Legislature(2019 - 2020)FBX LIO Conf Rm
08/14/2020 09:00 AM House ENERGY
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| Audio | Topic |
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| Presentation(s): Sb 123 Implementation by the Rca | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
Fairbanks, Alaska
August 14, 2020
9:00 a.m.
MEMBERS PRESENT
Representative Grier Hopkins, Chair
MEMBERS ABSENT
Representative Ivy Spohnholz, Vice Chair
Representative John Lincoln
Representative Zack Fields
Representative Tiffany Zulkosky
Representative George Rauscher
Representative Mike Prax
OTHER LEGISLATORS PRESENT
Senator Elvi Gray-Jackson (via teleconference)
Representative Chris Tuck (via teleconference)
COMMITTEE CALENDAR
PRESENTATION(S): SB 123 IMPLEMENTATION BY THE RCA
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
STEVE COLT, Ph.D., Research Professor of Energy Economics and
Policy
Alaska Center for Energy and Power (ACEP)
University of Alaska Fairbanks (UAF)
Fairbanks, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation titled
"SB 123 Opportunities for Alaska," updated for 8/14/20.
SENATOR CATHY GIESSEL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Offered comments regarding the presentation
provided by Dr. Steve Colt.
MICHAEL HOGAN, Senior Advisor
Regulatory Assistance Project (RAP)
Sunapee, New Hampshire
POSITION STATEMENT: Provided a PowerPoint presentation titled
"Reliability in Wholesale Power Systems," dated 8/7/20.
DAVID FARNSWORTH, Principal
Regulatory Assistance Project (RAP)
Montpelier, Vermont
POSITION STATEMENT: Provided a PowerPoint presentation titled
"Integrated Resource Planning: An Introduction," dated 8/14/20.
ACTION NARRATIVE
9:00:17 AM
CHAIR GRIER HOPKINS called the House Special Committee on Energy
meeting back to order at 9:00 a.m. [The meeting was recessed on
8/7/20]. Representative Hopkins was present at the call back to
order. Other legislators present were Representative Tuck and
Senator Gray-Jackson.
^PRESENTATION(S): SB 123 Implementation by the RCA
PRESENTATION(S): SB 123 Implementation by the RCA
9:02:21 AM
CHAIR HOPKINS announced that the only order of business would be
the continuation of presentations on implementation of SB 123 by
the Regulatory Commission of Alaska (RCA).
CHAIR HOPKINS said today's presenters would be talking about
integrated resource planning (IRP) and reliability standards.
He pointed out that the presentations are for informational
purposes only but may be helpful to any committee member wishing
to submit comments to the RCA as it continues its implementation
process of SB 123.
9:03:50 AM
CHAIR HOPKINS introduced the first witness, Dr. Steve Colt of
the Alaska Center for Energy and Power (ACEP). He related that
Dr. Colt is a research professor of energy, economics, and
policy at the University of Alaska Fairbanks. Dr. Colt is
working primarily on the roles of prices, incentives, and energy
policy in supporting and accelerating a shift toward sustainable
and resilient micro-grid and energy systems across Alaska.
Prior to joining ACEP, Dr. Colt spent 34 years as an economist
at the Institute of Social and Economic Research (ISER) at the
University of Alaska Anchorage, where he served as director from
2007-2010. Dr. Colt has also worked for the public utility
commissions in Maine and California.
9:04:34 AM
STEVE COLT, Ph.D., Research Professor of Energy Economics and
Policy, Alaska Center for Energy and Power (ACEP), University of
Alaska Fairbanks (UAF), provided a PowerPoint presentation
titled "SB 123 Opportunities for Alaska," dated 8/14/20. Dr.
Colt showed slide 2 and said ACEP is a team of more than 30
people that includes undergraduate and graduate students on
several campuses throughout the University of Alaska (UA)
system. He displayed slide 3 and noted that ACEP also has a
tremendous network of partners in that ACEP likes to know what
it doesn't know and brings in people who do know what ACEP
doesn't know. In that spirit, ACEP has reached out to the
Regulatory Assistance Project (RAP).
DR. COLT explained that slide 4 sets the table for RAP with
four questions that tee up the issues that he thinks the RCA
should be considering as it writes the rules for IRPs and
considers reliability standards. He moved to slide 5 and said
he looks forward to hearing the wisdom from RAP regarding the
question, "How should Alaska's reliability standards address
resilience?"
9:06:55 AMAM
DR. COLT turned to slide 6, "What should RCA consider when
setting rules for IRP?" He explained he has teed up three
questions in relation to this. He brought attention to slide 7
and his first question, "What is a resource?" He said that in
the Twentieth Century the IRP process was very much about
generation. It brought in new kinds of resources to the mix,
getting to a more diverse set of generation resources, which did
happen in Alaska.
DR. COLT moved to slide 8 and said the Twenty-first Century IRP
process has evolved to specifically include transmission,
distribution, and storage as a resource. He turned to slide 9
and stated that flexible loads, such as electric vehicles and
heat pumps, have now taken center stage. Flexible loads are
coming on strong because they can serve as resources that
regulate renewables, can feed power back to the grid, and can be
somewhat graceful about when they draw power from the generation
resources. He emphasized that to be used as resources flexible
loads must be networked and must be somehow controllable by the
system. The control doesn't have to be ironclad and direct, he
continued, it could be indirect using price signals and even
just the provision of information to those who are on the grid.
He displayed slide 10 and said the IRP process should emphasize
the interconnection between the resources the network.
DR. COLT continued to slide 11 and stated that people are the
most important resource that can be brought to bear in this
process. He recounted that he was asked last week to elaborate
on this assertion and qualified that his statements today in
this regard are his own opinion. He said people can bear risk
and they have always made decisions that create and shape loads.
