HomeMy WebLinkAboutSouth Fork Hydroelectric Project App
Prepared by:
SOUTH FORK HYDRO, LLC
1503 West 33rd Avenue, #310
Anchorage, Alaska 99503
Tel: (907) 258-2420
Fax: (907) 258-2419
SOUTH FORK HYDROELECTRIC PROJECT
AEA-09-004 - RENEWABLE ENERGY GRANT APPLICATION
FY 2009
SOUTH FORK HYDRO, LLC RENEWABLE ENERGY FUND GRANT APPLICATION
SOUTH FORK HYDROELECTRIC PROJECT
OCTOBER 8, 2008 PAGE 1 OF 16
Table of Contents
SECTION 1. - APPLICANT INFORMATION............................................................................ 2
1.1. Applicant point of contact.................................................................................................... 2
1.2. Applicant minimum requirements ....................................................................................... 2
SECTION 2. - PROJECT SUMMARY........................................................................................ 3
2.1. Project Type......................................................................................................................... 3
2.2. Project Description............................................................................................................... 3
2.3. Project Budget Overview..................................................................................................... 3
2.4. Project Benefit ..................................................................................................................... 3
2.5. Project Cost and Benefit Summary...................................................................................... 4
SECTION 3. - PROJECT MANAGEMENT PLAN..................................................................... 4
3.1. Project Manager................................................................................................................... 4
3.2. Project Schedule................................................................................................................... 4
3.3. Project Milestones................................................................................................................ 5
3.4. Project Resources................................................................................................................. 5
3.5. Project Communications...................................................................................................... 5
3.6. Project Risk.......................................................................................................................... 6
SECTION 4. - PROJECT DESCRIPTION AND TASKS............................................................ 6
4.1. Proposed Energy Resource..................................................................................................6
4.2. Existing Energy System....................................................................................................... 7
4.2.1. Basic configuration of Existing Energy System........................................................... 7
4.2.2. Existing Energy Resources Used.................................................................................. 7
4.2.3. Existing Energy Market................................................................................................ 8
4.3. Proposed System.................................................................................................................. 8
4.3.1. System Design .............................................................................................................. 8
4.3.2. Land Ownership............................................................................................................ 9
4.3.3. Permits.......................................................................................................................... 9
4.3.4. Environmental............................................................................................................... 9
4.4. Proposed New System Costs (Total Estimated Costs and proposed Revenues) ........Error!
Bookmark not defined.
4.4.1. Project Development Cost......................................................................................... 10
4.4.2. Project Operating and Maintenance Costs.................................................................. 10
4.4.3. Power Purchase/Sale................................................................................................... 10
4.4.4. Cost Worksheet........................................................................................................... 11
4.4.5. Business Plan.............................................................................................................. 11
4.4.6. Analysis and Recommendations................................................................................. 11
SECTION 5. - PROJECT BENEFIT........................................................................................... 12
5.1. Estimated Fuel Displacement ............................................................................................ 12
5.2. Estimated Annual Revenue................................................................................................ 12
5.3. Other Annual Revenue Streams......................................................................................... 12
5.4. Project Benefit from Direct Cost Savings.......................................................................... 12
5.5. Indirect Project Benefits .................................................................................................... 14
SECTION 6. - GRANT BUDGET.............................................................................................. 15
SECTION 7. - ADDITIONAL DOCUMENTATION AND CERTIFICATION....................... 15
SOUTH FORK HYDRO, LLC RENEWABLE ENERGY FUND GRANT APPLICATION
SOUTH FORK HYDROELECTRIC PROJECT
OCTOBER 8, 2008 PAGE 2 OF 16
SECTION 1. - APPLICANT INFORMATION
Name South Fork Hydro, LLC
Type of Entity: Independent Power Producer 1
Mailing/Physical
Address
1503 West 33rd Avenue, Suite 310 PO Box 770567
Anchorage, AK 99503 Eagle River, AK 99577
Telephone 258-2420 694-4351
Fax 258-2419 694-1122
Email earle@polarconsult.net
1.1. Applicant point of contact
Name Earle Ausman, PE Phyllis Janke
Title: Project Manager President
Mailing Address 1503 West 33rd Avenue, Suite 310 PO Box 770567
Anchorage, AK 99503 Eagle River, AK 99577
Telephone 258-2420 694-4351
Fax 258-2419 694-ll22
Email earle@polarconsult.net
1.2. Applicant minimum requirements
As an Applicant, we are: (put an X in the appropriate box)
X1 An electric utility holding a certificate of public convenience and necessity
under AS 42.05, or
X1 An independent power producer, or
A local government, or
A governmental entity (which includes tribal councils and housing authorities);
Endorsements
Yes Attached to this application is formal approval and endorsement for its project
by its board of directors, executive management, or other governing authority. If
a collaborative grouping, a formal approval from each participant’s governing
authority is necessary. (Indicate Yes or No in the box )
Yes As an applicant, we have administrative and financial management systems and
follow procurement standards that comply with the standards set forth in the
grant agreement.
