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Home My WebLink AboutSE Alaska Integrated Resources Plan2012SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN B&V PROJECT NO.172744 -eos iii, PREPARED FOR /=ALASKAqoENERGYAUTHORITY Alaska Energy Authority JULY 2012 BLACK &VEATCH ,Building a world of differences Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Disclaimer In conducting our analysis and in forming the recommendations summarized in this report,Black & Veatch Corporation (Black &Veatch)has made certain assumptions with respect to conditions, events,and circumstances that may occur in the future.In addition,Black &Veatch has relied upon information provided by others.Black &Veatch has assumed that the information,both verbal and written,provided by others is complete and correct;however,Black &Veatch does not guarantee the accuracy of the information,data,or opinions contained herein.The methodologies we utilized in performing the analysis and developing our recommendations follow generally accepted industry practices.While we believe that such assumptions and methodologies,as summarized in this report,are reasonable and appropriate for the purpose for which they are used,depending upon conditions,events,and circumstances that actually occur but are unknown at this time,actual results may materially differ from those projected.Such factors may include,but are not limited to, the ability of the Southeast Alaska electric utilities and the State of Alaska to implement the recommendations and execute the implementation plan contained herein,the regional and national economic climate,and growth in the Southeast region. Readers of this report are advised that any projected or forecasted financial,operating,growth, performance,or strategy merely reflects the reasonable judgment of Black &Veatch at the time of the preparation of such information and is based on a number of factors and circumstances beyond our control.Accordingly,Black &Veatch makes no assurances that the projections or forecasts will be consistent with actual results or performance. Any use of this report,and the information therein,constitutes agreement that:1)Black &Veatch makes no warranty,express or implied,relating to this report,2)the user accepts the sole risk of any such use,and 3)the user waives any claim for damages of any kind against Black &Veatch.The benefit of such releases,waivers,or limitations of liability shall extend to the related companies, and subcontractors of any tier of Black &Veatch and the directors,officers,partners,employees, and agents of all released or indemnified parties. BLACK &VEATCH |Disclaimer i Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Acknowledgements The Black &Veatch project team would like to thank the following individuals for their valuable contributions to this project. Alaska Energy Authority Sara Fisher-Goad,AEA Executive Director Jim Strandberg,Project Manager Doug Ott,Project Manager - Hydroelectric Programs Devany Plentovich,Program Manager - Biomass Program Sean Skaling,Project Manager -Energy Efficiency and Conservation Program Christopher Rutz,Procurement Manager May Clark,Administrative Assistant SE Alaska Utilities (numerous management personnel from the following Southeast Region utilities) Alaska Electric Light and Power Alaska Power and Telephone City of Sitka Electric Gustavus Electric Inside Passage Electric Cooperative Ketchikan Public Utilities Advisory Work Group Members Rick Harris,Sealaska Corporation, Chairman Chris Brewton,City of Sitka Electric Paul Bryant,Metlakatla Power &Light Dave Carlson,Southeast Alaska Power Agency Bill Corbus,Alaska Electric Light and Power Tom Crafford,Alaska Department of Natural Resources Russell Dick,Huna Totem Bob Grimm,Alaska Power and Telephone Company Steve Henson/Clay Hammer, Wrangell Light &Power Henrich Kadake,City of Kake Mike Kline/Tim McConnell,Ketchikan Public Utilities BLACK &VEATCH |Acknowledgements Metlakatla Power &Light Petersburg Municipal Power &Light Wrangell Municipal Light &Power Southeast Alaska Power Agency Yakutat Power Dan Lesh/Angel Drobnica,SEACC Richard Levitt,Gustavus Electric Jeremy Maxand,City &Borough of Wrangell Tim McLeod,Alaska Electric Light and Power Jodi Mitchell,Inside Passage Electric Cooperative Joe Nelson.Petersburg Municipal Power &Light Scott Newlun,Yakutat Power Merrill Sanford,Assembly Member, Juneau Paul Southland,ACE Coalition Barbara Stanley/Larry Dunham, USDA Forest Service Robert Venables,Southeast Conference Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Purpose and Limitations of the IRP PURPOSE AND LIMITATIONS OF THE SOUTHEAST ALASKA IRP e The development of this Southeast Alaska IRP is not the same as the development of a State Energy Plan; nor does it set State policy.Setting energy-related policies is the role of the Governor and State Legislature.With regard to energy policy making,the Southeast Alaska IRP does provide a foundation of information and analysis that can be used by policy makers to develop important policies. However,the existence of the State's Energy Policy and or the potential development of other related policies could directly impact the specific resources chosen for the region's future.As such,the Southeast Alaska IRP will need to be readdressed as future energy-related policies are enacted. e This IRP,consistent with all integrated resource plans,should be viewed as a "directional”plan.In this sense,the Southeast Alaska IRP identifies alternative resource paths that the region can take to meet the future energy needs of the region's citizens and businesses;in other words,it identifies the types of resources that should be developed in the future.These paths are summarized through the Preferred Resource Lists shown in this plan for each of eight subregions in Southeast Alaska.The granularity of the analysis underlying this IRP,and the quality and inclusiveness of available information on potential projects as discussed elsewhere,is not sufficient to identify the optimal combination of specific resources that should be developed. e The capital costs and operating assumptions used in this study for alternative demand-side management/energy efficiency (DSM/EE),generation and transmission resources do not consider the actual owner or developer of these resources.In other words,we assumed the same form of financing for all resource options.Ownership could be in the form of individual utilities,a regional entity,or an independent power producer (IPP).Depending upon specific circumstances,ownership and development by IPPs may be the least-cost alternative. e As with all integrated resource plans,the Southeast Alaska IRP should be periodically updated (e.g.,every three to five years)to identify changes that should be made to the Preferred Resource Lists to reflect changing circumstances (e.g.,resolution of uncertainties),improved cost and performance of emerging technologies (e.g,,tidal),and other developments. BLACK &VEATCH |Purpose and Limitations of the IRP ili Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Acronym List AC ACEEE ACS AEA AEL&P AEO 2010 AHFC AN ANGDA AP&T APC ARRA ASD AVEC AWG BC BESS BPA CAISO CDP Cl CL CNPV CO2 coD COP CORAC CSC CWIP DC DNR DOL&WD Alternating Current American Council for an Energy Efficient Economy American Community Survey Alaska Energy Authority Alaska Electric Light &Power Annual Energy Outlook 2010 Alaska Housing Finance Corporation Audible Noise Alaska Natural Gas Development Authority Alaska Power &Telephone Alaska Pulp Company American Recovery and Reinvestment Act Alaska Ship &Drydock Alaska Village Electric Cooperative,Inc. Advisory Work Group British Columbia Battery Energy Storage System Bonneville Power Administration California Independent System Operator Census-Designated Place Compression Ignition Corona Losses Cumulative Net Present Value Carbon Dioxide Commercial Operation Date Coefficient of Performance Composite Refiner Acquisition Cost of Crude Oil Source Converters Construction-Work-In-Progress Direct Current Department of Natural Resources Department of Labor and Workforce Development BLACK &VEATCH |Acronym List AL-1 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN DOT DOTPF DR DSM/EE EEI EEIRR EIA EIS EMS EPA EPRI EPS FDPPA FEIS FERC FS FSA GE GIS GSHP HDD HDR HERP HEV HS HVAC HVDC IFA IPEC IPP IRP IRR ISER JEDC Department of Transportation Department of Transportation and Public Facilities Demand Response Demand-Side Management/Energy Efficiency Edison Electric Institute Energy Efficiency Interest Rate Reduction Program Energy Information Administration's Environmental Impact Statement Energy Management System Environmental Protection Agency Electric Power Research Institute Electric Power Systems,Inc Four Dam Pool Power Agency Final Environmental Impact Statement Federal Energy Regulatory Commission Forest Service Farm Services Agency General Electric Co. Geographic Information System Ground-Source Heat Pump Heating Degree Day HDR Alaska Inc. Home Energy Rebate Program Hybrid Electric Vehicles High-Speed High Voltage Alternating Current High Voltage Direct Current Inter-Island Ferry Authority Inside Passage Electric Cooperative Independent Power Producer Integrated Resource Plan Internal Rate of Return Institute of Social and Economic Research Juneau Economic Development Council BLACK &VEATCH |Acronym List AL-2 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN KMC-GC KPU kV kw KWETICO LUD M&E MIC mmbf MMBtu MP&L MS MSRP MVA MW N2 NEL NIMBY NPV NRC NREL O&M 03 OATT OEM PCE PCS PHEV PMPL PNW PSA PWM R&R RD Kennecott Mining Company -Greens Creek Mine Ketchikan Public Utilities Kilovolt Kilowatt Kwaan Electric Transmission Intertie Cooperative,Inc. Land Use Designation Measurement and Evaluation Metlakatla Indian Community Million Board Feet Million British Thermal Units Metlakatla Power &Light Medium-Speed Manufacturer's Suggested Retail Price Megawatt-Ampere Megawatt Nitrogen Net Energy for Load Not In My Back Yard Net Present Value Nuclear Regulatory Commission National Renewable Energy Laboratory Operation and Maintenance Ozone Open Access Transmission Tariff Original Equipment Manufacturers Power Cost Equalization Power-Conditioning System Plug-In Hybrid Electric Vehicle Petersburg Municipal Power and Light Pacific Northwest Power Sales Agreement Pulse-Width Modulation Repair and Replacement Rural Development BLACK &VEATCH |Acronym List AL-3 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN REAP REGF RI RICE RIM RIRP rms ROD ROR RPS RurAL CAP SATP SCADA SEAPA STATCOM STI TRC ULC UMTRI USDA USFS VAC VEEP VMT VOC VSC WEC WECC WEST WGA WMLP Renewable Energy Alaska Project Renewable Energy Grant Fund Radio Interference Reciprocating Internal Combustion Engine Ratepayer Impact Measure Railbelt Regional IRP Roof Mean Square Record of Decision Run-of-River Renewables Portfolio Standard Rural Alaska Community Action Program,Inc. Southeast Alaska Transportation Plan Supervisory Control and Data Acquisition Southeast Alaska Power Agency Static Synchronous Compensator Swan-Tyee Intertie Total Resource Cost Upper Lynn Canal Transportation Research Institute At The University of Michigan US Department of Agriculture United States Forest Service Volts Alternating Current Village Energy Efficiency Program Vehicle Miles Traveled Volatile Organic Compound Voltage Source Converters Wave Energy Conversion Western Electricity Coordinating Council Wave Energy /Sequestration Technology Western Governor's Association Wrangell Municipal Light &Power BLACK &VEATCH |Acronym List AL-4 Alaska Energy Authority {|SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table of Contents 1.0 Executive Summary 1-1 1.1 Key Findings 1-4 1.2 Project Overview and Approach 1-8 1.3 Issues Facing the Region 1-10 14 Existing Utility Systems 1-11 1.5 Evaluation of Potential Hydro Projects 1-13 1.6 Evaluation of Potential Transmission Interconnections 1-18 1.7 Summary of DSM/EE Program Screening 1-22 1.8 Space Heating Conversion 1-23 1.9 Regional Expansion Plan Development 1-26 1.10 Implementation Risks and Issues 1-35 1.11 Conclusions 1-37 1.12 Recommendations 1-52 1.13 Near-Term Regional Implementation Action Plan (2012-2014)1-58 1.13.1 Capital Projects -SEAPA Subregion 1-59 1.13.2 Capital Projects -Other Subregions 1-60 1.13.3.Regional Supporting Studies and Other Actions 1-63 LIST OF TABLES Table 1-1 External Drivers and Regional Issues Facing Southeast Alaska 1-10 Table 1-2 Refined Screened Potential Hydro Project List 1-16 Table 1-3 Results of Transmission Interconnection Economic Evaluation 1-20 Table 1-4 Results of Transmission Interconnection Public Benefit Evaluation ....sssssssescsesseees 1-21 Table 1-5 Savings from Pellet Conversion Program -80 Percent (Cumulative Present Worth Costs $000)1-24 Table 1-6 Savings from Pellet Conversion Program -30 Percent (Cumulative Present Worth Costs $'000)1-25 Table 1-7 Resource-Specific Risks and Issues -Summary.1-36 Table 1-8 Results of Integrated Cases -Regional Summary 1-40 Table 1-9 Results of Integrated Cases -Subregional Savings 1-42 Table 1-10 General Strategy for Adding Regional Resources 1-46 Table 1-11 Committed Resources 1-49 Table 1-12 Region-wide Preferred Resource List 1-53 Table 1-13 Near-Term Implementation Action Plan -Capital Projects -SEAPA Subregion 1-59 Table 1-14 Near-Term Implementation Action Plan -Capital Projects -Admiralty Island Subregion 1-60 BLACK &VEATCH |Table of Contents TC-1 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-15 Near-Term Implementation Action Plan -Capital Projects -Baranof Island Subregion 1-60 Table 1-16 Near-Term Implementation Action Plan -Capital Projects -Chichagof Island Subregion 1-61 Table 1-17 Near-Term Implementation Action Plan -Capital Projects -Juneau Area Subregion 1-61 Table 1-18 Near-Term Implementation Action Plan -Capital Projects -Northern Region Subregion 1-62 Table 1-19 Near-Term Implementation Action Plan -Capital Projects Prince of Wales Subregion 1-62 Table 1-20 Near-Term Implementation Action Plan -Capital Projects -Upper Lynn Canal Subregion 1-63 Table 1-21 Near-Term Implementation Action Plan -Regional Supporting Studies and Other Actions 1-63 LIST OF FIGURES Figure 1-1 Elements of Stakeholder Involvement Process 1-9 Figure 1-2 Transmission Systems Considered in the IRP 1-12 Figure 1-3 Hydro Project Evaluation Process 1-14 Figure 1-4 Subregion Summary -SEAPA 1-27 Figure 1-5 Subregion Summary -Admiralty Island 1-28 Figure 1-6 Subregion Summary -Baranof Island 1-29 Figure 1-7 Subregion Summary -Chichagof Island 1-30 Figure 1-8 Subregion Summary -Juneau Area 1-31 Figure 1-9 Subregion Summary -Northern 1-32 Figure 1-10 Subregion Summary -Prince of Wales 1-33 Figure 1-11 Subregion Summary -Upper Lynn Canal 1-34 BLACK &VEATCH |Table of Contents TC-2 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.0 Executive Summary A directive from the Alaska Legislature designated the Alaska Energy Authority (AEA)as the lead agency to develop an Integrated Resource Plan (IRP)for the Southeast region,which includes over 30 communities.AEA retained Black &Veatch to examine the current status of energy resources in the region and explore the options for minimizing future power supply costs and space heating costs,while maintaining or improving current levels of power supply reliability.Black &Veatch was assisted by HDR Alaska,Inc.,,in the evaluation of potential hydro projects. The purpose of this section is to provide a summary of the results of the Southeast Alaska IRP study. In completing this study,Black &Veatch has reviewed and built upon the results of the significant analysis and planning work completed,over the years within the region,of specific generation and transmission initiatives,including the Southeast Intertie Plan that has envisioned tying all of the communities of the region into a single transmission network. Our goal has been to develop a detailed and cohesive plan that will be of use for all people of Southeast Alaska.This plan is the result of our effort.It is a large and complex document,which likely will be used in different ways by different people.There are specific sections,listed below, that develop different aspects of energy planning that are building blocks for the cohesive plan. Volume 1 -Executive Summary Section 1.0 -Executive Summary Volume 2 -Technical Report Section 2.0 -Project Overview and Approach--Provides an overview of Black & Veatch's approach to the completion of this study. Section 3.0 -Situational Assessment--Summarizes the various energy-related drivers and issues facing Southeast Alaska. Section 4.0 -Description of Existing System and Committed Resources-- Provides detailed information on each community,along with information on the region's existing generation and transmission resources,including the Committed Resources identified by the Advisory Work Group. Section 5.0 -Fuel Price Projections--Summarizes the fuel price projections used in this study. Section 6.0 -Economic Parameters--Identifies the economic parameters used in this study. Section 7.0 -Reliability Criteria--Summarizes the reliability criteria used in modeling the Southeast region's electric utility systems. Section 8.0 -Load Forecasts--Summarizes the three alternative load forecasts that were developed for each community. Section 9.0 -Financing Alternatives--Discusses alternative financial structures that could be used to finance future resource additions. Section 10.0 -Potential Hydroelectric Projects--Summarizes Black &Veatch's evaluation of potential hydroelectric projects. Section 11.0 -Other Generating Unit Alternatives--Provides information on other generation technologies considered in the study. BLACK &VEATCH |Executive Summary 1-1 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Section 12.0 -Transmission Interconnection Alternatives--Summarizes Black & Veatch's evaluation of potential transmission interconnections. Section 13.0 -Demand-Side Options--Summarizes Black &Veatch's evaluation of energy efficiency and conservation measures. Section 14.0 -Weatherization--Provides information on the region's existing weatherization programs. Section 15.0 -Space Heating Conversion--Summarizes Black &Veatch's evaluation of alternative space heating technology alternatives. Section 16.0 -Initial Analysis of Issues--Provides a detailed assessment of the energy-related issues facing the region. Section 17.0 -Regional Expansion Plan Development--Provides Black &Veatch's electric and space heating resource recommendations for each of the eight subregions considered. Section 18.0 -Financial Assessment--Provides Black &Veatch's recommendations related to financing the recommended resources. Section 19.0 -Implementation Risks and Issues--Summarizes the different implementation risks and issues for each alternative resource technology. Section 20.0 -Conclusions and Recommendations--Provides Black &Veatch's detailed conclusions and recommendations resulting from this study. Section 21.0 -Near-Term Regional Implementation Action Plan (2012-2014)-- Provides Black &Veatch's recommended near-term implementation plan. Volume 3 -Appendices Appendix A -Fuel Forecasts--Provides detailed information