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Vol. 12, No. 48 Week of December 02, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Electric storm brewing in railbelt

Aging Alaska power stations and infrastructure, combined with growing demand, tight gas supply behind urgency for change

Alan Bailey

Petroleum News

A “perfect storm” of technical and economic issues seems to be heading straight towards the Alaska Railbelt electrical power grid. And, with reliable and reasonably priced electrical energy underpinning almost everything that happens in the region, running for cover isn’t an option.

Aging power plants that need replacement, concerns about the future of Cook Inlet gas supplies, uncertainty regarding the relative merits of future energy sources, the existence of a weakly interconnected legacy electrical grid and a growing electricity demand are all converging as a web of issues that will require concerted action by all involved.

The Railbelt grid extends more than 500 miles from Seldovia in the southern Kenai Peninsula to Delta Junction in the north. Three major electricity demand centers, the Kenai Peninsula, the Anchorage/Matanuska-Susitna valleys region and the Fairbanks/central Interior region, are connected to each other by single transmission interties.

The Alaska Energy Authority wants to assess whether the formation of a Railbelt Electrical Grid Authority that would manage and dispatch power across the complete grid would provide an appropriate unified avenue for solving the grid’s problems. The authority has commissioned a study into this question and into the question of what options are available for coordinating the operation of the grid. Six independent utilities currently operate the grid.

A technical conference in Anchorage on Nov. 26 and 27 that kicked off the AEA study acted as a public forum for the discussion of issues and potential solutions.

Aging infrastructure

The grid suffers from an aging infrastructure that has evolved over many decades. Power plants originally built about 30 years ago, following the development of natural gas in the Cook Inlet region, require upgrade or replacement. The old electrical generation technology is relatively inefficient in its use of valuable natural gas.

At the same time growing demand for electricity across the Railbelt is driving a need for more power generation in the region.

Potential economies of scale would suggest a significant benefit if the six Railbelt utilities were to pool their resources to build new power generation capacity, Henri Dale, power systems manager for Fairbanks-based utility Golden Valley Electric Association, told the AEA technical conference.

“Building two 100-megawatt units is more expensive than building one 200-megawatt unit,” Dale said. “Maybe if we get together we can build some large plants and enjoy the economy of scale — we all need (new) units at exactly the same time.”

But the relatively low transmission capacity of the interties poses significant limits on the amount of power that can be shared across the entire grid. Moreover the vulnerability of the long, single transmission lines through rugged terrain between the major demand areas brings the risk of a major power outage, were one area to totally depend on obtaining power from generation in another area.

“We have to do our planning to take care of each region individually because that line can be down at any given time, for a period of hours or days or even longer,” Dale said.

“Dealing with transmission in Alaska is extremely challenging,” said Lee Thibert of Chugach Electric Association. “… We’ve had avalanches that have taken down transmission lines and when you lose a transmission line you lose access to that generation. … The key message here is you need alternative routes.”

In fact, some people argue for a more distributed style of electrical generation, with relatively small scale power plants supplying into the grid fairly close to where the power will be consumed. That type of arrangement can reduce transmission costs and power losses, while spreading the risk of a power generation outage.

Which energy source?

But any discussion of new power generation raises the issue of what energy sources to use, especially since building a new power plant requires major capital investment recouped over long time periods. Although the electricity utilities engage in integrated resource planning, there is no state or regional energy policy that could provide the framework for the appropriate energy mix to use for both heating and electricity generation.

Current projections of gas production from oil and gas fields around the Cook Inlet indicate that gas supplies will fall short of gas and electricity utility demand in 2015. Gas producers are optimistic about finding and developing new gas resources and there are proposals for building a pipeline to ship North Slope gas into Southcentral Alaska. But optimism doesn’t necessarily translate to new gas discoveries and at present there is no guarantee that a gas line will be built into Southcentral.

The state’s massive coal resources present an obvious alternative to natural gas for electricity generation but face an uphill struggle against environmental concerns. Proponents of coal say that modern clean coal technologies can all but eliminate the emission of pollutants. Carbon dioxide sequestration or some equivalent technology might address carbon dioxide emissions.

