HomeMy WebLinkAboutThayer Lake Hydropower Project Feasibility Analysis - Oct 2015 - REF Grants 7040038, 7050825Confidential Thayer Creek Hydro Project Feasibility Analysis Prepared for 30 October 2015
Confidential Page 1 October 2015 Review the project objectives that guided this workIntroduce the key parties in the hydro project feasibility analysisShow the two hydro project options being evaluated Review the grant and funding status for the project Review the initial cost estimates for the Barrier Falls and Pipeline Options Review the initial economic valuation of these two hydro project options Agree on the preferred hydro option to develop Discuss the next steps and agree on the proposed path forward Meeting Objectives
Confidential Page 2 October 2015 The following frame/objectives and value measures are proposed to guide this work. (I) 1. Appropriate Focus & Frame are we trying to achieve by decision on What is the right Angoon hydro project to pursue?Focus is on developing a hydro that will provide lower cost and renewable power to Angoon. We see no options to sell power outside of Angoon for the next 20 years (when a regional intertie might be built) AEA also made it very clear they would not continue grant funding for the larger 6.3MW project focused primarily on sales to Greens Greek Mine We therefore focused on a project that is sized to meet local demand and support some level of local demand growth -- ~500-700kW total demand Current average demand is under 250kW, and peak demand is about 350kW Important to consider the ability of project options to be expanded at a future date at reasonable cost OPTIONS CONSIDERED 2. 0.6MW on Notch Creek 3. 0.6MW at Barrier Falls (from Harza & AP&T Option 3 4. 0.6MW Upper Thayer Creek w/ Pipeline (from AEA)1. 6.3MW on Upper Thayer Creek X AEA terminated grant funding for large project XYear-round water/power not availableEvaluated in this analysisEvaluated in this analysis
Confidential Page 3 October 2015 The following frame/objectives and value measures are proposed to guide this work. (II) 2. Key Value Measures Price of power to residents of AngoonPrice to residential and commercial customers net of state subsidies and is based on avoided fuel costs (since IPEC distribution cost will not be affected) Return on Investment ROI on investment over time in the project Availability of additional lower cost energy to promote local growth
Confidential Page 4 October 2015 The electricity from a hydro project offsets only the fuel and generator O&M portion roughly about $0.26-0.29/kWh. We believe IPEC just received regulatory permission to raise its base retail rates in Angoon to $0.78/kWh. But, the fuel cost portion appears to be about 10% less than the $0.28/kWh cost in 2013 due to lower diesel prices. Delivered diesel costs have declined about 10% since 2013. Therefore, the current avoidable fuel cost is about $0.25/kWh, and variable O&M might increase this to about $0.26/kWh. This sets a cost ceiling for the levelized cost of energy for the project. IPEC Distribution ChargeAvoided Fuel Cost Avoided O&M Cost Avoidable Cost $0.68/MWh
Confidential Page 5 October 2015 The team that tackled the feasibility analysis was a selected set of hydro developers, engineers, and hydro and dam constructors, guided by Kootznoowoo. Kootznoowoo Project Team Sharon Love and Harold Frank ORENCO Hydropower (Mark Matousek, Jim Holeman) Project manager, turbine selection, project optimization, and permitting supportEvergreen Energy (Steve Anderson) Transmission design and cost assessment (looking at submarine cable vs. overland line options) AP&T/ASI Constructors (Larry Coupe/Del Shannon, Rich King) Civil engineering and cost assessment for marine landing, roads, dam and powerhouse The work built on the portions of the prior work by AP&T and its subcontractors that was relevant to the current smaller hydro project options. Shipley Group Fish/environmental assessment and hydrology studyGeoEngineersGeotechnical assessmentLiDAR and surface survey work
Confidential Page 6 October 2015 There are several key findings that have shaped the development and evaluation of the project options. Much of the project cost is to develop the access and infrastructure needed to reach the project sites (i,.e, marine facilities, roads and transmission lines) It is assumed that the project will primarily be funded by grant and related funding Estimated Project Development Cost (from today): ~$1.24MM (for project selection, design, engineering and permitting) 1. AP&T spent ~$1.7MM of the $2.3MM AEA/DOE Development Grant 2. ~$400k unauthorized cost overruns 3. Looking for ~$400-500k in additional grant funding to complete development (e.g., from $7MM AEA construction grant, or separate grant, or New Market Tax Credit) Project Construction Cost will be primarily grant funded 1. AEA has provided a $7MM construction grant 2. Believe that we can net $3.4MM from the IRS New Market Tax Credit (designed for infrastructure development in low-income communities) 3. RUS (USDA) debt financing ($2.5MM assumed) at about 3% interest rate
Confidential Page 7 October 2015 There are two Thayer Creek hydro project options that were evaluated and compared. (I) Barrier Falls Option Pipeline Option Capacity ~600-700kW ~600-700kW (or up to 2MW) Location Dam and Powerhouse at Thayer of barrier falls, and Dam a mile Dam Access Likely by marine facility at 3 Crosses, with 2.5 mile access road Likely by marine facility at 3 Crosses, with 3.25 mile access road Pipeline (Dam to PH) Elect. Transmission mile submarine cable line and 6.5 mile submarine cable The infrastructure developed for the Barrier Falls Option would enable later development of the Pipeline Option at much lower cost.
