Mixed outlook for energy in Southcentral, Interior Alaska; New gas in Cook Inlet, but big wind projects stall

The outlook for energy, its availability and affordability, is decidedly mixed for Southcentral and Interior Alaska, the state’s major population centers.

In Southcentral, the pending declines in natural gas production in Cook Inlet has become worrisome for business and community leaders. Imports of liquefied natural gas, or LNG, is the likely solution at least as a “bridge” until a better alternative is found.

Some good news is that HEX Alaska, owner of the Kitchen Lights gas field in Cook Inlet, has discovered gas with two new wells and has repaired a third well previously taken off line. Some not-so-good news is that President Trump’s war against wind is now taking a toll in Alaska.

Golden Valley Electric Association, Interior Alaska’s electric cooperative, has decided not to proceed with a 120-150 Megawatt wind project at Shovel Creek near Fairbanks because of uncertainties created by the president’s new legislation dropping tax credits for wind.

That doesn’t bode well for another new wind project in Southcentral Alaska near Mount Susitna, also 120-150 megawatts in size, which also faces challenges because of its location and is now further challenged by the loss of tax credits.

Matanuska Electric Association, or MEA, was hoping to be part of one or both projects so that it could reduce its reliance on gas, said Julie Estey, spokesperson for MEA. Demand for power is gradually increasing in the Mat-Su region because of continued population growth, which brings with growth in residential and small commercial requirements for electricity.

The new gas at the Kitchen Lights field is encouraging, but it will take lot more drilling to dent the looming gas supply gap. LNG imports will make up the difference. But importing gas will be expensive and the burden of that will fall heavily on home and building owners in the region who have few alternatives and must heat with gas.

Electrical generation also depends on gas but the two large electric cooperatives in the area, MEA and Chugach Electric Association, have access to alternatives like power from hydro as well as smaller amounts from wind and solar.

Another advantage is that the IGU and Hilcorp Energy, the gas producer, can keep prices stable given the large gas resource on the slope. This is in contrast with LNG imported into Southcentral Alaska, which will have its price linked to international markets.

Before it started receiving LNG from the slope IGU trucked liquefied gas up the Parks Highway from a small gas liquefaction plant in the Matanuska-Susitna Borough. But with Cook Inlet gas production set to decline the Fairbanks-area utility decided to switch its source of gas to the North Slope, a wise choice. The gas plant in Mat-Su will remain as a backup, however.

Southcentral Alaska home and business owners don’t have good choices if less natural gas is available. Owners of buildings are vulnerable to the Cook Inlet gas production decline because they depend on gas for space heating and power generation. There are innovations like heat pumps that have been shown to be workable in Southcentral but home and building owners must pay a conversion cost.

For years the state Division of Oil and Gas in the state Department of Natural Resources has been predicting a decline in annual gas production from Cook Inlet’s aging gas fields. State analysts say the reduction will begin in 2027.

Although the division keeps close tabs on the Inlet’s gas wells and regularly updates its forecasts the overall prediction hasn’t changed. In 2028 the shortfall will amount to about 15 billion cubic feet of the approximate 70 billion cubic feet needed.

In 2029 the deficit will be 20 billion cubic feet and in 2030 it will be 28 billion cubic feet, according to the state’s estimates. If this is correct, there will be a supply deficit of over a third of the regional gas demand by 2030.

Cost estimates aren’t yet available but they are generally thought be half again or twice as much as the current cost of Cook Inlet gas.To do the imports, Chugach Electric is working with Harvest Alaska on a plan to convert the mothballed former ConocoPhillips LNG export plant at Nikiski to handle the liquefied gas.

Enstar is separately working with Glenfarne, a New York-based energy company, on a plan for a new LNG import terminal to meet its needs, which are larger than the needs for Chugach Electric. Enstar won’t need LNG until 2032, when its contract for Cook Inlet gas with Hilcorp Energy expires. Chugach Electric’s Hilcorp supply contract ends in 2027, however, and it will need to import LNG sooner and must have its plans in place in 2026.

Enstar is most affected by any shortfall because it is required to supply natural gas to its customers. The electric utilities have alternatives such as inexpensive power from the Bradley Lake hydroelectric project near Homer, which is soon to be expanded.

Chugach also has access to power from the private Fire Island wind project. Solar power also supplied MEA by a private power producer at a price that matches that of natural gas. MEA has also equipped its Eklutna gas-fired power plant to switch to oil as a fuel if needed.

In the Interior, GVEA has access to large coal resources at the Usibelli Mine near Healy which allow it to generate power at stable, and affordable, prices. GVEA also has an oil-fired plant at North Pole that can be fired up when needed. The challenge for GVEA, however, is that its two lower-cost coal power plants at Healy are aging. The small 25 Megawatt Healy 1 plant built in the 1960s is still performing despite its age but there are operational problems with the larger 50 Megawatt Healy 2 plant because when built in the 1980s it employed new, experimental technologies which have created operating problems. Replacing these plants when they are retired will be expensive.

GVEA also generates renewable power at wind turbines at Eva Creek, near Healy, and purchases wind power from a private power producer near Delta, and gets a share of Bradley Lake’s low-cost power that is transmitted up the electric intertie from Southcentral Alaska.

The Interior utility had a sobering experience with new technologies in the Healy 2 plant but the cooperative has still embraced innovation and new technologies. A large battery power storage unit, for example was installed several years ago that give the co-op the ability to a fast startup in supplying power in the event of a major outage, even in winter.

GVEA hasn’t given up on innovation, however. It is now working with Westinghouse on a possible long-duration power storage facility at its North Pole generation plant that would store heat in ceramic materials. Heat converted to power would provide backup energy for an extended period. Chugach Electric and Homer Electric Association are also installing battery storage.

While progress is being made on new generation and power storage improvements are needed in long-distance electrical transmission systems, which are also aging. These are necessary to efficiently move power to where it is needed along the Southcentral-Interior “railbelt” transmission system. The upgrades are important if power from new projects like Dixon Diversion at the Bradley Lake or new wind projects in Southcentral and Interior Alaska are to be efficiently used.

Some of the transmission upgrades are now underway, led by the state’s Alaska Energy Authority, or AEA, and the regional utilities. State and federal funds are being used although the utilities are also contributing.

Chugach Electric and the AEA are currently rebuilding parts of the Homer-to-Anchorage transmission line on the Kenai Peninsula so that it can handle the increased power output from Bradley Lake’s Dixon Diversion when it is completed in 2031.

The AEA is separately working on a new submarine power cable across Cook Inlet that will connect existing transmission systems on the Kenai Peninsula to Chugach Electric’s Beluga power station on Cook Inlet’s west side. This will also involve an upgrade to transmission lines north from the Beluga plant to the Matanuska-Susitna Borough and around Knik Arm of Cook Inlet to Anchorage.

This new transmission loop will provide more energy security because it will be an alternative way to get Bradley Lake hydro power to Anchorage and Mat-Su communities in the event of a failure in the Kenai Peninsula transmission system. Unexpected events do happen. A few years ago forest fires on the Kenai Peninsula that temporarily disrupted delivery of Bradley Lake power north to Anchorage and the Mat-Su regions.