Anchorage Mayor Dan Sullivan recently asked city residents to practice cutting their energy consumption by turning down thermostats and shutting off lights because he is worried that utilities won’t be able to provide enough power when the weather gets cold. His plan is to have area residents voluntarily take action to reduce their energy consumption in hopes of avoiding rolling blackouts during the winter’s coldest, darkest days.
Unfortunately, the mayor’s fears are well founded. Southcentral Alaska relies on locally produced natural gas for more than 90 percent of its heating and power generation needs. But the region’s known gas reserves are running out and production has declined 40 percent during the past five years. Consequently, utility officials say our region could face a deliverability crisis starting in November 2010. This means gas producers can’t deliver enough gas to meet local needs on an hourly and daily basis. The danger is that the gas pipeline system could become under-pressurized and start to shut down. And without natural gas, we have no power to heat or to light our homes and buildings.
Our gas and electric utilities are now, more than ever, keenly aware of declining gas production from Cook Inlet gas fields, which have been declining on average 8-12 percent year after year, with a more than 40 percent decline in overall Cook Inlet production since 2005. To highlight the severity of this situation, Chugach Electric Association recently asked its regulators to approve an interruptible gas transportation contract for its primary power generation plant at Beluga, signaling that even the Beluga Field’s gas production, which has been a primary source of gas for the Beluga power plant, has declined to startlingly insufficient levels.
The gas deliverability problem could be helped in the near term by constructing a gas storage system to store extra gas produced in the summer, when demand is relatively low, for winter consumption when demand outstrips production. However, utilities project that local annual gas production will fall short of demand starting as soon as 2013. The only near term solutions to this problem are to drastically cut consumption while developing or importing new energy sources.
The challenge is that it takes years and millions of dollars to find and develop significant new energy sources, but shortages could start within weeks or months. Local business and political leaders have identified only two significant energy solutions that could be brought online before local gas production falls short of annual demand. One is imported liquefied natural gas (LNG) and the other is the Fire Island Wind project.
Imported LNG can fill the gas production-consumption gap, but it will be expensive. The Pacific Rim is a growing, energy-hungry market that currently supports LNG prices of $13 per thousand cubic feet, about 3 times the local price of Cook Inlet natural gas last year. And for several reasons, LNG imported to Cook Inlet could cost even more.
CIRI anticipated Southcentral Alaska’s energy challenges and has been working for several years to develop new energy resources including its Fire Island Wind project to help meet local energy demand. This local energy project is primed for construction and could be online and generating nonfuel electricity before the winter of 2012, thanks in part to an unprecedented cooperation and effort from the Federal Aviation Administration. The Fire Island Wind project is slated to produce some 144,000 megawatt-hours of electricity annually, mostly in the winter when it is most urgently needed.
Fire Island’s energy would power about 17,000 households and offset up to 1.5 billion cubic feet of natural gas consumption per year, which would reduce winter gas deliverability problems and might push our annual production short fall out by several years.
The project could be an important first step toward resolving Southcentral Alaska’s looming energy crisis by producing power that is economically competitive with the cost of gas-produced power starting in 2012. And because Fire Island wind power won’t need fuel, its cost will become increasingly attractive as world and local gas prices climb. The project would also boost the local economy by providing some 200 construction jobs, a dozen permanent jobs and millions of dollars in new local tax revenues.
However, the project must complete power purchase agreements with local utilities within the next few weeks in order to stay on schedule to complete construction and start generating power in 2012. Missing this deadline will likely add at least a year to the schedule and tens of millions of dollars to the project cost.
For the sake of all Southcentral Alaskans, I strongly urge Anchorage utility officials to do whatever it takes to bring timely, cost effective energy solutions, including the Fire Island Wind project. You can find email addresses to tell local officials your thoughts about Southcentral Alaska’s energy problem at www.fireislandwind.com.
