Legislature(2009 - 2010)BUTROVICH 205

01/25/2010 03:30 PM RESOURCES


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03:33:37 PM Start
03:35:49 PM SB220
04:55:22 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
= SB 220 ENERGY EFFICIENCY/ ALTERNATIVE ENERGY
Heard & Held
Energy-Related Budget Recommendations
Bills Previously Heard/Scheduled
-- Testimony <Invitation Only> --
          SB 220-ENERGY EFFICIENCY/ ALTERNATIVE ENERGY                                                                      
                                                                                                                                
CO-CHAIR  WIELECHOWSKI  announced  an   overview  of  the  energy                                                               
recommendations and invited testimony on SB 220.                                                                                
                                                                                                                                
MICHELLE SYDEMAN,  staff to Senator Wielechowski,  explained that                                                               
she would go over the  energy related budget recommendations. She                                                               
said  during the  Interim hearings  the most  frequently received                                                               
testimony  had  to  do  with  approval  of  the  existing  energy                                                               
programs  such as  weatherization, home  energy rebates  and low-                                                               
income energy  assistance. The committee was  repeated told about                                                               
how these programs are helping  to cut costs for Alaskan families                                                               
and they were  urged to work towards increased  funding for them.                                                               
The  public also  expressed support  for continued  investment in                                                               
renewable energy and the need  to get communities off high-priced                                                               
fossil fuels  and on  to locally  available sources  of renewable                                                               
energy. Where  such resources are available,  the committee heard                                                               
they could provide a more  reliable, flat-priced, and sustainable                                                               
source of energy over the long term.                                                                                            
                                                                                                                                
3:35:49 PM                                                                                                                    
A final  theme was that  investments in energy  efficiency result                                                               
in  real  savings.  She said  the  Resource  committee  co-chairs                                                               
followed up on  this testimony and spoke with  agency and private                                                               
sector experts to  assess the effectiveness of  the programs they                                                               
heard  about most;  and  a series  of  draft recommendations  was                                                               
produced  addressing  the  need   for  increased  funding  for  a                                                               
discrete  targeted set  of programs.  Those recommendations  were                                                               
contained in the  report that the co-chairs  released in October.                                                               
Those  were reviewed  and resulted  in the  letter that  was sent                                                               
last  week  to the  co-chairs  of  the Senate  Finance  Committee                                                               
detailing the primary budget recommendations.                                                                                   
                                                                                                                                
3:36:48 PM                                                                                                                    
She said that  she and Mr. Pawlowski were asked  to go over those                                                               
recommendations today  one by one  to describe why  the co-chairs                                                               
believed  they were  worthy of  being  passed up  to the  Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
3:37:03 PM                                                                                                                    
MIKE PAWLOWSKI, staff  to Senator McGuire, started  by saying the                                                               
$25  million  recommended  for weatherization  is  very  popular,                                                               
because  it is  a proven  way to  reduce energy  costs. From  the                                                               
program they  have learned that annual  household savings average                                                               
about $527/year  or $7565 over  the lifetime of  the improvement.                                                               
In  2008, $200  million was  appropriated for  weatherization and                                                               
that is  likely to be  fully encumbered by  the end of  2010. The                                                               
recommendations include $150 million  for weatherization, but the                                                               
chair  worked with  the actual  program and  found that  just $25                                                               
million would keep it going.  According to AHFC 27,000 residences                                                               
in Alaska are still ready to be weatherized.                                                                                    
                                                                                                                                
3:38:19 PM                                                                                                                    
The next point  was $175,000 to help Alaskans learn  how to lower                                                               
their  energy  costs through  a  statewide  public relations  and                                                               
education  campaign on  energy  efficiency.  Statistics from  the                                                               
weatherization program  demonstrate that  Alaskans stand  to save                                                               
millions  by  making  their  homes  and  businesses  more  energy                                                               
efficient.   Research   shows    that   energy   efficiency   and                                                               
conservation are  typically 50-75  percent cheaper  than building                                                               
new power plants or buying energy on the open market.                                                                           
                                                                                                                                
The  amount  of $100,000  was  recommended  to fund  a  technical                                                               
assistance program  to help business  owners learn how  to reduce                                                               
their energy-related expenditures  and improve profitability. The                                                               
AEA plans to  use federal stimulus funds to  initiate a technical                                                               
assistance program this fiscal year,  but this funding would help                                                               
it continue.                                                                                                                    
                                                                                                                                
MR.  PAWLOWSKI  said the  next  recommendation  was $250,000  for                                                               
energy-related  job  training. Using  grant  funds,  he said  the                                                               
Alaska Vocational  Technical Center currently trains  power plant                                                               
managers  and  bulk  fuel  operators  to  maintain  reliable  and                                                               
efficient  power  plants.  Unfortunately with  weakening  federal                                                               
support for the Denali Commission, this funding is dwindling.                                                                   
                                                                                                                                
