Triple Bottom Line Socioeconomic Benefits of the West Creek Hydropower Project

Transcription

1 West Creek Triple Bottom Line Benefits March, Employee owned, community minded. Triple Bottom Line Socioeconomic Benefits of the West Creek Hydropower Project Prepared by Alaska Power & Telephone, March 2014 Introduction: In 1994, John Elkington founder of a British consultancy called SustainAbility coined the term triple bottom line, which reflects the practice of clearly defining and giving recognition to the net positive economic, social, and environmental benefits produced by a project or course of action. Since that time, the concept of triple bottom line (or TBL) has been adopted by local government, planning firms, federal agencies including the US Economic Development Administration, the US Department of Agriculture / USFS, and others as a best practice for community and resource development planning. The purpose of this document is to identify and characterize the potential economic, environmental, and social benefits associated with the development of the West Creek hydropower project proposed near Skagway, Alaska. In developing this list of potential benefits, AP&T has reviewed the contents of Skagway s 2020 Comprehensive Plan, and current (March, 2014) draft West Creek Master Plan, as well as some preliminary feedback from Skagway residents. We have not attempted to prioritize benefits, but rather, are attempting to identify all net positive outcomes which may be possible, with hopes of better illustrating the significant positive outcomes which can be made possible for the Skagway community through the West Creek hydropower development opportunity. AP&T urges that these points please be taken into consideration and included within the characterization and analysis of the West Creek hydropower project opportunity in the community s West Creek Master Plan.

2 West Creek Triple Bottom Line Benefits March, As a business which was founded in Skagway in 1957, shortly before Statehood, Alaska Power & Telephone wishes to work closely with the Municipality of Skagway and other stakeholders to optimize the project to maximize the triple bottom line of environmental, social, and economic benefits which are produced for the Skagway community. We believe that our existing, long-term presence in Skagway, and our Skagway employee-owners who have been an essential part of AP&T s growth and development over the years give us greater insight, sensitivity, and willingness to work towards these types of benefits for the community, versus other, outside businesses which have been showing growing interest in developing the project. As we progress to study the economic viability of the project with hopes of future development, we believe that a project development approach which integrates community and stakeholder preferences is essential. The current draft West Creek Master Plan explains on page 26 that a poll of community members shows a majority of residents are supportive of the concept of developing new hydropower at West Creek; there are 44% in support of the project, with 31% against, and 24% undecided. AP&T is hopeful that with the active involvement and partnership of the Municipality of Skagway, the project s benefits can be optimized to gain an even higher level of support and approval from local stakeholders. Environmental Benefits Over the initial 50 year license period of the project, West Creek produces enough clean, renewable energy to displace over 392 million gallons of diesel fuel, valued at over $1.5 billion dollars, assuming a fuel cost of $4 / gallon. This diesel fuel avoidance represents avoidance of over 3.9 million metric tons of carbon dioxide, and over $184m in social cost of carbon avoidance benefits, per the federal Social Cost of Carbon calculation method (2010 valuation rates). When compared to natural gas-fired alternatives which are being considered in the Yukon market region, the West Creek project represents avoidance of 2.5 million metric tons of carbon dioxide, and over $118m in social cost of carbon avoidance benefits. While the project s initial license term is 50 years, the West Creek hydropower project is expected to last for 100 years, which would effectively double the quantities of these benefits. Calculation methodology and economic assumptions are found in Appendix A. The West Creek hydropower project can provide additional winter energy storage which can be used to displace diesel fuel consumption. This reduces diesel emissions and the strain on Skagway and Haines airshed, helps to meet current and future federal carbon and emissions reductions goals, and helps to meet community air quality goals. This supports Skagway 2020 Comprehensive Plan goal 10.25: Encourage the provision of an adequate supply of hydroelectric energy and other renewable energy sources to provide for the continued growth

