RCA considers wind power sales agreement

Fire Island Wind, Chugach Electric say timely decision needed to maintain tight construction schedule, qualify for stimulus grants

Wesley Loy

For Petroleum News

Alaska utility regulators are weighing a proposed contract between the state’s largest electric power company and a wind farm developer, who says a prompt decision is vital to allow construction to begin in time to qualify for key federal grants.

The wind farm is planned for Fire Island, located in Cook Inlet near Anchorage’s international airport.

The developer is Fire Island Wind LLC, a subsidiary of Cook Inlet Region Inc., the Alaska Native corporation that owns 3,200 acres on the island.

Anchorage-based Chugach Electric Association has agreed to buy power from the Fire Island project.

Now the deal is before the Regulatory Commission of Alaska, which has been asked to approve a “purchase power agreement” between Chugach and Fire Island Wind.

The two firms are urging the RCA to approve the agreement by Sept. 15 so that construction can start right away and the project can secure federal funding.

“Failing to start construction in 2011 will disqualify the Project from receiving approximately $18.7 million in federal grants,” Suzanne Gibson, CIRI’s senior director of energy development, told the RCA staff in a July 8 e-mail.

The grant money would come through the American Recovery and Reinvestment Act of 2009, specifically section 1603, which allows the treasury secretary to provide grants to partially reimburse developers of wind, solar, geothermal and other energy properties.

Failure to land the grant money will “make it impossible” to keep the power purchase price “reasonably close” to the level at which Chugach and CIRI have agreed, Gibson said in her e-mail.

A June 24 RCA public notice says the price of the wind power under a 25-year contract is $107.85 per megawatt-hour.

Aside from the federal grants, Fire Island Wind also is relying on $25 million in state grants, the RCA notice says.

In her e-mail, Gibson acknowledged the RCA is being asked to act on the contract more quickly than normal, but emphasized the proposed Sept. 15 decision date “is in fact critical to the viability of the entire Fire Island Project.”

Gibson continued: “In order to qualify for the ARRA Section 1603 grant, the project must begin construction (by statute definition in ARRA) and/or sign binding contracts and expend significant funds for major project equipment items by December 31, 2011, and further, must complete construction and be commercially available before December 31, 2012. It is therefore critical to the economic viability of the Project that the Project schedule be preserved.

“In order to begin construction by the end of 2011, given weather in Alaska, resources must be mobilized to Fire Island before ice forms on Cook Inlet. CIRI believes that construction mobilization must therefore occur no later than October 2011.”

Judging from its craggy, wind-warped trees, Fire Island is a very blustery place indeed. Efforts to establish a wind farm on the island stretch back many years.

Alaska’s main population corridor, known as the Railbelt, depends heavily on Cook Inlet natural gas for heating and electric power generation. But deliverability of this resource is increasingly strained, leading Chugach Electric and other power companies to look at alternatives to local gas.

As currently proposed, the Fire Island wind project would include 11 General Electric wind turbines capable of producing a combined 17.6 megawatts of electricity, enough to power more than 6,000 homes, the developer says.

Total project cost, including transmission, is about $90 million.

The wind project would supply the annual equivalent of about 4 percent of Chugach Electric’s retail sales in 2010, and would offset half a billion cubic feet of gas used for power generation, Fire Island Wind says.

The wind power will be expensive at first compared to what Chugach pays now for gas, but wind “will almost invariably be cheaper in the long run as natural gas prices go up,” says the nonprofit Renewable Energy Alaska Project.

Wind turbines have sprouted around Alaska in recent years, but the Fire Island wind farm would be the state’s largest, REAP says.

The RCA is taking public comments through July 24 on the purchase power agreement.