3:40:03 PM                                                                                                                    
Finally, he remarked that $2  million to help Alaskans save money                                                               
with energy efficient appliances  was another recommendation that                                                               
had a lot of public support.  He said that several states already                                                               
provide  rebates   to  home  owners  who   replace  older  energy                                                               
inefficient  appliances with  ones  that  are substantially  more                                                               
efficient than  federal standards,  and the Department  of Energy                                                               
(DOE)  reports   that  last  year's  savings   from  energy  star                                                               
appliances were enough to power  10 million homes and avoid green                                                               
house gas emissions from 12 million cars.                                                                                       
                                                                                                                                
3:40:47 PM                                                                                                                    
MS. SYDEMAN  reviewed that in  2008 the legislature  pledged $300                                                               
million in funding  over a five-year period  for renewable energy                                                               
projects.  The Renewable  Energy Fund  provided grants  up to  $4                                                               
million to eligible projects that  can range from feasibility and                                                               
reconnaissance studies  to actual construction. She  said the co-                                                               
chairs believe that continuing to  support the fund through 2012,                                                               
the  original date,  will allow  the legislature  to fulfill  its                                                               
original promise to help communities  develop their own renewable                                                               
energy resources.                                                                                                               
                                                                                                                                
3:41:35 PM                                                                                                                    
Next,  she  said, $8  million  was  recommended for  rural  power                                                               
system upgrades - above the  Governor's proposed $2 million. This                                                               
helps reduce  electrical costs  in rural  Alaska by  helping them                                                               
upgrade to more  efficient power systems. In the  last decade the                                                               
AEA has  upgraded about  35 rural power  systems resulting  in an                                                               
average  increase  in  efficiency  of  26  percent.  About  25-30                                                               
communities are still waiting for  funding for the upgrades. Most                                                               
of the funding  in the past has come from  the Denali Commission,                                                               
but its  funding is  declining. So  if the  state is  to continue                                                               
that commitment,  it will have  to step in  with some of  its own                                                               
funding.                                                                                                                        
                                                                                                                                
3:42:31 PM                                                                                                                    
The  next recommended  item, Ms.  Sydeman said,  was $200,000  to                                                               
provide  assistance to  those individuals  who operate  the rural                                                               
power systems. Right now the AEA  has staff travel in the Circuit                                                               
Rider Program to  different villages and work  with the operators                                                               
so  they can  make maximum  use of  their systems.  Having enough                                                               
trained people in the AEA to  do this training will continue this                                                               
important work.                                                                                                                 
                                                                                                                                
3:42:55 PM                                                                                                                    
CO-CHAIR MCGUIRE joined the meeting.                                                                                            
                                                                                                                                
3:43:34 PM                                                                                                                    
MS. SYDEMAN  said the next  item is  $4 million to  upgrade rural                                                               
bulk fuel  storage facilities.  The Governor's  budget recognized                                                               
the need  for increased funding  here with $1 million,  but their                                                               
research  indicates  that  about  $5 million  is  necessary.  The                                                               
reason  is  that  many  older  systems  don't  meet  federal  EPA                                                               
standards  and some  communities might  be disallowed  from using                                                               
these systems unless  they are upgraded. Again,  the challenge is                                                               
the declining Denali Commission funding.                                                                                        
                                                                                                                                
Another item  is $3  million for state  matching funds  to enable                                                               
communities to  successfully apply  for federal funds  for public                                                               
transit systems. Alaska is one  of three states that don't invest                                                               
public  funds in  road-based state  transportation systems.  Many                                                               
people use  those systems to get  to work, school and  homes, and                                                               
they  are  clearly used  and  beneficial.  They have  heard  that                                                               
several local governments  - the MatSu and Kenai -  have not been                                                               
able to  secure federal funding  because they can't come  up with                                                               
the state match.                                                                                                                
                                                                                                                                
The  next proposal  was for  $3  million to  replenish the  Power                                                               
Project Loan Fund - above  the Governor's proposal of $7 million.                                                               
The co-chairs thought $10 million  was more appropriate. The fund                                                               
provides loans  to utilities, local governments,  and independent                                                               
power  producers to  develop or  upgrade  their power  production                                                               
facilities.  Interest rates  vary from  tax exempt  rates on  the                                                               
high  end to  zero on  the low  end. The  last time  she checked,                                                               
about  47  loans  were  out  for a  total  of  $26  million;  the                                                               
repayment rate is excellent with  only one late loan. Communities                                                               
are taking good  advantage of this fund and are  doing their part                                                               
in paying the loans back, but the balance is almost used up.                                                                    
                                                                                                                                
3:46:47 PM                                                                                                                    
MR. PAWLOWSKI said  the next recommendation was  $200 million for                                                               
long-term  Railbelt  Energy  projects.   He  explained  that  the                                                               
Railbelt's  Regional   Integrated  Resource  Plan   was  recently                                                               
completed as the  guide to developing the  region's power systems                                                               
over the next  50 years and $2-$8 billion worth  of projects were                                                               
identified. So,  rebuilding the Railbelt  Energy Fund  would help                                                               
prepare communities and the state for needed investments.                                                                       
                                                                                                                                
