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HomeMy WebLinkAboutEva Creek Wind Project App SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Golden Valley Electric Association Type of Entity: not-for-profit rural electric cooperative holding a certificate of public convenience and necessity Mailing Address PO Box 71249 Fairbanks, AK 99707-1249 Physical Address 758 Illinois Avenue Fairbanks, Alaska 99701 Telephone 907-451- 5645 Fax 907-451-5657 Email KKLamal@gvea.com 1.1 APPLICANT POINT OF CONTACT Name Kathryn K. Lamal Mike J. Wright Title Vice President of Power Supply Vice President of Transmission and Distribution Mailing Address PO Box 71249 Fairbanks, AK 99707-1249 Telephone 907-451-5645 Fax 907-458-6374 Email Kate K. Lamal [KKLamal@gvea.com] Mike J. Wright [MJWright@gvea.com] 1.2 APPLICANT MINIMUM REQUIREMENTS Please check as appropriate. If you do not to meet the minimum applicant requirements, your application will be rejected. 1.2.1 As an Applicant, we are: (put an X in the appropriate box) X 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 A governmental entity (which includes tribal councils and housing authorities); Yes or No 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 ) Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 2 of 77 9/2/2008 Yes or No 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 or No 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 77 9/2/2008 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. Golden Valley Electric Association is seeking funding through the Renewable Energy Fund to complete final design and permitting and construction phases of its Eva Creek Wind Project. GVEA is a not-for-profit, rural electric cooperative providing electric service to a large area in the Interior of Alaska, including residents from Cantwell through Healy to Nenana along the Parks Highway to Fairbanks and then along the Richardson Highway to North Pole and Delta Junction. As a not-for-profit cooperative whose mission is to provide the best electric service at the lowest possible price to its members, GVEA cannot assume the financial burden of these two final phases to complete the Eva Creek Wind Project without impacting the electrical rates of its 33,000 members and the communities served. Given its investment in infrastructure* in the last decade that substantially improved GVEA’s ability to serve its members, GVEA must pay off its debt while at the same time look for ways to reduce its dependency on oil to generate electricity. GVEA has been a leader in the state for its commitment to renewable energy and promotion of renewable energy through its successful Sustainable Natural Alternative Power (SNAP) program, and its development of a Standard Power Purchase Agreement for member-owned small-scale renewable energy projects. GVEA does not have the benefit of consistent access to natural gas as is possible in southcentral Alaska even though its North Pole Expansion Plant has the capacity to run plant turbines on either oil or gas. However, now is the time to implement a “can-do, project-ready” alternative energy project to really benefit the 100,000 plus Interior residents in the GVEA service area; moreover, it can be accomplished within a reasonable timeframe to provide relief during this period of rapidly escalating and “homeowner crippling” energy prices. Public power utilities across the nation are developing diverse portfolios, including success with wind power. Wind cannot displace the need for oil-fired capacity, but it certainly can offset the dependency by reducing the amount of fuel oil burned. Wind power requires backup turbines when wind can’t deliver. Significantly, with this project GVEA estimates it can achieve a direct offset of fuel from a 24MW wind generation project that operates at a 33% capacity factor. At the current price of almost $3/gallon for oil GVEA would anticipate savings between $11 to $15 million on fuel purchases annually for the life of the project. That fuel cost comes directly off membership bills. The fuel and purchase power component of our members’ bills has nearly tripled in the last year. GVEA through this grant expects to generate wind power from Eva Creek at a cost to its members of 8-to-9 cents a kw/hr. This is a cost that is similar to what GVEA presently purchases Natural Gas Economy Power energy and that is equal to the cost of energy that Anchorage consumers pay—a cost which would be half the cost of GVEA’s oil-fired energy. Furthermore, by owning the power generation this 8-to-9 cents kw/hr cost is nearly half what the 13-to14 cents cost the market might bear if GVEA chose to purchase wind power (GVEA’s current avoided cost). All the more reason for GVEA to develop, build and own its own wind generation—it provides the best method to achieve substantial diversity to include alternative energy in a meaningful way Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 4 of 77 9/2/2008 in its energy mix, while, and importantly, keeping in mind the cooperative principle to achieve the lowest price possible for its members. GVEA is the second largest electric utility in the state and its location in the Interior means it can through this grant provide a large population with quality electric power at the best price possible without having to negotiate with market driven entrepreneurs who will certainly want to make money on the sale of wind power. Grant funding would enable GVEA to have a project up and running within 33-to-36 months and reduce the cost of electricity for its members. GVEA believes it can concurrently complete the requirements for the Final Design and Permitting Phase and the Construction Phase based on its six years plus of reconnaissance, resources assessment and feasibility analysis—all conducted with GVEA resources totaling $1 million. GVEA has invested in four years of wind data collection, feasibility studies, has had preliminary discussions with permitting agencies, talked with the immediate community to be affected about the project, received estimates of costs two years previously which have been updated for this request, has the staff to oversee a project of this magnitude and is a leader in alternative energy. GVEA’s pioneering experience with wind technology and its integrated resource planning model for assessing current and future energy needs target wind as the best option for major development among the renewable energy sources. Importantly, GVEA cannot afford to accomplish this project without this grant. The long-term economic benefit of this project is that upgrades and expansion are easy—permitting has been accomplished, infrastructure is paid for and the area offers room for expansion. Lessons learned from this project could be used around the state; and significantly, additional generation could be added at the proposed project site allowing other Railbelt utilities to add additional wind generating capacity for much less cost than duplicating the initial investment. Finally, Golden Valley Electric Association looks at wind ownership similar to its approach to conventional generation—utility-owned generation is for the long-term and can be a hedge during periods of extreme market volatility. *NOTE: CHANGES TO THE GVEA SYSTEM GVEA has undergone a period of significant capital expansion in response to its growth rate in the past decade. We constructed the North Pole Expansion Plant, the Northern Intertie, the Battery Energy Storage System, the Carney line, and moved the Chena 6 unit to become the Delta Power Plant and added an SVC in Delta. In large part, these additions have made the GVEA system far more reliable that it used to be, recently completing over four years between blackouts, doubling our previous best. The North Pole Expansion Plant, an LM6000 with a steam back end, can produce over 60 MW. The plant runs on Naphtha which is a very low sulfur fuel required by our air permits. The plant was designed such that the output of the plant can be easily doubled while minimizing replacement of existing hardware. The unit and facility were designed to allow easy conversion to natural gas when that becomes available. The NPEP met the goals of excellent efficiency and provided the ability to accommodate possible future expansion and fuels. The Northern Intertie provides a second path between Healy and Fairbanks, approximately 97 miles. It was built to 230 kV standards for the future, but is currently energized at 138 kV. Prior to this line, any fault on the old line would result in severe outages since it would separate GVEA’s load center from not only the Alaska Intertie but also our Healy generation plant. Any scheduled maintenance was extremely expensive on the old line as it resulted in our inability to purchase less expensive economy energy from Anchorage, the ability to use our Bradley Lake resources and we often had to send Healy coal power south at a loss since thermal cycling of a coal plant can lead to increased maintenance. Several such outages were averted in 2006 during the Parks Highway wild fire. The fire moved under Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 5 of 77 9/2/2008 the old line on several occasions that summer often resulting in trips. For safety reasons, the fire service requested the old line to be de-energized whenever they had crews or low flying aircraft in the area which was easily accomplished since we had the Northern Intertie in service. Since the Northern Intertie runs in parallel with the old Healy to Gold Hill 138 kV line, the current in the old line is cut approximately in half which reduces losses in a squared fashion. At high loads on the Alaska Intertie (typical), the losses are reduced by approximately 5 MW/hour. This results in a savings of almost $6M/yr. (based on GVEA current avoided cost tariff). The Battery Energy Storage System (BESS) provides 4 quadrant power (MW in, MW out, MVARS leading, and MVAR lagging) and can do so very quickly, typically on the order of a few cycles. In the current configuration with 4 strings of batteries, it passed commiss ioning by providing over 30 MW for 15 minutes and can go up to 46 MVA, but for a much shorter time frame depending on power factor. The facility and major equipment is sized to accommodate possible future expansion of up to 8 strings of batteries. BESS was built in conjunction with the Northern Intertie. BESS has the ability to not only regulate voltage like an SVC, but can quickly inject real power to the load center to reduce loading on the old line should the Northern Intertie trip out. BESS has been engineered to provide additional value to GVEA. The high cost of liquid fuel in the Interior has always made carrying spin a very expensive proposition. Consequently, we have used SILOS (Shed-In-Lieu-Of-Spin) instead of running additional units. We now have BESS inject power when the other utilities are in need of our spin and only start additional units after the fact as necessary instead of running them continuously waiting for a problem. Additionally, in the past, if the Intertie was overloaded, we would automatically shed load to get it back to normal quickly before the overload progressed to a trip. We now use BESS to inject power on Intertie overloads which has allowed the System Dispatchers to schedule closer to the edge by purchasing additional economy energy without fear of shedding members on small bumps to the system. BESS has been programmed to inject MW (if appropriate) when other GVEA transmission lines trip, or on the trip of our generators which lessens the impact on the other uti lities as well as ourselves. As of mid 2008, BESS has operated 255 times and has prevented an average seven outages per meter per year. The Carney Line runs between North Pole Industrial Sub and the Carney Substation, approximately 23 miles. This 138 kV line plugs the last gap in GVEA’s 138 kV transmission system; this backbone now runs continuously from Healy to Fairbanks to Delta. The old 69 kV lines in this region are still in service, but would be above their limits with the load growth that we’ve had in the Delta area and would not be robust enough to allow motor starts in the Delta area without exceeding our flicker standards. The old Chena 6 Unit in downtown Fairbanks was relocated to Delta to serve as the Delta Power Plant. It is a 23 MW diesel fired combustion turbine. In its old location at Chena Plant, the output was restricted to approximately 18 MW due to transmission constraints. Moving the existing unit was significantly less expensive than purchasing a new unit and since the construction of the NPEP was in progress; there was no need for additional capacity. The unit was relocated in response to the significant growth that GVEA was experiencing in the eastern portion of our system. The Delta area is served by a single transmission line and went from representing 5% to becoming 20% of our total system load. This unit allows energy to be restored to the area in the event of the loss of this line within 15 minutes, or allows maintenance to be done on the line with no interruption to the membership. The Jarvis Creek SVC is a Static VAr Controller (voltage regulator) in Delta AK. It has the ability to supply up to 45 MVAr leading (capacitive) to 8 MVAr lagging (inductive). A voltage controller was needed in the Delta area due in part to the large increase in loads see there as well as the type of loads, i.e. large motors that are started, trip, or are shutdown. The Additions of Pogo Mine and Alyeska Pipeline have helped reduce the risk of constructing NPEP and the Carney Line. The Teck Pogo mine on the Good Pasture River is a large underground gold mine in the eastern part of the GVEA system. Pogo built and owns a 138 kV line that runs down the Shaw Creek valley and connects to our 138 kV line that runs to Delta via the P ogo Tap Substation. The mine consumes Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 6 of 77 9/2/2008 approximately 10 MW and they have backup generators, but have to be disconnected from us when they run these as they didn’t install synchronizing gear. Pump Station 9 is a TAPS pump station located south of Delta. An extra two miles of 138 kV line was built to reach the site. The station has several pumps, not all of which are on at any given time. P9 was designed to take up to 18 MW but consumes approximately 9 MW due to lower flows in the pipeline. Both projects exhibit a fairly flat profile around the clock and throughout the seasons. 