Confidential Page 8 October 2015 There are two Thayer Creek hydro project options that were evaluated and compared. (II) Option 2a: Alt. road to Angoon Option 2: Dam Option 2: Powerhouse Option 1: Dam & penstock Option 1: Powerhouse Option 2: Pipeline & road Option 1: Road to marine facility Option 2: Road to Marine facility
Confidential Page 9 October 2015 There are two Thayer Creek hydro project options that were evaluated and compared. (III)
Confidential Page 10 October 2015 Both options have wetlands that need to be traversed. Most can likely be avoided in Option 1, but some remediation might be required. Road rerouted to avoid wetlands
CFS
Confidential Page 12 October 2015 Our initial cost estimates indicate a $14.8MM cost for the Barrier Falls Location Option and $17.1MM for the Pipeline Location Option. Description Cost Est. Barrier Falls Option Cost Est. Pipeline Option Kootznoowoo Admin. & Mgt. $150,000 $150,000 Permitting $150,000 $150,000 Design/Engineering $840,000 $840,000 Power Purchase Agreement, Financing, Etc. $100,000 $100,000 SUBTOTAL ENG. & DEVELOPMENT $1,240,000 $1,240,000 Bonds/Insurance $250,000 $250,000 MOBILIZATION $800,000 $800,000 Mancamp (25 person x 7 months) $1,181,250 $1,181,250 General Conditions $1,050,000 $1,050,000 Construction Quality Control/Assurance $325,000 $325,000 Marine Access Facilities $700,000 $700,000 Sediment & Erosion Control $25,000 $25,000 CLEARING & GRUBBING $120,000 $155,000 Access Road (Approximately 2.5 miles)$330,000 $430,000 Site Improvements $200,000 $200,000 Stream Diversion/Control of Water$400,000 $400,000 DAM$1,037,500 $1,571,250 POWERHOUSE (15' x 25' x 20')$544,167 $544,167 Penstock$150,000 $800,000 Turbine/Generator/SwGr/Controls$405,000 $780,000 Valve $100,000 $100,000 T/G/V Installation $200,000 $200,000 Transformer etc. @ powerhouse $217,500 $235,500 Transmission Lines on Land $207,480 $595,455 Underwater Cable $2,209,000 $2,209,000 Utility Interconnection $561,420 $561,420 SUBTOTAL CONSTRUCTION COSTS $11,671,650 $13,658,875 Project Contingency $777,125.00 $897,750.00 Corporate Overhead $466,275.00 $538,650.00 Construction Fee $621,700.00 $718,200.00 SUBTOTAL CONTINGENCY, OVERHEAD & FEE $1,865,100 $2,154,600 TOTAL BUDGET PRICING $14,776,750 $17,053,475
Confidential Page 13 October 2015 There are several areas where there appear to be opportunities to reduce this cost estimate, including: Man camp: Sourcing construction labor from Angoon, or providing housing nearby will reduce the $1.18MM cost as a pro rata share of the 25 person crew provided locally Possible savings about $500k if 8-12 staff are Angoon residents Also keeps wages retained locally, but will require daily boat transport Submarine cable: Coordinating the cable installation with another cable project in SE Alaska will reduce the mobilization, delivery and demobilization cost Possible savings estimated to be about $0.54MM. OTHERS __________________________________________________? But at this early stage of the design, there may be additional costs that are not yet included. The project will also need local support for future road and powerhouse operations and maintenance (O&M).