He  said  that $10  million  was  "broken out"  specifically  for                                                               
Susitna/Chakachamna  and other  hydro projects  in the  Railbelt.                                                               
These were identified  in the plan as "large  hydro projects with                                                               
important potential in near-term  development within the region."                                                               
This money  would carry  out the  needed geotechnical  work, pre-                                                               
permitting and conceptual design for some of the projects.                                                                      
                                                                                                                                
The next step  was $3 million for the  Emerging Energy Technology                                                               
Fund  (EETF).  This  idea  was  sponsored  initially  by  Senator                                                               
McGuire and  included in  SB 220,  he stated.  Most of  the other                                                               
recommendations are  based on many existing  programs, but little                                                               
or no state funding is  available for research and development of                                                               
new  technologies,  and  although the  state  supports  renewable                                                               
energy development,  those projects are limited  to off-the-shelf                                                               
technologies. The  proposed EETF  would encourage  innovation and                                                               
exploration of  new sources of  renewable energy and  match funds                                                               
provided by the Denali Commission.                                                                                              
                                                                                                                                
3:48:50 PM                                                                                                                    
MR. PAWLOWSKI said the next  recommendation was $10 million as an                                                               
initial capitalization  for the  Southeast Energy Fund  to expand                                                               
power  generation projects  in Southeast  and  help complete  the                                                               
regional electrical  grid. Most  Southeast communities  that rely                                                               
on hydro  still rely on  oil to generate electricity  and by-and-                                                               
large  heat;  and  many  of  the  hydro  electric  facilities  in                                                               
Southeast  are at  or  near capacity  which  severely limits  the                                                               
region's  growth. Following  on  that was  the recommendation  to                                                               
continue funding  for the Southeast Regional  Integrated Resource                                                               
Plan, similar  to what was  conducted in the Railbelt.  The final                                                               
recommendation  was to  fully fund  the  power cost  equalization                                                               
program (PCE) because it is  critical as a foundation of Alaska's                                                               
energy policy.                                                                                                                  
                                                                                                                                
3:50:18 PM                                                                                                                    
SENATOR HUGGINS  noted that  his last two  bullets didn't  have a                                                               
dollar figure with them.                                                                                                        
                                                                                                                                
3:50:51 PM                                                                                                                    
MS.  SYDEMAN responded  that their  original  proposal, based  on                                                               
conversations  with  legislative  staff  and the  AEA,  was  that                                                               
$700,000  would  be  needed. The  Governor's  budget  proposes  a                                                               
little bit  more than  that, and because  his budget  provided an                                                               
adequate amount the co-chairs didn't  feel that an increase above                                                               
that level was needed.                                                                                                          
                                                                                                                                
MR. PAWLOWSKI  said the  same thinking went  along with  the PCE;                                                               
they are supporting what the Governor is doing.                                                                                 
                                                                                                                                
3:51:39 PM                                                                                                                    
SENATOR STEDMAN said  he wasn't sure where the  cost structure is                                                               
on the  Southeast Integrated Resource  study, but  $700,000 seems                                                               
really high.  "Some of these  projects have been looked  at since                                                               
the 50s."                                                                                                                       
                                                                                                                                
SENATOR WAGONER  said he is bothered  that in looking at  the two                                                               
hydro  projects, the  smallest one  will generate  around 330-350                                                               
mgW, which  is more than is  needed in the Railbelt.  In addition                                                               
to that  they are looking  at revisiting the Susitna  project and                                                               
he  didn't know  why, because  millions of  dollars have  already                                                               
been spent  and the study is  done. "We don't need  to do another                                                               
thing, because  I don't  think that  study is  dated and  I don't                                                               
think the Susitna River has changed  that much," he said. He also                                                               
reminded members that the original  Railbelt Fund money came from                                                               
the balance  that had been  appropriated for the  Susitna project                                                               
study.                                                                                                                          
                                                                                                                                
SENATOR  WIELECHOWSKI  said  that  is  an  excellent  point.  But                                                               
speaking for  himself, he said they  followed the recommendations                                                               
of  the Integrated  Resource Plan;  this is  what experts  in the                                                               
field are  recommending. They don't  know that the  projects will                                                               
work yet; both have potential  environmental problems. It's clear                                                               
that  they can't  do all  of them,  but they  don't know  at this                                                               
point which one will actually happen.                                                                                           
                                                                                                                                
3:54:57 PM                                                                                                                    
MS.  SYDEMAN  noted that  they  have  invited the  Alaska  Energy                                                               
Authority to  justify those recommendations of  continued funding                                                               
for both projects in a committee meeting.                                                                                       
                                                                                                                                
SENATOR HUGGINS  said they  really need  to understand  what they                                                               
are buying  with this money assuming  that even 45 percent  of it                                                               
goes forward.  The Railbelt consolidation  effort is a  huge task                                                               
and leaves a question mark in his mind.                                                                                         
                                                                                                                                