on the fuel price projections. Appendix B -Financial Models--Provides example financial pro formas based upon the financing alternatives discussed in Section 9. Appendix C -Comprehensive Potential Hydro Project List--Provides the detailed list of all potential hydro projects that were identified and considered in this study. Appendix D -Advisory Work Group Resolution--Provides the resolution passed by the Advisory Work Group establishing the list of Committed Resources,which are discussed later in this section. Appendix E -Description of Strategist®--Provides a description of the Strategist® optimal generation expansion model used to evaluate the various alternatives and scenarios. Appendix F -Stakeholder Meetings--Provides a list of the stakeholder meetings held to gain input for the Southeast Alaska IRP. BLACK &VEATCH |Executive Summary 1-2 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN PURPOSE AND LIMITATIONS OF THE SOUTHEAST ALASKA IRP e The development of this Southeast Alaska IRP is not the same as the development of a State Energy Plan; nor does it set State policy.Setting energy-related policies is the role of the Governor and State Legislature.With regard to energy policy making,the Southeast Alaska IRP does provide a foundation of information and analysis that can be used by policy makers to develop important policies. However,the existence of the State's Energy Policy and or the potential development of other related policies could directly impact the specific resources chosen for the region's future.As such,the Southeast Alaska IRP will need to be readdressed as future energy-related policies are enacted. e This IRP,consistent with all integrated resource plans,should be viewed as a "directional”plan.In this sense,the Southeast Alaska IRP identifies alternative resource paths that the region can take to meet the future energy needs of the region's citizens and businesses;in other words,it identifies the types of resources that should be developed in the future.These paths are summarized through the Preferred Resource Lists shown in this plan for each of eight subregions in Southeast Alaska.The granularity of the analysis underlying this IRP,and the quality and inclusiveness of available information on potential projects as discussed elsewhere,is not sufficient to identify the optimal combination of specific resources that should be developed. e The capital costs and operating assumptions used in this study for alternative demand-side management/energy efficiency (DSM/EE)and generation and transmission resources do not consider the actual owner or developer of these resources.In other words,we assumed the same form of financing for all resource options.Ownership could be in the form of individual utilities,a regional entity,or an independent power producer (IPP).Depending upon specific circumstances,ownership and development by IPPs may be the least-cost alternative. e As with all integrated resource plans,the Southeast Alaska IRP should be periodically updated (e.g.,every three to five years)to identify changes that should be made to the Preferred Resource Lists to reflect changing circumstances (e.g.,resolution of uncertainties),improved cost and performance of emerging technologies (e.g.,tidal),and other developments. INTEGRATED RESOURCE PLANS (IRPs)VERSUS ECONOMIC DEVELOPMENT PLANS (EDPs) IRPs by their nature,and consistent with utility industry best practices,should be conservative with regard to the input assumptions used.Without such conservatism,there is a significant possibility that decisions will be made that turn out to be imprudent resulting in stranded assets.Since the costs incurred by utilities are borne by their customers,utilities need to develop plans that will meet expected load growth,while being aware of potential additional load growth that might require them to respond quickly to changed conditions. This is why Black &Veatch included a High Scenario Load Forecast in addition to the Reference Scenario Load Forecast in the Southeast Alaska IRP. EDPs,on the other hand,tend to be more optimistic in that they are often intended to paint a "build it and they will come”picture of what could happen if certain policies are enacted and actions are taken.This is appropriate as it helps regional policy makers to look at the potential beneficial impacts of adopting new policies. This does not mean that IRPs and EDPs are diametrically opposed;rather,they serve complimentary purposes and regional decision makers should consider both when making choices regarding how to meet the region's future energy requirements. BLACK &VEATCH |Executive Summary 1-3 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.1 KEY FINDINGS The key findings from this study include the following: Historical Crossroad -The current situation facing the Southeast region includes a number of issues that place the region at a historical crossroad regarding the mix of generation,demand-side management/energy efficiency (DSM/EE),end-use conversions, transmission,and transportation resources that it will rely on to economically and reliably meet future electric and heating needs. Subregional Differences Require Solutions for Each Subregion -Southeast Alaska has significant hydroelectric power resources,and many parts of the region enjoy the affordable and plentiful electricity from specific hydroelectric power projects that have been developed over the last century.Other subregions do not have this economic benefit and are forced to walk down the path of diesel fuel dependency.This has created a gap or chasm between communities,where stable and "well-to-do”communities exist near struggling communities and a notable absence of private sector economic activity are the norm.Asa result of these subregional differences,Black &Veatch developed Preferred Resource Lists for each subregion as part of this study.These Preferred Resource Lists,which are summarized later is this section and discussed in more detail in Section 17.0,include a portfolio of resources that have been identified according to the specific circumstances faced by each subregion. External Energy Drivers -Diesel fuel has evolved as the heating fuel and non- hydroelectric power generation fuel of choice over the last five decades.It was always perceived as being a stable priced fuel,which was easy to transport and use.The recent unprecedented increase in diesel prices has made the search for alternative fuels for heating,and development of economic renewable energy sources,a key part of energy planning for Southeast Alaska.These considerations are the foundation for this regional IRP. Future Role of SEAPA May Need to Evolve -A joint action agency,Southeast Alaska Power Agency (SEAPA),operates as a generation and transmission entity serving southern Southeast Alaska.SEAPA is not regulated by the Regulatory Commission of Alaska (RCA), but is governed by its Board of Directors which is made up of its member utilities.SEAPA currently provides service to Petersburg,Wrangell,and Ketchikan.As the region moves forward,there may be a need for SEAPA to evolve in terms of the services that it provides, the assets that it operates,and the communities and other entities to which it provides those services. Shortage of Storage Hydroelectric -The Southeast region as a whole is currently short of hydro storage capacity.As a result,potential hydroelectric projects with storage capabilities are more valuable,particularly from a system integration perspective (i.e.,the matching of generation capability with electric demands in connected load centers)than potential run-of-the-river hydro projects. Space Heating Conversions -The "achilles heel”of the current hydro system is the recent trend towards conversion of oil space heating to electric resistance space heating in those communities with access to low-cost hydroelectric.The relationship of the cost of fuel oil to the stable price of hydroelectric-based electricity has created a unique situation where,for hydroelectric rich subregions,it is economically advantageous for people individually to switch from heating with fuel oil to resistance electric heating.While this may seem a reasonable economic action for a resident to take to lower overall utility costs,it is and has BLACK &VEATCH |Executive Summary 1-4 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN been shown to be detrimental at a community-and utility-wide level.There is clear evidence that widespread conversions of energy supply for heating has eaten into reserve hydroelectric power capacity and energy supplies,such that nearly all of the hydro rich subregions need to supplant hydro power production with diesel-fired generation. Fi Lack of Information on Potential Hydro Projects -One significant impediment to the completion of this IRP was the wide variety in the quality and inclusiveness of information available to evaluate specific hydro projects.As a result of this wide variation in data quality across the spectrum of potential hydro projects in the Southeast region,it is impossible at this time to conduct a true "apples-to-apples”comparison of hydro projects. Ina similar manner,it is impossible at this time to complete a definitive comparison of the economics of potential hydro projects to other resources (e.g.,biomass,other renewable technologies,and DSM/EE). Need for Balanced Portfolio of Resources -The uncertainties facing the region and the limitations "There is no 'silver bullet'for on the quality and inclusiveness of information on the Southeast"ee ch,Wesse likepotentialhydroprojectsdrivehometheneedforSilverDUCKSNOt. the region to:1)develop multiple options,2)move Advisory Work Group Member towards a more balanced and diversified portfolio of resources,and 3)maintain flexibility with regard to the selection of resource options over time as the uncertainties above become more resolved.Black &Veatch concludes that a diversified,balanced solution represents the most appropriate way for the region to move forward.In short,Southeast Alaska will not be able to merely build more hydroelectric power and transmission projects to chart its future.It must embrace a coordinated action plan that includes DSM/EE,which are actions consumers and businesses must take,and development of hydro power projects in areas that now suffer extremely high and economically stifling utility rates.The solution set must involve electricity supply,heating energy supply,and considerations of electric vehicles for transportation. Phased Approach to the Future -Black &Veatch believes that it is important for the region to think about the future in two phases with regard to long-term resource decisions: Phase1 -the next 5 years (2012-2016) Phase 2 -beyond the next 5 years (2017 and beyond) In Phase 1,the regional emphasis should be on adding the Committed Resources (which are discussed in Section 1.11 and Section 4.0)and aggressively pursuing the implementation of DSM/EE and biomass space heating conversion programs. In parallel,the region should continue reconnaissance and feasibility studies of all potential hydro projects listed in the Refined Screened Potential Hydro Project List (see Table 10-4 in Section 10.0).These reconnaissance and feasibility studies should be completed consistent with the AEA-directed process and standards. Finally,as part of Phase 1,this IRP should be updated in 2014-2015 to make the longer- term resource selections that would be implemented in Phase 2.By updating the Southeast Alaska IRP in 2014 or 2015,the region will have:1)better project-specific information to make a definitive selection among specific alternative hydro and other renewable projects, and 2)actual experience with the implementation of DSM/EE and biomass conversion programs to better determine the level to which the region,and individual subregions,can rely on these programs over the long term. BLACK &VEATCH |Executive Summary 1-5 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN In Phase 2,the region would develop hydroelectric and other renewable projects,as well as continue to implement DSM/EE and biomass conversion programs as appropriate,based upon the results of the updated Southeast Alaska IRP. Economic Realities of Southeast Intertie Concept -The vision of interconnecting all of the Southeast communities into a backbone transmission system has been discussed by many Southeast Alaskans for several decades.This initiative is in direct response to the reality of Southeast Alaska that hydroelectric resources are beyond the economic reach ofa number of the Southeast communities.While the intent of this initiative has been to provide affordable hydropower-based energy to all communities,Black &Veatch finds that implementation of the backbone is not economic,and other energy solutions are recommended for specific communities.Two selected transmission line projects that have been a part of the initiative (Kake to Petersburg Intertie and the Metlakatla Intertie)are included in the list of Committed Resources.The remainder of the connections will include long submarine cables and very high construction costs that are not justified by the expected power flows.In short,even if the projects are fully funded by the State of Alaska, expected maintenance and operations costs will exceed significantly the benefits of many of the potential regional interconnections.The results of the initial economic evaluation of the transmission interconnections indicates that none of the interconnections evaluated have estimated transmission costs that are lower than the projected diesel generation costs. AK-BC Intertie -One specific resource addition considered in this study was the development of the AK-BC Intertie,which would connect the Southeast region to the BC Hydro transmission network,allowing for the import or export of power to or from British Columbia and the lower 48 states.Black &Veatch conducted a screening analysis for two cases:1)the "export scenario”and 2)the "import scenario,”and concluded that it was nota viable resource under the current conditions. Role of Technology Innovation -Black &Veatch's recommendations offer a multi-faceted energy future,but it is clear that this IRP cannot yield equality in cost of and availability of energy throughout the region.In particular,remote communities are facing a future of continuing higher rates for energy.Expected electrical rates in Kake,Angoon,and Ketchikan will remain distinctly different,and this will likely be one key player in the economic future of the communities.Certainly,Kake and Angoon,and the utilities that serve them,do not have the advantages of utilities,such as Ketchikan Public Utilities,of size and paid for energy infrastructure that is owned by SEAPA that has been significantly subsidized by past Federal and State-funded energy projects.Possible future solutions to this equality issue may reside in focused technology advances in small-scale power supply. Governmental organizations such as the AEA Emerging Energy Technology Fund and the Alaska Center for Energy can play an important role in seeking lower cost energy conversions. BLACK &VEATCH |Executive Summary 1-6 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Aggressive Pursuit of DSM/EE and Biomass Conversion Programs -Based upon the results ofthis study,the region should significantly increase the implementation of DSM/EE programs.However,to achieve these projected savings,the region will need to approach this effort as a top priority and address a number of important delivery issues,including: 1)how best to leverage existing Alaska Housing Finance Corporation (AHFC),AEA,and RurAL CAP programs,2)whether additional DSM/EE programs should be developed ona regional basis and implemented in close coordination with local utilities versus requiring each utility to develop their own DSM/EE-related staff and skills,3)establishing Southeast region-specific costs for higher efficient appliances and equipment,and 4)the financing of the up-front DSM/EE program development costs as well as ongoing incentives to residential and commercial customers to install more efficient appliances and equipment. Also,the region should pursue policies and programs to encourage the conversion of space heating to biomass.One particularly promising resource option to accomplish this goal is the regional adoption of wood pellet technology.Again,to achieve the very significant savings related to space heating conversions to biomass identified in this study,the region will need to be serious in its approach to this potential and address the same type of delivery issues as discussed above for DSM/EE programs. Load Uncertainties due to Economic Development Efforts and Potential Mines - Another risk facing the region is the potential for large load increases resulting from economic development efforts (e.g.,the development of one or more mines,ore or fish processing plants,etc.).Although the High Scenario Load Forecasts,discussed in Section 8.0,were developed to illustrate the potential for significantly higher load growth than shown in the Reference Scenario Load Forecasts (on a regional basis,the High Scenario Load Forecast is about 73 percent higher than the Reference Scenario Load Forecast by the end of the 50 year planning period),they may not adequately capture the impact of a large mine load increase (or any other large,discrete increase)because of the potential size of mine loads and the fact that,if developed,the impact of a new mine would be site-specific. Mine development and other large economic development loads face significant uncertainty and are very difficult to plan for electric generation additions without the risk of having stranded investment.This is especially true in planning for hydro generation which also faces significant uncertainty.Given the uncertainties associated with the development of potential mines,and other large economic development loads,their inclusion as part of the unspecified loads in the High Scenario Load Forecast is a prudent method of addressing them. for Contin Financial Assistan .; nd Pr AEA Decision Framework and T wou like to see the Abd playaPolicy-It will be critical for the State to continue to mucn stronger rote tn leading Me :...way to less reliance on carbon-provide financial assistance to enable the region to based fuels.”lower costs and meet its electric and heating needs . P ::Southeast Alaska Residentgoingforward.To ensure that State monies provide public benefit,the AEA is proposing a decision framework and policy requiring developers of each potential project to develop a standard set of information,at an appropriate level and quality of detail,prior to any decisions being made about which projects should be developed.This decision framework and related information standards,discussed in Section 10.1,are intended to yield a minimum threshold of information,thereby providing the foundation of decisions regarding the next increment of hydro projects.They are also intended to identify any fatal flaws that would prohibit a proposed project from being developed.Black &Veatch believes that this type of BLACK &VEATCH |Executive Summary 1-7 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN decision framework and information standards should be adopted to effectively address the issues associated with the quality and inclusiveness of information available on specific projects,and enable the region to make more fact-based decisions regarding which hydro projects should be developed. Encourage Private Development of Resources - To make private development of projects in the region more feasible,a standard power sales agreement (PSA)should be developed to: 1)facilitate the provision of State financial assistance,and 2)provide independent power "Public-private partnerships are crucial to developing energy infrastructure in Alaska.” Former Mayor,Rural Community producers (IPPs)an equal opportunity to submit qualified proposals to develop specific projects.Additionally,consideration should be given to the development of an open access policy for the region's transmission network,based on the Federal Energy Regulatory Commission (FERC)Open Access Transmission Tariff (OATT),which governs the planning and operation of the transmission grids in the lower 48 states. 