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. GVEA has been monitoring the wind resource at the Eva Creek Site since 2003 or for five years and has found a resource with approximately a 33% to 36% capacity factor. The Eva Creek Wind Project’s proximity to the Northern Intertie is key to its value, making the interconnection viable. The site is located on the east side of the Nenana River near Ferry, Alaska, in the GVEA service territory in the Interior. The area could support up to 150 MW of wind generation but GVEA would like to start by installing a 24 MW wind project. The proposed site is on a dirt road system that was developed to provide access to numerous mining claims in the area which would need some improvements,. The dirt road system is not connected to the highway system. Currently, access is gained by walking across a Railroad bridge. Some infrastructure improvements will need to be made including road improvements for access to the site, a substation, and a way to get equipment across the Nenana River. Eva Creek is located near Ferry, Alaska, near Healy off the Parks Highway. The entire GVEA service area will be served by this renewable energy project and the entire Railbelt potentially could be served by future expansion. GVEA has had an alternative energy team in place for the past decade. Wind has been a focal point of interest and investment. In 2002 GVEA contracted with Sterling Management Services to begin a series of studies evaluating the potential capacity of several sites within the service area after which it became clear Eva Creek had the best potential for success. Communities to be served: GVEA service 3,893 square miles extending 130 miles south including communities from Cantwell on the Parks Highway north through Healy, Anderson, Nenana, Ester, Fairbanks and 100 miles south on the Richardson through North Pole and Salcha to Delta Junction. More than 100,000 residents are in the area with 33,000 members and 43,000 meters. The members of the team who will be involved in the grant project will combine the talents and experience of existing GVEA staff and wind expert consultants and at the appropriate time the contractor for construction. GVEA personnel and contracted consultants will be working on this project. The GVEA team includes:  Kathryn K. Lamal, Vice President of Power Supply, GVEA  Mike Wright, PE, Vice President of Transmission and Distribution, GVEA  Tim DeVries, PE, Manager of Engineering Services, GVEA  Paul Morgan, Wind Specialist and Alternative Energy Team member, GVEA  Daniel R. Bishop, PE, Senior Engineer, GVEA  Henri Dale, PE, GVEA Power System Manager  Paul Parks, PE, Power Supply Engineer, GVEA Sterling Energy Management, LLC of California is the contractor wind consulting firm, naming senior consultants Ron Fawcett, Jake Drews and Jon Lantz to this project. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 7 of 77 9/2/2008 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 8 of 77 9/2/2008 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. To complete the final design and permitting process and to construct the 24 MW 16-turbine (assumes 1.5 MW turbines) wind farm at Eva Creek GVEA has estimated a project budget of $93 million through construction. We expect to contribute 15 percent of the funding ($14 million) to complete the Eva Creek Wind Generation project. Our members have urged the board to commit resources to alternative energy and GVEA has conducted preliminary studies on wind generation in response to that interest as demonstrated by those who are willing to contribute to the SNAP program. In addition, our members voted in 2006 to have GVEA continue to own its power generation, as well as transmission and distribution. This is clear direction about how we need to proceed and we believe our early work in wind makes us project ready to get these final phases completed in time to really help Alaskans facing extreme energy costs in the Interior. However, and importantly, GVEA could not afford to construct the Eva Creek Wind Project without funding through this grant. We cannot commit membership dollars that would increase the cost of power just to achieve Green Power efficiencies and to diversify our energy mix with more renewable sources of energy. We are required to deliver quality electric power at the best price possible for our members. Implementation of this project through construction not only reduces our carbon footprint, but also, the bottom line is it reduces the cost of electricity for our members. We are a cooperative bound by cooperative not-for-profit business principles—not a company that can choose to make money through the sale of electricity. Phase III - Final Design and Permitting Complete permitting Complete land acquisition Complete Engineering - civil, structural, electrical $ 3,000,000 Initial Payment for wind turbine procurement (At contract signing) $ 3,770,260 TOTAL PHASE III $ 6,770,260 PH ASE IV Construction, Commissioning, Operation and Reporting Procurement (Turbines & Towers) Wind Turbines (per GE Sept 08 proposal) 18 months prior to First Scheduled Major Component Ship Date $ 3,770,260 12 months prior to First Scheduled Major Component Ship Date $ 3,770,260 6 months prior to First Scheduled Major Component Ship Date $ 3,770,260 1 months prior to First Scheduled Major Component Ship Date $ 7,540,520 Delivery to Delivery Point $ 11,310,780 Turbine Completion $ 2,827,695 Final Project Acceptance $ 942,565 Special Tools and Training $ 50,000 Transportation $750k/unit, includes trailer rental, barge rental $ 12,000,000 Foundations $600k/unit $ 9,600,000 Cranes Rental (operators & crane) + shipping to and fro $ 1,300,000 Erection Labor $ 500,000 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 9 of 77 9/2/2008 Lightning Protection Grounding ($4.50ft) 250mcm cu + ground rods $ 40,000 Support Buildings Crane & work area 110 x 60 @ $250/sqft $ 1,650,000 Road and civil infrastructure $ 6,000,000 Roads Pads Electric Substation/Transmission/Subtransmission Transformer $ 1,200,000 Substation $ 3,900,000 Transmission $ 2,500,000 Cut into existing transmission line Build 1.5 miles of double circuit 138kV Substransmission 34.5kV cable $4.52/ft 3 runs $ 976,320 HDPE 5" (assume 72,000') @ $10/ft $ 720,000 Installation of HDPE, cables, terminations, transformers, trench) $ 1,300,000 34.5kV transformers + 2 spares. 18@$50k ea $ 900,000 Elbows ($80 ea) $ 7,680 Communications Microwave Sites $ 750,000 Fiber optic from substation to each WTG $ 550,000 Upgraded Transfer Trip Scheme $ 100,000 Engineering and Construction Management $ 963,960 Contingency $ 4,087,330 Spare parts $ 1,500,000 Bond 2.5% of project cost $ 2,043,665 TOTAL PHASE IV $ 86,571,295 PROJECT TOTAL $ 93,341,555 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. Completion of the Eva Creek Wind Project will result in direct economic benefits to GVEA’s 33,000 members and its customers in the Interior—100,000 residents in the communities of Fairbanks, Nenana, Healy, Anderson, Delta, North Pole, Salcha and others along both the Parks Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 10 of 77 9/2/2008 and Richardson Highways are served. There is no doubt the completion of a successful wind generation project in the Interior within the next 33-to-36 months will contribute significantly to the economic stability of the region. Fuel costs have nearly tripled for some as they are being hit with the high costs of heating oil, gasoline and electricity, which for GVEA is dependent to a large extent on the use of oil for its electrical generation at the North Pole Power Plant . We know wind cannot be the only answer, but we have learned, as a result of the studies of the past six years, that wind capacity of 33-to-36% is evident at Eva Creek and wind needs to be part of the mix for future electric power generation. Nationwide electric customers are supporting their utilities efforts in developing renewable energy; and GVEA has had an active Green Power committee which helped shape the board’s renewable energy strategy for the cooperative. GVEA met 2007 board goals of its Green Power Pledge to use 10% of the 2007 peak system load (223 MW) with renewable sources and has committed to meet a 20% goal by 2014. The fuel and purchase power component that GVEA has had to impose on its members in recent years jumped dramatically this past year. Approximately $100 out of the average GVEA member homeowner’s electric bill of $167 is going toward the fuel and purchase power component. GVEA is in the unique position of having six years of reliable data on the feasibility of wind availability on our system with specific wind data since 2003 for Eva Creek as a site for what is likely to be the Unites States’ largest Arctic wind generation project . With this grant GVEA can immediately go to work to complete the permitting/design and construction phases within a timeframe that can make a real difference in the cost of electricity for its members. GVEA is not in the business of making a profit—it is in the business of generating and delivering electricity to its members at the lowest cost possible. This is an underlying and essential cooperative business principle. Resource diversification will be essential given geopolitical, environmental and technical pressures which will result in volatile fossil fuel prices. In addition to the benefit of reducing our carbon footprint through the integration of renewab le energy sources into our system and the benefit of reduced costs to our members, there are other benefits to the state of Alaska as a whole. For example, with the investment in this infrastructure and the lessons learned from completion of this first major Arctic wind generation project in America, GVEA contributes to the understanding of the challenges of such construction in northern climates. Any future installation should be easier because of this “model” project. Of special significance to Alaska, is the capability to expand the system to provide renewable energy to other Railbelt Utilities at a cost far less than the initial investment. The Eva Creek site can accommodate expansion; it will have already been permitted and early operation will work out and resolve any unanticipated issues. Another benefit is the ability of the Interior and Fairbanks to build an image of a clean energy destination which has had an impact elsewhere on attracting conventions, travelers, new residents and businesses to an area. Finally, this project will develop a skilled workforce to operate and maintain wind generation systems. 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.) $93,341,555 2.5.2 Grant Funds Requested in this application. $79,340,322 2.5.3 Other Funds to be provided (Project match) $14,001,233 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $93,300,000 2.5.5 Estimated Benefit (Savings) $11.5 – 14.6 million (fuel costs) Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 11 of 77 9/2/2008 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.) Approximately 50,000 tons of CO2 offset per year SECTION 3 – PROJECT MANAGEMENT PLAN for FINAL DESIGN AND PERMITTING and CONSTRUCTION Phases 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. GVEA Vice Presidents Kate Lamal and Mike Wright are the project sponsors for this project with GVEA Engineering Manager Tim DeVries serving as the GVEA Eva Creek Wind Generation project manager. The resumes of these three responsible personnel are attached as Attachment A3.1. 