TDX Power, Inc. Population: 460 Major Employers: Location: Median Income:

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1 TDX Power, Inc. To reduce local energy costs, TDX Power, Inc. designed and developed a hybrid winddiesel power plant in St. Paul in The plant the largest in Alaska generates electricity at the cost of 12 cents per kilowatt hour (kwh), compared to 49 cents per kwh for diesel-powered electricity. High energy prices throughout rural Alaska have increased demand for the company s services. TDX Power now owns, operates, and maintains electric power plants and distribution systems of various sizes and technologies in five locations, holds assets in excess of $10 million, and attained $7 million in sales last year. Community St. Paul is located on the southern tip of St. Paul Island, the largest of five Bering Sea Pribilof Islands. It lies 300 miles west of the Alaska mainland, and 750 air miles west of Anchorage. The federally-controlled fur seal industry dominated the economy of the Pribilofs until Since then, St. Paul has become a port for the central Bering Sea fishing fleet, and fish processing and marine services dominate the economy. Many islanders also work in the city and tribal offices and commercially fish for halibut. As a result of the rising cost of living on St. Paul and the collapse of the crab fishery, population has decreased from 760 in 1990 to fewer than 500 in Business History Tanadgusix Corporation (TDX) is the village corporation of St. Paul created under the Alaska Native Claims Settlement Act of TDX is Population: 460 Major Employers: Location: Ethnicity: Median Income: St. Paul, Alaska Local Government, fish processing, commercial halibut fishing 300 miles west of the mainland in the Bering sea 87% Aleut $50,750 engaged in many economic activities, including hotels, alternative energy development, electric utilities, power plant projects, satellite technologies, environmental remediation, and maritime industries. The company s most innovative and profitable business venture has been wind power generation. TDX Power, Inc. is a subsidiary of TDX and is an electric power production and distribution company. It owns, operates, and maintains energy plants of all sizes and technologies. Prepared by the Center for Economic Development, University of Alaska Anchorage, under an award from the U.S. Department of Commerce, Economic Development Administration, January 2008.

2 TDX Power designed and developed its first hybrid wind-diesel power plant in St. Paul in In 2003, the company acquired a power plant in Sand Point, Alaska, which it is modifying to incorporate a wind farm. The Aleutian Pribilof Island Association has hired TDX Power to install a wind turbine in Nikolski, a village located on the far west end of the Aleutian chain. The company is also assisting the Alaska Energy Authority with design engineering for a wind-diesel facility. Economic and Community Impact The St. Paul project is a stand-alone utility system that produces heat and power. The 500-kW high-penetration, hybrid system comprises six 225 kilowatt wind turbine and two 150 kilowatt diesel gensets, which serve as a backup power source. The project supplies electricity and space heat to a 100,000 square foot industrial building and airport facility. It is a $3 million commercial project, paid for in whole by TDX Corporation. Employment: 22 Percent Local: 45% Percent Native: Ownership: Legal Status: Years in Operation: TDX Power, Inc. During the construction phase and the 2006 expansion phase, five to seven people were employed on the project. Two full-time employees operate and maintain the utility system. All the maintenance workers are local residents, assisted on occasion by manufacturers representatives. The most significant community benefit of this project has been the reduced cost of energy to light and heat the commercial seafood processing facilities near the St. Paul airport. Cost savings accrue to the benefit of TDX shareholders, because TDX Power owns the facilities powered by the utility. The long-range goal of TDX Power is to provide wind-powered electricity to all St. Paul residents. Household electricity is currently provided by St. Paul Municipal Electric Utility, which manages a diesel-powered production facility and the grid. TDX made a proposal to the City of St. Paul to buy the diesel power plant and to merge it with the TDX wind power plant. This offer has not yet been acted upon by the city government. TDX Power has also successfully brought wind-powered energy to other communities. When the company installs the wind farm for the power plant at Sand Point, a windy Aleutian community, cost savings are anticipated to be 50%. The reduction in the Sand Point utility s diesel fuel consumption is projected at 126,400 gallons per year. At a current cost of $3.06 per gallon for diesel fuel, total annual fuel savings of almost $387,000 would be passed on to utility customers. The Nikolski project is scheduled for installation in % Village corporation ANCSA village corporation, 8(a) subsidiary 8 years 2

