Legislature(2013 - 2014)BUTROVICH 205
02/19/2013 07:30 AM Senate SENATE SPECIAL COMM ON IN-STATE ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Overview: Susitna Watana Hydroelectric Project, Alaska Energy Authority (aea). | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON IN-STATE ENERGY
February 19, 2013
7:30 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator John Coghill, Co-Chair
Senator Peter Micciche
Senator Dennis Egan
Senator Bill Wielechowski
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Cathy Giessel
COMMITTEE CALENDAR
OVERVIEW: SUSITNA-WATANA HYDROELECTRIC PROJECT~ ALASKA ENERGY
AUTHORITY (AEA).
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
SARA FISHER-GOAD, Executive Director
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the Susitna-Watana
Hydroelectric Project.
WAYNE DYOK, Project Manager
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the Susitna-Watana
Hydroelectric Project.
NICK SZYMONIAK, Project Economist
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the Susitna-Watana
Hydroelectric Project.
ACTION NARRATIVE
7:30:05 AM
CO-CHAIR CLICK BISHOP called the Senate Special Committee on In-
State Energy meeting to order at 7:30 a.m. Present at the call
to order were Senators Micciche, Co-Chair Coghill, and Co-Chair
Bishop.
CO-CHAIR BISHOP welcomed Senator Giessel to the committee
meeting.
^OVERVIEW: Susitna Watana Hydroelectric Project, Alaska Energy
Authority (AEA).
OVERVIEW: Susitna Watana Hydroelectric Project, Alaska Energy
Authority (AEA).
7:30:56 AM
CO-CHAIR BISHOP announced that the order of business would be an
overview from the Alaska Energy Authority's (AEA) overview on
the Susitna-Watana Hydroelectric Project (SWHP). He stated that
SWHP could have a 100 year long lasting positive effect for
Alaska. He said he had always been an advocate for hydroelectric
power. He remarked that he was involved in the original SWHP
camp out of Devils Canyon in 1984 and it was moved to the
Bradley Lake Hydroelectric Project (BLHP) site. He stated that
it had been 30 years and SWHP was still being discussed.
7:32:28 AM
CO-CHAIR BISHOP announced that Senator Egan and Senator
Wielechowski had joined the committee meeting.
7:32:38 AM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority,
said AEA had made significant progress with SWHP over the past
two years and noted the committee should have received the
annual AEA Activities Report. She said AEA's mission was to
reduce Alaska's energy costs, invest in energy infrastructure,
and energy portfolio diversification.
7:34:09 AM
MS. FISHER-GOAD said Alaska's energy challenges included:
· Varied regional energy costs by region, an issue beyond the
Railbelt.
· Aging facilities.
· Declining oil production.
· Highly volatile fossil fuel costs, a reason why SWHP was
being reconsidered.
· Dispersed communities and no central grid.
· Short and long-term solutions, AEA had a portfolio of
programs to address Alaska' energy challenges.
MS. FISHER-GOAD said AEA had a 2010 renewable energy goal for 50
percent renewable by 2025. She explained that SWHP would be a
significant way for Alaska to achieve its energy goal by 2025.
She said Alaska's current electricity sources included
hydroelectric at 21 percent and a small percentage from "other
renewables" due to the introduction of wind projects at Eva
Creek, Fire Island, and Kodiak Island. She detailed that
hydropower made up 90 percent of renewables and was a
historically significant resource for Alaska. She said
hydropower was a significant resource for Southeast and
continued to provide some of the lowest cost power in the state.
7:36:39 AM
She said SWHP's history had been studied since the 1950s and
significant work was put into developing SWHP during the 1980s.
She noted that SWHP's current concept had been scaled back to a
smaller project.
She explained that Wayne Dyok was chosen as project manager due
to his past experience with SWHP during the 1980s. She stated
that Mr. Dyok brought over 30 years of experience working on
international and Alaska hydro-projects, specifically on SWHP.