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.) Eva Creek 24 MW Wind Project Development Schedule The following milestone schedule is based on a 33 month development plan for commercial operation of a project at Eva Creek for operation in September, 2012: 1/2009: Initial decision to proceed to detailed feasibility phase 3/2010: Complete initial feasibility assessment as follows:  Complete initial project wind turbine layout using typical WTG  Determine additional meteorological tower layout requirements  Determine estimated project production based on preliminary information  Determine all land requirements for access, electrical, roads, and other infrastructure.  Determine electrical interconnect requirements and location  Determine permit requirements for avian study (consideration is given to conduct preliminary Avian assessment to help determine final permitting requirements), wet lands, other constraints and noise analysis requirements. Please see Appendix B for a listing of potential environmental assessment, permitting and licensing areas.  Prepare initial development and construction scope to minimize risk  Refine development schedule and capital cost estimate  Refine project operating and financial model Identify required information specification for WTG and any other major equipment (transformers, switchgear) commitments. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 12 of 77 9/2/2008  Establish definitive plan, schedule and budget for development to major equipment commitments  Refine cost effectiveness of project in reducing GVEA fuel and overall power costs  Prepare final project evaluation results for final presentation to management. 4/2010: Assuming final management commitment is to proceed to the development phase, the following development activities are initiated:  Additional meteorological towers are erected, most likely multiple towers at hub height.  Permitting, Environmental Impact, Avian (incorporate all prior study information into plan) and Noise studies effort are initiated as required for project permitting.  Interconnect plan is developed.  Required land acquisition/royalty agreements are initiated.  Project civil and electrical design effort is initiated.  A definitive development and construction strategy is defined.  Wind turbine, major equipment suppliers and contractors are engaged to develop a supplier and contracting plan. 3/2011: All of the conditions precedents have been achieved for a decision to proceed to construction:  12 months of additional meteorological data has been acquired with micro siting met towers, correlated to long term sites, a definitive WTG layout has been made and definitive production estimates have been developed. A net energy production assessment is completed.  All environmental permits have been negotiated and ready for execution.  All required land acquisition/royalty agreements are in place or ready for execution.  Project civil and electrical design is complete based on assumed turbine type, subject to minor modifications with alternative turbine selection.  The project procurement plan is in place and the following agreements may be ready for execution:  Wind Turbine Supply and Erection  Transformer and Switchgear (Unless included in construction contracts)  Substation and Transmission Construction  Wind Plant WTG Foundation, Electrical Infrastructure and Miscellaneous Civil Construction  A definitive capital cost budget and operating/financial model have been refined that reflect the appropriate returns for the investment based on all information acquired to date. 10/2011: Detailed engineered civil and electrical design is completed 4/2012: Begin civil/electrical underground construction to engineered design 4/2012: Begin major equipment delivery Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 13 of 77 9/2/2008 6/2012: Complete project civil and electrical underground construction 8/2012: Complete:  WTG erection and commissioning  Electrical construction and electrical commissioning including substation and transmission interconnect 9/2012: Commercial Operation  All equipment installed and engineer sign off for proper installation and operation  All infrastructure support services (O&M building, Operations center, SCADA system, internal utility support systems, and trained technicians with proper vehicles, tools and spare parts supply) in place  Final turbine supply operation criterions’ testing begin and is completed according to wind turbine supply agreement for availability and power performance. 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. EVA Creek 24 MW Wind Project Milestones The following typical milestone schedule follows that is based on a 33 month development plan for commercial operation of a potential project at Eva Creek for operation in September 2011: 1/2009: Initial decision to proceed to detailed feasibility phase (assuming funding) 3/2010: Complete initial feasibility assessment 4/2010: Final management commitment is to proceed to the development phase. 3/2011: All of the conditions precedents have been achieved for a decision to proceed to construction. Major equipment orders are placed 10/2011: Detailed engineered civil and electrical design is completed 4/2012: Begin civil/electrical underground construction to engineered design 4/2012: Begin major equipment delivery 6/2012: Complete project civil and electrical underground construction 8/2012: Complete WTG erection and commissioning and electrical construction and electrical commissioning including substation and transmission interconnect 9/2012: Commercial Operation Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 14 of 77 9/2/2008 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. PERSONNEL GVEA personnel and contracted consultants will be working on this project. The GVEA team includes:  Kathryn K. Lamal, Vice President of Power Supply, GVEA  Mike Wright, PE, Vice President of Transmission and Distribution, GVEA  Tim DeVries, PE, Manager of Engineering Services, GVEA  Paul Morgan, GVEA Wind Specialist and Alternative Energy Team member  Daniel R. Bishop, PE, GVEA Senior Engineer  Henri Dale, PE, GVEA Power System Manager  Paul Parks, PE, GVEA Mechanical Engineer Sterling Energy Management, LLC (SEM) of California will provide project development and management support services for GVEA. SEM has committed:  Ron Fawcett, Managing Principal  Jake Drews, Senior Consultant  Jon Lantz, Senior Consultant Attached is a summary of SEM’s Wind Power Management Services and Experience. SEM will be working with us to identify the pool and select the construction contractors. NOTE: Resumes of the Eva Creek Wind Generation project team are attached as Attachment A 3.1 and Attachment A 3.4. GVEA will coordinate all resources for the project, contracting equipment or personnel as needed. GVEA anticipates selecting a turbine vendor who will provide overall WTG design, an engineering firm to assist with civil and electrical design and civil/electrical contractors for construction. The vendors, engineers and contractors will be selected as needed within the project timeline. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. GVEA proposes to provide quarterly progress reports and more if needed and appropriate during the actual construction and installation of the wind turbine farm. Tim DeVries will be the point of contact for all progress reports and communication about the project. Any unexpected delays, issues, problems and/or concerns will be communicated to ensure AEA is apprised and can offer a perspective on an appropriate resolution or project adjustment. Communication through quarterly reports will: Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 15 of 77 9/2/2008  Detail project activities completed to date,  Identify existing or potential problems not previously anticipated,  Outline the activities targeted for the next reporting period, and  Provide project photos to demonstrate progress on the project especially when it gets to the construction phase. The quarterly report will also account for expenditures to date and identify discrepancies between budget and new cost estimates. Other required reporting requested b y AEA will be accommodated. 3.6 Project Risk Discuss potential problems and how you would address them. The greatest risk of any wind project is the availability of wind, and in this instance we know we have a consistant wind resource as a result of our six years of work studying wind resources in the GVEA service area. Meteoralogical towers which have been on-site since 2003 demonstrate we have a good wind capacity factor of 33 - 36% at Eva Creek. The construction risks associated with the Eva Creek Wind Project will be similar to the risks of any construction project in Alaska. There is nothing we have uncovered through feasibility studies and our understanding and experience in working during the Interior’s limited construction season that we believe will pose problems to prevent a successful installation. With funding we can move ahead relatively quickly to secure the required permits and mitigate concerns. Environmental issues can be a potential problem; however, in this case GVEA has recent experience obtaining permits in the proposed project area during the permitting process for the Northern Intertie. Specific permitting and environmental issues are discussed in Section 4. The location of the proposed wind project will make construction more of a challenge. GVEA will need to make road improvements as part of the project. GVEA’s construction experience with the Northern Intertie will likewise prove valuable during this project. Availability of large WTG’s is also a risk factor. Large WTG’s are in demand and there are many projects planned throughout the lower 48 over the next few years. GVEA has been in discussions with WTG vendors to ensure availability if this grant application is approved. System integration of a large WTG project on GVEA’s system may be an issue. GVEA is in the process of completing a wind integration study to determine any system upgrades that may be required. Required upgrades will be incorporated in the system design. For example modern wind turbines can be specified with zero voltage ride-through where in the past wind generation was tripped off-line during system faults. Modern turbines can also provide reactive compensation in order to help with voltage stability issues. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 16 of 77 9/2/2008 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. The Eva Creek Wind Project is planned to be a 24 MW wind farm located on the east side of the Nenana River near Ferry, Alaska, in the GVEA service territory in the Interior. Preliminary wind resource studies indicate that the gross capacity factor for this project would be approximately 36% with a net capacity factor of approximately 33%. This capacity factor translates into an annual energy production of 68.5 GWh. [Note: Benefits are addressed in Section 2 above.] The Eva Creek Wind project would provide clean, renewable energy that would (a) reduce the emission of greenhouse gasses, (b) help GVEA meet its renewable energy pledge of 20% by 2014, and (c) support Federal facilities in GVEA’s service area meet their green mandates. Furthermore, the cost of production (including capital recovery) would likely be below the variable cost of generation for many of GVEA’s ex isting generation resources. The Eva Creek project would be subject to intermittent energy generation that would necessitate daily resource regulation planning which would likely result in periodic inefficiencies in operation of its existing assets. GVEA has a diversified mix of generation as discussed previously in this application. Other alternatives to wind in GVEA service territory are biomass; hydro, solar and geothermal. The Fairbanks North Star Borough is in the process of reviewing bids for a biomass generator located at the landfill. GVEA has been contacted concerning purchasing the power from this project. The proposed projects are relatively small and will not be sufficient to meet GVEA renewable energy pledge. The cost of power may also come in close to avoided cost which would provide no rate relief to GVEA’s members. Solar is too costly at this time; however, GVEA does support small scale solar projects through the SNAP program. GVEA has received grants to study hydro resources along the Nenana and Tanana rivers. The studies may show that there is availability of run-of-river hydro in our service territory; however, there is little elevation differential so a large scale hydro may not prove feasible. GVEA does support the renewed study of the Susitna Hydro project and would enter into a power sales agreement if the project were to move forward. There has recently been the development of a small geothermal plant at the Chena Hot Springs Resort east of Fairbanks. The challenge at this time is that there has not been a sufficient geothermal resource identified to make a large scale project viable. