Rd., Suite 2
Patterson, NY 12563
SUBJECT: ACMP REVIEW NOT REQUIRED AT THIS TIME
Kenai Winds Project
ID2009-0134AA
Dear Mr. Berkow:
The Division of Coastal & Ocean Management (DCOM) has reviewed the Coastal Project
Questionnaire (CPQ) and other pertinent information regarding the above referenced project. Based
upon the information you have supplied, your proposed project does not require a State review for
consistency with the Alaska Coastal Management Program (ACMP), because it does not require
permits subject to the ACMP.
You are not relieved from obtaining required permits and approvals from state, federal or local
agencies before you begin the proposed work. Nothing in this letter excuses you from compliance
with other statutes, ordinances, or regulations that may affect any proposed work.
This decision is ONLY for the proposed project as described. If there are any changes to the
proposed project, including its intended use, prior to or during its siting, construction, or operation,
contact this office immediately to determine if further review and approval of the revised project is
necessary.
Thank you for your cooperation with the ACMP.
Sincerely,
Peter Boyer
Project Review Coordinator
"Develop, Conserve, and Enhance Natural Resources for Present and Future Alaskans. "
end: CPQ, page 1&2
cc: Adele Lee, ACMP Liaison, DML W
David Gann, DCOM
Marla Carter, ADFG
Ellen Simpson, ADFG
Fran Mann, FWS
Fran Roche, DEC -JNU
Gary Williams, Coastal District Coordinator
Ginny Litchfield, ADFG/Habitat
Lee McKinley, ADFG/Habitat
Linda Markham, ADOT&PF
Lynnda Kahn, FWS
Pamela Russell, Kenai River Center
Sean Palmer, DEC -ANC
SHPO, DNRlSHPO
Susan Chihuly, ADFGIHabitat
USACE Regulatory Branch, USACE
Federal Aviation Administration
Air Traffic Airspace Branch, ASW-520
2601 Meacham Blvd.
Fort Worth, TX 76137-0520
Aeronautical Study No.
2009-WTW-847-OE
Page 1 of 2
Issued Date: 02/18/2009
Josh Berkow
BQ - Kenai
20 Jon Barrett Rd. Suite 2
Patterson, NY 12563
** DETERMINATION OF NO HAZARD TO AIR NAVIGATION **
The Federal Aviation Administration has conducted an aeronautical study under the provisions of 49 U.S.C.,
Section 44718 and if applicable Title 14 of the Code of Federal Regulations, part 77, concerning:
Structure:Wind Turbine KT-1
Location:Kenai, AK
Latitude:60-39-59.57N NAD 83
Longitude:151-22-33.64W
Heights:459 feet above ground level (AGL)
609 feet above mean sea level (AMSL)
This aeronautical study revealed that the structure does not exceed obstruction standards and would not be a
hazard to air navigation provided the following condition(s), if any, is(are) met:
As a condition to this Determination, the structure is marked and/or lighted in accordance with FAA Advisory
circular 70/7460-1 K Change 2, Obstruction Marking and Lighting, white paint/synchronized red lights -
Chapters 4,12&13(Turbines).
It is required that FAA Form 7460-2, Notice of Actual Construction or Alteration, be completed and returned to
this office any time the project is abandoned or:
_____ At least 10 days prior to start of construction (7460-2, Part I)
__X__ Within 5 days after the construction reaches its greatest height (7460-2, Part II)
This determination expires on 02/18/2011 unless:
(a)extended, revised or terminated by the issuing office.
(b)the construction is subject to the licensing authority of the Federal Communications Commission
(FCC) and an application for a construction permit has been filed, as required by the FCC, within
6 months of the date of this determination. In such case, the determination expires on the date
prescribed by the FCC for completion of construction, or the date the FCC denies the application.
NOTE: REQUEST FOR EXTENSION OF THE EFFECTIVE PERIOD OF THIS DETERMINATION
MUST BE POSTMARKED OR DELIVERED TO THIS OFFICE AT LEAST 15 DAYS PRIOR TO THE
EXPIRATION DATE.
Page 2 of 2
Additional wind turbines or met towers proposed in the future may cause a cumulative effect on the national
airspace system. This determination is based, in part, on the foregoing description which includes specific
coordinates and heights . Any changes in coordinates will void this determination. Any future construction or
alteration requires separate notice to the FAA.
