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HomeMy WebLinkAboutIndependent Engineer's Evaluation Final Report, Hydropower Feasbility Development for the Community of Elfin Cove, Alaska 2012 Independent Engineer’s Evaluation Final Report Hydropower Feasibility Development for the Community of Elfin Cove, Alaska Report prepared by Offices Nationwide www.meadhunt.com October 2012 Table of Contents Page Executive Summary ...................................................................................................................................... 1 1. Introduction and Background ........................................................................................................... 3 2. Scope and Approach ........................................................................................................................ 3 3. Technical Review Discussion .......................................................................................................... 4 4. Power Demand ................................................................................................................................ 6 5. Socioeconomic Trends and Future Transmission Planning ............................................................ 7 6. Conclusions ...................................................................................................................................... 8 7. References ....................................................................................................................................... 9 Tables ables Table 1. Energy Generation Demand and Fuel Usage Patterns 2004-2010 ............................................... 6 1 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx Executive Summary The Community of Elfin Cove, Alaska (Elfin Cove) is an isolated, unincorporated community located on the northern shore of Chichagoff Island that is accessible only by seaplane or watercraft and relies exclusively on diesel-based electric generation. Distant from access to any regional electric grid, Elfin Cove hopes to pursue development of new dedicated hydropower generation resources to serve the community as a means to reduce the high cost of energy. This potential new energy resource is intended to encourage new population growth and potentially attract new industry and commerce to the community. Affordable energy production is an ongoing challenge, particularly for residents largely reliant on seasonal industries. Those same characteristics apply to many Alaska communities. In recent years , Elfin Cove has experienced declining population and energy consumption trends as documented by historic data. The relatively high cost of energy could well be a contributing factor to these declines. It is beyond the scope of this review to predict future outcomes and the various factors which could encourage new business activity and residential growth for Elfin Cove, but it can be said that where energy costs are conducive to a robust economy and business activity, a more vibrant and healthy community is likely to result. Project alternatives identified by Polarconsult Alaska, Inc. (Polarconsult) in reconnaissance and feasibility study efforts completed in 2010 and 2011 defined a range of alternative project configurations and sizes that match up well with projected population and energy demand characteristics for this community. Project alternatives identified capture a range of alternative project sizes that match up well with projected population and energy demand characteristics for this community. Given the potential capital investment needed to support such a venture t he Alaska Energy Authority (AEA), the funding entity that likely would be looked to for financial support, requested that Elfin Cove retain an independent hydropower consultant to review the previous studies and provide an objective second opinion of project feasibility. Mead & Hunt, Inc. (Mead & Hunt) was engaged to conduct this review soon thereafter. We emphasize that this report results from a limited “desktop” review and it was not possible to visit any of the potential project sites or to conduct extensive review of facility layouts, project costs and other details. Geotechnical, permitting and environmental considerations have not been considered in the course of this review except on a high level, cursory basis and may have significant effect in assessing ultimate project feasibility. We also note that the location of any of the proposed projects within the Tongass National Forest and the associated roadless rule restrictions presents challenges to energy project development of any kind. We consider the hydropower development interests of Elfin Cove worthy of further consideration by the AEA, but perhaps not at the scale put forth as the recommended alternative in previous studies. Development of the largest of the proposed project alternatives examined by Polarconsult, identified as Executive Summary 2 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx Option 2C, does not appear to be justified and supported by the information considered in the course of this review In summary, the residents of Elfin Cove would undoubtedly benefit from lower cost energy derive d from a renewable hydropower resource. The cost of constructing an appropriately sized hydropower generation facility near Elfin Cove appears to closely match the value of energy produced by such a facility over a reasonable time frame. We encourage consideration of smaller sized facility options for potential funding by the AEA. 3 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx 1. Introduction and Background Southeast Alaska faces a number of challenges related to its unique landscape and the region’s demands for energy. Among those are the multitude of federal and state oversight and regulatory entities each charged to preserve and protect Alaska’s resources. The high cost and geographically-constrained availability of fossil fuel dominates the lives of permanent residents and business operations as well as the economic vitality of entire communities. This has led many remote communities such as Elfin Cove to evaluate renewable energy resources (hydro, geothermal, wind, etc.) as a more cost -effective means of providing community energy. Elfin Cove engaged Polarconsult in 2009 to undertake reconnaissance and feasibility studies and the evaluation of potential hydro projects in close proximity to the community. Polarconsult was tasked with identifying the most