Hydropower

The state enjoys significant potential hydropower resources that, if harnessed, could provide a major component of electricity base load at a relatively constant cost over very long time periods. Possibilities include a 300-megawatt power plant at Lake Chakachamna on the west side of Cook Inlet or a 1,500-megawatt hydro scheme in the upper Susitna River.

Kate Lamal, vice president of power supply for Golden Valley Electric Association, said that a recent study showed that hydropower looked second only to energy conservation as a long-term solution for addressing the energy issues of the Interior Alaska power grid, with gasification of coal or biomass as a medium term solution.

“We would like to look at renewable, sustainable and alternative energy to meet our electrical, transportation and home heating needs,” Lamal said.

In addition to hydropower, there are several possibilities for wind farms in the Railbelt, including a proposed farm on Fire Island next to Anchorage. A geothermal plant, perhaps next to the Mount Spurr volcano on the west side of Cook Inlet, is a possibility. And a company is planning to test a tidal energy system in the Knik Arm next to Anchorage.

And just to complicate the energy situation, a massive freight train called “global warming and carbon emissions” is on the tracks and getting ready to leave the station at the Capitol in Washington, D.C. — a federal carbon tax or cap-and-trade system would have a major impact on the economics of any power plant that emits carbon dioxide.

Managing the grid

There is considerable controversy regarding the question of how to manage and operate the Railbelt grid.

One key question, for example, is whether to decouple electrical transmission from electricity generation, so that power generation entities can compete to supply power on a level transmission-grid playing field. Following U.S. deregulation of the power industry in the 1980s, regional power transmission entities formed in some parts of the country. But there are question marks regarding whether the scale of the Alaska Railbelt electricity market is large enough to make this type of arrangement workable.

And should the current utilities continue to exist in their current form? Although the utilities work cooperatively on the day-to-day operation of the grid, each utility’s planning objectives are driven by a priority to satisfy the needs of its own ratepayers. Those priorities may not be in the best interests of the grid as a whole — a major decision on power generation made by one utility impacts the economics of decisions made by the other utilities.

“The system operates on one premise: save yourself first,” said Tuckerman Babcock, assistant general manager of Matanuska Electric Association.

“The true cost of having six at-odds management companies operating the system is truly unknown,” said attorney Robin Brena, who characterized the Railbelt electricity utilities as “dueling fiefdoms.”

Additionally, the capital cost of a major new power plant may be beyond the capability of any individual utility.

What’s next?

So how will people resolve all of this?

The AEA Railbelt Electrical Grid Authority study is scheduled for completion in May and will provide insights into how to operate the grid. Meantime, attendees of the Anchorage AEA technical conference agreed to spawn some expert working groups to address some of the key issues. New discussions between the electricity utilities also appear to be in the offing.

Two utilities, Chugach Electric Association and Municipal Light and Power, have already been assessing a possible merger. And in August Matanuska Electric Association filed a petition with RCA, asking the commission to consider developing regulations to force unitization of the grid.

The administrations of the Municipality of Anchorage, Matanuska-Susitna Borough and the Kenai Peninsula Borough have jointly embarked on the development of an energy policy for Southcentral Alaska.

Political and regulatory action will likely figure into any solution. In addition to the possibility of a politically driven energy policy, the high capital cost of upgrading the electrical infrastructure may need some form of government assistance. One interesting question, for example, is whether the state should provide seed money for the massive cost of making the transmission infrastructure more resilient and more capable of supporting flexible power supply options.

Should the utilities or the state government or both make decisions regarding power generation and the structure of the Railbelt grid, asked retired Alaska state representative Norman Rokeberg.

“Politicians are not engineers and they’re not financial analysts,” Rokeberg said. “However, if the project is so large … it’s my experience that they’ll come to the Legislature for funding. … Politicians should not have to make those decisions but … you can’t remove politics from this whole issue.”

Another question relates to the role of the Regulatory Commission of Alaska. Does the commission have a role in enforcing the way in which the electrical grid is constructed or operated, for example?

Whatever happens, the Alaska Railbelt needs to deal with the impending storm in its electrical power systems sooner rather than later. The State of Alaska enjoys an abundance of energy sources. But harnessing those resources in a practical, economic and dependable manner seems something of a challenge.



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