Yes If awarded the grant, we can comply with all terms and conditions of the
attached grant form. (Any exceptions should be clearly noted and submitted with
the application.)
1 Under State Law (AS42.05.221), IPPs selling wholesale energy to a public utility are subject to RCA
jurisdiction. SFH has applied to the RCA for an exemption from regulation as allowed in AS42.05.711. If an
exemption is not granted, then SFH would need to become a certificated utility, and is fit, willing, and able to
do so. South Fork Hydro, LLC and Fishhook Renewable Energy, LLC are currently pioneering this process
for grid-tied IPPs on the railbelt, and their efforts will provide some clarity on this process for future similar
projects.
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OCTOBER 8, 2008 PAGE 3 OF 16
SECTION 2. - PROJECT SUMMARY
2.1. Project Type
The proposed project is for design and construction of a run-of-river hydroelectric project
located on the South Fork of Eagle River in Eagle River, Alaska. Fiscal year 2009 (FY09) grant
funds are requested to partially fund final design and construction.
2.2. Project Description
The South Fork hydroelectric project is a low-impact run-of-river project located in Eagle River,
Alaska. The project will be located on a private homestead off Hiland Road in Eagle River.
Energy from the project would be provided into the Matanuska Electric Association (MEA) grid.
South Fork Hydro, LLC (SFH) is the project proponent, and would contribute funding, own, and
operate the project. SFH has already completed reconnaissance, feasibility, and permitting
efforts. Final design is currently in progress, and construction is planned for 2009. Final design
would be completed by members of South Fork Hydro, LLC. Construction would be completed
by South Fork Construction, Inc., with some construction tasks subcontracted as appropriate.
Subcontractors for significant budget items would be selected through a competitive bidding
process.
2.3. Project Budget Overview
SFH requests FY09 grant funds to contribute to the final design and construction phases of the
project. SFH will contribute both capital and in-kind services to the project. SFH proposes to
contribute 68% to the cost of the project, with 32% from grant funds. A project cost summary is
provided below.
2.4. Project Benefit
The direct financial benefits from the proposed project are summarized below. Assumptions
used to estimate these benefits are discussed in Section 5 of this application.
1. The project will be eligible for Renewable Energy Credits (RECs), which will be
transferred to the State as part of the public benefit from a grant.
2. The capacity of the project will be made available to the local utility at no cost. This is a
direct benefit to the owners of the local utility, which are the MEA ratepayers.
3. The project will decrease the amount of energy being imported from the CEA system to
Eagle River. This will reduce line losses over that transmission line, increasing overall
efficiency of both the MEA and CEA transmission and distribution systems.
The project is also expected to have the following indirect benefits to the public:
1. Increased reliability and stability of the local power grid. Also, increased diversity of
fuel sources for the railbelt grid.
Project Phase Grant Funds Local Match (Capital and
In-Kind) Total Funding
CONSTRUCTION (FY 09) $1,000,000 $2,087,000 $3,087,000
TOTAL CAPITAL COST $1,000,000 $2,087,000 $3,087,000
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SOUTH FORK HYDROELECTRIC PROJECT
OCTOBER 8, 2008 PAGE 4 OF 16
2. Reduced demand for Cook Inlet natural gas. This project will offset natural-gas fired
power generation, reducing natural gas consumption and incrementally extending the life
of the existing Cook Inlet fields, to the benefit of the public that relies upon these fields
for electricity and space heating needs.
3. A significant portion of the project funding will go towards hiring local construction
firms to perform the work, thus boosting the local economy.
4. Local firms are performing the design and development. This benefits Alaska by
promoting local experience and can be used to develop additional future projects thus
providing even more economic development and jobs for Alaskans.
2.5. Project Cost and Benefit Summary
2.1 PROJECT COST AND BENEFIT SUMMARY
Include a summary of your project’s total costs and benefits below.
