Coal Could Power Alaska's Future

Study: Coal Could Power State's Future

Jul 05 - Alaska Journal of Commerce

Alaska's most abundant fuel source, coal, provides only 5 percent of the state's Railbelt electric power generation, although it could increase to a double-digit portion of generation capacity with resolution of a lengthy dispute involving the Healy Clean Coal Project.

Coal should be considered among Alaska's fuel sources to meet the next decade of growth in electric power demand in Alaska, according to a recently released Railbelt Energy Study by the Alaska Energy Policy Task Force. That, report recommends building new large- scale, coal-fired plants in either Fairbanks or Anchorage - or possibly near both urban areas - to meet future growth in electric demand.

But shifting more of the state's power generation to coal-fired plants doesn't appear to be in the immediate future, as a purchase offer for that experimental plant in Healy was rejected in late April by board members of the Alaska Industrial Development and Export Authority.

Golden Valley Electric Association offered to pay AIDEA $70 million for the experimental plant to be paid over a 40year period in annual payments, once the shuttered plant became operational.

GVEA's offer was contingent on completion of a $65 million retrofit of a portion of the experimental technology, funding that was anticipated from a $125 million federal appropriation in the pending U.S. energy bill.

News of the rejected purchase offer is "very disconcerting," according to Steve Denton, vice president of business development at Usibelli Coal Mine, Alaska's only commercial coal producer.

"That plant is sitting there, aging, without putting out any kilowatt hours," he said. "It's like a vehicle that you park in your driveway for four or five years. It's not good for the plant to not be running."

Usibelli would like to supply the 50-megawatt experimental plant with coal for its electric generation, which would bump up the mine's domestic sales of Healy coal. But more importantly, Denton said, it would also help diversify the Interior's power generation sources, helping to protect electric consumers from increasing costs due to price spikes in petroleum-based products.

"Coal provides a very good risk management strategy," he said. "Adding a sizable amount of coal to the mix reduces risk."

Currently, Usibelli provides coal that can be used to generate about 100 megawatts of commercial electric power generation throughout Alaska. Another 60 to 75 megawatts of coal-fired power generation exists at the three military bases in the Interior at power plants that may be privatized in the future.

Those military coal users consume about 440,000 tons of Usibelli coal each year, a large portion of the company's instate sales, Denton said. As electric power use has increased in recent years, so has the total volume of coal consumption, he said. That's despite a trend among Alaska's electric power providers of building new generation plants that use natural gas or petroleum-based products, The Healy clean coal project is the only new coalfired power generation plant built in Alaska since the mid-1970s.

"On the Railbelt, they should not get locked into that situation of depending solely on natural gas and oil for electricity," Denton said.

Alaska is far from the nationwide trend for electric generation. Half of all electricity produced in America comes from coal, compared to the 5 percent in Alaska, according to Denton.

Geologists have identified 171 billion tons of coal resources in Alaska, widely distributed from the remote northwest deposits of highrank coal, to small amounts of high-rank coal on the Alaska Peninsula near Chignik, both on lands held by Alaska Native corporations.

Within the Railbelt region, more than I billion tons of proven coal reserves have been identified, Denton said, an amount equivalent to 16 trillion cubic feet of gas. Those proven reserves could provide 300 years of electricity to Railbelt consumers at the current annual consumption rate of 4 millionmegawatt hours per year.

Usibelli has suggested to Alaska's electric providers construction of a large mine-mouth, coal-fired power plant at Healy. Called the Emma Creek Energy Project, the plan calls for a 200- megawatt plant to be built near a new coal resource northeast of Usibelli's current openpit coal mine operation.

Such a project would require $421 million for construction, producing electricity at a cost of $41 per megawatt hour. About half of the cost would be for debt service and the other half for operating costs, according to Usibelli's analysis.

"We've continued to float Emma Creek as a good alternative," Denton said. "Our intent was for utilities to see it as a model for the size of plant and its economics - to create a model for people to look at. The jury is still out on where that plant needs to be located."

The state's Railbelt Energy Study did not factor in coal transportation costs when recommending 150-megawatt coalfired plants be built in Fairbanks or/and Anchorage, Denton noted.

"You can have lower fuel costs or be located near the load centers," he said. "If all things are equal, utilities prefer to build near consumers because of reliability."

Transmission lines connecting Alasla's Railbelt utilities become part of the consideration in where to locate a large coal-fired power plant in Alaska. Currently, about 70 megawatts of power can be moved on the Intertie transmission lines between the Interior, the Anchorage bowl area and the Kenai Peninsula utilities.