3 West Creek Triple Bottom Line Benefits March, and development of the community and region. Development of additional winter storage supports recommendations within the Southeast Alaska Integrated Resource Plan (SEIRP). The West Creek hydro project will provide a surplus of energy which can potentially be used for cold ironing delivering shoreside power to cruise ships and other large marine vessels utilizing Skagway and/or Haines s port facilities, and allowing them to shut down auxiliary generators while in hoteling mode. This would help reduce emissions releases and the associated strain upon Skagway and Haines airsheds, help meet tightening MARPOL standards for emissions reductions in North American waters, and provide marine vessels with an affordable in-port alternative to low sulfur fuels. Supply of shoreside power has an additional benefit of reducing ambient noise associated with on-board generators; an aesthetic improvement which supports improved quality of life for residents and visitors alike. After some preliminary analysis, AP&T believes cold ironing can be realistically achieved in Skagway and Haines, with cooperation of the cruise industry. Many vessels currently utilizing Skagway and Haines port facilities already have the required shipside improvements, and are using shoreside power in other ports of call in the lower 48 and Canada. AEL&P currently supplies shoreside power to vessels berthing in Juneau; this arrangement demonstrates feasibility of the concept in southeast Alaska, and provides a replicable model for application in Skagway and/or Haines. This would support Goal in the Skagway 2020 Comprehensive Plan: Produce enough local power from renewable sources to tie cruise ships into shore power while in port. The West Creek project will create new green jobs in the renewable energy sector. Because the project is estimated to have a lifespan of a century, these green jobs will be legacy jobs which new generations of Skagway residents can enjoy far into the future. Development of green jobs through West Creek supports Skagway 2020 Comprehensive Plan goal 5.5: Support development of green economic opportunities and jobs, including businesses, manufacturing, and operations that minimize waste and pollution and promote efficient use of energy and resources. A future transmission connection to Yukon Territory would allow for export of renewable energy which is in excess of what is required to meet local Alaskan needs. This means that surplus green power from West Creek could be utilized by Yukon Energy Corporation instead of energy which would otherwise be produced by diesel or natural gas-fired generation. This clean energy alternative would help meet Canadian and Provincial government air quality goals, reduce carbon emissions, and reduce atmospheric strain. This supports Skagway 2020 Comprehensive Plan goal 10.25, which speaks to developing a community and regional supply of renewable energy (described above). A future transmission connection to Yukon Territory would help ensure that any future large scale commercial and industrial development, such as mining, can be powered by clean, renewable energy at lower social and environmental cost.

4 West Creek Triple Bottom Line Benefits March, A future transmission connection between Haines and the Kensington Mine would allow the clean energy produced by West Creek to be wheeled to the Kensington Mine, a remote operation which currently relies upon diesel-fired generation, and utilizes approximately [INSERT NUMBER OF GALLONS] of diesel per year. The ability to use West Creek s surplus energy would help significantly reduce the environmental impacts of the Kensington mining operation. This supports Skagway 2020 Comprehensive Plan goal 10.25, which speaks to developing a community and regional supply of renewable energy (described above). A future transmission connection between Haines and Juneau would allow for wheeling of surplus energy from the West Creek project to the Juneau market region. This would help reduce diesel-fired generation in Juneau, replacing it with clean, renewable energy, and helping to significantly reduce emissions and environmental impacts of diesel-fired generation of energy. This supports Skagway 2020 Comprehensive Plan goal 10.25, which speaks to developing a community and regional supply of renewable energy (described above). The significant new sales tax, property tax/land use fees, and other revenues which may be produced from the West Creek hydropower project can be applied at the discretion of the Municipality of Skagway to any number of community projects which help support environmental goals, values, and priorities. Skagway is experiencing increasing use of electric vehicles, which may grow in the future. The National Park Service now is operating electric vehicles in Skagway, as is at least one private party. As fossil fuel prices increase and electric vehicle technology advances, electric vehicles may become an increasingly attractive option for residents. Electric space heater loads are growing, as an increasing number of residents choose to utilize renewable energy as an alternative to more costly home heating oil. Use of electricity for heating also reduces or eliminates the need to transport and store fuel in residential neighborhoods, helping to eliminate risks of spillage or contamination. The National Park Service has converted some of their buildings to meet LEED certification requirements, which can be supported through use of clean, renewable energy. As noted in the current draft West Creek Master Plan, the West Creek hydropower project can be developed in a manner which helps support and enhance the diverse ways in which Skagway community members enjoy and interact with the environment in the West Creek area. Trails and other improvements can be preserved or enhanced as desired by the community, to support community usage of the area. Alaska Power & Telephone is aware that some community stakeholders are concerned by the impacts which resource extraction practices such as hydraulic fracking, petroleum extraction, and petroleum transportation may have upon the natural environment. Utilization of locally available hydropower provides an alternative to fossil fuels helps reduce the level of extractive practices which are required.