People can choose to consume electricity and they can also
choose to produce electricity. People can choose to supply
investment capital, which has always been a scarce resource for
the Railbelt grid. People can also help each other get through
emergencies and ride out rough spots. People are a critical
resource in any integrated resource planning process.
9:10:54 AM
DR. COLT moved to slide 12 and discussed his second question,
"How can we integrate resources?" He said the Twentieth Century
IRP was focused on a distinction that economists like to make
between quantities and prices and was focused on quantities:
What to build? When? Where? How to finance it? He turned to
slide 13 and pointed out that to make progress, great attention
must be paid to the prices side of prices versus quantities.
There must be focus on incentives, markets, and mechanisms, he
said. For example, Dominion Energy South Carolina has filed a
proposal with that state's Public Service Commission for a
tariff that will apply to storage-plus-renewables, with an eye
toward better integrating intermittent solar into its system.
DR. COLT drew attention to slides 14-15 and discussed his third
question, "What is Planning?" He submitted that in the
Twentieth Century, and even into the Twenty-first Century, what
was ended up with were plans. An Alaska commissioner, he
related, referred to one recent plan as "a real good
doorstopper." Planning was mostly about plans, but things must
get beyond that mentality. Shared data is a critical part of
good planning, he advised, and he hopes the RCA will emphasize
some means for having platforms where everyone can participate
using a common shared set of data.
DR. COLT displayed slide 16 and concluded his presentation. He
noted that RAP professional David Farnsworth was a lead author
of "Sustainable Energy Solutions for Rural Alaska," an excellent
and current summary of the challenges faced off the road system.
He added that Mr. Farnsworth and his colleague Mark LeBel
recently gave talks at the Virtual Alaska Electric Vehicle
Workshop co-hosted by ACEP and the U.S. Arctic Research
Commission, a workshop that is available on the ACEP website.
9:15:24 AM
CHAIR HOPKINS recalled Dr. Colt's statement regarding load
management and the importance that it includes informational
provisions to different utilities and the public. He requested
Dr. Colt elaborate on how that works with IRP and what type of
information should be provided from this planning.
DR. COLT replied that there are two levels at which this could
occur. First, to have good integrated resource planning there
must be common and widely available information about the
system, how it works, and what the possibilities are. The big
power markets in the Lower 48 have beautiful data platforms that
make it transparent to everybody what's going on in the system
and what the opportunities are for joining the system. But
Alaska doesn't have well-developed wholesale markets like the
Lower 48, so Alaska must put that transparency and openness to
collaboration into its planning process. Second, it's possible
to manage the loads in Alaska without necessarily having to
control them with an iron fist. It's possible to get people
into the process just by sharing information with them real
time, such as providing messaging about when a big peak load is
coming, or when the grid might be having a problem, or when it
is particularly good to charge an electric vehicle (EV) in
combination with an incentive to make it worth people's while to
pay attention and follow the information.
9:18:06 AM
CHAIR HOPKINS surmised that the [Dominion Energy] South Carolina
process is a living document that the company is updating.
DR. COLT clarified that the South Carolina example is just a
run-of-the-mill/business-as-usual tariff filing as opposed to
being part of an IRP. The IRP, he said, needs to line out,
articulate, and put in place the openness and the willingness of
the ongoing ratemaking and regulation process to be receptive to
proposals like this. It's unknown what the technologies are
going to be in 10 or 20 years, so what the IRP can do is make
sure that the doors are open for proposals like this one and
that they won't be precluded by some kind of exclusive plan that
isn't going to be open to new proposals like this.
9:19:53 AM
SENATOR GIESSEL commented that Dr. Colt made an important
statement when he referred to a plan being a good doorstop. She
remarked that this calls to mind General Eisenhower's statement
that plans are worthless, but planning is everything. She
stated her appreciation for Dr. Colt's emphasis on the
importance of a dynamic process of planning and remarked that
energy innovations are happening so rapidly and beyond
expectations that [Alaska] cannot get married to a static
written-in-cement plan.
CHAIR HOPKINS agreed it is critical for Alaska to have the
flexibility to allow for the ever-changing world and technology
that is yet unknown.
9:21:22 AM
CHAIR HOPKINS introduced the next presenter, Michael Hogan of
the Regulatory Assistance Project (RAP). He explained that RAP
is an independent, nonpartisan, nongovernmental organization
composed of former utility and regulators, industry executives,
system operators, and other officials with extensive experience
in the power sector. The RAP team focuses on the world's four
largest power markets responsible for half of the global power
generation - China, Europe, India, and the U.S.
CHAIR HOPKINS related that since 2010 Mr. Hogan has been a
senior advisor to RAP on the power industry's decarbonization in
the areas of wholesale market design, demand response, and
system integration of intermittent supply. Mr. Hogan previously
directed the European Climate Foundation's landmark roadmap 2050
decarbonization study. During 18 years in the private power
industry Mr. Hogan was responsible for development, financing,
acquisition, and operations for tens of thousands of megawatts
of generation from independent powerplants on four continents.
Mr. Hogan began his career in power systems marketing with
General Electric and earned degrees in business, engineering,
and management from Harvard, Massachusetts Institute of
Technology, and University of Notre Dame.
CHAIR HOPKINS stated Mr. Hogan would provide a presentation on
wholesale power system reliability, metrics that are appropriate
for assessing system readiness, and mechanisms for ensuring
delivery at lowest reasonable cost. He said Mr. Hogan would
also provide a brief description of best practices in the use of
integrated resource planning (IRP) to assist in delivering
reliability with integration of variable renewables.
9:23:07 AM
MICHAEL HOGAN, Senior Advisor, Regulatory Assistance Project
(RAP), provided a PowerPoint presentation, titled "Reliability
in Wholesale Power Systems," dated 8/7/20. He displayed slide 2
and addressed current best practice and power system
reliability. He said reliability is the idea that the value of
continuous good supply of electricity to various consumer
segments can be quantified, and that the loss of value or
societal welfare through involuntary interruption of that supply
can likewise be quantified, and the design, construction, and
operation of modern power systems should be calibrated to a
standard that is consistent with that value.