Confidential Page 14 October 2015 At $2.2MM, a 6.5 mile submarine cable appears to the cheapest option for the 12.5kV transmission line to Angoon. Barrier Falls Option Pipeline Option Transformer & Switchgear 750 KVA Rating $218,000 750 KVA Rating $236,000 Powerline, Power Plant to Shore 1400 feet underground $208,000 5400 feet overhead pole line $596,000 Powerline, Submersible Cable to Angoon6.5 miles +/- $2,209,000 cost Could be ~$540,000 less if scheduled with another submersible cable installation6.5 miles +/- $2,209,000 cost Could be ~$540,000 less if scheduled with another submersible cable installationPowerline,Utility Interconnection at Angoon Powerline to Substation Safety & Protection Equip. $561,000 Dependent on Utility requirements Powerline to Substation Safety & Protection Equip. $561,000 Dependent on Utility requirements Total Estimated Cost: $2,488,000-$2,988,000 $3,100,000-$3,600,000
Confidential Page 15 October 2015 The team recommends the development of the Barrier Falls Option because it is expected to have both lower cost and lower risk. Barrier Falls Option Pipeline Option Approx. Cost $14.8MM $17.1MM AdvantagesLess costly access to dam and powerhousePower output is well matched to current demand plus moderate growth Higher head allows higher output (>2MW)Disadvantages Steady power output limited to about 600-700kW (but Pipeline Option could be developed later as local demand grows) Access road avoiding wetlands seems likely Somewhat larger dam Additional ~mile of access road, and transmission line Penstock is ~3 Powerhouse and a portion of access road, penstock and transmission line located in large slide area Access road traverses wetlands, but partial reroute may be possible rock (to avoid drilling or pumping water uphill)
Confidential Page 16 October 2015 The mock-up of the dam and powerhouse illustrate the design of the Barrier Falls option.
Confidential Page 17 October 2015 Given current grant funding, project viability (based on targeting a levelized cost of energy under ~$0.25/kWh) requires that project development and construction cost must be brought under ~$12MM at current demand levels.* Current AverageDemand * Based on the AEA $7MM grant, $4MM in RUS debt, and $1MM in equity. Since the project cost appears to be above this $12MM target, we will need to find additional grant financing for the project.
Confidential Page 19 October 2015 The other grant and debt funding sources that we exploring include:Grant Source Grant AEA May be possible to obtain separate AEA grant for transmission line and/or road development USDA High Energy Cost Grant: Provides up to $0.5MM/yr during construction for projects that reduce energy costs in very high energy cost regions USDA Rural Energy for America Program Grants: Provides up to $0.5MM for renewable energy development in rural communities USDA/RUS Debt Provides low-cost debt (~3.3%/year) for energy development in rural communities
Confidential Page 20 October 2015 If the project costs $15MM, adding the ~$3.4MM New Market Tax Credit to the existing $9.2MM grant, the levelized cost of energy would be below $0.20/kWh, at current demand levels, and below $0.13/kWh if average demand in Angoon grew to 0.3MW. Current Average Demand Current Average Demand
Confidential Page 21 October 2015 The key drivers of the levelized cost of energy are the project cost and the level of grant funding. Levelized Cost 1st Year ($/kWh) 0.000.100.200.300.400.500.60Base Value Base Value = 0.23 Project Cost ($000) 8,000 20,000 12,000 Grant Funding ($000) 10,000 0 7,000 Equity Cost5.00% 10.00% 6.50%Average Load Initial (MW) 0.225 0.175 0.200 Loan Term 50 20 30Plant O&M ($000) 10 75 25Interest Rate3.00% 6.00% 3.20%Construction Time 1 3 2 Insurance ($000) 5 25 10SG&A ($000) 5 25 10
