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Vol. 18, No. 28 Week of July 14, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Power to the people

AEA says Railbelt electrical grid upgrades would bring long-term benefits

Alan Bailey

Petroleum News

Upgrades to the Alaska Railbelt’s aging and fragile electricity grid could cost some $902 million but would bring long-term cost savings for the region’s electricity consumers as well as eliminating some troublesome points of potential failure in the overall grid layout, executives of the Alaska Energy Authority, or AEA, told the Regulatory Commission of Alaska on July 3.

AEA Executive Director Sara Fisher-Goad told the commission that AEA is conducting a study, looking at priorities for upgrading the Railbelt power grid, given recent changes in power generation arrangements in the Railbelt region. With, for example, Homer Electric Association and Matanuska Electric Association building new power stations on the Kenai Peninsula and at Eklutna, north of Anchorage, and with new power generation in Anchorage itself, the center of gravity of power generation is moving away from Chugach Electric Association’s aging power station at Beluga on the west side of Cook Inlet.

“We have a situation in the Railbelt where there is a significant amount of change in generation and transmission needs,” Fisher-Goad explained.

Flexible transmission

A prime purpose of the grid upgrades would be to enable the more flexible movement of power around the system, rather than having electricity utilities continue to operate through a transmission grid containing bottlenecks that limit the utilities’ ability to make best use of available power generation capacity. That flexibility would enable operators of the grid to move more towards what is referred to as “economic dispatch,” the ability to manage and control the movement of power through the grid as a unified whole, rather than as a series of somewhat independent segments.

AEA says that, as new generation comes on line, improved flexibility and efficiency in power generation usage would translate directly to power cost savings that would more than offset the cost of the grid upgrades.

Costs and benefits

For the purposes of discussion, the agency has taken a stab at figuring out the potential impact on the cost of power, if the estimated upgrade cost were to be recovered from the rates that utilities charge their customers, with those costs offset by benefits gained primarily from the more efficient use of power generation.

AEA’s calculations assume that the operation and maintenance costs of new facilities would be 2 percent of capital costs and that projects would be funded through bonds with an interest rate of 5 percent, AEA project economist Nick Szymoniak told the commission. Electric Power Systems Inc. has estimated that annual savings gained from the improved transmission system could amount to a figure somewhere in the range $146 million to $241 million. Taking all of the dollar figures, dividing by the total kilowatt-hours of electricity sold in the Railbelt and then distributing the costs and benefits between the utilities in proportion to each utility’s share of power sales leads to a net savings of 1.6 cents to 3.9 cents per kilowatt hour in the first year of operation of the upgraded system, Szymoniak said. And, assuming some level of inflation in the economy, those savings would increase each year, based on 2013 dollars, he said.

Weaknesses

The weaknesses of the Alaska Railbelt power grid have long been a subject of debate. There is, for example, just a single electrical intertie through avalanche prone country between Anchorage and the Kenai Peninsula. And capacity constraints in the single intertie between the Anchorage area and Fairbanks limit how much power can be shipped between Southcentral Alaska and the Alaska Interior.

AEA’s proposed upgrades to the grid tackle these weaknesses while addressing two primary objectives: the removal of transmission constraints on the delivery of power from the Bradley Lake hydropower facility in the southern Kenai Peninsula, and a significant increase in the capacity of the northern part of the transmission grid, the section of the grid between Fairbanks and the Matanuska-Susitna Valley, Gene Therriault, AEA deputy director, told the commission.

Bradley Lake

A Bradley Lake-related package of projects, at a cost of $402 million, would enable Bradley Lake energy to be shipped out of the Kenai Peninsula, would reduce transmission losses in the system, would provide better voltage control and would increase system reliability to required standards, AEA says. And one of the proposed projects would involve the construction of a high voltage direct current transmission line between the northwest Kenai Peninsula and the old Beluga power station on the west side of the Cook Inlet. From Beluga an existing major transmission line connects to the Matanuska-Susitna Valley, to Anchorage and to the intertie to Fairbanks.

A few years ago there was a push to obtain state funding assistance to address one of the single points of failure in the grid by building a second intertie between Anchorage and the Kenai Peninsula. However, AEA’s new investigation has found that, especially given the locations of new power generation capacity, the proposed new transmission line to Beluga would provide a cheaper means of eliminating this weakness in the grid, Therriault explained.

Northern capacity

Addressing AEA’s second objective — increasing the capacity of the northern part of the grid — would cost about $481 million and would involve the construction of new transmission lines along 171 miles of the Fairbanks intertie route, as well as new substation construction and some upgrades to existing substations.

And in Southcentral Alaska, AEA sees a need to bring into operation a transmission line segment between Anchorage and Eklutna that has been constructed but not yet energized, Therriault said. This project, involving the construction of two new substations, would cost around $20 million.

Taken together, the costs of the Bradley Lake related projects, upgrades to the northern intertie and the Southcentral upgrade add up to $902 million, the amount of money that AEA thinks needs to be invested in the grid.

Grid management

As well as assessing the technical structure of the grid, AEA has over the years taken an interest in the way in which the management and operation of the grid is organized. In particular, the fact that six independent electricity utilities operate different parts of the grid has presented an organizational hurdle in trying to harmonize the economic dispatch of power across the grid as a whole.

An AEA study in 2008 had proposed the formation of a unified company to manage the entire grid. But in 2009 a bill designed to enact this concept failed to pass the state Legislature. Since then four of the Railbelt utilities have formed an entity called the Alaska Railbelt Cooperative Transmission and Electric Co., or ARCTEC, to coordinate management of the grid. And the utilities have been developing new reliability standards for the grid, with a grid intertie management committee scheduled to consider adoption of those standards, Therriault said.

AEA’s proposed grid upgrades would bolster organizational efforts to better manage the grid by providing the technical means to achieve the efficient dispatch of power across the grid, by improving grid reliability and stability, and by moving the grid as a whole towards the required reliability standards, Therriault explained.

“We really are moving from the dirt road to a highway,” Therriault said.

Funding

However, Therriault emphasized that AEA has not addressed the question of how its proposed upgrades would be funded.

“That’s the million dollar question,” he said.

And Fisher-Goad told the commission that AEA still has further work to do on the power transmission study and has only just reached a point where it can start to make recommendations. The agency continues to work with the utilities and other stakeholders in the power grid, listening to what people have to say, she said. The agency is also working with the state administration to determine what types of recommendation are needed. And the agency is investigating potential funding sources for grid upgrades, recognizing that the future is likely to see reduced state capital budgets, she said.



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