Legislature(2013 - 2014)BUTROVICH 205
02/21/2013 07:30 AM Senate SENATE SPECIAL COMM ON IN-STATE ENERGY
| Audio | Topic |
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| Start | |
| Presentations: Alaska Independent Power Producers | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON IN-STATE ENERGY
February 21, 2013
7:30 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator John Coghill, Co-Chair
Senator Peter Micciche
Senator Dennis Egan
Senator Bill Wielechowski
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Cathy Giessel
COMMITTEE CALENDAR
PRESENTATIONS: ALASKA INDEPENDENT POWER PRODUCERS
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DUFF MITCHELL, Executive Director
Alaska Independent Power Producers Association (AIPPA)
Business Manager
Juneau Hydropower, Inc.
Juneau, Alaska
POSITION STATEMENT: Provided an overview of AIPPA and the
Sweetheart Lake Hydroelectric Project.
MIKE CRAFT, Owner
Delta Wind Farm
Fairbanks, Alaska
POSITION STATEMENT: Provided an overview of the Delta Wind Farm.
ETHAN SCHUTT, Senior Vice President
Cook Inlet Region, Incorporated (CIRI)
Fire Island Wind Farm
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of the Fire Island Wind
Project.
BOB GRIMM, CEO
Alaska Power & Telephone
Port Townsend, WA
POSITION STATEMENT: Provided an overview of Alaska Power &
Telephone's alternative energy projects.
JOEL GROVES, Project Manager
Fishhook Renewable Energy, LLC
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of Fishhook Renewable
Energy's hydroelectric project.
ACTION NARRATIVE
7:30:02 AM
CO-CHAIR CLICK BISHOP called the Senate Special Committee on In-
State Energy meeting to order at 7:30 a.m. Present at the call
to order were Senators Micciche, Egan, Wielechowski, Co-Chair
Coghill and Co-Chair Bishop.
CO-CHAIR BISHOP welcomed Senator Giessel to the committee
meeting.
^PRESENTATIONS: Alaska Independent Power Producers
PRESENTATIONS: Alaska Independent Power Producers
7:30:48 AM
CO-CHAIR BISHOP announced that the order of business would be
overviews from the Alaska Independent Power Producers
Association (AIPPA) by the following individuals:
· Duff Mitchell, AIPPA Executive Director and Business
Manager for Juneau Hydropower, Inc.
· Mike Craft, Delta Wind Farm.
· Ethan Schutt, CIRI-Fire Island Wind Farm.
· Bob Grim, CEO, Alaska Power & Telephone.
· Joel Groves, Fishhook Renewable Energy, LLC.
7:31:44 AM
DUFF MITCHELL, Executive Director, Alaska Independent Power
Producers Association (AIPPA), and Business Manager, Juneau
Hydropower, Inc., thanked the committee for allowing AIPPA to
provide their insights and understanding from Alaska's leading
private power producers. He said AIPPA would share their vision
for energy opportunities, challenges, and solutions facing the
development of domestic power in Alaska's local economies.
MR. MITCHELL said AIPPA developers and operators invest in
Alaska and take the risk away from public utilities. He
explained that to date, AIPPA had collectively invested millions
of dollars and created hundreds of jobs in Alaska.
7:34:34 AM
He said AIPPA's role was providing private resources, know-how,
and hard work to make energy happen. He explained that
competitive power created a market force that produced the
public-benefit to stabilize and reduce energy prices over time.
He said AIPPA's renewable resources were derived from wind,
hydropower, tidal, and natural gas.
He said AIPPA helped Alaska by providing private-dollars to
assist in the public benefit of developing power for Alaskans.
He explained that Independent Power Producers (IPP) would
continue to put up the development and risk monies at no expense
to the utilities or rate payers. He stated that IPP's actions
allowed utilities to use their resources to keep up on
maintenance, reliability, and operations. He said IPP had to
compete at the wholesale level and therefore had no choice but
to understand their local markets to find solutions and wisely
invest their monies. He detailed that IPP hired local
environmental scientists, permitting personnel, construction
employees, and provided operational jobs that paid wages to
raise one's families on. He said energy projects typically had a
life of 20 to 50 years and IPP had no choice but to understand
the long term view of developing Alaska's energy resources to
eliminate diesel generation dependency. He declared that AIPPA
was a team player with the state and local utilities. He noted
that AIPPA was at times the assisters or the drivers in
assisting Alaska in meeting an energy goal for 50 percent
renewable energy by the 2025.
