Homer Electric Associ-ation’s recent decision to revive the Healy Coal Plant appears to raise more questions than it answers. From what’s publicly available, the provisions of the deal include the following:
n Alaska Industrial Devel-opment and Export Authority (AIDEA), the current owner of the $300 million plant, will initially pay for start-up costs, estimated at $25-29 million;
n HEA will operate the plant and buy the power for 35 years;
n HEA will reimburse AIDEA for start-up costs, some unpaid debt from original construction, and interest;
n HEA can back out of the 35-year power purchase agreement for up to two years after start-up;
n The agreement is subject to resolution of legal battles between AIDEA and Golden Valley Electric Association (GVEA), the Fairbanks utility that the Healy plant was originally built for and that decided after 90 days of operation almost a decade ago that the plant could not perform as intended.
The original construction cost was about $300 million and the plant operated for 90 days total before it was shut down and declared an unworkable failure by its original operator, GVEA.
To their credit, HEA is searching for solutions to a challenging problem: an existing electricity production system that is highly dependent on natural gas, which continues to rise in price. And if a $300 million asset can be acquired for $29 million plus interest and unpaid debt, perhaps that’s a fire sale price for an almost new facility with no fire at all.
On the other hand, how much is the additional unpaid debt? From when, at what rate and on what principal will the interest accrue? What kind of wear and tear has the facility experienced — and what upkeep is required — after sitting idle since 1999? And what are the extra costs associated with operating a plant so far removed from HEA’s service territory?
HEA won’t need, nor can it purchase, the power until 2014 when its current contract with Chugach Electric, the Anchorage utility, expires. Will the plant sit for another seven years? Will HEA be paying interest all that time?
The purchase agreement is for 35 years, with the assumption that nearby Usibelli Coal in Healy will provide the fuel. But is there also a 35-year agreement on purchasing coal with fixed prices? If not, and considering the recent uptick in global and regional interest in coal for electricity and fertilizer feedstock, and proposed legislation to discourage coal use, what guarantee do we have that coal prices won’t rise like natural gas prices have, in which case HEA’s short-term remedy could be worse than the long-term ailment.
And what is the status of that pesky technology that has dubbed Healy a “clean” coal plant, but that GVEA determined was not working or worth the ongoing effort? Even if working, it appears the “clean” technology does not reduce mercury or carbon dioxide — perhaps the two most worrisome pollutants from coal burning, given Alaska’s unique sensitivity to global warming and reliance on clean fish.
How is the agreement dependent on the outcome of the ongoing legal issues between AIDEA and GVEA? Why was Healy not good enough for GVEA yet it appears HEA is willing to consider a 35-year commitment? And what is required to exercise the option to back out of the agreement?
There also are many other questions, some of which may be easily answered in upcoming press releases or public meetings. But considering the promise of new renewable energy technologies just over the horizon — including geothermal and tidal, along with already proven and improving wind, solar and biofuels — do we want to hitch our energy future to a 19th century technology that, even in the best case, will worsen climate change and mercury emissions and is likely to rise significantly in cost?
Details matter, but with so much at stake, the real question is quite simply, “Can we do better?”
Of course, reduced reliance on natural gas and more equal footing with Chugach Electric are desirable. But some promising technologies, such as large-scale geothermal, may require increased cooperation among utilities such as HEA, Chugach and GVEA. We do still have time to chart a 35-year course that does not even begin until 2014 to balance costs, self-reliance, environmental concerns and future technologies. We and our children will live with these decisions in a very different future at mid-century.
Put simply, are you ready to sign on the dotted line right now to commit to burning coal until 2050?
HEA should be recognized for identifying a possible component of a mixed energy supply and providing a two-year escape hatch, but let us not rush to the conclusion that this apparent straight path, shrouded in much uncertainty, is actually the shortest or best solution to our energy challenges. The bar has now been set, and we have seven years to get busy and find other alternatives.
Brian Hirsch, Ph.D., is currently president of Deerstone Consulting, a Homer-based firm working on renewable energy issues in rural Alaska, and the development director of the Yukon River Inter-Tribal Watershed Council, a coalition of 64 Tribes and First Nations in Alaska and Canada. He received his doctorate in natural resources from the University of Wisconsin-Madison, with a focus on energy issues in northern regions of the world. He can be reached at hirsch@alaska.net.
