507 Adak Renewable/Diesel Project

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507 Adak Renewable/Diesel Project

Proposer: TDX Adak Generating, LLC
Benefit/Cost Ratio: Applicant : 1.61 AEA : .92
Project Description:
Adak is reliant on diesel fuel for electricity and heat production. This dependence makes the community sensitive to price fluctuations. TDX aims to explore alternative energy resources in the area to reduce CO2 emissions and dependence upon fossil fuels. Adak is classified as a class 7 wind region and it is likely that a wind-diesel integrated system will produce significant energy savings. However, geothermal and hydro resources are also available, and TDX would like to assess all three options before committing to one.
Phase I (Reconnaissance) has already been funded for $84.6 K. Details of what was studied in Phase I were not included in the application. This proposal is for Phase II (Resource Assessment/Feasibility Analysis/Conceptual Design), and asks for $229,500. It includes $12,000 for geothermal ($2,000) and ($10,000) for hydro feasibility studies.
Total project costs at this preliminary stage are estimated at $2-$4 million. This includes the cost of final design and construction of necessary infrastructure to harness the most favorable alternative energy resource. Wind is the most likely alternative energy source given the relatively high cost of developing hydroelectric systems.

Contribution to Lower the Cost of Energy:
This analysis looked at the cost of only the wind-related itemized expenses. A median construction estimate of $3 million was used, and total wind project costs were estimated at $3,217,500 based on the data supplied by the applicant (not including amount for geothermal and hydro feasibility studies).
The conceptual wind farm is designed for a 225 kW capacity generated by one turbine. The Vestas V-27 is expected to produce 648,000 kWh of electricity annually at an 80% availability rate. Applicant states that the current power plant uses 273,526 gallons of diesel a year to produce 2,603,294 kWh of electricity. Using these figures, it is possible that the wind resource will displace 25% of the current electricity usage, or about 68,380 gallons of fuel per year.
The AEA benchmark uses 13.00 gal/kWh efficiency, which is much higher than the 9.51 gal/kWh claimed by the applicant. Using the AEA benchmark, only 49,846 gallons of fuel will be displaced (or 18%) of current diesel used, and produces a B/C ratio of .91. Lowering the current efficiency to the 9.51 as claimed by applicant increases B/C to 1.28.
PCE data were unavailable for Adak, and NEI could not verify the current efficiency. Before making a decision on this project, the efficiency of the current system should be verified.
Assumptions Modified:
Applicant estimates that the turbine could produce 810,000 kWh annually. It was assumed that this figure is derived using a 100% turbine availability rate. For the analysis of the applicant’s figures, NEI noted this percentage. For the AEA analysis, we assumed the benchmark 80% availability and adjusted the figures accordingly (i.e., displaced electric kWh and capacity factor).
As mentioned above, the applicant claims a 9.51 gal/kWh efficiency rate for their current system. The AEA analysis used the benchmark figure of 13.00 gal/kWh.
Based on AEA benchmarks for installed capacity costs of $5,000 per kW, this 225 kW project should cost $1,125,000. Current cost estimates are 186% higher than the AEA benchmark. Using the revised benchmark of $12,500 per kWh, costs are still 14% higher.
The cost estimate for this project is $2-4 million. This is a large cost window, and should be narrowed. Should total construction estimates surpass the median $3 million used for this study (not including Phase II costs) the B/C ratio will need to be recalculated.
No costs for land were included. Applicant states that the Aleut Corporation and the City of Adak will make land available.
The applicant states that a new diesel plant is needed in Adak to accommodate the wind turbines. The installation of this system may be a significant cost factor. AEA may want to take a closer look at the cost of the new diesel plant in relation to the cost of the wind portion of the system to ensure that the alternative energy program is not being used to fully fund the installation of an upgraded diesel based system. All funds necessary for Phase II of this project are to be provided by AEA. There is no project match.
Possible Enhancements:
Further explanation as to the deviation from the AEA rural benchmark installed capacity costs would provide much needed insight.
Long-term Sustainability:
Reasonable to assume long-term sustainability.
Potential public benefits:

  1. Infrastructure. Evaluators are currently unaware of any public infrastructure that will be built for the placement of the turbines.

  2. Employment. The construction phase of the project could contribute to the local economy (possible local employment, goods and services provided to temporary workers, etc.).

  3. Community Solutions. No significant community benefits mentioned other than potential reduction in energy costs and increases in energy reliability as stated in the application.

  4. Improve Existing Energy System. The project will improve Adak’s existing generator system, which is particularly less efficient than most rural generators (as compared to the AEA benchmark figure).

  5. Statewide Applicability. Similar successful projects have already been implemented in several parts Alaska.

  6. Other Public Benefits. The study, including assessments of hydro and geothermal resources in and around Adak, will contribute to the local knowledge base, and may be useful in the future.

Northern Economics -- 4/21/16

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