She explained that the preliminary decision document that led to
SB 42 provided AEA with the authority to proceed with SWHP. She
noted that former state Senator Joe Thomas from Fairbanks and
Representative Craig Johnson from Anchorage were both
instrumental in funding AEA to look at large-hydroelectric. She
said AEA had done an analysis of both SWHP and the Chakachamna
Hydroelectric Project. She disclosed that AEA developed a
preliminary decision document that showed SWHP was the project
to pursue. She noted that the work done in the 1980s provided a
significant amount of information for AEA to pursue SWHP and get
the project completed by 2024.
7:39:01 AM
WAYNE DYOK, Project Manager, Alaska Energy Authority, explained
why AEA was moving forward with SWHP as follows:
· Serves 80 percent of the state's population.
· 1,000 jobs during peak construction.
· Stable electricity rates for over 100 years.
· Long-term diversification of Alaska's energy generation
portfolio.
· Clean, reliable energy source.
· Promotes integration of variable power sources like wind.
MR. DYOK addressed SWHP highlights and facts as follows:
· SWHP site would be located approximately 184 miles upstream
from the mouth of the Susitna River and 87 river miles from
Talkeetna.
· 10 mile impediment located downstream at Devils Canyon, an
area that inhibits most anadromous fish from getting
upstream.
· SWHP would provide 50 percent of the Railbelt's energy
needs.
· SWHP would have an installed capacity of 600 megawatts
(MW), and 2.8 million megawatt hours (MMWh) of energy on an
annual basis.
7:41:31 AM
He stated that AEA had been evaluating three alternative
transmission routes for SWHP and the proposed routes were the
same as what was proposed in the 1980s. He said AEA was in the
process of evaluating each transmission route and a final route
selection would occur after AEA's engineering and environmental
analysis. He noted that the transmission route decision would
also involve AEA interacting with landowners, resource agencies,
and people that had an interest in SWHP.
CO-CHAIR BISHOP addressed the Chulitna Corridor and asked if it
had ever been traversed. He noted that the Denali Corridor was
the route used in the 1980s for camp installation.
MR. DYOK answered correct. He said the westerly part of the
Chulitna Corridor had an old pathway that went in a certain
distance and the remaining length would be a unique overland
route.
He addressed SWHP's timeline and noted that the project
resurfaced in 2010 when the state established an energy policy
for a 50 percent renewable goal. He said 2011 was spent
primarily to introduce SWHP and review materials produced in the
1980s. He explained that a pre-application document was produced
in 2011 and filed with the Federal Energy Regulatory Commission
(FERC). He said 2012 was spent primarily to develop a robust
study plan and preliminary fieldwork to get a handle on studies
and see how SWHP had changed over 30 years. He said AEA was in
the implementation phase of the two major study years. He
explained that on February 1, AEA received a FERC study plan
determination for 44 of the 58 studies with the remaining 14
studies potentially being approved with some modifications on
April 1. He revealed that FERC told AEA that the agency had
enough information to make the final determination on the
remaining 14 studies. He said AEA would do the studies with a
goal to file a license application with FERC in September, 2015.
He remarked that AEA would not anticipate receiving a license
until the early part of 2017. He noted that a seven year
construction period would commence for SWHP after a license was
received with the intent to have the project online by 2024.
7:45:21 AM
SENATOR MICCICHE noted that seven years was a long construction
time and asked if that was typical for project the size of SWHP.
MR. DYOK answered yes. He noted that AEA would like to construct
SWHP more quickly, but the project faced northern environment
challenges that did not allow for 12 month concrete placement.
He said AEA would challenge the detail design engineer to look
at expediting the SWHP schedule.
He remarked about current employment as follows:
· 385 total individuals outside of AEA were contracted to
work on SWHP.
· Majority of workers are Alaskans.
· Hydropower licensing experience in the Pacific Northwest
was supplementing the workforce.
· 180 individuals anticipated to be in the field in 2013 to
collecting different types of environmental and
geotechnical information.
