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Home My WebLink AboutSuWa213-HistorySusitna Hydro Evaluation ProjectSeminar on the Development of Large Hydroelectric Projects with a Focus on the Susitna Projectpresented toAlaska Energy AuthorityNovember 2008 Project History Presentation ContentIntroduction to presentations by HDR, DTA and NEBackground and history of Susitna Project, including Watana and Devil CanyonOriginal studies completed in the 1980sEngineering and environmental considerationsRegulatory processes and FERC license application Original approaches to financingProject postponement……fast forward to 20083 Susitna Project Background and HistorySusitna River recognized as a valuable Alaskan renewable resource and energy assetVast natural resources surround the riverEarly studies set original potential for hydropowerLocation between Anchorage and Fairbanks is significantWell suited to providing energy needs for the Railbelt and other parts of Alaska4 Previous StudiesU.S. Bureau of Reclamation 1953 StudiesU.S. Bureau of Reclamation 1961 StudiesAlaska Power Administration (APA) 1974 StudiesKaiser Proposal for Development 1974 StudiesU.S. Army Corps of Engineers 1977 StudiesU.S. Army Corps of Engineers 1979 StudiesAPA Studies for FERC License 1983 ApplicationAPA Extended Studies for License 1985 Amendment5 More Background and Recent HistoryAlaska’s rich energy base includes hydropowerDiversification of resources for energy securityNumerous detailed Susitna optimization studies, including environmental and engineering, were completedStudies led to 1983 FERC license applicationProject could present investment and revenue opportunity for the State of Alaska and other project participants6 7 FERC License Process Led to More StudyCase for Susitna was strong enough to call for additional studiesMajor design study and environmental appraisal beganBasis of engineering design followed earlier conclusions and examined options for staged constructionStudies terminated when FERC Application withdrawn8 Earlier Studies Recognized RiskManagement and Made ProvisionsHydropower development, as in all infrastructure, has specific risks that can be identified, assessed and managedDam, powerhouse and transmission construction incurs climatic, flood and geological risk Excavation incurs geological and seismic risk Hydrology and associated energy generation varies seasonally and annuallyRevenue is also subject to market demandBased on personal experience, large-scale hydro projects compare well with other energy sources9 Example of Risk Tabulation from 1982LoadForecastAlt.CapitalCostFuel Cost IncreaseResult IDProbabilityLong-Term Cost Present Worth10Probability Tree – System with Alternatives to Susitna Risk ConsiderationsPower generation alternatives are all subject to varying risksUncertainties and variability in world and regional economies, commodity values, and fossil fuels pricing compound these risksGeologic, seismic, and engineering risks are today among the more manageable of project risksA comprehensive assessment of project risks is warranted based on many past project examples11 Recent History 1983 to 2008From early 1980s energy prices were sharply reducedProgress on possible Susitna development slowed downFinally FERC license application was withdrawnSubstantial design studies underway were endedValuable environmental baseline data records preserved Integrated Resources Plan (IRP) linked with Susitna review12 Principal Objectives of 2008 ReviewValuable project definition exists from 1980 studiesRequires full updating and matching to changed conditionsEconomic pressures have forced increasing cost escalationCommodity costs are much higher with Asian demandOil pricing and electricity costs have substantially increasedHydropower has become economically more attractive13 Type of Comparative Analysis Employed in 1983Energy Costs and Prices (Mil/kWh)14 Project Development StagesThese alternatives were previously studied and will be revisited:(1) Watana ~ Full-scale development(2) Watana and Devil Canyon in 3 stages ~ Watana Stage 1~ Devil Canyon~ Full-scale Watana(3) Watana ~ Stage 1 only(4) Devil Canyon ~ only15 Susitna Project LocationGLENALLENDELTA JUNCTIONFAIRBANKSHEALYGOLD CREEKPALMERANCHORAGEDEVIL CANYONWATANAVEEDENALIDENALI NATIONAL PARK16 Profile of Watana - Devil Canyon Development1460 ft2200’2100’2000’WatanaDevil CanyonWatanaWatana IWatana IIRiver MilesGold Creek GageElevation (ft)17 Susitna Four Dam Scheme Alternative18DENALIDAMSITERESERVOIR MAP UPPER SUSITNA BASINWATANA DAMSITEDEVIL CANYON DAMSITEVEEDAMSITEUPPER SUSITNA RIVER PROFILE General Arrangements – WatanaUnderground PowerhousePowerhouse IntakeSpillwayTailrace OutletSusitna RiverDam Crest19 Devil Canyon Hydropower PlanUnderground PowerhousePowerhouse IntakeSpillwayDam Crest20 Susitna and Power Alternativesin 1983Major CityHydroGasCoalSUSITNAChakachamnaChakachamnaKEYSnowSnowKenaiKenaiTalkeetnaTalkeetnaWillowWillowBrowneBrowneFairbanksFairbanks21SusitnaHealyHealy Alternative Generation Options Considered for Railbelt in 1983Coal-fired generation 200 MW at BelugaCoal-fired generation 200 MW at NenanaGas-turbine generation 70 MW at various sitesCombined-cycle generation 400 MW at one or two sitesChakachamna hydropower 330 MW22 Environmental and Socioeconomic ConsiderationsWater use and qualityFish - recreational andcommercialWildlifeBotanical resourcesHistorical andarchaeological dataSocioeconomic impactsGeological and soil conditions Recreational resourcesAesthetic resourcesLand-use issues 23 Economic Considerations in 19831980 support for Susitna came from energy pricing sideRealization that high capital cost led to high entry priceBanking view that Alaskan State Appropriation essentialValue in long-term savings over escalating thermal powerFinancing mechanisms such as Bill 646 proposedOutcome supported decision to proceed with FERC process24 Cost Distribution Over 21-Year PeriodYear19822004Susitna Hydroelectric ProjectCumulative Annual Cash Flow- January 1982 ($)6500Cumulative Cash Flow (mil of $)06500Annual Cash Flow (mil of $)25 Dealing with “Inflationary Financing Deficit”Hydropower has higher initial capital cost, lower long-term O&M, and ever-increasing revenue valueInterest and inflation rates interact over early yearsOver time, hydropower becomes increasingly more economic Financing debt turns into long-term savingsHydropower is a long-term-valued asset26 1983 Energy Cost Comparison27 Specific Study Steps to be Based on…Engineering, socioeconomic environmental findings of 1980sUpdating for engineering advances in past 25 yearsAdapting to meet changed regulatory requirementsRe-estimating with advanced construction practice2008 costs for large hydropower worksPrice trends, escalation and contingenciesLikely trends in major power project credit financing28 Fundamental Issues Remain ~ 1980s and TodayCapacity limits within system to absorb the energyStaging of construction may be needed but adds costEnvironmental effects may need extensive studyFinancing likely to again need special actionHydropower “green” benefits are greater than ever29 THANK YOU FOR YOUR ATTENTION30