Total
2.5.1 Total Project Cost
(Including estimates through construction.)
$3,087,000
2.5.2 Grant Funds Requested in this application. $1,000,000
2.5.3 Other Funds to be provided (Project match) $2,087,000
2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $3,087,000
2.5.5 Estimated Benefit (Savings) $0
2.5.6 Public Benefit
(See section 5 for discussion)
$4,106,500
SECTION 3. - PROJECT MANAGEMENT PLAN
3.1. Project Manager
The Project Manager is Earle V. Ausman, PE. Mr. Ausman has over 40 years' experience in
studying and developing hydroelectric project in Alaska, including extensive experience
evaluating, designing, permitting, and operating hydroelectric projects similar to the proposed
project in southcentral Alaska. Mr. Ausman designed, permitted, and constructed the McRoberts
Creek Hydro project behind Palmer Alaska, in 1991, and has owned and operated this project for
nearly 20 years. This is the only privately owned grid-tied hydro project on the railbelt energy
grid. Resumes and references are attached to this proposal.
No project management assistance from AEA or other government entities is expected for this
project.
3.2. Project Schedule
The project proponents have been attempting to develop this project since the 1960s. Past efforts
have been thwarted by contracting issues with the utilities. The current effort to develop this
project has been underway since 2005’s’s past efforts. To date, the following activities have
already been completed or are in advanced stages:
1) Reconnaissance Studies (completed)
2) Feasibility Studies (completed)
3) Project Permitting (completed)
4) Major uplands earth work (completed)
5) Project Design (final design in progress)
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OCTOBER 8, 2008 PAGE 5 OF 16
6) Power Sales Contract Negotiations with MEA (advanced stages)
7) RCA Exemption from Regulation (ruling due early November 3, 2008)
SFH is on schedule to complete design this year. With timely completion of contract
negotiations and RCA approvals currently underway, SFH will be able to secure financing and
begin materials procurement in early 2009. Construction can commence in April 2009, with
completion and project commissioning scheduled for fall 2009.
3.3. Project Milestones
IP will continue to evaluate the viability of the project throughout the 2009 development phase.
Key factors such as hydrology, expected power generation, power sales, construction cost,
construction feasibility, and similar issues will be reviewed to validate that the project is feasible.
These key project milestones are summarized in the table below.
Milestone Scheduled Completion
Receive RCA Exemption November 2008
Final Power Sales Contract (PSC) November 2008
Final RCA/MEA Board Approval of PSC,
Execute Contract January 2009
Secure Construction Financing February 2009
Order Turbine Package February 2009
Begin Construction April 2009
Finish Construction October 2009
Commencement of Operations October 2009
3.4. Project Resources
SFH members include a registered civil engineer (Earle Ausman) and the owner of a general
contracting business (Phyllis and Dan Janke). SFH members will serve as general contractor and
construction engineer for construction. Some activities will be subcontracted out to appropriate
qualified entities.
As needed, SFH will contract with Polarconsult Alaska, Inc (PCA), the engineering consulting
firm of which Mr. Ausman is President for engineering support services. Such services may
include construction engineering, surveying, equipment rental, and related activities.
In the construction phase of the project, when needed SFH will obtain bids from specialty
vendors/contractors for construction and major equipment supply. SFH will select
vendors/contractors based upon the best interests of the project.
3.5. Project Communications
SFH will keep AEA apprised of project status by issuing monthly project status reports. The
reports will include a brief (1 page) report including a narrative of current project status,
activities in the current month, problems encountered, and anticipated activities in the following
month. The report will also include a budget status summary.
As warranted, SFH may also advise the AEA grant manager of upcoming events such as field
visits on an as-needed basis.
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3.6. Project Risk
Major project risk items that SFH has identified to date are listed and discussed below:
There are no known risks other than a precipitous drop in the avoided cost of power by the
significant reduction in the cost of fuel, or heavily subsidized competing renewable power plants.
SECTION 4. - PROJECT DESCRIPTION AND TASKS
4.1. Proposed Energy Resource
SFH energy is derived from power generated by water falling some distance. SFH project has a
gross head, fall, of 380 feet and a net when including pipeline losses of 350 feet. The plant is
design ed to use about 50 cfs. The energy of the water is converted into electricity by passing it
through a turbine driving a generator. The only parameter of consequence is what the availability
of the water is. For the Southfork the river flows summer and and winter with the low flows
occuring just prior to spring breakup. Shown below is a Flow duration Curve that shows based
on past readings the amounts of water anticipated over a time period. This translates directly, up
to equipment limitations, to the amount of kWh generated.