1.2 PROJECT OVERVIEW AND APPROACH The IRP study process for the Southeast Alaska region consisted of four key stages:data collection, optimal generation expansion and integrated DSM/EE and transmission expansion planning, consideration of space heating and transportation requirements,and report writing and documentation.Throughout this process,data related to alternative demand-side,supply-side,and transmission resource options were compiled,reviewed,screened,and modeled,where appropriate,using Ventyx's Strategist®optimal generation expansion model.Model inputs and assumptions consider possible sensitivity cases and considerations unique to each community and their serving utilities to derive an expansion plan for the Southeast region. One of the AEA's directives to Black &Veatch was to proactively solicit input from a broad cross- section of the Southeast region's stakeholders.Elements of the stakeholder involvement process are summarized in Figure 1-1. BLACK &VEATCH |Executive Summary Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN :[Technical -: fe Conference Bae Draft Report bdoF eke as AdvisoryWorkingGroupMeetings Figure 1-1 Elements of Stakeholder Involvement Process As part of the stakeholder involvement process,the AEA assembled an Advisory Work Group (AWG),which provided input on a number of project-related issues,including the following: -Project objectives,scope,and approach. -General and project-specific input assumptions. Potential projects to be treated as Committed Resources. he Preliminary results,conclusions,and recommendations. Draft report. In addition to working with the AWG,Black &Veatch took the following actions to increase the level of public input into the process of developing the Southeast Alaska IRP: Participated in two technical conferences.The first technical conference was at the beginning of the project to discuss the objectives,process and schedule to be followed,as well as to receive initial input from regional stakeholder regarding issues that need to be addressed.The second technical conference occurred after the Draft Report was issued at the Southeast Conference Mid-Session Summit. Participated in approximately 50 community meetings that were held during the course of the project (Appendix F includes a list of these community meetings). Participated in eight AWG meetings to which the general public was invited. Conducted other discussions with utilities and community leaders to gather information (e.g.,input data required for the development of the three load forecast scenarios)and to better understand specific issues faced by each utility or community. BLACK &VEATCH |Executive Summary 1-9 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.3.ISSUES FACING THE REGION The Southeast region faces a number of challenging energy-related drivers and issues including those listed in Table 1-1.Each of these drivers and issues is discussed in more detail in Section 3 and Section 16. Table 1-1 "EXTERNAEDRIVERBeaeeaeee e Federal and State energy policy legislation e Fossil fuel prices and availability e Land use regulations REGIONAL JSSUESS External Drivers and Regional Issues Facing Southeast Alaska Uniqueness of Southeast Alaska Subregional Differences ©Cost of electricity o Conversion to electric space heating ©Rapidly declining excess hydroelectricity ©Declining population in communities (e)Declining economies in communities High cost of space heating Difficulty in developing new hydroelectricity and transmission interconnection projects Low levels of weatherization and energy efficiency Availability and cost of capital Risk management issues "After the business is closed for the day,I go upstairs to relax and read by the light of the street lamp.I cannot afford to keep the lights on for pleasure.” Yakutat Business Owner "Because of the high energy costs, we had to lay off our employee. My husband and I have to do all the work ourselves.” Hoonah Restaurant Owner BLACK &VEATCH |Executive Summary "The key energy-related issues and uncertainties in the Southeast are manifold including threats stemming from high energy costs to rural communities,resulting in outmigration of residents.” Commercial Fisherman "We are surrounded by forests, but we can't touch them.” Southeast Business Owner 1-10 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.4 EXISTING UTILITY SYSTEMS Southeast Alaska is characterized by numerous islands,marine passages,mountains,and evergreen forests in a wet,relatively temperate climate.The combination of high precipitation levels and the mountainous terrain provides significant opportunity for hydroelectric generation.The mountainous,island environment,however,has limited the development of roads and other infrastructure systems,including electric transmission lines,generally to relatively confined areas surrounding the region's cities,towns,and villages.Consequently,although significant hydroelectric power is available in some locations,the lack of power transmission facilities prevents its distribution to the region as a whole. The existing transmission system in Southeast Alaska is very limited;however,the electric systems in a few communities are currently interconnected.To date,the Southeast Alaska power system has developed to utilize hydroelectric resources on a subregional or isolated community basis.Within the subregions,some transmission lines are currently planned to be constructed in the near future to further distribute power from relatively small hydroelectric projects.For the purposes of analyzing the transmission system in Southeast Alaska,subregions were identified as shown on Figure 1-2. From a modeling perspective,it was necessary to divide the Southeast region into subregions that are not currently interconnected.This was required to evaluate the economic benefit of specific transmission connections,and is consistent with standard industry practice as it relates to the evaluation of potential transmission interconnections.Completing the modeling in this manner does not mean that the modeling was done on a subregional basis as opposed to a regional basis. Rather,the modeling (using Strategist®)was completed on a regional basis (i.e.,electric costs were minimized on a regional basis)using the subregions to evaluate the cost-effectiveness of building transmission interconnections between the various subregions as part of the regional solution. As part of its deliberations,the Southeast Alaska IRP AWG passed a resolution directing Black & Veatch to consider the following generation and transmission projects as "Committed Resources” for purposes of this study: Blue Lake Expansion Hydro (Sitka)-2015 Gartina Falls Hydro (Hoonah)-2015 Reynolds Creek Hydro (Prince of Wales)-2014 Thayer Creek Hydro (Angoon)-2016 Whitman Lake Hydro (Ketchikan)-2014 Kake -Petersburg Intertie -2015 Ketchikan -Metlakatla Intertie -2013 From an analytical and modeling perspective,the designation of these projects as Committed Resources means that they are treated as existing units. BLACK &VEATCH |Executive Summary 1-11 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Transmission Planning Regions |ote '1Yakutat,lade 1 | A ! -;1 Douglas }{ Chilkat .Haines Auke Bay J Valley ee |i 1 -'7 r'i i 1 i j ] t i t t I i J i --, Juneau Greens Y.!CreekI\eeehichapofIslan[Klukwan [Skagway iF i()lA ek De ea Elfin Cove Hoonah_|'Admiralty |slange - SEAPARegionAngoonanne Pelican a f '"\ ----[Kake fe PetersburgTenakee|\y, . : Wy pi A "{-T.}Springs Prince of Wales RegionBeSIO}:1 YWhalePass Wrangell Coffman Cove i i ! -{ t i I|Klawock -Thorne Bay \1 -| i J l | ! 1 i } |[rot]|- vYY.v[Craig JL rveasuc ||saan |SestFigure 1-2 Transmission Systems Considered in the IRP BLACK &VEATCH |Executive Summary 41-12 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.5 EVALUATION OF POTENTIAL HYDRO PROJECTS The approach used by Black &Veatch to evaluate the potential hydro projects in the region is summarized on Figure 1-3 and described in detail in Section 10.0. The screening process started with the development of a comprehensive list of potential hydro projects in the region.Black &Veatch,and its subcontractor HDR Alaska Inc.(HDR),developed this Comprehensive Potential Hydro Project List,and it contains the projects that Black &Veatch/HDR become aware of from numerous sources.One of the main sources of potential projects was the 1947 Water Powers of Southeast Alaska Report prepared by the Federal Power Commission.This report contained 200 hydro projects some of which have already been constructed.Where more than one source of information was available,data from the additional sources were also included in the screening process.Some data were conflicting,and some became more refined and, potentially,more accurate as projects developed.In all,nearly 300 projects are included in the Comprehensive Potential Hydro Project List. The next step of the process was to conduct a high-level evaluation of the Comprehensive Potential Hydro Project List,which yielded a list of potential projects that could supply future power needs, subregion by subregion.The criteria for screening,listed below,are a practical set of gates that projects must pass through to be considered a potential generation resource.Screening narrows the potential projects to be considered and is structured so all reasonable projects can be considered as generation resources;typically,acceptable projects are currently under development or have had a significant level of development work conducted for them.This list is referred to as the Refined Screened Potential Hydro Project List: Committed Resources -Projects where the decision to develop them has already been made. -Projects which would otherwise be viable resource candidates,but are deemed to have significant environmental and land use issues,are identified and set aside for potential consideration later in the planning. Projects that are being developed to specifically serve loads for potential new mines being developed and,therefore,not generally intended to be interconnected in any meaningful fashion to the utility grid system. Projects which are primarily being developed to export power from Alaska. Projects which may be suitable for development to serve the utility systems of the Southeast Alaska communities. BLACK &VEATCH |Executive Summary 1-13 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN "aeatinaetcarherpo*.aweauViatLDFigure 1-3 Hydro Project Evaluation Process BLACK &VEATCH |Executive Summary Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN The Refined Screened Potential Hydro Project List is shown in the Table 1-2. One significant impediment to the completion of the SEIRP was the wide variety in the quality and inclusiveness of information available to evaluate specific hydro projects,including: Realistic commercial operation dates (CODs). Capital costs. Storage capacity,if any,and monthly energy output. ae Environmental,permitting,and licensing issues. Business structure and agreements,including ownership structure,project development capabilities,and power sale and interconnection agreements. As a result of this wide variation in data quality across the spectrum of potential hydro projects in the Southeast region,it is impossible to conduct a true "apples-to-apples”comparison of projects. To get all projects to a comparable level of data quality requires a significant amount of further study,and this effort is outside of the scope of this study;consequently,it is impossible at this time to make a definitive selection of which hydro projects should be developed within each subregion to meet future electric requirements. As a result,generic hydro projects were developed for use in modeling expansion plans in Strategist®to evaluate:1)the proper sizing and timing of additional hydro projects that could be added to each subregion,and 2)transmission interconnections and other alternative generation and demand-side projects.The generic projects were developed for use in the modeling to avoid having to model with the specific projects identified in Table 10-2 with their attendant issues of the quality and inclusiveness of cost and performance estimates.The generic projects developed for each subregion are shown in Table 10-5.It should be noted that these generic hydro projects are not based on actual projects that are available within each subregion.They represent a more idealistic view of the type of hydro projects that would best match the capacity and storage needs of each subregion. As a final step in the hydro project evaluation,Black &Veatch and HDR assessed the types of project development and operational risks related to each project on the Refined Screened Potential Hydro Project List in Table 1-2.The relative rankings for each risk factor are shown in Table 10-7,located in Section 10.0. BLACK &VEATCH j Executive Summary 1-15 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-2 Refined Screened Potential Hydro Project List SEAPA Anita -Kunk Lake Cascade Creek Connell Lake Lake Shelokum Mahoney Lake Orchard Lake Ruth Lake Scenery Creek Sunrise Lake Thoms Lake Triangle Lake Tyee New Dam Construction Tyee New Third Turbine Virginia Lake Baranoff Island Takatz Lake Chichagof Island Crooked Creek and Jim's Lake Indian River Water Supply Creek Wrangell Petersburg Ketchikan Wrangell Ketchikan Meyers Chuck Petersburg Petersburg Wrangell Wrangell Metlakatla Wrangell Wrangell Wrangell Sitka Elfin Cove Tenakee Springs Hoonah Storage Storage Storage Storage Storage Storage Storage Storage Storage Storage Storage Storage Storage Storage Storage Storage/Run-of-River Run-of-river Run-of-river 27.70 0.16 0.25 0.40 90.54-135.82 146.35-219.53 5.40-10.80 39.00-91.00 34.50-51.76 34.20-79.80 84.54-126.82 128.98-193.48 16.64-24.96 110.11-135.17 12.63-18.95 36.60-85.4 13.20-30.80 103.21-154.81 117.04-175.56 1.48-2.22 2,02-3.02 5.49-8.23 TAPsTALTOS |TSMILTiONSyay 10,528-15,793 2,091-3,136 3,176-6,353 3,900-9,100 3,594-5,392 3,420-7,980 4,227-6,341 4,299-6,449 4,160-6,240 14,681-18,023 3,609-5,414 26,143-61,000 1,320-3,080 8,601-12,901 4,225-6,338 9,250-13,875 8,080-12,080 13,725-20,575 Lanpatem 28,100 202,300 10,600 40,000 46,066 56,000 70,700 128,700 13,500 24,200 13,100 9,100 43,800 106,900 666 916 1,480 BLACK &VEATCH |Executive Summary Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN ' eMLLiONy Juneau Area Lake Dorothy Expansion Juneau Storage 28.00 71.40-166.60 2,550-5,950 96,000 Sweetheart Lake Juneau Storage 30.00 82.82-124.08 2,761-4,136 136,000 Upper Lynn Canal , Connelly Lake Haines Storage 12.00 36.80-55.20 3,067-4,600 39,762 Schubee Lake Skagway Storage 4.90 36.00-54.00 7,347-11,020 25,000 Walker Lake Chilkat Valley Run-of-river 1.00 6.08-9.12 6,080-9,120 2,750 West Creek Skagway Storage 25.00 112.00-168.00 4,480-6,720 76,600 Note:This table is provided for general information purposes.The information shown in this table was gathered from multiple sources,and the quality and inclusiveness of this information varies significantly across the projects shown.Black &Veatch and HDR have completed a high-level review of this available information and showa range of capital costs for each project to reflect the uncertainties associated with the available information.As a result of the wide variation in the quality and inclusiveness of project-specific information,the AEA believes that this information shoul ini rren ny investmen isions. BLACK &VEATCH |Executive Summary 1-17 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.6 EVALUATION OF POTENTIAL TRANSMISSION INTERCONNECTIONS As discussed in Section 12.0,the AEA directed Black &Veatch to consider transmission from the perspective of a "public benefit investment”as part of its evaluation of potential transmission segments.As a result of this directive,Black &Veatch analyzed the economics of potential transmission investments in two ways.First,Black &Veatch,examined the best information available (modified where appropriate based upon Black &Veatch's transmission construction and operating experience)regarding the capital and operations and maintenance (O&M)costs of specific transmission segments (including segments that would transfer power within a subregion as well as between subregions).An economic screening (the Initial Economic Evaluation Case)was then conducted to compare the annual capital carrying costs and O&M expenses of transmission segments to the value of the diesel power displaced.None of those transmission segments passed the economic screening of having lower transmission costs on a $/MWh basis than diesel generation.This approach did not include the effect of any State financial assistance. Additionally,Black &Veatch evaluated the economics of potential transmission segments assuming: 1)that the State provided financial assistance in the form of a grant equal to 100 percent of the construction capital costs,and 2)that the local utility would be responsible for covering the annual O&M expenses,as well as an annual contribution to a repair and replacement (R&R)fund to ensure adequate monies for future major repairs and replacement investments to keep the transmission system in good shape for decades (the Public Benefit Case). In this case,the cumulative present worth costs were determined by modeling the subregions with Strategist®using the generic hydroelectric projects,as described in Section 10.0,with and without the subject interconnection.The cumulative present worth savings from the interconnected operation,minus the O&M and R&R costs for the interconnection,are compared to the estimated capital cost of the proposed interconnections to determine the estimated benefit-cost ratio for each interconnection. There have been many studies regarding transmission in the Southeast region.Many of these studies focused on individual projects.Three studies,however,focused more on the entire transmission system: q Southeast Alaska Transmission Intertie Study,Harza Engineering Company,1987. Southeast Alaska Electrical Intertie System Plan,Acres International Corporation,January 