Introduction Eska Creek Preliminary Feasibility Analysis This report examines the feasibility issues of energy and economics for a 1.8 MW hydroelectric project on Eska Creek (project). The Project is located near Sutton, AK and would use Eska Creek as a source for energy production. The preliminary analysis includes Site reconnaissance to identify locations for the intake, pipeline, and powerhouse in conjunction with mapping, Discussion of environmental, land use, and permitting, Collection of hydrology data and an estimation of the available water for power production, Conceptual project configuration and size, and Preliminary opinion of project cost and economic viability Project Location and Description Figure 1, at the end of the report, shows the location of the project and watershed basin based on USGS 63k quad maps. The project is generally located in the Matanuska Susitna Borough on state owned mental health trust land with existing mining and geological exploration activities underway related to coal extraction. The area is also a significant resource for recreation and subsistence activities with established motorized trails. The selection of the intake site was determined from on the ground reconnaissance efforts that identified pipeline and access routing resulting in the intake location shown in Figure 1. The location for the powerhouse was chosen based on the limits of anadromous fish habitat, land ownership, location of exiting power transmission lines, and general topography. An alternative powerhouse location, at a higher elevation with a shorter pipeline, was also examined but eliminated after evaluation. Photos showing the proposed location of the intake, the general pipeline area, and Eska Creek near the powerhouse site are included at the end of the report. Compatibility with Existing Use The project is located above mapped anadromous fish habitat. Eska Creek is cataloged as stream number 247-50-10220-2095 by ADF&G with coho salmon present and chum salmon spawning identified as the species and use. The original nomination states that the fish presence extends up to rail grade indicating that the steeper stream gradient precludes further access. Culverts exist in the vicinity of the upper limit that do not appear to present a barrier (see attached photos). The presence of resident species is unknown. Also, there are no water rights filings related to the conservation of habitat. The initial analysis adopts the optimal assumption that no environmental flow releases would be required at the intake to support aquatic life in the bypassed reach of Eska Creek. 1/10/2013 Page 1 of 11
The project is located in an area designated as a moose range. The area is also utilized extensively for recreation. Neither of these uses would be incompatible with the project. The most significant existing land use activity is the existing and proposed coal mining operations. Usibelli has an existing lease for coal mining and exploration that covers most of the project footprint. Specific development plans were not investigated at this time. The impact of coal resource extraction can range from completely prohibiting project development to enhancing the project the prospect for development. Identifying the compatibility of the project with existing coal mining authorizations and planned developments must be investigated should further feasibility efforts continue. Permitting the project would require leasing or easement applications with the State of Alaska. The state land use noticing and permitting process would be the forum for public review and comment for any proposed development. The project would also require additional stream gaging to satisfy state water rights permitting. Additional aquatic habitat investigations would also be required to initiate the state fish habitat permitting. The project is not likely to require significant federal permits although a FERC jurisdictional determination and corps of engineers permit will be needed. Hydrology This investigation included performing hydrology data collection at the Eska gage site established just downstream of the culverts for the lower road crossing (see Figure 1). The purpose of the data collection was to provide a preliminary assessment of Eska Creek hydrology in relation to nearby drainages with extensive gaging records. The location was chosen for the ease of access and a stream cross section with good low flow resolution. On December 18, 2011, a Campbell Scientific pressure transducer and data logger were installed at the Eska gage site. The installation utilized a conduit to submerge the pressure transducer in the stream under the ice and snow. The Eska gage was set to log at 15 minute intervals and the first reading averaged 1.15 feet of water over the gage with a temperature of 33.1 degrees F. Flow measurements were taken using a dye tracer method. The figure below shows the flow readings, corresponding gage depths, and the derivation of the stage discharge relationship. 1/10/2013 Page 2 of 11
