Cost of upgrading rural power houses has increased dramatically

Alan Bailey

for Petroleum News

During an Oct. 23 presentation to the Regulatory Commission of Alaska Curtis Thayer, executive director of the Alaska Energy Authority, commented that the cost of upgrading powerhouses in rural Alaska has doubled in recent years. AEA helps rural communities by replacing outdated and inefficient generation equipment with modern equipment. Powerhouses that used to cost $3 million to $4 million now cost $5 million to $7 million, Thayer said.

AEA is now seeing deferred costs of over $300 million for equipment replacements, Thayer said, adding that recent federal grants for energy upgrades from the Infrastructure Investment and Jobs Act and the Inflation Reduction Act did not provide any funding for the upgrading of diesel generation systems, because these systems use fossil fuels. But if aging power generation systems are not replaced in a timely manner, the generation systems can fail, Thayer commented.

As an example of the type of assistance that AEA can provide, Thayer showed an illustration of the power generation facility in the village of Tuluksak, where the agency has installed three new diesel generators. AEA builds the generation facilities in Southcentral Alaska and then ships them to the rural sites, Thayer said.

There is a similar problem with the replacement of bulk fuel storage facilities, with more than 400 of these facilities in Alaska, Thayer commented. The projected cost of deferred maintenance of these facilities now amounts to nearly $1 billion, with the cost of replacing a fuel tank farm amounting to about $11 million.

Thayer also said that, as part of its assistance for rural communities and with financial assistance from the Denali Commission, AEA has conducted 3D modeling of powerhouses and is carrying out a similar project for bulk fuel facilities. This enables an AEA expert to assist a rural operator remotely, seeing a visual image of exactly what the operator is working with. The Department of Energy has learned about what AEA is doing and wants to invest in the remote support technology, Thayer added.

"So it's a project that started in house that's having great success," Thayer commented.

--ALAN BAILEY