MR. HOGAN stated that different metrics have been developed to
assess the reliability of different parts of the system. For
the generation sector there are determinant target reserve
margins and probabilistic loss of (indisc.) energy metrics. For
delivered reliability (indisc.) or system average interruption
duration index and system average interruption frequency index
to the duration and frequency of customer service interruptions.
Less common but increasingly important are attempts to recap the
metrics for different layers of the power system in a common
context so that the tidal wave of new investment needed to
transport an energy system can be properly prioritized based on
value to consumers. Underlying every recognized reliability
metric is that while reliability is a paramount objective,
consumers are best served by balancing measures to add an
increment for reliability against the cost of those measures to
consumers. It is inescapably true, and always has been, that
there is some level of expected deliberate load curtailment due
to the feature of a reliable prudently managed power system, not
a failure. The details matter, he continued. One should never
(indisc.) short-lived, controlled power interruptions that
result from a rare shortfall in generating capacity or the
uncontrolled but localized interruption that is typically caused
by distribution system problems, such as a squirrel in a
transformer, with cascading system collapse and system-wide
blackouts that are almost exclusively the result of transition
system failures.
MR. HOGAN pointed out that electric system planning today faces
a lot of uncertainty from rapidly evolving technology like
transportation and heating that hasn't been seen since the days
when Edison and Westinghouse were fighting it out over AC versus
DC transmission. The good news is that investment cycles today
are far shorter than they were 30 years ago. The leading
generation of technology has become more modular and most
leading technologies can be added quickly and in smaller
increments to meet need. He stated that never in his career has
it been less clear what technology options will be available in
10 years from now or what demand for energy services due to
technology options will need to be met. But much can be done to
ensure there are ways to adapt to put the interests of consumers
first. It's never been more important to balance the need to
ensure readiness against the need to protect consumers from
being saddled with decades of paying for wasted or imprudent
investments. In this new reality, best practice is to shift
focus from "how much" to a focus on "how flexible" (indisc.).
The capacity of the system still matters, but the system's
capabilities matter more. The more operationally adaptable the
resource portfolio the less capacity will be required.
9:28:20 AM
MR. HOGAN stressed the importance that "reliability need no
longer be a one-way street, nor can we afford for it to be so."
He said a significant share of electricity demand has always
been controllable to some extent even if there was historically
little value in exercising that controllability. But, as the
resource portfolio shifts and as uses like transportation and
heating proceed to be electrified, exploiting the potential and
controllable demand will become a critical success factor.
Planning, regulatory processes, and market arrangements will
need to embrace this potential in ways that few have yet
contemplated, right down to the question of integrated retail
rate designs.
MR. HOGAN moved to slide 3 depicting a graph dealing with
standards for resource adequacy. He explained it's a classic
graph of the relationship between a common reliability metric
used to determine the quantity of investment in generating
capacity. The X-axis is the loss of load expectation or loss of
load hours, and the Y-axis is what the chosen standard implies
about the value to consumers of avoiding service interruptions.
MR. HOGAN said the graph offers two key insights. First, as
more generating capacity is added, lowering the expected average
number of hours during which the amount of available generating
capacity is expected to fall short of demand, beyond a certain
point the implied value of adding that extra megawatt of
generation begins to rise exponentially. In other words, the
value of adding a megawatt of generation to go from two hours
per year to one hour per year needs to be much, much higher than
it would need to be to go from six hours per year to five hours
per year in order to justify adding that megawatt capacity.
Second, the graph illustrates the chasm that exists between the
standard [green line] reflecting what dozens of economic studies
over the years have found to be the upper end of the value that
residential and small commercial customers place on avoiding a
service interruption, which is about $25,000 per megawatt hour.
The value implied by the conventional standard employed by
operators like the Southwest Power Pool have one day in ten
years [gold line], which equates to about $50,000 per megawatt
hour. The value assumed by the standard employed by operators
like the PJM system operator has one event in ten years [red
line], which can amount to $250,000 per megawatt or more, which
is 25,000 cents a kilowatt hour. He said he will leave it to
legislative members to think about what they might happily do
for a tiny fraction of 25,000 cents per kilowatt hour in order
to help keep their and everyone else's lights on for the next
couple of hours.
9:31:38 AM
MR. HOGAN turned to slide 4 and said the disconnect illustrated
in slide 3 comes into sharper relief when these commonly cited
generation resource adequacy standards are presented alongside,
and on the same terms, as the delivered standard performance
consumers have come to expect. He explained the left side of
the graph presents the statistics [for Western Europe] for what
is heard about how much service disruption the average consumer
experiences from all causes the system average interruption
duration index (SAIDI). The numbers for the U.S. are about
twice as high - the average U.S. customer experiences about two
hours per year cumulative service interruptions from various
causes. He said the right side of the graph is the resource
adequacy standard typically adopted in Western Europe, which is
less than (indisc.) system operators 3 hours per year compared
to 2.4 hours or less per year. He stated that the two standards
of performance reflect wildly different conceptions of what
reliability is worth to consumers.
MR. HOGAN specified slide 5 is another way of looking at it but
using U.S. data. He said interruptions due to a shortfall in
available generating capacity overall represent less that .009
percent of the service interruption hours consumers experience.
