Plans for a large hydroelectric project on the upper Susitna River, a potentially a $4 billion-plus project, are moving along, although things are at a very early stage.
The Alaska Energy Authority, a state agency, has selected a possible dam at the Watana site on the upper Susitna as a good option for a large hydro project and the Legislature is considering a $65 million capital appropriation requested by Gov. Sean Parnell to begin the required licensing with the Federal Energy Regulatory Commission.
Meanwhile, the AEA has signed a $5 million contract with MWH Americas, a consulting firm specializing in large power projects, to do preliminary design and engineering work related to the license application.
Under federal law FERC must authorize a hydroelectric project. There seems to be wide support in the Legislature for the $65 million appropriation, but the final decisions won't be made until the Legislature approved the state's fiscal year 2012 capital budget, which will come most likely as lawmakers adjourn in mid-April.
However, what's needed along with approval of the initial funding is a revamping of the state energy authority to allow it to build and own projects. At this point, AEA essentially administers state energy programs but does not own or operate projects.
Legislation to allow AEA to undertake construction also is before the Legislature in Juneau. House Bill 103 is in the state House, while the Senate is considering Senate Bill 42, the version before that body. Both bills are sponsored by the governor.
Rep. Lance Pruitt, R-Anchorage, co-chair of the House Energy Committee, said there are some lawmakers questioning just how much new authority they should give the energy authority. However, most recognize that the agency must be given the tools to develop the project.
Other state agencies could do it too, but there's general agreement that projects as large and complex as hydro projects require the focus of a specialized agency.
HB 103, authorizing the AEA to take on new powers, is before Pruitt's committee.
AEA has developed hydro projects before. Until it was reorganized in the 1980s the energy authority was the Alaska Power Authority, which did build projects. The old APA group developed the 120-megawatt capacity Bradley Lake hydro project near Homer as well as hydro projects near Kodiak and Valdez, and in Southeast Alaska near Petersburg, Wrangell and Ketchikan.
All of these projects are operating today and produce some of the least costly power in the state.
What is contemplated on the Susitna River is a large dam at the Watana site that would have about 600 megawatts of installed generation capacity. The dam would create a reservoir about 39 miles long and two miles in width at its widest point.
It would produce about half of the existing electricity needs of the Railbelt regions, covering the Interior, Southcentral and Kenai Peninsula connected by the Alaska Railroad.
This would not eliminate the need for Southcentral utilities to generate power with natural gas, but it would greatly reduce the need for gas, extending the life of existing gas fields in the region, which are being depleted.
"It's important to realize that what's being proposed now on the Susitna River is not the large project that was proposed in the 1980s. That would have had a 1,800-megawatt capacity. This has been 'right-sized' to meet the expected demand for power," Pruitt said in a briefing to Commonwealth North, an Anchorage-based business group.
If a conventional earth-filled dam were built, preliminary estimates show the project could cost between $6 billion and $8 billion. If a new technology in building dams can be used - roller compacted concrete - costs could be reduced to $3 billion to $4.5 billion, Pruitt said. The project could be done faster using roller compacted concrete, too.
Roller compacted concrete would require more materials to be moved to the dam site and the best way of providing transportation may be via railroad, AEA project manger Bryan Carey told the Senate Resources Committee in a January briefing.
If a conventional dam-building technique were used a road, most likely built off the Denali Highway, would probably be the best way to move materials to the site.
Pruitt said that if costs cold be reduced with roller compacted concrete, the project could be more affordable for utilities and consumers. No matter which technique is used, the project will probably need a large state capital investment to pay part of the construction costs.
If that happens the cost of power could be roughly in the same range consumers are paying today, 6 to 10 cents per kilowatt hour, Pruitt said. The AEA has estimated that a $4.5 billion project with the state paying for half would provide power for 6.3 cents per kwH and a roller compacted concrete dam costing $3.6 billion could provide power for 5 cents per kwH. Those numbers do not include power transmission or the utilities' distribution costs, however.
"There are a lot of variables involved in a project this large, and the costs will be different depending on whether or not they go with RCC or Embankment," Pruitt said. "We've heard as little as $3.6 billion for RCC (roller compacted concrete) and older estimates as high as an $8.3 billion estimated capital cost for the proposed area."
Pruitt said that if there were no state investment, leaving the utilities and consumers to pay all of the revenue bond costs, the power cost could be in the range of 20 cents per kwH, which could make it unaffordable, he said.
The approach of the state paying for half a major hydro project and utilities paying the rest was done with the Bradley Lake dam in the 1980s, and this was successful. Today Bradley Lake provides the lowest-cost power of any generation in the Railbelt.
With the other dams built by APA in Southcentral and Southeast in the 1980s, the state paid all of the costs.
Tim Bradner can be reached at firstname.lastname@example.org.
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