|
Harnessing Alaska winds Electricity from wind turbines looks attractive, faces some economic hurdles Alan Bailey Petroleum News Staff Writer
Pending natural gas shortages in Southcentral Alaska and the escalating cost of diesel-generated electricity in rural Alaska have both been driving some creative thinking about electricity generation in the state. And with an abundance of wind in many areas, wind turbines seem an obvious alternative to gas or diesel-powered generators.
At the May meeting of the Alaska chapter of the International Association for Energy Economics, Mark Foster, principal of Mark A. Foster and Associates, talked about the economics and feasibility of wind power in Alaska.
The City of Kotzebue has been operating a wind farm since 1997 and small wind turbines generate some electricity elsewhere in rural Alaska. Kotzebue has been very pleased with the results of its wind generation project, Foster said.
At the same time, the delivered cost of diesel fuel for rural communities has risen above $2 per gallon.
“That (diesel cost) is I think a really critical piece of the rural wind potential,” Foster said.
Government funding, mainly through the Denali Commission, is also encouraging rural wind power initiatives. Two million dollars for reconnaissance studies is being channeled through the Alaska Energy Authority and the Alaska Village Electric Cooperative. And there’s approximately $28 million of additional funding available for the installation of wind energy systems. Wind maps As part of its wind energy program, the Alaska Energy Authority has been mapping wind data from meteorological stations around Alaska. AEA is in the process of developing a high-resolution version of its wind map and this version should be available in July, Foster said.
It doesn’t come as any great surprise to find that the wind map depicts areas susceptible to strong winds around most of the state’s coastline. However, AEA’s high resolution mapping is highlighting some promising inland sites, including ridge locations. And where there are reasonable winds near relatively large communities, there may be some good opportunities to develop wind farms.
“Some of the places that are a little bit off the coast that have fairly large village markets, like Bethel, are now looking more attractive than the original assessments done about four or five years ago,” Foster said. Reconnaissance economics Foster has been doing some high-level economic analysis of rural wind energy. This type of analysis can help identify sites to place meteorological towers for assessing the feasibility of specific wind generation sites. The analysis also provides insights into how much money is worth investing in specific wind power applications, Foster said.
By using wind data from meteorological records and community diesel usage data from the state’s power cost equalization database, Foster was able to determine the feasibility and economics of wind power for a large number of rural villages. Foster’s economic model made some basic assumptions such as $40-per-barrel oil, a 5 percent real discount rate and a capital cost of about $4,200-per-kilowatt to install the wind generation facilities.
The model also assumed that wind energy would only replace 20 percent of the diesel fuel that’s currently used. Cost benefits from wind generation would include both the cost of the saved diesel fuel and some savings in the maintenance of the diesel generators.
To determine the cost of the wind generation, Foster used wind strength data and required power capacities to determine the number of wind turbines needed at a specific site. This number translated into installation costs and recurring maintenance costs.
Foster’s analysis indicated that wind generation might be viable at a number of villages.
“It looks like you’re getting about 36 communities where it looks pretty attractive using that set of numbers,” Foster said.
Adjusting parameters such as the extent to which wind power would displace diesel alters the economic characteristics.
“It’s an interesting horse race between the capital cost of putting in the additional turbines and the savings in the fuel and what your discount rate is and how many years you’re going out,” Foster said. Fifteen years is our timeline for the analysis but we don’t really know how long a wind turbine will continue to work, he said.
However, Foster’s analysis assumes that communities would retain sufficient diesel generation capacity to meet electricity demand during times when the wind stops blowing — the use of wind power would simply reduce the costs of operating the diesel plants. Hub communities Although there’s a definite potential for using wind power in some rural communities, a critical mass of wind power installations would achieve economies of scale and really kick the economics into viability, Foster said.
“Unless you get some hub communities dialed in — the Bethels and Kotzebues — it’s going to be hard to keep it going,” Foster said. “… it’s just on the edge of getting enough mass to make it stick.”
Maintenance staff, for example, could support a significant number of wind generation systems — employing staff to service one small installation becomes an expensive proposition. And there’s a need to build up a level of expertise to troubleshoot system faults or do routine maintenance.
Foster sees this type of shared expertise as being particularly applicable to the control systems that perform tasks such as matching diesel generation and wind generation outputs to the minute-to-minute demand for electricity. The remote control and monitoring of multiple systems from a central facility might even be a possibility, Foster said.
However, Foster sees shared expertise in the maintenance of the wind turbines themselves as being a little more challenging, because different sized communities in areas with differing wind characteristics will require different turbine designs. Fire Island Chugach Electric Association, in conjunction with some other utilities, has proposed a wind farm on Fire Island in Cook Inlet just offshore Anchorage. The Fire Island development would feed electricity into the Southcentral Alaska grid and would compete with natural gas rather than diesel fuel. Chugach has also proposed helping rural wind energy initiatives by incorporating training facilities at the Fire Island site.
The Fire Island development would involve rows of 262-foot tall turbines feeding into a 138-kilovolt line that hooks into the grid at Point Woronzof, next to Ted Stevens International Airport. Chugach has considered 50-megawatt and 100-megawatt designs for the wind farm, with total costs ranging from $93 million to $176 million.
The viability of this project critically depends on future gas price trends — low gas prices would make gas generation cheaper than wind generation. A 2004 Alaska Railbelt energy study used gas prices trending from $2 per mcf in real 2008 prices to around $4.40 per mcf to assess the economics of a Fire Island wind farm. The study suggested a marginal return for a 50-megawatt Fire Island installation.
“They came up with a net benefit of about $3 million over a 2008 to 2033 study period using their gas (price) projections,” Foster said.
Foster tried to match the assumptions made in the study with the equivalent parameters in the Chugach proposal for Fire Island. He found that the assumed capital costs in the study were a little lower than the cost estimates for what’s now produced. Also the study used a different method to calculate operations and maintenance costs. Marginal economics Economic calculations suggest that government capital funding would be required to make the project viable at current gas price levels in the Cook Inlet area, Foster told Petroleum News. The Fire Island wind farm “does not appear to be economic under unsubsidized assumptions,” he said.
Chugach has been considering an option to have private investors build and operate the Fire Island facility. That arrangement would trigger some federal tax credits for wind energy, thus making the project more economic. However, these tax credits have not been consistently available and potential investors would probably need tax stability, Foster said.
Also, Cook Inlet wholesale gas prices consistently at or above $5 per mcf would start to make the project attractive, Foster said. Interestingly, Enstar Natural Gas Co.’s contract price for delivered Cook Inlet gas starting in January 2005, including taxes and transportation, is around that $5 level. However, there is considerable gas price variability in the Cook Inlet market and future price trends are unknown.
So, will wind power really take off in Alaska? That’s certainly possible — it all depends on fuel prices and achieving economies of scale.
| 