Confidential Page 22 October 2015 Assuming a annual growth rate in demand of 8% year, by the fifth year, average load is 300kWh and levelized costs drop to $0.17/kWh. Levelized Cost 5th Year ($/kWh) 0.050.100.150.200.250.300.350.40Base Value Base Value = 0.17Project Cost ($000) 8,000 20,000 12,000 Grant Funding ($000) 10,000 0 7,000Average Load Final (MW)0.400 0.200 0.300 Equity Cost 5.00% 10.00% 6.50%Loan Term 50 20 30Plant O&M ($000) 10 75 25Interest Rate3.00% 6.00% 3.20%Construction Time 1 3 2 Insurance ($000) 5 25 10SG&A ($000) 5 25 10
Confidential Page 23 October 2015 Step 1: Project Framing and Approach (Complete) Step 2: Updated Conceptual Design and Feasibility Study (Complete) Step 3a: Initial PPA Discussions with IPEC Step 3b: Preliminary Design and Project Permitting ~3-9 months Step 4: Detailed Design and Engineering (65%) ~9 months Step 5: Final Design (100%) and Construction 12-24 months Next Steps and Schedule
Confidential Page 24 October 2015 The $1.3MM development cost is based on the following tasks and proposed budget. This meeting nearly completes Phase 1. Task # Reimbursable Task Kootznoowoo/ORENCO Proposal Task 1 Administration and management $150,000 Task 2 Review and revise alternative selection (COMPLETE) $0 Phase I Technical Feasibility Study 105,990 Task 3 Interconnection evaluation - cost and feasibility of transmission options $23,990 Task 3a Project concept evaluation - investigation of the constructability and costs for each concept design $45,000 Task 7a Wetland Delineation - mapping of wetlands in project area for update of USFS EIS and USACE $15,000 Task 4 Capacity, energy, and life cycle cost / benefit analysis for each concept design $22,000 DECIDE ON PREFERRED PROJECT DESIGN Phase II Preliminary Design and Permitting 252,000 Task 7 Permits and environmental plans 69,000Task 8 USFS supplemental EIS 81,000 Task 9 Topographic mapping (COMPLETE) 0Task 10 Surveying (PHASE 1COMPLETE) 52,000Task 11 Geotechnical investigations (PHASE 1 COMPETE) 50,000Task 12 Fish studies of bypassed reach (COMPLETE) 0 Task 13 Stream gaging (COMPLETE) 0 Phase III 65% Design 735,000 Task 14 Contract 1 design (marine facilities, camp and staging areas, access roads) 81,000 Task 15 Contract 2 design (generating equipment) 49,000 Task 16 65% design (diversion structure, penstock, powerhouse, access, and transmission) 487,000 Task 17 Contract 4 design (transmission line) 118,000 Phase IV PSA and Business Plan update 77,000 Task 5 Updated MOU with utility, interconnection and O&M agreement 34,000 Task 6 Power sales agreement 21,000 Task 18 Update of cost estimates, business and financial plan, and feasibility 22,000 TotalTotal$1,319,990 We are here
Confidential Page 25 October 2015 The permit process will likely take until summer of 2016 to complete since preliminary project engineering is needed as input.
Confidential Page 26 October 2015 The regulatory permitting process should be relatively straight-forward, but will entail agency outreach and community input. Regulatory Agencies USFS: The USFS is the lead agency and the proposed project will require a change analysis from the larger project approved in the USFS Record of Decision but this should be relatively east since almost all impacts have been reduced from the proposed plan ADFG: Expressed few concerns except in maintaining water quality and flow in the anadromous reach of Thayer Creek below the Barrier falls ACE: Will need to sign off that the project has minimal wetlands impacts and approve the marine facility and submarine cable ADNR: Will need to provide a tidelands lease for the marine facility and the submarine cable in the tidelands Community Issues Minimize impacts of submarine cable on halibut fishingSourcing of labor for construction and operationsOther: ______________________________________
Confidential Page 27 October 2015 APPENDIX
Confidential Page 28 October 2015 ADD OUR NEW ESTIMATE Barrier Falls Dam Option: Large differences in cost estimates for similar project designs illustrate the need for better information. Note that indirect costs including contingency, licensing/permitting, design engineering and construction management are not included and typically increase the project cost by 35-45%.The Harza project is 400kW, while the AP&T project is 1.2MW.