This determination does include temporary construction equipment such as cranes, derricks, etc., which may be
used during actual construction of the structure. However, this equipment shall not exceed the overall heights as
indicated above. Equipment which has a height greater than the studied structure requires separate notice to the
FAA.
This determination concerns the effect of this structure on the safe and efficient use of navigable airspace
by aircraft and does not relieve the sponsor of compliance responsibilities relating to any law, ordinance, or
regulation of any Federal, State, or local government body.
If we can be of further assistance, please contact our office at (770) 909-4401. On any future correspondence
concerning this matter, please refer to Aeronautical Study Number 2009-WTW-847-OE.
Signature Control No: 616247-108311804 ( DNE -WT )
Earl Newalu
Specialist
Appendix C: Letter from HEA Regarding Power Sales
HOIIl.er Electric Association, Inc.
Corporate Office
3977 Lake Street
Homer9 Alaska 99603-7680
Phone (907) 235-855]
FAX (907) 235-33] 3
Ccentral Peninsula, Service CeJnlt~r
280 Airport Way
Kenai 9 ARaska 996]! -5280
Phone (907) 283~583]
FAX (907) 283-7] 22
March 5, 2009
Mr. Paul F. Curran
Kenai Winds LLC
clo BQ Energy LLC
20 Jon Barrett Road
Patterson, NY 12563
Dear Mr. Curran:
I understand that in your recent meeting with the Alaska Energy Authority, you elected to
prepare a Supplemental Filing for your Round 2 Application under the Renewable Energy Grant
Program. This letter is being written in support of that supplemental filing with respect to power
sales from the Kenai Winds facility to Homer Electric Association (HEA). HEA intends to
negotiate with Kenai Winds in good faith with the intended outcome being the procurement of
the power produced by the Kenai Winds project and its utilization as part of our overall supply
progranl to meet our customer needs.
Long-term energy pricing requires consideration of several factors and the location of generation
is critical to a well planned system. The Kenai Winds project is located on the REA system in a
place where it should allow for easier access to our existing transmission system.
HEA supports the decision to split the project into two phases each of 9 MW. While further
study work must be completed for the initial 9 MW, from an operational perspective the initial
phase should be easier to integrate into the existing transmission system as compared to a larger
project. In addition, the smaller initial capacity will allow HEA to learn the operating aspects of
Wil1d energy and its impact on system stability. We look forward to working with you and other
professional wind energy meteorological organizations such as A WS Truewind or Lawrence
Livermore National Labs in developing operating protocols that will ensure continued safe and
reliable power supply to our members.
HEA is also interested in collaborating with Kenai Winds and other stakeholder groups with
respect to marketing of Renewable Energy Credits (RECs). The sale of RECs has been limited in
Alaska to date and REA will need to ensure that there is sufficient customer interest before
nlaking commitments in that area.
Obviously our power procurement from Kenai Winds will require approval by our Board as well
as by the Regulatory Commission of Alaska and is subject to the negotiation and execution of a
power purchase agreement acceptable to both parties. If REA is to acquire the power directly
prior to December 31, 2013, HEA~s wholesale power purchase agreement with Chugach Electric
Association will also need to be amended and approved by the RCA as well.
A Touchstone Energl Cooperative ~"1'J1
Mr. Paul Curran
March 5, 2009
Page 2
HEA supports the grant application fully and views the Kenai Winds project as being among the
most viable and attractive wind farm projects in Alaska. We look forward to your moving
forward this year with this landmark renewable energy facility in our service territory.
Sincerely,
HOMER ELECTRIC ASSOCIATION, INC.
~~~
Bradley P. J anorschke, General Manager
Appendix D: Order Granting Exemption for South Fork
Hydro
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STATE OF ALASKA
THE REGULATORY COMMISSION OF ALASKA
Before Commissioners:
In the Matter of the Petition Filed by Southfork
Hydro LLC for an Exemption from Regulation
under AS 42.05.711(d)
u-08-1 02(2) - (021 0e | 200e)
Page 1 of 5
Robert M. Pickett, Chairman
Kate Giard
Mark K. Johnson
Anthony A. Price
Janis W. Wilson
u-08-102
ORDER NO. 2
BY THE COMMISSION:
Summary
We grant the petition of Southfork Hydro LLC (Southfork) for exemption
from regulation. We close this docket.
