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HomeMy WebLinkAboutSouthwest Alaska Regional Geothermal Energy Project App Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 1 of 22 9/2/2008 Application Forms and Instructions The following forms and instructions are provided for preparing your application for a Renewable Energy Fund Grant. An electronic version of the Request for Applications (RFA) and the forms are available online at http://www.akenergyauthority.org/RE_Fund.html The following application forms are required to be submitted for a grant recommendation: Grant Application Form GrantApp.doc Application form in MS Word that includes an outline of information required to submit a complete application. Applicants should use the form to assure all information is provided and attach additional information as required. Application Cost Worksheet Costworksheet.doc Summary of Cost information that should be addressed by applicants in preparing their application. Grant Budget Form GrantBudget.xls A detailed grant budget that includes a breakdown of costs by task and a summary of funds available and requested to complete the work for which funds are being requested. Grant Budget Form Instructions GrantBudgetInstr.pdf Instructions for completing the above grant budget form.  If you are applying for grants for more than one project, provide separate application forms for each project.  Multiple phases for the same project may be submitted as one application.  If you are applying for grant funding for more than one phase of a project, provide a plan and grant budget for completion of each phase.  If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted.  If you have additional information or reports you would like the Authority to consider in reviewing your application, either provide an electronic version of the document with your submission or reference a web link where it can be downloaded or reviewed. REMINDER:  Alaska Energy Authority is subject to the Public Records Act, AS 40.25 and materials submitted to the Authority may be subject to disclosure requirements under the act if no statutory exemptions apply.  All applications received will be posted on the Authority web site after final recommendations are made to the legislature. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 2 of 22 9/3/2008 SECTION 1 – APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Naknek Electric Association Inc Type of Entity: 501 (C) (12) Electric Cooperative Mailing Address Naknek Electric Association Inc PO Box 118 Naknek AK 99633 Physical Address #1 School Road - Mile 1 Alaska Peninsula Hwy Telephone 907 246 4261 Fax 907 246 6242 Email dvukich@nea.coop 1.1 APPLICANT POINT OF CONTACT Name Donna Vukich Title General Manager - Naknek Electric Association Inc Mailing Address Naknek Electric Association Inc PO Box 118 Naknek AK 99633 Telephone 907 246 4261 Fax 907 246 6242 Email dvukich@nea.coop 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 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 Xbox ) Yes 1.2.3. As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement. Yes 1.2.4. If awarded the grant, we can comply with all terms and conditions of the attached grant form. (Any exceptions should be clearly noted and submitted with the application.) Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 3 of 22 9/3/2008 SECTION 2 – PROJECT SUMMARY Provide a brief 1-2 page overview of your project. 2.1 PROJECT TYPE Describe the type of project you are proposing, (Reconnaissance; Resource Assessment/ Feasibility Analysis/Conceptual Design; Final Design and Permitting; and/or Construction) as well as the kind of renewable energy you intend to use. Refer to Section 1.5 of RFA. The Southwest Alaska Regional Geothermal Energy Project – Phase III Confirmation Well, Feasibility, Final Design and Permitting identifies and tests the geothermal resource at the Pike’s Ridge site in King Salmon for utility scale electric generation and district heating applications. Phase III components include drilling program design and management and generation facility design and planning. 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. The Southwest Alaska Regional Geothermal Energy Projec t is a long-term energy solution to rising and unpredictable costs of energy in rural and remote regions with geothermal ene rgy potential. The next phase of the project and the subject of this application is geothermal energy resource confirmation and qualification. Phase III includes design, engineering and construction of a deep well preceded by funding and permit acquisition, road and well site improvements and drilling and drill management contracts . Subsequent to resource confirmation and qualification, NEA proposes constructing a 25 MW geothermal plant and interconnection infrastructure that will supply 25+ communities in the Bristol Bay and Lake Region with low-cost electricity that effectively decreases the cost of power 70% by displacing 5.4 million gallons of diesel fuel currently used to meet regional electrical and heating energy requirements. The project will be the first utility grade geothermal development in Alaska establishing long-term firm, reliable and cost effective alternative energy that will enhance rural sustainability and the development of renewable and strategic natural resources. Although the project focuses on the production of electricity the identification and development phases will bring geothermal technology transfer and demonstration that is applicable to other geothermal sites in the region. 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. The Southwest Alaska Regional Geothermal Energy Project Phase III: Confirmation Well, Feasibility, Final Design and Permitting requires a $10,020,000 investment. This phase is high risk with high return if successful. $3,000,000 in Congressionally Directed Project Appropriations for 2009 and funded through United States Department of Energy - Energy Efficiency and Renewable Energy (EERE) specifically for this phase of the project and $2,000,000 in local contributions provide a 50% match for the proposed $5,000,000 investment from the Renewable Energy Grant Fund. Estimated total project cost through Phase VI are included in the Budget Summary. 