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CEA board approves Fire Island terms
Kristen Nelson Petroleum News
The Cook Inlet Region Inc. Fire Island wind project is poised to move ahead, albeit on a smaller scale than CIRI originally envisioned.
On June 15 the board of directors of Chugach Electric Association approved an agreement to purchase power from Fire Island Wind LLC, a wholly owned subsidiary of CIRI formed to develop and sell wind power from Fire Island. Eleven wind turbines will be installed on the southern end of Fire Island, offshore Anchorage.
CEA would take up to 17.6 megawatts of power at a net price of $97 per megawatt-hour for 25 years, beginning Jan. 1, 2013. CEA said it agreed to buy the power at $107.85 per megawatt hour and Fire Island Wind LLC agreed to pay a system integration charge of $10.85 per megawatt hour to help integrate the power into the system.
Fire Island Wind estimates energy output at approximately 48,500 megawatt-hours per year — equivalent to about 4 percent of CEA’s retail sales in 2010.
Negotiations between CEA and CIRI began in the summer of 2010.
CIRI initially planned a 52.8 megawatt wind farm, with 33 wind turbines, but the project was downsized to fit CEA’s retail customers when other Railbelt utilities failed to take a portion of the output.
CIRI needs to formally approve the contract, as does the Regulatory Commission of Alaska.
The price issue CIRI addressed the consumer price issue at an Anchorage Chamber of Commerce meeting last November.
Suzanne Gibson, CIRI’s senior director for energy development, said that while the initial price of electricity from the wind farm exceeds the current price of electricity in Southcentral Alaska, the rising price of natural gas will within a few years make gas-fired power more expensive than wind power.
And with Southcentral utilities anticipating importing liquefied natural gas to supplement local gas, the area would then be open to paying prices pegged on worldwide LNG prices, which are much higher than local gas prices.
A recent study commissioned by the utilities estimated the cost of drilling and development needed to maintain local gas supplies at more than $2 billion, and a new gas supply agreement signed last year between CEA and Marathon Oil set gas prices at an inflation-indexed range from $5.90 to $8.90 per million Btu.
Consumers are currently paying some $7 per million Btu, plus gas distribution and service fees.
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