Date Stage (ft) Discharge Measurement Temperature (deg F) 12/18/11 16:01 1.15 7.4 33 4/7/12 15:17 0.83 5.5 33 4/14/12 14:31 1.09 12.1 34 5/28/12 13:29 1.44 46.1 42 1.60 1.40 Eska Creek Stage Discharge Curve 1.20 1.00 (ft) g e0.80 S ta 0.60 y = 0.2824ln(x) + 0.3627 R² = 0.9963 Discharge Measurement (cfs) 0.40 Excluded Discharge Measurements 0.20 Stage Discharge Equation 0.00 0.0 10.0 20.0 30.0 40.0 50.0 Discharge (cfs) The discharge measurement of 12/18/2011 was left out of the stage discharge calculation due to suspected errors in the flow measurement. The discharge calculations are presumed valid within a stage range of 0.7 to 1.5 feet. In order to perform an average annual energy production estimate for the project a synthesized annual hydrograph was developed using the gaged data and the median daily flows for the Little Susitna River which has a 63 year gaging record performed by the USGS (USGS site number 15290000). Adjustments to the Little Susitna River median daily values to arrive at a synthesized hydrograph for the project included proportioning based on the basin area, averaging with the Eska gaged flows, and flattening of the summer runoff profile to account for the generally higher elevation of the project basin versus the Little Susitna basin. The hydrograph below shows the synthesized result for the Eska gage site location. The actual hydrograph used for the project used this hydrograph scaled by the basin area of the intake versus the basin area of the Eska gage site. 1/10/2013 Page 3 of 11
140 Eska Gage Avg Daily Measured Discharge Little Su Median Scaled to Eska Gage Basin Area Eska Gage Site Estimated Median Hydrology 120 100 Flow (cfs) 80 60 40 20 0 Date Future hydrology data collection should be done near the intake if at all possible to identify whether the high altitude sub basin area may exhibit significantly different runoff characteristics than the lower basin and with those of nearby comparison basins. The intake site would be accessible during the summer by ATV and hiking about 1/4 mile. Winter access will likely require helicopter use although snow machines are capable of reaching the intake site under favorable snow conditions. Project Concept The conceptual project configuration used in this analysis consists of a small concrete diversion structure for the intake, a combination of buried HDPE and steel pipeline located in a constructed access trail, a small powerhouse with a single turbine, switchgear, and a transformer connected directly to the existing distribution line. Not included in the cost, and likely a project requirement, is upgrading the existing transmission to three phases. A number of different hydraulic capacities and pipeline sizes were evaluated in the project concept. The sizing analysis settled on a project with a hydraulic capacity of 22 cfs and nominal pipeline diameters of 22 and 20 with a peak output of 1.8 MW as the baseline size for the cost estimate and economic analysis. With a single turbine most of the project sizes would not be operational during the lowest flows of late winter and spring. The sizing analysis is shown in the table and chart below. 1/10/2013 Page 4 of 11
Hydraulic Annual Energy Pipe wt Nominal Pipe Velocity Capacity (cfs) (kwh) (tons) Dia (inches) (fps) Headloss 15 6.1E+06 241 18 8.9 132 17 6.5E+06 241 18 10.1 168 19 7.2E+06 302 20 9.2 124 21 7.6E+06 302 20 10.2 150 23 7.8E+06 302 20 11.2 178 25 8.5E+06 353 22 10.1 131 27 8.7E+06 353 22 10.9 151 29 9.2E+06 419 24 9.9 113 31 9.3E+06 419 24 10.6 128 33 9.4E+06 419 24 11.2 145 35 9.5E+06 419 24 11.9 162 1.0E+07 Annual Energy (kwh) Pipe wt (tons) 450 Annual Energy Output (kwh) 9.0E+06 8.0E+06 7.0E+06 6.0E+06 5.0E+06 400 350 300 250 Pipe Weight (tons) 4.0E+06 200 15 20 25 30 35 Hydraulic Capacity (cfs) 1/10/2013 Page 5 of 11
The daily project output based on the information from above is shown in the following chart. 2000 Power (kw) 1800 1600 1400 1200 1000 800 600 400 200 0 Cost Estimate Date A preliminary opinion of cost for the project is included in this analysis and is based on existing cost estimates for similar projects and is shown in the table below. Item Labor Labor Cost Equip Cost Materials Cost Ship Cost Total Cost CONSTRUCTION SUPPORT 3,750 $ 356,000 $ 360,000 MOBILIZATION $ 250,000 $ 250,000 POWERHOUSE 1,350 $ 110,000 $ 250,000 $ 360,000 INTAKE 2,400 $ 190,000 $ 88,000 $ 280,000 PIPELINE 2,400 $ 190,000 $ 992,000 $ 1,180,000 ACCESS TRAILS 1,980 $ 152,000 $ 321,000 $ 470,000 TURBINE AND GENERATOR 540 $ 51,000 $ 950,000 $ 1,000,000 TRANSMISSION EQUIPMENT $ 403,000 $ 120,000 $ 520,000 SUBTOTAL, Direct Costs 12,400 $ 1,049,000 $ 403,000 $ 2,721,000 $ 250,000 $ 4,420,000 Contingency 25% $ 1,110,000 Contractor profit 15% $ 660,000 SUBTOTAL, Construction $ 6,190,000 SUBTOTAL, Construction $ 6,190,000 Construction interest $ 140,000 Feasibility and Permitting 6% $ 350,000 Engineering 4% $ 250,000 Inspection and testing 3% $ 180,000 Owner admin 2% $ 100,000 TOTAL PROJECT $ 7,210,000 1/10/2013 Page 6 of 11
