Providing coverage of Alaska and northern Canada's oil and gas industry
January 2018

Vol. 23, No. 3 Week of January 21, 2018

Chugach files Fire Island wind tariff

Documents its estimated costs and cost savings associated with CIRI Wind’s proposed expansion of wind farm offshore Anchorage

In response to a request from CIRI Wind, Chugach Electric Association has filed a tariff with the Regulatory Commission of Alaska for a proposed expansion to Cook Inlet Region Inc.’s wind farm on Fire Island, offshore Anchorage. The tariff sets out Chugach Electric’s estimates of its costs and cost savings, if it were to use power from the wind farm expansion.

In November CIRI Wind asked Chugach Electric for tariffs for two potential wind farm expansions: an 11 turbine system with a 20.35 megawatt nameplate capacity, or a five turbine system with a 9.25 megawatt capacity. The electric utility has responded with a set of tariffs for the 20.35 megawatt option. The existing wind farm, with 11 wind turbines and an output capacity of 17.6 megawatts, went online in September 2012, supplying power to Chugach Electric.

As anyone who uses Anchorage’s nearby Kincaid Park can attest, the Fire Island site enjoys an excellent wind resource. But the variability of the wind strength poses a challenge for a utility using the wind power, because some appropriate form of variable power generation must counterbalance the varying wind power. This integration of the wind power represents a cost to the utility. On the other hand, a wind farm can provide stably priced, clean energy that displaces the cost of power generated by some other means

Estimated cost impacts

In its RCA filing, Chugach Electric has documented its estimated cost of connecting the wind farm expansion to its system, a tariff setting out annual estimates of costs avoided as a consequence of wind power displacing other power sources, and a tariff with estimated annual integration costs. The overall viability of the wind farm expansion, and the impact on electricity prices, would presumably depend on some combination of connection costs, integration costs, avoided costs and the price that Chugach Electric would pay for the wind power.

CIRI Wind has requested tariffs for the proposed additional wind power as what is referred to as a “qualifying facility,” under the terms of state regulations driven by the federal Public Utilities Regulatory Policies Act, or PURPA. Under PURPA, a statute designed to encourage use of renewable energy sources, electricity utilities are required to purchase power under reasonable terms from qualifying, independent renewable power facilities.

In its tariff filing Chugach Electric told the RCA that, because the commission’s version of regulations for qualifying facilities appears to be unique, collaboration between the utility, CIRI Wind and the commission will be needed to achieve a proper implementation of the tariff filing requirements.

Avoided costs

Given that Chugach Electric has no planned additions to its generation capacity, the utility’s avoided costs from use of the wind farm expansion would entirely consist of power generation fuel savings and savings in the purchase of power from other entities, the utility told the commission. And, although CIRI has asked for a tariff for a wind farm life of 25 years, it is only possible to project avoided costs for 15 years, since Chugach Electric has no basis on which to forecast its costs beyond that 15-year period, Chugach Electric said. The estimated avoided costs range from $67.87 per megawatt hour in 2018, to $71.21 per megawatt hour in 2033.

Integration costs

When it comes to integration costs, Chugach Electric told the commission that it sees no benefit from integration of the wind farm expansion that could offset the cost of accommodating the varying wind power. The cost estimates for integration derive from reduced generation efficiency resulting from Chugach having to back down its more efficient power generation; the increased cost of having to use less efficient generation, in particular Chugach Electric’s old Beluga plant on the west side of Cook Inlet; and increased curtailment of power from the existing Fire Island wind farm.

Integration charges could range from $31.58 per megawatt hour in 2018 to $35.88 per megawatt hour in 2032, Chugach Electric has estimated.

However, Chugach Electric cautioned that these integration cost estimates assume operational flexibility that is currently constrained by factors such as the scheduling of gas supplies and the dispatch of hydroelectric power. In fact, these operational constraints may render it impossible to integrate all of the wind farm power, as required under Alaska’s regulations for a qualifying renewable energy facility, Chugach Electric said.

Impact on power pooling

The electric utility also cautioned about complications relating to the current efforts by Chugach Electric, Municipal Light & Power and Matanuska Electric Association to pool their power generation, to make maximum use of the least cost power sources. Under currently contemplated pooling arrangements, Chugach might have to reserve sufficient generating capacity to enable the wind power integration. Moreover, there is a proposal for Chugach Electric to buy ML&P. Because the impact of this purchase, if it goes ahead, on the power pooling is not currently known, the purchase may require a re-evaluation of the avoided costs and integration costs associated with the wind farm.

Submarine cables

Another complication relates to the submarine power cables that connect Fire Island to Chugach Electric’s onshore transmission and distribution system. Chugach Electric told the commission that, to accommodate the 20.35 megawatt capacity of the proposed wind farm expansion, a third cable would need to be added to the two cables that connect to the current farm. A feasibility study commissioned by Chugach Electric has estimated a cost of around $34 million for the laying of that third cable.

In addition, the current cables were laid with a design life of 25 years, six years of would have already passed before the wind farm expansion could go into operation. That raises questions over whether Chugach Electric would be able to purchase power from the expanded wind farm over the full 25-year timeframe that CIRI Wind anticipates, Chugach Electric suggested.

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