3:56:53 PM                                                                                                                    
SENATOR WIELECHOWSKI  said that  was another excellent  point and                                                               
the plan  is to have  the ones who  prepared the plan,  Black and                                                               
Veatch, to  explain and see  what their thoughts were.  He agreed                                                               
that they  can't go forward  on all three  and that they  have to                                                               
decide  if they  continue moving  forward until  they figure  out                                                               
which one is correct or just pick  one now. It's a good debate to                                                               
have.                                                                                                                           
                                                                                                                                
SENATOR  HUGGINS reflected  that some  people are  skeptical; for                                                               
instance, Healy  clean coal was  given to a couple  of operators,                                                               
but now  the report  says they shouldn't  restart that.  He said,                                                               
"We can't  afford those kind of  mistakes in what we  are putting                                                               
our money against. So, trial and  error is not a good technique -                                                               
as we're spending this amount of money."                                                                                        
                                                                                                                                
CO-CHAIR WIELECHOWSKI said, "Excellent point."                                                                                  
                                                                                                                                
3:57:52 PM                                                                                                                    
CHRIS ROSE, Executive Director,  Renewable Energy Alaska Project,                                                               
said  their  goal is  to  increase  the production  of  renewable                                                               
energy  in Alaska.  One of  their primary  objectives is  also to                                                               
increase energy efficiency. They are  very happy with the omnibus                                                               
bill. It is  great to have renewable and  efficiency energy ideas                                                               
in one place.  He said  they would probably support many of them,                                                               
but they need a chance to look them over.                                                                                       
                                                                                                                                
3:59:49 PM                                                                                                                    
He said that  he serves on the advisory committee  that helps AEA                                                               
bring recommendations to  the legislature and he is  happy to see                                                               
the $50-million recommendation for the  fund this year. The first                                                               
$100 million for  the program was released last  February. So for                                                               
the length  of time they  have been working  on it, it  is moving                                                               
ahead  quite quickly.  He saw  some "tweaks"  in the  legislation                                                               
that are consistent with what AEA  is already doing - things like                                                               
making sure  there is a  positive benefit/cost ratio and  that an                                                               
outside firm  will do  an economic  analysis (AEA  has contracted                                                               
with ISER to do that.)                                                                                                          
                                                                                                                                
4:01:16 PM                                                                                                                    
MR. ROSE said  that SB 150, the Emerging  Energy Technology Fund,                                                               
is a priority  for this state, because while it  currently does a                                                               
lot  for  commercial,  existing,   and  mature  technologies,  it                                                               
doesn't do much for the  emerging technologies. And Alaska has 90                                                               
percent of  this country's tidal  power potential, 50  percent of                                                               
the  nation's  wave  power potential,  tremendous  hydro  kinetic                                                               
potential, and it is the only  place outside of some remote parts                                                               
of Hawaii  where a  demonstration project can  be brought  in and                                                               
save  people  money at  the  same  time.  Alaska is  the  perfect                                                               
laboratory to test these things.                                                                                                
                                                                                                                                
He said he had been working  with staff on potential tweaks to SB
220  to make  sure it  works  as smoothly  as possible  including                                                               
adding the  National Renewable Energy  Lab and the  Fossil Energy                                                               
Office at  UAF as  members of the  advisory committee  that would                                                               
make the decisions about those  grants. He suggested putting even                                                               
more than  $3 million into that  fund because they might  be able                                                               
to get more matching funds from  the Denali Commission as well as                                                               
the Department of Energy.                                                                                                       
                                                                                                                                
4:02:55 PM                                                                                                                    
He said he  supported SB 31, the state production  tax credit. He                                                               
stated  that  the federal  production  tax  credit has  been  the                                                               
primary  driver  of  renewable  energy  development  in  the  US.                                                               
Congress has been  authorizing it for only one or  two years at a                                                               
time,  and for  that reason  it has  been an  "uncertain policy."                                                               
States  have  been  doing  all kinds  of  things  to  incentivize                                                               
renewable energy  including creating their own  tax credits. This                                                               
tax credit  would be 15 percent  of the retail rate  with a range                                                               
of 2.1-5 cents/kW over five years.                                                                                              
                                                                                                                                
MR. ROSE said  they also support SB 121 that  provides making all                                                               
public  buildings  in  Alaska  energy  efficient,  because  being                                                               
efficient  is  always  cheaper  than  generating  the  equivalent                                                               
amount of  energy. This language  actually promotes the  state to                                                               
use  performance contracting,  which means  the contractor  would                                                               
finance the project and the utility  savings would be used to pay                                                               
back the loan over time - a great way to finance these projects.                                                                
                                                                                                                                
4:05:03 PM                                                                                                                    
Another recommendation, although it's not  in the omnibus, is $25                                                               
million for more  weatherization. The $360 million  that came out                                                               
of  the  2008 legislature  for  both  the current  weatherization                                                               
program and the  rebate program has paid  tremendous dividends in                                                               
terms of creating jobs and energy savings, he said.                                                                             
                                                                                                                                