More details on hydrology are shown in Appendix A
FLOW DURATION CURVE
Based on this hydrology, the project would have an installed capacity of 1.2 MW, and an
average annual energy generation of 6000 MWh.
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Alternative energy resources available to this market include all alternatives available to the
railbelt energy grid, which principally include: natural gas, diesel/oil, coal, storage hydro, run-of-
river hydro, hydrokinetic, wind, geothermal, and tidal. Many of these resources are not in the
immediate Eagle River vicinity. The comparison of the alternatives follows:
¾ Natural gas and diesel used as turbine fuel have high fuel costs, and significant exposure to
any future carbon taxes.
¾ Coal has a relatively high capital cost. The fuel is relatively inexpensive, however it has
significant exposure to any future carbon taxes. In MEA’s service area coal has received
astiff opposition from the public. A coal plant would not likely be permittable in the Eagle
River area because of air quality issues.
¾ Storage hydro, wind, and geothermal have high capital costs. The ‘fuel’ is essentially free.
¾ Wind has a low capacity factor (typically 25-35%, and varying from 0-100% output at any
time), and must be backed by firm stand-by generation.
¾ Tidal and hydrokinetic systems also have high capital costs, but most tidal / hydrokinetic
technologies are not yet mature. Although their production is calculatable it is not as
consistant as hydro’s
¾ Other run-of-river hydroelectric projects may be competitive with this project on a cost basis,
however this project has very favorable economics on a capital cost per installed kW or kWh
basis.
Overall, this project is competitive with other renewable and nonrenewable generation options
available to the railbelt. In the long term, it can provide price stability and lower costs to railbelt
energy consumers than any of the nonrenewable alternatives. It also has a significantly longer
design life than hydrokinetic, wind, or geothermal alternatives. Only storage hydroelectric
projects would generally have an equal or longer design life than this proposed project. Run-of-
River projects generally have a lesser environmental impact than storage hydroelectric projects,
making them one of the best overall renewable energy technologies available to the railbelt in the
sub-10 MW installed capacity class.Also Run-of-River plants can qualify as low-impact hydro
and as such can acquire green tags to help with their costs.
4.2. Existing Energy System
4.2.1. Basic configuration of Existing Energy System
The project would be connected to the MEA grid, which is interconnected with the railbelt
energy grid.
4.2.2. Existing Energy Resources Used
MEA purchases wholesale power from Chugach Electric Association (CEA), Alaska Energy
Authority (AEA, Bradley Lake Hydroelectric Plant), and Enerdyne (McRoberts Creek
Hydroelectric Plant). MEA also owns a share of Eklutna Hydroelectric Project.
The project would not significantly impact existing energy infrastructure. The project would
interconnect with the MEA grid at a point where that system is capable of receiving the full
project output. In fact, this project would improve voltage and frequency stability on the MEA
system.
Under normal operating conditions, this project would offset natural gas-fired generation in the
Cook Inlet basin. This would incrementally reduce the demand for Cook Inlet natural gas,
extending the life of the Cook Inlet gas fields. This would directly benefit the residents of the
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OCTOBER 8, 2008 PAGE 8 OF 16
railbelt, which rely on that gas supply for affordable electricity and space heating. The volume
of natural gas offset by this project is modest, but is a significant benefit to the public.
4.2.3. Existing Energy Market
The existing energy market is the six railbelt utilities, SES, CEA, Homer Electric Association
(HEA), Matanuska Electric Association (MEA), Municipal Light & Power (MLP), and Golden
Valley Electric Association (GVEA). MEA is the logical market for energy from this project, as
the project is located within MEA service territory. Sales to other utilities are possible, although
the wheeling costs and complexity in negotiating wheeling agreements could adversely affect the
project’s economic feasibility.
SFH is in advanced contract negotiations for the sale of energy from the project to MEA.
4.3. Proposed System
4.3.1. System Design
The South Fork Project will consist of the following major components:
¾ Intake structure. The intake structure will be located at the 1180 foot elevation on the
South Fork. It will divert water from the creek up to the design flow (50 cfs), pass it
through a settling basin, screens, and other apparatus to remove deleterious materials
from the water and discharge it to the penstock. Filtered materials would be returned to
the creek below the intake structure.