Backqround
Southfork filed a petition for an exemption from the requirements of
AS 42.05, in accordance with AS 42.05.711(ü.1 Matanuska Electric Association, Inc.
(MEA)filed a response to the Petition.2
'Letter from P. Janke, filed August 20, 2008 (Petition).
zPetition for Waiver Pursuanf fo AS 42.05.711(d), filed August 29, 2008 (MEA
Response), as corrected by Errata to MEA's Response to Petition for Waiver Pursuant
fo AS 42.05.711(d), filed September 2,2008.
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Discussion
Southfork is single-project company that is developing a small run-of-the-
river hydroelectric generation facility within MEA's service territory that is planned to
produce less than 5 gigawatt-hours of electricity per year for sale to MEA.3 Once in
operation, Southfork will likely come within the statutory definition of a "public utility" that
is subject to regulation by us.a The Petition requests that we exempt Southfork from
regulation under AS 42.05.711(d):
The commission may exempt a utility, a class of utilities, or a utility service
from all or a portion of this chapter if the commission finds that the exemption
is in the public interest.
The Petition asserts that for a small renewable energy producer
Southfork, regulation is very costly and onerous because its support organizations
'Petition at 1, MEA Response at 1.
oAS ¿2.05.990(4) provides in part:
"public utility" or "utility" includes every corporation whether public,
cooperative, or othen¡uise, company, individual, or association of individuals,
their lessees, trustees, or receivers appointed by a court, that owns,
operates, manages, or controls any plant, pipeline, or system for (A)
furnishing, by generation, transmission, or distribution, electrical services to
the public for consumption.
AS 42.05.990(3) provides in part:
"public" or "general public" means
(B) one or more customers that purchase electrical service for use within
an area that is certificated to and presently or formerly served by an electric
utility if the total annual compensation that the electrical utility receives for
sales of electricity exceeds $50,000; and
(C) a utility purchasing the product or service or paying for the transmission
of electric energy, natural or manufactured gas, or petroleum products that
are re-sold to a person or group included in (A) or (B) of this paragraph or
that are used to produce the service or commodity sold to the public by the
utility.
u-08- 1 02(2) - (02t 0e | 200e)
Page 2of 5
like
are
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comprised of only a few non-specialist people not proficient with regulation, and that
over-regulation will chill the development of renewable energy. Southfork also states
that it will be indirectly regulated because MEA will need to obtain our approval of its
purchase contract with Southfork.5
MEA states that it will be the sole purchaser of the output of the Southfork
facility, and because of its location the project will only affect consumers on the MEA
distribution system.6 MEA agrees that its agreement to purchase the Southfork output
will be subject to our approval under AS 42.05.361(a), so granting the requested
exemption will not result in any increased risks to consumers.t The MEA Response
expresses concern that our administrative burden would increase if we went through the
process of issuing certificates of public convenience and necessity to Southfork and
other small distributed generation prolects in the MEA service area, resulting in higher
regulatory cost charges to MEA.8 MEA is also concerned that the distributed generation
projects could have overlapping service territories that would likely cause confusion to
consumers and require additional proceedings before us to resolve.e MEA expresses
concern that the Southfork project and other similar projects may not be economical
with the added burden of regulation, and therefore regulation would tend to discourage
these projects.lo MEA supports the Petition and also urges us to consider adopting
rules that would exempt small generators from regulation.ll
sPetition at 1.
6MEA Response at 1.
'td. aT 2.
Btd.
etd. atg.
to rd.
tt rd.
u-08- 1 02(2) - (02t }st 200e)
Page 3 of 5
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We find that it is in the public interest at this time to exempt Southfork from
regulation. Southfork's sole customer, MEA, is a sophisticated regulated electric utility,
and MEA supports granting the exemption. The purchase and sale agreement between
Southfork and MEA is subject to our approval underAS 42.05.361(a) even if we grant
the exemption to Southfork. So long as Southfork operates only one small distributed
generation project, it will remain a relatively small company for which the expense of
regulatory compliance would be relatively large. Exemption from regulation in
appropriate circumstances may encourage small distributed renewable generation
projects. Finally, if a change circumstances occurs that warrants or requires that we
regulate Southfork, we have the authority to revoke this exemption. For these reasons
we grant Southfork's request for exemption from regulation under AS 42.05.
