Electric utilities for Anchorage and Mat-Su install $63 million Tesla battery system

Two Southcentral Alaska utilities have installed a giant Tesla battery system in Anchorage to provide power more efficiently. They say it will save an estimated $121 million over 15 years, leading to modest savings for customers.

The 24 Megapacks were installed in June on land owned by Chugach Electric Association, the majority owner. The $63 million project also includes Matanuska Electric Association, primarily serving the Wasilla-Palmer area, a 25% owner.

The batteries will be charged and ready in October 2024 or possibly earlier, officials involved with the project say.

The batteries will reduce the utilities’ demand for gas, they say.

The two utilities’ power requirements are pooled, so dispatchers work together to distribute power in the most efficient way to consumers, said Chris Kohler, the project manager for Chugach Electric, during a tour of the project in June.

They will provide power instantaneously if, say, there’s a disruption on the Railbelt grid that requires a new power source. Instead of firing up gas turbine generators, energy can be quickly drawn from the batteries, saving money.

“So it’s operational efficiency, savings on gas and (operations and maintenance) on our thermal generating units,” Kohler said, referring to the gas-based units.

The Megapacks will also reduce greenhouse gas emissions by allowing less burning of natural gas, he said.

[Chugach Electric Association wants to raise the base rate by nearly 6%]

The batteries are like a Swiss Army knife of energy storage for a utility, said Mark Henspeter, business development analyst with Chugach Electric. They’re capable of doing many things in addition to lowering fuel expenses and other costs.

“It’s improved resiliency, it improves the ability to bring on new renewable projects,” and they improve the reliability of power production, he said.

The battery system loses some efficiency in winter. But it has a thermal management system to help keep the batteries at their optimal temperature, Henspeter said.

The Megapacks are housed in rows of white containers that look like storage lockers, on a gravel lot near Chugach’s Southcentral Power Project. They will be connected to the Railbelt power grid through the plant. In June, a crane lowered them onto concrete pads over two days. The utilities are waiting on other equipment from the Lower 48, like transformers, before the project can be completed.

The batteries will be able to produce 40 megawatts of power for about two hours. That’s a significant amount, equivalent to about 15% of Chugach’s power demand at any given time during summer.

A looming gas shortage

The batteries have arrived as the two utilities and others on the Railbelt grid from Homer to Fairbanks look for alternatives to natural gas produced in Cook Inlet, the primary source of power in the region. The battery project was already underway before that issue arose last year, but it will be a part of the solution, Chugach Electric officials said.

The state’s leading gas producer, Hilcorp, warned in May 2022 of a potential shortage of Cook Inlet gas in the future.

Shortfalls of gas from that aging basin could begin arising in 2027, analysts say. Chugach and Matanuska electric utilities, with about 145,000 members collectively, have gas supply contracts ending in 2028.

The batteries will offer a good closeup look for the utilities at their benefits and limits, said Julie Estey, a spokeswoman with Matanuska Electric Association.

“It’ll be a great way to learn as we look at a larger energy transition,” she said.

Among other steps, Chugach and Matanuska electric are studying new solar and wind projects. Chugach Electric is weighing the feasibility of a large wind farm proposed for an area northwest of Anchorage across Cook Inlet, as well as a large-scale solar farm — two projects that could reduce dependence on natural gas.

Homer Electric also deploys Megapacks

On the Kenai Peninsula southwest of Anchorage, Homer Electric Association last year installed a larger Tesla battery system consisting of 37 Megapacks.

[Aniak residents shocked by quadrupling of power bills have their say before Regulatory Commission of Alaska]

The utility is seeing substantial savings from the batteries, said Larry Jorgensen, director of power, fuels and dispatch at Homer Electric.

The battery system’s power helps close the gap between electric demand and generation, he said.

“We use ours for system regulation, when the generation we have doesn’t meet the demand in the system, because people turn things on and off all the time, and we’re always chasing that,” Jorgensen said.

The system cost $41 million, Jorgensen said.

He said the costs for the latest Tesla batteries have risen sharply in the last year alone, with inflation a factor, but the batteries are constantly being improved, he said.

Homer’s Megapack system was the largest in North America for a spell, until larger projects came online, he said.

“We have shown that they work,” he said.

They’re allowing the Homer utility to generate the same amount of power using about 10% less natural gas, he said.

“We are one of the smallest utilities on the Railbelt, so that impact is significant for us,” he said.