Transmission Lines in Rural Alaska

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1 Transmission Lines in Rural Alaska The electrical grid in the lower 48 and the Railbelt areas of Alaska are served by transmission lines, allowing large scale power plants to efficiently generate power at low rates. Electricity is then distributed to customers, often over long distances. Electrical power generated from coal or natural gas is often used, as these energy sources are less expensive on a per energy basis than crude oil. Some in Alaska have advocated building transmission lines from the Railbelt to remote Alaskan communities as a way of providing lower cost energy, especially given the recent increases in the cost of diesel fuel. It would seem that if all Alaskan communities were connected to the same electrical grid, the price of electricity would be the same in every community, which would dramatically lower the cost of energy in remote communities. At first glance, this idea seems reasonable: the distances that need to be covered are no longer than existing transmission lines in the lower 48, and the construction of transmission lines in the railbelt proves that this technology will work in the Alaskan environment. So from a customer s point of view, there is no excuse for not stringing wires to every remote community and giving people the cheap power they deserve. Worth noting is the rural electrification program in the lower 48, begun as part of FDR s New Deal, that brought electrical power to many rural communities. From the utility point of view, however, things look different. When power is to be supplied in remote communities, an assessment needs to be made of the costs associated with generating and delivering that power. And while it is cheaper to generate power in large central power plants to distribute through wires to a large customer base, building long transmission lines to serve a small customer base is very expensive. Transmission lines can cost from $200,000 per mile to $2,000,000 per mile depending on the voltage, wire size, amount of energy to be transferred, terrain and climate conditions such as icing, wind and solar heat gain. With the high capital costs associated with transmission lines, it is critical to evaluate the economics when planning transmission lines. Building transmission lines in remote Alaska is complicated by the terrain mountains and rivers must be crossed, permafrost areas managed and there are no roads in most areas where these transmission lines would need to be built. Building a transmission system for the whole state Undertaking the building of a transmission line network to rural Alaska would make sense only if the resulting network could indeed provide lower cost power than the existing diesel generation infrastructure. An order of magnitude estimate can be made to the cost of a transmission network to every village. If we assume that the lines could be built for $400,000 per mile, and that something on the order of 10,000 miles of total lines would need to be built, the cost is in the range of four billion dollars. Given the difficult terrain in much of the state, costs could be considerably higher. In addition to the capital costs of the lines, maintenance costs of 3% per year would be expected, or about $120 million per year, which is more that is currently spent on all diesel fuel purchases for all remote communities in Alaska. From this rough calculation, building and maintaining a transmission system for the entire state would be much more expensive than continuing the existing diesel generation system, even at the 2008 diesel fuel prices.

2 Building transmission lines to communities near the rail belt grid One way to evaluate a transmission line is to determine the cost per kilowatt-hour to transfer the energy across the transmission line, and to compare this to the cost of generating that same kilowatt hour with the existing diesel generation system. This question is important for considering the needs of communities located near the existing electrical grid. How far does it make sense to extend the power lines? Costs per kilowatt hour increase as the distance between the existing grid and the new load increase, and as the amount of power decreases. The following table shows the cost to transfer a kilowatt-hour based on the length of the line and the energy transferred. In this table, the peak energy transferred is converted into an annual energy using a load factor of 0.45, 3% of capital cost for Operations and Maintenance, a 6.25% interest rate, 30-year life, a capital cost of $400,000 per mile and a TIER of 1.2 to compute the margin. From the table, upper right quadrant, it is easy to see the high costs of delivery when the loads are low and the distances are high. A load of 300 kilowatts for a distance of 25 miles yields a cost to delivered energy of $1.17 per kilowatt-hour. Increasing the load to 1,000 kilowatts reduces the delivery cost to $0.35 per kilowatt-hour. This delivery number is important as it has to be added to the cost to produce electricity to get the cost of delivered power. If a community generates enough energy for another community at a 300 kilowatt peak with a cost of $0.50 per kilowatt-hour and the energy is delivered over a 26 mile transmission line at a cost of $1.17 the delivered power to the other community is $1.67 per kilowatt-hour. Curse of Low Usage === kw Transmission Line Costs/kWh 0.45Load Factor $400,000$/mile Miles %Interest Cap $ $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 30year I&D+O&M+m $276,667 $553,333 $830,000 $1,106,667 $1,383,333 kwh Curse of Long Distance ==========> Bad ,200 $0.70 $1.40 $2.11 $2.81 $ ,400 $0.35 $0.70 $1.05 $1.40 $ ,182,600 $0.23 $0.47 $0.70 $0.94 $ ,576,800 $0.18 $0.35 $0.53 $0.70 $ ,971,000 $0.14 $0.28 $0.42 $0.56 $ ,365,200 $0.12 $0.23 $0.35 $0.47 $ ,759,400 $0.10 $0.20 $0.30 $0.40 $ ,153,600 $0.09 $0.18 $0.26 $0.35 $ ,547,800 $0.08 $0.16 $0.23 $0.31 $ ,942,000 $0.07 $0.14 $0.21 $0.28 $ ,884,000 $0.04 $0.07 $0.11 $0.14 $ ,826,000 $0.02 $0.05 $0.07 $0.09 $0.12 November

3 Building transmission lines between small communities with diesel generators However, most remote villages are located far from the Railbelt grid, and local transmission lines would not have access to the relatively inexpensive power used in the above calculation. There is some economy of scale with larger generators as compared to smaller ones, so proposals have been made to use generating plants in larger communities to supply power to nearby smaller villages. There are already some examples of this, between Bethel and Napakiak, for example. A screening study has been conducted by AEA to look at close pairs of villages (all villages less than 25 miles from each other) in Alaska to see if transmission lines could reduce the cost of power to these communities with existing diesel plants. Using standard utility methods for determining cost (including capital construction, operations and maintenance, and utility margins), only a single transmission system appeared to be economical, that between Naknek and South Naknek. The line from Naknek to South Naknek already exists. There are many more transmission lines in Alaska which have been built over the years that enjoyed buffering levels of grant funding. A line that is 100% grant funded can be very economical with the resulting cost requirement to cover the operating cost of the line. All other pairs of villages had a transmission cost greater than the potential savings of the line. Transmission costs from local renewable power sources Transmission costs are also a significant part of many other projects in remote communities, such as conventional hydro or geothermal resources. For example, the geothermal resources near Dutch Harbor are thought to be capable of providing more than enough power for the town, but the cost of transmitting that power 15 miles is more than an appropriately sized plant could justify. However, the cost of building the transmission lines between the power source and the load center must be considered as part of the necessary capital for the project. In many cases, the cost of transmission alone drives the economics above the cost of current diesel fuel. Conclusions Based on the above analysis, the following conclusions can be drawn: Building transmission lines is technically possible in the state of Alaska, but current costs make this option unattractive for delivering power to remote communities. Developing a statewide transmission grid would likely not result in cost savings, as the O&M costs alone would be higher than current diesel fuel costs. Connecting nearby communities with independent diesel power generators does not appear to be an effective cost saving measure, even when the villages are relatively close. For remote power projects (hydro, geothermal, and wind), the cost of transmission lines between the generating site and the load must be considered in the overall economics of the project.

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