He  also supported  the Statewide  Energy Policy  in SB  220 that                                                               
came from work  the House Energy Committee did  over the Interim.                                                               
Having a statewide energy policy  that looks at how Alaskans will                                                               
get energy  to light their businesses  and heat their homes  is a                                                               
great idea.  That will also  make Alaska more competitive  in the                                                               
world economy.                                                                                                                  
                                                                                                                                
4:07:23 PM                                                                                                                    
MR. ROSE said they hadn't vetted  these ideas yet, but he thought                                                               
they would support  job training because the  skills the industry                                                               
needs have  to be developed  as well as technical  assistance for                                                               
people  who want  to  continue running  the  existing and  future                                                               
systems.  He  thought they  would  support  an energy  efficiency                                                               
grant  fund   and  alternative   energy  for   public  buildings.                                                               
Alternative energy for home owners,  in sections 20-23, is an old                                                               
program  that would  be  revived  and he  thought  it would  have                                                               
pretty high demand. Using more  energy efficient appliances makes                                                               
sense as  well as taking the  old inefficient ones out.  Mr. Rose                                                               
said  it  makes  sense  to  have an  energy  plan  like  the  one                                                               
developed by Black and Veatch.                                                                                                  
                                                                                                                                
4:10:23 PM                                                                                                                    
CAITLIN   HIGGINS,   Executive  Director,   Alaska   Conservation                                                               
Alliance (ACA) and  Alaska Conservation Voters, said  she and her                                                               
members  applauded   the  co-chairs  and  committee   for  strong                                                               
leadership  and hard  work on  these  issues. She  said that  the                                                               
Alaska  Sustainable Energy  Act  continues to  put  Alaska on  an                                                               
economically  viable, sustainable,  stable  energy  path for  the                                                               
future, a fundamental change that  the conservation community has                                                               
encouraged  for  a  number  of  years.  They  strongly  supported                                                               
inclusion of  SB 121 that  would make state owned  buildings more                                                               
efficient. She was glad to see the state leading by example.                                                                    
MS.  HIGGINS  said the  Conservation  Alliance  felt so  strongly                                                               
about  intensifying the  need to  be more  energy efficient  that                                                               
they  commissioned an  energy  economist  at National  Capitalism                                                               
Solutions to develop  a report that shows how  the Railbelt could                                                               
reach its goal  for energy efficiency by 2025.  The report should                                                               
be released in the next several days.                                                                                           
                                                                                                                                
4:13:17 PM                                                                                                                    
Support including  goals for energy efficiency  and encourage the                                                               
committee  to consider  whether  or not  to  push those  forward,                                                               
especially in uncodified  statute. The plans goals  would be more                                                               
achievable  and  meaningful  if   they  were  found  in  codified                                                               
language.  The  same  is  true  of  the  committee's  50  percent                                                               
renewable goal.                                                                                                                 
                                                                                                                                
4:15:31 PM                                                                                                                    
They also support the committee's  inclusion of SB 150, the EETF,                                                               
another of  the Alliance's priorities this  session. They support                                                               
the  potential   entrepreneurial  and   technological  innovation                                                               
created by  the fund. Alaska's unique  circumstances justify this                                                               
local research  and development effort  and they think it  can be                                                               
done effectively and efficiently.                                                                                               
                                                                                                                                
4:16:28 PM                                                                                                                    
SENATOR WAGONER asked if they favored the hydro projects.                                                                       
                                                                                                                                
MS. HIGGINS replied they are developing a hydro paper.                                                                          
                                                                                                                                
SENATOR WAGONER said that is a  tough task, and he thought it may                                                               
not even be possible.                                                                                                           
                                                                                                                                
CO-CHAIR WIELECHOWSKI asked if the  ACA had looked at Chakachamna                                                               
or Susitna.                                                                                                                     
                                                                                                                                
MS. HIGGINS said they didn't have an official position.                                                                         
                                                                                                                                
SENATOR HUGGINS  asked her what  their position was  on including                                                               
nuclear power in this package.                                                                                                  
                                                                                                                                
MS. HIGGINS  said she would have  to take that issue  back to her                                                               
members.                                                                                                                        
                                                                                                                                
CO-CHAIR WIELECHOWSKI said  he wanted to hear  their positions on                                                               
hydro and nuclear power.                                                                                                        
                                                                                                                                
4:18:55 PM                                                                                                                    
GWEN  HOLDMAN,  Director,  Alaska  Center for  Energy  and  Power                                                               
(ACEAP)  at UAF,  commended the  committee for  its hard  work on                                                               
this issue.  She said two  sections were most important  to their                                                               
interests: the first  is additional language in section  8 on the                                                               
Renewable  Energy Fund  that mandates  long-term data  collection                                                               
and  reporting   for  projects.  She   said  the  AEA   has  done                                                               
significant work upfront in  considering cost/benefit analysis of                                                               
projects  that   the  fund  considers,  but   following  up  with                                                               
technical  and   economic  performance  data  is   need  so  that                                                               
additional long-term funding can  be considered for more projects                                                               
that  make economic  sense.  She explained  that  ACEAP had  been                                                               
working with  the ISER  to collect  performance data  and install                                                               
capital cost  data for wind  projects in Alaska and  finally came                                                               
to the  conclusion that a lot  of the data they  were looking for                                                               
actually just  didn't exist because  no one is being  mandated to                                                               
collect it.                                                                                                                     
                                                                                                                                