CO-CHAIR BISHOP addressed Alaska employment and asked AEA to
work closely with the Alaska Department of Labor and Workforce
Development (ADLWD). He noted that ADLWD had a template that
could be used for employment modeling for a project that was the
size of SWHP.
7:47:33 AM
MR. DYOK reiterated that AEA had prepared a study plan with FERC
approving 44 of the 58 studies. He noted that he had been doing
hydro-work for many years and the level of effort involved with
developing the SWHP study plan was unprecedented. He said AEA
worked closely with the various resource agencies, Alaska native
entities, and interested members of the public to develop the
study plan.
SENATOR WIELECHOWSKI asked what type of salmon impact research
would be done.
MR. DYOK responded that salmon impact was a major focus for
AEA's studies. He said AEA would take information from the 1980s
and look at the current system to develop a habitat based
analysis. He explained that the effects from SWHP's impact on
water flow and water quality would be analyzed. He said AEA was
working closely with the Alaska Department of Fish and Game
(ADFG) and noted ADFG was collecting field work information to
analyze fish populations. He disclosed that AEA had conducted
initial studies on SWHP's impact on the salmon's life stages. He
explained that the salmon study would extend down to the Cook
Inlet and was a substantive program to really get to the heart
of how SWHP might affect the anadromous fish. He stated that the
results from the study would be used to make sure SWHP's effects
were mitigated.
7:51:08 AM
SENATOR WIELECHOWSKI stated that his biggest concern was the
potential impact on salmon. He asked if AEA was planning on
keeping the legislature informed with their report findings. He
inquired what some of the impacts were from releasing water at
hydroelectric sites throughout the world.
MR. DYOK answered that AEA would keep Senator Wielechowski
informed. He explained that SWHP would store water during the
summer run-off period for potential energy use during the winter
time when it was needed most by Alaskans. He said the largest
flow-change effects would occur immediately downstream from
SWHP, but the effects had to be observed all the way downstream.
He explained that water level change and speed of change had the
potential to affect the fish. He noted that AEA would like to
change the flows in order to best meet the Railbelt's needs. He
remarked that a balance had to be considered between the effects
on fish and operating SWHP efficiently. He said in the winter
the river would be free of ice from SWHP to some point
downstream, a typical occurrence in Canadian hydropower
projects. He noted that ice would eventually form downstream and
its effect on the fishery would dictate SWHP operations. He said
in the spring time, the flows typically come up and SWHP would
be able to adjust the flows, one of the beauties of a
hydroelectric dam. He noted that there would be a milder breakup
due to SWHP's flow control and stable flows would occur in the
summertime. He affirmed that AEA would look at the impact from
lower flows on each of the different [salmon] life stages and
react accordingly.
CO-CHAIR BISHOP requested that AEA meet with ADFG and have them
get back to the committee. He asked what streams had ADFG
identified as spawning streams.
MR. DYOK replied that much of what AEA was finding was very
consistent with studies from the 1980s. He noted that fish
populations were not what they used to be, particularly for the
anadromous salmon. He explained that the key was to work with
the stakeholders and make sure all of the issues were
objectively identified to allow AEA to file a complete license
application in 2015.
7:56:42 AM
He explained that AEA met all of their major deliverables with
the Proposed Study Plan in July and the Revised Study Plan in
December. He said AEA was reviewing the 3000 reports produced
from the 1980s and assimilating pertinent data with the current
SWHP. He remarked that AEA had great technical information from
the 1980s that had not changed and was being refined for SWHP's
dam design. He noted that there had been significant
developments in dam types and AEA was looking at a roller-
compacted concrete (RCC) design. He said AEA spent much of last
year looking at SWHP's optimized height for what the state could
afford and how it would best fit into the Railbelt's energy
demand. He noted that AEA had brought on a panel of world
renowned experts and FERC concurred with the decision. He
explained that experts were normally not brought in until a
project's detailed design phase. He said it was important to get
information out to make sure AEA had the right project for
Alaska.
