CEA, MEA talk to House Energy about Southcentral power supply
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Alan Bailey for Petroleum News
On Feb. 4 representatives from several electricity utilities talked to the Alaska Legislature's House Energy Committee about their utilities, their operations and the challenges that they face. Part 1 of this three-part series on the meeting covered presentations by Homer Electric Association and Golden Valley Electric Association at the southern and northern ends of the Railbelt electrical system. Part 2 covers presentations by Chugach Electric Association and Matanuska Electric Association in the Anchorage region and the Matanuska Susitna Valley. Part 3 will cover a presentation about a rural Alaska electric cooperative.
Chugach Electric gas supplies Trish Baker, senior manager government affairs for Chugach Electric, spoke to the committee about her utility, starting with an overview of the utility's gas supply situation. Gas fueled power generation accounts for 78% of the utility's electricity, Baker said. The gas supplies come from two sources: 60% comes from the Beluga River gas field, where Chugach Electric is the majority field owner; the remaining 40% is supplied by Hilcorp Alaska under a firm contract that expires on March 31, 2028.
As part of its policies for maintaining adequate gas supplies the utility is continuing to invest in the Beluga River field, having drilled five new wells last year and planning the drilling of five more wells this year, Baker said
"So we'll try to get us much value out of that asset as we possibly can," she said.
The utility's second strategy for maintaining adequate gas supplies, given the upcoming termination of its firm supply contract with Hilcorp, is to progress plans for the import of liquefied natural gas to the Cook Inlet region, Baker said. As previously reported by Petroleum News, on Feb. 6 Chugach Electric and Hilcorp affiliate Harvest Alaska announced a plan to convert Marathon's mothballed LNG export facility at Nikiski into an LNG import facility.
The utility also plans to expand its renewable energy portfolio, Baker said.
An integrated resource plan She also told the committee that the utility has a long-term integrated resource plan, considering the future need for replacement of existing assets and the future needs for energy storage. That plan does anticipate needing some amount of natural gas well into the future.
On the other hand, the Chugach Electric board has set an objective of reducing the utility's carbon intensity by at least 35% by 2030 and at least 50% by 2040, without a material impact on electricity rates or supply reliability, Baker commented.
"That remains very, very important to us and very central to our mission," she said, adding that the utility has a community solar project under construction.
In addition, the utility sees its plan for the importing of LNG as a relatively short-term, bridge solution to the gas supply challenge. Future possibilities include obtaining gas from the North Slope or obtaining more gas from the Cook Inlet, Baker said. Chugach Electric anticipates that the cost of imported LNG will impact about 11% of the cost components on the utility's current retail electricity bills, given that a large portion of the charges involves the recovery of fixed costs associated with the electricity system.
Energy storage At the same time Chugach Electric is advancing its energy storage capabilities, to address the required stability of its electricity supplies. In particular, it has installed a battery facility that the utility jointly owns with Matanuska Electric Association. The concept is to use the battery to store reserve energy as an alternative to what are referred to as "spinning reserves," the availability of active, backup power generation that can be called on to respond to a sudden increase in electricity demand.
While running a backup gas-fueled generation plant in reserve mode does not make efficient use of fuel gas, the new battery storage system provides Chugach Electric with 30 megawatts of instantly available power. This is resulting in 5% savings in gas usage, Baker commented.
Transmission line upgrades Baker also said that Chugach Electric is currently engaged in a project to upgrade the transmission line between Anchorage and the Kenai Peninsula. That line, among other things, enables the shipment of hydroelectric power north from the Bradley Lake hydropower facility in the southern Kenai Peninsula. The transmission line was built in 1962 and is being upgraded section by section in a project that is running from 2012 to 2032. The objective is to increase the capacity of the line by upgrading the operating voltage from 115 kilovolts to 230 kilovolts, thus also reducing line losses and improving power transferability. The anchoring of the power line structures is also being upgraded.
And Baker commented that Chugach Electric is very supportive of the proposed Dixon Diversion expansion of the Bradley Lake facility, while also supporting the plan to build a new undersea transmission line from the Kenai Peninsula to Beluga, to connect the peninsula region with the Anchorage region.
Matanuska Electric Association Julie Estey, chief strategy officer for Matanuska Electric Association, talked to the committee about her utility. MEA provides power through 72,000 meters, she said. That compares with a figure in the low 60,000s 11 years ago when she started working for MEA, she added.