Final Order
This order constitutes the final decision in this proceeding. This decision
may be appealed within thirty days of the date of this order in accordance with
AS 22.10.020(d) and the Alaska Rules of Court, Rule of Appellate Procedure
(Ak. R. App. P.) 602(a)(2). ln addition to the appellate rights afforded by
AS 22.10.020(d), a party may file a petition for reconsideration as permitted by
3 AAC 48.105. lf such a petition is filed, the time period for filing an appeal is then
calculated under Ak. R. App. P. 602(a)(2).
Docket Closure
With the above determinations, no substantive or procedural matters
remain in this proceeding, and there are no allocable costs under AS 42.05.651 and
3 AAC 48.157. Accordingly, we close this docket.
u-08-1 02(2) - (02t 0e | 200s)
Page 4of 5
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ORDER
THE COMMISSION FURTHER ORDERS:
1. The request for exemption from regulation filed August 17,
Southfork Hydro LLC is granted.
2. Docket U-08-102 is closed.
DATED AND EFFECTIVE at Anchorage, Alaska, this 9th day of February,200g.
BY DIRECTION OF THE COMMISSION
(Commissioners Kate Giard and Anthony A. price,
not participating.)
u-08- 1 02(2) - (02t 0e t 200e)
Page 5 of 5
2009, by
Appendix E: Updated Project Schedule
IDTask NameDurationStartFinishPredecessors1Preliminary Feasibility Study97 daysThu 3/1/07Fri 7/13/072Preliminary Economic Model67 daysThu 4/12/07Fri 7/13/071FF3Preliminary Stakeholder Meetings80 daysSat 7/14/07Thu 11/1/0714Meteorological Study292 daysFri 11/2/07Mon 12/15/08356 Month Meteorological Assessment30 daysWed 4/2/08Tue 5/13/084SS+108 days6Update Economic Model5 daysWed 5/14/08Tue 5/20/0857Infrastructure Review4 daysWed 5/14/08Mon 5/19/086SS8Preliminary Environmental Review30 daysWed 5/14/08Tue 6/24/087SS9Preliminary Plant Layout30 daysWed 6/25/08Tue 8/5/08810Turbine Commitment297 daysWed 8/6/08Thu 9/24/0911Short List Turbine Suppliers45 daysWed 8/6/08Tue 10/7/08912Term Sheets Received45 daysWed 10/8/08Tue 12/9/081113Turbine Selection70 daysWed 12/10/08Tue 3/17/091214New Term Sheets40 daysWed 3/18/09Tue 5/12/091315First Downpayment7 daysWed 5/13/09Thu 5/21/0914,5216Manufacture of Turbines1 monFri 5/22/09Thu 6/18/091517Negotiation of Turbine Contracts45 daysFri 5/22/09Thu 7/23/091518Signature of Turbine Contracts0 daysThu 7/23/09Thu 7/23/091719Second Payment0 daysThu 7/23/09Thu 7/23/091820Towers at Site45 daysFri 7/24/09Thu 9/24/0919,1621Turbines at Site45 daysFri 7/24/09Thu 9/24/0920SS22Blades at Site45 daysFri 7/24/09Thu 9/24/0920SS23Final Payment0 daysThu 9/24/09Thu 9/24/092124Interconnection Requirements Study226 daysWed 8/6/08Wed 6/17/0925Negotiate Study Scope106 daysWed 8/6/08Wed 12/31/0810SS26System Impact Study80 daysThu 1/1/09Wed 4/22/092527Negotiate Interconnection Agreement40 daysThu 4/23/09Wed 6/17/092628Sign Interconnection Agreement0 daysWed 6/17/09Wed 6/17/092729Site Development Plan5 daysWed 8/6/08Tue 8/12/08930Media/Community Relations Plan5 daysWed 8/13/08Tue 8/19/082931Coastal Zone Management Review13 daysWed 1/21/09Fri 2/6/098,29,5032FAA Obstruction Evaluation14 daysMon 1/26/09Thu 2/12/0931SS+3 days33Community Stakeholders Meetings90 daysFri 2/13/09Thu 6/18/093234Negotiate Taxing Agreement70 daysFri 2/13/09Thu 