¾ Penstock. The penstock will be32 to 30 inches in diameter, and will convey water from
the intake about 3800 feet to the powerhouse. The penstock will be mosty constructed of
plastic with about 300 feet of steel. The penstock will be fully buried. Power and
communications between the intake and powerhouse will be co-located with the
penstock. The penstock alignment will generally serve as the access route to the intake
for construction, maintenance and operations.
¾ Powerhouse. The powerhouse will house the turbines, generators, switchgear, controls,
and associated equipment for the project. It will be located at an elevation 808 feet on
the bank of the Southfork. The powerhouse will measure approximately 22 by 36 feet.
¾ Generation equipment.
There will be 4 turbines of which 3 will be pumps operating as turbines, and a 4 jet
Pelton wheel. All of the turbines will be vertically mounted and each will be equipped
with a 350 kW induction generator. The output of each machine will be 300 kW when
running at the lowest net head, 350 feet.
Pump turbines fall in the reaction turbine class of which the more familiar type are
Francis turbines. The difference is a pump turbine doesn’t have wicket gates which can
regulate the flow hence the power. The pump turbine is either on or off and produces
what power it can. Because the pump-turbine is simple and manufactured in large
quantities it is much less expensive and has only two parts to wear. To deal will variable
flows a 4 jet vertical impulse turbine will be utilized. This turbine has a very good
efficiency over a wide range of power generation. This turbine will be used to fill the
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OCTOBER 8, 2008 PAGE 9 OF 16
steps between the one power pumps. This enables to use all of the flows effectively. Two
turbine manufacturers being considered are Canyon, Pelton, and Cornel, Francis.
The power will be generated at 480 volts and sent to a 1500 kVA transformer where it
will be converted to 7.2/12.4 kV. From there it is sent to the MEA line where it is
metered and where there is appropriate disconnects and surge arrestors to protect the
plant from lightning and other power surges. Information from the meter will be
telemetered to SFH, MEA and CEA . The former for informational purposes and the
latter two for billing.
SFH controls will transmit data from each turbine to computers for monitoring and status.
Set values for operations will be changeable from external computers.
¾ Tailrace. Water from the powerhouse will be discharged back into the South Fork.
¾ Transmission Line. Power generated by the project will be transmitted via a new
transmission line approximately 1300 feet to MEA’s distribution system.
¾ Access. Access to the project will be from Hiland Drive to existing roads on the
property.
The project will have an installed capacity of 1200 kW.
The project’s capacity factor will be about 57%.
4.3.2. Land Ownership
The entire project works is located on the Janke Homestead. The project footprint and access
easements are being leased to SFH by the Janke family.
4.3.3. Permits
The following permits and approvals have been obtained for this project:
¾ Use Permit / Water Rights (ADNR)
¾ Fish Habitat Permit (ADFG)
¾ Nationwide Permit 17 for Hydropower Projects – for incidental wetlands fill and
similar matters (Army Corps of Engineers)
¾ Alaska Coastal Management Program Consistency Review (ACMP)
¾ Utility certification or exemption (RCA)
¾ Finding of non-jurisdiction (FERC)
¾ The SFH is a Qualified Facility
¾ Municipality of Anchorage
o Conditional use permit through zoning change
o Variance allowing work in and near the Southfork
4.3.4. Environmental
Compatibility of the project with environmental considerations has been reviewed as part of the
permitting process. Key initial findings are summarized below.
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¾ Fish Habitat. The project is located above fish habitat as designated on the Atlas of
Waters Important to the Rearing and Spawning of Anadromous Fishes. ADFG has issued
fish habitat permits for the project as there are no fish in the upper reaches where the
plant is located
¾ Threatened or Endangered Species. The USCE permit includes language as
recommended by the appropriate agencies.
¾ Aesthetics. The project will have negligible if any adverse aesthetic impact. The project
is located in the bottom of a very deep wooded canyon. The uplands are all part of the
Janke homestead. There will be no visible features anywhere outside of the Janke
property. Most of this project with the exception of part of the intake and the power
house is buried. Access roads and trails are preexisting with the exception of the pipeline
bench.
¾ The project does not have wetlands as it is steep and well drained. . This issue was dealt
with in the Corps of Engineers nationwide permit.
¾ No archeological or cultural resources are known in the project vicinity
¾ Land development constraints are a permit erosion control plan requirements
¾ Telecommunications Interference
¾ Aviation: Absolutely no impact because of topography.