Even after excluding unusual [weather] events, 99.773 percent of
customer service interruption hours are the result of
transmission and distribution problems. The bottom line, he
advised, is that nearly everywhere in the developed world today
investment in generating capacity is vastly overvalued, and
investment in transmission, distribution, and non-(indisc.)
alternatives, such as demand response and energy efficiency as
options for meeting consumers demand for reliability, is
undervalued. This tendency is especially strong in (indisc.)
planning processes and some extra caution is warranted. He
qualified that he isn't an expert on Alaska or the Railbelt in
particular but said that a quick look at the characteristics of
the Railbelt system suggests to him that if the question is what
the highest priority should be for improving system reliability,
then adding large central station generating capacity that must
be connected to distant load centers by high voltage
transmission lines strung across a challenging landscape in a
harsh environment may not be the first choice. Higher
priorities might include achieving a coordinated economic
dispatch with system balancing resources, improving the ability
to move power around the system from the existing generation
portfolio, incentivizing the participation of large, controlled
loads in line with the value of doing so, and otherwise
improving the ability of the various load centers to ride
through reliability events occurring elsewhere in the system.
9:34:50 AM
MR. HOGAN explained slide 6 is a conceptual representation that
the Irish system operator EirGrid uses to portray the challenges
facing the system planners in a run up to 2050, in an islanded
system with a peak load of about 12.5 gigawatts and with the
share of energy coming from wind production reaching as high as
65 percent of energy into the system in some hours. While the
system is expected to become increasingly capital intensive, as
seen by the bar graph on the left, the righthand columns
indicate that the reliability challenge going forward will be
far less a question of how much generated capacity is on the
system and far more a question of the range and scope of the
operational capabilities of the system's resources to provide
system services both on the supply side and on the demand side.
MR. HOGAN stated that slide 7 presents a similar trend that is
emerging in the Ercot system in Texas, which is another islanded
system with very high penetration from (indisc.) resources and
at the highest load growth of any region in the U.S. He said
Ercot has consistently met an extremely stringent resource
adequacy standard while maintaining a reserve margin of about 11
percent, which is less than one-third as large as the 35 percent
reserve margin on the much larger and much better interconnected
PJM system, and PJM claims to observe the identical resource
adequacy standard that Ercot asserts. Ercot's focus has shifted
strongly to 1) increasing the amount and range of flexibility
services available to system operators as illustrated in the
slide; 2) strengthening the transition network making the
changing resource portfolio to their major load centers; and 3)
developing new ways to tap into the inherent flexibility of many
of their customers largest electricity loads.
9:37:03 AM
MR. HOGAN displayed slide 8 and said that the value of equitably
incentivizing and enabling the inherent controllability of many
electricity loads, especially new ones like electric vehicle
charging, is one that is still poorly understood and
[under]appreciated by too many energy regulators and policy
makers. He noted the graphic is from one of the leading
decarbonization studies and depicts the typical summer week in a
future system with about 35 percent of annual energy coming from
intermittent resources. The dotted black line on the graph
shows the historical load profile in the system over the course
of a week in the summer, while the solid black line shows the
load profile after shifting only 10 percent of the daily energy
consumption within the day from when the supply is tight to when
it is plentiful. The difference in investment and operating
costs between the two scenarios is dramatic. As much as 40
percent less investment is required for the scenario where
policy and market design enable the deployment of a modest share
of the inherent flexibility in electrical demand. In the
interest of meeting consumers' demand for cost-effective
reliability, policy, and regulation, including the all-important
issue of retail tariff design, "they must adapt themselves to
move from a world where we forecasted load and scheduled
generation, to one where increasingly we are going to forecast
generation and schedule load." An essential enabler for this
will be the ability of third-party aggregators to enter the
market with innovative new products and services for a wide
range of consumers.
MR. HOGAN moved to slide 9 and advised that traditional avenues
for the participation of load and maintaining system
reliability, to the extent that they existed at all, are
woefully inadequate to meet this challenge. He said the graphic
is from a massive study of the range of low cost, easily
deployed options for electricity demands in California to adapt
and to respond to para-market conditions. The red boxes depict
the scope of this potential, traditionally captured by
traditional (indisc.) demand response, scheduled peak shedding
and under-frequency load shedding programs. Both were based on
inconveniencing the relevant consumers and, as a result, were
tightly limited in how and how often they could be used. Demand
flexibility that meets the needs of the previous slide can no
longer be about paying a few consumers to be inconvenienced once
in a blue moon. It will be about delivering the reliable energy
services consumers want day to day in ways that are easy to
understand, convenient, and beneficial to the family budget. In
conclusion, he stated that automation and ready access for
third-party service providers will certainly be two, among many,
critical success factors in achieving this.
9:41:00 AM
CHAIR HOPKINS returned attention to slide 6 and requested the
definitions of capacity, ramping, stability, reactive, and
reserve.
MR. HOGAN advised that utility service terminology varies
significantly from one system to another. He defined capacity
as the instantaneous capability of a resource to feed power into
the system if required. He specified that ramping is an old
concept that has acquired new importance with the growing
penetration of intermittent resources. Ramping refers to the
ability of a resource to change its output over different time
scales in order to follow changes in demand on the system.
Typically, ramping refers to longer time scales of, say, 30
minutes to several hours as opposed to the much shorter time
scale of changing the output that is required to do things like
manage frequency (indisc.) system. Ramping will be acquiring
more and more importance as more and more intermittent resources
come on to the system.
MR. HOGAN pointed out that stability tends to refer to a more
arcane service but one that is going to become extremely
important. On a system that relies on a lot of very large, very
heavy spinning machineries, he explained, an upset such as a
transmission line going off or a powerplant tripping offline can
cause instantaneous disturbance in system frequency. If the
system has a lot of inertia it tends to resist for some period,
for seconds or even approximately a minute, changes in frequency
until other resources can be brought into play to bring the
frequency back to 60 hertz, or in the case of Europe 50 hertz.
As these large heavy spinning machines are replaced with
asynchronous connective resources like wind power, the level of
inertia and the system's inherent resistance to changes in
frequency tends to decline. So, there is going to be growing
demand for a way to replace the role that big heavy spinning
pieces of machinery used to play in the system, and there are
several options for doing that. The Irish system operator has
been on the forefront of trying to develop those because with 65
percent or more of energy coming from asynchronous resources,
they have begun to confront the question of how to continue to
operate the system in a stable fashion from a frequency
perspective. The Ercot system in Texas is approaching a similar
frontier.