5/21/0933SS35Preliminary Engineering45 daysThu 4/23/09Wed 6/24/0936Final BOP Quotes30 daysThu 4/23/09Wed 6/3/092637Identify Long Lead Items 10 daysThu 4/23/09Wed 5/6/0936SS38Surface and Geotechnical Survey30 daysThu 4/23/09Wed 6/3/0936SS39Finalize Layout15 daysThu 6/4/09Wed 6/24/093840Tesoro and HEA Offtake Agreements295 daysWed 5/14/08Tue 6/30/09541Tesoro Term Sheets80 daysWed 5/14/08Tue 9/2/08542Updated JDA150 daysWed 9/3/08Tue 3/31/094143Homer Electric Term Sheets34 daysFri 2/13/09Wed 4/1/093244PPA Negotiation21 daysThu 4/2/09Thu 4/30/094345Regulatory Approval43 daysFri 5/1/09Tue 6/30/094446PPA Signed0 daysTue 6/30/09Tue 6/30/094547Site Lease30 daysWed 4/1/09Tue 5/12/094248Financing337.5 daysWed 9/3/08Fri 12/18/0949Alaska Renewable Energy Fund Activities215 daysWed 9/3/08Tue 6/30/0950Round 1 Grant100 daysWed 9/3/08Tue 1/20/094151Round 2 Grant185 daysWed 10/15/08Tue 6/30/0950SS+30 days52Financing For Turbine Downpayments7 daysFri 5/1/09Mon 5/11/094453Construction Financing30 daysWed 5/13/09Tue 6/23/0943,47,5254DOE Grant / ITC0 daysFri 12/18/09Fri 12/18/0910455Long Term Debt0 daysFri 12/18/09Fri 12/18/0910456Construction126.5 daysThu 6/25/09Fri 12/18/0957Negotiate Contract10 daysThu 6/25/09Wed 7/8/093958Full Notice to Proceed0 daysWed 7/8/09Wed 7/8/095759Detailed Engineering40 daysThu 7/9/09Wed 9/2/0960Electrical2 wksThu 7/9/09Wed 7/22/095861Foundation - Design2 wksThu 7/9/09Wed 7/22/09587/237/239/246/176/3012/1812/187/83/04/05/06/07/08/09/010/11/12/1/02/03/04/05/06/07/08/09/010/11/12/1/02/03/04/05/06/07/08/09/010/11/12/1/12/1TaskPhase 3 TaskPhase 4 TaskSplitProgressMilestoneSummaryProject SummaryExternal TasksExternal MilestoneDeadlinePage 1Project: Kenai WindsDate: Thu 3/5/09
IDTask NameDurationStartFinishPredecessors62Site Plan and Detail Drawings2 wksThu 7/23/09Wed 8/5/096163Construction Plan10 daysThu 8/6/09Wed 8/19/096264O&M Plan10 daysThu 8/20/09Wed 9/2/096365Owner Approval2 wksThu 7/23/09Wed 8/5/0960,6166Material & Equipment Procurement30 daysThu 7/23/09Wed 9/2/0967PMTs and Conductor4 wksThu 7/23/09Wed 8/19/0960SS+10 days68UG Material4 wksThu 8/6/09Wed 9/2/096569OH Material4 wksThu 8/6/09Wed 9/2/096570Metering & Relays2 wksThu 8/6/09Wed 8/19/096571Embeds & Bolts2 wksThu 8/6/09Wed 8/19/096572Start of Construction0 daysWed 8/5/09Wed 8/5/096573Site Grading & Roads1.5 wksThu 8/6/09Mon 8/17/097274WTG Foundations45 daysMon 8/17/09Mon 10/19/0975Excavation10 daysMon 8/17/09Mon 8/31/097376Additoinal Sub-Grad Prep & Mud Mats9 daysMon 8/31/09Fri 9/11/0975SS+10 days77Install Steel, Bolt Cage, & Conduits10 daysMon 9/7/09Mon 9/21/0976SS+5 days,7178Pour6 daysMon 9/21/09Tue 9/29/0977SS+10 days,6879Install Grounding5 daysTue 9/29/09Tue 10/6/0978SS+6 days80Backfill5 daysTue 10/6/09Tue 10/13/0979SS+5 days81PMT Pads & Conduit4 daysTue 10/13/09Mon 10/19/0980SS+5 days82Collection System53 daysMon 8/17/09Thu 10/29/0983Trench, Cable, & Backfill1.5 wksMon 8/17/09Wed 8/26/097384Overhead1.5 wksMon 8/17/09Wed 8/26/097385Set PMT's & Terminate MV6 daysMon 10/19/09Tue 10/27/098186Test2 daysTue 10/27/09Thu 10/29/0983,84,8587Substation55 daysMon 8/17/09Mon 11/2/0988Test Existing Equipment1.5 wksMon 8/17/09Wed 8/26/097389Install New Metering4 daysThu 8/27/09Tue 9/1/0970,8890Install New Relays1 wkThu 8/27/09Wed 