Tables May Be Turning For Alaska’s Dormant Wind Power Industry

NAW Staff
Written by Laura DiMugno
on October 13, 2011 No Comments
Categories : Policy Watch

8736_alaska-cropped Tables May Be Turning For Alaska's Dormant Wind Power Industry Talks of wind energy development in the U.S. rarely make mention of Alaska: The state has a dismal 10 MW of installed wind power capacity, according to statistics from the American Wind Energy Association.

But despite its meager progress to date and an ambiguous renewable energy policy – Alaska has an ‘alternative energy goal,’ but no mandatory renewable portfolio standard – hope may not be dead for the state's wind energy sector.

Thanks to support from advocates such as the Alaska Public Interest Research Group, the Regulatory Commission of Alaska (RCA) on Oct. 10 approved a power purchase agreement (PPA) for the Fire Island Wind Project, a 17.6 MW wind farm planned for approximately three miles west of Anchorage in Cook Inlet.

The state's largest electric utility, Chugach Electric Association Inc., which will purchase the power output from the wind farm, had said the project would likely be put to rest if a decision was not reached this week, as time was necessary to secure federal funding and get the project online before the Dec. 31, 2012, production tax credit deadline.

Under the PPA, the utility will purchase, at a fixed price of $107.85/MWh, approximately 48,500 MWh from the project, to be built by Fire Island Wind Inc. (FIW), a subsidiary of regional Native corporation Cook Inlet Region Inc. According to Chugach, this price includes all project operations and maintenance expenses, as well as system integration costs.

The agreement also requires FIW to pay a system-integration charge equal to $10.85/MWh to Chugach. The net price to Chugach of $97/MWh is fixed for the energy, capacity credits (if applicable) and green attributes for 25 years, according to the order issued by the RCA.

FIW will be responsible for constructing, financing, operating and maintaining the wind farm, as well as for adhering to the Dec. 31, 2012, commercial operation deadline.

Why the holdup?
According to RCA Commissioner Robert Pickett, the PPA approval was delayed due to Alaska's "fragmented and disjointed" renewable energy policy. For instance, he said, "The current framework of statutes and limitations does not address many of the issues surrounding the review of intermittent, non-firm supply agreements."

The RCA was also hesitant in making its decision because it was presented with questionable data, thus necessitating further examination of the case: In Chugach's PPA proposal, the utility skewed its analysis by estimating a cost savings of $3 million over the 25-year life of the project, when in reality, the economic gain, if any, would be minimal, the commissioners claimed.

Chugach also used this disputed cost data when polling customers about the wind farm, which received broad support. Ratepayers may have had a different opinion on the project had they known the true costs, the commissioners claimed. All of these factors were taken into consideration when the RCA was evaluating the PPA.

One of the major factors in the RCA's decision, according to both Pickett and Commissioner Paul Lisankie, was the Alaska Legislature's passage in 2010 of a law establishing the legislature's goal of obtaining 50% of the state's electricity from renewable and "alternative" energy sources by 2025.

After much deliberation, Pickett expressed his support for the PPA, but under certain conditions. For one, Chugach must disclose to ratepayers, on an ongoing basis, the full costs it will recover for the project. Right now, the plan is to tack on an approximately $2.00 increase to monthly electric bills.

In addition, Chugach will be fully accountable for all negative impacts on interconnected utilities as a result of adding intermittent power to the Railbelt grid. The utility must also file a status report on the progress of the project, integration study and cost-reimbursement agreement.

Despite the PPA's approval, this case will warrant future observation and attention, as the commissioners expressed trepidation in their decisions.

"This is one of the most challenging and frustrating dockets I've been involved with during my tenure as an RCA commissioner," Pickett said in a statement. "The power purchase agreement between Chugach Electric Association Inc. and Fire Island Wind LLC has been shaped by a number of powerful and conflicting forces. The circumstances surrounding this PPA are unique."

Leave a Comment