Vol. 28, No.13 Week of March 26, 2023
Providing coverage of Alaska and northern Canada's oil and gas industry

REAP argues renewables

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With prospect of gas imports, should Railbelt transition to renewable energy?

Alan Bailey

for Petroleum News

As part of a continuing debate over the future of the Alaska Railbelt electrical system, in a March 16 meeting of the House Energy Committee Chris Rose, executive director of Renewable Energy Alaska Project, made the case for using renewable energy power generation and moving away from the current dependence on natural gas fueled power.

Currently, much of the power generation in the southern sector of the Railbelt is provided by gas fueled generators, with the gas coming from oil and gas fields in the Cook Inlet. But, with uncertainty about the future availability of sufficient gas from the inlet, electric utilities are evaluating their future power supply options. In a Feb. 1 presentation to the Senate Resources Committee, the CEOs of the utilities said that total supplies of natural gas will likely fall below demand after 2027 and, after that point, it will probably become necessary to import liquefied natural gas to bolster local gas supplies.

High and volatile LNG pricing

Rose expressed REAP’s disagreement with this position, saying that LNG in the Pacific market is much more expensive than Cook Inlet gas and that the LNG pricing is highly volatile. The result would be a sharp increase in the cost of Railbelt electricity coupled with volatile electricity pricing, Rose said. Moreover, with increasing prices for natural gas in Southcentral Alaska, the cost of using gas for heating buildings would also increase.

Rising prices for electricity in the Railbelt would also adversely impact electricity costs in rural Alaska, given that the power cost equalization program that provides state funding assistance for rural energy is in part indexed to the cost of electricity in the Railbelt, Rose said.

Rather than importing LNG, the Railbelt electrical system should move towards the use of renewable energy sources such as wind and solar energy, Rose said. The cost of renewable energy has dropped dramatically in recent years - wind and solar energy are now both cheaper than gas fueled power, even in the Lower 48, where gas prices are significantly lower than in Southcentral Alaska, Rose said. Over the past 10 years the price of solar has dropped 90%, the cost of wind has come down 70% and the cost of batteries, used to regulate the varying renewable energy, has dropped 70%, he said.

And renewable energy has stable and predictable pricing, given that much of the cost emanates from the amortization of construction costs.

A renewable portfolio standard

Rose favors the use of a renewable portfolio standard to drive the buildup of renewable energy deployment. An RPS sets targets for the increases in renewable energy use, with penalties for the utilities if those targets are not met. At this point 31 states have renewable portfolio standards, Rose said. Last year Gov. Dunleavy introduced a bill to the state Legislature for creating an RPS, with a target of raising renewable energy use from its current level of 15% of total generation to a level of 80% by 2040. Senate Bill 101, currently in the Legislature, proposes an RPS with a requirement for electricity utilities in the state to have at least 25% renewable power by Dec. 31, 2027; 55% renewable power by Dec. 31, 2035; and 80% renewable power by Dec. 31, 2040.

Rose said that the National Renewable Energy Laboratory has conducted a study into the practicalities of achieving the proposed Alaska RPS goals and has found that the goals are achievable. NREL is still conducting a study into the potential cost of meeting the goals. However, consulting company Analysis North has estimated a capital cost of $3.2 billion to achieve the 80% renewables target using the NREL model. That capital cost would potentially save around $6.7 billion in natural gas purchases, Rose said. However, NREL in its model assumed that transmission system upgrades and battery installations needed for the renewables would be required, regardless of whether the power generation moves away from natural gas.

Renewable energy intermittency

A critical issue for the widespread implementation of wind and solar energy is the intermittency of these energy sources - wind power, for example, varies in response to the fluctuating strength of the wind. Electricity utilities must have the means of compensating for these fluctuations, to maintain a stable voltage and frequency in the electrical system. And the possibility of drops in renewable power output raises questions over the risks of power outages.

During the Senate Resources meeting, Tony Izzo, chief executive officer of Matanuska Electric Association, said that his utility would need to retain significant gas fired power generation to ensure electricity supply reliability as the amount of renewable energy increases.

In the House Energy meeting Rose argued that supply reliability can be maintained through the use of industrial scale batteries to balance supply variations. Homer Electric recently installed a major new battery system in its network, while Chugach Electric Association and Golden Valley Electric Association are in the process of obtaining similar systems for their networks. It is also possible that more batteries will be needed within an RPS’s 17-year timeframe for achieving 80% renewable use, Rose commented.

The other issue relating to power supply reliability is a plan that the utilities are proposing for upgrading the Railbelt transmission system. The concept is to significantly increase the power carrying capacity of the system and to eliminate single points of failure in the system. As previously reported by Petroleum News, the utilities are applying to the Department of Energy for funding assistance for the upgrades, under the terms of the DOE’s Grid Resilience and Innovation Partnership.

Upgrades to the transmission system could enable more sharing of power across the system, thus enabling more smoothing out of power generation variations across the region, Rose said. For example, wind power from the Fairbanks region could help the Anchorage region when there is no wind in Anchorage, and vice versa, he said.

The Railbelt Reliability Council

Another significant factor feeding into the future of Railbelt electricity supplies is the recent RCA certification of the Railbelt Reliability Council as the electric reliability organization for the Railbelt high-voltage electrical system. The RRC is in the process of establishing its organization and of seeking RCA approval for its initial budget and tariff. The RRC will maintain and mandate reliability standards for the Railbelt’s high voltage electrical system; administer rules for open access to the transmission grid; and conduct Railbelt-wide system planning.

Clearly the future use of renewable energy will become a key factor in system planning. Moreover, open access to the grid will significantly improve the economics of the implementation of renewable systems by independent power producers, Rose said. Under the current arrangements each utility owning some sector of the grid charges its own fees for transmitting power across its sector, thus resulting in the pancaking of transmission fees for power transmitted over long distances across the system. Open access to the grid would probably involve a single “postage stamp” rate for any use of the transmission system.

And while the utilities tend not to have room on their balance sheets for the construction of new power generation facilities, the independent power producers that typically build renewable energy systems can obtain the capital and take the associated financial risks, Rose said.

Moreover, the development of renewable energy systems would use local resources and create local jobs, rather than exporting millions of dollars from the economy to pay for imported LNG.

“The era of really affordable renewables is here,” Rose said.

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