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. Regional geothermal energy generation will potentially displace 5.4 million gallons of diesel fuel used for electricity and heating requirements. Over $15,000,000 per year in avoided fuel costs is a conservative f potential benefit estimate. Stabilizing energy costs will foster economic development in the region’s main industries, fishing and resource extraction. Tourism and service sector employment opportunities will grow as will a perceived environment of security and well-being that is absent today as evidenced in unprecedented outmigration rates. The production, transmission and distribution of energy from an environmentally benign renewable resource for electricity and heating requirements will decrease the Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 4 of 22 9/3/2008 demand for costly and potentially hazardous transportation of fossil fuels along habitat sensitive waterways in a region that support the world’s largest wild salmon runs. 2.5 PROJECT COST AND BENEFIT SUMARY – Phase III Include a summary of your project’s total costs and benefits below. 2.5.1 Total Project Cost (Including estimates through construction.) $10,020,000 2.5.2 Grant Funds Requested in this application. $ 5,000,000 2.5.3 Other Funds to be provided (Project match) $ 5,000,000 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $10,000,000 2.5.5 Estimated Benefit (Savings) $15,000,000 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.) $ Public Benefit:  Stable, firm, renewable, secure and cost effective energy generation  Lower cost of electric and home heating energy to the end user  Increased capacity without increased environmental liability and costs  Controlled cost of power compared volatile world energy market  Increased development of renewable and strategic natural resources in the region  Healthy economic growth and diversity  Increased employment and sustainability  Higher capacity factor than other renewable  Clean generation with nearly zero emissions  Offsets most environmental pollutants caused by fossil fuel  Increased security and decreased dependency on foreign supply energy  Reversal of negative perception that rural communit ies are non-sustainable and a liability  Substantial decrease in PCE payments to regional utilities  Promote value-added manufacturing in the fishing and resource extraction industries  Increase value of seafood due to quality enhancing icing infrastructure to processors and fleet  Increased tax revenue from increased value of seafood  Increased land sales and revenue from property taxes  Renewable energy produced hydrogen heralding in an era of new energy development SECTION 3 – PROJECT MANAGEMENT PLAN Describe who will be responsible for managing the project and provide a plan for successfully completing the project within the scope, schedule and budget proposed in the application. 3.1 Project Manager Tell us who will be managing the project for the Grantee and include a resume and references for the manager(s). If the applicant does not have a project manager indicate how you intend to solicit project management Support. If the applicant expects project management assistance from AEA or another government entity, state that in this section. Project Manager: Donna Vukich, General Manager of Naknek Electric Association, Inc. is the project manager. Phases I and II of the project are more than 80% complete with permitting application for a deep confirmation drill in progress. Phase III Confirmation, Feasibility and Design will require contractual drill site construction and management solicitation with general oversight performed by Ms. Vukich and NEA staff. Management contract procurement will follow generally accepted reasonable and competitive solicitation guidelines. Alternative management scenarios will be considered in cooperative agreements with stat e federal and industry participants as warranted. All project progress and financial reporting will be guided by AEA specified recording and reporting standards. Project sponsor organization and Phase I and II participant qualifications and private contractor information are presented below. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 5 of 22 9/3/2008 THE MISSION: Naknek Electric Association, Inc. is committed to the mission of providing superior electric service, accomplished through the efforts of a highly skilled, motivated and safety conscious workforce with the support services, technologies and facilities to ensure the association’s members enjoy the benefits at the lowest price consistent with sound management. NEA has a competent and dedicated team of professionals capable of administrating and implementing the project’s plan including operation and maintenance upon completion. Among their qualificatio ns is an outstanding safety record. As of August 31, 2007 there has been no lost time in 2,054 days, an exemplary record and confirmed by 10 consecutive years of Safety Achievement Awards from the Alaska Power Association (APA). Recently, management and employees collaborated to become the first small “bush” cooperative in Alaska to earn Rural Electric Safety Accreditation (RECAP) from National Rural Electric Cooperative Association (NRECA). Some of the guidelines establishing accreditation exceed local, state and federal requirements. The cooperative underwent two stringent evaluations based on a three -year review period and successfully demonstrated that its management and employee safety practices provide a safe and healthful work environment. Team efforts were rewarded when they accepted the award at Alaska Power Association’s Annual Meeting in 2006 and received insurance premium discounts resulting in substantial savings for the cooperative. NEA management understands the need for a prosperous economy and to ensure it the cooperative includes enhancing economic development in its strategic goals. Work re -establishing the Bristol Bay Borough Chamber of Commerce and guidance provided to a small fisherman’s cooperative earned NEA the 2005 Silver Switch Award presented by the National Food and Energy Council in recognition of the association’s economic development program. In an effort to offset salaries at NEA and ensure economic and operational success of neighboring utilities, the cooperative provides management and services to INN Electric Cooperative, Inc. and training and oversight services to Manokotak Power Company, the latter through an agreement with the Denali Commission. These activities and relationships are supported by a well trained and experienced board (Certified NRECA Credentialed Cooperative Directors), are deployed by management that is strong on leadership with a long-term vision, and employees dedicated to their work and community. NEA’s financial management is sound as evidenced in its ability to reduce spending and aggressively seek additional load, minimizing the economic decline. The cooperative, as a Rural Utilities Service borrower complies with government standard accounting and reporting practices