What does Interior Alaska’s renewable energy play mean for Southcentral gas?

The history of Interior Alaska power, for many decades, has been written in coal. Since the inception of Fairbanks power co-op Golden Valley Electric Association, coal power plants have been the backbone of the region’s electrical generation. There have been good reasons for that: Coal is abundant, locally available and cheap — as far back as the 1920s, coal mines in Healy supplied fuel for Fairbanks and, to a lesser extent, Anchorage, and helped build Alaska business magnate Austin E. “Cap” Lathrop’s fortune — Lathrop’s influence can still be seen here; he built the 4th Avenue Theatre, among other historic landmarks in Fairbanks and Anchorage.

But in the 21st century, the tides of power generation are turning: On Monday, GVEA made a historic move by opting to shut down a beleaguered Healy coal plant and replace its generation capacity with a mix of wind power, battery storage and natural gas. It’s important to note that the move wasn’t driven solely by environmental concerns, either: The utility found that the wind/gas mix would actually be a cheaper option for Interior ratepayers.

Healy Unit 2, the coal plant GVEA is shuttering, has a checkered past. Originally conceived as a “clean coal” pilot program by the Alaska Industrial Development and Export Authority and the U.S. Department of Energy in the 1990s, the plant failed its initial test run and was shuttered until 2012. GVEA worked to turn the plant into a conventional coal plant, but multiple accidents related to the coal-feed system during its operation led to extended periods where the plant was shut down.

Now GVEA is planning on replacing the power Healy Unit 2 produced with a mix of new wind power generation — the co-op is soliciting proposals for that project — and Southcentral-generated power powered by natural gas. Both offer opportunities for Southcentral power producers, but also underscore challenges Alaska is facing.

GVEA has previously pursued power from an expansion to the Fire Island wind farm as a potential source, but those attempts have previously been scuttled by the cost of transmitting power over the Intertie, the power grid link between Anchorage and Fairbanks. The co-op’s wind power plans offer an opportunity to revive those discussions.

The issue of gas-generated power, some of which GVEA already purchases via sharing agreements over the Intertie, is a somewhat different matter. Selling generation capacity is a plus for Chugach Electric Association. But Southcentral is already looking at potential supply issues for its own heat and power generation, and GVEA’s move to lean more heavily on gas further underscores the importance of building out a future of natural gas supply. With the deepening demand from the Fairbanks-area utility, the vast majority of Alaska’s population — roughly 550,000 people — will be heavily dependent on a reliable, low-cost supply of natural gas for heat and power generation.

The uncertain long-term future of Cook Inlet gas should already be on Alaskans’ minds, particularly after Hilcorp signaled it has questions about its ability to provide enough gas from existing wells to supply new contracts over the next 2-11 years. State estimates hold that Cook Inlet still has lots of undeveloped gas, and Hilcorp is exploring for more — but that gas isn’t online yet, and we need to be sure that gas supply is mapped and developed. And with more utilities moving into renewable energy for economic and climate reasons, gas will remain a crucial backstop to smooth power generation and adjust to quick demand shifts. It’s no exaggeration to say that the next few decades of Alaska power depend on it.