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 17 of 77 9/2/2008 There have been several investor owned groups that have contacted GVEA about the possibility of GVEA purchasing wind generated electricity. An investor owned wind project would be an option for GVEA to achieve its renewable pledge; however, a non-regulated investor owned wind project would not reduce energy costs to GVEA members. 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 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 18 of 77 9/2/2008 GVEA is a not-for-profit, rural electric cooperative providing electric service to a large area in the interior of Alaska, including residents in the Fairbanks, Delta, Nenana, Healy, and Cantwell areas. The GVEA mission statement is “To provide our member-owners and communities with quality electric service, quality customer service and innovative energy solutions at fair and reasonable prices.” To meet this objective, GVEA relies on its self-owned generation, transmission, and distribution facilities described in this section and depicted in Figure 2 -1. It also participates in firm and non-firm power purchase exchanges. GVEA currently operates and maintains 3,047 miles of transmission and distribution lines and 36 substations. GVEA transmission facilities extend as far south as Healy, north to the Ft. Knox substation, and southeast to the Jarvis Creek substation and to Alyeska Pump Station 9. The system is interconnected with Fort Wainwright, Eielson Air Force Base, the University of Alaska - Fairbanks, and the electric utilities in the Railbelt by way of the Anchorage-to-Healy Intertie (AH Intertie). GVEA is the northern control point for the AH Intertie, which has a maximum rating of 79 MW of transfer capability. The AH Intertie is owned by the State of Alaska and operated under multi-party agreements. Currently GVEA has a total firm capacity resources of 258.6 MW (peak winter ratings), comprised of 217.6 MW of self-owned generation capacity, 20 MW from Bradley Lake, and 21 MW of firm energy purchases from Aurora Energy. The primary characteristics of these resources are shown in Table 2-1. As seen in the table, GVEA’s existing capacity is a mixture of combustion turbine (190.6 MW), coal (27 MW), contracted hydroelectric capacity (20 MW) and contracted coal (21 MW). Most units have already achieved a long service life wilth all combustion turbine units except for the new combined-cycle plant on-line prior to 1977, and the coal (Healy) facility has been in operation since 1967. The Bradley Lake hydroelectric facility is relatively new, however, as it came on-line in 1991 and, as with most hydroelectric facilities, is expected to have a unit life of 50 years or more. As shown in Figure 2-1, the GVEA generating plants are dispersed in and around Fairbanks, with the exception of the Healy coal unit and Bradley Lake. Table 2-1 also lists the fuel type and heat rate of the GVEA resources. GVEA’s combustion turbine capacity operates on heavy atmospheric gas oil (HAGO) with the exception of the John Brown unit, which operates on No. 1 diesel fuel. The full load, net plant heat rates for the combustion turbine units range from a low of 6,638 Btu/kWh for North Pole 1X1 combined cycle plant, to 14,587 Btu/kWh for Zehnder 2. GVEA also owns and operates two 2.8 MW diesel generators used for peaking and black start situations. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 19 of 77 9/2/2008 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 20 of 77 9/2/2008 Table 2-1 GVEA-Owned Capacity and Bradley Lake Contracted Capacity GVEA Generation Resources Characteristics Location Type Year Installed Fuel Capacity (January) Full Load NPHR (Btu/kWh)(4) North Pole 1 North Pole CT Frame 7 1976 HAGO 63.6 MW 10,085 North Pole 2 North Pole CT Frame 7 1977 HAGO 65.5 MW 9,886 Zehnder 1 Headquarters CT Frame 5 1971 HAGO 19.6 MW 14,325 Zehnder 2 Headquarters CT Frame 5 1972 HAGO 18.8 MW 14,587 John Brown Delta CT Frame 5 1976 De#1 23.1 MW 13,587 Healy 1 Healy ST-Coal 1967 Coal 27.0 MW 11,501 Bradley Lake Homer Hydro 1991 Hydro 20.0 MW 0.0 BESS Fairbanks Energy Storage 2003 Battery 46 MW (for 5 min) NA North Pole 1x1 North Pole CC- LM6000 April, 2006 Naphtha 59.9 MW 6,638 Aurora Fairbanks ST - Coal 21.0 / 4 MW - Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 21 of 77 9/2/2008 4.2.2 Existing Energy Resources Used Briefly discuss your understanding of the existing energy resources. Include a brief discussion of any impact the project may have on existing energy infrastructure and resources. The interaction of net plant heat rate and fuel cost generally determine the dispatch order on a utility system. Following the principles of economic dispatch, the North Pole CT units are operated at a higher capacity factor than the Zehnder units or John Brown. GVEA combustion turbine operation is also economically dispatched against the availability of economy power sales from Chugach Electric or Anchorage Municipal Light & Power over the AH Intertie. Healy 1 has a full load, net plant heat rate estimated to be 13,596 Btu/kWh, although its low fuel cost results in a base load dispatch of the facility during the year. GVEA also purchases 100% of the output as base load from the Aurora Energy coal plant located in Fairbanks. Under the operatin g agreement for Bradley Lake, Chugach Electric dispatches the hydro facility but GVEA is afforded scheduling flexibility and is able to largely use the Bradley Lake energy in a peak shaving mode where it has the greatest value. The GVEA system also includes a unique battery energy storage system (BESS), completed in 2003. The BESS system is an energy storage facility that allows GVEA to utilize up to 46 MW of stored power for a five-minute period or 27 MW for approximately 15 minutes. The facility is located in a large warehouse in Fairbanks and consists of nearly 14,000 liquid electrolyte-filled cells. The facility serves as an electrical bridge, allowing GVEA sufficient time to bring other generation on-line without shedding load during an unexpected power supply disruption. The principal value of a wind project in the GVEA system is to displace higher electric energy resources. The energy from the proposed Eva Creek Project will be used to off-set combustion turbine energy. Reducing emissions from fossil fuels with a renewable resource is a major benefit of the project. The reduction in emissions will be from reduced oil consumption by GVEA’s combustion turbine. Wind power will not be able to eliminate all CT energy as some level of CT generation will be required to provide regulation due to the variability of wind. An additional goal of this project is to reduce the cost of power to the rate payer. Regulation costs in order to integrate a large scale wind project such as EVA Creek into the GVEA system may be expensive due to the weak nature of the interconnected Railbelt grid. The reduction in capital costs to the rate GVEA’s rate base through a grant will improve the cost benefit to the rate payer. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. GVEA sells over 1.4 billion kWhrs of electricity a year. The majority of this energy comes from burning fossil fuel as discussed previously. Energy sales are split evenly among residential, commercial and industrial loads. This project will reduce the amount of fossil fuel burned by GVEA to generate electric energy with a secondary goal of also reducing the overall cost of power to all ratepayers. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 22 of 77 9/2/2008 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 The Eva Creek Wind project is proposed to have a capacity of 24 MW. The estimated capacity factor for this project is 36.2% (gross) and 32.6% (net), resulting in an annual energy generation of 68.5 GWh. Anticipated barriers include the high capital cost (on the order of $4000/kW) and potential permitting issues as discussed in Section 4.3.3. Basic integration concept – the project will operate intermittently depending on wind resource to displace the cost of otherwise operating less economical hydrocarbon fuel combustion turbines. However, the intermittent nature of the wind resource will necessitate system regulation requirements and associated costs of implementation. Cost of regulation includes the cost of always maintaining the ability to pick up or drop generation on fast-reacting combustion turbines. The cost of regulation may vary significantly depending on factors such as wind variability, system load, available system resources, fuel costs, etc Delivery methods – energy will be generated and delivered into the existing GVEA system. 4.3.2 Land Ownership Identify potential land ownership issues, including whether site owners have agreed to the project or how you intend to approach land ownership and access issues. The land identified for the GVEA Eva Creek wind generation farm is currently owned by the following agencies and entities.  State of Alaska, Department of Natural Resources (DNR)  State of Alaska, DOT  University of Alaska  Private Land Owners  Unpatented State Mining Claims  Mental Health Trust Land  Alaska Railroad Corporation The State of Alaska, DNR, is the largest land owner in the area. GVEA has met with DNR on a Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 23 of 77 9/2/2008 preliminary basis and they are supportive of this project. No formal land use or permit applicati ons have been submitted. There is an existing 100-foot wide access road (Ferry Road/Eva Creek Road). Portions of the existing road will serve well as is and other portions will need to be upgraded or widened to accommodate trucks transporting equipment to the site. GVEA will work with the State of Alaska DNR and DOT on the road use and any necessary changes to the existing road. The Alaska Railroad will be the access point to the project and will be involved in material staging. The other land owners have not been contacted at this point. 4.3.3 Permits Provide the following information as it may relate to permitting and how you intend to address outstanding permit issues.  List of applicable permits  Anticipated permitting timeline  Identify and discussion of potential barriers The GVEA staff has identified a number of permits required before we can proceed with the project. Listed below are the areas and the Government Agencies involved:  List of applicable permits State of Alaska, DNR State Historical Preservations Office (SHPO) Fish & Game Forestry DEC (road work) DOT/PF Alaska Railroad (ARRC) Federal Aviation Administration (FAA) U.S. Army Corp of Engineers (USACE) Wetlands River Crossing Mental Health Trust Land (MHTL) Easements (Private land owners) Potential barriers include: Historically, the biggest detraction of wind energy projects from an environmental standpoint is the effect on avian mortality. Much of this detraction has been remedied through the design and use of turbine blades that spin slower. Depending on the location of the project, noise can also be an issue. Critics of wind energy projects have raised concerns that the noise emitted from operation of a wind turbine constitutes a nuisance or harms wildlife. Some states have enacted statutes prescribing allowable noise levels that must be met by a project. Other environmental concerns with the permitting of wind projects involve wildlife issues where a project may disturb wildlife habitat. In addition, because the development of a site often requires grading and construction, erosion issues and the effect of the construction on habitats and riparian zones may have to be addressed.  It is anticipated that permitting will take at least one year and is scheduled for completion in 2010. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 24 of 77 9/2/2008  Ferry Road will require substantial realignment and grading, taking improvements outside the 100 foot right-of-way, it is unknown at this time whether there will be opposition to this re- alignment. Two years ago GVEA held an informal meeting in the community which was well attended to discuss the potential project. Ferry is a community of approximately 20 households. In addition, there are a number of seasonal cabins located in the area.  