and consistently rec eives unqualified opinions from auditors. NEA’s recent projects are highlighted below. The cooperative has weathered difficult economic times in the region because of dedicated professionals with decades of experience in electric generation, distribution, district heating, personnel, project management and grant administration. Since 1997 the cooperative has accomplished the following: Grants Administered During the Last Ten Years:  Management of $750,000 award from FEMA for ice storm damage  Administered a $500,000 Denali Commission grant for generation upgrade and the purchase of a 3512(b) Caterpillar engine  Administered a $2.6 million Rural Utilities Service High Cost Energy award purchasing and installing two 3512(b) Caterpillar engines, switchgear and a substation upgrade  Administered a $325,000 Denali Commission grant for a 3D seismic study Construction:  Tank farm upgrade to meet DEC leak detection and the installation of a new 500,000 gallon tank  Changed out 4 engines and increased capacity from 7,685 kW to 10,337 kW  Substation capacity increase of 5 MVA  Completed a 2,400 square foot plant and administration office addition  Currently working on the construction of a vehicle maintenance building Recaptured Heat:  100% of Bristol Bay Borough School District’s heating needs since the early 1970’s  100% of Camai Community Health Center and 8 residences’ heating needs since 1983  Provide 80% of Kvimarvik Swimming Pool heating requirements since 1999 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 6 of 22 9/3/2008 THE TEAM: NEA Board of Directors David Jedlicka – President Steven Jones - Director Herbert Mitchell – Vice President Nanci Lyon - Director Dale Peters – Secretary/Treasurer Tom Deck - Director Pete Hill – Director Donna Vukich - NEA General Manager 22 years electric utility experience with NEA 10 years as General Manager of NEA 5 years Finance Manager of NEA Manages $16,000,000 portfolio Implemented $2.7 million RUS High Energy Cost Grant Implemented all grants awarded over the past 10 years Engineering interface Managed tank farm and generation upgrade Lead on Regional Geothermal Project Geothermal Energy Instructor at University of Alaska Campus in King Salmon, Alaska Darrell Aspelund - NEA Plant Supervisor Over 30 years experience in electric generation Responsible for scheduling, engine overhauls and plant maintenance Engineering interface Lead on tank farm and generation upgrade Alaska Power Association’s 2006 Hatcher-Williams-Turkington Employee Service Award Kevin Coissart - NEA Line Supervisor 12 years experience as lineman Lead construction and maintenance of distribution system Transmission construction project experience Experienced operations and maintenance supervisor Engineering interface Peggy Saia - NEA Chief Financial Officer/Office Manager Supervises office staff, accounts payable and accounts receivable Government interface on utility issues Performs all government and industry reporting requirements Principle safety and loss control administrator Bill Edwards - NEA Heat Recovery Systems and Contract Liaison 30 years electric generation experience including diesel generation Installation and maintenance of recaptured heat systems Service agreement liaison with INN Electric Cooperative and Manokotak Power Company Power & Control Engineering Robert Dryden, P.E. PO Box 2338 Sitka, AK 99835 907 747 3657 (tel) - rdryden@aol.com Kemppel, Huffman and Ellis, P.C. John Andrew Leman 255 East Fireweed Lane - Suite 200 Anchorage, AK 99503 907 277 1604 (tel) - 907 2762493 (fax) - rrk@khe.com Coastal Surveyors Ralph Mancuso PO Box 181 Naknek, Alaska 99633 907 246 4408 (tel) 907 246 4408 (fax) - ralph@coastalsurveyors.com Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 7 of 22 9/3/2008 Energy and Resource Economics Tom Lovas 5840 Azalea Drive Anchorage, Alaska, 99516-4362 907 345 5116 (tel) 907 351 7846 (cell) - tlovas@acsalaska.net Egli Air Haul, Inc Sam Egli PO Box 169 King Salmon, Alaska 907 246 3554 907 439 6119 - egliair@bristolbay.com Phase I and II Geology, Engineering and Exploration Consultants: Hattenberg, Dilley and Linnell, LLC - Engineering Consultants Laurie Dilley 3335 Arctic Blvd - Suite 100 Anchorage, Alaska 99503 907 564 2120 (tel) - 907 564 2122 (fax) - info@hdlalaska.com CGGVeritas - Seismic Joe Pagliero - Project Manager 2450 Cinnabar Loop Anchorage, Alaska 99507 907 276 6037 (tel) - 907 276 6034 (fax) - 907 27 8680 - joe.pagliero@cggveritas.com 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.) Action Plan The staff and management of NEA have established the goals of maintaining financial stability and electric reliability. To accomplish those goals, NEA plans for system growth through continual review of generation and distribution capacity and seeks alternative or more efficient energy sources that will mitigate the high cost of diesel generation. NEA has taken steps toward a geothermal future by collecting field data on identified thermal sources and making reconnaissance visits to currently installed and operating geothermal electric and heat production facilities in Iceland, Nevada and California. The next steps include more detailed investigation of resource potential and refining the information. NEA seeks local, state, federal, and private industry cost-share, investment and cooperative agreements to bring the project to completion. This proposal initially seeks a $5,000,000 investment match from the Renewable Energy Grant Fund that will support drilling a deep well, Phase III: Confirmation Well Construction, Feasibility and Design, to confirm and qualify geothermal resource potential. The action plan to proceed upon availability of adequate funding will include: Step 1: Cooperative agreements with local, state, federal and private industry. In-kind contributions of equipment, manpower and transportation from regional firms are being investigated to help offset costs. Step 2: Upon completion of the confirmation phase drilling program a final engineering evaluation of economic feasibility will be conducted. Upon resource confirmation and qualification action will proceed to: Step 3: Final feasibility analysis including: detailed plant engineering; site preparation and development; permitting process requirements; and final regional benefits. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 8 of 22 9/3/2008 Step 4: Prepare and submit loan application documentation and obtain verification of permitting, loan acceptance or grant procurement. Step 5: Finalize construction contracts upon removal of contingency and proceed to project completion. 