9/2/0970,8891Connect to Collection System1 dayThu 10/29/09Fri 10/30/0986,9092Collection System Backfeed1 dayFri 10/30/09Mon 11/2/099193WTG Installation26 daysTue 10/27/09Wed 12/2/0994Set Converters, Bases, Lower Mids, & Gro4 daysTue 10/27/09Mon 11/2/0973,85,2095Set Upper Mids, Tops, & Nacelles4 daysMon 11/2/09Fri 11/6/0994,2196Set Gearbox Assemblies4 daysFri 11/6/09Thu 11/12/099597Install Rotors4 daysThu 11/12/09Wed 11/18/0996,2298Install Wiring & Elevators8 daysWed 11/18/09Mon 11/30/099799Final Walkdowns and Punchlists1 dayMon 11/30/09Tue 12/1/0998100Backfeed and Turnover to Commission1 dayTue 12/1/09Wed 12/2/0999,92101Guaranteed Infrastructure Completion0 daysWed 12/2/09Wed 12/2/09100102Commissioning12 daysWed 12/2/09Fri 12/18/09100103Roads Reshaped & Reclaimed1 wkWed 12/2/09Wed 12/9/09100104Commerical Operations0 daysFri 12/18/09Fri 12/18/091028/512/212/183/04/05/06/07/08/09/010/11/12/1/02/03/04/05/06/07/08/09/010/11/12/1/02/03/04/05/06/07/08/09/010/11/12/1/12/1TaskPhase 3 TaskPhase 4 TaskSplitProgressMilestoneSummaryProject SummaryExternal TasksExternal MilestoneDeadlinePage 2Project: Kenai WindsDate: Thu 3/5/09
Appendix F: Updated Project Budget
Alaska Energy Authority ‐ Renewable Energy FundBUDGET INFORMATIONBUDGET SUMMARY: Phase 4 BudgetMilestone or Task Federal FundsState Funds (AEA Grant)Local Match Funds (Cash)Local Match Funds (In‐Kind)Other FundsTOTALS1Remaining Wind Turbine Payments ¹5,014,568$ 9,987,453$ 15,002,021$ 2 Engineering‐$ 95,202$ 95,202$ 3Balance of Plant1710,432$ 2,154,497$ 2,864,929$ 4Construction ¹‐$ 1,112,166$ 1,112,166$ 5 Power Factor Correction Equipment 125,000$ 375,000$ 500,000$ 6 Contractor Fees‐$ 921,364$ 921,364$ 7 Contingency‐$ 164,810$ 164,810$ 8 Inflation‐$ 339,508$ 339,508$ 5,850,000$ 15,150,000$ 21,000,000$ Milestone # or Task #BUDGET CATAGORIES:12345678TOTALSDirect Labor and Benefits‐$ Travel, Meals, or Per Diem‐$ Equipment 15,002,021$ 2,864,929$ 500,000$ 18,366,950$ Supplies‐$ Contractual Services‐$ Construction Services 95,202$ 1,112,166$ 921,364$ 164,810$ 339,508$ 2,633,050$ Other Direct Costs‐$ TOTAL DIRECT CHARGES 15,002,021$ 95,202$ 2,864,929$ 1,112,166$ 500,000$ 921,364$ 164,810$ 339,508$ 21,000,000$ ¹ Note: includes interest during constructionTotalRFA AEA09-004 Budget Form
Appendix G: Letters of Support and Kenai Peninsula
Borough Resolutions
JOHN J. WILLIAMS
BOROUGH MAYOR
KENAI PENINSULA BOROUGH
Office of the Borough Mayor
144 North Binkley Street ● Soldotna, Alaska 99669-7599
Toll-free within the Borough: 1-800-478-4441, Ext. 2150
PHONE: (907) 714-2150 ● FAX: (907) 714-2377
www.borough.kenai.ak.us
October 1, 2008
Butch White
Manager
Renewable Energy Fund
Alaska Energy Authority
813 W Northern Lights Blvd
Anchorage, AK 99503-2495
Dear Mr. White:
Last year I met with a team from BQ Energy to talk about wind generation. They were here on
behalf of Tesoro to look at the possibility of constructing a clean energy wind farm on the property
surrounding the refinery. At that time, BQ Energy was erecting monitoring towers to begin the
process of data collection. It was a detailed presentation. I was told because of years of wind data
that Tesoro had already collected that it appeared to be a good location for wind energy technology.