Economic Analysis The economic analysis evaluates future revenue and costs by estimating those costs and calculating present day values using estimated economic trends. For this analysis a schedule of cash flows has been generated over the economic term. Future cash flows are discounted to determine their Present Value for comparison. It should be understood that the high variability of the economic factors coupled with the uncertainty of the necessary assumptions for future estimations makes accurate economic analysis difficult in the early stages of project development. For this analysis the major economic factors of concern are: The present day capital cost and financing terms including the economic term of the analysis, the loan term, the project life, cost of capital, and discount rate. The estimates for these factors are presented in the economic summary table. A weighted cost of capital is used based on a 5% borrowing rate for 75% of the capital cost and an 8.5% rate of return for the remaining 25%. Pre construction costs are not included in the project financing. The actual annual revenue generated by the project is dependent on competing generation sources, climate and hydrology, and project reliability. This has been estimated using the annual average energy generation, as shown in the hydrology section, and a fixed rate for energy. The project would deliver power to Matanuska Electric Association, a southcentral utility, at wholesale rates equal to the avoided cost of existing generation which is currently $0.067/kWh. The actual annual costs incurred to operate and maintain the project (parts, labor, taxes, fees, insurance, credits, etc) are estimated throughout the project life in accordance with the schedule below. Construction start is assumed to occur after 5 years of predevelopment work. Project Operation Cost Schedule Description Interval Cost Taxes, insurance, fees Annual $40,000 Parts, labor, and administration Annual $60,000 Turbine and Generator Overhaul 15 years $260,000 Intake and power transmission replacement 20 years $580,000 Pipeline 50 years $1,200,000 The results of the economic evaluation are shown in the summary table below. The negative Net Present Value (NPV) incidates the project is not viable given the current set of assumptions. Project Cost Estimate $7,210,000 Financed Construction Cost $6,510,000 Construction Cost Financing Term 20 years Construction Cost Weighted Finance Rate 5.88% Annual Finance Payment $562,000 Annual Energy Production 7,720,000 kwh Energy Rate $0.067 /kwh Annual Revenue $517,000 Annual Operation Cost $100,000 Economic Life 30 years Economic Discount Rate 5.0% Net Present Value (NPV) -$1,630,000 1/10/2013 Page 7 of 11
Conclusion The initial analysis indicates that the project is not economically viable at this time. However, this could change in the next several years if the cost of natural gas (avoided cost of energy) rises as is likely the case for alternative fuel or energy sources that will be needed to replace dwindling Cook Inlet natural gas supplies. Analysis shows that an avoided cost rate of $0.0875/kWh would result in a NPV of 0. Higher sales rates have already been agreed upon with the Fire Island wind farm obtaining approximately $0.10/kWh, a rate that would make this project potentially beneficial. It is concluded that the project is not recommended at this time. If energy rates rise significantly and additional investigation is pursued, the following areas require further analysis: Investigate compatibility with mining operations, Perform additional hydrology data collection and analysis focusing on establishing flows at the intake, Investigate aquatic habitat concerns, Improve on the project concept and cost estimate, and Investigate transmission connection requirements. 1/10/2013 Page 8 of 11
Bering Pacific Engineering Figure 1 Project Location 1/10/2013 Page 9 of 11
Bering Pacific Engineering Photos Photo of culverts taken from Eska gage site. Photo of Eska Creek near powerhouse site. 1/10/2013 Page 10 of 11
Bering Pacific Engineering Photo showing pipeline terrain taken from near intake site looking towards powerhouse site. Photo looking down on intake site. 1/10/2013 Page 11 of 11