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. Phase I – IV Milestones:  Identification of Anomalies  Preliminary Geological Evaluation  Interconnection Survey (sub-transmission)  Shallow Test Well Drilling – Identification of Bedrock in King Salmon and Water Temperature Dated  Shallow Temperature Survey  3D Seismic Study  Preliminary Cost Benefit Analysis  Congressionally Designated Project Appropriation  Funding and Permit Acquisition  Confirmation Well Design and Construction Contract  Resource Confirmation and Qualification  Final Cost Benefit Analysis  Funding and Permit Acquisition for Generation Facility Construction  Funding and Permit Acquisition for Interconnection Phase I -King Salmon to Dillingham  Generation Facility Design and Construction Contract  First Phase Interconnection Design  Hydrogen Production Integration Analysis  Project Management Plan  Project Commissioning  District Heating System Cost Benefit Analysis  Funding and Permit Acquisition for District Heating System  District Heating Design and Construction  Long Term Energy Plan See Project Timeline attached 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. Decisions have not been made regarding project participants other than Phase I and II contractors, professionals and service providers Hattenberg, Dilley and Linnell, Engineering Consultants, Power & Control Engineering, Energy and Resource Economics, Coastal Surveyors and Egli Air Haul. Confirmation well design, well construction, drill management and resource qualification are outside general management experience. Phase III and IV tasks require significant input from drilling experts, geothermal process and construction engineers, and industry professionals. Phase IV construction tasks and commissioning will be contractual and let by competitive solicitation guidelines unless other agreements are warranted. NEA staff will be expected to maintain a steep learning curve and enthusiasm through all phases of the project. Project management mandates direct experience manpower development, training and technology transfer to insure project success and sustainability. NEA will staff and train for project operations and maintenance and comply with all project accounting and reporting requirements in -house. See Resumes attached Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 9 of 22 9/3/2008 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. Ms. Vukich’s management experience at NEA, regional involvement and electric industry decision making at state and federal levels is evidence of oversight and communication skills necessary to bring the project online and within budget. 3.6 Project Risk Discuss potential problems and how you would address them. Project Risks Funding Support: Nationally, the negative spin on “Pork Barrel” funding may cripple successful investment in many projects that are in the public’s best interest. Congressionally designated projects are sighted by those against earmarking as a fraudulent use of federal funds. The Southwest Alaska Regional Geothermal Energy Project is a congressionally designated project slated to receive $3 million specifically for drilling a deep confirmation well. Those earmarked dollars are a substantial portion of the match in this proposal. Funding for the project may be at risk because of the popular attitude toward “pork”. The upside, renewable energy projects have considerable public support and the mandates for deep drilling technology research and development are clearly evident in DOE funding. Permitting and Leasing Costs: Project management anticipates reasonable leasing cost agreements required by the state. Prudent cost of power analysis and rate scheduling will successfully mitigate the risk of cost of power increases. Estimated Cost Overruns: Cost overruns are pandemic in grant funded projects. Project management experience and commitment to cost control are evident in NEA’s ability to provide quality electric service at the lowest price consistent with sound management. NEA’s financial management is note worthy in its commitment to reduce spending and aggressively seek addition al load which recently minimized the effects of a fisheries related economic downturn in the region. Ms. Vukich has decades of experience with RUS borrower compliance requirements and government standard accounting and reporting practices and consistently receives unqualified opinions from auditors. The use of standard accounting procedures and record keeping and reporting, diligent project monitoring and informed decision making will help prevent unnecessary cost overruns. Cost estimates are guidelines for planning and in this project all estimated costs include adjustments for location and transportation discrepancies. To help buffer unexpected costs the proposed budget for Phase III includes a 10% contingency. Permitting and Environmental Regulations: NEA has preliminary site control through ownership of the project site and approved access easements. A deep drilling permit is being sought through the Department of Natural Resources Oil and Gas Division. Management recognizes the importance of permitting and regulatory compliance in keeping the project moving forward and mitigating any circumstances that result in costly delays. Development of a road map and schedule for site development, well and generation facility construction, and interconnection infrastructure environmental and ROW permitting, and all other regulatory compliance requirements will be contractual and overseen by project management and corporate counsel. Capital Equipment, Drilling Management and Material Acquisition: Drilling equipment availability, leasing and drilling project management contracting could pose significant risks due to increased demand on capital equipment and manpower by new oil, gas and geothermal exploration projects. Cooperative agreements between the state and the oil and gas industry could significantly decrease the risk. Project Delays in Material and Capital Equipment Delivery: Individuals and organization doing business in remote Alaska anticipate delays due to weather and transportation. Project management has experience and established working relationships with utility industry vendors, barge service operators and local transportation companies, and is proactively seeking cost saving freight rates for equipment and materials. Interconnection ROW Permitting and Construction: Unanticipated delays in project completion caused by permitting and access could postpone the delivery of affordable energy and magnify the problem in the region poses great risk. Hiring an engineering consultant to handle permitting processes is worth the Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 