The V.I. Water and Power Authority’s quest for an alternative-energy provider surged ahead Monday with the announcement that WAPA had entered into two power-purchase agreements with Denver-based Alpine Energy Group for waste-to-energy facilities on St. Thomas and St. Croix.
During a press conference at Government House, officials also announced that the V.I. Waste Management Authority would contract with the same agency and use the facilities to help reduce waste at the territory’s two landfills. Both sets of agreements are for 20 years.
The project clearly demonstrates that two government agencies can really work together and reach a turning point from which they can both move into the future, Gov. John deJongh Jr. said during the press conference.
Alpine will invest $440 million — $280 million on St. Thomas and $160 million on St. Croix — to construct the refuse-derived fuel-and-power-generation facilities on both islands. It’s projected that 146,000 tons of municipal solid waste will be converted to refuse-derived fuel every year, producing 33 megawatts of power on St. Thomas and 16 megawatts on St. Croix — or about 32 to 33 percent of the authority’s current peak-generation load, according to WAPA head Hugo Hodge Jr.
"It’s called a take-or-pay contract," Alpine President James Beach explained after the press conference. "WAPA is obligated to buy 75 percent of our output if the facility is up and running."
And if WAPA needs to purchase more power, they can do so at a discounted rate, Hodge said later.
WAPA will continue the search for another provider to produce the remaining 10 megawatts of energy available for St. Croix, he said during the press conference.
Included in the construction costs are $11 million for St. Croix and $6 million to $8 million for St. Thomas to allow WAPA to upgrade its system so that Alpine’s facilities can fully connect to WAPA’s power grid — including buying a transmission-circuit cable and paying for the construction of a new substation in Estate Bethlehem on St. Croix.
WAPA will put the money out to fund the interconnection and, as part of the agreement, Alpine will reimburse the utility up to $15 million per island. WAPA will also spend $6 million to $8 million in bond proceeds and other internally generated funds on upgrades to St. Croix’s Richmond Power Plant.
WAPA issued its request for proposals for alternative-energy providers in 2007. After going through a rigorous selection process and months of negotiations, the authority selected Alpine because it essentially kills two birds with one stone, delivering low-cost alternative energy and helping the territory solve its solid-waste issues, officials said Monday. The Waste Management Authority, after going through a similar RFP process a few months before, was invited by WAPA in August 2008 to sit in on the waste-to-energy presentations.
"At WAPA’s request, WMA collaborated to negotiate these contracts," said authority Executive Director May Adams Cornwall on Monday.
WMA is currently operating under two consent decrees, and has been mandated by the U.S. Environmental Protection Agency to close out St. Croix’s Anguilla Landfill at the end of this year, and the Bovoni Landfill on St. Thomas between 2014 and 2017. The waste-to-energy technology will help in that process by sorting out the waste on both sites, removing the recyclable materials and turning the remaining trash — including scrap tires — into what looks like small pellets for fuel.
The Waste Management Authority has to pay $7.8 million annually for the operation of the plant on St. Thomas and $10.2 million — a combination of operating and capital costs — for the facility on St. Croix, Cornwall said.
"The capital cost is what we call debt service — we’re paying the company back for financing the center," she explained later. "And that way, if we want to own it, we can do so after 20 years."
It’s likely that a General Fund appropriation will be needed to cover the cost of operating the plants, she said.
The permitting phase is expected to last nine to 12 months, putting the start of construction around May 2010. The facilities should be complete during the last quarter of 2012, according to officials. On St. Thomas, the facility will be located in Long Point — or Estate Bovoni — while St. Croix’s facility will be built near the Krause Lagoon, between the container port and molasses pier. The St. Thomas site, owned by Property and Procurement, is 32 acres, while the 25-acre St. Croix site is owned by WAPA and the V.I. Port Authority.
In an emergency meeting held just before the press conference, WAPA board members gave the green light to a lease-option agreement between Alpine and WAPA for the use of about eight acres of land on St. Croix on which the electric-generating facility would be constructed and operated. The option would be $20,000 for the first year, with two nine-month extensions at a cost of $15,000 each.
Board members also approved executing a lease agreement with Alpine at an annual fee of $40,086. The lease, which is for 20 years with three five-year options to renew, would start when St. Croix’s facility is up and running.
"These plants will begin moving WAPA away from complete dependency on fossil fuel for electric-power generation and water production, and it will be the first time in the Virgin Islands history that fossil fuel has not been used to generate electricity and potable water," the governor said. "It is also the first time that the government has developed a viable solution to the landfill and solid-waste issues in the territory."
The power-purchase agreements still have to be approved by the Public Services Commission, officials said.
In their meeting before the press conference, WAPA board members also stipulated that the cost of the agreement will be an annually adjusted electric-energy charge for each on-peak and off-peak hour of electric energy dispatched from Alpine’s facilities. A minimum take-or-pay obligation will be included in the power-purchase cost and recovered through the Levelized Energy Adjustment Clause (LEAC).
Hodge can also negotiate with Hovensa for a supply of petroleum coke needed to fuel the facilities at a cost based on the Pace Petroleum Coke Price Index. The cost is included in the power-purchase agreement and recovered through the LEAC.
The board also authorized Hodge to execute two side-letter agreements with Alpine and its equity investor, a fund managed by Energy Investors Funds, ensuring the sharing of tax benefits and government incentives.