4.3.5. Project Development Cost
SFH has completed an engineer's cost estimate for the project of $3,087,000. This includes all
development and construction costs required to complete the project through commencement of
operations.
4.3.6. Project Operating and Maintenance Costs
Project operation (includes taxes) and maintenance costs are projected to be $35,600 annually.
SFH would establish an operating fund at project startup to fund annual O&M expenses. This
fund would likely be capitalized as part of SFH’s project financing, and then replenished on a
perpetual basis from operating revenues. The fund would also cover seasonal cash flow
fluctuations, such as reduced power sales revenue during the winter months, when the flow in the
South Fork is reduced, and increased maintenance costs during this period, when most
preventative maintenance costs would typically be incurred. This fund would also be used to
manage longer-term cash flow issues, such as weathering drought years and some major
maintenance / repair activities.
No grant funding is requested for operations and maintenance costs.
4.3.7. Power Purchase/Sale
The energy from the project would be sold to one of the six railbelt utilities. The most likely
purchaser would be the local utility, MEA, with which advanced contract negotiations are
underway. CEA has also expressed an interest in purchasing energy from the project.
Current negotiations are for a power purchase price at MEA's avoided cost of energy.
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Current projections are for the avoided cost of energy to MEA to run in the range of 5 to 13
cents/kWh for the life of the contract.
Based upon existing estimates and available information, the estimated rate of return for the
project would be in the range of 5 to 25% annually.
4.3.8. Cost Worksheet
Assumptions used in completing the attached AEA cost worksheet are summarized below.
4.3.9. Business Plan
The members of SFH have over the past 18 years operated the McRobert’s Creek Hydroelectric
Project, the only privately owned grid-tied hydroelectric project on the railbelt grid. Through
this experience, SFH has the knowledge, institutional framework, and processes to operate small
hydroelectric projects such as the South Fork project. These processes include:
¾ Financial Management Team. SFH will contract with independent entities to perform
bookkeeping, accounting, and financial management functions as required with the direct
oversight of SFH members. Our financial management team is familiar with the unique
financial aspects of small hydroelectric projects and with project construction
¾ Operations and Maintenance Team. SFH members will be directly responsible for and
involved in operations and maintenance of the hydroelectric project. The project will
employ a full SCADA system that will enable unmanned operation of the plant.
Operators will be able to monitor plant operations and telemetry, and will be able to
troubleshoot and modify plant settings remotely via secure communications. SFH
members live adjacent to the powerplant, and will be able to respond to issues in a timely
manner. The project will have a rigorous preventative and scheduled maintenance
program to minimize unscheduled outages.
SFH is within a few hundred feet of the Janke’s houses so operations and maintenance is
much easier. Further, Southfork Construction owns many types of heavy construction
equipment which they operate, maintain and repair themselves. They have many years of
experience and much necessary equipment to make sure the hydro system is properly
operated. Further, they are backed by Earle Ausman, PE who owns and operates the
McRobert’s Creek hydro and has years of detailed experience dealing with hydroplants.
Earle is backed up by David Ausman and the resource if needed of Polarconsult.
¾ Business Team. SFH members will develop and maintain a formal business plan, that
will address key business issues such as maintaining regulatory compliance, capital
replacement needs, etc.
4.3.10. Analysis and Recommendations
The Southfork Project is nearly ready for construction. With timely completion of contract
negotiations, RCA approvals, and construction financing, construction of this favorable project
can proceed in 2009 and have power on line that year.
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SECTION 5. - PROJECT BENEFIT
5.1. Estimated Fuel Displacement
The project would primarily displace Cook Inlet natural gas burned by Chugach Electric for
power generation. Estimated fuel displacement and assumptions used to generate the estimates
are summarized below:
Fuel Type Natural Gas
Annual Displaced Energy 6,000,000 kWh
Displacement 100%
Efficiency of Displaced Generation (Heat Rate) 9,800 btu/kWh
Average Annual Displaced Fuel MMCF
Displaced Fuel over 30 Years 58.8 MMCF
Average Market Value of Displaced Fuel $7.00/MCF
Annual Value of Displaced Fuel $411,600
Inflation Rate 2%
Discount Rate 5%
Present Value of Displaced Fuel over 30 years $8,067,000
5.2. Estimated Annual Revenue
Estimated annual revenue from power sales and assumptions used to generate the estimates are
summarized below:
Contract price structure Avoided Cost
Average avoided cost over 30 years (Power Sales Rate) $0.05/kWh
Average Annual Energy Sales 6,000,000 kWh
Average Annual Gross Revenue From Power Sales $300,000
Average Annual Operating Expenses $ 35,600
Average Annual Net Revenue $264,000
5.3. Other Annual Revenue Streams
SFH anticipates that the project would qualify for low-impact certification under the national
standards established by Green-e, and likely other certification entities. This would make energy
from the project eligible for green tags/renewable energy certificates (RECs). RECs currently
market in Alaska for $0.02/kWh (Denali Green Tags).
