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Sufficiency 


What would cause Juneau to need more hydropower?

The Regulatory Commission of Alaska tariff provisions require a regulated utility to serve all customers within its service district.  Most of the City and Borough of Juneau road system is in the service area of AEL&P.  However there is no utility service north of Eagle Beach in the northern section of the CBJ.

Juneau is in hydropower balance with firm rate customers. That means that those AEL&P customers in rate classes that are firm and not “interruptible” have current hydropower generation to meet their demand. Interruptible rate customers such as Hecla Greens Creek Mine, which is the largest single interruptible customer of AEL&P, is historically taken off AEL&P generated power whenever water reservoirs are too low to satisfy firm rate payer current and expected demand. Other interruptible customers include the Princess Cruise Ship dock and the Federal Building heating system. In addition, the Coeur Alaska Kensington Mine in the City and Borough of Juneau is not in the AEL&P service area and is connected to the Juneau electrical grid. The Coeur Alaska Kensington Mine produces 100% of its power with diesel generation and through no fault of their own, is the largest emitter of carbon emissions in the CBJ.  Interestingly, the Coeur Alaska Kensington Mine produces and uses more electrical power than the City of Skagway and the City of Haines combined[1]. A Coeur Alaska Kensington Mine interconnection to a hydropower source would materially help meet and perhaps exceed the CBJ Climate Action Plan goals of community reduction in green house gas emissions of a 10% reduction by 2017.

[1] Source- Alaska Power & Telephone, the electrical utility for Skagway and Haines 

 Table X Juneau’s approved GHG Emission targets

Table 2. Juneau’s approved GHG Emission targets

Source 2011 CBJ Climate Action Plan

Economically, limited or a lack of adequate hydropower over time could negatively impact Juneau’s economic growth and could lead to more diesel generation or other more carbon emitting fuel supply usage in the Capital city when electrical demand outstrips hydropower electrical supply.

Juneau’s total electrical sales (firm and interruptible customers) grew 10.83% compared from November 2011 to November 2012. AEL&P sold 329,250,834 kWh in 2011 and sold 364,906,469 kWh in 2012 through November of each year.[1] These sales numbers do not include December sales of either year. Hydropower projects are reliant on precipitation and rain fall. Lower water years means that hydropower projects produce less power than in higher water years.

Industrial and commercial growth is not the only electrical energy demand looming for Juneau. In addition to economic growth that could develop by means of new subdivisions, new commercial ventures, and new mining activity, there is also economic fuel substitution that occurs when people switch from high cost fuel sources to lower cost fuel sources. Based solely on the cost of competitive fuel sources (aside from the impact on GHG), oil to electric conversions growth is the other primary reason that Juneau will need more hydropower in the near and long term future. The recent draft Southeast Integrated Resource Plan (SEIRP) identifies the “Oil to Electric” conversion phenomenon as a threat to hydropower dependent communities.In communities where hydroelectric power is available, rapid conversion from heating oil to electricity for space heating has been common in recent years due to the lower cost of hydroelectric electricity for home heating and other uses. While a benefit to users who convert to electricity, this has had the effect of reducing the availability of excess hydroelectric generation and increasing the reliance on diesel generation for communities having limited hydroelectric capacity”[2]. 

The price of oil drives the amount of space heating load converted from oil to electric.[3]

[1] AEL&P Tariff Advice No. 413-1 Regulatory Commission of Alaska December 12, 2012

[2] Final Draft SEIRP page 3-25

[3] Final Draft SEIRP page 15-2

 

Figure 2. Achilles heel of the current hydro system

(Source AELP 11-12 presentation slide)

There are many factors that impact the price of home heating oil that impact why someone would substitute home heating oil with electrical heat.  Many of these factors are international in nature and are therefore directly related to the world supply and availability of oil at any given time. However, in the past, diesel fuel used to be an economical form of electrical generation through diesel generation that was on par with hydropower. This is no longer the case.  The charts below depict how oil prices have risen over time and demonstrate the correlation between oil imports, diesel costs and local Juneau home heating fuel costs. 

