Renewable Energy Technology Assessments - Kauai Island Utility ...

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Kaua’i Island Utility Cooperative Renewable Energy Technology Assessments 8.0 Hydro The Wailua project, and to a lesser extent the Upper Lihue project, are the only projects with line-item construction cost estimates that closely reflect the selected project. Total project cost is all that was available for the Wainiha, Waimea Mauka, and Kokee projects. It is assumed, but could not be verified, that all these lumped costs include engineering and construction administration as well as any required transmission upgrades. Costs were updated from the time of the initial project reports to November 2004 based on the Engineering News Record Construction Cost Index. 96 8.6.2 Operating and Maintenance (O&M) Costs Project O&M costs are estimated based on percent of construction cost and staff allocation. The Corps has used 0.5 percent of the construction cost for annual O&M. 97 However, since these plants are small, and two projects are upgrades, this cost was assumed to be 1 percent. O&M costs are expected to be higher for upgrade plants because, though some of the equipment would be new, the diversion and conveyance structures may still require a greater level of maintenance than a new project. One tenth of one percent (0.1 percent) is assumed to be contributable to insurance. The O&M cost assumes automated power plants with remote monitoring via radio telemetry. Although full-time, on-site personnel are not typically required at these plants, staff will be needed for monitoring, routine site visits, troubleshooting, and annual maintenance. It is assumed that one full staff would be assigned for each of the three new projects (Wainiha, Wailua and Kokee), and that one-half staff unit be added for Waimea Mauka. No additional effort was believed to be needed for the Upper Lihue plant based on the small increase in capacity. Each staff unit was estimated at $90,000 per year including salary and benefits. This addition should give a conservative estimate for annual O&M costs. 96 http://enr.construction.com/features/coneco/subs/constIndexHist.asp. 97 U.S. Army Corps of Engineers, Honolulu District, Summary Report for Hydroelectric Power, October 1978, p. C-9. 21 March 2005 8-18 Black & Veatch
Kaua’i Island Utility Cooperative Renewable Energy Technology Assessments 8.0 Hydro Figure 8-11. Waimea Mauka Powerhouse Generator Maintenance (Source: Hawaii Business Magazine, Nov. 2003). 8.6.3 Applicable Incentives In 2002, State Representative Mina Morita submitted a bill to provide a tax credit of 20 percent for hydroelectric systems erected and placed in service between 2003 and 2010. This bill never passed. The bill which did pass included tax credits only for solar and wind energy. This exclusion, however, apparently was due to State budget limitations rather than a preference for a particular renewable energy technology. 98 There are several federal incentives available for the development of hydroelectric generation facilities. The federal production tax credit provides a $9/MWh incentive for five years following the initial commercial operation date of the facility, however the facility must be owned by a taxable entity to claim this credit. The hydroelectric facility must also be located in an irrigation system and not use any new dams or impoundments. The incentive would be available for the Upper Lihue, Waimea Mauka, Puu Lua-Kitano, and Kitano-Waimea projects. This incentive is included in the life-cycle cost analysis for the developer owned scenario. Various federal grants and low interest loan programs may also be applicable to these projects; however, the exact impact of these programs is uncertain and not quantified at this time. Therefore, no incentives are assumed in the life-cycle cost analysis for the KIUC ownership scenario. 8.6.4 Life-cycle Economics The life-cycle cost of providing power from each of the proposed hydroelectric projects was evaluated by calculating the levelized cost. The hydro project performance 98 Personal electronic mail correspondence from Rep. Mina Morita, November 16, 2004. 21 March 2005 8-19 Black & Veatch
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