1998. Southeast Alaska Intertie Study Phases 1 and 2,D.Hittle &Associates,December 2003. Many of these studies had addenda that updated and focused on specific aspects of the region.Of these studies,the D.Hittle study is the most recent and most well known.The D.Hittle study focused primarily on the transmission system.The IRP significantly differs from the D.Hittle transmission study in that the IRP focuses on integrated solutions for communities in the Southeast with equal emphasis on generation,transmission,conservation and energy efficiency as well as space heating.This integrated approach provides more robust solutions to meeting the communities'energy requirements. BLACK &VEATCH |Executive Summary 1-18 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Building upon the D.Hittle study,Black &Veatch evaluated the following transmission interties. The numbering and nomenclature used in the D.Hittle study is used to maintain continuity with previous studies.SEI-1 is now called SEI-1A Hawk Inlet -Hoonah,since part ofthe original SEI-1 transmission line has been constructed.SEI-2 and SEI-3 are Committed Resources and discussed above.SEI-5 and SEI-6 North-South,is a combination of two interconnections evaluated together as single interconnection which was not evaluated in a combined fashion in the D.Hittle study.SEI-9 is an interconnection that was not evaluated in the D.Hittle study. Lt SEI-1A:Hawk Inlet -Hoonah SEI-2:Kake -Petersburg SEI-3:Ketchikan -Metlakatla SEI-4:Ketchikan -Prince of Wales SEI-5:Kake -Sitka SEI-6:Hawk Inlet -Angoon -Sitka Fs SEI-6 Alternate:Hoonah -Tenakee Springs -Angoon -Sitka SEI -5 and SEI-6:North -South SEI-7:Hoonah -Gustavus =SEI-8:Juneau -Haines SEI-9:Pelican -Hoonah Table 1-3 provides the results of the Initial Economic Evaluation Case of proposed transmission interconnections,and Table 1-4 presents the results of the Public Benefit Case evaluation. In considering the results of this analysis,it is important to note that the "SE Intertie”(with the exception of two segments:the Kake -Petersburg Intertie and the Ketchikan -Metlakatla Intertie) was not designated by the AWG as a "Committed Resource.”Second,the economic results are driven by the small loads that exist in the region,and demonstrate the economic difficultly of following a "go big”strategy to meeting the region's future energy needs.Third,it should be noted that the results are not significantly affected by the capital cost assumptions used;for example, even if the capital costs were 50 percent less than those used in the Southeast Alaska IRP,the resulting benefit-cost ratios under the Public Benefit Case would still be well below 1.00 (i.e.,0.2 to 0.64). As a final note,the potential interconnection from Skagway to Whitehorse could also support mining loads that might develop in Canada.The interconnection might be economical if the loads were large enough and they could be supplied by low-cost hydro projects developed in the Southeast.However,there is uncertainty associated with both the mine development and the hydro project development. BLACK &VEATCH |Executive Summary 1-19 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-3 Results of Transmission Interconnection Evaluation -Initial Economic Evaluation Case SEI-1A Hawk Inlet -Hoonah SEI-4 Ketchikan -Prince of Wales SEI-5 Kake -Sitka SEI-6 Hawk Inlet -Angoon-Sitka SEI-6 Alternate Hoonah -Tenakee Springs -Angoon -Sitka SEI-5 and SEI-6 North -South SEI-7 Hoonah -Gustavus SEI-8 Juneau -Haines SEI-9 Pelican -Hoonah 2011 Diesel Generation Cost 28.5 35.2 55 102 106 137 29 85.3 55 350,000 293,000 432,000 471,000 497,000 789,000 350,000 319,000 288,000 2,802 9,094 31,521 11,104 7,290 93,180 m=,Note 1:The annual average transfer over the interconnection is determined by taking the sum of the annual flows for each segment of each interconnection as modeled in Strategist®for the 50 year planning period and dividing the sum by 50. Note 2:The annual transmission interconnection cost does not include any cost for generating the electricity that would be transmitted over each transmission interconnection. BLACK &VEATCH |Executive Summary 1-20 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-4 Results of Transmission Interconnection Evaluation -Public Benefit Case SUBREGIONS SEI-1A Hawk Inlet-Hoonah 28.5 101.7 SEI-4 Ketchikan -Princeof 35.2 99.7 307.6 282.5 25.1 114 13.7 0.14 Wales SEI-5 Kake -Sitka 55 199.1 386.1 341.6 44.5 15.5 29.0 0.15 SEI-6 HawkInlet-Angoon 102 143.1 339.8 290.1 49.7 16.5 33.2 0.23 -Sitka SEI-6 Hoonah -Tenakee 106 147.2 182.8 128.2 54.6 17.6 37.0 0.25 Alternate Springs -Angoon - Sitka SEI-S and --North -South 137 310.2 654.0 522.9 131.1 32.0 99.1 0.32 SEI-6 SEI-7 Hoonah -Gustavus 29 116.5 115.1 110.5 4.6 13.1 -B.5 - SEI-8 Juneau -Haines 85.3 243.8 278.8 239.5 39.3 13.8 25.5 0.10 SEI-9 Pelican -Hoonah 55 63.6 51.9 46.7 5.2 10.1 49 - BLACK &VEATCH |Executive Summary 1-21 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.7.SUMMARY OF DSM/EE PROGRAM SCREENING Section 13.0 provides a description of the process used by Black &Veatch to evaluate potential DSM/EE measures. The list of measures considered,and the related input assumptions,are summarized in Tables 13-1 and 13-2, located in Section 13.0.Also,included in Sections 13.0 and 16.0 are descriptions of the existing DSM/EE programs available in the Southeast region. For the measures relevant to the Southeast region,Black & Veatch completed a cost-effectiveness screening using the "Funding is the main hurdle to energy efficiency and demand- side management.The State Should offer matching grants to electric utilities and/or communities to make public buildings more energy efficient.” Southeast Alaska Retiree following three industry-standard DSM/EE cost-effectiveness tests:the Total Resource Cost (TRC) Test,Ratepayer Impact Measure (RIM)Test,and Participant Test.Furthermore,Black &Veatch conducted the standard cost-effectiveness tests for three categories of communities,including high- cost utilities (those communities who are dependent upon high-cost diesel generation),mid-cost utilities (those communities who have access to some low cost hydro generation but have higher costs due to economies of scale),and low-cost utilities (those communities who have sufficient low- cost hydro generation to meet almost all of their electric demand). For the cost-effectiveness screening,Black &Veatch established the criterion that a DSM/EE measure had to pass all three of the standard DSM/EE cost-effectiveness tests.This criterion is both conservative and restrictive:conservative in that this requirement helps ensure that the specific DSM/EE measures will prove to be cost-effective, and restrictive in that more measures would have passed the cost-effectiveness screen if Black &Veatch had not required a measure to pass all three cost-effectiveness tests.Black &Veatch believes that this is the most appropriate approach given the limited end-use and vendor DSM/EE-related information available at this time and the region's limited experience with these types of programs. "Demand-side management, conservation and energy efficiency are necessary components to sustainable economic and energy policies.” Southeast Stakeholder However,it should be noted that additional measures could be implemented if utility decision makers and regional policy makers choose to apply a less conservative standard.One point of note is that many measures did not pass the RIM test for the high-cost utilities.This is because those utilities also have high per capita non-fuel costs and therefore will suffer significant lost revenue due to DSM/EE programs.This issue will need addressing if utility decision makers and regional policy makers choose to apply a less conservative standard. The results of the DSM/EE cost-effectiveness screening for the high-cost utilities,mid-cost utilities, and low-cost utilities are shown on Figure 13-1 through Figure 13-3,located in Section 13.0. Those measures that passed all three standard cost-effectiveness tests were then grouped into DSM/EE programs and used in the development of the Low Scenario Load Forecasts,as discussed in Section 8.0 and Section 17.0. BLACK &VEATCH |Executive Summary 1-22 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.8 SPACE HEATING CONVERSION Space heating costs represent a major portion of residential,commercial,and industrial energy expenditures in Southeast Alaska,generally 60 -75 percent of total average monthly bills.This reality is one of the reasons why the Southeast Alaska IRP is focused on both electricity and space heating.Historically,most space heating used fuel oil.When oil prices increased significantly in 2008 and again in 2010 and 2011,many customers in areas with low-cost hydroelectric generation areas converted to electric resistance heat.This conversion significantly increased electric loads, consuming excess hydro generation resources and,in some cases,resulting in the operation of diesel generation when water levels of the hydro projects dropped to unacceptable levels.The significant increase in electric loads also often strained other parts of the utility system,including transformer capacity.In most instances the increase in electric loads occurred very rapidly. Biomass space heating is analyzed in Section 16.0.The technology for all three forms of biomass is well established,although the infrastructure for production and delivery for pellets and chips need to be developed in the Southeast.There are a number of favorable aspects relative to the social/political characteristics of biomass.The concept of using a local renewable resource that creates local jobs is well received.The ease and convenience of use varies considerably with the form of biomass.One of the big social/political benefits of oil and electric space heating is the convenience of use.Pellet space heating can provide a similar level of convenience via continuous feed from a hopper and minimal operating maintenance.On the other hand,cord wood space heating requires much more effort and attention for burning the wood and for removing ash.Wood chips are in between the effort required for pellets and cord wood. Based on the analysis of the use of pellets for space heating in the Southeast,Black &Veatch has conducted an evaluation of the cost and impact of a proposed plan for a major conversion to pellets for space heating in the Southeast,assuming an 80 percent conversion of the region's existing residential and business fuel oil space heating equipment to biomass.This conversion level assumption is not based upon any detailed market studies and,in fact,there are a number of uncertainties that exist with regard to what conversion levels are achievable.Therefore,Black & Veatch also evaluated the capital costs and savings that would result from a more realistic conversion level,30 percent. For the first step of the evaluation,Black &Veatch estimated the oil space heating load for each of the subregions in the Southeast through the 50 year evaluation period.The oil space heating load was based on information used for the electric load forecasts described in Section 8.0 and the space heating requirements contained in the Alaska Energy Pathway.Figures 15-11 through 15-18, located in Section 15.0,present the estimated oil space heating load in annual gallons per year of fuel oil for each region. The economic evaluation of the savings from the pellet conversion program is presented in Table 15-3,located in Section 15.0.Table 15-3 is based on the medium heating oi!projections in Section 5.0 and assumesa pellet cost of $300 per ton escalating at the general escalation rate of 3 percent as presented in Section 6.0.The costs for the pellet space heating equipment are those presented in Subsection 15.4.4 and are escalated at 3 percent annually.Specific costs for pellet mill development or transportation or distribution system infrastructure are not included,the $300 pellet price used is the delivered price for pellets in Southeast Alaska,and those production and infrastructure costs are captured in the delivered costs.The actual program may want to provide assistance in these areas to hasten the local development of the industry.Table 15-4 presents the estimated capital cost for the pellet space heating equipment.The proposed 80 percent pellet conversion program would save an estimated $2.1 billion in cumulative present worth costs for space heating for the region over the 50 year period and would require a total capital investment of $227 million for the BLACK &VEATCH |Executive Summary 1-23 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN pellet space heating equipment,while the 30 percent pellet conversion program would save an estimated $0.9 billion and require a capital investment of $85 million. Table 1-5 shows the 50 year savings from the proposed pellet space heating conversion program, assuming an 80 percent conversion level.Table 1-6 shows similar information,assuming a 30 percent conversion level.As stated,the 80 percent conversion level was used to demonstrate the impact ifa comprehensive,serious program was implemented throughout the region;the actual conversion level will most likely be less but the bottom line conclusion still applies -biomass conversions would result in significant savings which can bring real relief to the region now. It should also be noted that changes in utility rate structures can also be used to discourage electric space heating conversions. Table 1-5 Savings from Pellet Conversion Program -80 Percent (Cumulative Present Worth Costs $7000) LG SEAPA 977,320 258,011 238,441 558,327 418,993 Admiralty Island 22,334 6,830 4,717 12,742 9,592 Baranof Island 460,426 121,745 98,280 23,655 243,680 216,746 Chichagof Island 58,459 13,753 11,950 2,806 28,509 29,950 Juneau 2,120,883 541,759 490,307 111,314 1,143,380 977,503 Northern 147,786 39,089 23,925 6,849 69,863 77,923 Prince of Whales 366,725 94,304 77,469 14,916 186,689 180,036 Upper Lynn Canal 347,271 90,274 67,919 16,287 174,480 172,791 Total Southeast 4,501,204 1,165,765 1,013,008 238,897 2,417,670 2,083,534 Region BLACK &VEATCH |Executive Summary 1-24 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-6 Savings from Pellet Conversion Program -30 Percent (Cumulative Present Worth Costs $'000) ont ot RO AA CO J REGION 2s SEAPA 977,320 688,029 800,647 176,673 Admiralty Island 22,334 18,213 1,769 448 20,430 1,904 Baranof Island 460,426 324,653 36,855 8,871 370,379 90,047 Chichagof Island 58,459 36,675 4,481 1,052 42,208 16,251 Juneau 2,120,883 1,444,691 183,865 41,473 1,670,079 450,854 Northern 147,786 104,237 8,972 2,568 115,777 32,009 Prince of Whales 366,725 251,477 29,051 5,594 286,122 80,603 Upper Lynn Canal 347,271 240,731 25,470 6,108 272,309 74,962 Total Southeast 4,501,204 3,108,707 379,878 89,317 3,577,902 923,302 Region Conversions to heat pumps represent an alternative to pellet conversions.Available heat pump technologies are discussed in Section 16.3.3.On an energy cost only basis,heat pumps can be lower in cost than pellets for communities with low cost hydro generation.Even though the cost of energy for heat pumps is less than half that of resistance heating,nearly all of the conversions have been and continue to be to resistance heating because of the significant higher capital cost of conversion with heat pumps.A conversion program to heat pumps would have significantly higher capital costs than a conversion program to pellets and the conversion program to heat pumps would still add nearly half the electric load per conversion that resistance heating does.Sucha program could only be conducted for communities with low cost hydro generation.High electric cost communities would still need to convert space heating to pellets. The encouragement of heat pumps would increase the use of electricity.The region's excess hydro capacity is rapidly disappearing due to the recent trend toward electric space heating conversions. As a result,without the development of new hydroelectric or other generation projects,or restrictions on future conversions to electric space heating,all customers in these communities will pay higher rates for electricity as a result of higher future use of diesel for electric generation,and communities will be denied new economic development opportunities.This reality raises the question,what is the highest value use of current and future hydroelectric power?An important element of this question is the alternative energy sources that can be used to meet specific end- uses.For example,in the case of lighting,there is no practical alternative to electricity that provides the same level of quality of life.However,in the case of space heating,there are alternatives such as biomass,including the use of wood pellets,which for all intents and purposes do not use local electricity. BLACK &VEATCH |Executive Summary 1-25 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Given the fact that the region's transmission network is very limited in terms of the number of communities connected,and the size of loads within the region adversely affect the direct economics of additional transmission segments,hydroelectric power within the region will remain a limited resource.Therefore,the region should carefully consider the best use of this limited resource.Biomass is a particularly good option given the local and abundant nature of this solution,and the relative economics and availability of supplies within the region,both as a short- term solution for the region as well as a long-term solution for certain communities. 1.9 REGIONAL EXPANSION PLAN DEVELOPMENT The Southeast Alaska IRP is built upon a number of input assumptions,including the following: drivers and issues;economic and financial factors;load forecasts (i.e.,High,Reference and Low Scenario Load Forecasts);forecasts of fuel prices including emissions allowance costs;existing generation and transmission resources;and reliability criteria.Each of these categories of input assumptions is discussed in Section 3.0 through Section 8.0. Additionally,future resources were considered,including hydroelectric generation,other generation resources (including conventional and renewable resources),DSM/EE,and transmission,along with the types of screening that were conducted for each category to determine which resources should be included in the detailed economic modeling.These alternative resources are discussed in detail in Section 10.0 through Section 15.0. In addition to the detailed economic modeling,Black &Veatch considered the environmental impacts and risks associated with each resource category to develop a Preferred Resource List for each subregion. Each of the subregions shown on Figure 1-2 was modeled using the Strategist®optimal generation expansion program.Strategist®evaluates all combinations of potential generating units to develop an expansion plan that has the least cumulative present worth cost over the planning period.The expansion plans for each of the three load forecasts (High,Reference,and Low Scenarios)are presented for each subregion in Tables 17-9 through 17-11,located in Section 17.0,and summarized in Figures 1-4 through 1-11. BLACK &VEATCH |Executive Summary 1-26 Alaska Energy Authority SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Subregion:SEAPA a Summary of Results Electric Load Forecast Space Heating SEAPASEAPA 000000 -_ve cenenecnnee -45,000800,000 : 40500000 rmTT 9G.099 41,000 000 +35.000 3.500.009 eeeeen +30.000 I 3,000 000 I *8.0 3Jsosoe :F3»20.000 i 2.un0 ave |! i 15.000+500 0)200,000 10.0001.000.000 100,000 _oaen -00 009 1 bau ee re emge ate °.7 +h 6 8 Abb no 0b ©+ah 40 "7 '0 "+>-a Kake PP FHP PPK PPP PPS PGP Mg gr gM gM HP Ft sr PK Ran 2 2 3 b -==SEAPA-High emeeesEAPA =SEAPA-OSM !4 i PenwtsatlonPetersburg:mt Sp Wrangell [Cumulative Present Worth Cost ($000s)-Ol Only:977,320 K tchikan/Saxman Cumulative Present Worth Cost ($000s)-Biomass&Oil:558,327er Metlakatla ric Utili ion Pl ctric Utility Ex ion Plan ..Electric Utility Expansion Plan Electric Utility Expansio Expansion Plan Alternatives: :-rey ;*Speer aeSEAPA-Reference Case SEAPA -Low Case Boog SEAPA ie$00,000 $00,000 -cen . 