Southwest AlaskaSouthwest Alaska

Rural Energy ProjectRural Energy Project

Community:Community: March March 0606

Fuel # 1Fuel # 1

March 06March 06

GasolineGasolineAvg. Resid.Avg. Resid.

Electric RateElectric Rate

06-30-0606-30-06

After PCEAfter PCE

06-30-200406-30-2004DieselDiesel

UsedUsed

By UtilityBy Utility

DillinghamDillingham $3.95/$3.95/galgal

$4.44$4.44 24.3924.39

cents per cents per kwhkwh

16.5816.58

cents per cents per kwhkwh

1,242,521,242,5222

gallonsgallons

ManokotakManokotak $6.05/$6.05/galgal

$7.00/gal$7.00/gal 34.0034.00

cents per cents per kwhkwh

27.2727.27

Cents per Cents per kwhkwh

97,05297,052

gallonsgallons

High Cost EnergyHigh Cost Energy

Peak Oil:Peak Oil:The point we have recovered half of all available oilThe point we have recovered half of all available oil

“Our ignorance is not so vast as our failure to use what we know”

Dr. M. King Hubbert

After making a prediction in 1956 that U.S. oil production would peak in 1970 and decline thereafter, he was laughed out of the industry. His prediction was only one year off.

Peak Oil: Peak Oil: Has it happened yet on a global scale?

A number of theorists believe some peak in world oil production has already occurred. Colin Campbell of the Association for the Study of Peak Oil & Gas (ASPO) has calculated that the global production of conventional oil peaked in the spring of 2004.

Kenneth S. Deffeyes predicted in his book Beyond Oil - The View From Hubbert's Peak that global oil production would hit a peak on Thanksgiving Day 2005 (Deffeyes has since revised his claim, and now argues that world oil production peaked on December 16 2005).

“Peaking will result in dramatically higher oil prices, which will cause protracted economic hardship in the United States and the world. However, the problems are not insoluble. Timely, aggressive mitigation initiatives addressing both the supply and the demand sides of the issue will be required.”

VolatilitVolatilitVolatilityVolatility

Crude Oil Imports (Top 15 Countries)(Thousand Barrels per Day)

CountryMar-

06Feb-

06YTD

2006Mar-

05Jan - Mar

2005

CANADA 1,716 1,710 1,732 1,451 1,509

MEXICO 1,697 1,774 1,722 1,590 1,500

SAUDI ARABIA

1,322 1,418 1,356 1,553 1,561

VENEZUELA 1,183 1,178 1,197 1,315 1,340

NIGERIA 1,114 1,342 1,191 879 996

ANGOLA 510 464 465 675 493

IRAQ 476 450 487 548 516

ALGERIA 281 163 228 134 165

ECUADOR 242 222 281 305 322

COLOMBIA 170 126 156 108 110

UNITED KINGDOM

145 82 88 290 215

BRAZIL 123 164 114 32 38

NORWAY 121 71 87 165 128

KUWAIT 111 152 111 179 184

CHAD 84 77 79 46 73

    

Renewable Energy Renewable Energy

Environmentally Friendly

Harnessed LocallyEndless Supply

Economical

Decentralized

Diversified Sources

Financial IncentivesFinancial Incentives

• Avoided Fuel CostsAvoided Fuel Costs

• Predictable Life-Cycle CostsPredictable Life-Cycle Costs

• Green Tag EarningsGreen Tag Earnings

• Federal Production Tax CreditFederal Production Tax Credit

• Accelerated Equipment Accelerated Equipment Depreciation Tax CreditDepreciation Tax Credit

Renewable EnergyRenewable Energy

Renewable Portfolio Renewable Portfolio Standards Standards

Currently 22 States have a mandated Renewable Energy Requirement

Green TagsGreen Tags

UtilityUtility AnnualAnnual

kwhkwhCO2CO2

EmissionsEmissions

(lbs)(lbs)