CO-CHAIR BISHOP asked if the US Army Corps of Engineers (USACE)
continued to model dams in Vicksburg, Mississippi. He inquired
if AEA could provide information on the USACE's background. He
noted that he had been on a dam project and the project's model
was still in USACE's facilities.
MR. DYOK answered that USACE continued to model dams in
Vicksburg and the organization was formally called the Waterways
Experiment Station. He said USACE looked at the specifics of how
the flows and sediment transport would be affected by dams. He
noted that mathematical models had come a long way and most of
SWHP's analysis would come from mathematical modeling. He
revealed that AEA had been in preliminary discussions with
University of Alaska-Fairbanks (UAF) on doing SWHP modeling
studies. He mentioned that AEA had done significant geotechnical
work to fill in missing information from the 1980s.
8:00:26 AM
MR. DYOK said AEA conducted an independent cost estimate to not
rely on a single engineer's estimate. He explained that a second
opinion was important because cost was a big driver in the
overall rates. He said AEA put out a request for proposal (RFP)
and AECOM was selected. He revealed that AECOM had a tremendous
amount of Arctic hydropower experience and was ranked by
Engineering News Record as the best hydroelectric developer. He
mentioned that AECOM had an office in Anchorage and was involved
with many projects in Canada. He said AEA was asked to develop
an estimate from a contractor's prospective and come up with
unit prices and field crew development costs. He stated that
AECOM confirmed that the engineer design consultants' timeline
was reasonable and feasible. He said the RCC design was
applicable to Alaska's cold climate and time could be saved by
finding ways to extend the construction's "shoulder seasons" by
using climate control techniques that incorporated large tarps.
He said AECOM recommended that SWHP's reservoir could begin
filling prior to project completion for early power generation.
He stated that the most important finding was the cost
comparison between AECOM and AEA's licensing and design
feasibility engineer. He said AECOM felt that their 2012 based
cost estimate was within 25 percent of what SWHP would cost and
their input was helping AEA to hone in on SWHP's cost.
8:04:03 AM
He addressed cost probability distribution to make sure AEA had
a good handle on SWHP's overall costs. He noted that 20 percent
of items were usually responsible for 80 percent of the cost. He
explained that AEA used a Monte Carlo Simulation method to run
thousands of cost simulations with multiple pricing and quantity
estimate errors.
He revealed that AEA estimated SWHP's cost at $5.09 billion with
a probabilistic cost distribution spread between $4.5 billion
and $5.9 billion. He noted that the median price was $5.19
billion and Nick Szymoniak's economic analysis would be based
upon a $5.2 billion cost estimate.
8:05:49 AM
NICK SZYMONIAK, Project Economist, Alaska Energy Authority,
addressed SWHP's best capital cost estimate at $5.19 billion,
with a 90 percent probability range of $4.48 billion to $5.89
billion. He explained that SWHP's minimum capital cost estimate
was $3.73 billion with a maximum of $6.48 billion.
He explained the impacts of inflation on SWHP and noted that it
was important to talk about inflation prior to addressing
economic benefits. He explained an inflation impact graph that
started with a 2013 inflation index at 1 percent and continued
to climb over time. He noted that SWHP would attain a consistent
cost "flat line" by 2024 while the inflation index for all other
costs continued to rise. He said SWHP's cost stability was a
benefit versus power sources that were affected by inflation.
CO-CHAIR BISHOP asked if AEA had track records of other dam
projects like Hoover Dam regarding "flat lined" costs. He
inquired if a comparison could be shown from other dam projects.
MR. SZYMONIAK replied that he did not have comparisons to
present to the committee, but acknowledged that a comparison
would be an interesting exercise to put together.
MR. DYOK addressed AEA's experience with BLHP. He said when BLHP
went online in 1992, the price of power was around $0.0450 per
kilowatt hour (kWh) and today it was still $0.0450/kWh. He noted
that BLHP verified the straight-line approach. He explained that
a hydro project was similar to buying a structure with payments
that stayed the same. He said SWHP's operational costs were a
very small percentage that allowed for a horizontal straight-
line for costs over time.