MR. HOGAN defined reactive power on the system as the amount of
the total alternating current electricity that is available to
do work on the system. If the three phases of built-in current
get out of sync with each other for various reasons, then the
effectiveness of some of the power that is generated at the
powerplant is lost before it gets to end users. So, reactive
power services are different ways that the system compensates
for problems, reductions, in reactive power. On a system with
more and more asynchronous resources connected there is likely
to be a greater demand for reactive power services.
MR. HOGAN specified that conventional reserves are reserves that
the system operator maintains to provide frequency regulation as
quickly as possible if there is an upset in the system. Given
the amount of inertia of the system, one wants to bring in
reserves standing by that can respond in milliseconds to seconds
to a few minutes to bring the frequency back up to 50 or 60
hertz. Secondary, or operating, reserves are reserves that can
be available to respond very quickly to boost frequency but can
only operate for a few minutes. Therefore, other kinds of
reserves are needed that can be brought in to replace those and
can operate longer - some can operate for as long 15-30 minutes.
Then, those must be replaced by tertiary reserves, which are
reserves that can be brought in and operate on a steady state to
bring the system back into stable operation. All of these are
different kinds of services. As more and more intermittent
resources become part of the system, it is going to become
increasingly important that the resources that are available can
provide some or all these services regardless of the capacity of
resources. The more capacity that lacks these capabilities the
more expensive it's going to become to operate the system
reliably.
9:48:49 AM
CHAIR HOPKINS introduced the next presenter, David Farnsworth of
the Regulatory Assistance Project. He said Mr. Farnsworth
advises regulators and advocates on clean energy and
environmental policy and regulation. Prior to working with RAP,
Mr. Farnsworth served as hearing officer and staff attorney for
the Vermont Public Service Board from 1995-2008. He has also
worked internationally as a regulatory consultant providing
training on legal and policy issues to relevant ministries and
regulatory commissions in Slovakia, Romania, Mozambique,
Swaziland, and Tanzania. Mr. Farnsworth earned degrees from
Colby College and the Vermont Law School.
9:49:37 AM
DAVID FARNSWORTH, Principal, Regulatory Assistance Project
(RAP), provided a PowerPoint presentation, titled "Integrated
Resource Planning: An Introduction," dated 8/14/20. He turned
to slide 1 and said his goal for this presentation is to provide
committee members with enough understanding of integrated
resource planning (IRP) so members know where they are in
subsequent IRP discussions and so members can ask where the
discussion is going and have a sense of where that is. He
displayed slide 2 and noted that IRP is very complex. He then
showed slide 3 and said his goal isn't that members will
understand everything there is to know about this topic, but to
provide a general outline and sense of the big picture.
MR. FARNSWORTH moved to slide 4 and explained the origin of IRP.
He said several states started IRP processes and adopted laws
requiring this because they were experiencing backlashes from
large utility projects that for various reasons weren't working
out as had been planned. Most important, states realized they
didn't have the information, and the public didn't have the
information, to make decisions when expectations about the
future and how things were supposed to happen weren't really
paying off. A plan helps in understanding where things are and
what needs to be done.
MR. FARNSWORTH showed slide 5 and related that about 30 states
have some form of regular integrated planning on the books. He
said it's important to notice that integrated planning also
happens in other contexts and can provide similar benefits.
MR. FARNSWORTH turned to slide 6 and pointed out that utility
regulators have a very complex job. Historically, he explained,
traditional regulatory goals meant ensuring safety, reliability,
and rates that were just, reasonable, and nondiscriminatory.
But today their workload and the things they need to know and
stay on top of have increased significantly, such as new
technologies with different capabilities. Resources are not
just a supply of energy from a powerplant. Resources can be
many things: the ability to interconnect one's micro-grid; the
accessibility of good, easy charging; the ability to ensure that
the quality of the power on a system is what is needed; the
creation of new technologies; different capabilities; and
building and transportation electrification that involves both
thermal and electric storage. Renewable energy is becoming less
expensive and competitive in many ways with traditional
resources. Their capabilities are slightly different, but the
pricing is going to result in them putting a lot of pressure on
traditional resources. There are more efficient technologies.
For example, natural gas plants are way more efficient today
than they were in, say, 1990. There is the ability to manage
load as a result due to the flexibility of some of these
resources, the digital capabilities to manage power grids, and
the ability to coordinate supply and consumer demand for that on
these grids. Add in environmental compliance costs: Will there
be climate change legislation at some point that will require
fossil fuel-fired electricity to pay more to account for the
effects it's having on the environment? Air quality compliance
costs as well? Mr. Farnsworth advised that when the complexity
and inter-relatedness of all these factors are added up, it
makes comprehensive planning for utility regulators quite a
challenge. That's partially why integrated resource planning is
being talked about today.
9:55:22 AM
MR. FARNSWORTH drew attention to slide 7 and specified that IRP
is a plan to meet the public's need for energy services. It
looks at supply-side and demand-side resources, he explained,
and it does not arbitrarily favor one over the other but
considers the capabilities of each. It considers various likely
futures for meeting the public's need for energy. If an
integrated resource plan were a set of headlights, then they
would shine 20 years down the road - it looks at the very long
term.
MR. FARNSWORTH displayed slide 8 and reiterated that his goal
for committee members is to understand the structure so members
know where they are and where they are going.