promising stream sources and topography conducive to hydropower generation and conducting project feasibility studies as the basis for evaluating the identified projects and determining what form of hydropower development might best serve Elfin Cove. Those efforts resulted in the identification of a number of potential hydro generation projects thought to be technically and economically viable. The AEA provided the funding for these early studies and subsequently requested that Elfin Cove retain an independent hydropower consultant to review the previous studies and provide an objective second opinion of project feasibility. Mead & Hunt was selected to perform this peer review. This peer review is intended first to offer comment on the adequacy of the prior feasibility studies and to provide an opinion on whether the results and conclusions of the given reports are reasona bly supported and documented in the previous studies. Additionally, a limited review of projected socioeconomic conditions, projected energy demand and future transmission planning was desired. This opinion is therefore offered to Elfin Cove with the hope of meeting those expectations and to satisfy the AEA’s request for a second opinion on project feasibility. 2. Scope and Approach Mead & Hunt’s defined work scope included the following aspects:  Perform a limited technical review of the preferred project in terms of layout and configuration. This will include appropriateness of suggested diversion points, penstock alignments, powerhouse locations and suggested routing of project flows.  Review and provide an opinion on the proposed energy projections from the preferred project, with a check on the appropriateness of turbine/generator sizing and estimated power production based on the observed flows and proposed generating heads.  Provide an opinion on the validity of the economic analysis assumptions, including project population and energy demand and incorporate specific emphasis as outlined in the Southeast IRP. This will include specific discussions with members of Elfin Cove regarding the appropriateness of the general information and conclusions from the IRP. 4 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx Our involvement was envisioned at the outset to be a “desk study” level review based on the documentation provided without the benefit of conducting site visits or a more thorough examination. As such, we relied upon the accuracy of completeness of the documentation provided to us and have made no attempts to field verify or confirm information on which our conclusions are based. As this review progressed, it was evident that emphasis on the evaluation of the proposed hydro project options weighed against historic power demand was the central issue for this review so our attention was focused on this key point. 3. Technical Review Discussion As indicated, Elfin Cove previously engaged Polarconsult to undertake a two stage program of reconnaissance and feasibility studies to evaluate potential hydro projects in close proximity to the community with the intent of identifying the most promising stream sources, natural features and topography conducive to hydropower generation. Potential small hydro projects identified in the course of these project siting and evaluation activities included the following:  A run-of-river project on Crooked Creek  Several different configurations of run-of and storage options associated with Crooked Creek and Jim’s Lake  A run-of-river project on Roy’s Creek  A combination of run-of-river projects on Roy’s, Joe’s and Ernie’s Creeks. Potential project options were first identified by Polarconsult from USGS mapping which is commonly done. Site reconnaissance visits were then conducted to confirm that that the subject sites were potentially viable and that project features could reasonably be sited and constructed. From that starting basis, project layouts were prepared and rough sizing of project features corresponding to estimates of flow and elevation drop (head in hydro terms) was performed. Energy production and cost estimates were then produced to serve as the basis for comparison of project alternati ves. We consider the approach taken by Polarconsult to identify project sites and alternatives to be reasonable and adequate as far as satisfying the original study objective. The primary goal in any hydropower project siting exercise is to define an economic project layout that best utilizes the natural topography and landform features and the water resource in manner that will maximize the energy generation potential for the given site. Polarconsult appears to have done a credible job of this as best we can determine. Each of the studies completed and presented in report form by Poloarconsult appear to be comprehensive and well done. Without going into specific detail about each project alternative identified and its associated evaluation, we believe Polarconsult identified a wide range of project options that each have merits and could conceivably be constructed to Elfin Cove’s benefit. The methodology and 5 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx approach taken by Polarconsult are consistent with typical practice for these types of studies, and we believe the work performed is credible and well documented. Engineering layouts, preliminary features siting and estimated construction costs for the various projects appear to be reasonable and at the very least offer a relative basis for comparison of alternatives. Lacking other data or information, improved geology definition, or mapping for the project vicinities we are hesitant to suggest project layout or feature siting changes as possible enhancements for the given project alternatives. The project features identified uniformly appear to have been positioned in locations that make sense from a hydropower development perspective. Similarly, without the benefit of extended hydrologic records and daily flow data, it is difficult for us to question the assumed hydrology and resulting energy production estimates for each given project alternative. We can offer one general concern pertaining to the stability of slopes in proximity to identified features as there is evidence of mass wasting and debris flows that give us pause. Additional site reconnaissance, geotechnical investigation and more refined engineering would be necessary to properly address this concern. Regarding the cost estimates prepared for the project options identified by Polarconsult, the logistical and