Fuel Oil Volatility – Complications for Evaluating A Proposed Power Purchase Agreement for Renewable Energy in Nome, AK

Presenters: Antony G Scott, (University of Alaska Fairbanks, USA)

Overview

Private development of a geothermal project to bring electric power to Nome, AK, will require a power purchase agreement between the developer and local utility. Small loads and difficult logistics increase fuel costs for the existing diesel based system, suggesting potential economic benefit from geothermal power. But tools for evaluating future diesel prices in remote, rural markets are sparse – in large part because only 1-3 deliveries determine diesel prices for the year. This paper leverages standard tools to help clarify consequences for Nome citizens of replacing a portion of their stochasticly diesel-based power with stable-priced geothermal energy. It finds that accounting for the unusual nature of episodic fuel deliveries significantly adds to normal annual fuel-oil volatility.