MR. FARNSWORTH said he put together the graphic on slide 9 using
information from Portland General Electric. He explained that
reading from left to right and looking at the green arrows gives
a sense of the steps in the IRP process: identify needs,
develop portfolios, [optimize and evaluate options, and
preferred portfolio]. He further explained that the rectangles
above and below generally suggest some of the major topics that
feed into this process. As indicated by the red circle, an IRP
puts together and analyzes a portfolio of resources. He said
the company, the regulator, and the public look at this and ask,
"What are we going to need in the way of resources over the next
20 years?" What needs to be considered includes the load - what
the utility will have to provide - what resources are already
available on both the supply and demand side, and what will be
the future resource options.
MR. FARNSWORTH addressed slide 10 [mistakenly numbered as 9].
He explained that each option - whether it is energy efficiency,
demand response, renewable energy, a powerplant upgrade, or a
brand new powerplant is analyzed with respect to meeting
reliability needs over the horizon of the plan and doing that in
a least-cost manner.
9:57:52 AM
MR. FARNSWORTH moved to slide 11 and specified that some new
technologies will work like load in that they will be drawing
energy off the system. Some new technologies will be able to
work like supply. For example, electric vehicles are electric
storage or batteries on wheels, and electric water heaters are
thermal energy stored in batteries, so to speak. An IRP inquiry
asks questions like, "Will electrification double utility sales
by 2050?" He urged members to look at the paper written by The
Brattle Group.
MR. FARNSWORTH brought attention to the graphic on slide 12 and
stated that as things move along beyond developing portfolios,
the process comes to optimization, the comparing of different
collections of resources and their suitability under different
future scenarios. He said this isn't a matter of simply looking
at one or more crystal balls but an effort to tease out probable
futures. All sorts of obvious questions get asked as well as
other questions that may not be so obvious. Will there continue
to be wars in the Mideast that affect world energy prices? Will
there be more than one war? Will world natural gas prices go up
or will they go down? What effects will that have on liquefied
natural gas (LNG) export and import? Will battery technology
costs continue to drop, making electric vehicles and other
resources more possible? Will renewable energy costs continue
to drop? Questions like these get asked and answered as the
process tries to optimize and evaluate options. The process
tries to winnow out scenarios that are determined to be "a
little bit far out" and focus on more plausible future scenarios
and to determine what sort of resource choices should be made
given those future scenarios.
10:00:30 AM
MR. FARNSWORTH turned to slide 13 and specified that modeling
helps this work by creating a sense of possible ways for a
utility to respond to these possible futures.
MR. FARNSWORTH showed slide 14 and discussed the important topic
of risk. Risk can mean many things, he noted, such as financial
risk, regulatory risk, risks associated with construction costs,
and risks associated with weather. As an IRP looks at potential
futures, it helps to understand the strengths and weaknesses of
various approaches and responses to different futures, and one
thing it does is to help sort out risk. It gathers information
about risk and characterizes it in as useful a way as possible
to inform decision-making.
MR. FARNSWORTH moved to slide 15 and pointed out the importance
of the public being part of the effort at each step of the way.
He said this goes to the question that was asked of Dr. Colt
about access to information. He advised that incorporating
stakeholder point of view means that the state's energy future
is considered through the eyes of citizens, through industry,
and through local and tribal government, as well as other
members of society. Practices may vary as to how much the
public participates or at what point the public participates,
but IRP is generally understood as a public process that goes to
informing the public's need for energy services. In Colorado,
for instance, there is a great deal of public participation and
engagement in the first two or three of the arrows [shown on the
graphic] and less public engagement later. He continued to
slide 16 and pointed out that regardless of whether the public
is meeting in a large group or virtually, public participation
is important to educate people and to build constituencies and
support for a cohesive vision of the state's energy future.
MR. FARNSWORTH brought attention to the graphic on slide 17 and
explained that due to space constraints, the action plan is
shown in the blue box rather than in a green arrow. He moved to
slide 18 and said he is emphasizing this because the bulk of the
work that is done on an IRP is looking at 20-plus year horizons
for planning, but still every good IRP has a vision for the next
two to five years and that is called the action plan. The
action plan answers the question of what things need to happen
as soon as leaving the starting gate. Every IRP, despite being
a long-term effort, has a short-term action plan appended to it.
10:04:10 AM
MR. FARNSWORTH addressed slides 19-21 to summarize. Addressing
slide 19, he said an IRP is good for creating a vision. It's an
illustration of a state's future energy needs and its resources.
The bulk of the work is based on long-term horizon but still
there must be a short-term vision with an action plan at the end
of it. Integrated resource plans are relevant for big systems
as seen in the Lower 48, but also perfectly suited to Alaska's
circumstances where there needs to be coordination across
multiple systems. Addressing slide 20, he advised that IRP
helps in understanding where large investment might work or
where numerous small-scale investments might work better.
Addressing slide 21, he said that engaging in this planning
effectively requires: that the regulator be enabled, that
there's very clear institutional process, that there's
recognition of all the public policy goals that are relevant,
that the data is accessible and timely, and that stakeholders
engage so there is support for the effort. It's a technical
undertaking as well as a political undertaking, as anybody at a
utility commission knows. Utility commissions are created by
legislatures. They are quasi-judicial as well as quasi-
legislative, so it is very important to include the public in
this effort. Displaying slide 22 he concluded by saying that
plans are what they are, but it's the undertaking, it's the
planning that is everything.
10:06:32 AM
CHAIR HOPKINS recalled that at last week's hearing the
Regulatory Commission of Alaska (RCA) described the cross-
utility integration of this IRP as being somewhat unique or
rare. He requested Mr. Farnsworth or Mr. Hogan to describe what
that cross-utility integration could look like in Alaska and why
it's rare in other parts of the U.S.