Tesoro and BQ Energy have kept me up to date on their year-long process to bring wind turbines to
the Kenai Peninsula Borough. I heartily support BQ Energy/Kenai Winds LLC grant application.
Energy for our Borough’s economy and citizens is a major priority of my administration. The
Kenai Winds project would be a significant step towards meeting that priority. Your grant monies
would essentially jump-start a wind-energy industry in the Borough, and in Alaska.
As you know, our local utility has examined several areas that are conducive to wind energy, and I
view the Kenai Winds project as facilitating the development of these other opportunities.
Additionally, our industrial base in Nikiski has suffered several setbacks in recent years, and this
grant’s ability to help one of our remaining refineries stabilize energy costs will be welcome benefit
while helping to redevelop a brownfield site.
If I can be of any assistance in your deliberations, please contact me.
Sincerely,
John Williams
Mayor
Kenai Peninsula Borough, Alaska New Text Underlined; [DELETED TEXT BRACKETED]Resolution 2007-069
Page 1 of 2
Introduced by:Long, Gilman, Martin, Smith
Date:10/23/07
Action:Postponed Until 11/20/07
Action:Postponed Until 01/08/08
Action:Adopted as Amended
Vote:6 Yes, 3 No, 0 Absent
KENAI PENINSULA BOROUGH
RESOLUTION 2007-069
A RESOLUTION COMMITTING TO THE DEVELOPMENT OF A LOCAL CLIMATE
CHANGE IMPACT PLAN
WHEREAS,the Kenai Peninsula Borough Assembly has recognized the need to develop a
community understanding of the potential impacts, adaptation to, and opportunities
from climate change and learn what local actions could be taken and then consider
appropriate steps to address these issues; and
WHEREAS,numerous Alaskan commissions and panels charged with identifying Alaska’s
climate change indicators, have been considering the local impacts measured through
research and observations. These include the University of Alaska International
Polar Year Scenarios Network for Alaska Planning (SNAP) activities, Alaska Center
for Climate Assessment and Policy (ACCAP) research on public infrastructure
impact costs, the Denali Commission’s community surveys, Governor Palin’s Sub-
Cabinet Panel on Climate Change, the Alaska Army Corp of Engineers, and Homer’s
Global Warming Task Force; and
WHEREAS,numerous University of Alaska scientists have presented information developed from
their research that points to both short term and long term impacts to the natural
environment and surrounding communities, including increased risks of forest fire,
floods, and coastal erosion; and
WHEREAS,local actions to increase energy efficiency and alternative energy developments are
expected to reduce the high cost of energy needed to heat our homes and our
businesses and, when incorporated into a borough energy plan that would reduce the
use of fossil fuels, will be effective in adapting to climate impacts, producing
financial savings, strengthening our economy, improving air quality and lead to a
healthier, sustainable community;
NOW THEREFORE, BE IT RESOLVED BY THE ASSEMBLY OF THE KENAI
PENINSULA BOROUGH:
SECTION 1.That the Kenai Peninsula Borough commits to develop a Climate Change Impact
plan that will promote public awareness of the benefits of developing and
implementing a plan that improves our local economy, and that protects our
resources and borough residents.
Resolution 2007-069 New Text Underlined; [DELETED TEXT BRACKETED] Kenai Peninsula Borough, Alaska
Page 2 of 2
SECTION 2.That the Assembly requests the Mayor to specifically develop a Climate Change
Impact plan that includes:
1. Study and assess the Borough’s vulnerability
The Kenai Peninsula Borough shall work with local and agency experts to assess
vulnerabilities and opportunities associated with climate change.
2. Set goals and prioritize
Based on the assessment, the borough shall develop a prioritized list of goals and targets that
reduce climate change vulnerabilities and enhance opportunities, including goals based on
a borough energy plan that prioritizes cost savings and reduces emissions.