SENATOR MICCICHE asked to verify that SWHP's incremental costs,
turbine maintenance, and human resources costs were such a small
cost percentage.
MR. SZYMONIAK answered correct. He said he did not have an exact
percentage, but it was a relatively small share.
8:08:47 AM
He explained SWHP's Base Case Economic Assumptions (BCEA) used
to generate the power cost. He noted that AEA had taken a very
conservative approach with many of the assumptions and some
optimization could be achieved. He said BCEA were as follows:
· Capital costs: $5.19 billion.
· Power production: 2,800 gigawatt hours.
· Interest rate: 5.00 percent, with the possibility for lower
cost financing to reduce SWHP's power cost.
· Debt term: 30 years, with the possibility to finance at
longer terms and reduce power costs during SWHP's earlier
years.
· Annual operating and maintenance costs: $16 million, an
assumption that represents 2 percent of SWHP's annual cost.
· Operation start year: 2024.
SENATOR MICCICHE clarified that the only incremental cost on a
$5.2 billion project was the $16 million per year for operating
and maintenance costs, a cost that would increase by two percent
a year moving forward. He asked Mr. Szymoniak to verify that
relatively low operating and maintenance costs were a reason why
SWHP's operations did not increase dramatically.
MR. SZYMONIAK answered correct, one of SWHP's primary benefits.
8:10:29 AM
He explained the SWHP power costs as follows:
· Year-one rate at 2024 nominal-dollars: $0.1810/kWh in
dollars when SWHP comes online.
· Year-one rate at 2013 real-dollars: $0.1380/kWh, a rate
used to compare to current energy costs.
· 10-year average rate at 2013 real-dollars: $0.1240/kWh.
· 25-year average rate at 2013 real-dollars: $0.1060/kWh.
· 50-year average rate at 2013 real-dollars: $0.0610/kWh.
He explained that reductions in the yearly averages were
attributed to inflation in everything other than SWHP's
consistent cost of power. He stated that SWHP's cost of power
would become cheaper in real terms. He cited SWHP's significant
50-year average drop off was due to the 30-year debt retirement
and all that was being paid for was the inflated operational
costs.
He stated that another important note, assuming no direct state
financing in the model itself, AEA had taken received funding
for SWHP and the funding that was in the capital request this
year. He explained that AEA had conservatively modeled funding
as being paid back at 5 percent interest and noted SWHP's
earlier costs would not drive the project's cost too much.
8:13:04 AM
MR. SZYMONIAK said it was important to look SWHP's competing
energy that it would be offsetting. He explained that AEA used a
simple natural gas generation comparison model and SWHP was cost
competitive during the early years and became much lower over
time. He stated that an important caveat was that future natural
gas prices were unknown and a range was presented. He explained
that for the model itself, AEA was assuming a constant
efficiency and fuel costs for natural gas generation; a heat
rate of 8,000 British thermal units/kWh and non-fuel cost of
$0.03/kWh.
He said the natural gas price forecast was based upon $6.50 per
thousand cubic feet (Mcf) in 2013 and increased 4 percent
annually, a rate that was 1.5 percent greater than the 2.5
percent inflation rate AEA was using. He explained that future
natural gas prices were probably better represented with a range
of $6.00 to $12.00/Mcf. He reiterated that SWHP's major benefit
was price certainty.
8:15:39 AM
He addressed a natural gas price forecast and range graph. He
said the Base Case Natural Gas (BCNG) price forecast started at
$6.50 and increased at 4 percent, with a $6.00 to $12.00 range
that increased 2.5 percent. He explained that SWHP equaled the
natural gas cost after 12 years and much sooner if prices were
higher. He asserted that SWHP's energy cost became cheaper over
time with greater benefits when the 30 year debt was paid off.
He addressed a graph that showed a 2013 real-dollars cost
comparison between SWHP versus natural gas. He noted that SWHP
would come on at a little under $0.14/kWh and decreased in real
term. He explained that natural gas price generation was modeled
relatively flat and only increased for inflation, slightly more
for a base case scenario.
