New Hydro Projects

The State of Alaska studied, built, or considered building several large hydroelectric facilities in the early 1980s, when state coffers were flush and oil prices were high. With the low natural gas prices of the late 1980s and 1990s, it appeared that many of these hydroelectric projects were uneconomical with a cost/benefit ratio under 1. These projects may now have net benefits with the recent increase in prices.

As a result of the large upfront capital costs of these facilities, screening for their economic viability and benefits is vulnerable to assumptions about oil and natural gas prices and the actual swings in their market prices. These projects could benefit from a longer-term assessment and assumption of statistical ‘most probable diesel’ and natural gas prices. The state’s roles as proponent, developer, engineer, rate payer (through the Power Cost Equalization program), regulator, and banker through its various agencies and fiduciary bodies also result in conflicting tensions when assessing project feasibility. Yet, large infrastructure projects are typically financed with public dollars under the philosophy that the public enjoys the derived benefits for many years after the project’s completion.


Three hydropower projects are now under construction in Alaska. Falls Creek near Gustavus is being built by Gustavus Electric Company, Kasidaya Creek, between Haines and Skagway, by Alaska Power and Telephone Company, and Lake Dorothy by Alaska Electric Light and Power.1 FERC licenses have also been issued for hydropower projects at Reynolds Creek and Mahoney Lake, and soon to be issued for Whitman Lake.

Recent Grant Applications

AEA sought interest in study and development of alternative and renewable energy projects through three different grant application cycles in 2008. Applications for hydropower project development and construction have been received for 64 projects. Requested grant funds total $159.8 million for facilities costing $3.35 billion in capital costs. Because the applications are currently under review and funds requested exceed grant funds available, not all applications will receive the amount requested. However, this information is an indication of the current level of interest in hydro development in Alaska.

Chakachamna Hydroelectric Project

The Chakachamna hydroelectric project is currently under study by TDX Power. Located on the western side of Cook Inlet, the project would entail a lake tap, 12-mile power tunnel, and a 40-mile transmission line extension to provide 330 MW of energy to the Railbelt grid at 1600 MWh annually. Originally studied by the Alaska Power Authority in the 1980s, the project as currently envisioned would divert water from the Chakachatna River to the McArthur Drainage Basin.

Susitna Hydroelectric Project

The large-scale Susitna Hydro Project was proposed in the 1980s to provide hydroelectric power for the Railbelt. It was evaluated extensively by the state, but tabled in 1985 when oil prices dropped precipitously. AEA is currently engaged in the reevaluation of the feasibility of this project. Historical information about the Susitna Hydro Project is available at

AEA intends to complete these studies on or before June 1, 2009. The RIRP for the Railbelt will require consideration of information from the Susitna Hydro Evaluation Project.

The hydroelectric potential of the Susitna River has been studied over many decades.2 The initial studies were done by the Bureau of Reclamation in the early 1950s; in the 1970s studies by the Corp of Engineers reconfirmed the feasibility of Susitna River hydropower development. In 1980 the Alaska Power Authority (now Alaska Energy Authority) was commissioned a review of studies to date and a comprehensive feasibility study to determine whether hydropower development on the Susitna River was a viable option.3 Based on these and other studies and the urging of the Alaska Legislature, the AEA submitted a FERC license application in 1983. The license application was amended in 1985 for the construction of a two-dam, three phase construction project. The estimated cost of that project was $5.9 billion.

Arriving at a plan for bond financing was found to be difficult for a project of this scale, one which was to be constructed in phases over a 20-year time period. Cash payment of a portion of the construction costs was proposed as a means of reducing power costs to customers.4

As a result of the high cost of the project, the relatively low cost of gas-fired electrical generation in the Railbelt, and the effect on the state budget of the declining price of oil in the early 1980s, the project was terminated by the Board of Directors of the Power Authority in March 1986. At that point, approximately $227 million had been appropriated to the project from FY79-FY86 ($382 million 2007 dollars) and $145 million had been spent. Extensive field work, biological studies, and activities to support the FERC license application were conducted with these funds. Though the conclusion reached in 1986 was that the impacts of the project were manageable, the license application was withdrawn. The project data and reports were archived to be available for reconsideration sometime in the future.

More recently the Alaska Energy Authority was authorized $2.5 million in funding to perform a Susitna Hydro Feasibility Study and Cost Estimate as part of the FY 2009 Alaska capital budget. Two distinct tasks were identified in the legislation. First, the 1984 cost estimate for construction of the Susitna hydro project using current construction and design technology will be reviewed and updated ($1.5 million). This renewed analysis will produce four alternatives of development for the project, with energy output and costs.

Second, a Railbelt wide integrated resource and transmission study will consider the four incremental Susitna development alternatives, in conjunction with other Railbelt wide generation projects (1.0 million). The analysis will make use, to the maximum extent possible, of the phased project development considered in 1984, but key to the analysis will be new assessment of long-term Railbelt load growth, and matching the project the realistic future Railbelt needs.

This integrated resource plan will yield an economic plan for construction of power generators, transmission lines, and fuel aggregation infrastructure to meet the capacity, energy and reliability needs of the Railbelt over the next 50 years. The plan will include creation of a diversified power portfolio, and robust transmission system by year 10 that can supply reliable postage stamp rate power for all Railbelt utilities. The Susitna project will be a key economic element in the creation of this plan.

According to a November 2008 presentation to the Alaska Energy Authority, the two dam configuration of the Susitna hydro project would be capable of producing approximately 7 million MWh annually.5

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