430,000 450,000 + 400,000 +400,000 ri @ Generic Hydro»¢380,000 +aS A Sood n-_-=e Diesel &fend 300.000 300.000 ae e DSM/EE .ao "oes€250.000 4 ¥280,000 1 @ Biomass Space Heating 2z280.000 L os ©Wind -Project Development290,000 200,000 Bo arwR meng ES:pou : 150.000 180.000 diaid 100.000 100,000 39,000 30,000 a one BPP?BP SP PPP PP PS PEP PSP SFP PS PPK mus Reference Case Diesel Generation Reference Case Hydro Generstion "mmmpRefe rence Case Lod Forecast [curnutative Present Worth Cost ($000s):I 288,797 Figure 1-4 Subregion Summary -SEAPA BLACK &VEATCH |Executive Summary swias Low Case Diesel Generation 7 o a or |BBP BF PPP PP SP PF Fr PP PF SP PP a PPP Low Case Hydro Generation mmm ow Case Load Forecast [cumulative Present Worth Cost {$000s)-including DSM:|234,723] 1-27 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Admiralty Island Subregion:Admiralty Island Electric Load Forecast Summary of Results 120000 + Trayer Creek Angeon wave -8[GaBemn)me Angoon 1,000 9.000 so00 8.000 000 -tte 7,000 TOO0 + 6.006 -$900 $.000 $000 -ee i i4.000 000 a 3,000 aod ” 2.000 2000 ;3,000 roo b -=cee ee i 0 Pr nrsgpererer rope eee pene seme ey ee a >'al "a "a a "7 7 >eoPHLIPLSPIIISMTPFPPFPPLPhGPPSFgsSEPLSS mame Reference Cure Diesel Generation Reference Case Hydro Generation emmmRe ference Case Load Forecast ameme Low Case Sresal Garner atban%%,%,a%,"e%,7%,Yomm Adiriralty isfand -High ee eee Admiralty island -OSM or-.- 40000 Go 20900 + Space Heating Admiraity Island :1.a00 Electric Utility Expansion PlanAdmiraltyIsland-Reference Case [cumutativePresent Worth Cost ($000s):T Figure 1-5 PSSARSERELAEZEEERADERT| Ic Present Worth Cost ($000s}-Oil Only:|22,334 [cumulative Present Worth Cost ($000s)-Biomass&Oil:I 12,742 Electric Utility Expansion Plan Admiralty Island -Low Case FI SPI IPO LILO PELL PLLLowCeseMyaieGanarebon-SMLow Cate Load forecast 8,022] Subregion Summary -Admiralty Island BLACK &VEATCH {Executive Summary [cumulative Present Worth Cost ($000s)-induding OSM:_|3,044] r is successful.gE. Expansion |Plan Alternatives:rena one pore ny Leow ”Admiralty |Island '4 .Committed Resource:Hydro®©Diesel:Bec ©DSM/EE°Biomass space Heating Pa©=Wind=Project Development” °Tidal -Technology Developmen Se BacalBe heard Sd 1-28 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Summary of Results Electric Load Forecast Space Heating Baranof Island Baranof Island 300,000 eee vee 2.000.000 ae a ™ 1.900000.s-=={16.000 Subregion:Baranof Island 250.000 4,600 009;=14008 Pun Wwe 808s 200,000 *anoonn vem mu fer tress 1.200 000[pewniee H Oiee Lote Fupaation ne £0.000 §soon cee vee .a .. 3 00.000 =- Sitka 400,000 400 000 400.000 50,000 200 000 -.J 2t0o os sone :|wb es ley ee oe _-Seb esse Pe FCs PP FKP PK KKK EK SEEPS |ZELZLS RE SPTELPLELLLLEEEES ---Berenof sland --Berarof island -High --"barerof sland -05M 1,Ob -Spas Ht Swe [cumulative Present Worth Cost ($000s)-Oil Only:460,426 Cumulative Present Worth Cost ($000s)-Biomass&Oil:243,680 Electric Utility Expansion Plan Electric Utility Expansion Plan Baranof island -Reference Case Baranof island -Low Case Expansi n Plan Alternatives:1A:-180.990 © :ane S01 meee Bs amet Baranof Island 190.000 |190 000 1i roe Door140.000 |oo ete es oe _-oe 19 000 a Cee _.-___Committed Resource -Hydro ..a ®Generic Hydro DSM/EE100900.100 000 | {'§Biomass Space Heating is .eae we ne 90900pee ee ween _oe _wee oon 5 Ft os fF cs ¢0.000 f 40.000 40.000 40.000» ok wee en :o be rnFPFPFFOFFFFSFPKPFHSPPPPKar-L SK st KOK KK PH SK PK PSP KP LPHLC KLvoCoresndtoGenerationsomarterenceCoteLoedForncedtname\ou cere Cans:denerenen Lon Cae yer Gs iow cose {Cumulative Present Worth Cost ($000s):|97,345][Cumulative Present Worth Cost ($000s)-Including osm:|95,872]Figure 1-6 Subregion Summary -Baranof Island BLACK &VEATCH |Executive Summary 1-29 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN \ i 14.000 - ' 1 9.000 @000+ Chichagof Island Summary of Results Electric Load Forecast OR{Cations}12,000 -Subregion:Chichagof Island 10.000beeGovee meu tee Conn $000 °iwhee 6,000 - P rtinainndl 4,000 Elfin Cove | Hoonah !2000 + Pelican : Tenakee Springs or. s Electric Utility Expansion Plan Chichagof Island -Reference Case ---Cruchagof islandFFPFPF PFHFIFFH FES PP PHP PELL SL mamnChichagot island -High 4.000 yom 6000 oe ne ne $000 ---wee eee 2000 =-----oo -- 1.900 °ik »4s BF PPP MPP HIPAMP LPF PK PAP HP gt gh ghmeeHelecenceCoeOnsetGenerationAeterenceCovestrateGenesetion-@merevenceCove 00d Forecast {cumut Present Worth Cost($000s):I 53,291] Figure 1-7 Subregion Summary -Chichagof Island BLACK &VEATCH |Lxecutive Summary meee Chichogof istend -OSM Space Heating Chichagof tsiand ae 222524 8223822323 e ea aresESRRSESSRRESSSPERSEEREESE .Perateien Cumulative Present Worth Cost {$000s)-Ol!Only:|58,459 lative PresentWorthCost ($000s)-Biornass&Oil:28,509 Electric Utility Expansion Plan Expansion Plan Alternatives: Chichagof island -Low Case a ee 9000 :Chichagof Island | ed +:Committed Resource -Hydro 7900 |.=Generic Hydro i Diesel og 0 _OSM/EE .a ;-. Ben at ”ve ey$900 bw ne ce ee nee e nn ne eee ecnei e eee eee tee .Biomass Space Heating =Geothermal -Project Development ra TT re "Tidal Technology Development ©” $000 =----oe ene eerie -Bowe how aotbetKaseifewer 1000 »-we ne ete eee boon = iof antsLomCate Deere!Genes ator Lew Cove "have Generation [Cumulative Present Worth Cost ($000s)-Induding ps:|46,563] eionCane 088 ForecestKKKPFFSKIFFFEFKFPPPPPLIFEPFL LS 1-30 a!4 at Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Summary of Results Electric Load Forecast Space Heating Juneau Area Juneau Area 12,000,080 ------soe ne cena ne serene tee eee1,000,000 i tenon 900.000 Subregion:Juneau Area 100.000 790,000 600,000 F 00.000fatesania*i Greeti Creek 400.000 300,000 Juneau 200,000 Greens Creek 100.000 KH KK PK PLS PF IPH PILLS LEE PI LS PERSP R ER ER REREL ERATE aE mjunes Area mmr lunean Area -High meen juneau Area -DSM fc Present Worth Cost ($000s)-Oil Only:]2umes|Summary of Results CurnulativePresentWorthCost ($000s)-Biomass&Oil:|1,143,380 Electric Utility Expansion Plan Electric Utility Expansion Plan ..-Ste Expansion Plan Alternatives:Juneau Area -Reference Case :Juneau Area-Low Case Lekcbhnd °°pew bikeseo00000009JuneauArea sec.200 ..$90.00 |pos a 30090 >-.-300.000 +-wer ce ae eee ...._-_-_-_-_-o :Biomass Space Heating iiiaane,i ct --490.000 ::©Tidal-Technology DevelopmentiIi*”Biomass Generation Technology”*i$20,000 +:300.000 &Development oh bed dea ed i 300 090 'laa tins.!Pe !10090 -100 900 Lo nena oe eee ene teint nae er - fateh Aes oe Re ee ne ee tee nen oe eeeFKPKKFFSKKKPSSPSPPPLPHKPKKPLP|KK KK SPP SKK PSP KF PLS PKL LK ELL LK (at 00s torent |!monsowCane Qrasel Gerarebor cen Caos "dro Gereveber -eumman cave ied Perecent [curnulative Present Worth Cost ($000s):I 234,265][Cumulative Present Worth Cost($000s)-including DSM:I 185,556]Figure 1-8 Subregion Summary -Juneau Area BLACK &VEATCH |Executive Summary 1-31 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Summary of Results Space Heating Northern Region i Northern Region 1 600,000 ©ano Subregion:Northern Region 300.060 4.400 ' Rende seuyfeme. .Pa ae one L500 7Tassse:i 3 2.600 jYakutat Gustavus 000 eter]i see 4,000 -1.600 108.000 2.000 300 De enepn beet gwengepet Dd ee gee rssereeesreKKSeKKKLLLKHLKeKL PERSE RESRRREA RETR PR EZR AES =Northern Region Norther Region -High mmetorthern Region -OSM U Present Worth Cost ($000s)-Oil Only: Cumulative Present Worth Cost Electric Utility Expansion Plan Electric Utility Expansion Plan ..oo ity =xpans oe yExP .--Expansion Plan Alternatives: Northern Region Reference Case Northern Region -Low Case 'pos : .z1.000 10.000 E ;Northern Region teoeo wee 18000 +wz:«=@ Generic Hydro gyfa.»Diesel hed14000-14900 + ©DSM/EE 17900 .42000 +E «Biomass Space Heating .. e Wind -Project Development19O00+12000 +wee cee eee #«©Tidal-Technology Development 000 +sooo To gm eo nsser eee ne a «"Biomass Generation-Technology soo bk}-_--woe $000 ...ger Development |Ba deck !4000 +--wee --eee we nee 4200 -on me we i ee rove f wee --ee 2000 -_. ok a _ee et oc ce ee ee ee ee ee enn a Ses K PKK KF KP SK PSK Fe es P eee SK Fes PF er KS Pr eK er PPK KFS PPL LES o cidta Generation aamntatarevcecasetoedPorecent eet enone One aore?enn Len ene "were Gecarener -EBL Cene L088 Paracent [cumulative Present Worth Cost ($000s):|63,256][cumulative Present Worth Cost ($000s)-Inctuding DSM:_|55,825] Figure 1-9 Subregion Summary -Northern BLACK &VEATCH |Executive Summary 1-32 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Summary of Results Electric Load Forecast Space Heating Subregion:Prince of Wales ..eee -vest eee a i Prince of Wales Prince of Wales _:40,000 dMueseu >eee ence eng -sents ete teectemnene 6 sueeeeoeeee oo +eeeU worn 1eve.eeo -14,000 or head ayn | Naukati Whale Pass Coffman Cove Klawock Thorne Bay Hollis ;; Craig PERL EP ELSE EPR EES EEL EERE RE Hydaburg ;mre Prince of Wales Total -High Tete of Wales Total -OSM _-. Kasaan [Cumulative Present Worth Cost ($000s)-Oi!Only:}366,725[Cumulative Present Worth Cost ($000s)-Biomass&Oil:|186,689 Electric Utility Expansion Plan Electric Utility Expansion Plan Prince of Wales -Reference Case Princeof Wales -Low Case Expansion Plan Alternatives: ™nm aa.Prince of Wales 50.000 -some -Committed Resource -Hydro ©_Diesel bons ogsooo+--..vase oe a :« OSM/EE "4mm'e*Biomass Space Heating | wooo =-Soe -10000 -- ''oh ere 0 Biase neem ee gtinaiy Meeepiae tine nani eqns eset ee yn rg sae net ane ag opment apeHsFPKHSPFPPFMPPPPPKPKKSKPSreerrrrrrtPrOPKTPPKKLPPKKLLLsmoneterenencoveGraceGenereveneferanceCun-ware cameron mtb efaranca care woes Paracan sme serene Geeelcaresener owe mere Gereraner Seow Coen seed fereeon [Cumulative Present Worth Cost ($000s):|24,094][e Present Worth Cost($000s)-Including DSM:_|20,781] Figure 1-10 Subregion Summary -Prince of Wales BLACK &VEATCH |Executive Sumriaty 1-33 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Summary of Results Electric Load Forecast Space Heating Upper Lynn Canal Upper Lynn Canal 80,000 Subregion:Upper Lynn Canal 60,000 } 50,000dontLoteatorPpPaLontotesi40,000-"tanigeye Geen mote 30,000 +* Chilkat Valley 10.000Kiukwan Haines O tyr+ iSkagwayFFPPFEPPFIFEKgsFESPPKFIISLPISLae 3284545 3333283523 2 a2 22 =Upper Lynn Canal ==Upperiynn Canal -High =m Upper Lynn Canal -OSM "ss mmtshing O8-ceteam a ot ons ws Masta aPeutaton "es Cumulative Present Worth Cost ($000s)-Oil Only:7 347,271 tative PresentWorthCost {$000s)-Biomass&Oil:|174,480 Electric Utility Expansion Plan Electric Utility Expansion Plan"Upper tynn Canal -Reference Case "Upperiynn Canal-Low Case Expansion Plan Alternatives:«0.000 40.000 ..MR 2 AMMEUEA 07 QueteAR A ureRiR = 'Upper tynn Canalte 7 poe vone 30.000 +GenericHydro :Diesel |mee 0000 |1000 |DSM/EE |Biomass Space Heating 90.000 a ee ee ne ec Foo !-- 2 i 10.000 mene vee ee oe fe wee we eee 20.000 bene eee neeeee ene noe tte ee ee one ee ce| ||19.900 fence eee See ee wee ----_19.000 pe---a we ---- i t|@ Ba ec ee neeee ee o be ia apapraran wae a neonanmsaesecetitSESSESSHSMMSSeeeeSFOKLOETHLSeeeaeweWerGarerewon-eumanetererceCateLoedForecast ateLewCate Ose)Gee sabon Low hase vate Generation -MammonCubeLondForecast [cumulative Present Worth Cost {$000s):|44,538][Cumulative Present Worth Cost ($000s)-including DSM:I 27,678)Figure 1-11 Subregion Summary Upper Lynn Canal BLACK &VEATCH |Executive Suminary 1-34 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.10 IMPLEMENTATION RISKS AND ISSUES In Section 19.0,Black &Veatch identifies and discusses a numberof general issues and risks that relate to the implementation of this Southeast Alaska IRP.These general issues and risks are grouped into the following categories: Resource Potential Risk -the risk associated with "Continued regulatory burdens the total energy and capacity that could be placed on utilities for diesel economically developed for each resource option;generation emissions by the EPA this risk is particularly important for certain are a major risk for the future of renewable technologies such as wind and utilities and communities. geothermal.Rural Utility Manager Project Development and Operational Risks - the risks and issues associated with the development of specific projects,including regulatory and permitting issues,the potential for construction cost overruns,actual operational performance relative to planned performance,and so forth.This category also includes non-completion risks once a project gets started,the risk that adverse operating conditions (e.g.,earthquake)will severely damage or impair the facilities and result in a shorter useful life than expected,and project delay risks.These risks are particularly important for hydroelectric projects. Fuel Supply Risks -The risks and issues associated with the adequacy and pricing of required fuel supplies,including diesel and biomass. Environmental Risks -The risks of environmental-related operational concerns and the potential for future changes in environmental regulations;these risks could significantly impact each of the resources contained in the Preferred Resource Lists. Transmission Constraint Risks -The risk related to the impaired ability to move power from a specific generation resource to a load center such as during a transmission line outage caused by an avalanche. Financing Risks -The risk that a regional entity or individual utility will not be able to obtain the financing required for specific resource options under reasonable and affordable terms and conditions. =Regulatory /Legislative Risks -The risk that regulatory and legislative issues could affect the economic feasibility or operations of specific resource options. Price Stability Risks -The risk that wholesale power costs will increase significantly as a result of changes in fuel prices and other factors (e.g.,carbon dioxide [COz2]emissions allowance costs). In addition,Black &Veatch identified the primary issues and risks associated with the development of the following resource options: DSM/EE. Generation resources,including fuel oil,hydro,biomass,wind,solar,geothermal,solid waste tidal/wave,coal and modular nuclear. i Transmission resources. The results of this assessment are shown in Table 1-7. BLACK &VEATCH |Executive Summary 1-35 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-7 Resource-Specific Risks and Issues -Summary DSM/EE Moderate Limited Generation Resources Fuel Oil Limited Limited Significant Hydro Limited -Moderate N/A Moderate Biomass Limited -Limited Moderate Moderate Wind Moderate Moderate N/A Solar Moderate Moderate N/A Geothermal Significant Limited -Moderate N/A Solid Waste Significant Moderate-N/A Significant Tidal/Wave Limited Significant N/A Coal Significant Moderate-Moderate Significant Modular Nuclear _-_Limited Significant Moderate Transmission Limited Significant N/A Moderate Moderate Limited Limited Limited Limited -Moderate Significant Significant Significant Significant Moderate Limited Moderate N/A Significant Significant Moderate - Significant Moderate Moderate - Significant Significant Moderate N/A ay Limited - Moderate Limited Limited - Moderate Limited- Moderate Limited - Moderate Limited - Moderate Limited - Moderate Limited - Moderate Moderate - Significant Significant Significant Significant Moderate Moderate Limited Limited Limited Limited Limited Limited- Moderate Moderate - Significant Significant Significant Moderate - Significant Limited Significant Limited Limited- Moderate Limited - Moderate Limited - Moderate Limited Moderate Limited - Moderate Moderate Moderate N/A BLACK &VEATCH |Executive Summary 1-36 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.11 CONCLUSIONS The primary conclusions from the Southeast Alaska IRP study are grouped into three categories and summarized below.These conclusions are discussed in more detail in Section 20.0. General. Analysis and Results. Moving Forward. Conclusions -General 1.The current situation facing the Southeast region includes a number of issues that place the region at a historical crossroad regarding the mix of generation,DSM/EE,end-use conversions,transmission,and transportation resources that it will rely on to economically and reliably meet the future electric and heating needs of the region's citizens and businesses. The key factors that drive the results of Black &Veatch's analysis include the following: Limitations in the quality and inclusiveness of capital cost and operating information on specific hydroelectric projects from previous studies and other sources provided to Black &Veatch during the course of this study. The inclusion of the Committed Resources as the next set of resources to be developed within the region. Future load forecasts which are driven by projected population trends,economic forecasts,and recent electric heat conversions. The future availability and price of diesel. The uncertainties and risks that exist for all DSM/EE,generation,and transmission resource options available to the region. Potential future CO2 emissions allowance prices,which would impact all fossil fuels, which may or may not result from proposed federal legislation. The region's existing transmission network,which is limited in terms of:1}the number of communities connected to the network,2)the ability to transfer power between areas within the region,and 3)the resulting limited amount of dispatchable resources that can be integrated into the region's transmission grid and,thus,can be economically dispatched to minimize total electric costs ona regional basis. The ability of the region to raise the required financing and mitigate the rate impacts of constructing new resource alternatives. Another key driver is the fact that the Southeast region as a whole is currently short of hydroelectric storage capacity.As a result,potential hydroelectric projects with storage capabilities are more valuable,particularly from a system integration (i.e.,the matching of generation capability with electric demands in connected load centers)or utilization perspective,than potential run-of-the-river hydroelectric projects;more specifically,low- altitude,large storage hydro projects are of the greatest value. BLACK &VEATCH |Executive Summary 1-37 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 4.The "achilles heel”of the current hydro system is the recent trend toward conversion of fuel oil space heating to electric space heating in those communities with access to low-cost hydroelectric.While this trend is resulting in significant savings for those residential and commercial customers that convert,it is leading to a rapid decline in the "excess”hydro capacity in the region.In this context,"excess”refers to capacity and annual generation relative to loads.As a result of the limited storage capability of the region,spilling of water (i.e,water flowing over dams without generating electricity)occurs on a regular basis in certain months of the year (i.e.,spring and fall)when electric loads are low and water flows are high due to the limited storage capability. 