New Life for Clean Coal Plant

Oct 18 - Alaska Journal of Commerce

A new chapter is being written on the long saga of restarting a mothballed 50-megawatt, new-technology coal power plant at Healy, between Anchorage and Fairbanks. Homer Electric Association and the Alaska Industrial Development and Export Authority, which owns the Healy Clean Coal Project, signed an agreement Oct. 7 under which HEA would work with the state authority to restart the plant that has been idle since December 1999.

The utility, which serves customers on the Kenai Peninsula, will take the lead on an engineering review and physical inspections of the plant, HEA spokesman Joe Gallagher said. The work, expected to be completed in four months, will assess the plant's current condition.

Work will meanwhile continue on finalizing agreements with AIDEA under which HEA would manage a restart of the plant, if that proves feasible, and would assume responsibilities for its operations and maintenance, he said.

Homer Electric would also purchase the power generated at the plant and would make power available to others.

Ron Miller, AIDEA's executive director, said meetings are currently underway with the Homer utility to hammer out the long-range agreement.

If the plan goes forward, HEA would step into the role formerly held by Golden Valley Electric Association, the Fairbanks-based electric cooperative that serves Interior Alaska.

GVEA terminated its contract with the state authority to operate and buy power from the plant after an acrimonious dispute developed over its operating capabilities. GVEA made a subsequent offer to purchase the plant, which AIDEA turned down.

GVEA operates a smaller, older, 25-megawatt coal-fired plant adjacent to the larger plant owned by AIDEA. Usibelli Mine Inc. supplies coal from its mine at Healy.

In an Oct. 7 press release, HEA general manager Brad Janorschke said his utility is keenly interested in developing alternatives to the use of natural gas for the generation of electricity.

"As most people are aware, the price of natural gas has been escalating, and there is concern about an adequate future supply of gas in the Cook Inlet area. The Healy Clean Coal Project may be an opportunity to diversify our power options," Janorschke said.

The Homer utility is also working with Northern Dynasty Minerals on providing power to that company's planned copper-gold mine near Iliamna. If the mine goes ahead it could require between 250 and 275 megawatts of power, according to Northern Dynasty.

Currently, about 90 percent of Homer Electric's power generation comes from natural gas, HEA's Gallagher said. The rest comes from hydroelectric power.

AIDEA's Miller said the agreement with HEA is an important first step in restarting the plant. Debt service on bonds and maintenance of the plant costs AIDEA about $7 million a year. It is also important for the plant to begin earning revenues again as well as help meet growing power needs in the state's Railbelt region that covers the Interior and Southcentral, Miller said.

Gallagher said power from the Healy plant would be carried to customers through the Railbelt Intertie, a long-distance electrical transmission system linking Southcentral and Interior Alaska. The intertie runs through Healy carrying electricity to the Interior that is generated by natural gas and hydro in Southcentral. The intertie also carries power from the smaller operating coal-fired plant at Healy.

GVEA was originally a partner with AIDEA in the 50-megawatt plant, but a dispute developed in 1999 over the plant's performance during a 90-day commercial operations test. The plant, which cost $297 million to build, was completed in November 1997 and began a one-year period of demonstration testing to fulfill obligations to the U.S. Department of Energy, which provided $117.3 million in grant funds toward construction.

The tests were of new clean-coal combustion and pollution-control systems installed in the plant by TRW and Babcock & Wilcox, the technology providers for the project. The new equipment passed the tests with flying color, the Department of Energy later said. Significant reductions in pollutants like sulfur dioxide, nitrogen oxide, carbon monoxide and particulate matter were documented in the tests.

GVEA, which had been the plant operator during the start-up and one-year demonstration test of the technology, sought to terminate its agreement with AIDEA after the 90-day commercial test.

The utility cited operating problems and costs in its decision, but the main concern is that the plant is a one-of-a-kind demonstration plant that could be expensive to operate in the future. The Fairbanks-based utility can't afford that level of technical and financial risk, said its president, Steve Haagenson.

The utility proposed a total retrofit of the plant, removing the new technology equipment and replacing it with more conventional coal-burning and power generation systems. Cost of the full retrofit would be about $80 million, according to estimates.

AIDEA said the new-technology operating systems worked well and countered with a proposal for modifications to the plant to solve operating problems identified during the commercial test, which will cost about $20 million.

GVEA rejected that proposal and ultimately withdrew from the project.

Homer Electric plans to get the plant running with the new-technology equipment in the facility.

GVEA will now assist Homer Electric in its investigation of the plant, said GVEA spokeswoman Corinne Bradish.

Bradish said the Fairbanks utility would provide HEA with its assessment of the plant's operating problems. "We've always wanted nothing more than to see this plant up and running," she said.

Haagenson said there were still issues between his utility and AIDEA that need resolution. The 50-megawatt plant and the 25-megawatt plants at Healy are side by side and share supporting infrastructure, he said.

Steve Denton, vice president for Usibelli Mine Inc., said the Homer utility's interest in the power plant is good news. "We are ready to start delivering coal tomorrow," Denton said.

The Associated Press contributed to this article.

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