LNG imports are likely
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Railbelt electric utilities need gas fired generation as CI gas production drops
Alan Bailey for Petroleum News
Given the continuing need for predictable gas-fired power generation to ensure reliable electricity supplies in the Alaska Railbelt there will likely be a future need to import liquefied natural gas, as production from Cook Inlet gas fields continues to fall in the coming years, the CEOs of the Railbelt electric utilities told the Alaska Senate Resources Committee on Feb. 1. In addition, major upgrades to the Railbelt transmission system will be essential both for future supply reliability and for the ability to incorporate new sources of clean power such as renewable energy.
“A critical issue facing the Railbelt utilities is the continuing decline of Cook Inlet gas reserves,” Arthur Miller, chief executive officer of Chugach Electric Association, told the committee. In addition to an alert last year by Hilcorp Alaska that existing contractual gas supply arrangements could not continue after the end of the current contracts, projections of Cook Inlet gas supplies indicate that total supplies will fall below total demand in 2027.
Brad Janorschke, CEO of Homer Electric Association, commented that about 41% of the Cook inlet gas is used to produce electricity. The rest of the gas is supplied to the Nikiski oil refinery on the Kenai Peninsula, and to Enstar Natural Gas Co., primarily for distribution for heating buildings.
Investigating supply options Tony Izzo, chief executive officer of Matanuska Electric Association, told the committee that, along with the Railbelt gas utilities, the utilities are currently narrowing down gas supply options.
And different utilities reach the ends of their current gas supply contracts at different times. Matanuska Electric Association, for example, has gas under contract to meet all its needs until March 31, 2028, but no gas currently under contract beyond that date, Izzo told the committee. Chugach Electric’s two-thirds ownership of the Beluga River gas field accounts for about 50% of its gas supplies, but the utility also anticipates a shortfall in gas supplies in 2028, Miller said. He said that the utility is currently evaluating a proposed large scale solar power project and a large scale wind project, but that these project would together only put a small dent in the potential energy supply shortfall.
Janorschke said that Homer Electric only has firm gas supplies to meet all its needs through to the end of March 2024. And while accepting that future LNG imports will probably be necessary, he suggested that this option will not be popular with Alaskans, given the state’s hydrocarbon resources. Janorschke also commented that the closure of the Kenai LNG export facility in 2018 had undermined the gas market for Cook Inlet gas explorers and developers.
Golden Valley Electric Association is in a different situation from the other utilities, in that it currently obtains 38% of its power from diesel generation and 44% from coal fired generation, said John Burns, GVEA president and CEO. GVEA can reduce its electricity rates by importing cheaper power from the south across the transmission system - the utility obtains some of its electricity from hydropower and from gas-fired power obtained from other utilities. And GVEA’s system, being part of the interconnected Railbelt electrical network, is impacted by what happens elsewhere in the system.
“We are all in this situation together,” Burns said.
A North Slope gas line? One unknown in the gas supply equation is the possibility of a major gas line being built to the Cook Inlet for the export of natural gas from the North Slope - gas from such a line could provide a cheaper source of gas for Southcentral than the current Cook Inlet supplies. Miller commented that, if a North Slope gas line were to be built, it could come into operation as early as 2027 or 2028. Although there is a risk of investing in arrangements for LNG imports and then finding that a North Slope pipeline is in the offing, “I cannot assume that is going to happen,” Izzo said, adding that his utility needs gas.
Izzo said that MEA is working on power supply diversification and that all the utilities are seeking opportunities for maximizing carbon emission reductions. However, a utility is held accountable for power supply reliability at an acceptable cost. He said that MEA is currently at a level of about 16% renewables. Given that the utility needs variable gas-fired power generation to regulate the variable power from renewable energy sources such as wind farms, if the utility were to move to 40% renewables, the utility would still require two-thirds of its current gas supplies, to maintain electricity supply reliability.
“We don’t want to do what’s called rate shock, and none of us signed up for rolling blackouts,” Izzo said.
Izzo presented data indicating that current electricity prices in the Railbelt are within the range of prices elsewhere in the United States, but about 25% above the national average. We all want to see electricity rates as low as possible, to facilitate economic development, he said.
“Utility decision making is really driven by reliability, to ensure that we are able to serve our customers in reliable way. By the same token, rate levels are critical,” Miller said. The utilities are investigating several options to fill the looming gap between gas supply and demand. In addition, bearing in mind past crises in the Cook Inlet gas supply situation, the utilities are now viewing the issue from the perspective of “We don’t want to be here five years from now. We don’t want to be here 10 years from now. We’ve been here before,” Miller said.
While the utilities are interested in the use of renewable technologies, the utilities also need to figure out how to integrate those technologies into the electrical system, Miller said.
Transmission system constraints A constraint on bringing in new low carbon power generation, including renewable energy systems, is the limitations of the current Railbelt electricity transmission system. In addition to having relatively low throughput capacity along some of its length, the system is fraught with single points of failure, where some form of accident could cause major power supply disruption.
“We have one of the most fragile systems in the United States,” Izzo said.
The Railbelt utilities have a vision for major upgrades to the system, to make the system more reliable and to make more possible a new, more diverse system of power generation.
“The Railbelt’s vision regarding transmission is very pointed,” Burns said. “It is to lower the cost of electricity along the entire Railbelt, to ensure that the lowest cost electron can be dispatched from wherever it is generated, from whatever source, be that renewable, hydro, nuclear, or carbon based, to wherever it is needed, reliably, efficiently, and at the lowest cost possible.”
A four-stage upgrade The utilities see four stages over a 10- to 12-year timeframe in achieving this vision. The first stage involves the upgrading of the existing system. The second stage involves building additional transmission lines for both the southern and the northern section of the system. The third stage involves building a new transmission line along the highway system from Anchorage through Palmer and Glennallen up to Delta Junction. The fourth stage involves adding energy storage facilities strategically along the Railbelt, Burns said.
Izzo commented that, having a more resilient transmission system with greater transmission capacity could open the door to the implementation of larger, and hence more economically viable, renewable energy systems. For example, the currently constrained transmission interties may limit a wind farm to a 40 megawatt capacity, with an unacceptable power rate of perhaps 11 cents per kilowatt hour. A 100 megawatt wind farm, if the transmission system can support that, might reduce that rate to an acceptable 6 cents per kilowatt hour, Izzo said.
At the same time, all the utilities agree on the importance of seeking opportunities to maximize carbon emissions reductions.
“It’s clear that there is a transition in the industry,” Izzo said. “Technology is advancing quickly and we want to plan for that in the most prudent way possible.”
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