As with all Wind projects, the avian interaction will be closely looked at; however, the US Fish and Wildlife has expressed support for renewable energy projects and their willingness to work with GVEA. GVEA conducted an extensive avian study which included this area as part of the Northern Intertie project. 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 Any potential issues and mitigating measures with respect to the following will be identified during the agency review and public comment period through the State permit process.  Threatened or endangered species – unlikely in this area based on the work conducted for the Northern Intertie project.  Habitat issues – little impact to wildlife habitat, hunting activities may be slightly impacted, but we have had some discussions with local residents and don’t believe access will be limited.  Wetlands and other protected areas – no protected areas but some areas of ridge top wetlands will require an individual permit.  Archaeological and historical resources – Surveys have been done at the current met (meteorological) sites and no significant findings have been found. Individual WTG tower sites will be examined.  Land development constraints – dependant on public comment and DNR stipulations.  Telecommunications interference – Area is outside of microwave and cell corridors, no interference is expected.  Aviation considerations – The area does not affect commercial traffic, but is in an area between Fairbanks and Healy, subject to both private and military low flying aircraft. Based on public and FAA comments, measures may be taken to mitigate.  Visual, aesthetics impacts – area falls about 12 miles east of the transportation corridor and may be visible along ridge tops. Public comment will be taken as part of the permitting process. Avian study - Area has previously been identified as a major Sandhill Crane migration route and will require further study to mitigate any impacts. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 25 of 77 9/2/2008 4.4 Proposed New System Costs (Total Estimated Costs and proposed Revenues) The level of cost information provided will vary according to the phase of funding requested and any previous work the applicant may have done on the project. Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer’s estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of the project. Cost information should include the following:  Total anticipated project cost, and cost for this phase  Requested grant funding  Applicant matching funds – loans, capital contributions, in-kind  Identification of other funding sources  Projected capital cost of proposed renewable energy system  Projected development cost of proposed renewable energy system The initial Phase 3 Development effort will commence upon grant approval. The budget for this initial development phase is $3,000,000 of the total $93.3MM mentioned in Section 2. The final expenditure for Phase 3 is the initial down payment of $3,770,020 for the selected WTG bringing the total cost for Phase 3 to $6,760,020. Phase 4 Construction, Commissioning, Operating and Reporting costs of the Eva Creek project is budgeted at $86,571,295 bringing the total cost of the project to $93,341,555. GVEA is requesting 85% in grant funds for Phases 3 & 4 with the 15% balance provided by GVEA matching funds. 4.4.2 Project Operating and Maintenance Costs Include anticipated O&M costs for new facilities constructed and how these would be funded by the applicant.  Total anticipated project cost for this phase  Requested grant funding The following table summarizes the estimated annual operating costs for the project for the first five years of operation. Subsequent year costs are escalated at 2.5%. Note that the first two years of operation are assumed to be under manufacturer warranty, as indicated by a lower WTG maintenance cost than subsequent years. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 26 of 77 9/2/2008 O&M Cost Details ($) Year 1 Year 2 Year 3 Year 4 Year 5 Labor Support / Supplies $342,116 $342,116 $418,346 $418,346 $418,346 Required Equipment Costs $3,592 $3,592 $7,926 $7,926 $7,926 Parts Usage After Warranty $99,575 $99,575 $99,575 O&M Facilities $16,460 $16,460 $16,460 $16,460 $16,460 O&M Transmission $34,000 $34,000 $34,000 $34,000 $34,000 O&M Electrical Usage $8,000 $8,000 $8,000 $8,000 $8,000 Subtotal Annual Cost $404,168 $404,168 $584,307 $584,307 $584,307 Cost per Turbine 16 WTGs $25,261 $25,261 $36,519 $36,519 $36,519 Parts Initial Purchase for Stock Year 3 $799,035 Cost per Turbine $49,940 Annual G&A Costs $100,000 Costs quoted in year 2008 prices Annual cost escalator:2.50% 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 GVEA membership recommitted in 2006 to having its electric cooperative own its own power generation for the long term. This means GVEA would use the grant to build and own the Eva Creek Wind Project installation and add it to its mix of energy sources for electric power generation. While wind will have its challenges, all studies conducted over the last six years tell us it can reduce fuel costs for GVEA, which benefits the GVEA membership. We avoid negotiating a purchase of wind power at a price the market will bear, which currently could be around 14 cents kWh. All capital costs born by GVEA will roll into GVEA’s basic tariff rate and will be recovered over the life of the project. The significant financial return to GVEA’s members is the reduction to fuel and purchase power costs. 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. SEE ATTACHMENT B The Cost Worksheet Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 27 of 77 9/2/2008 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. A Business Plan for Golden Valley Electric Association (GVEA) was prepared to support its potential 24 MW Eva Creek Wind project. This business plan is attached in full. The business plan assumes that GVEA will develop and own the project, with equity capitalization at its average cost of capital at 6%. The Eva Creek Wind project is assumed to benefit from a Renewable Energy Fund Grant (REFG), which is assumed to offset 85% of project capital costs. The electricity produced by the wind project will offset some portion of the production requirements of GVEA’s remaining resources. The capital cost of the project would be approximately $93 million. The business plan has assumed a year 2012 operation start-up for the project. The attached business plan indicates that the cost of production of energy will be approximately $42/MWh including the cost of capital recovery of the GVEA-funded 15% of capital costs. An additional cost of system regulation will be incurred due to the variable, intermittent nature of wind energy generation. The business plan assumes this cost to be on the order of $50/MWh. Please refer to the attached business plan for additional project details. ATTACHMENT B 4.4.5 SEM Business Plan for GVEA Eva Creek Project. 4.4.6 Analysis and Recommendations Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. Sterling Energy is a company completely dedicated to professional management of wind, solar, and biomass as well as thermal power generation assets. Since incorporation in 1989, SEM has managed assets in more than 20 countries, including multiple plants in the United States and Canada. Most of the wind projects SEM has supported have been in the Americas and Europe. SEM believes the wind capacity studies indicate cost savings for GVEA long-term as it pilots the use of wind as a key component to the energy mix that will be so important in Alaska’s future. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 28 of 77 9/2/2008 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 Potential annual fuel displacement (gal and $) over the lifetime of the evaluated renewable energy project: Potential fuel savings will be dependant on what power is displaced by the wind energy. GVEA’s NPP GT 1 & 2 use 4,989,546 gallons of HAGO to produce 68,515MWhrs for an annual savings of $14,469,683. NPEP uses 4,226,501 gallons of naphtha to produce 68,515MWhrs for an annual savings of $11,647,550. GVEA’s members will save between $233 and $289 million dollars over the 20 year life of the project based on current fuel prices. Essentially fuel savings will be somewhere between 85 to 100 million gallons. Potential additional annual incentives: There may be additional future savings to GVEA when carbon tax legislation is developed. The savings will be dependent on the tax rate and fuel source offset by the wind energy. Discuss the non-economic public benefits to Alaskans over the lifetime of the project: Wind is increasingly seen as an important renewable energy source to harness to mitigate the negative impacts of fossil based fuels. Although in some instances aesthetics of windmills has caused community issues and turbine design initially affected avian populations, the improvements in design and careful consideration of location provide a relatively quiet and a clean source of power. Nationwide electric customers are supporting their utilities efforts in developing renewable energy; and GVEA has had an active Green Power committee which helped shape the board’s renewable energy strategy for the cooperative. GVEA met 2007 board goals of its Green Power Pledge to use 10% of the 2007 peak system load (223 MW) with renewable sources and has committed to meet a 20% goal by 2014. GVEA takes pride in being responsive to its membership when it can incorporate new ideas without excessive cost to its membership. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 29 of 77 9/2/2008 GVEA is in the unique position of having six years of reliable data on the feasibility of Eva Creek as a site for what is likely to be the United States’ largest Arctic wind generation project. In addition to the benefit of reducing our carbon footprint through the integration of renewable energy sources into our system and the benefit of reduced costs to our members, there are other benefits to the state of Alaska as a whole. For example, with the investment in this infrastructure and the lessons learned from completion of this first major Arctic wind generation project in America, GVEA contributes to the understanding of the challenges of such construction in northern climates. Any future installation should be easier because of this “model” project. Of special significance to Alaska, is the capability to expand the system at Eva Creek to provide additional renewable energy to Railbelt Utilities at a cost far less than the initial investment. The Eva Creek site can accommodate expansion; it will have already been permitted and early operation will work out and resolve any unanticipated issues. Another benefit is the ability of the Interior and Fairbanks to build an image of a clean energy destination which has had an impact elsewhere on attracting conventions, travelers, new residents and businesses to an area. Finally, this project will develop a skilled workforce to operate and maintain wind generation systems. 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 Funding sources include GVEA’s financial commitment to the project. For the past decade GVEA, in response to its members, has invested in wind studies to assess the feasibility of going forward with a major development to capture wind capacity at Eva Creek near Ferry, AK. Investments to Date and funding sources – GVEA has spent $1,000,000 of the Association’s general funds to advance the Eva Creek Wind Project to the existing level of development. In 2002, GVEA funded a terrain to high level wind data predictive wind resource evaluation which was then field proofed by a meteorologist who sited two areas for further evaluation. These two areas were Murphy Dome in Fairbanks and Eva Creek near Ferry, Alaska. In addition, GVEA began evaluating the potential cost benefit of wind in the GVEA system. In 2003 land permits were obtained and a data collection site (met site) was installed in the Eva Creek area. The met site was maintained; data was downloads and evaluated in 2004. The results suggested Eva Creek was a favorable wind resource warranting further investigation. In 2005 land permits were obtained, an archeological study undertaken and an additional 5 met sites were installed in the area, the existing site was maintained, and data was evaluated. In 2006 resource evaluation continued and the environmental permitting process was defined. A Feasibility Study was completed suggesting wind had the Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 30 of 77 9/2/2008 potential of reducing fuel costs for GVEA members. In 2007 and 2008 a System Integration Study was undertaken in two separate phases to identify how a wind project would be integrated into the GVEA system, the met sites were maintained and data downloaded and evaluated. Note. There were four additional Eva Creek met sites added and one at Walker Dome as a resource comparison and repeater to link all the sites to the GVEA microwave communications backbone. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 51 of 77 9/2/2008 B. Cost Worksheet per application form Section 4.4.4 Business Plan Attachment B 4.4.5 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. 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 $7,044,877 ii. Annual O&M cost for non-labor $5,395,704 c) Annual electricity production and fuel usage (fill in as applicable) i. Electricity [kWh] 851,358,000 ii. Fuel usage (if system is part of the Railbelt grid, leave this section blank Diesel [gal] Other iii. Peak Load 223.1 MW iv. Average Load 157.1 MW v. Minimum Load 110.7 MW vi. Efficiency 9,752 Btu/kWh vii. Future trends Reference charts d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] ii. Electricity [kWh] Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 52 of 77 9/2/2008 iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other 3. Proposed System Design a) Installed capacity 24 MW b) Annual renewable electricity generation 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 Wind-powered turbine generators 4. Project Cost a) Total capital cost of new system $93,342,000 b) Development cost Included above c) Annual O&M cost of new system $1,800,000 d) Annual fuel cost $0 5. Project Benefits a) Amount of fuel displaced for i. Electricity 68,515,000 kWh at a net capacity factor of 32.6% ii. Heat iii. Transportation b) Price of displaced fuel $20.00+ per MMBtu c) Other economic benefits Potential GHG reduction credits d) Amount of Alaska public benefits 50,000 tons/year CO2 production offset 6. Power Purchase/Sales Price a) Price for power purchase/sale $31.16 / MWh cost to GVEA Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 53 of 77 9/2/2008 7. Project Analysis a) Basic Economic Analysis Project benefit/cost ratio 6.0% rate of return on investment Payback 13.9 years Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 54 of 77 9/2/2008 Draft Eva Creek Wind Project Business Plan For: Golden Valley Electric Association October 3, 2008 Sterling Energy Management, LLC Draft Eva Creek Wind Project Business Plan Sterling Energy Management LLC 55 Table of Contents Table of Contents ........................................ 56 Executive Summary ........................................ 57 Introduction ............................................. 58 Project Development Schedule ............................. 60 Capital Costs ............................................ 62 Wind Resource and Energy Production ...................... 63 Operating Costs and Assumptions .......................... 64 Operating and Financial Results .......................... 66 Appendix A: Generic Wind Project Development Discussion .......................................... 68 Appendix B: Environmental and Permits ................... 73 Appendix C: Direct Capital Cost Estimate ................ 74 Draft Eva Creek Wind Project Business Plan AEA 09-004 Grant Application Page 56 of 77 9/2/2008 Executive Summary Sterling Energy Management, LLC (SEM) has prepared a Business Plan for Golden Valley Electric Association (GVEA) to support its potential 24 MW Eva Creek Wind project. The site is located on the east side of the Nenana River near Ferry, Alaska, in the GVEA service territory in the Interior. The area could support up to 150 MW of wind generation but GVEA would like to start by installing a 16-turbine 24 MW wind farm. The business plan assumes that GVEA will develop and own the project at its average cost of capital at 6%. The Eva Creek Wind project is assumed to benefit from a Renewable Energy Fund Grant (REFG), which is assumed to offset 85% of project capital costs. The electricity produced by the wind project will offset some portion of the production requirements of GVEA’s remaining resources. The capital cost of the project would be approximately $93 million. SEM has assumed a year 2012 operation start-up for the project. The following chart illustrates the results of the preliminary operating and financial analysis effort. Cost of Generation ($/MWh) $0 $50 $100 $150 $200 $250 $300 $350 $400 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 NP1 Variable Cost NP2 Variable Cost NP3 Variable Cost NP3&4 Variable Cost Healy Variable Cost EVA Creek EVA Creek + Regulation Eva Creek includes variable O&M + capital recovery; all others are variable generation cost This business plan presents some cursory comparisons to forecasts of energy costs from other GVEA energy production resources (as shown in the chart above). The comparison indicates that the Eva Creek Wind energy production displaces more expensive variable operating cost resources. Draft Eva Creek Wind Project Business Plan AEA 09-004 Grant Application Page 57 of 77 9/2/2008 Introduction Sterling Energy Management, LLC (SEM) has completed this initial business plan for the Eva Creek 24 MW Wind Project for Golden Valley Electric Association (GVEA). SEM uses the term “initial” to indicate that current assumptions related to site meteorology, project capital cost, and project operating parameters will require refinement with project development. GVEA’s Eva Creek site is approximately 7 miles east of Ferry and near Healy. This site was selected over the alternate Murphy Dome site because of its more promising energy production and transmission access. The project size was selected at 24 MW as appropriate for GVEA’s approximate 250 MW system. Project size is subject to refinement based on further analysis of system integration and demand characteristics. The Eva Creek Wind project is expected to take approximately 33 months from inception to completion assuming there are no delays in permitting. Assuming a decision to proceed to the development phase is made by early 2010, project completion could be anticipated in 2012. For purposes of illustrating the project development schedule, tasks and milestones, we have used September, 2012 as a target operational date. This business plan assumes that GVEA, as owner of Eva Creek, is not a Federal tax paying entity and thus cannot realize the benefits of the Federal Production Tax Credits for wind. The business plan assumes operations of 16 GE 1.5 MW wind turbine generators with 77 meter rotors. GVEA solicited and received a budgetary proposal for such equipment from GE. While the business plan currently assumes the GE equipment placement, GVEA will continue to solicit proposals from all credible manufacturers of wind turbines during the development effort. Issues such as delivery, performance, cold weather options, etc. will be considered. GVEA will make an appropriate selection of wind turbines based on these factors. SEM developed a preliminary layout for the Eva Creek Wind project as illustrated on the following diagram. Draft Eva Creek Wind Project Business Plan AEA 09-004 Grant Application Page 58 of 77 9/2/2008 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 59 of 77 9/2/2008 Project Development Schedule The business plan features a 24 MW wind project development schedule. Associated with this schedule is a generic wind project development task description that is contained in Appendix A for reference. The following typical milestone schedule follows that is based on a 33-month development plan for commercial operation of a potential project at Eva Creek for operation in September 2012: 1/2009: Initial decision to proceed to detailed feasibility phase 3/2009: Complete initial feasibility assessment as follows:  Complete initial project wind turbine layout using typical WTG  Determine additional meteorological tower layout requirements  Determine estimated project production based on preliminary information  Determine all land requirements for access, electrical, roads, and other infrastructure.  Determine electrical interconnect requirements and location  Determine permit requirements for avian study (consideration is given to conduct preliminary Avian assessment to help determine final permitting requirements), wet lands, other constraints and noise analysis requirements. Please see Appendix B for a listing of potential environmental assessment, permitting and licensing areas.  Prepare initial development and construction scope to minimize risk  Refine development schedule and capital cost estimate  Refine project operating and financial model Identify required information specification for WTG and any other major equipment (transformers, switchgear) commitments.  Establish definitive plan, schedule and budget for development to major equipment commitments  Refine cost effectiveness of project in reducing GVEA fuel and overall power costs  Prepare final project evaluation results for final presentation to management. 4/2009: Assuming final management commitment is to proceed to the development phase, the following development activities are initiated:  Additional meteorological towers are erected, most likely multiple towers at hub height.  Permitting, Environmental Impact, Avian (incorporate all prior study information into plan) and Noise studies effort are initiated as required for project permitting.  Interconnect plan is developed.  Required land acquisition/royalty agreements are initiated.  Project civil and electrical design effort is initiated.  A definitive development and construction strategy is defined.  Wind turbine, major equipment suppliers and contractors are engaged to develop a supplier and contracting plan. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 60 of 77 9/3/2008 3/2010: All of the conditions precedents have been achieved for a decision to proceed to construction:  12 months of additional meteorological data has been acquired with micro-siting met towers, correlated to long term sites, a definitive WTG layout has been made and definitive production estimates have been developed. A net energy production assessment is completed.  All environmental permits have been negotiated and ready for execution.  All required land acquisition/royalty agreements are in place or ready for execution.  Project civil and electrical design is complete based on assumed turbine type, subject to minor modifications with alternative turbine selection.  The project procurement plan is in place and the following agreements may be ready for execution:  Wind Turbine Supply and Erection  Transformer and Switchgear (Unless included in construction contracts)  Substation and Transmission Construction  Wind Plant WTG Foundation, Electrical Infrastructure and Miscellaneous Civil Construction  A definitive capital cost budget and operating/financial model have been refined that reflect the appropriate returns for the investment based on all information acquired to date. 10/2011: Detailed engineered civil and electrical design is completed 4/2012: Begin civil/electrical underground construction to engineered design 4/2012: Begin major equipment delivery 6/2012: Complete project civil and electrical underground construction 8/2012: Complete  WTG erection and commissioning  Electrical construction and electrical commissioning including substation and transmission interconnect 9/2012: Commercial Operation  All equipment installed and engineer sign off for proper installation and operation  All infrastructure support services (O&M building, Operations center, SCADA system, internal utility support systems, and trained technicians with proper vehicles, tools and spare parts supply) in place  Final turbine supply operation criterions’ testing begin and is completed according to wind turbine supply agreement for availability and power performance. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 61 of 77 9/3/2008 Capital Costs Wind turbine supply is the single largest capital cost for the Eva Creek Wind project. Currently, wind turbine costs have risen based on the Euro/$ exchange rate, escalation in steel prices, and an overheated sellers market. Cited below is a summary capital cost estimate for the project using a specific WTG budgetary quote for GE 1.5 MW 77 meter rotor wind turbine generators. Capital Cost Summary:Cost Unit Cost Percentage Wind Turbine Generators $39,587,730 $1,649/kW 42% WTG Transportation $12,000,000 $500/kW 13% WTG Installation $3,500,000 $146/kW 4% Balance of Plant $32,246,200 $1,344/kW 35% Development / Owner $6,007,625 $250/kW 6% Total $93,341,555 100% Appendix C cites a detailed development of these costs. Cumulative Capital Cost Draw ($MM) - $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Jan-09Apr-09Jul-09Oct-09Jan-10Apr-10Jul-10Oct-10Jan-11Apr-11Jul-11Oct-11Jan-12Apr-12Jul-12Oct-12Wind Turbine Generators WTG Transportation WTG Installation Balance of Plant Development / Owner This business plan further assumes that a Renewable Energy Fund Grant (REFG) will be available to offset 85% of capital costs. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 62 of 77 9/3/2008 Wind Resource and Energy Production GVEA commenced its wind energy field measurement program in July 2003, at which time two 30-m meteorological towers (#101, 102) were installed at Murphy Dome. A 30-m tower (#202) was installed at Eva Creek in August 2004. GVEA then added five towers in the Eva Creek are during early 2007 to support active wind farm planning at that site. GVEA now has nearly 5 years of data from Murphy Dome and 4 years from Eva Creek. From this data, a wind study was prepared by Richard Simon, Jeff Gawrych and David Matson of V-Bar, LLC, on September 28, 2008. The resulting long-term mean annual wind speed estimates in meters per second, along with extrapolations to the 80-m hub height: Site 10-m*30-m*50-m Shear 80-m 101 5.50 6.31 0.126 7.14 102 5.76 6.51 0.113 7.28 202 6.11 6.75 0.092 7.39 1-49 6.03 6.86 0.118 7.70 2-42 5.94 6.72 7.23 0.123 7.66 2-57 4.97 6.15 0.193 7.43 3-01 5.95 6.67 6.98 0.099 7.19 Walker Dome 7.81 est 0.05 9.01 * approximate height in some cases, Walker Dome was only 15 feet The aggregate long-term mean annual hub-height wind speed is predicted to be 7.47 mps, and the aggregate long-term mean annual gross capacity factor is predicted to be 36.21%. After assuming an allowance of 10% for electrical, availability and other losses (as listed below), the net capacity factor is assumed to be 32.6%. Production Loss Accounting Multiplier Loss WTG Availability 97.00%3.00% Collection & Substation 100.00%0.00% Availability of Utility Grid 99.50%0.50% Re-start after Grid Outage 99.70%0.30% Electrical Efficiency 98.00%2.00% Cold Weather Package 99.00%1.00% Turbine Performance 99.00%1.00% Icing & Blade Degradation 99.00%1.00% Low Temperature Shutdown 99.00%1.00% Other 99.35%0.65% Total Loss Impact 90.00%10.00% Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 63 of 77 9/3/2008 Operating Costs and Assumptions The following table summarizes the estimated annual operating costs for the project for the first five years of operation. Subsequent year costs are escalated at 2.5%. Note that the first two years of operation are assumed to be under manufacturer warranty, as indicated by a lower WTG maintenance cost than subsequent years. O&M Cost Details ($) Year 1 Year 2 Year 3 Year 4 Year 5 Labor Support / Supplies $342,116 $342,116 $418,346 $418,346 $418,346 Required Equipment Costs $3,592 $3,592 $7,926 $7,926 $7,926 Parts Usage After Warranty $99,575 $99,575 $99,575 O&M Facilities $16,460 $16,460 $16,460 $16,460 $16,460 O&M Transmission $34,000 $34,000 $34,000 $34,000 $34,000 O&M Electrical Usage $8,000 $8,000 $8,000 $8,000 $8,000 Subtotal Annual Cost $404,168 $404,168 $584,307 $584,307 $584,307 Cost per Turbine 16 WTGs $25,261 $25,261 $36,519 $36,519 $36,519 Parts Initial Purchase for Stock Year 3 $799,035 Cost per Turbine $49,940 Annual G&A Costs $100,000 Costs quoted in year 2008 prices Annual cost escalator:2.50% An indirect cost of integrating the project into the GVEA resource mix occurs due to the requirement of regulating the existing GVEA operations to accommodate the uncertain nature of the wind resource. Cost of regulation includes the cost of always maintaining the ability to pick up or drop generation on fast-reacting combustion turbines. The cost of regulation may vary significantly depending on factors such as wind variability, system load, available system resources, fuel costs, etc. The chart below illustrates an example of regulation cost over a wide range of load swings: Cost of Regulation ($/MW) $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 5 7 9 11 13 15 17 19 21 23 25 Regulation (MW) This business plan assumes a $50/MWh cost of regulation based on 12 MW of load swing (50% of Eva Creek capacity). Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 64 of 77 9/3/2008 Operating and Financial Results SEM prepared a preliminary operating and financial model for the Eva Creek Wind project given the aforementioned development schedule, capital costs, and operating costs. The model is transmitted with this assessment document. Capital cost sources and uses are indicated in the following table: Uses and Sources of Capital Uses of Funds ($000)Total $/kW Pct Wind Turbine Generators $39,588 $1,649 42% WTG Transportation 12,000 500 13% WTG Installation 3,500 146 4% Balance of Plant 32,246 1,344 35% Development / Owner 6,008 250 6% Working Capital 0 0 0% Total Capital Cost ($000)$93,342 $3,889 Sources of Funds GVEA Equity $14,001 $583 15% Renewable Energy Grant 79,340 3,306 85% Total Capital Uses ($000)$93,342 $3,889 A GVEA developed, owned, and operated facility results in a 2009 cost of power estimated at $31MWh escalating annually at 2.5% in order to meet a 6.0% weighted average cost of capital target. Inclusion of the cost of regulation (at $50/MWh) increases the cost of the wind energy to $81/MWh. The value of the Eva Creek Wind project in the GVEA system is to displace higher electric energy resources. GVEA currently has sufficient capacity to serve peak loads; however, the existing resources consume high-cost hydrocarbon fuels. The Eva Creek Wind project would provide low-cost, non-polluting renewable energy. Based on information in the GVEA Integrated Resource Plan, SEM made a cursory assessment of the results of this effort compared to projected variable operating costs (fuel + variable maintenance) for North Pole 1/2 and the new combined cycle unit also located at North Pole. The chart that follows indicates the results of this assessment. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 65 of 77 9/3/2008 Cost of Generation ($/MWh) $0 $50 $100 $150 $200 $250 $300 $350 $400 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 NP1 Variable Cost NP2 Variable Cost NP3 Variable Cost NP3&4 Variable Cost Healy Variable Cost EVA Creek EVA Creek + Regulation Eva Creek includes variable O&M + capital recovery; all others are variable generation cost Although the detailed assessment of the project’s value to GVEA will require additional analysis, this business plan suggests that a REFG-funded project would reduce GVEA system costs below levels otherwise projected without the project. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 66 of 77 9/3/2008 Appendix A: Generic Wind Project Development Discussion It is important for this analysis to provide some generic background on the various activities that result in a successful wind project development. This discussion is based on an approach by an independent wind project developer. Not all of these activities are applicable to the GVEA situation. And some activities may be omitted. However, it is a very useful background piece and check list for applicability to the GVEA situation. In the early stages of finding a project location many companies have a general approach to wind energy exploration. The works can be broken down to pre-development, development, construction, commissioning and project operation. Each of these stages involves unique activities, and each company will choose when to incorporate these items into the project based on the specifics of the situation. For purposes of this analysis, it is useful to generally describe the activities as pre-development and development phases of a wind energy project. Pre-Development The pre-development phase generally involves the following activities:  Companies generally start with evaluating several areas in a state or a region which may include several states.  Preliminary evaluations are conducted that include location analysis, interviews with landowners or area locals, consultants, and others to narrow the opportunities for best potential results and those which fit the company profile and goals.  Preliminary wind resource indications are a basic step in these evaluations to determine the most energetic wind sites.  Land availability and general topography of the area which is deemed most suited for the companies plans are evaluated  Electrical interconnect and transmission access are evaluated to take the projects electrical generation.  Environmental and social impacts are considered.  Governmental regulations are considered that may improve or impair the project development. Availability of economic incentives that may improve project economics is investigated.  Power generation requirements for the region are considered. The potential development area is evaluated for potential power purchase agreements. Once all of the preliminary findings above are assessed, the total project development is economically evaluated. If the analysis suggests a promising project, agreements are developed with land owners to install meteorological towers with wind speed data acquisition equipment to assess the strength of the wind resource. The wind resource data is gathered and analysis is initiated. In some cases, land lease and/or purchase options for the required land for a project are also executed. In this pre-development process many preliminary concepts are discussed and general ideas are conceptualized for a project. Many more projects are conceptualized than are ever moved to the development stage. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 67 of 77 9/3/2008 Development The development stage is where companies have assessed the pre-development analysis to form a general profile of the project and determine whether the area will be pursued for specific development. This stage of development is often initiated six to eighteen months after the actual installation of the first meteorological tower. Companies have a pretty good idea of the approximate size of the project in terms of “installed capacity” and the company structure to support the venture. Many companies follow a development profile which includes the following:  Meteorologists provide services to process the raw data into projected energy yields based on different turbine sizes and various power performance yields as represented by various manufacturers of different wind turbines.  Based on the detailed results of an area having adequate wind resource, project developers become increasingly active in the pursuit of securing the property in the area of meteorological tower location. Negotiations are initiated with landowners to secure long term leases with terms that allow the landowner to receive royalties, or the land is purchased depending on the economics of the situation.  The anticipated social impacts are viewed and the project structure is developed to promote positive attributes for the local area.  Environmental evaluations begin in the project area (as defined by land leases or purchases) to determine suitability and compliance with all environmental requirements.  Permitting requirements are defined with local, state and federal entities and all required governmental processes are incorporated into the project area plan.  Any positive governmental supports like production tax credits, local county incentives or others are incorporated into preliminary financial models as part of the overall project economic evaluation.  Detailed analysis on the electrical distribution system are performed, contact and negotiations for interconnection contract begin with local utilities.  Power purchase agreement potentials are defined and negotiations are carried out to procure a contract.  Financial support requirements and funding availability for the project are defined and potential sources are sought to fund the project. Project funding is highly dependent on the financial strength of the developer and therefore, this activity is unique to each situation. Some projects are internally funded by large developers and others are funded by seeking equity investors and project lenders.  Engineering studies are performed for preliminary roads and pad design, grading requirements, electrical distributions systems, communication systems, buildings, sub stations, and electrical interconnections.  