10 of 22 9/3/2008 investment. Developing a road map, schedule and plan that maintains project momentum is essential. Cooperation and open communication between local, state, federal, private and native land owners, permitting agencies and project management regarding ROW’s and transmission corridors will be established in Phase III and continue through all remaining phases of the project. Reservoir Characteristics: Geothermal energy development through the resource confirmation phase is high risk. Based on resource characteristics generation design can mitigate some of the risks associated with less than optimal resource temperatures, chemical composition, permeability and flow rates, but not all. The development of new technology is in high gear to utilize the natural heat of the earth in efficient and cost effective ways. Enhanced geothermal system technology develop ment is one example. The only way to know the characteristics of the reservoir is to confirm and qualify the resource with a deep drill program that applies appropriate engineering and technology for cost effective development. This proposal seeks investment, consultant and cooperative agreements between local, state, federal and private industry to determine appropriate design and technology application through all phases of development maximizing project success. Commissioned facility operations and maintenance obligation will be met with sales revenue. 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. Project Requirements: The Southwest Alaska Regional Geothermal Energy Project has 6 major phases of development. Greater than 80% of all tasks scheduled in Phases I and II are complete. Phase I Interconnect from King Salmon to Dillingham and 5 communities is 157 miles long with 6 substations. Phase I Interconnection Infrastructure is designed but engineering is incomplete. Phase II Interconnect from King Salmon to Egegik and both survey and design are 50% complete. Project management is submitting information on Phases I-VI including project timeline, tasks, milestones and cost estimates in this proposal. Other renewable energy resources viable in the region are not firm/baseload and require 100% firm power back-up. Geothermal energy technology is growing at a rapid pace. DOE fund ed opportunities and cooperative agreements are driving the search for low cost geothermal energy development technology. The idea is old, the potential is tremendous and the regions ’ people, their culture and a sustainable fishery resource are worth the investment. Generation plant Title V Air Quality Permits contribute substantially to the cost of power. Cost savings in excess of .01 / kWh are anticipated with the proposed project. Estimated project costs were developed before HDL’s cost matrix became public. However, project management cost estimates track matrix estimates. Resource potential estimates are directly from the matrix and are outlined below. Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 11 of 22 9/3/2008 Deep temperatures are from geothermomety or estimated based on similar geological provence. Mt Spurr, Makushin, Akutan, Port Moller and Naknek are considered similar provences with comparable temperatures (HDL). Southwest Alaska Regional Geothermal Energy Project - Naknek Estimated Resource Potential  Temperature of Shallow Resource (Mt Martin shallow temperature used): 94°C  Depth of Shallow Resource: Unknown  Temperature of Deep Resource: 200°C  Depth of Resource: 10,000 ft  Capacity of Resource or Flow: Unknown  Distance From Load or Intertie: 2 Miles  Size of Project: 25 MW  Road Miles Needed: 2 Miles  Transmission Line: Phase I King Salmon to Dillingham and 5 Communities 157 Miles  Deep Resource Assumed Temperature: 392°F  Estimated Potential MW/Well: 4.34 MW  Number of Production Wells Needed: 6  40% Success Rate: 8 See HDL Matrix and Budget Information attached 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 infor mation about the number, size, age, efficiency, and type of generation. The information presented below is a snapshot of the NEA facility and operations. Nushagak Cooperative, Inc. has a similar profile. Other regional stand-alone diesel generation and distribution facilities have poor economies of scale, and less efficient and higher cost profiles. NEA’s generation plant was first energized in November 1960. The utility is primarily engaged in generation and distribution of electricity to the targe t communities, Naknek, South Naknek and King Salmon. The utility currently maintains the following operations:  10.3 MW generation plant  7.2 KV and 14.4 KV distribution lines  90 miles of distribution  Service to three communities  District heating to school, clinic, ambulance garage, pool, residences and NEA facility  1,049 meters  Service agreement with two neighboring utilities  Service to large power seafood processors  Service to government consumers, United States Air Force, Federal Aviation Administration, United States Fish & Wildlife Service, Alaska Department of Fish & Game, United States Weather Service, National Park Service  Service to Bristol Bay commercial fishing, sport fishing and tourist industry  Just under 20,000,000 kWh were sold in 2007  Newest engine was installed in 2005 and the oldest, a White Superior, was installed in 1974  Efficiency 15.1 kWh / gallon  24 hour plant The generation facility consists of a steel building containing ten diesel generator sets, control panels and feeder switchgear, situated on 3.66 acres owned by the cooperative. All fuel, battery, cooling, ventilation, recaptured heat systems and all other associated equipment is also housed in the generation building. A separate building houses distribution inventory and equipment and a new vehicle maintenance facility construction is in the 2009 capital budget. The generators are fueled from a 2.1 million gallon capacity tank Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 12 of 22 9/3/2008 farm that is in compliance with the Alaska Department of Environmental Conservation (DEC). The tank farm is located directly behind the generation plant, inside the fence on NEA property. 