3 Business Management Ron Philemonoff is the Chairman and CEO of TDX Corporation. He developed the concept of harnessing wind for power generation after visiting Palm Springs, California, where he was amazed by the scale and numbers of wind turbines in the valley. The Palm Springs wind was but a breeze compared to the wind in St. Paul, so, in 1998, Philemonoff encouraged the TDX Board of Directors to join him in exploring the development of wind power on St. Paul. The company searched for expertise to assist this project and found Bruce Levy, who helped TDX get the best expertise and technology available in the world to tap the wind resources on St. Paul. Bruce Levy is Chairman of the Electric Power Supply Association (EPSA), the national trade association representing competitive power suppliers, who St. Paul wind turbines. account for nearly 40 percent of the installed generating capacity in the United States. He continues to advise TDX Power, Inc. With Levy s guidance, TDX Power was established and a wind power generating system was designed for St. Paul in 2000 and installed in During its first two years, the system experienced two major mechanical breakdowns when the gearbox failed due to inadequate design for cold temperatures. Once the problem was addressed by the manufacturer, the system operated very successfully. In 2007, TDX Power expanded the system with four additional wind turbines. This expansion was made possible by new technology that allowed turbines manufactured in the Netherlands in 1991 to be re-built for use in St. Paul. The system generates 700,000 kilowatt hours of electricity annually. Ten local St. Paul construction workers trained in 2003 were re-employed in the recent installation process. Five local residents were trained in the operation and maintenance of the system in the first three years, and continue to work for the company in St. Paul. TDX Power expanded its reach with the acquisition in 2003 of an electric utility serving the oilfield support industry at Prudhoe Bay. For this project, the company converted a diesel electric generator to a natural gas turbine as a source of fuel, and designed and installed a 14 mile underground distribution system in Deadhorse. In 2004, TDX Power purchased the diesel-powered Sand Point electric utility. The company has since designed and installed a set of wind powered turbines to create a third hybrid system in Alaska, with energy savings passed on to the 520 village customers. 3

4 The company also recently won a competitive solicitation with the U.S. Air Force to develop a high-penetration project at Tin City, a long-range radar site in northwest Alaska. This project must address the issue of ice on the wind rotars and innovate a design for Arctic conditions. The contract also calls for new heating packages on the remanufactured wind turbine, the systems used in the St. Paul expansion. TDX Power holds assets in excess of $10 million and had sales of $7 million in the past year. The company continues to look for new business opportunities through consulting services for wind power in rural Alaska and utility privatization at military bases in Alaska and the Lower 48. Marketing. TDX Power is teaching other communities about wind energy. When the company built Alaska s first hybrid wind-diesel power plant, the U.S. Department of Energy Blades on new TDX power turbines in St. Paul. and the National Renewable Energy Laboratory (NREL) recognized the achievement and started working closely with the company to expand on this success. NREL held numerous workshops and conferences to promote wind power in Alaska and invited TDX Power to many of these meetings to showcase their story with hybrid wind-diesel power. The company has made presentations at energy meetings across the state over the past five years. TDX Power has responded to numerous inquiries from other villages about converting diesel-powered systems to wind-diesel hybrid systems. The high price of diesel fuel has created serious financial problems for several rural communities. Many isolated dieselpowered grids exist in regions with good wind resources. A typical 100-kW wind turbine can displace about 17,800 gallons of diesel fuel per year, a savings of nearly $55,000 to an electric utility paying $3.10/gallon for diesel fuel. (St. Paul has six 225-kW turbines.) This could explain why wind is the world s fastest growing renewable energy source. Challenges and Lessons Learned According to Philemonoff, technology is a limiting factor in further wind power development in Alaska. While the majority of the wind power industry continues to race toward larger, more sophisticated machines, few manufacturers focus on the small and midsize turbine market suited to Alaska. However, technology is only half the problem the other half being the human factor. This factor comes in two forms: human resources and human nature. First, the new technology requires qualified maintenance personnel. As Philemonoff said, We must train local personnel as soon as construction begins. We need a long-term warranty 4

5 period three years at least to ensure that local staff gets up to speed with help from the turbine manufacturer. Second, there must be the will to apply the technology. As Philemonoff explained, Human nature is a nice way to say politics. St. Paul people are apparently upset that local and statewide energy policies prevent this new system from providing the benefit of wind energy to the individual homeowner in St.Paul. They cannot understand why they must continue to pay 40 cents per kwh for diesel-generated electricity when there is 12 cent per kwh electricity at the airport. Philemonoff hoped the TDX Power offer to the City is accepted, saying, St. Paul has a great wind resource, high fuel prices, and now just needs to embrace the wind project. Philemonoff believes that diversification of businesses by TDX is critical to the future of the community and the corporation. TDX is engaged in many businesses located off St. Paul Island, which allows the corporation to underwrite job creation projects such as digitizing materials for the U.S. Department of Defense. Twenty local people are now working on the digitization project, which adds very little to the TDX bottom line but greatly assists families to meet their needs on the island. Philemonoff sees a time when internet connectivity is enhanced to the point where villages can host international call centers for global corporations. That kind of technological advance will sustain residents who want to stay in their villages and retain their family and cultural connections. 5