weather implications of constructing infrastructure projects in Alaska are always challenging and have a large impact on facility construction costs. In this instance we could point to several elements of construction for which the estimates appear to be low while at the same time pointing to elements that may be estimated high. Across the board, we consider the costs estimates to be representative of other comparable work in Alaska. Geotechnical conditions can also have dramatic effect on hydropower project costs yet in this case, would not appear to be a dominant factor given that the penstock and transmission features are expected to be placed at grade or at the least with minimal cu t and cover. If for any reason these features have to be placed underground, construction costs can be expected to increase significantly given the difficulty of getting suitable excavation equipment to the site(s) and shallow bedrock presence. The outcome of the reconnaissance study indicated that the most promising and potentially viable project , identified as Option 2C, involved a combination of run-of-river generation and limited storage sited on the Crooked Creek/Jim’s Lake vicinity. This option was then further expanded and reviewed for various options using these two water sources independently and then again with a combination of the two sources configured in such a manner as to provide both run-of-river generation and storage. This project consisted of a 5 cubic feet per second (cfs) diversion from the Crooked Creek drainage that in turn would be diverted to a small 35 kilowatt (kW) powerhouse situated immediately upslope of Jim’s Lake, which would discharge directly to the lake itself. Conceptually, Jim’s Lake would then be utilized as the forebay for extended power generation by drawing water from the lake to match peak energy demands from Elfin Cove. It was envisioned that the lake will fluctuate between its normal natural discharge level to a pool level approximately 8 feet below the natural pool surface as described in the feasibility report. No augmentation of the lake’s natural storage capacity was proposed. Diverted outflows will drop to a tidewater powerhouse yielding a gross generation head of 305 to 313 feet and a powerhouse sized at roughly 125 kW plant capacity. This layout and scenario is certainly technically feasible although not wholly without engineering and operational challenges. 6 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx Other options considered reflected smaller scale, reduced scope developments with net outputs ranging from 50-210 kW. A limited economic evaluation was performed for each alternative culminating with calculation of project benefit to cost (B/C) ratios for each scheme. These B/C ratios in general ran ged from 0.7 to 1.4 with a trend to a B/C ratio of unity or 1 which is generally considered to be a marginal project from an economic standpoint. We noted several factors in our review of assumptions used as the basis for simplified economic analysis that a major turbine overhaul was anticipated between years 15-25 of operation and that a fuel price of $4.00 per gallon was used. With today's hydro turbine technology we consider it likely that the turbine will not need a major overhaul tha t early in its operational life. The cost of diesel is now in excess of $5.00/gal. and is certainly trending upward. These factors alone suggest that the B/C ratios determined in Polarconsult's review could be negatively skewed and may warrant an update before any hard conclusions are reached about project economics. While considering B/C ratios as the primary means to assess economic feasibility it is difficult to point to any of the identified project alternatives as being an economically strong hydro development opportunity. The preferred option (2C) does result in producing the maximum capacity and annual energy production of given alternatives, but at the same time appears to be less attractive in terms of present value of net savings and B/C ratio. We leave it to others to determine if development of a hydro project having a B/C ratio near one is worthy of investment. 4. Power Demand Elfin Cove experiences a fluctuating population of year round residents, transient fisherman, boat travelers and sightseeing and recreation visitors. Energy demand varies greatly by season coinciding with the better weather and fishing conditions occurring in summer months. Monthly peak dem and and monthly average consumption range over the course of a given year from approximately 120 kW to 240 kW, and 25 kW to 90 kW respectively. Other data of interest provided by the Elfin Cove Utility Commission and Polarconsult reports regarding energy generation demand and fuel usage patterns over the period of 2004 to 2010 are summarized in the following table: Table 1. Energy Generation Demand and Fuel Usage Patterns 2004-2010 Time Frame Elfin Cove Population Average Energy Demand (kW) Average Diesel Fuel Consumption (gal/day) Diesel Consumed (gal/year basis) Oct-April 20-25 30-70 40-80 33,000 May-September Up to 250 100-300 110-150 18,000 These data records also reflect a slightly declining population of year round residents with a corresponding decline in in fuel usage and energy consumption as would be expected. It is evident from this information that the population of Elfin Cove is on a downward trend and in turn the energy demand and consumption for the community is also declining. Average energy usage over the coming 3-5 year horizon appears to be on the order of 30-40 kW on an annual basis with demand peaking at roughly 240 kW at the height of the summer fishing and transient visitor season. Peak power 7 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx demand spikes at approximately 240 kW once each year for a limited duration which suggests that sizing a hydropower facility adequate to cover those extreme occurrences is difficult to justify given the option of back-up diesel generation that exists. Continued escalation of diesel fuel costs now in excess of $5/gal. could alter this impression however. A variety of factors contribute to the declining population of Elfin Cove. Among them undoubtedly is the high cost of fuel and energy on business and industry and basic cost of living. It is difficult to state with any degree of accuracy what impact the cost of energy has had on population, but it is fair to say the high cost of energy has impacted this community in many ways with a declining population among them. Objectively, a hydropower generation resource sized in the range of 125 to 150 kW appears to match up best with the historic and anticipated future energy demand patterns given the declining use and population trends of this community. During periods of excess generation capacity, space or water heating could be done to further reduce diesel use and overall energy costs for residents of the community. 