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. Regional baseload electric generation, heating and transportation energy requirements are fueled with diesel and gasoline Grant assisted new energy infrastructure development will make the near-term transition to an energy independent future possible. Yes, the region is highly invested in diesel generation and petroleum fueled transportation systems, but many small stand-alone diesel generation facilities are unable to bear the costs of fuel and are becoming a liability to the state. The electric generation industry as a whole is approaching the point in the cost-benefit analysis where renewable energy system development, even with initial capital intense investments, is feasible. Concerns in the region about energy costs, the environment and the political attitude toward climate change are making geothermal energy development not only necessary but desirable. Renewable energy alternatives should be developed for Alaskans, used and managed locally with state supported one-time capital investment for generation and interconnection infrastructure. HB 152 Alternative Energy Grant Fund is a giant step in the right direction and must be followed by sustained commitment to the prospect of renewable energy for Alaska. Renewable alternative energy policy makers should look 50 years into the future and understand that these kinds of projects are pathways to unlocking hydrogen’s potential and a new energy future. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The cost of electricity in Southwest Alaska is high by any standard. Nearly all electrical power is provided by stand-alone diesel generation systems. That same fuel provides most space and water heating requirements. Southwest Alaska communities are in trouble. High energy costs are destabilizing rural population and as a result, village life and culture are in decline. Schools are closing, businesses are failing and residents are moving to larger hubs and cities increasing demand on resources already struggling to keep up with population increases. Lowering and stabilizing the cost of energy will radically improve local economies, enhance resource development, expand employment opportunities and stem outmigration. Significant returns are anticipated from quality enhancement and local value-added manufacturing in the seafood industry. Project management knows the value of the fishery in Bristol Bay. With cost-effective energy on-shore processors have indicated that local secondary manufacturing processes are feasible. Low cost energy would allow affordable icing infrastructure and cold storage options for large and small seafood processors for improved quality and price. There will be many economic development opportunities, both direct and indirect, with affordably energy that will help return the region to its once independent and self-sufficient status. 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 Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 13 of 22 9/3/2008 The Southwest Alaska Regional Geothermal Energy Project is a multi-stage development project. Resource confirmation and qualification will move the project into facility design and construction of a 25 MW geothermal energy plant serving 25+ communities. The project will be the first utility-grade geothermal development in Alaska. The initial cost estimate for the plant and approximately 450 miles of phased interconnects linking communities is $200 million. NEA owns the land, has documented access to the site and will have full site control with exploration drilling and site development permits. Proposed Project Components:  25 MW geothermal generation facility + 12.5 MW capacity additions with growth  Binary system  50,000,000 kWh generation annually with growth to 75,000,000 in 2 years  Gathering field  Project integration utilizing existing distribution systems  Phased construction of 34.5 KV interconnection infrastructure delivering wholesale power  450 miles of phased construction of interconnecting infrastructure linking 25+ communities  157 mile Phase I Interconnection links King Salmon to Dillingham and 5 other communities  Initial Load: 18 MW with full potential to use 25 MW within two years and 50 MW with growth  4 miles of distribution line upgrade from single phase to three phase  50% capacity factor with geothermal generation  100% capacity factor with hydrogen production  District heating system  Hydrogen storage facility Benefits:  Dramatic drop in the cost of power production, estimated to decrease 70%  Cleaner environment with negligible emissions  Elimination of 3.5 million gallons of diesel fuel for electric generation  Potential elimination of an additional 1.9 million gallons of diesel for home heating  Long-term firm and reliable energy base for economic development sustaining local communities Barriers:  Acquisition of state and federal transmission corridor  $ magnitude of 450 miles of Interconnection lines crossing state, federal, private and native land  Permitting and ROW access delays may present road blocks to project advancement  Environmental permitting in God’s country is always an issue in project development Rationale: The geothermal plant engineering detail follows geothermal development feasibility. Physical plant design will be based upon test results and anticipated uses within NEA’s service area. Due diligence will be accomplished through preliminary engineering and cost estimation studies. Preliminary engineering will be based on the relationships of costs of known facilities or more thoroughly planned geothermal developments and the geothermal potential identified by the confirmation drilling program. The studies will provide order of magnitude cost estimates for various components, estimated construction time and energy production estimates including:  Estimated total annual operating costs  Estimated total monthly operating costs  Estimated monthly energy delivery  Estimated monthly peak delivery  Estimated hourly energy delivery profile The costs and operating characteristics derived from preliminary engin eering will be compared with resource requirements and present value determinations providing guidance for continued engineering and additional funding requirements. The initial engineering and cost analysis will form the feasibility test of a design-build project. If NEA-sponsored design-build is determined infeasible as a result of preliminary engineering, restrictions on access, system financial considerations or other factors faced by NEA, a process of seeking developer proposals and purchase power ar rangements will be developed. The geothermal potential identified within federal or state lands may be leased, publicly available or shared by Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 14 of 22 9/3/2008 NEA with a potential developer and subject to any drilling and testing access granted to NEA. If design-build by NEA is determined feasible following preliminary engineering, more detailed engineering will be acquired from a qualified engineering, procurement and construction (EPC) contractor. The contractor will provide design, drawings and detailed specifications suitable for solicitation of construction bids. The detailed work will include:  Generation facility engineering  Transmission line engineering  Substation engineering  Roads, foundation and well site surveys and designs  Geotechnical site work for roads, foundations and well sites  Well system engineering  Water collection and return systems civil engineering  SCADA system engineering  O&M facility engineering  Other engineering The design will include multiple stage development information corresponding to th e total geothermal potential and possible facility expansion opportunities, as will be identified in the benefit analysis and NEA resource planning assessments. 