Huge new federal grant promises easier access for cheaper, cleaner power in Alaska’s Railbelt

When wildfires ripped across the Kenai Peninsula in 2019, among the burned homes and businesses was a key power line that supplied cheap hydroelectricity to Anchorage.

After that line was destroyed, even people untouched by the fire still felt the burn. Anchorage residents paid more than $10 million extra on their power bills.

Last month, the Alaska Energy Authority won a $206 million federal grant that may keep the same thing from happening again and incidentally help electric utilities along the Railbelt replace expensive fossil-fuel generators with clean, renewable energy.

“This is a once in a lifetime event for this kind of funding,” said Curtis Thayer, the authority’s director, by phone.

The grant, provided by the U.S. Department of Energy as part of Congress’ bipartisan infrastructure law, will allow the Alaska Energy Authority to install a 50-mile undersea power cable between the Kenai Peninsula and Chugach Electric’s power plant at Beluga, on the west side of Cook Inlet.

AEA will also build two new battery banks — one in Southcentral Alaska and another in Fairbanks — to manage the ebb and flow of wind and solar power.

These projects aren’t cheap, and the federal grant comes with a catch: The state of Alaska has to match it, dollar for dollar.

That likely means Gov. Mike Dunleavy and state legislators will be asked next spring to approve another $206 million to build this new power infrastructure.

It’s a big ask: Five years ago, AEA’s budget for capital projects was only $10 million, Thayer said. But if the governor and Legislature agree to spend the money, they’ll be buying a big upgrade to Alaska’s largest electrical grid.

“(High-voltage direct current) lines are a proven technology, but this project will be the first of its kind in Alaska and a significant advancement for the Railbelt,” said Arthur Miller, CEO of Chugach Electric Association.

Looking down from the sky 40,000 feet above Alaska, the Railbelt’s electrical grid doesn’t look like a grid at all — it’s a single line, stretching from Homer to Fairbanks.

“It’s not a grid. It’s no different from a series of extension cords that are plugged in from Homer and Southcentral all the way to Fairbanks,” said John Burns, president and CEO of Golden Valley Electric Association in Fairbanks.

When new power plants are built, such as the large new solar power plant near Houston, their usefulness is limited by their ability to ship power to other places.

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Fairbanks, for example, has some of the highest electricity prices on the Railbelt and could buy cheaper power from hydroelectric, wind and solar power plants farther south, but its ability to do so is limited by the capacity of the high-voltage power lines between it and the power plant.

“Without transmission, you can’t transport electrons. Just like you need a highway to transport goods, transmission is no different,” Burns said.

Anchorage experiences similar problems. If a giant new solar farm is built on the Kenai Peninsula, Chugach Electric would need the ability to get power from that facility.

The high-voltage DC power line planned for this project is particularly suited for “intermittent renewable resources,” Miller said, and adding a second route for electricity between Anchorage and the Kenai means there’s more flexibility if something goes wrong with the usual route.

Adding two battery banks also helps utilities deal with fluctuations in wind and solar energy.

When the wind abruptly dies down or clouds obscure the sun, utilities need to be able to spin up other generators to deal with demand.

The preferred source is cheap hydroelectricity, but dams can’t react instantly. Here, that means utilities keep fast-reacting fossil-fueled generators spinning as a stopgap measure.

Battery banks, like the ones planned by AEA, ensure utilities won’t have to do that as often, saving them fuel costs and reducing air pollution. In the Lower 48, battery storage has been deemed the “backbone” of a reliable electric grid.

Burns, talking from Fairbanks, was enthusiastic about what’s coming to the state.

“I do not know of a time … when the opportunity for transformative change of a positive nature is so readily apparent and available,” he said.

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A new power line — particularly one underwater — isn’t as visible as a new power plant, but it’s as crucial to the state’s future, he said.

“It’s not sexy, but it’s completely necessary,” he said. “It’s also large dollars.”

The cost of the project is likely to be the first hurdle. Thayer and AEA have requested that Dunleavy include the $206 million needed from the state in the governor’s draft budget, expected in December. The governor’s office declined to say whether the request will be included.

The state’s match could potentially be paid across several years — meaning that a lump sum won’t be needed in the spring — or the state could include the money in a statewide general-obligation infrastructure bond that’s under discussion by the Dunleavy administration.

The federal government could also consider some money already spent by the Alaska Energy Authority — which borrowed millions last year for energy upgrades — as part of the match, but that’s not certain.

AEA also faces other hurdles: Under the terms of the grant, the state has eight years to complete the project, and it must use American-made products.

That could be a problem because — so far, at least — AEA staff haven’t found anyone in the country who manufactures the type of high-voltage underwater cable that’s needed.

Thayer is confident that the Alaska Energy Authority will be able to find a manufacturer or get a waiver, and while the eight-year timeline is “tight,” he told members of AEA’s board at a recent meeting, he believes it’s doable.

Burns said he hopes that as large as this project is, it will be just the first step. Other parts of the state’s electrical transmission system need to be upgraded in order for cheap power to reach any place along the Railbelt, and he hopes state officials are willing to step up.

“We have a chance in Alaska to really take advantage, but it’s going to take state participation and then investing on a go-forward basis. Ideally, you get a robust, secure, reliable, open-access system,” he said.

Originally published by the Alaska Beacon, an independent, nonpartisan news organization that covers Alaska state government.