Green TagGreen Tag

ValueValueUtility A Utility A EarningsEarnings

Utility BUtility B

EarningsEarnings

UnalaskUnalaskaa

31,106,87531,106,875 41,305,88641,305,886 $626,982$626,982 $139,981$139,981 $93,321$93,321

UmnakUmnak

NikolskiNikolski145,631145,631 193,379193,379 $2,935$2,935 $655$655 $437$437

Created from the generation of 1 MWh of green electricity

Sold separately from electricity ($20 per tag)

Represent the environmental, social benefits, etc. of renewable energy and approximately 1,400 lbs. of avoided Carbon Dioxide emissions

Life CycleLife Cycle

EarningsEarnings

$2,333,025$2,333,025

$10,925$10,925

Green Tags:Green Tags:

• Utilities required to meet RPSUtilities required to meet RPS

• Organizations looking to green Organizations looking to green operationsoperations

• Individuals in areas without local Individuals in areas without local green energy purchasing optionsgreen energy purchasing options

Who Buys Them?

Systems Benefits ChargesSystems Benefits Charges

System benefit charges are generally expressed in terms of mills per kilowatt hour generated. One mill is equal to 1/10 ($0.001) cent. In other words, for every one million kilowatt hours generated, a one mill charge would raise $1,000 (1,000,000 kilowatt hours times $0.001).

A systems benefits charge is an additional charge added to a consumers electric bill each month. The money is utilized to fund a specific initiative outlined by the utility.

Examples Include:

Scholarship Funds

Low-Income Power Assistance Programs

Renewable Energy Development

Production Tax CreditProduction Tax Credit

• Private company with tax appetite Private company with tax appetite provides initial investment & owns turbinesprovides initial investment & owns turbines

• Sells electricity to utilitySells electricity to utility

• Hires utility to do O&MHires utility to do O&M

• Receives tax credit for 10 yearsReceives tax credit for 10 years

• $0.019/kWh (adjusted for inflation)$0.019/kWh (adjusted for inflation)

• Turns ownership of system over to local Turns ownership of system over to local entityentity

PTC ExamplePTC Example

Installed cost = $8 millionElectricity generated = 8,100,000 kWh/yr

Investor:PTC = $121,500/yr ($1,215,000 over 10 yrs)Sales to utility = $810,000/yr (8,100,000 over 10 yrs)

Utility:Payments to turbine owner = $810,000/yr (8,100,000 over 10 yrs)

Wind EnergyWind Energy

United States Installed Capacity

Wind EnergyWind Energy

Alaska Wind Energy Development

Existing Project or Area

Owner Date Online

MW Power Purchaser/User

Turbine /Units

1. Kotzebue Kotzebue Electric Assoc.(KEA)

1997 0.15 Kotzebue Electric Assoc. Atlantic Orient (3)

St. Paul Island Tanadgusix Corp. March 1999

0.225 Tanadgusix Corp. Vestas (1)

1. Kotzebue(Phases II and III)

Kotzebue Electric Assoc.  May 1999 0.35 Kotzebue Electric Assoc. Atlantic Orient 15/50 (7)

Wales Wind Energy Project

Kotzebue Electric Assoc. Oct 2000 0.1 Alaska Village Electric Coop

Atlantic Orient 15/50 (2)

1. Kotzebue Kotzebue Elec. Assoc. 2002 0.1 Kotzebue Elec. Assoc. NPS Northwind 100 (1)

Selawik Wind Project Kotzebue Electric Assoc. 2003 0.2 Alaska Village Electric Coop

AOC 15/50 (4)

Selawik Wind Project KEA/ Alaska Village Electric Coop

2004 0.15 Alaska Village Electric Coop

AOC 15/50 (3)

Kotzebue Wind Project Alaska Village Elec Coop 2005 0.3 Alaska Village Elec Coop Northern Power Systems 100 kW (3)

1.6 MW

Alaska Installed Capacity

What Can We Do?What Can We Do?