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. NEA owns the land on Pike’s Ridge and is granted access through ownership. See Property Deed and Access Documentation attached 4.3.3 Permits Provide the following information is 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 Project management met with representat ives from Alaska Department of Natural Resources - Oil and Gas Division and discussed the permitting process for a deep resource confirmation well. The permit is being prepared and approval from the date of application is expected to take approximately 1 month. Management recognizes the importance of permitting and regulatory compliance in keeping the project moving forward and mitigating any circumstances that could cause costly delays. A road map and schedule for site development, well and generation facility construction, and interconnection infrastructure and ROW permitting and regulatory compliance will be contractual. Local Permits Required: Bristol Bay Borough  Site Development and Building Permits Project management will utilize NEA manpower to prepare and submit application for local site development and building permits to the Bristol Bay Borough. The process is underway and should not encounter any barriers as land ownership and access are not at issue. State Permits Required: Alaska Department of Natural Resources (DNR) – Lead Agency Division of Oil and Gas Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 15 of 22 9/3/2008  Operation, Exploration and Development Permits Division of Mining Land & Water  Land Use Permit  ROW Permit  Water Rights Office of Project Management & Permitting (OPMP)  Alaska Coastal Management Program Consistency (ACMPC) Alaska Department of Environmental Conservation (ADEC)  Temporary Storage of Drilling Waste  Oil Discharge Prevention and Contingency Plan  Certificate of Financial Responsibility  Domestic Water and Wastewater Permits and Certification Federal Permits Required: US Army Corp of Engineers (ACOE)  Construction Permits Environmental Protection Agency (EPA)  NPDES Federal Aviation Administration (FAA)  Airstrip Notification 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will they 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 The development and operation of the Southwest Alaska Regional Geothermal Energy Project is subject to state law and federal regulation and will affect the local environment including a majority of the issues listed above. National Environmental Protection Act (NEPA) compliance is required when a project receives federal dollars. Environmental review preparation and coordination with stakeholder agencies will be the responsibility of a contractual consultant. Acute understanding of NEPA and all compliance and permitting requirements and how tasks can be addressed simultaneously and according to project scheduling will expedite regulatory processes and help bring the project to completion. 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: Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 16 of 22 9/3/2008  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 Cost Information: Phase III: Confirmation Well, Final Design and Permitting Estimated Costs: $10,020,000 Renewable Energy Grant Funds Requested: $5,000,000 Local Match: $5,000,000 In-Kind: $20,000 Phase IV: Facility Construction, Design, Commissioning, Operation and Maintenance Estimated Costs: $55,000,000 Phase V: Interconnection Phase I: King Salmon to Dillingham and 5 Communities Estimated Costs: $60,000,000 – 157 miles Phase VI: District Heating Estimated Costs: $ 5,000,000 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 Grant funding is requested for crucial capital project funding to improve regional self reliance. The Southwest Alaska Regional Geothermal Energy Project will meet all operating and maintenance costs with sales revenue. 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 Phase I Interconnection links King Salmon to Dillingham and 5 other communities. The project will supply wholesale electricity for distribution to Nushagak Electric Cooperative at the cost of power plus the cost of distribution. All wholesale power sales agreements will follow this model. The goal is to lower the cost of power to consumers, utilizing existing distribution systems owned by stand -alone cooperatives in the region. See Geothermal Impact Analysis below (also attached) 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. See Cost Worksheet attached Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 17 of 22 9/3/2008 4.4.5 Business Plan Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum proposed business structure(s) and concepts that may be considered. The Southwest Alaska Regional Geothermal Project will be owned and operated by NEA. NEA is incorporated as a not-for-profit 501 (C) (12) cooperative and employs the cooperative business model to provide its members with reliable electric energy at the lowest possible cost consistent with sound business practices. This business model returns excess margins to its members on a patronage bases. Net margins above expenses belong to consumer members and may be allocated for distribution or retained as working capital to expand, improve or maintain operations. Short-term gains are not the focus in a cooperative business model but rather the creation of long-term value and sustainability for consumer members. NEA is an efficiently run electric uti lity and has a proven record with RUS. In over 48 years of operation debt service expenses have not posed difficulty. Since 1960 most capital improvements were financed with member money. NEA will apply the cooperative business model and all audit, regulatory and reporting for grants, financing and contractual agreements will be accomplished according to the participating agency guidelines and NEA management standards. In the long-term, building locally produced renewable energy electric generation and distribution infrastructure will bring security and sustainability to the