5 West Creek Triple Bottom Line Benefits March, Social Benefits The proposed West Creek hydropower project has the potential generate significant new sales tax, property tax / land use, and/or other revenues for the Municipality of Skagway particularly if surplus energy can be sold to other market regions such as Yukon Territory. Skagway will be able to utilize this revenue stream at its own discretion, to provide services which help improve quality of life for residents. This could include increased funding for schools, for non-profit organizations, for parks and recreational improvements, or for community capital improvement projects. At present, State revenues are declining long-term due to decreasing oil prices, increased domestic production of oil, and changes to the State of Alaska s tax structure. Meanwhile, increased State operating budget costs and educational funding requirements place a significant strain on the State s existing funds. The State s capital appropriations budget has been declining significantly, and there is a strong likelihood that the State s municipal revenue sharing program may be phased out. The new tax revenue stream which would be produced by the West Creek project could help offset the declining availability of State funds, and ensure sustainability of municipal government and community organizations. This helps support Comprehensive Plan goal 5.7: Maintain public sector jobs including local and tribal government, state and federal agency, and school district employment. The draft West Creek Master Plan document describes resident concerns which speculate as to how the presence of a hydropower project may impact access to the West Creek area. As a local business with a long-term presence in the Skagway community, AP&T is strongly interested in collaborating and cooperating with the Muncipality of Skagway to fine-tune project features, define project operating methods, and ensure access in a manner which is consistent with community preferences. As described in the draft West Creek Master Plan document, the lake created by a new impoundment on West Creek will create diverse new recreational opportunities for Skagway residents. AP&T hopes to collaborate with the Municipality of Skagway to achieve and support new recreational goals which are consistent with stakeholder preferences and desires. A hydropower project at West Creek project will provide a supply of renewable energy which can be used instead of diesel-fired power plants, and instead of the auxiliary generators located on board hoteling cruise ships and other porting marine vessels. This will result in significant reductions in ambient noise, and reductions in carbon dioxide and other emissions; outcomes which provide air quality improvements, aesthetic benefits, and increased quality of life for residents in Skagway and Haines. Skagway is experiencing increasing use of electric vehicles, which may grow in the future. The National Park Service now is operating electric vehicles in Skagway, as is at least one private party. As fossil fuel prices increase and electric vehicle technology advances, electric vehicles may become an increasingly attractive option for residents. Electric space heater loads are growing, as an increasing number of residents choose to utilize renewable energy as an alternative to more costly home heating oil. Use of electricity

6 West Creek Triple Bottom Line Benefits March, for heating also reduces or eliminates the need to transport and store fuel in residential neighborhoods, helping to eliminate risks of spillage or contamination. The National Park Service has converted some of their buildings to meet LEED certification requirements, which can be supported through use of clean, renewable energy. A sustainable economy characterized by stable, year-round jobs serves as the foundation of a safe, healthy, community. Because West Creek can help provide that foundation, many of the economic benefits described below cross-cut into the social benefits category. Economic Benefits AP&T believes that the attributes of the West Creek hydropower project are likely very favorable, and that the project s economies of scale could result in particularly affordable energy costs during the project s initial 30-year financing period. After bonds or loans are repaid, cost of energy from the West Creek project would drop even further, as there would no longer be a need to recover debt service costs from energy rates. More detailed analysis of the West Creek hydro project development opportunity will help provide realistic and well-supported cost estimation data, which can help predict the levelized cost of energy produced by the project, and better judge the economic benefits associated with development of the project. However, a key challenge and key area of opportunity is that because the size of the prospective West Creek project is greater than Skagway/Haines energy needs, there is a need to find a market for remaining output of the project which would be unsold. AP&T imagines that the business plan for the West Creek project could be structured in a manner where energy customers in the Haines and Skagway regions receive first rights to the project s energy output. Any remaining energy can be sold to other off-takers for example, Yukon Energy Corporation by means of a power sales agreement. An arrangement of this type could assure that Skagway and Haines current and future energy needs are met, and that new businesses seeking to local to the area would have assurance of an ample supply of energy and capacity. This approach would be similar to the arrangement by which Wrangell, Petersburg, and Ketchikan share power from the Tyee Lake hydropower project Wrangell and Petersburg receive first rights to the project s output, and any remaining output is sold to Ketchikan over SEAPA s transmission system. AP&T is willing and eager to consider this approach, which puts local Alaskan needs first, due to the fact that AP&T is a local business with a long-term presence and continuing commitment to Haines and Skagway also, because AP&T would hope to utilize output of the project to help provide more affordable energy to better serve its ratepayers. AP&T is concerned that an outside business may be less likely to utilize an approach of this type. AP&T s suggested approach is consistent with Skagway 2020 Comprehensive Plan goal Encourage the provision of an adequate supply of hydroelectric energy and other renewable energy sources to provide for the continued growth and development of the community and region.