8:18:00 AM
He said SWHP's other very significant benefit was the reduction
in electricity cost uncertainty. He said price certainty would
potentially impact 50 percent of the Railbelt's power
generation.
SENATOR MICCICHE stated that SWHP was a project where tomorrow's
rate payers could pay for funding. He asked what the impact
would be for paying off SWHP over 50 years rather than 30 years.
MR. SZYMONIAK answered that paying off SWHP in 50 years had been
calculated, but he did not have the data with him.
SENATOR MICCICHE asked if paying off SWHP in 50 years
significantly changed the onset power cost.
MR. SZYMONIAK answered yes. He explained that power costs
significantly dropped in the initial years and pushed more costs
off into the future.
SENATOR MICCICHE stated that it would be interesting to see the
data.
MR. SZYMONIAK answered yes.
CO-CHAIR BISHOP asked that the information be distributed to the
committee members.
MR. SZYMONIAK summarized the analysis on SWHP's impact on price
stability and noted that the range of power costs was a much
narrower band going into the future. He said SWHP would provide
increased certainty for homeowners and businesses to make
investments in the future.
He summarized the economic takeaways from SWHP as follows:
· Greatly reduced future power cost uncertainty.
· Competitive with natural gas in the early years and much
lower-cost over the long run.
· Equals the price of base case natural gas after 12 years
without any direct state financing.
8:21:03 AM
MR. DYOK addressed what AEA's 2013 goals and milestones were as
follows:
· Continued stakeholder and landowner outreach to make sure
all parties were fully informed with adjustments made from
input.
· Implement the Revised Study Plan. He said AEA had
reimbursable services agreements with the ADFG for
fisheries work and animal impact studies. He noted
logistical support involved with safely overseeing 180
fieldwork personnel, field camps, helicopter support, and
obtaining land permits from all impacted parties: private,
state, federal, and native corporations.
· Resources and Procurement Plan, a mechanism used to limit
costs risks associated with detailed engineering design and
construction costs.
· Utility Precedence Agreement with Railbelt utilities to
enlist buyer support.
· Geotechnical exploration for engineering design refinement
and optimization.
CO-CHAIR BISHOP asked if a hydroelectric project complements
wind generation.
MR. DYOK answered yes. He said wind had a lot of uncertainty
associated with it. He stated that a hydropower project had the
ability to vary its generation very rapidly; 10 to 30 megawatts
could be changed within seconds. He said the issue was how fast
changes could be made without having an adverse effect on the
environment downstream. He explained that AEA would be looking
at what the environmental limits were to allow for setting the
bounds. He noted that AEA was addressing a worst case scenario
if BLHP's 125 megawatts went offline and how SWHP would be able
to respond. He explained that hydro power had the ability to
setup and support high penetration wind energy locations in the
event of low wind situations.
8:25:50 AM
CO-CHAIR BISHOP stated that it would be interesting to see how
fast SWHP could be throttled up.
SENATOR GIESSEL addressed how Mr. Dyok explained SWHP's power
generation and asked what aspect of the transmission lines were
the responsibility of the project.
MR. DYOK replied that AEA had developed a plan for transmission
lines that would take the power to the Intertie. He explained
that FERC's oversight was strictly from SWHP's northern and
western primary-transmission lines to the Intertie.
SENATOR GIESSEL asked if Mr. Dyok was describing a "loop" for
reliability.
MR. DYOK answered yes. He stated that there was no need for a
third line, but two lines were required to assure reliability if
one line went down. He noted that AEA was looking at having two
or three lines in the same corridor as well.
8:27:34 AM
CO-CHAIR BISHOP thanked AEA for their SWHP presentation.
8:28:20 AM
There being no further business to come before the Senate In-
State Energy Committee, Co-Chair Bishop adjourned the meeting at
8:28 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AEA Susitna Watana Hydro Senate Instate Energy 02.19.13 .pdf |
SISE 2/19/2013 7:30:00 AM |
In-State-Energy |