SFH proposes to transfer REC rights to MEA as a public benefit of this project. No project
revenue is assumed from RECs.
State or federal tax credits may be available to the project over its life. Currently available
federal tax credits for renewable energy have very limited eligibility criteria for hydroelectricity,
and this project would likely not quality. Generally, the volatility in tax credits precludes
forecasting any benefit from them over the project’s life.
5.4. Project Benefit from Direct Cost Savings
SFH has identified the following direct cost savings resulting from this project.
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¾ Green Tag / Renewable Energy Credits (RECs): SFH will transfer title and rights to
RECs the project will qualify for to MEA. These RECs could be marketed by the state,
or transferred to the local utility or other utilities. The project meets the certification
criteria established by Green-e for low-impact hydropower. RECs currently market in
Alaska for $0.02/kWh (Denali Green Tags).
¾ Capacity and Energy Rate Reduction: While the South Fork project provides capacity to
the railbelt grid, to expedite contract negotiations, SFH has pursued a non-firm avoided
cost of energy price structure for this project. The lowest avoided cost of energy
available to MEA is likely to be at or equal to CEA's avoided cost for the foreseeable
future, and this is the avoided cost upon which a contract would likely be based. This
price structure offers the project's capacity as a direct benefit to MEA at no cost.
¾ Line Efficiency: The line losses from the South Fork project to MEA are less than the
line losses from CEA generation to MEA. The project will increase the efficiency of the
MEA and CEA systems, reducing costs for both utilities.
These annual public benefits are summarized, and their present value is estimated in the table
below. Assumptions used to generate the estimates are also stated.
SOUTH FORK HYDRO, LLC RENEWABLE ENERGY FUND GRANT APPLICATION
SOUTH FORK HYDROELECTRIC PROJECT
OCTOBER 8, 2008 PAGE 14 OF 16
DIRECT ECONOMIC BENEFITS FROM PROJECT
Green Tags / RECs
Average annual generation: 6,000,000 kWh (assumed)
Market Value: $0.02
Annual Value: $120,000
Term: 30 years
Inflation Rate: 2%
Discount Rate: 5%
Present Value: $1,785,000
Increased Available Capacity
value per kW $0.075 ( approx. cost, NG Turbine)
kW provided (firm, summer months) 1,200kW (estimated)
Capacity value $104,800
Present Value $2,054,000
Line Efficiency
Line losses from CEA G&T to MEA 2% (CEA Tariff)
Line losses on MEA System: ½% (assumed)
Line losses from South Fork to MEA load center: 1% (assumed)
Power throughput avoided by project: 6,000,000kWh (assumed)
Avoided energy losses (CEA): 120,000kWh
Avoided energy losses (MEA): 90,000kWh
Nominal value of energy: $/0.05kWh (projected over life)
Average annual savings from reduced energy losses: $11,250
Term: 30years
Inflation Rate: 2%
Discount Rate: 5%
Present Value: $223,000
TOTAL DIRECT ECONOMIC BENEFITS FROM PROJECT
5.5. Indirect Project Benefits
SFH has identified several indirect public benefits that may result from the project. These are
summarized and briefly discussed below.
1. The project will be connected to the railbelt electrical grid. This provides desirable
operational enhancements to this transmission and distribution system. There is an
increase in stability, reliability, and redundancy. These gains can only be obtained by
providing multiple, distributed generation sources which is generally not feasible with
typical large utility generation facilities. This new generation asset also improves the
diversity of fuel sources powering the grid through the addition of renewable energy.
2. This new generation asset will offset generation from existing natural gas-burning
facilities in Southcentral Alaska. This will reduce consumption of Cook Inlet basin
natural gas. Cook Inlet gas production from existing developed fields is declining, and
shortages are already occurring during periods of peak gas demand. By offsetting natural