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Kenai Hydro grant ‘not recommended’ Alaska Energy Authority cites several concerns in advising state legislators against $4M renewable energy funding request Wesley Loy For Petroleum News
The Alaska Energy Authority is recommending the state not award $4 million requested for a proposed hydroelectric project on the Kenai Peninsula.
Kenai Hydro LLC, a subsidiary of Homer Electric Association, is pursuing the Grant Lake hydro project.
It would involve taking water from the existing Grant Lake, near the Moose Pass community, to generate electricity for Homer Electric members.
In August 2011, Kenai Hydro submitted an application for $4 million from Round 5 of AEA’s ongoing Renewable Energy Fund grant program.
The Kenai Peninsula legislative delegation including House Speaker Mike Chenault, R-Nikiski; Rep. Kurt Olson, R-Soldotna; and Sen. Tom Wagoner, R-Kenai, wrote to AEA saying the Grant Lake project “deserves favorable consideration.”
But after an AEA review, funding was “not recommended.”
AEA’s concerns In a Jan. 25 letter to legislative leaders, AEA said it received 97 applications for Round 5 grants, and was recommending up to 41 projects be funded.
With respect to Grant Lake, AEA cited a number of concerns about the project.
Kenai Hydro said it was applying for a $4 million “construction grant.” But AEA said final design funding appeared premature, as Federal Energy Regulatory Commission licensing for the project isn’t expected until March 2014.
AEA also cited “significant public opposition to the project,” plus the likelihood of additional expenses not included in the cost estimate.
AEA continued: “We expect that in the FERC licensing process, there will be constraints on the operation of the project that will significantly impact the amount of energy that can be produced. For instance, energy output will be reduced in order to maintain environmental stream flows and lake levels necessary to mitigate impact on fisheries.”
Finally, AEA said Kenai Hydro “does not demonstrate site control at this time.”
Kenai Hydro already has received AEA grants totaling $2.1 million, the agency said.
Homer Electric is pursuing the hydro project as part of its drive to assemble a diversified fleet of generation assets and get away from wholesale power buys.
The project would involve building a 2-foot dam to control outflow from Grant Lake, and a tunnel to take water downhill to a powerhouse. The facility would have a generation capacity of 5 megawatts, and would be “essentially unmanned requiring only periodic inspection and routine maintenance,” the AEA grant application said.
Homer Electric’s average load is about 62 megawatts, with winter peaks approaching 85 megawatts.
While total construction cost is pegged at $35.4 million, the application said the hydro project could save an estimated $239.6 million in avoided fuel cost over 50 years.
Beyond the requested $4 million grant, Kenai Hydro said the balance of the construction funding was anticipated to come from a combination of financing, federal and state grants and possibly legislative appropriation.
Commercial operation is scheduled to commence in May 2016, assuming a final FERC license by March 2014.
‘Minor opposition’ The Grant Lake hydro project is not without controversy. Some Kenai Peninsula residents see it as a threat to headwaters of the Kenai River, famed for its salmon and trout fishing.
The Alaska Center for the Environment hailed AEA’s no-funding recommendation as “a wise choice that will go far in protecting the integrity of the Kenai River.”
In its grant application, Kenai Hydro acknowledged some controversy, but suggested it will abate.
“The project has encountered some not unexpected minor, local opposition, but initial reaction of this sort is common and misunderstanding tends to diminish as people become more knowledgeable with a project’s details and unsubstantiated rumors are dispelled,” the application said.
Homer Electric’s board “has shown consistent support for renewable energy projects,” it added.
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