3. Develop the plan
Produce a concise plan that describes the action and policies for adapting to climate change
by reducing the negative impacts and taking advantage of opportunities. The plan will
include a description of timing, financial impact, responsible parties, and potential partners.
4. Implement the plan
The Borough administration will implement the plan provided that any parts of the plan
requiring appropriation will necessitate Assembly approval and/or notification.
5. Monitor efforts and reevaluate the plan
The responsible parties will document results and accomplishments towards the goals in the
plan and will periodically report those findings to the Mayor, Assembly and public in order
that they may determine if revision of the plan or if an alternative approach is necessary to
reach the goals set in the plan.
SECTION 3.That this resolution takes effect immediately upon its adoption.
ADOPTED BY THE ASSEMBLY OF THE KENAI PENINSULA BOROUGH THIS 8TH
DAY OF JANUARY, 2008.
Grace Merkes, Assembly President
ATTEST:
Sherry Biggs, Borough Clerk
Yes:Gilman, Knopp, Long, Martin, Smith, Sprague
No:Fischer, Superman, Merkes
Absent:None
Kenai Peninsula Borough, Alaska New Text Underlined; [DELETED TEXT BRACKETED]Resolution 2008-007
Page 1 of 2
Introduced by:Smith
Date:01/22/08
Action:Adopted
Vote:9 Yes, 0 No, 0 Absent
KENAI PENINSULA BOROUGH
RESOLUTION 2008-007
A RESOLUTION COMMITTING TO REDUCING ENERGY CONSUMPTION AND
GREENHOUSE GAS EMISSIONS BY PARTICIPATING IN THE ENERGY STAR
SEVEN STEP CHALLENGE PROGRAM
WHEREAS,the cost to the taxpayers of the Kenai Peninsula Borough for purchased energy has
risen to unprecedented levels, both in total dollars and as a percentage of budget; and
WHEREAS,the Kenai Peninsula Borough Assembly has recognized the need to develop a plan
to understand and control the rising costs of energy for heating, lighting and
powering Borough activities. At a minimum, this includes all energy consuming
activities within Borough buildings and schools, transportation and maintenance use,
solid waste operations, plus operational and management practices; and
WHEREAS,numerous University of Alaska scientists have presented information developed from
their research which indicate that high levels of green house gases have led to both
short term and long term impacts to the natural environment and surrounding
communities; including weather anomalies, increased risk of forest fire, floods and
coastal erosion; and
WHEREAS,actions which reduce energy consumption also reduce greenhouse gas emissions; and
WHEREAS,numerous municipalities and businesses throughout Alaska and the United States
have realized dramatic savings by developing and implementing an Energy Action
Plan based on proven methodology; and
WHEREAS,nationwide experience indicates that the most benefit is derived when some staff is
dedicated to an energy management program in order to set goals, track progress and
promote energy management; and
WHEREAS,Borough actions to increase energy efficiency and utilize alternative energy
developments are expected to reduce the amount of energy used by Borough
activities and would reduce the use of fossil fuels, produce financial savings,
strengthen our economy, reduce dependence on foreign oil, improve air quality and
lead to a healthier, sustainable community;
Resolution 2008-007 New Text Underlined; [DELETED TEXT BRACKETED] Kenai Peninsula Borough, Alaska
Page 2 of 2
NOW THEREFORE, BE IT RESOLVED BY THE ASSEMBLY OF THE KENAI
PENINSULA BOROUGH:
SECTION 1.That in order to increase energy efficiency and conserve tax dollars, the Kenai
Peninsula Borough Assembly commits to develop an Energy Efficiency Action Plan
using the Energy Star Challenge seven step program created by the U.S. Departments
of Energy and Environmental Protection.
SECTION 2.That the Assembly requests the Mayor to develop and coordinate, for all borough
operations, an Energy Efficiency Action Plan following Energy Star guidelines and
present that plan for Assembly approval.
SECTION 3.That this resolution takes effect immediately upon its adoption.
ADOPTED BY THE ASSEMBLY OF THE KENAI PENINSULA BOROUGH THIS 22ND
DAY OF JANUARY, 2008.
Grace Merkes, Assembly President
ATTEST:
Sherry Biggs, Borough Clerk
Yes:Fischer, Gilman, Knopp, Long, Martin, Smith, Sprague, Superman, Merkes
No:None
Absent:None