region. Energy Resource Economics is working with project management to develop a business plan. 4.4.6 Analysis and Recommendations Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. Southwest Alaska is poised both geographically and geologically for major economic productivity. Transforming strategic natural resources like seafood, oil, gas and minerals, into globally viable market commodities will provide economic benefit to the region, state and the nation. Government renewable energy systems investments supporting natural resource development is important for long-term rural sustainability and independence. By whom and for whom these resources are developed is a question that needs to be addressed by all participants. The development of low-cost renewable energy for seafood processing and cold storage will bring sustainable economic benefits to the region. As a result of resource availability, geography, potential strategic oil, gas and mineral value-added manufacturing such as refining, smelting, cold storage, and transportation and service sector growth local economies will stabilize and diversify. 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 Public Benefit:  Stable, firm, renewable, secure and cost effective energy generation  No fuel cost for the life of the project  $450,000,000 in avoided fuel costs over 30 years at current consumption levels and current costs is a conservative estimate  Lower cost of electric and home heating energy to the end user  Increased capacity without increased environmental liability and costs Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 18 of 22 9/3/2008  Controlled cost of power compared subjection to volatile world energy market  Increased development of renewable and strategic natural resources in the region  Healthy economic growth and diversity  Increased employment and sustainability  Higher capacity factor than other renewable, especially in northern latitudes  Clean generation with nearly zero emissions  Increased security and decreased dependency on foreign supply energy  Increased rural community sustainability  Substantial decrease in PCE payments to regional utilities  Promote value-added manufacturing in the fishing and resource extraction industries  Increase value of seafood due to quality enhancing low cost icing infrastructure  Increased tax revenue from increased value of seafood  Increased land sales and revenue from property taxes  Renewable energy produced hydrogen heralding in an era of new energy development Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 19 of 22 9/3/2008 Bristol Bay Regional Geothermal Energy Project Resource Benefits Preliminary Geothermal Impact Analysis – First Year Full Operation Tom Lovas - Energy Resource Economics Annual Energy MWh Annual Cost NEA Avg. Rate $000 ¢/kWh Naknek Electric Distribution System Load 12 MW Annual Load Factor 20.5 % 21,550 Annual Non-Fuel System Cost of Service 5,993 27.8 Annual Fuel Cost 15 kWh/gal 2.50 $/gal 3,592 16.7 Naknek Average Cost per kWh (net of fuel) 11.1 Geothermal Plant Capacity 25 MW Plant Capacity Factor 85 %/yr 186,150 Geothermal Cost: Nevada Facility 1.5 ¢/kWh Alaska Differential (times 2) 3.0 ¢/kWh 21,550 646 3.0 Naknek Average Cost per kWh (all energy geothermal) 14.1 Potential Wholesale Power Sales Net Available for Wholesale Gross MWh - NEA 164,600 Energy 30 % of avail. 49,380 Margin Requirement (NEA) 10 % 148 0.7 Naknek Average Cost per kWh (after geothermal and wholesale power sales) 13.5 Other Revenues: Offset Fuel Oil Cost 4.00 $/gal* 30.30 $/MMBtu B Btu Heat Load Residential 700 homes Fuel Displaced 100 gal/mo. 110.9 -3,360 Heat Load Commercial 100 buildings Fuel Displaced 5000 gal/mo. 792.0 -6,000 District Heat Loop 15 mi. Capital Cost (inc. conversion) 350 $000/mi. Fixed Cost Recovery, 30 yr., 5%, $000 342 Operating Cost, 1% Capital 52.5 $000/yr. Total Annual Cost 394 Avoided Fuel Cost 902.9 -8,966 Avoided Cost, Equivalent ¢/kWh* -3.4 Naknek Net Average Cost per kWh (after credit for heat sales) 10.1 * 1 kWh = 3413 Btu Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 20 of 22 9/3/2008 SECTION 6 – GRANT BUDGET Tell us how much your total project costs. Include any investments to date and funding sources, how much is requested in grant funds, and additional investments you will make as an applicant. Include an estimate of budget costs by tasks using the form - GrantBudget.xls The Southwest Alaska Regional Geothermal Energy Project Phase III: Confirmation We ll, Feasibility, Final Design and Permitting requires a $10,020,000 investment. This phase is high risk with high return if successful. $3,000,000 in Congressionally D esignated Project funding for Fiscal Year 2009 in the Energy and Water Appropriation Bill is in the United States Department of Energy - Energy Efficiency and Renewable Energy (EERE) budget specifically for drilling a deep well. $3,000,000 for federal appropriations and $2,000,000 in local contributions provide a 50% match for the proposed $5,000,000 investment from Renewable Energy Grant Fund. Estimated total project cost s through Phase VI are estimated in the Budget Summary. See Budget Information attached Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 21 of 22 9/3/2008 SECTION 7 – ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION: Attachments: A. Resumes B. Cost Worksheet C. Grant Budget Form D. Grant Budget Instructions E. Electronic Version of Application F. Naknek Electric Association, Inc. - Board of Directors Resolution 2008-05 G. Pike’s Ridge Property Deed - AA-7906, Parcel B H. Pike’s Ridge Access Easement Map I. Southwest Alaska Regional Geothermal Energy Project Timeline J. Prospective Stakeholders - Southwest Alaska Regional Geothermal Project K. Preliminary Geothermal Impact Analysis - First Year Full Operation, Energy Resource Economics, Tom Lovas L. Proposed Regional Geothermal Distribution Network, Coastal Surveyors, Ralph Mancuso M. Geothermal Cost Matrix - Hattenburg, Dilley & Linnell (HDL) N. Preliminary Geological Resource Assessment, Amanda Kolker, Geologist University of Alaska Fairbanks (UAF) O. Literature Review and Recommendations, Amanda Kolker, Geologist University of Alaska Fairbanks (UAF) P. Area Soil Sample - Soil Survey for Geothermal Tracer Elements, Amanda Kolker, University of Alaska, Fairbanks (UAF) Q. Preliminary Geological Evaluation – Naknek Geothermal Sources (HDL) R. Shallow Temperature Survey (HDL) Certification Renewable Energy Fund Grant Application AEA 09-004 Grant Application Page 22 of 22 9/3/2008 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 Donna Vukich Signature Title General Manager - Naknek Electric Association, Inc Date Attachments: Resumes