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Web posted
The 50-megawatt coal-power plant was completed in 1998 but has been idle since late 1999 in a dispute between the state development authority and the Fairbanks utility on whether the new technology works.
AIDEA is anxious to get the issue resolved so the plant can get back into operation, according to Bob Poe, executive director of the authority.
"We're paying $6.5 million yearly on debt service and another $2.3 million to Golden Valley to keep the plant maintained," said Poe. "That money comes out of the authority's annual income and it's money that could be used to finance other development or to help fund the state budget."
The Healy Clean Coal Project was designed to demonstrate the effectiveness of new clean coal-burning and emissions-control technologies developed by TRW Inc., and Babcock and Wilcox, which is now a part of McDermott International.
The U.S. Department of Energy contributed $117 million in grants to the plant as a part of its clean coal research program with the state financing the rest.
A key part of the plan was that the plant would burn low-quality waste coal from the nearby Usibellicoal mine, using a resource that cannot now be sold commercially.
Poe said the limited-retrofit approach would be less costly and might allow the plant to get back into operation in six to nine months compared with an estimated four years to replace the new technology with conventional coal-burning systems.
For its part, Golden Valley officials feel the new technology would have problems and want to replace it with conventional systems that are more reliable.
The limited retrofit would troubleshoot problems with the existing systems by modifying equipment rather than replacing it.
Sen. Frank Murkowski, R-Alaska, added an amendment to the federal energy bill that would allow the U.S. Department of Energy to loan AIDEA up to $125 million in low-interest financing to pay for the retrofit. Poe applauded Murkowski's efforts and said the money should be able to be used for either a limited or a total retrofit.
"Let's not forget the federal loan has to be paid back, however," he said.
Poe is concerned that if the full $125 million is used for a total replacement, adding that to the $297 million already spent on the plant, would amount to a total investment of almost $425 million.
That's extremely costly for a plant that will produce 50 megawatts of electricity, he said.
It could increase the cost of power to as much as 8 or 10 cents per kilowatt-hour, about double the cost the plant expected with its current technology.
Golden Valley now buys power from Chugach Electric Cooperative in Anchorage for about 4.7 cents per kwh.
Engineering companies that worked with AIDEA and Golden Valley during a 90-day test in late 1999 said the new systems actually worked well, although modifications are needed to solve some problems.
"Every knowledgeable engineering person that has been involved with this project, except those that work with GVEA, say the equipment worked, and worked well. Given the enormous investment in this plant, it deserves more than one 90-day test," Poe said.
GVEA contests the argument that the 90-day test was too short. "We ran that plant for a year and a half after its completion. The 90-day test was at the end of that period. We know how that plant works, and we know that it doesn't work," said Steve Haagenson, president and chief executive of the utility.
"Based on its past performance, it failed miserably. It won't last 35 years," he said.
Haagenson also disputed Poe's contention that the full retrofit would drive up the cost of power. The retrofit will cost only $80 million, and if the authority uses $45 million more in the $125 million DOE loan to refinance its bonds, the final cost of power will be within the range originally forecast, he said.
The official report from the 90-day test by Duke Engineering reported results were 'inconclusive' about whether the plant met its goals, Haagenson said. The main problem, however, was not so much in the clean-coal technology, which worked as expected, but that Usibelli Mines was unable to supply the plant with the quantity of low-quality waste coal for which it was designed.
Usibelli had to supply coal normally produced at the mine for other customers, which is of higher quality. For the test, contaminants were added, like dirt and sand, to mimic waste coal.
But because waste coal was not used the plant technically failed to reach one of its goals, which was to test the equipment using waste coal.
Engineers later felt the sand that was added might have contributed to problems encountered with the equipment, Poe said. Sand would not ordinarily be in waste coal that Usibelli would deliver if the plant were in normal operation.
AIDEA has discussed a limited-retrofit with Golden Valley and is exploring other options, Poe said. If the utility does not want to be the operator of the plant, as was envisioned originally, the authority could operate the plant itself and sell power into the railbelt power grid, contracting with an operating company to run the plant.
Usibelli Mines Inc., which would supply coal to the power plant, also operates a coal-burning power plant in Fairbanks. AIDEA is also in contact with large out-of-state operating companies, Poe said.
There are a number of options, but AIDEA has to do something to reduce the financial burden of the idle plant, he said.
GVEA's Haagenson said AIDEA has a short-term goal to convert a large, nonproducing asset into a producing asset, just as Usibelli Mines has a goal to sell coal to the plant.
But GVEA's goal is long-term power supply for the Interior. The utility can't afford to operate the plant if there are frequent shutdowns due to equipment malfunctions that will have the effect of upsetting GVEA's power load, Haagenson said.
The Interior's power requirements are growing, and there are potential large new power customers, like the Pogo Mine and missile defence facilities near Delta.
GVEA hasn't added any baseload generation capacity in 10 years because it was waiting for the new 50MW Healy plant to come on line, he said. But the supply of power from the plant must be reliable.
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