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United States

Serious designs on Alaska resource -- Big player team

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A slice of wind power may soon be blended in with the billions of dollars of fossil fuel energy that is extracted each year in Alaska. Wind Energy Alaska, a partnership formed between American wind developer Enxco and CIRI, one of Alaska's largest private landowners, could in the next couple years bring the first commercial scale wind power to America's most northerly state.

Farthest along is the Fire Island wind project on an undeveloped island three miles off the coast of Anchorage, Alaska's largest city. The first phase calls for 50 MW but could later be expanded to 100 MW, says CIRI's Jim Jager. Turbines have been pre-ordered through Enxco for the project, but it is too soon to say what specific units will be used until closer to construction.

Enxco, the US wind division of French national utility EDF, is a well-proven wind developer, but CIRI is a serious player too, says Jager. CIRI is owned by about 7300 Alaska Native shareholders from various tribes and is broadly diversified in many industries in numerous US states and abroad with end-of-year 2006 assets totalling $698 million.

"We're a sophisticated investor," says Jager. "We don't lightly enter a market. We're very careful about what industries we enter, and the fact we've entered this market is because we've looked at it very carefully, looked at [energy] consumption trends and alternative investments and we've said, hey, we think we can make some money here."

Less than 2 MW of wind split among ten small projects is online in Alaska for remote power needs in distant regions. Affordable natural gas prices have kept large commercial wind developments at bay -- until now.

With all its oil and gas extraction, Alaska is first and foremost an energy state. But most of its natural gas is extracted hundreds of miles from centres of population on the North Slope and no lines are able to bring that gas directly to the Anchorage area. Existing nearby gas reserves have been quickly depleted and are running out. Long term contracts with gas-fired plant at around $0.062/kWh with local utilities are coming up for renewal at rates expected in excess of $0.12/kWh.

The Fire Island wind project is modelled at a cost of $0.085/kWh. Power contract negotiations are currently underway with electric utilities that serve the so-called Railbelt electric grid, the state's major electric grid in the southern and most populated region. New exploration for gas deposits has ramped up in earnest but even a successful find is not likely to deliver gas to the power-strapped region for as long as a decade, says Jager.

Anchor first

Fire Island could act as an "anchor" project that would provide the critical financial momentum for other potential projects elsewhere in the region that are not as well developed, says Jager. CIRI has meteorological towers installed elsewhere, such as the Kenai Peninsula, and it recently applied to install some in the Hatcher Pass area, north of Anchorage.

Fire Island would be needed to help lower the transportation and construction costs for other projects and improve access to human resources and spare parts. "The trick is, none of the projects are pencilling out without Fire Island," says Jager. With Fire Island as an anchor project, the same turbines would be used in other developments to ensure synergies in spare parts and maintenance work.

Three issues are holding up the project. The developers received a Notice of Presumed Hazard from the Federal Aviation Administration (FAA) because the project is close to the flight path of the Anchorage international airport. But many projects in the continental US have received similar notices only later to be cleared for construction following changes to local radar protocol or just a completion of the underlying bureaucratic FAA review process.

Turf war

A turf war is also in play between two local electric utilities and over which one has the right to serve future load on the island. It is assumed that a wind project on Fire Island will be a precursor to development of all kinds because land is in strong demand close to the city. For this reason the utilities are eager to win power delivery rights -- particularly to the expected industrial-scale customers. The Anchorage international airport is experiencing a crush of new business as more international shipping flights use it as a mid-way point along Arctic flight paths.

Lastly, Wind Energy Alaska is seeking government assistance to build the basic infrastructure on Fire Island to accommodate ships bearing the wind plant components and the electric transmission line to the mainland. These are needs for the project, but costs should not solely be the wind developers' burden since both will be used for future non-wind development, Jager says. The companies expect some of the underlying issues to be resolved as early as the spring with optimistic project construction slated for 2009.

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