MR. FARNSWORTH replied that "typically we often find ourselves
in silos and IRP is no different." He said integrated resource
planning statutes were passed and the requirements were placed
on utility companies. When a state has multiple utility
companies it often ends up being the case that an IRP for
Company A occurs and an IRP for Company B occurs. In
practice over the last few years folks have found that somewhat
limiting because, after all, a resource can be that utility's
powerplant or it can be a contract that Utility A got from
Utility B and those resources are available, not to mention
any other resource that can be gotten across a system. These
systems are interconnected and highly flexible. So, when it
comes to planning, ideally what one would do is have a utility
plan for the resources available or have a state and all its
utilities plan for those resources that are available, and make
sure that everything is put on the table so there can truly be
an integrated look at the resources out there.
10:08:47 AM
MR HOGAN elaborated about cross-utility planning. He related
that in Europe where he does a little more than half of his
work, and which is a place that would be more in love with
central planning than most parts of the U.S., the hot topic of
the last few years is what is referred to as sector coupling.
Sector coupling may be another way of describing cross-utility
planning and it may be a bit more comprehensive than cross-
utility planning. It refers to the power sector transformation
that's taking place and the role of decarbonized electricity
that is going to play in reducing greenhouse gas emissions from
the transportation and heating sectors and the effects that both
of those things have on the shape and size of demand for natural
gas and the ways that natural gas is going to be used in the
system. It is frankly crazy, he said, "to have a plan to do an
electricity sector that is in any way independent of your plan
for the transportation sector and is in any way independent from
your plan for oil imports and exports that is in any way
independent of your plan for building technologies that is in
any way independent of your plan for your gas transportation and
distribution system." He said these are all now intimately
linked in terms of what's going to drive cost-effective, low-
cost, affordable, reliable delivery of energy services to
customers because, in the end, customers don't buy gas,
electricity, or oil - they buy services. What is going to be
seen is a level of interdependent linkage among the various
formerly independent prior energy sources that has never been
seen before.
10:11:39 AM
CHAIR HOPKINS noted that in the past an outside contractor did
the large "doorstop" plan that was referenced earlier. He asked
who, in Mr. Farnsworth's experience, usually does the IRP
planning.
MR FARNSWORTH responded that the first steps associated with IRP
are convening all the appropriate stakeholders and making sure
that the information that's being brought forward is as complete
as possible. It's engineering information and all the other
information that can inform the process, as stated by Mr. Hogan.
It's important to get information about buildings if it's known
that buildings are poorly insulated and so more fossil fuel or
wood will be burned, or more electricity used, to keep those
buildings warm. It's important to get information about the
transportation system. It's important to get a sense of what
the Railbelt communities are thinking as well as more distant
communities, as everybody has different needs and perspectives.
It is a bit overwhelming when thinking about that initial
inquiry and the need to include public input into the effort,
but all this goes to emphasize the point that to the degree that
that information is included and a contractor is helping to put
this together, it really doesn't matter where the contractor is
if the contractor is enabling the basic tenets of participation
and access to all information. If all those things are
observed, he continued, it doesn't really matter whether
[Alaska] has a contractor. Some fairly involved modeling often
goes on, and that expertise may be found at the utility
commission, but oftentimes many of these specialties are not,
and the most cost-effective thing to do is to engage somebody to
provide those resources. If the commission were to oversee a
process that is as inclusive and open to as much information as
possible, then the commission can proceed perfectly well with
outside help.
10:15:21 AM
CHAIR HOPKINS noted that Alaska is something of an island that
is without power system and transmission line connection to the
outside world. For example, he said, Fairbanks is at the end of
a large transmission line. He asked about the ways that IRPs
could address end-of-line reliability and flexibility that might
lend some light to directions that should be looked at for an
IRP in Alaska.
MR. FARNSWORTH referenced Ercot in Texas and Ireland as
mentioned by Mr. Hogan. He said a comprehensive approach is
going to recognize everybody on the system. What's interesting
to see is how thorough the process is at evaluating ways to
address the folks who are at the end of the line. It may be a
good solution to build a big new transmission line, big pipe
right down to the end of the line. It may be that there are
lots of smaller solutions that are useful at the end of the line
that reduce demand, that maybe provide for micro-grids that can
provide some of the supply that would have been sent a long
distance down the system to the end of the line that could
produce those things more effectively and at lower cost. For
example, Bar Harbor, Maine, adjacent to Arcadia National Park,
is exploring these things because Bar Harbor is in exactly that
situation. Bar Harbor is looking at alternatives to a big wire
going out to the community and looking at things that the
community can do to provide more supply for itself, more
flexible supply for itself, more flexibility in the way it uses
energy, and more efficient ways to get what it needs to get done
at lower cost.
10:18:23 AM
CHAIR HOPKINS related that one of the big energy projects in
Alaska that's been going on for 50-60 years is the large-scale
Susitna-Watana Hydroelectric Project that is currently off the
shelf; however, no work is being done to that study. It is
planned to provide up to 600 megawatts of power in its current
iteration, he explained, which would provide one-half to two-
thirds of the generation on the Railbelt. It seems to match
well the goals of the capital expenditure (capex) and operating
expenditure (opex) in 2050 as seen in slide 6 of Mr.
Farnsworth's presentation. He inquired as to how a large-scale
project like this would fit into an integrated resource plan
that would look towards more flexibility in its sources.
10:19:31 AM
MR. HOGAN qualified that he probably knows less about Alaska and
the Railbelt situation than does Mr. Farnsworth, who likely
would suggest he's not an expert on it either. Therefore, he
prefaced, he would need to know a lot more to give a truly
robust answer to the question. He said the question ties back
to the other question just asked and to Dr. Colt's point about
resilience versus reliability for people at the end of the line.
He recalled the point he made earlier about the tendency to
overvalue the contribution of investment in generating capacity
to reliability versus the value of investment in transmission
distribution and (indisc.) alternatives like demand response and
energy efficiency. In a system the size of the Railbelt today,
600 megawatts come awfully close to being able to supply the
entire system, which may sound like a good thing, but in
traditional utility planning it is always wise to be leery about
a system that is too overly reliant on any one failure, called
the M-minus-one test.