5.There are a number of region-specific uncertainties that underlie the completion of this study related to loads,resources and State financial assistance.These uncertainties are described in more detail in Section 20. These uncertainties drive home the need for the region to:1)develop multiple options,2)move "There are significant economic towards a more balanced portfolio of resources opportunities to improve energy (i-e.,the solution to the region's energy security for Southeast through challenges is not as simple as adding more hydro from foasil fuels to renewableandsometransmission),and 3)maintain clean energy.Alaska should beflexibilitywithregardtotheselectionofresourceleadingtheway.”options over time as the uncertainties above Southeast Alaska Residentbecomemoreresolved. CALL TO ACTION The energy challenges facing the Southeast region are not new and they have been studied,debated,and acted upon over the years.There have been numerous studies that have been completed in the past, including project feasibility studies and regional transmission studies.These studies have served an important role and the results of these studies,to varying degrees,have been reviewed as part of this effort to develop a Southeast Alaska IRP.Additionally,ongoing efforts like the Southeast Conference energy programs and the USFS-funded Juneau Economic Development Council's Renewable Energy Cluster provide important forums to help move the region forward in meeting its energy challenges.As the various quotes from regional consumers and business representatives that are contained in the Executive Summary of this report demonstrate,the need is great,the problem is regional in nature,and regional solutions are required. The objective of this Southeast Alaska IRP is to help put some "stakes in the ground,”better enabling the region to move forward in meeting its energy challenges. BLACK &VEATCH |Executive Summary 1-38 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Conclusions -Analysis and Results 6.As noted earlier,the key assumptions used in Black &Veatch's analysis are discussed in detail in the sections that are contained in Volume 2 of this report. To complete this study,Black &Veatch grouped the region's communities into eight subregions that are currently not interconnected,as shown on Figure 1-2.This was required to evaluate the economic benefit of specific transmission connections,and is consistent with standard industry practice as it relates to the evaluation of potential transmission interconnections.Completing the modeling in this manner does not mean that the modeling was done on a subregional basis as opposed to a regional basis.Rather,the modeling (using Strategist®)was completed on a regional basis (i.e.,electric costs wereminimizedonaregionalbasis)using the subregions to evaluate the cost-effectiveness of building transmission interconnections between the various subregions as part of the regional solution.This approach was taken due to the limited reach of the region's transmission network and the disparity of energy costs throughout the region,which require solutions be developed at the subregional level.Many of the analyses (e.g.,load and fuel forecasts)were completed at the community level.These analyses provided the foundation for the development of specific Preferred Resource Lists for each subregion,as discussed in Section 17.0,which were then combined to result in the overall Southeast Alaska IRP. As previously stated,there is a wide variety in the quality and inclusiveness of information available to evaluate specific hydroelectric projects.As a result,itis impossible to conduct a true "apples-to-apples”comparison of hydroelectric projects.In a similar manner,it is impossible to complete a definitive comparison of the economics of potential hydro projects to other resources (e.g.,biomass,other renewable technologies,and DSM/EE).To get all projects to a comparable level of data quality requires a significant amount of further study, and this effort is outside of the scope of this study;consequently,it is impossible at this time to make a definitive selection of which specific resources (e.g.,hydro,other renewable technologies,or DSM/EE)should be developed within each subregion to meet future electric requirements. Despite the discussion above regarding the inability to complete a definitive comparison of all potential resources and projects,the reality remains that the region must do something to address its energy challenges.To provide guidance despite the uncertainties,Black & Veatch evaluated two "Integrated Cases”to develop a balanced strategy for the region,and each subregion,to move forward with now and provide the basis for making longer-term resource decisions in the years ahead.The two Integrated Cases analyzed were: Optimal Hydro/Transmission Case -This case is based on the generic hydroelectric projects discussed in Section 10.0 and the potential transmission segments discussed in Section 12.0.This case compares the economics,ona subregion basis,of adding Committed Resources,additional generic hydro projects, and potential transmission interconnections between subregions to the costs associated with the subregions continuing to rely on existing generation resources, Committed Resources,and the burning of diesel to meet electric load requirements. In essence,this is an "electric supply side only”case with continued reliance upon fuel oil for space heating. Optimal DSM/EE,Biomass and Other Renewables Case -this case shows the economic impact of adding Committed Resources,DSM/EE,and biomass for space BLACK &VEATCH |Executive Summary 1-39 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN heating in each subregion,compared to the costs associated with the subregions continuing to rely on existing generation resources along with more limited generic hydro additions,Committed Resources,and the burning of diesel to meet electric load requirements. These Integrated Cases are compared to status quo case on which the region continues to rely on diesel for electric generation and space heating. As noted above,this approach does not provide "definitive”results,in terms of a direct comparison of actual projects;the approach was required due to the aforementioned issues regarding the quality and inclusiveness of information currently available on potential hydro projects and other alternative resources.This approach,however,does provide "illustrative”results,from which conclusions can be drawn regarding the most appropriate way for the region to move forward in achieving the objective of developing a balanced portfolio of supply-side and demand-side resources. 10.Black &Veatch computed the total capital costs and cumulative net present value (CNPV) costs,over the 50 year planning horizon for each of these two Integrated Cases,compared to the Status Quo Case (which includes only existing generation and transmission resources and Committed Resources).These regional results are shown in Table 1-8. Table 1-8 Results of Integrated Cases -Regional Summary . ra : PR VALUE} ( R J COS) alive Ey CE 100,000 Optimal Hydro/Transmission 1,407 5,313 340 Case Optimal DSM/EE,Biomass,and _Biomass Conversion Biomass Conversion Biomass Conversion Other Renewables Case 80%30%80%30%80%30% (Note 1)1725 1,583 3.093 4,253 2,561 1,401 Status Quo Case 770 5,654 - Note: 1.Includes optimized hydro and transmission. The subregional results are shown in Tables 20-2 and 20-3,located in Section 20.0. Table 1-9 provides three tables which summarize the results of these integrated cases as follows: 50 Year CNPV Savings -Optimal Hydro/Transmission Case relative to the Status Quo Case. 50 Year CNPV Savings -Optimal DSM/EE,Biomass and Other Renewables Case relative to the Status Quo Case. 50 Year CNPV Savings -Optimal DSM/EE,Biomass and Other Renewables Case relative to the Optimal Hydro/Transmission Case. BLACK &VEATCH |Executive Summary 1-40 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-9 shows that the cost associated with a greater reliance on hydroelectric power, DSM/EE,and renewable resources (including biomass)is less than the continued heavy reliance on diesel,based upon the base case diesel price forecast that was used in this analysis. Based on these results,Black &Veatch concludes that an integrated,balanced solution represents the most appropriate way for the region to move forward.Table 1-9 clearly shows that a balanced portfolio of resources (essentially a combination of the Optimal Hydro/Transmission Case and Optimal DSM/EE,Biomass and Other Renewables Case)is more cost-effective than a "build only hydro and transmission”solution,and the Status Quo Case. BLACK &VEATCH |Executive Summary 1-41 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-9 Results of Integrated Cases -Subregional Savings OPTIMAL HYDRO/TRANSMISSION CASE -SAVINGS RELATIVE TO STATUS QUO CASE Total Cumulative Net Present Value (CNPV)Savings -2012-2061 ($'000) Oil Space Heating Utility System Costs Plus Biomass Costs Total $%$%$% SEAPA 167,356 37%0 0%167,356 12% Admiralty Island 0 0%0 0%0 0% Baranof Island 198 0%0 0%198 0% Chichagof Island 7,934 13%0 0%7,934 7% Juneau 136,408 37%0 0%136,408 5% Northern 26,239 29%0 0%26,239 11% Prince of Whales 0 0%0 0%0 0% Upper Lynn Canal 2,065 4%0 0%2,065 1% Total Southeast Region 340,200 30%0 0%340,200 6% OPTIMAL DSM/EE,BIOMASS AND OTHER RENEWABLES CASE -SAVINGS RELATIVE TO STATUS QUO CASE Total Cumulative Net Present Value (CNPV)Savings -2012-2061 ($'000) Utility System Plus DSM Oil Space Heating Plus Biomass Costs Total Costs()80 Percent 30 Percent 80 Percent 30 Percent $%$%$%$%$% SEAPA 221,430 49%418,993 43%176,673 18%640,423)45%398,103 28% Admiralty Island (22)0%9,592 43%1,904 9%9,570 32%1,882 6% Baranof Island 1,671 2%216,746 47%90,047 20%218,417 39%91,718 16% Chichagof Island 13,218 22%29,950 51%16,251 28%43,168 37%29,469 25% Juneau 185,117 50%977,503 46%450,854 21%1,162,620 47%635,971 26% Northern 33,670 38%77,923 53%32,009 22%111,593 47%65,679 28% Prince of Whales 3,313 14%180,036 49%80,603 22%183,349 47%83,916 21% Upper Lynn Canal 18,925 41%172,791 50%74,962 22%191,716 49%93,887 24%) Total Southeast Region 477,322 41%|2,083,53 46%923,302 21%2,560,856 45%1,400,624 25% (Includes savings from generic hydro projects. BLACK &VEATCH |Executive Summary 1-42 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN OPTIMAL DSM/EE,BIOMASS AND OTHER RENEWABLES CASE -SAVINGS RELATIVE TO OPTIMAL HYDRO/TRANSMISSION Total Cumulative Net Present Value (CNPV)Savings -2012-2061 ($000) Oil Space Heating Plus Biomass Costs Total Utility System Plus DSM Costs 80 Percent 30 Percent 80 Percent 30 Percent $%$%$%$%$% SEAPA 54,074 19%418,993 43%176,673 18%473,067 37%230,747 18% Admiralty Island (22)0%9,592 43%1,904 9%9,570 32%1,882 6% Baranof Island 1,473 2%216,746 47%90,047 20%218,219 39%91,520 16% Chichagof Island 5,284 10%29,950 51%16,251 28%35,234 32%21,535 20% Juneau 48,709 21%977,503}46%450,854 21%1,026,212 44%)499,563 21% Northern 7,431 12%77,923 53%32,009 22%85,354 40%39,440 19% Prince of Whales 3,313 14%180,036 49%80,603 22%183,349 47%83,916 21% Upper Lynn Canal 16,860 38%172,791 50%74,962 22%189,651 48%91,822 23% Total Southeast Region 137,122 17%2,083,534 46%923,302 21%2,220,656 42%1,060,424 20% BLACK &VEATCH |Executive Summary 1-43 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 11.The region's limited size directly affects the ability to justify the expansion of the region's transmission network,based on fundamental economics.Simply stated,regional loads are insufficient to result in sufficient flows of electricity over an expanded transmission network to justify the capital and operating costs.This was previously discussed in Section 1.6. 12.One specific resource addition considered in this study was the development of the AK-BC Intertie,which would connect the Southeast region to the BC Hydro transmission network, allowing for the import or export of power to or from British Columbia and the lower-48 states.As discussed in Section 12.0,Black &Veatch conducted a screening analysis of the AK-BC Intertie and concluded that it was not a viable resource under the current conditions. However,given the 50 year time horizon for this study and the volatility of North American power market dynamics and other factors that affect the economic viability of the AK-BC Intertie,it is impossible to conclude with absolute certainty that the AK-BC Intertie would not,under any set of conditions,become a viable project.Therefore,it is appropriate to consider the various set of conditions under which the AK-BC Intertie might become economical.The following is a list of such conditions: The expected monthly profile of electric sales (or purchases)and whether those sales (or purchases)would be under the terms of a long-term firm contract or on the spot market is clearly defined. Prices in potential export markets in North America (principally British Columbia, and the Pacific Northwest and or Southwestern regions of the United States) increase significantly due to capacity and energy shortages,continued increases in applicable RPSs,and or increased environmental regulations that cause existing generation facilities to be retired or prohibit planned facilities from being built. For potential import,costs for new generation will have to increase substantially over the costs for potential hydroelectric projects capable of meeting Southeast Alaska's energy requirements.This could be the result of large project cost increases,or significant load increases that exceed the availability of lower cost regional hydroelectric projects,or regulatory and or legislative prohibitions to the development of Southeast resources. As discussed in Section 12.8,a detailed business plan should be developed prior to the AK- BC Intertie being considered a viable project in the future.The development of this business plan needs to include:1)technical studies,2)market assessment,3)risk assessment,and 4)operational assessment.In the lower-48 states,it is typically the responsibility of project proponents to complete and or fund these studies. 13.In addition to comparing the total capital costs and CNPV costs,over the 50 year planning horizon for each of the two Integrated Cases (i.e.,the Optimal Hydro/Transmission Case and Optimal DSM/EE,Biomass and Other Renewables Case),Black &Veatch evaluated how long the next hydro project could be delayed as a result of the aggressive implementation of DSM/EE and biomass conversion programs.These results are shown in Figures 20-2 through 20-9,located in Section 20.0. BLACK &VEATCH |Executive Summary 1-44 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN HIGHEST VALUE USE OF HYDRO AND THE FUTURE ROLE OF BIOMASS As has been discussed previously in this report,communities with access to low-cost hydroelectric power have seen a recent increase in the number of conversions to electric space heating.While these conversions have resulted in significant savings for those residential and commercial customers who have made the conversions,they have led to a significant reduction in the amount of hydroelectric capacity available to meet future electric demands.As a result,without the development of new hydroelectric or other generation projects or restrictions on future conversions to electric space heating,all customers in these communities will pay higher rates for electricity as a result of higher future use of diesel for electric generation,and communities will be denied new economic development opportunities. This reality raises the question,what is the highest value use of current and future hydroelectric power?An important element of this question is the alternative energy sources that can be used to meet specific end- uses.For example,in the case of lighting,there is no practical alternative to electricity that provides the same level of quality of life.However,in the case of space heating,there are alternatives such as biomass, including the use of wood pellets,and heat pumps. Given the fact that the region's transmission network is very limited in terms of the number of communities connected,and the size of loads within the region adversely affect the direct economics of additional transmission segments,hydroelectric power within the region will remain a limited resource.Therefore,the region should carefully consider the best use of this limited resource. Biomass is a particularly good option given the local and abundant nature of this solution,and the relative economics and availability of supplies within the region,both as a short-term solution for the region as well as a long-term solution for certain communities.Our analysis also shows that biomass is economical in most cases even if it is shipped in from the lower 48 states.As discussed elsewhere,one supply chain-related challenge that should be addressed for wood biomass to be utilized to its optimal level is the development of one or more pellet manufacturing facilities within the region and securing long-term fiber supplies.This will provide a more secure fuel supply,lower costs,and produce jobs within the region. BLACK &VEATCH |Executive Summary 1-45 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Conclusions -Moving Forward 14.Given the previous discussion,Black &Veatch believes that it is important for the region to think about the future in two phases with regard to long-term resource decisions,as shown in Table 1-10 and discussed below: Phase1 -the next five years (2012-2016) Phase 2 -beyond the next five years (2017 and beyond) Table 1-10 General Strategy for Adding Regional Resources Feocners [bet pea|.RESOURCES Sa |Wee (20122016)[(201ZAND BEYOND) Committed Resources V¥ DSM/EE Programs Vv Vv Biomass Conversion Programs Vv Vv Next Increment of Hydro and Other Vv Renewable Projects In Phase 1,the regional emphasis should be on adding the Committed Resources,and aggressively pursuing the implementation of DSM/EE and biomass space heating conversion programs. In parallel,the region should complete reconnaissance and feasibility studies of all potential hydro projects listed in the Refined Screened Potential Hydro Project List (see Table 1-2). These reconnaissance and feasibility studies should be completed consistent with the AEA- directed process and standards. Finally,as part of Phase 1,this IRP should be updated in the 2014-2015 time frame to make the longer-term resource selections that would be implemented in Phase 