4:21:14 PM                                                                                                                    
The  other high  priority section  she said  was section  11 that                                                               
forms  the Emerging  Energy Technologies  Grant Fund.  The Denali                                                               
Commission  has  already funded  an  initial  trial run  of  this                                                               
program and the  Alaska Center for Energy and  Power is currently                                                               
managing it. However,  the University would be happy  to defer to                                                               
the House version that designates  AEA as providing that service.                                                               
She explained  that the  University is  really interested  in the                                                               
information on how successful  the emerging technologies projects                                                               
are, so they  can use it to make decisions  on future funding and                                                               
conduct  research   in  partnership  with  private   entities  to                                                               
actually get some of the projects off the ground.                                                                               
                                                                                                                                
She  said the  Denali Commission  has  funded 11  projects for  a                                                               
total  of  $7.5  million.  A  higher  amount  might  be  also  be                                                               
appropriate  for this  program,  because it  has enough  projects                                                               
that provide  "real opportunities" and can  also leverage federal                                                               
dollars.                                                                                                                        
                                                                                                                                
4:23:49 PM                                                                                                                    
MS.  HOLDMAN said  an  example  of one  critical  project is  the                                                               
integration of  wind and diesel  systems to reduce the  amount of                                                               
diesel fuel  that is used.  They are  looking for ways  to modify                                                               
algorithms  on  Northwind 100  inverters  that  are part  of  the                                                               
turbines that have pretty commonly  been installed - primarily in                                                               
villages - under the Renewable Energy  Grant Fund to operate in a                                                               
diesel off mode. It is  not a commercial technology and therefore                                                               
not appropriate  for funding under  the Renewable Energy  Fund or                                                               
other existing  funding mechanisms.  This is critical  to Alaska,                                                               
but not to the national research agenda.                                                                                        
                                                                                                                                
4:24:45 PM                                                                                                                    
MS. HOLDMAN also  mentioned that ACEAP participated  in the House                                                               
Energy Task  Force and helped  develop policy language in  SB 220                                                               
that can  set that overall future  vision for the state  that can                                                               
provide focus for a lot of planning efforts.                                                                                    
                                                                                                                                
4:25:23 PM                                                                                                                    
DENALI DANIELS,  Sr. Energy  Program Manager,  Denali Commission,                                                               
said that as  a federal agency, the  Commission typically doesn't                                                               
weigh  in  on  legislation;  therefore   her  comments  would  be                                                               
informational   in  nature.   She  said   they  appreciated   the                                                               
invitation for input on establishing a statewide energy policy.                                                                 
                                                                                                                                
She said  the Commission has  a local board agency  that consists                                                               
of their  federal co-chair,  Joel Neimeyer,  and the  Governor or                                                               
his  appointee; currently  that spot  is filled  by OMB  director                                                               
Karen Rehfeld. Other  members include Julie Kitka  with AFN, John                                                               
MacKinnon,  Vince Beltrami,  Karen Purdue  at the  University and                                                               
Kathy Wasserman representing the Alaska Municipal League.                                                                       
                                                                                                                                
MS. DANIELS  explained that  the Commission  uses an  annual work                                                               
plan and FY10  is now in draft  form. The plan is  used for grant                                                               
making  and was  developed by  an advisory  committee within  the                                                               
Energy Program,  which is chaired  by Commissioner  MacKinnon and                                                               
has membership from Vince Beltrami  who serves as chairman of the                                                               
Renewable Energy Fund.                                                                                                          
                                                                                                                                
She  said  the  Denali  Commission  is 11  years  old  and  their                                                               
enabling  legislation  was  the  result  of  a  number  of  rural                                                               
communities  being out  of EPA  compliance with  their bulk  fuel                                                               
tank farms (and were at the risk  of being shut down by the Coast                                                               
Guard). Shortly  after, it was recognized  that energy efficiency                                                               
could  be significantly  improved by  power plant  replacement or                                                               
upgrades. So  the Bulk  Fuel Program and  the Rural  Power System                                                               
Upgrade  (RPSU) have  really been  "our meat  and potatoes,"  she                                                               
said, and continues as one the Commission's major priorities.                                                                   
                                                                                                                                
