Officials tout low costs of hydro

MAT-SU — What does a $95 million state appropriation buy these days?

If you’re the Alaska Energy Authority and the money is going to the Susitna-Watana Hydroelectric project, it buys 385 workers on contract — 180 in the field this summer — working on 58 studies approved by the Federal Energy Regulatory Commission. Of those 58 studies, 29 are geared toward fish and wildlife (30 if you throw in the study on how those resources are used for subsistence living).

“We want to reduce the risk, the environmental impacts,” Sara Fisher-Goad, executive director of AEA, said in a Frontiersman editorial board meeting Friday in explaining why the authority is embarking on so many studies.

Also at the meeting was Nick Szymoniak, the AEA economist assigned to the dam project.

He said that if the project doesn’t get any kind of state funding, if the dam is built entirely with loans that AEA has to pay back — including the $95 million from the state this year — when it is switched on in 2024 power will cost 18 cents per kilowatt hour.

Natural gas power, according to charts AEA prepared, is expected to cost something on the order of 12 cents per kilowatt hour. But, he said, the thing about hydro power is that eventually the lines on that graph are going to cross.

“It’s going to come online at 18 cents and its gong to stay at 18 cents,” he said, adding that you can’t say the same for natural gas. “As everything in the world gets more expensive, Susitna-Watana hydro power gets cheaper.”

In 2052 when the debt on the dam is paid off, that cost drops like a stone to below 5 cents a kilowatt hour. At least that’s the experience in other communities. Some of the cheapest power in Alaska is in Southeast where old hydropower dams are supplying the bulk of the electricity, Fisher-Goad said.

“Everybody loves old hydro, but you can’t get old hydro until you build new hydro,” Fisher-Goad said.

But if AEA builds a dam, it will essentially be a producer of power selling to utilities that will function as customers of AEA.

Matanuska Electric Association General Manager Joe Griffith, currently in the thick of a major construction project in Eklutna that will generate the bulk of the utility’s power needs, has talked about Sustina hydro previously and said that, essentially, when it’s online it will be incumbent on MEA to evaluate which is cheaper — gas power produced at its own plant or power from the dam. The duty to ratepayers dictates that MEA would choose the cheaper.

But, Fisher-Goad said, the economic models don’t take into account any state money or really any kind of financing beyond 5 percent interest paid on the loans over 30 years.

“More than likely we’ll be into something far more creative to finance this,” she said.

If the past is any prologue, some of that creativity could potentially come from the state. When the Bradley Lake hydro project came online, the state stepped in to pay enough of the debt to make the project competitive with other power sources.

Goad said the state could do that and recoup its investment if it paid the debt down with a loan with longer terms. That would extend the period in which hydro power was still more expensive than that 5 cent projection for 2052, but it would still be stable, predictable pricing.

“There’s a huge benefit to having stable predictable rates for a long period of time,” Fisher-Goad said, noting that business and industry could use that kind of certainty. “The stable cost of power is really important for people making investment decisions.”

Contact Andrew Wellner at 352-2270 or andrew.wellner@frontiersman.com.