2.By updating the Southeast Alaska IRP in 2014 or 2015,the region will have:1)better project-specific information to make a definitive selection among specific alternative hydro and other renewable projects,and 2)actual experience with the implementation of DSM/EE and biomass conversion programs to better determine the level to which the region,and individual subregions,can rely on these programs over the long term. In Phase 2,the region would develop the hydro and other renewable projects,as well as continue to implement DSM/EE and biomass conversion programs as appropriate,based on the results of the updated Southeast Alaska IRP. 15.This two-phase approach is appropriate given the following challenges that exist with each resource type: Hydro Projects -The need to improve the quality and inclusiveness of project- specific estimates regarding capital costs,operating costs,annual and monthly energy output,ability to utilize annual and monthly energy outputs in nearby load centers,and so forth. BLACK &VEATCH |Executive Summary 1-46 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 16. DSM/EE Programs -Issues related to DSM/EE programs include the following: The total market potential for these programs (which will be addressed in large part by the AEA's current Energy End Use Data Collection Project). The ability of the region,and subregions,to implement a comprehensive and aggressive set of DSM/EE programs. Determining the most effective way to leverage existing DSM/EE programs in the region (including the existing AHFC,AEA,and RurAL CAP programs discussed in Section 10.0). Determining the most effective way to deliver these programs (e.g.,each utility developing its own DSM/EE programs,a regional entity that would develop and deliver these programs in close coordination with local utilities, and or development of public-private partnerships to deliver these programs). Actual response of residential and commercial customers to the DSM/EE programs offered. Biomass Conversion Program -Issues related to a regional biomass conversion programs include the following: Future price of oil which will impact the level of conversions from diesel space heating that will occur. The total market potential for biomass conversion in each subregion. The ability of the region,and subregions,to implement an aggressive biomass conversion program. Determining the most effective way to leverage existing biomass conversion programs in the region (e.g.,biomass programs being implemented by the Coast Guard,USFS,and Sealaska). Similar to the DSM/EE discussion above,there is a need to determine the most effective way to deliver these programs (e.g.,individual utilities,a regional entity,and or public-private partnerships). Actual receptiveness of residential and commercial customers to biomass conversions. Transmission Projects -while none of the proposed transmission interconnections considered were selected for inclusion in the region's expansion plan (other than the transmission Committed Resources),the State may decide to move forward with one or more of these interconnections for noneconomic reasons. It is Black &Veatch's opinion that the long-term definitive selection of specific potential projects cannot be made until:1)these challenges are addressed,2)better information is available regarding the capital and operating costs of specific projects,and 3)experience is gained with regard to the implementation of DSM/EE and biomass conversion programs. Again,the level of these uncertainties drive home the need for the region to:1)develop multiple options,2)move toward a more balanced portfolio of resources (i.e.,the solution to the region's energy challenges is not as simple as adding more hydro and some transmission),and 3)maintain flexibility with regard to the selection of resource options over time as the uncertainties above become resolved. The Preferred Resource Lists that were developed for each subregion as part of this study, which are discussed in more detail in Section 17.0 and Section 21.0,include a portfolio of resources that have been identified based on the specific circumstances faced by each subregion.If implemented,the Southeast Alaska IRP will lead to the following: BLACK &VEATCH |Executive Summary 1-47 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 17. 18. The development ofa more diverse resource mix resulting from a regional planning process. Allow for moving forward with certain resources now (including the Committed Resources,DSM/EE,and biomass programs),while developing better fact-based information to make long-term resource decisions. A reduction in the overall costs for electricity and heating. Greater reliance on DSM/EE and renewable resources,including hydroelectric power and biomass,and a lower dependence on diesel. A somewhat more expansive transmission network as a result of the completion of the transmission Committed Resources. A stronger foundation upon which to base future economic development efforts. Included in the Preferred Resource Lists are seven Committed Resources,which are described in Table 1-11.As discussed earlier in this report,these hydroelectric and transmission projects were identified by the AWG (adopted through a resolution)as projects that should be developed because of the economic benefits that they would provide to the region.As stated in the AWG resolution,these "projects have been under development for many years,have completed or nearly completed exhaustive FERC licensing or similar process,and have broad public support.”From a modeling perspective, consistent with this AWG directive,Black &Veatch treated these projects as existing resources. While these Committed Resources are included in the Preferred Resource Lists,it is important to note that significant work is still required to bring these projects to reality. For example,several of the hydroelectric projects on this Committed Resource list require additional engineering and design work,as well as additional environmental and permitting work,before they can move to construction.For the transmission projects on the Committed Resource list,not only is additional engineering and design,environmental and permitting work,required but operational agreements with SEAPA must also be developed, as well as construction funding acquired. As stated above,the region should significantly increase the implementation of DSM/EE programs consistent with the State's target of 15 percent increase in energy efficiency by 2020,building upon the current programs offered by the AHFC,AEA,and RurAL CAP.These programs will lower total energy requirements,thereby reducing the draw on hydro resources in those communities with access to hydro power and lowering costs and or improve the quality of living in all communities.However,to achieve these projected savings,the region will need to address a number of important delivery issues,including: 1)how best to leverage existing AHFC,AEA,and RurAL CAP programs,2)whether additional DSM/EE programs should be developed on a regional basis and implemented in close coordination with local utilities versus requiring each utility to develop its own DSM/EE-related staff and skills,3)establishing region-specific costs for higher efficient appliances and equipment,and 4)the financing of the up-front DSM/EE program development costs,as well as ongoing incentives to residential and commercial customers to install more efficient appliances and equipment. BLACK &VEATCH |Executive Summary 1-48 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-11 Committed Resources ESTIMATEDREMAININ' PITAL LOS D Py URAL) Blue Lake Expansion Hydro Expansion will increase the capacity of the existing Blue Lake Hydro Project by $1.0 (Note 1) (Sitka,City of Sitka Electric)an estimated 8 MW and increase the average annual energy from the project by approximately 34,500 MWh. Gartina Falls Hydro New run-of-river project near Hoonah that will provide an estimated 0.44MWof $6.3 $5.5 (Hoonah,IPEC)capacity and approximately 1,800 MWh of average annual energy. Reynolds Creek Hydro New storage project located that will provide an estimated 5 MW of capacityand $28.6 $0.0 (Note 2) (Hydaberg,Haida Energy and approximately 19,300 MWh of average annual energy. AP&T) Thayer Creek Hydro New run-of-river project that will provide an estimated 1 MW of capacity and $15.2 $6.0 (Note 3) (Angoon,Kootznoowoo,Inc.)approximately 8,400 MWh of average annual energy. Whitman Lake Hydro New storage project at an existing lake located that will provide an estimated 4.6 $25.8 $3.3 (Note 1) (Ketchikan,KPU)MW of capacity and approximately 15,900 MWh of average annual energy. Kake -Petersburg Intertie New 69 kV overhead and submarine cable transmission line connecting Kake and $52.9 (Note 4)$52.9 (Note 4) (Kwsan Electric Transmission Petersburg. Intertie Cooperative) Ketchikan -Metlakatla Intertie New 34.5 kV overhead and submarine cable transmission line connecting $12.7 $8.2 (Metlakatla Indian Community)Ketchikan and Metlakatla. Totals $238.0 $76.9 Notes: 1.Local bonding under way.Community request pending. 2.Authorized loans being negotiated. 3.$7.0 million Renewable Energy Grant Round 5 award recommendation. 4.Cost estimate does not include existing grants. BLACK &VEATCH |Executive Summary 1-49 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 19. 20. 21. Also,as stated above,the region should pursue policies and programs that reduce the number of residential and commercial customers converting to electric resistance space heating.One particularly promising resource option to accomplish this goal is the regional adoption of wood pellet technology for space heating.Additionally,rate structures could be modified (e.g.,increased rates for higher consumption levels)to discourage electric resistance space heating conversions.Similar to DSM/EE programs,this resource option would provide benefits to all subregions.Additionally,the region should address a number of important delivery issues,including:1)how best to leverage current programs underway within the region to encourage the adoption of wood pellet technologies,2)whether additional wood pellet programs should be developed on a regional basis and implemented in close coordination with local utilities versus relying solely on private parties and or each utility to develop their own wood pellet-related staff and skills,3)establishing region- specific customer educational and contractor certification programs,and 4)the financing of the up-front wood pellet conversion costs. There are a number of risks and uncertainties regardless of the resource options chosen, including the following categories,which are discussed in Section 1.10 and Section 19.0 along with their potential implications. Resource Potential Risk Project Development and Operational Risks Fuel Supply Risks Environmental Risks Transmission Constraint Risks Financing Risks Regulatory/Legislative Risks Price Stability Risks In some cases,these risks and uncertainties might completely eliminate a particular resource option.Due to these risks and uncertainties,it will be important for the region to maintain flexibility so that changes to the Preferred Resource Plan can be made,as necessary,as these resource-specific risks and uncertainties become clearer or get resolved. Another risk facing the region is the potential for large load increases resulting from economic development efforts (e.g.,the development of one or more mines}.Although the High Scenario Load Forecasts,discussed in Section 8.0,were developed to illustrate the potential for significantly higher load growth than shown in the Reference Scenario Load Forecasts,they may not adequately capture the impact of a large mine load increase (or any other large,discrete increase)because of the potential size of mine loads and the fact that,if developed,the impact of a new mine would be site specific.Due to the speculative nature of these potential load increases,it is impossible in this study to identify how these potential loads would be served.Most proposed mines are in remote locations and far removed from potential grid access,It is likely that hydro resources in proximity to the mines could be developed to displace diesel-generated power.Given the uncertainties associated with the development of potential mines,their inclusion as part of the unspecified loads in the High Scenario Load Forecast is a prudent method of addressing them. BLACK &VEATCH |Executive Summary 1-50 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 22.Given the size of the Southeast region and the financial capabilities of the region's utilities,it will be critical for the State to continue to provide financial assistance to enable the region to lower costs and meet its electric and heating needs going forward.Black &Veatch's recommendations regarding the capital projects,and other supporting studies and actions, which should be considered for State assistance are discussed in Section 21.0,Furthermore, Section 18.0 provides the results of Black &Veatch's evaluation of alternative options for State financial assistance. 23.Integrated resource plans are typically updated on a periodic basis,most typically every 3 to 5 years to reflect changes that occur over time,as well as other alternative resources and projects that are identified.Given the uncertainties that exist in the Southeast,coupled with the limited development work that has occurred with regard to many of the resources contained in the Preferred Resource Lists,it will be important to update the Southeast Alaska IRP on a periodic basis. RELATIONSHIP BETWEEN THE SOUTHEAST ALASKA IRP AND THE "ALASKA ENERGY PATHWAY” In July 2010,the AEA published "Alaska Energy Pathway -Toward Energy Independence.”This report,which was the result of extensive consultations between the AEA and communities throughout Alaska,was developed to provide direction and focus to the goal that all Alaskans should have access to affordable power.This report was part of the AEA's effort to develop a long-term energy strategy for the State of Alaska.The first step in that effort was the 2009 publication of "Alaska Energy-A First Step Toward Energy Independence,"which contained information on available energy technologies and a database of community energy resources. Alaska Energy Pathway laid out an overall direction for the State,including aggressive targets for energy efficiency and conservation as well as renewable energy development;recommendations which have been adopted,with certain modifications,by the State Legislature and Governor.For areas of the State outside of the Railbelt Region,the report focused on the use of locally available resources whenever possible to meet energy needs for heat and electricity.An assessment of possible options for each community was completed, yielding a potential pathway for each community.This resulted in a recommended community resource development strategy that would involve the deployment of renewable resources,including hydroelectric power,where economically feasible,but also the continued use of diesel as a major fuel source for both electricity and heating. There are many similarities between the Southeast Alaska IRP and the Alaska Energy Pathway,including the underlying objectives and resources considered.In that sense,this IRP is a logical next step on the journey to developing community plans to lower energy costs.The Southeast Alaska IRP,however,differs from the Alaska Energy Pathway in several important ways.First,the analysis completed as part of this IRP (e.g.,projected heating and electric load forecasts,the costs of available resources including generation and transmission,etc.)was at a more granular level of detail.Second,the analytical approach was different in that it was more detailed and considered the interaction between alternative resources in more detail. Finally,the level of involvement of regional stakeholders throughout the development of this IRP was greater. As a result,the results of this IRP,including the Preferred Resource Lists for each subregion,represent a more comprehensive and tailored set of near-term and long-term solutions for addressing the region's energy challenges.In that sense,the Southeast Alaska IRP builds upon the Alaska Energy Pathway and provides a more detailed pathway for the Southeast region. BLACK &VEATCH |Executive Summary 1-51 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.12 RECOMMENDATIONS This subsection summarizes the overall recommendations arising from this study are grouped in two categories and summarized below.These recommendations are discussed in more detail in Section 20. Recommendations -Capital Projects Recommendations -Other Recommendations -Capital Projects The following general actions should be taken to ensure the timely implementation of the Southeast Alaska IRP: 1,As stated in Subsection 1.12,Black &Veatch believes that the region should move forward with regard to long-term resource decisions,as follows: Phase 1 -the next 5 years (2012-2016) Phase 2 -beyond the next 5 years (2017 and beyond) 2.The State should work closely with the region's utilities and other community stakeholders to confirm the recommended Preferred Resource Lists for the region as a whole,and for each subregion,resulting from this study. 3.Black &Veatch believes that the region-wide Preferred Resource List,provided in Table 1-12,should be the starting point for the selection of resources to be developed to meet the region's future energy requirements.This table is based on the subregion Preferred Resource Lists discussed in Section 17.0. BLACK &VEATCH |Executive Summary 1-52 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Table 1-12 Region-wide Preferred Resource List Ksovres PHASE 1 RESOURCES:2012-2016 SEAPA Admiralty Island Baranof Island Chichagof Island Juneau Northern Kake-Petersburg Interconnection Ketchikan-Metlakatla Interconnection Whitman Lake Hydro Diesel DSM/EE Biomass (80 percent/30 percent) Thayer Creek Project DSM/EE Biomass (80 percent/30 percent) Blue Lake Hydro Diesel DSM/EE Biomass (80 percent/30 percent) Gartina Falls Hydro Diesel DSM/EE Biomass (80 percent/30 percent) Diesel DSM/EE Biomass (80 percent/30 percent) Diesel DSM/EE Biomass (80 percent/30 percent) ESTIMATED CAPITAD)COSTS ($'000,000)OPERATION DATE (COD) 52.9 8.200 13.40 51.1 3.1 36.7/13.8 6.00) 0.00) 0.8/0.3 1.00) 20.2 0.9 14.1/5.3 5.5 0.3 0.0 1.9/0.7 20.2 3.6 63.3/23.7 2.8 0.0 4.1/1.5 2012-2016 2012-2016 2012-2016 2016 2012-2016 2012-2016 2015 2012-2016 2012-2016 2012-2016 2015 2012-2016 2012-2016 2012-2016 2012-2016 2012-2016 2012-2016 2012-2016 2012-2016 2012-2016 PROJECTED FOMMERCIAL, BLACK &VEATCH |Executive Summary 1-53 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN --RESOURCE} Prince of Wales Reynolds Creek Hydro DSM/EE Biomass (80 percent/30 percent) Upper Lynn Canal DSM/EE Biomass (80 percent/30 percent) PHASE 2 RESOURCES:2017-2061 SEAPA Hydro -Storage (10 MW) Diesel DSM/EE Biomass (80 percent/30 percent) Admiralty Island Diesel DSM/EE Biomass (80 percent/30 percent) Baranof Island Diesel DSM/EE Biomass (80 percent/30 percent) Chichagof Hydro Run of River (1 MW) Diesel DSM/EE Biomass (80 percent/30 percent) Juneau Hydro -Storage (10 MW) Diesel DSM/EE Biomass (80 percent/30 percent) ESTIMATED CAPITALCOSTS($000,000) 0.000 0.0) 8.9/3.3 0.2 9.7/3.6 193.1 202.8 102.1 42.1/15.8 1.7 0.1 0.7/0.3 83.4 31.4 16.1/6.0 21.7 6.4 0.8 1.6/0.6 237.5 216.6 124.5 79.5/29.8 PROJECTED COMMERCIAT)OPERATION DATE (COD 2014 2012-2016 2012-2016 2012-2016 2012-2016 2044 2017-2061 2017-2061 2017-2021 2017-2061 2017-2061 2017-2021 2017-2061 2017-2061 2017-2021 2035 2017-2061 2017-2061 2017-2021 2051 2017-2061 2017-2061 2017-2021 BLACK &VEATCH |Executive Summary 1-54 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Lorre Northern Prince of Wales Upper Lynn Canal (Additional funds required to complete project considering pending grant requests. |RESOURCE Hydro -Storage (1 MW) Hydro -Run of River (1 MW) Diesel DSM/EE Biomass (80 percent/30 percent) Diesel DSM/EE Biomass (80 percent/30 percent) Hydro -Storage (1 MW) Diesel DSM/EE Biomass (80 percent/30 percent) @)Cost is zero due to rounding.Actual cost is 0.002. ESTIMATED CAPITALCOSTS($000,000). 