Providing coverage of Alaska and northern Canada's oil and gas industryJanuary 2019
| Vol. 24, No 2 | Week of January 13, 2019 |
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New Delta Junction wind power proposal
AEP and Eco Green Generation planning new wind farm in conjunction with battery storage and propane generators for firm power Alan Bailey Petroleum News
Mike Craft, a wind power developer from Fairbanks, has announced that his company, Alaska Environmental Power LLC, and Eco Green Generation LLC are planning to build a new wind farm at Delta Junction, in conjunction with battery storage and a series of propane generators for delivering a firm electricity supply in the Fairbanks region.
AEP already operates Delta Wind Farm, a small 2-megawatt wind system at Delta Junction, connected to Golden Valley Electric Association’s power supply system. For several years Craft has been pushing to build an additional, larger wind farm at the Delta Junction site, but has been stymied by failure to reach a workable tariff arrangement with GVEA. The key issue is the fluctuating nature of the wind energy - GVEA has maintained that the cost of handling the fluctuations in Delta Junction wind output would make the wind power too expensive in relation to other power sources.
Counterbalancing the wind power Craft now says that the impasse will be resolved by having 4.4 megawatts of battery storage to smooth out the wind power, and by using propane powered generators that can rapidly change their outputs to counterbalance the fluctuating wind output. Heat from the generators would be sold for applications such as heating buildings. Craft has in the past said that Delta Wind Farm is in a particularly advantageous position for making use of a wind system flowing from the Wrangell-Saint Elias Mountains and that the farm enjoys an especially high capacity factor as a result.
In a Jan. 4 press release Craft said that the plan is to implement 42 megawatts of wind power next to the existing wind farm at Delta Junction, in conjunction with up to 100 megawatts of cogenerated power and the battery storage. The cogenerated power would consist of up to 20 separate propane heat and power plants distributed across Fairbanks and North Pole - the plants would presumably be colocated with sites that could make use of the generated heat, in the form of hot water.
Propane from Canada In comments to the board of the Interior Gas Utility on Jan. 8 Craft said that propane for the system would be sourced from Canada and shipped to Fairbanks by barge and the Alaska Railroad, using 33,000-gallon rail cars. And the establishment of a propane supply to Fairbanks would make propane available as a heating fuel for consumers in the Fairbanks region, as well as elsewhere in Interior Alaska. Essentially, the companies would sell propane in addition to using propane as a fuel for power generation.
“We’d like to be able to get propane to anybody and everybody that wants it,” Craft told the board, adding that part of the plan involves making loans available for people who want to retrofit their heating systems.
However, the primary intent is to implement a viable new wind farm at Delta Junction.
“We want to sell wind. That’s our goal,” Craft told the board. “We want to sell as much wind power as we can get out hands on, because it’s the cheapest form of energy.”
Applied for tariffs Craft told the board that the companies had already applied to GVEA for a connection tariff. The companies have also applied to Doyon Utilities LLC, the company that provides utility services for the military in Alaska - the idea is that the new system could provide power and heat for Fort Wainwright, Fort Greely and Eielson Air Force Base, with propane combined heat and power plants located in the military bases. The press release says that a base’s entire winter supply of propane could be stored at the base. And, more generally, the use of distributed powerhouses would provide improved energy security in the Fairbanks region, the press release says.
Craft told the IGU board that under federal law GVEA and Doyon Utilities must write tariffs for the proposed power supply within 60 days.
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Court rejects wind farm tariff appeal
The Alaska Superior Court has rejected an appeal against the Regulatory Commission of Alaska’s July 2016 approval of Golden Valley Electric Association’s tariff for the connection of small renewable and alternative energy sources to GVEA’s electricity supply system. Alaska Environmental Power LLC, operator of a small wind farm at Delta Junction, launched the appeal following the RCA approval decision — AEP wants to expand its wind farm, but has been struggling to come to some workable agreement with GVEA over the terms and conditions for connecting an expanded wind power facility.
In a separate case, in December 2016 AEP formally requested GVEA for a specific tariff for the connection of an expanded Delta Junction wind farm. GVEA subsequently published a tariff. However, following an investigation, the RCA rejected that tariff on the grounds that it was uneconomic: Essentially, GVEA had concluded that payment for the wind power would require an increase to its electricity rates. GVEA supplies electricity in the Fairbanks region of the Alaska Interior.
Complex issue The question of connecting a renewable energy source to the Alaska Railbelt grid is a complex and contentious issue, in particular because of the intermittent nature of the power output from a wind farm, for example. This fluctuating power must be counterbalanced by equal and opposite fluctuations in some other power source, such as a gas or oil-fired power station. The regulation of the wind power costs money. And the larger the amount of wind power in relation to a utility’s total power generation capacity, the greater the impact of the wind power regulation on the economics of the overall power system. On the other hand, the cost of wind power is typically stable over long periods of time because the power generation does not require the purchase of fuel.
Alaska Environmental Power has argued that its wind farm is positioned at a particularly advantageous location for benefiting from Interior wind patterns and that GVEA could handle the fluctuations in power output from the facility.
PURPA regulations Under RCA regulations, driven by the federal Public Utilities Regulatory Policies Act, or PURPA, electricity utilities are required to purchase power under reasonable terms from qualifying, independent renewable power producers. Determining what constitutes reasonable terms involves projecting both the cost of integrating the renewable power into the electrical system and the benefits that the relevant electric utility would gain from the use of the renewable energy. Benefits can come, for example, from the displacement of some of the utility’s other power sources.
But contention can arise over the methodologies used both to calculate the cost of regulating the varying renewable energy, and to calculate the benefits to the utility from the use of the wind power. Different methodologies and assumptions can lead to different economic conclusions.
The legal position In challenging the RCA’s July 2016 approval of GVEA’s general tariff for renewable energy sources, AEP raised a long list of issues. And Superior Court Judge Andrew Peterson commented that “it is clear to this court that the parties do not agree on much, including what issues are presently before the court.” Peterson elected to base his ruling simply on the question of whether the RCA had appropriately approved the tariff. And that question revolved around two key issues: whether the commission should have conducted a full-scale investigation of the tariff, rather than simply approving it; and whether the tariff complies with the commission’s PURPA regulations.
Peterson concluded that approval of the tariff without an investigation had been reasonable, given the fact that the commission had issued a memorandum explaining how it had reviewed AEP’s comments about the tariff, and how it had concluded that those comments had not raised any valid concerns.
The issues over the tariff’s regulatory compliance are more complex and relate to the method for calculating power purchase rates, depending on the scale of the renewable energy facility. Peterson found that the version of the GVEA tariff that the RCA had approved only applied to power generation facilities with capacities greater than 100 kilowatts. And the purchase rate options offered for that scale of facility complied with PURPA requirements, Peterson concluded.
—ALAN BAILEY
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