5. Socioeconomic Trends and Future Transmission Planning Alaska faces many choices for investment in energy infrastructure projects and Elfin Cove is among many communities who seek financial support for renewable power based generation projects that will ease or free them from the high costs of diesel generation. The Alaska State Legislature in turn must make difficult decisions regarding the level and form of investment that is made and where those investments are most beneficial and necessary and improve economic conditions for the maximum number of Alaska’s citizens. Related to this, there has been much discussion among Alaska communities and utility industry members about the recently released Southeast Alaska Integrated Resource Plan (SEAIRP). In particular, the results and conclusions of this evaluation pertaining to population, energy demand growth and transmission interconnection in this region have been called into question. A shift toward pellet fuel based power generation which was a strong recommendation from this plan presents its own set of complications and issues for energy consumers to address. Opinions vary widely on these results, but there has been broad support for reexamination of the methods and data on which population and energy growth forecasts were made. Alaska State Senator Bert Stedman and others have offered comment and input to the AEA to the effect that the issued SEAIRP “should be intensely reexamined and redrafted with the aim of pr oducing a workable document that lays out a clear set of options for addressing the short- and long-term energy needs of Southeast Alaska and a plan for developing the region’s new generation projects .” Providing commentary on the SEAIRP and its resulting recommendations and conclusions is again beyond the scope of this review but we do offer support for the notion of taking a more complete and in -depth look at the renewable energy projects that would benefit Southeast Alaska residents to the greatest exte nt. 8 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx Among the other aspects of the SEAIRP that have been disputed are the conclusions reached regarding transmission interties, both regionally within Southeast Alaska and across the border into Canada. At this time, it does not appear that either of these transmission enhancements is likely to move forward in the near term and as such, there is little potential that Elfin Cove would benefit from any such transmission interconnection possibility. 6. Conclusions It is the view of many that hydropower should continue to play a large role in securing a clean, dependable energy future for Alaska’s residents. Locally produced, renewable energy presents the best option for Elfin Cove to reduce their wholesale cost of energy, and in our judgment, hydropower development undoubtedly presents the best opportunity for renewable generation for this community. It is evident that the residents and commercial enterprises of Elfin Cove face hardships, difficult choices and a disconcerting energy future given the relatively high cost of diesel based power generation approaching $0.80/kwh, which is considered high even by Alaska standards. There does not appear to be a substantial socio-economic paradigm shift on the horizon that has the potential to alter or affect this reality aside from hydropower based generation. In consideration of broad economic drivers or other factors which could alter this energy landscape, we could point to significant relaxation of National Forest land use and logging or mining restrictions as having the best potential to encourage population growth and new business opportunities. At this time, this outcome does not have the necessary public or government support to be enacted. A surplus of lower cost energy also has the potential to attract investment by seafood processing operations at Elfin Cove, but the resources and project options identified appear to be smaller than needed for such a commercial enterprise. Of the various alternatives presented by Polarconsult, options matching up better with historic population, energy demand and trend information appear to make the most sense. Providing some allowance for peak demand events and nominal population growth, projects sized at 125-150 kW output capacity appear to be a reasonable compromise of project cost vs. energy demand. A project of this scale would go a long ways toward easing the cost of energy for Elf in Cove residents and visitors provided sufficient State of Alaska grant funding is provided to reduce the cost of capital to a minimum level. Elfin Cove’s existing diesel generation features are relatively new having been commissioned in 2007 and are presumably well maintained to operate at maximum efficiency. Nevertheless, if they have not done so previously, Elfin Cove should continue to operate and maintain these features in a manner to preserve peak operation capability and commit themselves to a program of demand side management and energy efficiency. To the extent desired, investigation of pellet fuel based generation could be considered by Elfin C ove to determine if that has any basis for improving the cost of energy picture for the Community. We do not have sufficient data or information on this option to be able to render an opinion in this regard. 9 \\sea-fp01\ENTP\4153100\120992.01\CORR\Rpts\WPC\Elfin Cove IE Opinion Final Report.docx 7. References Reference information used in the course of completing this review is the following: Crooked Creek and Jim’s Lake Hydroelectric Feasibility Study – Final Report Prepared for the Community of Elfin Cove by Polarconsult Alaska, Inc., June 2011. Elfin Cove Utility Commission Statistics for Fiscal Years 2004-2007. Hydroelectric Reconnaissance Study, Elfin Cove, Alaska – Final Report Prepared for the Community of Elfin Cove by Polarconsult Alaska, Inc., June 2010 . Letter from Alaska State Senator Bert Stedman dated March 26th, 2012 to Jim Strandberg of the Alaska Energy Authority Providing Comments on the Southeast Integrated Resource Plan. PCE Utility Statistics for the Community of Elfin Cove for Fiscal Years 2008-2011.