18.6 32.8 23.3 1.3 4.7/1.8 16.6 66.4 10.2/3.8 55.4 19.8 5.4 11.1/4.2 PROJECTED COMMERCIALOPERATIONDATE(COD) 2017 2049 2017-2061 2017-2061 2017-2021 2017-2061 2017-2061 2017-2021 2054 2017-2061 2017-2061 2017-2021 BLACK &VEATCH |Executive Summary 1-55 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN Recommendations -Other Other actions,related to the implementation of this IRP,that should be undertaken include: 4.The State and the region should develop a public outreach program to inform the general public regarding the Southeast Alaska IRP and the Preferred Resource Lists,including the costs and benefits of developing the projects included.Additionally,the benefits of DSM/EE and biomass conversions should be included as part of this public outreach program. 5.The State Legislature should make decisions regarding the level and form of State financial assistance that will be provided to assist the region's utilities in developing the generation resources and transmission projects identified in the Preferred Resource List. 6.The AEA proposes a decision framework and policy requiring developers of each potential project to "While new energy infrastructure develop a standard set of information,at an is important and necessary,the appropriate level and quality of detail,before any State needs to oversee development to assure a safe and sane approach with the good of its residents in mind.” Rural Community Council decisions are made about which projects should be developed.The AEA proposes that this policy would apply to all projects for which the State will be providing financial assistance,and it recommends that it also apply to cases where the project proponents decide not to seek State financial assistance so that the permitting agencies can compare the benefits consistently between all projects.This decision framework and related information standards are intended to yield a minimum threshold of information, thereby providing the foundation of decisions regarding the next increment of hydro projects.They are also intended to identify any fatal flaws that would prohibit a proposed project from being developed. Black &Veatch believes that this type of decision framework and information standards should be adopted,as they will effectively address the issues associated with the quality and inclusiveness of information available on specific projects and enable the region to make more fact-based decisions regarding which hydro projects should be developed. 7.The State Legislature should appropriate funds for the initial stages of the development of a regional DSM/EE program to supplement current programs offered by the AHFC,AEA,and RurAL CAP.This appropriation should be directed at the required elements of a comprehensive DSM/EE program,which are described in Section 20.0. It should be noted that the Southeast region can learn from the lessons of others with regard to the development and execution of a comprehensive DSM/EE program.Many regions of the country,as well as other countries,have been delivering DSM/EE programs for a number of years;some utilities have been implementing DSM/EE programs for 30 years.Consequently,there are many "lessons learned,”and the region should do everything it can to take advantage of this experience. 8.The State Legislature should appropriate funds for the initial stages of the development ofa regional biomass conversion program to supplement current programs offered in the region.This appropriation should be directed at the required elements of a comprehensive biomass conversion program,which are described in Section 20. BLACK &VEATCH }Executive Summary 1-56 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 10. 11. 12. 13. 14. 15. 16. Again,it should be noted that the Southeast region can learn from the lessons of others with regard to the development of biomass space heating programs,especially those programs that have been implemented in Europe. Evaluate the potential benefits and costs of forming a regional entity,or utilizing an existing entity,to develop and deliver DSM/EE programs,in close coordination with the region's utilities,to residential and commercial customers throughout the Southeast region.Black & Veatch does not believe that the region will be successful in developing an aggressive DSM/EE program if each utility has to develop:1)its own DSM/EE program,including hiring the appropriate staff,2)detailed DSM/EE program plans,3)a set of qualified vendors,and 4)an education and marketing campaign. Evaluate the potential benefits and costs of forming a regional entity,or utilize an existing entity,to accelerate the development of a biomass conversion program. Consistent with the need to improve the quality and inclusiveness of available information on potential hydro projects,the State Legislature should appropriate funds to assist hydro project proposers complete high-level reconnaissance studies.These relatively low-cost reconnaissance studies would provide the necessary information to determine whether a proposed hydro project should move forward to the preparation of a FERC license application. For those proposed hydro projects that meet the needs identified as the next increment of hydro and have completed reconnaissance studies that show they are sufficiently viable to move to the FERC license process,the State Legislature should appropriate funds to assist project proposers prepare the FERC license application.The FERC licensing process is a multi-year and multi-million dollar process that could prohibit the development of some feasible projects without State financial assistance. Complete a regional technical and economic market potential assessment,including the identification of the most attractive sites,for all non-hydro renewable resources included in the Preferred Resource List. Similar to many proposed hydro projects,there is a need to improve the quality and inclusiveness of available information on potential non-hydro renewable projects.Asa result,the State Legislature should appropriate funds to assist non-hydro renewable project proposers complete high-level reconnaissance studies.These reconnaissance studies would provide the necessary information to determine whether a proposed renewable project should move forward to the next step of the development process. Support further development of emerging technologies (e.g.,tidal and wave power)to encourage the development of additional resource options to provide the region with additional future generation options. Develop a standard PSA that could be used by project proponents and the potential purchasers (e.g.,utilities)ofa project's power as the starting point for negotiations. Financing for potential projects will not occur without a clear identification of who will buy that power,and the terms and conditions associated with the sale.The existence of a standard PSA will quicken the time required to negotiate an agreement and lower the related costs. BLACK &VEATCH |Executive Summary 1-57 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 17. 18. 19. 20. 21. 22. Consider the development of an open access policy for the region's transmission network, based on the FERC's Open Access Transmission Tariff (OATT),which governs the planning and operation of the transmission grids in the lower-48 states.Over a number of years,and as a result of thousands of hours of negotiation and litigation among industry stakeholders, the FERC has developed and implemented a standard OATT which governs the terms and conditions of service for transmission service in the lower-48 states.While transmission service in Alaska is not under the jurisdiction of the FERC,Black &Veatch believes that the FERC OATT should be the starting point for the development of a transmission open access policy for the region and State. Consistent with previous comments,this IRP should be updated in the 2014-2015 time frame to make the longer-term resource selections that would be implemented in Phase 2. By updating the Southeast Alaska IRP in 2014 or 2015,the region will have:1)better project-specific information to make a definitive selection among specific alternative hydro and other renewable projects,and 2)actual experience with the implementation of DSM/EE and biomass conversion programs to better determine the level to which the region,and individual subregions,can rely on these programs over the long term. The regional utilities,perhaps with the assistance of the AEA,should evaluate the benefits of developing tariff structures that better reflect actual costs,particularly with regard to the additional long-term costs that will be incurred as a result of electric space heating conversions.As part of this effort,workshops should be held to focus on the issue that the last block in tariffs need to better reflect incremental costs.Additionally,cost-of-service studies should be completed for each utility facing the impact of electric space heating conversions to determine what rates should be for higher consumption. To the extent that electric space heating conversions continue to increase a utility's electric load,those utilities should evaluate the benefits of developing weather normalized load forecasts.These activities should be as part of this effort:1)hold workshops to focus on the need for,and approaches to,weather normalized load forecasting methodologies, 2)develop a standard weather normalized load forecasting methodology,and 3)develop short-term weather normalized load forecasts for each relevant utility. The State and the region's utilities should work closely with resource agencies to identify changes that can be made to streamline State and Federal regulatory and permitting processes related to the resources contained in the Preferred Resource List. Federal legislative and regulatory activities,including those related to emissions regulations,should be monitored closely and influenced to the degree possible. 1.13 NEAR-TERM REGIONAL IMPLEMENTATION ACTION PLAN (2012-2014) This section provides Black &Veatch's recommended near-term implementation plan,covering the period from 2012 to 2014,Black &Veatch's recommended actions,which are consistent with the Preferred Resource Lists presented in Section 17.0 and the recommendations resulting from this study that are discussed in detailed in Section 20.0,are grouped into the following categories: Capital Projects -SEAPA Subregion. Capital Projects -Other Subregions. Regional Supporting Studies and Other Actions. BLACK &VEATCH |Executive Summary 1-58 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN The near-term implementation plans shown in the following tables serve two objectives.First,they identify the steps that should be taken during the next 3 years regardless of the alternative resource plan that is chosen as the preferred resource plan.Second,they are intended to maintain flexibility as the uncertainties and risks associated with each alternative resource become clearer or resolved. 1.13.1 Capital Projects -SEAPA Subregion Table 1-13 Near-Term Implementation Action Plan -Capital Projects -SEAPA Subregion |APITAL PROJECTS j 'DESCRIPTIO }|IME FRAMEM |ESTIMATED COSTS Committed Resources e Kake-Petersburg Transmission Intertie (SEI-2)2013-2015 $48,590,000 e Estimated total cost -$52,938,000 ¢Previous grants -(1) ¢Remaining project cost -$52,938,000 e Ketchikan-Metlakatla Transmission Intertie (SEI-3)2012-2013 $8,225,200 e Estimated total cost -$12,725,200 ¢Previous grants -$4,500,000 e Remaining project cost -$8,225,200 e Whitman Lake Hydroelectrice-Estimated total cost -$25,830,000 2012-2014 $13,400,000 e Previous grants -$12,420,000 e Remaining project cost -$13,400,000 Replacement of Existing Diesel Generation Facilities 2012 $39,685,000 DSM/EE Programs 2012 $69,100 2013 $169,900 2014 $395,300 Biomass Conversion Program (80 Percent/30 Percent)2012 $6,955,600/$2,608,400 2013 $7,079,600/$2,654,800 2014 $7,372,300/$2,764,600 SEAPA Subregion Total (2012-2014)$136,290,000/$122,910,300 (80 Percent Biomass/30 Percent Biomass) (0)The previous grants were not included in D.Hittle's estimated costs. BLACK &VEATCH |Executive Summary ;1-59 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.13.2 Capital Projects -Other Subregions 1.13.2.1 Admiralty Island Subregion Table 1-14 Near-Term Implementation Action Plan -Capital Projects -Admiralty Island Subregion r [CAPITAL PROJECTS} 'DESCRIPTION Bi|JIMEFRAMESR |ESTIMATED COST Committed Resources e Thayer Creek Hydroelectric 2012-2016 $6,000,000 e Estimated total cost -$15,201,100 e Previous and pending grants -$9,201,100 e Remaining project cost -$6,000,000 DSM/EE Programs 2012 $100 2013 $100 2014 $300 Biomass Conversion Program (80 Percent/30 Percent)2012 $144,000/$54,000 2013 $108,600/$40,700 2014 $249,500/$93,600 Admiralty Island Subregion Total (2012-2014)$6,502,600/$6,188,800 (80 Percent Biomass/30 Percent Biomass) 1.13.2.2 Baranof Island Subregion Table 1-15 Near-Term Implementation Action Plan -Capital Projects -Baranof Island Subregion ||TIME FRAMERMR |ESTIMATED COSTE Committed Resources e Blue Lake Hydro 2012-2015 $1,000,000 e Estimated total cost -$96,500,000 e Previous State funding -$49,000,000 e Previous and pending bond net proceeds - $48,000,000 ¢Remaining project cost -$1,000,000 Replacement of Existing Diesel Generation Facilities 2012 $20,220,000 DSM/EE Programs 2012 $20,800 2013 $50,800 2014 $118,100 Biomass Conversion Program (80 Percent/30 Percent)2012 $2,663,700/$998,900 2013 $2,664,400/$999,200 2014 $2,825,900/$1,059,700 Baranof Island Subregion Total (2012-2014)$29,563,700/$24,467,500 (80 Percent Biomass/30 Percent Biomass) BLACK &VEATCH |Executive Summary 1-60 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.13.2.3 Chichagof Island Subregion Table 1-16 Near-Term Implementation Action Plan -Capital Projects -Chichagof Island Subregion CAPITAL PROJECTS ] ||SIME FRAMEQM®|ESTIMATED COSTE Committed Resources ¢=Gartina Falls Hydroelectric 2012-2015 $5,480,000 o Estimated total cost -$6,330,000 o Previous grants -$850,000 o Remaining project cost -$5,480,000 Replacement of Existing Diesel Generation Facilities 2012 $303,500 DSM/EE Programs 2012 $600 2013 $1,400 2014 $3,100 Biomass Conversion Program (80 Percent/30 Percent)2012 $313,700/$117,600 2013 $417,000/$156,400 2014 $327,400/$122,800 Chichagof Island Subregion Total (2012-2014)$6,846,700/$6,185,400 (80 Percent Biomass/30 Percent Biomass) 1.13.2.4 Juneau Area Subregion Table 1-17 Near-Term Implementation Action Plan -Capital Projects -Juneau Area Subregion Replacement of Existing Diesel Generation Facilities 2012 $20,220,000 DSM/EE Programs 2012 $82,200 2013 $201,500 2014 $468,800 Biomass Conversion Program (80 Percent/30 Percent)2012 $11,379,500/$4,267,300 2013 $12,016,400/$4,506,200 2014 $12,675,700/$4,753,400 Juneau Area Subregion Total (2012-2014)$57,044,100/$34,499,400 (80 Percent Biomass/30 Percent Biomass) BLACK &VEATCH |Executive Summary 1-61 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.13.2.5 Northern Subregion Table 1-18 Near-Term Implementation Action Plan -Capital Projects -Northern Region Subregion [CAPITAL PROJECTS'PESCRIPTIO ]|TIME FRAMEMMM |ESTIMATED COSTA Replacement of Existing Diesel Generation Facilities 2014 $2,790,200 DSM/EE Programs 2012 $900 2013 $2,100 2014 $4,700 Biomass Conversion Program (80 Percent/30 Percent)2012 $780,700/$292,800 2013 $749,200/$281,000 2014 $828,200/$310,600 Northern Region Subregion Total (2012-2014)$5,156,000/$3,682,300 (80 Percent Biomass/30 Percent Biomass) 1.13.2.6 Prince of Wales Subregion Table 1-19 Near-Term Implementation Action Plan -Capital Projects -Prince of Wales Subregion "APITAL PROJECT: TIME FRAMERS ESTIMATED (OST Committed Resources e Reynolds Creek Hydroelectric 2012-2014 $0 e Estimated total cost -$28,581,500 e Previous and pending grants and loans - $28,581,500 e Remaining project cost -$0 DSM/EE Programs 2012 $100 2013 $100 2014 $200 Biomass Conversion Program (80 Percent/30 Percent)2012 $1,339,800/$502,400 2013 $1,549,600/$581,100 2014 $1,757,100/$658,900 Prince of Wales Subregion Total (2012-2014)$4,646,900/$1,742,800 (80 Percent Biomass/30 Percent Biomass) BLACK &VEATCH |Executive Summary 1-62 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN 1.13.2.7 Upper Lynn Canal Subregion Table 1-20 Near-Term Implementation Action Plan -Capital Projects -Upper Lynn Canal Subregion ESTIMATEDCOsTs DSM/EE Programs $3,500 $8,700 $20,500 Biomass Conversion Program (80 Percent/30 Percent)2012 $1,624,700/$609,300 2013 $1,828,200/$685,600 2014 $1,839,600/$689,800 Upper Lynn Canal Subregion Total (2012-2014)$5,325,200/$2,017,400 (80 Percent Biomass/30 Percent Biomass) 1.13.3 Regional Supporting Studies and Other Actions Table 1-21 Near-Term implementation Action Plan -Regional Supporting Studies and Other Actions wer er sede Soe General Public Outreach/Education Program 2012 $250,000 Regional DSM/EE Program Start-up Costs 2012-2013 $2,325,000 Regional Biomass Conversion Program Start-up Costs 2012-2013 $2,225,000 Formation of Regional DSM/EE Entity Start-up Costs 2012 $500,000 Formation of Regional Biomass Conversion Entity Start-up 2012 $500,000 Costs Hydroelectric Project-specific High Level Reconnaissance 2012-2013 $2,000,000 Studies Hydroelectric Project-specific FERC License Application 2012-2014 $5,000,000 Preparation Regional Technical/Economic Market Potential 2012 $500,000 Assessment of Non-Hydro Renewable Technologies Other Renewable Project-specific High Level 2012-2014 $1,000,000 Reconnaissance Studies Support Development of new Technologies (e.g.Tidaland 2012-2014 $1,000,000 Wave Power) Develop Standard Power Sales Agreement 2012 $200,000 Consider Development of Open Access Policy and Related 2012 $250,000 Tariff (including terms and conditions of service) BLACK &VEATCH |Executive Summary 1-63 Alaska Energy Authority |SOUTHEAST ALASKA INTEGRATED RESOURCE PLAN IME FRAME; Update Southeast Alaska IRP in 2014 2014 $750,000 Support Development of Tariff Structures That Better 2012-2013 $1,550,000 Reflect Costs Support Development of Weather Normalized Load 2013 $375,000 Forecasts Total $18,425,000 BLACK &VEATCH |Executive Summary 1-64