7 West Creek Triple Bottom Line Benefits March, This suggested approach would also be consistent with and supportive of the new Economic Development Corridors project being championed by the State of Alaska, and the Yukon Government, which expresses particular interest in development of the West Creek project to assist in meeting the Yukon s energy needs. The cost of diesel or natural gas-fired generation is linked to the price of fuels, which are commodities subject to market volatility. Cost depends upon a complex and unpredictable web of factors, including details of supply, demand, and political events. A key difference and advantage for hydropower-based generation is that pricing can be reliability predicted far into the future, because locally available hydropower does not heavily rely upon external commodities such as fuels. This pricing stability and predictability creates greater certainty for economic development and planning, as well as for municipal, school, and family budgeting purposes. The ability to access an additional supply of affordable renewable energy is particularly helpful in recruiting new businesses and jobs to rural Alaska, and expanding existing business operations. Over the initial 50 year license period of the project, West Creek produces enough clean, renewable energy to displace over 392 million gallons of diesel fuel, valued at over $1.5 billion dollars, assuming a fuel cost of $4 / gallon. The West Creek hydro project would create an opportunity to maximize commercial participation in the cruise ship and visitor industry by allowing for sale of renewable energy to cruise ships. This increases the number of local jobs, local revenues, and local sales tax revenues associated with the visitor industry sector. This opportunity supports Skagway 2020 Comprehensive Plan goals (described above), and 5.2: Support efforts to maintain the summer tourism based economy, expand opportunities and activities that attract independent tourists, expand winter tourism opportunities and maximize visitor industry benefits to the community. As previously described, hydropower development at West Creek would generate new municipal tax revenue, which helps support and maintain public sector jobs including local government and school district employment. Aligns with Comprehensive Plan 2020 goal 5.7, described above. Development of additional hydropower capacity at West Creek would provide a current and future supply of affordable renewable energy for Skagway s existing and expanding marine industry sector, increasing regional competitiveness versus other Alaskan and North American ports. This supports Skagway 2020 Comprehensive Plan goal 5.3: Serve as a regional port for northern Alaska and the Yukon, and continue to develop and improve the waterfront to serve the freight and passenger transportation industries more effectively and efficiently. A new hydropower project at West Creek will support new, year-round green jobs in renewable energy, and energy export. These jobs will be well-paying, family wage jobs which are sustained year-round, and will serve to diversify Skagway s employment base. Because the anticipated lifespan of the West Creek hydropower project is 100 years, employment opportunities will be legacy jobs which generations of future Skagway

8 West Creek Triple Bottom Line Benefits March, residents will enjoy for many decades. This outcome supports Skagway 2020 Comprehensive Plan goals: 5.5 Support development of green economic opportunities and jobs, including businesses, manufacturing, and operations that minimize waste and pollution and promote efficient use of energy and resources. This outcome also supports 5.1 Diversify the economy to support a stable and active year round community; and 5.6 Support resident owned businesses. A future transmission connection to the Yukon of the type described by the Economic Corridors project being jointly promoted by the State of Alaska and the Yukon Provincial Government would allow energy in excess of local Skagway/Haines needs to be exported to the Yukon market region. This would allow Skagway to participate commercially in new economic growth and development occurring in the Yukon, and realize additional sales tax revenues. This supports Skagway 2020 Comprehensive Plan goal Promote development of a Southeast Alaska electrical intertie grid, including a connection from Skagway to the Canadian electrical and Southcentral Alaska electric grid systems. Similarly, a future transmission connection to the Kensington Mine and/or the Juneau service region would allow Skagway to participate commercially in economic growth and development occurring in other areas of southeast Alaska, again supporting Comprehensive Plan goal 10.26, above. List of key community development goals outlined in Skagway s 2020 Comprehensive Plan, which are supported by the West Creek hydropower project: Encourage the provision of an adequate supply of hydroelectric energy and other renewable energy sources to provide for the continued growth and development of the community and region Promote development of a Southeast Alaska electrical intertie grid, including a connection from Skagway to the Canadian electrical and Southcentral Alaska electric grid systems Produce enough local power from renewable sources to tie cruise ships into shore power while in port. 5.1 Diversify the economy to support a stable and active year round community. 5.2 Support efforts to maintain the summer tourism based economy, expand opportunities and activities that attract independent tourists, expand winter tourism opportunities and maximize visitor industry benefits to the community. 5.3 Serve as a regional port for northern Alaska and the Yukon, and continue to develop and improve the waterfront to serve the freight and passenger