The big increase in the number of meters is great from the perspective of spreading the utility's fixed costs over more members. But the utility also has to ensure that it has sufficient power transmission capacity and substations to handle the increasing load. Consequently, the growth does cost money, Estey said.
At the same time, the cooperative has 57,000 members, a relatively low number to spread the costs across.
"That is something that weighs heavily on our board and staff and constantly keeps us in check to make sure that we are making fiscally conservative decisions for our members," Estey said.
In addition, 75% of MEA's members are residential rather than industrial. That impacts the manner in which the utility's costs are spread across the membership. And, as elsewhere in the United States, those costs have been increasing. Currently the cost of bringing power to MEA's customers amounts to 22 cents per kilowatt hour.
However, the biggest drivers behind reducing the cost is access to cheap hydropower or cheap gas, Estey said. And this is a time of great change in the electricity industry.
The fuel supply challenge One of the biggest challenges facing Alaska is fuel supplies for power generation, especially given the projected decline in firm gas supplies from the Cook Inlet basin. In terms of long-term planning, MEA is looking to diversify its generation portfolio, hoping to decrease its gas usage, while also recognizing that the use of natural gas will remain a cornerstone of power production, Estey said.
At the same time, MEA currently only drives about 10% of the total demand for Cook Inlet gas. Consequently, the utility needs alliances and partnerships with other organizations that use gas, to resolve issues around future gas supplies.
Enstar Natural Gas Co., the Anchorage based gas utility, has done a great job of investigating the various options for addressing upcoming shortages in firm gas supplies from the Cook Inlet basin, Estey said. But, even taking into account a potential clean energy portfolio with 50% clean energy by 2050, the gas demand from the electric utilities is dwarfed by the demand from other uses, in particular the heating of buildings, Estey said.
"So gas is a big issue, and renewables and other clean energy options will absolutely help, but it can't solve that gas problem," she said, adding that the utilities need to solve the problem as a group. LNG imports will be necessary to help fill the gas supply gap. But there is still a predicted gap in adequate supplies before it would be possible to start LNG importing.
New developments On the other hand, there have been some exciting developments. Enstar has just signed an amended contract with Furie Operating Alaska, reflecting Furie's potential ability to bring more gas to market. And MEA has a proposed solar energy project.
Also MEA's power plant at Eklutna was designed to use diesel fuel as well as natural gas. However, at present diesel costs about three times the cost of natural gas, Estey commented in response to a question from the committee.
Other options being discussed include potential wind projects and a potential West Susitna coal project. There has also been further talk about a North Slope gas pipeline. Estey commented that current federal policies are impacting some possibilities for renewable energy development.
But almost all of the options that MEA is investigating are more expensive than the utility's current cost of power, regardless of whether they involve renewable or non-renewable energy, Estey said.
Estey said that the top priority for MEA's members is electricity supply reliability, closely followed by the cost of the power. At the same time, all of the options for dealing with the gas supply problem involve trade-offs of one form or another. And, while the potential for solutions such as a North Slope gas pipeline or increased Cook Inlet drilling is currently very uncertain, the utilities are at a point where they need to make a decision about LNG importing.
In terms of hydropower, MEA obtains some power from Bradley Lake. The utility also has a share in the Eklutna hydropower system in northeast Anchorage, has some run-of-river hydro projects and some wind and solar power.
Transmission constraints Constraints in the transmission system that connects the three main regions of the Alaska Railbelt limit the ability to obtain electricity from other regions, thus making it necessary for MEA to keep some spinning reserves in operation.
"Almost every large project that I am looking at for my diversification efforts is currently limited by that transmission," Estey said, commenting that a lack of adequate and redundant transmission is the biggest hurdle to bringing on new power generation and to work with independent power producers and the other utilities.
There is currently the project to build the new subsea transmission line from the Kenai Peninsula, but MEA needs a second transmission line that runs north towards Fairbanks. MEA is also looking to the newly formed Railbelt Reliability Council and the Railbelt Transmision Organization to move towards a more unified approach to the Railbelt electrical system.
"MEA is very committed to a joint energy highway with unified oversight and management and a more systems-wide approach to solving these problems, involving all of the utilities working cohesively," Estey said.
--ALAN BAILEY
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