MS. DANIELS said  they have funded 100 bulk  fuel projects, seven                                                               
of  which  are  now  under  construction,  and  58  power  system                                                               
upgrades, 12  of which are  now under construction.  Funding over                                                               
the  last 11  years for  both  programs is  around $350  million.                                                               
Around 60  percent of that  is dedicated  to the State  of Alaska                                                               
through  the  AEA;  the  remaining balance  has  over  time  been                                                               
dedicated  to  Alaska  Village Electric  Cooperative  (AVEC)  and                                                               
other direct grants to entities  that for whatever reason are not                                                               
under the  NEA process.  She emphasized that  it is  important to                                                               
realize that  other entities  outside of  the state  program have                                                               
substantial  needs  and are  receiving  funding  from the  Denali                                                               
Commission also; these  needs might even be a  little bit greater                                                               
than what they are projecting.                                                                                                  
                                                                                                                                
MS. DANIELS  said the  Commission is in  discussions with  the US                                                               
Coast Guard  and the EPA  regarding the  remaining infrastructure                                                               
needs  and ways  to take  different approaches  in rural  Alaska.                                                               
When the Commission  began a lot of projects were  at the highest                                                               
need in terms of replacement  or upgrade in the higher performing                                                               
communities. But now, the most challenging communities are left.                                                                
                                                                                                                                
4:32:52 PM                                                                                                                    
MS.  DANIELS switched  to the  emerging  technology program.  She                                                               
explained  that the  Energy Policy  Act of  2005 established  new                                                               
authorities  for the  Denali Commission  - one  of which  put the                                                               
emphasis on alternative and  renewable energy; but appropriations                                                               
didn't accompany  that authority.  Yet the  commissioners elected                                                               
to dedicate funding  to a new program that didn't  have a name at                                                               
the time, but it was the first  step to what is now the Renewable                                                               
Energy Fund under AEA.                                                                                                          
                                                                                                                                
4:34:10 PM                                                                                                                    
She related that the Commission  dedicated $4 million to identify                                                               
a few  projects outside of that  and it has also  dedicated close                                                               
to $8 million  to emerging technologies over the  last two years.                                                               
In the  summer of  2009 the competitive  process involved  a two-                                                               
phase   solicitation.   Criteria   in   it   included   research,                                                               
development  or  demonstration  projects  in Alaska  that  had  a                                                               
reasonable expectation to become  commercially viable within five                                                               
years  or  less. These  pilot  projects  had to  be  replicatable                                                               
elsewhere in Alaska.                                                                                                            
                                                                                                                                
MS. DANIELS said a review panel  was formed and used to vet those                                                               
projects. ACEAP  did not serve on  the panel but did  observe the                                                               
face-to-face  presentations. She  emphasized that  ACEAP did  not                                                               
influence the  decision making process whatsoever.  She said they                                                               
received 50  proposals totaling $29 million  in funding requests.                                                               
They  narrowed the  proposals down  to 15;  9 were  selected from                                                               
those; 5 were  actually asked to reduce their budgets  or to come                                                               
up with additional match and all 5 were able to do so.                                                                          
                                                                                                                                
4:36:41 PM                                                                                                                    
She  stated that  the  conflicts  of interest  on  behalf of  the                                                               
committee members  were handled on a  case-by-case basis. Members                                                               
either  abstained from  deliberation or  in some  cases left  the                                                               
room depending on  the nature of the decision.  The conflicts are                                                               
documented  through  minutes.  In terms  of  administration,  she                                                               
said, the Denali Commission remains  neutral. It's important that                                                               
ACEAP  remains  involved from  a  data  collection and  reporting                                                               
standpoint, and she  reported that they were able  to keep within                                                               
the administrative cap of 5 percent.                                                                                            
                                                                                                                                
MS. DANIELS noted  that all stakeholders are  working together to                                                               
make  this   work;  the  Denali  Commission   has  $2.24  million                                                               
dedicated to the program in  its plan. However, the commissioners                                                               
want the state to see this  as a priority or they will reallocate                                                               
the funding to other programs.                                                                                                  
                                                                                                                                
4:38:44 PM                                                                                                                    
She  said that  bulk fuel  funding  is in  the work  plan in  the                                                               
amount of just under $9 million;  $10 million is marked for rural                                                               
power system  upgrades - for  a total  of $20 million  for energy                                                               
infrastructure in Alaska.                                                                                                       
                                                                                                                                
4:39:03 PM                                                                                                                    
SENATOR WAGONER asked what the  future for federal funding is for                                                               
the Denali Commission.                                                                                                          
                                                                                                                                
Ms. DANIELS replied that their  federal funding is declining. The                                                               
work plan  is based on the  most optimistic outcome for  FY10 and                                                               
their budget  is only  $60 million  - down  from $150  million in                                                               
2005  - and  it's  fair  to expect  that  to  continue. So,  it's                                                               
important for the state to be involved.                                                                                         
                                                                                                                                
SENATOR  WAGONER  asked if  they  had  considered setting  up  an                                                               
enterprise  fund for  the future  maintenance of  the rural  bulk                                                               
fuel facilities. So if money is  not available through a state or                                                               
federal grant the facility could still be maintained.                                                                           
                                                                                                                                
MS. DANIELS answered that a  business plan is required to receive                                                               
funding, and that includes a repair and renovation fund.                                                                        
                                                                                                                                