9 West Creek Triple Bottom Line Benefits March, transportation industries more effectively and efficiently. 5.5 Support development of green economic opportunities and jobs, including businesses, manufacturing, and operations that minimize waste and pollution and promote efficient use of energy and resources. 5.6 Support resident owned businesses. 5.7 Maintain public sector jobs including local and tribal government, state and federal agency, and school district employment.

10 West Creek Triple Bottom Line Benefits March, Appendix A: Calculations for Fuel and Social Cost of Carbon Assumptions: IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation 2011 Lifecycle Carbon Dioxide Emissions by Electricity Source Data. US Department of Energy Energy Information Administration carbon dioxide emissions per fuel type. US Government Interagency Working Group for the Social Cost of Carbon 110a GWH West Creek project, 50 Year Project Lifespan (first term of license) West Creek Carbon Dioxide Versus Coal Coal = (110 agwh) x (1,001 metric tons / gwh) x (50 years) = 5,505,500 metric tons Hydro = (110 agwh) x (4 metric tons /gwh) x (50 years) = 22,000 metric tons ,483,500 metric tons of carbon dioxide avoided versus coal West Creek Carbon Dioxide Versus Natural Gas Natural Gas (various generator types without scrubbing) = (110 agwh) x (469 metric tons / gwh) x (50 years) = 2,579,500 metric tons Hydro = (110 agwh) x (4 metric tons /gwh) x (50 years) = 22,000 metric tons ,557,500 metric tons of carbon dioxide avoided versus natural gas West Creek Carbon Dioxide Versus Diesel Diesel = (110 agwh) x (1,000,000 GWH / KWH) = 110,000,000 KWH 110,000,000 KWH / (14 gallons diesel /KWH) = project produces clean energy equivalent to 7,857,143 gallons of diesel fuel per year (7,857,143 Gallons Diesel / Year) x (50 years) = project produces clean energy which is the equivalent to 392,857,150 gallons of diesel fuel. (392,857,150 gallons diesel) x (22.38 lbs carbon dioxide per gallon of diesel) / ( lbs per metric ton) = 3,988,054 metric tons of carbon dioxide. Hydro = (110 agwh) x (4 metric tons /gwh) x (50 years) = 22,000 metric tons 3,966,054 metric tons of carbon dioxide avoided versus diesel fuel.

11 West Creek Triple Bottom Line Benefits March, Valuation of West Creek Social Cost of Carbon Source: US Government Interagency Working Group for the Social Cost of Carbon, Year 2010 Valuation Method. One Year, 5% Avg per Metric 3% Avg 95th Percentil Average of Valuation Ton Benefit 3% Avg Benefit 2.5% Avg Benefit e Benefit Scenarios Benefit Hydro vs. Diesel $ $ 872, $ $ 2,617, $ $ 4,124, $ $ 7,138, $ $ 3,688, Hydro vs. Natural Gas $ $ 562, $ $ 1,687, $ $ 2,659, $ $ 4,603, $ $ 2,378, Hydro vs. Coal $ $ 1,206, $ $ 3,619, $ $ 5,702, $ $ 9,870, $ $ 5,099, % Avg per 50 Year, 2010 Metric 3% Avg 95th Percentil Average of 4 Valuation Ton Benefit 3% Avg Benefit 2.5% Avg Benefit e Benefit Scenarios Benefit Hydro vs. Diesel $ $ 43,626, $ $ 130,879, $ $ 206,234, $ $ 356,944, $ $ 184,421, Hydro vs. Natural Gas $ $ 28,132, $ $ 84,397, $ $ 132,990, $ $ 230,175, $ $ 118,923, Hydro vs. Coal $ $ 60,318, $ $ 180,955, $ $ 285,142, $ $ 493,515, $ $ 254,982, Note: AP&T believes these estimates, which rely upon year 2010 valuations, to be very conservative, as per the federal econometric model, annual SCC avoidance valuation increases over time. Subsequent analysis could seek to more fully define this benefit schedule, and cumulative SCC avoidance benefit.