July 11, 2011
Congratulations to Chugach Electric Association and CIRI for their work on this project!
Chugach Electric Association in June agreed to purchase power from the Fire Island Wind project. When built, the 17.6-megawatt wind farm will be the largest in Alaska. But the Power Purchase Agreement between Chugach and Fire Island Wind LLC needed approval from the Regulatory Commission of Alaska (RCA). On Oct. 10, the RCA made the decision to give that approval.
Under the contract, the price Chugach Electric Association will pay for the wind power will remain constant for the next 25 years, a typical advantage of a renewable energy project that does not rely on fuel with volatile prices. Natural gas prices in Anchorage, in comparison, have more than doubled during the past 10 years, and are expected to continue to rise in the near future.
Download the commission’s ruling here.
Read the AK Dispatch story on the decision.
Fire Island Facts
Fire Island would…
The wind farm would initially include 11 turbines with a total capacity of 17.6 megawatts. Chugach has agreed to purchase up to 48,500 megawatt-hours of power per year from the project, about 4 percent of the utility’s annual 2010 power requirement. The wind power would supplant an estimated 300-500 million cubic feet of natural gas per year, between about 3-5% of Chugach’s current use of about 9 billion cubic feet of gas a year.
Power in 2013
Construction of the turbine sites has already begun. Fire Island Wind LLC, which is a subsidiary of CIRI, plans to install the turbines next summer and expects power to be flowing from the turbines in late 2012.
Wind will cost less over the long term
Under the agreement, Chugach will pay $97 a megawatt-hour for 25 years for wind power. This is more than the $65 per megawatt hour Chugach now pays for natural gas-fired power, but the cost of natural gas will surely go up over the next 25 years while the wind power costs will remain stable. For example, some of the cheapest energy Chugach now purchases is hydroelectricity from the Bradley Lake hydropower plant built in 1991 near Homer. That hydropower cost more than twice that of natural gas-fired power when the plant was built, but is now cheaper because the cost of the hydropower has remained stable.
Wind power is an insurance policy against the inherent uncertainty in the cost of natural gas. Fire Island wind power won’t supply all of our energy needs, but the portion it will supply will be at a fixed stable rate and that will help reduce costs and uncertainty over the long run.
Natural gas supplies for Southcentral Alaska are uncertain
Anchorage utilities are planning to import liquefied natural gas (LNG) as early as 2014 because of shortfalls in supply of local natural gas. In June, the “Long Term Gas Supply Work Group” which includes ENSTAR, Chugach Electric, ML&P and Donlin Creek (a proposed mine project) made a presentation to the RCA, saying they expected a shortfall of up to 2 billion cubic feet of gas in 2014. Right now, the Work Group is not saying where the liquefied natural gas will be purchased, how it will be delivered, or how much it will cost.
Why can’t we just tap the natural gas in Cook Inlet?
There is a lot of natural gas in Cook Inlet. A new USGS report announced a revised estimate of 19 trillion cubic feet of natural gas in Cook Inlet, but that’s gas that technically recoverable, not necessarily economically recoverable. The difference is important. We could harvest snow from Mt. McKinley to make fresh water, but it’s not cost effective.
Alaska is such a relatively small energy user that the cost of developing Cook Inlet gas fields without a large industrial user, like the liquefied natural gas export facility or the Agrium fertilizer plant, is both uncertain and potentially very expensive. A March 2010 study by Petrotechnical Resources of Alaska prepared for Chugach Electric, Municipal Light and Power, and Enstar estimated producers would need to invest between $1.9 to $2.8 billion in natural gas development in Cook Inlet to meet projected natural gas demand from 2010 to 2020.
The Bullet Line?
According to an Alaska Natural Gas Development Authority (ANGDA) report released in July 2011, the estimated cost is $7.5 billion to build a natural gas bullet line from the North Slope to Southcentral Alaska. The line could supply gas by 2020 at an estimated cost just over the current cost of natural gas, according to the report. However, the report says the cost could be quite a bit higher and the project also requires a large industrial customer to purchase half the gas that would be moved through the system because utilities would be only able to use about 250 million cubic feet of gas per day. That large industrial user was not identified in the report.
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