Confidential Page 29 October 2015 The three US and Canadian turbine/generator/controls bids we have received vary from $375k to $1.6MM for 640-787kW units. The low is bid from a US company developing new technology low-head turbines. Vendor Contact Turbine Runner Size Head (ft) Max Flow (cfs) Effic at Max Flow Flow at Max Effic Max T Effic kW Gen Output Gen V Gen Speed Price $/kW NORCAN 1 Rod Foster, Oprns Mgr 613-883-3503 Double Discharge Francis 800mm 45 240 85.9% 190 91.1% 787 866 kVa 480 400 $ 1,662,927 $ 2,113 NORCAN 2 Double Res Saxo Kaplan 980mm 45 183 93.50% 154 93.80% 653 718 kVa 480 514 $ 1,386,382 $ 2,123 CHC 1 Nicole Beaudette, Gen Mgr, (613) 256-1983 Single Reg Axial Flow 900mm 187 5.3 90% 643 620 kW 720 $ 815,000 $ 1,267 Tyler Vandervelde CHC 2 Single Reg Axial Flow 1000mm 184 5.2 91.5 642 620 kW 600 $ 920,000 $ 1,433 NatelEric Thompson, VP BD, SLX10045673$ 375,000 $ 557
Confidential Page 30 October 2015 The two years of flow data we have was from 2003 HDR study, and indicated sufficient water flow on all days during 1999-2001. 0200400600800100012001400Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov DecCFS Average Monthly Discharge at Thayer Creek 199920002001Average
Confidential Page 31 October 2015 The $1.3MM development cost is based on the following tasks and proposed budget. This meeting completes the new Phase 1. Task # Reimbursable Task Orig Total Budget Prior Approved Total Expenditures2Kootznoowoo/ORENCO Proposal Task 1 Administration and management $319,712 $221,780 $150,000 Task 2 Review and revise alternative selection (COMPLETE) $47,369 $77,591 $0 Phase I Technical Feasibility Study 49,702 10,518 105,990 Task 3 Interconnection evaluation - cost and feasibility of transmission options $23,990 $0 $23,990 Task 3a Project concept evaluation - investigation of the constructability and costs for each concept design $0 $0 $45,000 Task 7a Wetland Delineation - mapping of wetlands in project area for update of USFS EIS and USACE $0 $0 $15,000 Task 4 Capacity, energy, and life cycle cost / benefit analysis for each concept design $25,712 $10,518 $22,000 DECIDE ON PREFERRED PROJECT DESIGN Phase II Preliminary Design and Permitting 1,171,437 1,212,341 252,000 Task 7 Permits and environmental plans 84,141 $4,937 69,000 Task 8 USFS supplemental EIS 81,592 $3,930 81,000 Task 9 Topographic mapping (COMPLETE) 61,554 $65,703 0 Task 10 Surveying (PHASE 1COMPLETE) 166,559 $21,587 52,000 Task 11 Geotechnical investigations (PHASE 1 COMPETE) 579,311 $725,027 50,000 Task 12 Fish studies of bypassed reach (COMPLETE) 114,221 $238,450 0 Task 13 Stream gaging (COMPLETE) 84,059 $152,708 0 Phase III 65% Design 560,300 207,485 735,000 Task 14 Contract 1 design (marine facilities, camp and staging areas, access roads) 155,720 $77,301 81,000 Task 15 Contract 2 design (generating equipment) 69,357 $0 49,000 Task 16 65% design (diversion structure, penstock, powerhouse, access, and transmission) 217,470 $130,184 487,000 Task 17 Contract 4 design (transmission line) 117,753 $0 118,000 Phase IV PPA and Business Plan update 137,191 20,387 77,000 Task 5 Updated MOU with utility, interconnection and O&M agreement 46,462 $0 34,000 Task 6 Power sales agreement 68,567 $20,387 21,000 Task 18 Update of cost estimates, business and financial plan, and feasibility 22,162 $0 22,000 Total Total $2,285,711 $1,750,103 $1,319,990 We are here
Confidential Page 32 October 2015 Glossary of Acronyms1. Cfs: cubic feet /second (water flow rate) 2. kW: kilowatt (measurement of power) 3. kWh: kilowatt hour (measurement of energy usage) 4. MW: megawatt (measurement of power = 1000kW) 5. MWh: megawatt hour (measurement of energy usage = 1000kWh) 6. KVA: kilovolt ampere (current rating of a transmission line) 7. O&M: Operations and maintenance 8. PPA: Power purchase agreement 9. MOU: Memorandum of understanding 10. EIS: Environmental impact statement 11. SEIS: Supplemental environmental impact statement 12. ROD: Record of Decision 13. ACE: US Army Corps of Engineers 14. ADFG: Alaska Dept. of Fish & Game 15. ADNR: Alaska Dept. of Natural Resoruces 16. AEA: Alaska Energy Authority17. DOE: US Dept. of Energy18. USFS: US Forest Service