4:42:18 PM                                                                                                                    
BRIAN  HIRSCH,  National   Renewable  Energy  Laboratory  (NREL),                                                               
reviewed his  professional background  and credentials in  the US                                                               
and  in  Alaska.  He  said  that NREL  is  the  nation's  premier                                                               
government-owned   laboratory  focused   exclusively  on   energy                                                               
efficiency  and renewable  energy and  it is  based in  Colorado.                                                               
Traditionally, it  has been  research based  and focused  on high                                                               
tech  solutions. For  instance, they  are involved  in developing                                                               
sophisticated coatings for solar  panels that will ideally become                                                               
even more cost effective and produce lower-cost power.                                                                          
                                                                                                                                
He   said   those  inventions   have   contributed   to  the   US                                                               
technological lead  over the years,  but over the last  decade or                                                               
so these kinds of solutions have  lacked focus. Now NREL and much                                                               
of  the Department  of Energy  have refocused  on what  is called                                                               
"Integrated  Deployment,"  a  fancy  phrase  for  "boots  on  the                                                               
ground" to move projects forward.                                                                                               
                                                                                                                                
MR.  HIRSCH  said  that typically  NREL  doesn't  have  satellite                                                               
offices like  it does  in Alaska.  Their Antarctica  operation is                                                               
not  a  full office,  but  its  technology solutions  program  is                                                               
focused on some of the same  challenges Alaska faces. But in many                                                               
ways  Alaska  is  already  a   world  leader  in  some  of  these                                                               
technologies  - in  particular,  activities  in high  penetration                                                               
wind/diesel  systems,  combined  heat   and  power  for  biomass,                                                               
enhanced geothermal  energy storage  of various types,  tidal and                                                               
hydro  kinetic   energy  technologies,  and  wringing   the  last                                                               
possible bit of energy from diesel fuel.                                                                                        
                                                                                                                                
4:48:59 PM                                                                                                                    
He drew  their attention to  a recent federal  grant solicitation                                                               
that provided over for $1  billion for smart grid technologies to                                                               
49 states. The only state that  did not receive money was Alaska.                                                               
The point  here is not  that anybody was  out to get  Alaska, but                                                               
that  the challenges  are so  different here  that Alaska  didn't                                                               
really fit their grant criteria  and got overlooked. That led him                                                               
to believe  that Alaska needs  to take  care of itself  and solve                                                               
its own problems.                                                                                                               
                                                                                                                                
MR. HIRSCH  said at the national  level a model for  the Emerging                                                               
Energy Technologies  Fund was implemented in  February; some know                                                               
it  as the  Stimulus Act  or the  American Recovery  Reinvestment                                                               
Act. In  it the  "Advanced Research Project  Agency -  Energy Act                                                               
(ARPA-E)"  was modeled  after Department  of Defense  legislation                                                               
that funded  very experimental technologies  that had  high risk,                                                               
but  very  high  potential  yields  if  they  were  successful  -                                                               
recognizing that  these projects  wouldn't immediately  lower the                                                               
cost of energy in rural Alaska.  Alaska is as extreme as anywhere                                                               
in  the world  with  its tremendous  renewable  resources in  the                                                               
summer time,  but a  lack of  them in the  winter. So  storage is                                                               
huge for  either renewable or  non-renewable energy  sources, and                                                               
these   are  the   kinds  of   opportunities  that   an  Emerging                                                               
Technologies  Fund would  be addressing.  The ARPA-E  legislation                                                               
has provided $450  million at the national level to  look at some                                                               
of   these   high-risk    but   high-potential-yield   technology                                                               
solutions.                                                                                                                      
                                                                                                                                
SENATOR WAGONER asked how the Ruby project worked this summer.                                                                  
                                                                                                                                
MR. HIRSCH  replied that it  worked well  for learning a  lot; it                                                               
had some  basic technical  problems that had  nothing to  do with                                                               
the turbine itself.  The underwater power cable  that brought the                                                               
power to  shore had a short  and didn't produce a  lot of energy,                                                               
but  they learned  a lot  about impacts  to fisheries  and debris                                                               
floating down  the river  and how to  better integrate  the power                                                               
with the existing local diesel grid.                                                                                            
                                                                                                                                
4:53:42 PM                                                                                                                    
SENATOR HUGGINS  commented that this  bill has great  elements in                                                               
it like  section 19 on  page 13  that talks about  the transition                                                               
fuel, natural  gas, and storage  is a major component  of natural                                                               
gas. So, he encouraged people to keep  an eye on that ball in the                                                               
near  and  mid-term, because  no  matter  how  much we  wish  for                                                               
renewables and wish for them soon, gas is what works now.                                                                       
                                                                                                                                
4:55:22 PM                                                                                                                    
CO-CHAIR  WIELECHOWSKI thanked  everyone for  their comments  and                                                               
finding  no  further  business  to  come  before  the  committee,                                                               
adjourned the meeting at 4:55 p.m.                                                                                              
                                                                                                                                

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