Industry support contractors and equipment suppliers are engaged to support cost estimates for the project financial projections in an effort for the developer to determine more accurate potential project costs and revenue returns. This includes a host of product suppliers which include vendors who supply electrical cable and equipment, sub stations, transformers, buildings to house equipment to name just a few. The analysis for product purchase will include items like:  Best fit product for the project  Pricing for equipment, exchange rate, shipping costs  Product size both production rating and overall dimensions  Performance profile  Project climate and influence to equipment for rating specifications  Topography and constraint for equipment deliveries or installation  Manufacturer delivery schedule and guaranties  Installation provisions Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 68 of 77 9/3/2008  Warranties on equipment, production and availability  Operations and maintenance requirements  Inventory supply support and recommended spare parts list from manufacturer  SCADA (Supervisory Control And Data Acquisition) system provisions  Overall contract language negotiations on purchases  Design and engineering support Many companies are funding this effort internally up to this point. The development team is aligned with the project goals for annual energy production and annualized revenue requirements. In general a comprehensive plan is in place to begin the final development of the project when all the project development processes are merging into a real project prior to the notice to proceed for the construction phase. It is important to note that at this stage it is often six to ten months prior to actual construction start due to long lead order items, and lengthy turbine supply agreement negotiations. Developers commonly look at the following to be sure all details of the project are ready for a notice to proceed:  Much effort is devoted to selection of the wind turbine supplier for the project. In general, the wind turbine generator supply costs are Check Numbers against Model of total direct project costs. Wind turbine generator performance and cost is a major issue for consideration as it is essential to realizing the electrical generation goals of the project. Wind turbine generator selection is generally based on cost, power curve (wind energy capture at various wind speeds), warranties, guarantees, reliability, supplier performance history, delivery schedules and financial capability. In general, a process of requesting proposals, evaluating proposal for lowest lifecycle cost, and terms and conditions lead to selection of a WTG supplier. Upon selection, negotiations are conducted to finalize a detailed supply agreement.  The power purchase agreement with the project electrical energy customer is finalized. In this case a power delivery offset assumption and rate base determine the value of the energy for the GVEA project.  Manufacturers and material providers that have a track record of successfully delivering on commitments and reliability or track record of equipment performance are selected.  All cost proposals have been received and evaluated for award of contracts or purchase orders.  Detailed equipment supply agreements with, engineered equipment specifications, warranties, liabilities, delivery schedules and terms are put in place. Primary among these is the wind turbine generator supply agreement discussed earlier.  Installation agreements and guaranties on the installation requirements for the equipment.  Operation and maintenance agreements are developed and finalized.  Material sub suppliers are selected in support of the equipment purchase and installation, like transport haulers, construction products and materials, etc.  Final negotiations and contracts with contractors are put in place  Final design criteria for the project are established and engineering plans for the project are completed.  Complete utility service and interconnection agreements are negotiated.  Community outreach programs are defined, scheduled and open issues resolved.  Final environmental reports and mitigation measures put into place as required.  Project layout and design including final production energy yields are finalized.  Project lender negotiations and funding are completed, if applicable.  All permitting requirements are completed. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 69 of 77 9/3/2008  Governmental agencies are pursued with an out reach team to address and satisfy their requirements.  Meteorologist studies and projections for the project performance with the selected wind turbine generator are completed.  FAA requirements for obstacles are addressed.  Communication systems on the project addressing any radar, and/or military concerns are defined, specified and designed.  Budgets and schedules are finalized.  Project defined goals are finalized, project development efforts are concluded and a notice to proceed for construction is issued. As these project activities reach final negotiations, contractual agreements are put into place. The industry as a whole requires well defined contracts. Wind projects often with only one wind turbine exceed a million dollars in total costs. These projects have high dollars involved and require well defined contracts and agreements. When these agreements are crafted they include items like the following:  Terms and conditions are well defined so both parties have a clear understanding of performance criteria, expiration of agreements, the goals and objectives, budgets, schedules, and limits of liability. All partner authority is well defined with limits of exposure defined in financial terms for both parties.  Legal and binding contracts that have appropriate legal review and management authorization. Start dates, end dates, and limits of liabilities are well defined.  Warranties and guaranties of the parties are well defined and corporate limits are defined both in exposure and in maximum limits the company can cover.  Clear pricing terms and payment schedules are established.  Complete scope of works to define the deliverables for each party and the consequences of the agreement when commitments are not satisfied.  Terms in the wind turbine supply agreement require negotiation with the selected provider like:  Product Operating Parameters  Power production characteristics  Electrical Grid Connection Characteristics  Design Life Warranties  Liabilities  Well Defined Deliverables  Prior failures  Size and weights  Constructability  Purchase Price and Payment Schedule  Payment Adjustment Agreements  Liquidated Damages  Equipment options,  Turbine Availability Warranties  Controller Logics  Controller Communication to turbine and to SCADA  Service requirements and costs  Delivery schedules  Packing of Product  Transfer of Title and risk of Loss  Closing conditions  Installation support  Installation Schedules Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 70 of 77 9/3/2008  Commissioning requirements and schedules  Tooling requirements and costs  Guarantied Commercial Operation Date  Defined Force Majeure  Documentation Support of Product  Termination Agreements These items are commonly the means and methods used By the highly skilled SEM development team for contracting services and procuring required equipment and supplies for a wind project. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 71 of 77 9/3/2008 Appendix B: Environmental and Permits Listed below are the typical areas that will be reviewed for Environmental and Permit requirements:  Avian Issues, Studies and Impact Assessments  Socio-economics of project area  Aesthetics  Noise  Time of day work restrictions  Air Quality  Dust Abatement  Biological Resources  Cultural Resources  Native American Intervention  Geology and Soils  Weather Constraints  Hazards  Waste Management  Hydrology and Water Quality  Streambed Alteration  Water Consumption  Erosion Control  Land Use  Agriculture  Adjacent Land Use  Proximity to State/Federal Park Lands  Proximity to Military Installations  Mineral Resources  School District  Concerns  Appropriate concessions  Proximity to other Utilities  Gas Line  Water Lines  Mines  Wells  Telecommunication Availability  Fire Control  FAA Requirements  Micro Wave facilities  Radio Facilities  Radar Facilities Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 72 of 77 9/3/2008 Appendix C: Direct Capital Cost Estimate Wind Turbines $37,702,600 Special Tools and Training $50,000 Transportation $750k/unit, includes trailer rental, barge rental $12,000,000 Foundations $600k/unit $9,600,000 Cranes Rental (operators & crane) + shipping to and fro $1,300,000 Erection Labor $500,000 Lightning Protection Grounding ($3.80ft) 4/0 cu $40,000 Support BuildingsCrane & work area 110 x 60 @ $250/sqft $1,650,000 Road and civil infrastructure $6,000,000 Electric Substation/Transmission/Subtransmission Transformer $1,200,000 Substation $3,900,000 Transmission $2,500,000 Substransmission 34.5kV cable $4.52/ft 3 runs $976,320 HDPE 5" (assume 72,000') @ $10/ft $720,000 Installation of HDPE, cables, terminations, transformers, trench)$1,300,000 34.5kV transformers + 2 spares. 18@$70k ea $900,000 Elbows ($80 ea)$7,680 Communications Microwave Sites $750,000 Fiber optic from substation to each WTG $550,000 Upgraded Transfer Trip Scheme $100,000 Engineering, Design, PM Phase 1 $3,000,000 Phase 2 $963,960 WTG Contingency $1,885,130 BOP Contingency $2,202,200 Spare parts $1,500,000 Bond: 2.5% of project cost $2,043,665 Total Estimated Cost $93,341,555 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 73 of 77 9/2/2008 C. Grant Budget Form per application form Section 6 GVEA Eva Creek Wind Project - Phase III - Final Design & Permitting BUDGET INFORMATION BUDGET SUMMARY: Milestone or Task Federal Funds State Funds Local Match Funds (Cash) Local Match Funds (In-Kind) Other Funds TOTALS Date 1) Initial Decision to Proceed to Detailed Feasibility Phase $0 Jan-09 2) Complete Initial Feasibility Assessment $5,754,721 $1,015,539 $6,770,260 Mar-10 3) Final Management Commitment is to proceed to the Development Phase Apr-10 4) All of the Conditions Precedents have been achieved for a decision to Proceed to Construction. Major Equipment Orders are Placed. Milestones 3-10 Relate Mar-11 5) Detailed Engineered Civil & Electrical Design Completed to Phase IV Construction, Commissioning Oct-11 6) Begin Civil/Electrical Underground Construction to Engineered Design Apr-11 7) Begin Major Equipment Delivery Apr-11 8) Complete Project Civil and Electrical Underground Construction Jun-12 9) Complete WTG Erection, Commissioning, Electrical Construction and Electrical Commissioning, including Substation and Transmission Interconnect Aug-12 10) Commercial Operation Sep-12 TOTALS $5,754,721 $1,015,539 $6,770,260 GVEA Eva Creek Wind Project - Phase III - Final Design & Permitting Milestone # or Task # Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 74 of 77 9/3/2008 BUDGET CATAGORIES: 1 2 TOTALS Direct Labor and Benefits $0 Travel, Meals, or Per Diem $0 Equipment $3,770,260 $3,770,260 Supplies $0 Contractual Services $3,000,000 $3,000,000 Construction Services $0 Other Direct Costs $0 TOTAL DIRECT CHARGES $0 $6,770,260 $6,770,260 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 75 of 77 9/3/2008 GVEA Eva Creek Wind Project - Phase IV - Construction, Commissioning BUDGET INFORMATION BUDGET SUMMARY: Milestone or Task Federal Funds State Funds Local Match Funds (Cash) Local Match Funds (In-Kind) Other Funds TOTALS Date 1) Initial Decision to Proceed to Detailed Feasibility Phase Milestones 1 & 2 Relate $0 Jan- 09 2) Complete Initial Feasibility Assessment to Phase III Final Design & Permitting $0 Mar- 10 3) Final Management Commitment is to proceed to the Development Phase $0 Apr- 10 4) All of the Conditions Precedents have been achieved for a decision to Proceed to Construction. Major Equipment Orders are Placed. $6,409,442 $1,131,078 $7,540,520 Mar- 11 5) Detailed Engineered Civil & Electrical Design Completed $4,024,087 $710,133 $4,734,220 Oct- 11 6) Begin Civil/Electrical Underground Construction to Engineered Design $17,499,477 $3,088,143 $20,587,620 Apr- 11 7) Begin Major Equipment Delivery $0 Apr- 11 8) Complete Project Civil and Electrical Underground Construction $26,340,374 $4,648,301 $30,988,675 Jun- 12 9) Complete WTG Erection, Commissioning, Electrical Construction and Electrical Commissioning, including Substation and Transmission Interconnect $9,605,000 $1,695,000 $11,300,000 Aug- 12 10) Commercial Operation $9,707,221 $1,713,039 $11,420,260 Sep- 12 TOTALS $73,585,601 $12,985,694 $86,571,295 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 76 of 77 9/3/2008 GVEA Eva Creek Wind Project - Phase IV - Construction, Commissioning Milestone # or Task # BUDGET CATAGORIES: 1 2 3 4 5 6 7 8 9 10 TOTALS Direct Labor and Benefits $0 Travel, Meals, or Per Diem $0 Equipment $7,540,520 $3,770,260 $18,851,300 $1,500,000 $2,100,000 $3,770,260 $37,532,340 Supplies $1,736,320 $57,680 $9,200,000 $10,994,000 Contractual Services $963,960 $12,000,000 $12,963,960 Construction Services $11,300,000 $7,650,000 $18,950,000 Other Direct Costs $6,130,995 $6,130,995 TOTAL DIRECT CHARGES $0 $0 $0 $7,540,520 $4,734,220 $20,587,620 $0 $30,988,675 $11,300,000 $11,420,260 $86,571,295 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 77 of 77 9/2/2008 D. An electronic version of the entire application per RFA Section 1.6 Enclosed Electronic application also includes a copy of the Business Plan Financial Spreadsheet E. Governing Body Resolution per RFA Section 1.4 Attached 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 Michael J. Wright Signature Title VP, Transmission and Distribution Date October 8th, 2008