MR. HOGAN stated he doesn't know anything about the Susitna-
Watana project. However, he said, assuming it's a reservoir
hydroelectric project and it has adequate storage, the good news
is that hydro can be quite a flexible resource, and it can be a
great complement to intermittent resources like wind and solar.
Assuming that the reserve margin of an installed generation on
the Railbelt is adequate to comfortably adequate, which in
preparing for this presentation he concluded that it is, it's
not clear to him what reliability purpose that project would
serve. It may be an excellent choice over time for meeting
expected load growth from new industry and growth in the
Railbelt region, but from a reliability perspective he said he
questions the wisdom of adding a very large, single-point
resource that is by and large going to be connected to distant
load centers by high voltage transmission across a challenging
landscape in a harsh environment, as opposed to focusing more on
resiliency as Dr. Colt referenced. Resiliency, Mr. Hogan said,
is about how quickly and to what extent a given level of
essential services can be maintained in the event of a very
significant reliability event on the system. It's not about
building a duplicate system so that nobody notices that there's
been a reliability event, he specified, it's more about
maintaining as much of the central services as possible until
the system can be restored to something resembling a stable
system.
10:25:40 AM
MR. HOGAN advised that an issue that would be quite widespread
is how many people are not "at the end of the line" in a system
like the Railbelt. Planning is going to be a way forward as
opposed to some combination of planning and market. When
assessing these different things and their impact on reliability
and their impact on the cost of reliability, they must be put in
some sort of a common context in order to weigh the "bang for
the buck" of investment in different measures on the
contribution they make to the delivery of reliable energy
services to end use customers across the system. The mistake
that is so often made in these prophesies is to focus on
resource adequacy to the exclusion of a focus on the customers'
lived experience of reliability, and what the causes and sources
of (indisc.) effects on those lumped experiences are, and what
the nature of the solutions are. There was a time when they'd
take the (indisc.) generation adequacy separately from
distribution issues because generation had to be added in such
large increments that would occur in 5 to 10 to 15 years. It
was more challenging to get into trouble on generation adequacy
than it might have been to get into trouble on reinforcing part
of a local distribution system that tended to fail from time to
time - but that is increasingly no longer the case.
MR. HOGAN further pointed out that investment cycles on the
generation side for many of the leading resources are now quite
short, and those resources, those technologies, can be added in
a very modular fashion, which is not what is being talked about
with the Susitna-Watana Hydroelectric Project. It's a big
project and it's a huge percentage of the total demand on the
system. That's not to say it's not a good idea, but he would
suggest thinking of it differently from the measures that are
wanted to improve reliability, maybe more something to think
about as a long-term way of addressing load growth to the extent
there is confidence that load growth is going to be seen.
10:28:55 AM
MR. FARNSWORTH provided an example from IRP that would be
informative here, although it's about an existing plant, not the
idea of building a new one. He related that Southern California
Edison in 1999 owned a plant called the Mojave Generating
Station that was about 1600 megawatts. It had two coal-fired
resources in it, built between 1967 and 1971. The owner
executed an agreement with California officials to install
sulfur dioxide controls or to close the plant by 2005. In 2003
the owners approached the California Public Utilities Commission
(CPUC) with a preliminary engineering study for the retrofit.
After hearings, the CPUC said it wanted a comprehensive review,
an integrated resource plan, to be done for this unit. In 2005,
they produced the Mojave Alternatives and Complements Study and
it examined alternatives to that retrofit. In other words, pull
the 1600-megawatt plant out of the picture and fill that 1600-
megawatt hole. In looking at alternatives they found a wide
variety of alternatives that were far more cost-effective, and
the study recommended closure. They closed the plant as a
result of that study. He said Mr. Hogan alluded to that when he
suggested that Alaska doesn't have to build or acquire all 600
megawatts at once, it could be approached in a modular fashion.
This sort of observation underlies Mr. Hogan's earlier
observation about financing periods being shorter because
projects can be smaller. He asked the committee to imagine an
all resources request for proposals (RFP) for 600 megawatts or
whatever amount that Alaska thinks suitable to fill that need.
What people submit as bids, and what is found to be reasonable
proposals, might put the resource that is being thought about in
the chair's question in an entirely different light, and it
might help inform [Alaska's] decision about how suitable it
would be to go with that one resource or these alternatives.
10:31:58 AM
MR. HOGAN added that in a system the size of the Railbelt
system, adding 600 megawatts or even 300 megawatts from a
single-point production facility would have significant ripple
effects on how the overall system is operated, the economics,
and operational characteristics of the other resources on the
system. Especially in that situation, he advised, it will be
absolutely critical to assess the economics of such a decision
on a systemwide basis dynamically based on how it affects the
overall system operation. Not on a busbar-to-busbar comparison
between adding a 300- or 600-megawatt hydro plant (indisc.)
basis versus, say, what a combination of a wind farm and a 100
megawatt highspeed diesel operating on natural gas or hydrogen
and what the busbar production cost for that would be. It is
absolutely critical to look at the economics of those two
decisions based on how the overall system would function if one
or the other were done. He added that that gets back to the
question of achieving some sort of a coordinated economic
dispatch balancing resources.
10:34:17 AM
CHAIR HOPKINS thanked the presenters and concluded the meeting.
10:36:01 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 10:36 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2020-08-14 - David Farnsworth Presentation.pdf |
HENE 8/14/2020 9:00:00 AM |
SB 123 SB 123 Implementation |
| 2020-08-14 - Michael Hogan Presentation.pdf |
HENE 8/14/2020 9:00:00 AM |
SB 123 SB 123 Implementation |
| 2020-08-14 - Steve Colt Presentation to Energy Committee.pdf |
HENE 8/14/2020 9:00:00 AM |
SB 123 SB 123 Implementation |