 

Figure 3. Inflation adjusted monthly crude oil prices. www.inflationdata.com

 

 

Figure 4. Nominal and actual price for imported crude oil chart. http://www.eia.gov    

At 2012 diesel fuel prices, the cost per kWh of diesel generated electricity is over .30 a kilowatt hour.  In economic terms, continued increases in home heating fuel prices will have home and business owners migrate to lower cost heat sources such as electricity generated by lower cost hydropower.   Over time, these conversions, combined with economic growth, will utilize the current hydropower capacity of Juneau’s existing hydroelectric facilities. At first, capacity and generation used by “interruptible” customers such as Hecla Greens Creek Mine and Princess Cruise lines will be decreased to ensure that there is enough electricity to meet growing electrical heating demand for firm ratepayers. It is not a question of if, but a question of when Juneau will eventually run out of currently developed hydropower resources. When this happens is predicated on economic development, the price of oil and the price of substitute fuel sources. Electricity is now, and with higher oil prices will become, a favored home heating fuel substitute to diesel.

Figure 5. Annual Retail Heating Oil Price Chart. http://www.eia.gov

Higher home heating fuel prices is a double edged sword with two negative consequences. As home heating fuel prices increase, a tipping point is created somewhere on the price continuum.  An economic tipping point is defined as the crisis stage in a process, when a significant change takes place. In the case of Juneau’s tipping point from oil to electric heat conversions, it might be a quick rise in the price of home heating fuel to $7.00 or $8.00 a gallon (or perhaps less) whereby home heating fuel oil is decreased and a large spike of demand occurs for electricity as smart households mitigate their home heating costs. Tipping points naturally occur in all markets and economies where substitution begins slowly and then a massive shift occurs over a relatively short period of time.  For example, American adoption of cellular phones went from nonexistent to large scale use when the cost of ownership and cellular local and long distance rates dropped below what was typically charged for land line telephones.

If Juneau does not preplan and maintain a growing supply of hydropower and a tipping point occurs, it could have an expensive impact on Juneau’s economy and household disposable incomes.  Interruptible ratepayers will be impacted first by a loss of excess hydropower capacity.  After the interruptible power capacity is consumed by the migration from oil to electric conversions, additional generation will need to be supplemented with diesel generation at high fuel costs. While the addition of diesel generated costs will be diluted into the hydropower mix and cost of supply, diesel generation will add small but incremental costs to Juneau ratepayers by a fuel cost adjustment.

Juneau’s Climate Action Plan addressed this issue in the executive summary. The community's challenge is to use its clean energy wisely in order to stretch existing hydroelectric capacity as far as possible, limiting the need to use back-up diesel generators. The Juneau Climate Action Plan has the following strategy and actions:

Strategy RE3-A. Develop an energy plan for Juneau to ensure sufficient renewable energy resources for future growth that reduce/eliminate GHG emissions.

Under this strategy, the CBJ Climate Action Plan calls for the following short term strategy:

Develop an Energy Plan for the community to identify and evaluate the economics of renewable energy sources (including hydroelectric, biomass, solar, tidal, and wind) that will be able to meet the community’s needs in the future. The Energy Plan will need to be flexible enough to respond to changing conditions and will need to examine the full range of renewable energy potential and relative costs

Consider the feasibility of other potential hydroelectric sources to meet future needs such as Phase 2 Lake Dorothy and Sweetheart Lake.

Implement the recommendations of the Energy Plan to identify and develop local renewable energy sources.

 

Figure 6. Utility Planning Conundrum    

(Source AELP 2010 presentation Rural Energy Conference slide)


[1] Source- Alaska Power & Telephone, the electrical utility for Skagway and Haines

[2] AEL&P Tariff Advice No. 413-1 Regulatory Commission of Alaska December 12, 2012

[3] Final Draft SEIRP page 3-25

[4] Final Draft SEIRP page 15-2