He stated that Alaska's enormous energy potential was virtually
untapped. He said Alaska's resource potential could be unlocked
with the right regulatory regime, attitude, and direction. He
remarked that Alaska did not have the funds or ability to "do it
all" with finite financial resources. He noted that Alaska did
have the ability to encourage private investment and development
to help fill the financial gaps. He explained that IPP generated
38 percent of the nation's net power generation, in Alaska it
was 3 percent.
7:39:10 AM
SENATOR MICCICHE asked how an independent power producer was
defined.
MR. MITCHELL answered that IPP put up their own money and
develop their projects with the intent to sell to local
utilities at a wholesale rate. He explained that IPP privately
competed to entertain what a utility could normally produce
themselves. He stated that the burden was on the IPP to produce
energy more cheaply than local utilities. He specified that IPP
were completely private and allowed to apply for state grants.
He stated that Alaska had some of the nation's highest energy
costs and economic potential in resource development could not
be realized unless energy prices were reduced. He said high
energy costs affected residential, commercial, industrial, and
transportation sectors. He remarked that Alaska's industries
were electricity intensive and noted electricity accounted for
30 to 40 percent of the mining industry's costs. He said the
fish processing industry's energy use for freezing and canning
were large operational costs. He noted extensive energy use by
government buildings, schools, timber industry, and military
bases.
He explained that high cost energy communities had become more
and more dependent on government services. He said a community
without jobs had no economy and that led to more dependency. He
stated that high energy costs sometimes repelled or discouraged
economic development. He said the Bush had been ravished by high
cost energy and the word "crisis" was appropriate in certain
parts of Alaska.
He declared that energy problems were only going to get worse as
the state dealt with declining oil revenues and programs such as
Power Cost Equalization (PCE) were dependent on funding from oil
revenues. He said AIPPA believed that Alaska's economy could be
diversified from the oil sector and allow other electrical
resources to be developed as a foundation for Alaska's future
economy.
He reiterated that Alaska had the resources and IPP had the
know-how, private sector funding, and financial capital ready to
develop energy projects if access to markets was available. He
stated that man-made problems could be man-solved. He noted that
the Chinese word for "crisis" was composed of the symbols for
"danger" and "opportunity." He stated that AIPPA did not want to
solely point out the dangers of where Alaska was at, but to also
point out the opportunities as well.
MR. MITCHELL said Alaska's elected leaders had wisely enacted a
State Energy Policy (SEP) to aggressively achieve 50 percent
renewable energy by 2025. He explained that Alaska had energy
policies that required private energy development in addition to
directing fiscal and regulatory regimes to support private
energy development.
7:44:06 AM
He said the next opportunity was to transform SEP into state
statutes and directives. He stated that consideration should be
given for positive actions and steps for updating statutes and
regulations to fit the state's aggressive energy policy. He
asserted the need for the wholesale energy market to open up via
access to publically financed transmission lines.
SENATOR MICCICHE commented that he would like to receive off-
line information from Mr. Mitchell on his ideas and objectives
for the state's evolving energy outlook in addition to thoughts
on how the Regulatory Commission of Alaska (RCA) could be
updated effectively. He noted that AIPPA was moving in a logical
direction.
MR. MITCHELL responded that he would provide additional
information.
SENATOR EGAN asked if AIPPA's companies had any problems dealing
with and reaching system tie-in agreements with municipal
cooperatives or private entities.
7:46:19 AM
MR. MITCHELL replied that good working relationships were
required with the utilities and cooperatives. He explained that
RCA could be improved to help facilitate relations. He remarked
that IPP only accounted for 3 percent of the state's energy use
and that was an indication that room for improvement existed.
SENATOR EGAN asked if AIPPA found that some utilities and
cooperatives gave a push-away feeling and required convincing.
MR. MITCHELL answered that there was a little bit of the control
aspects. He explained that AIPPA came to the market from an
economic aspect to save money and reduce costs. He expressed
that a prudent business should be willing to at least listen and
engage. He noted that at times if a business entity was not
working under market forces, the same motivation might not exist
that would otherwise be natural. He stated that he did not want
to mischaracterize things, but IPP had to compete in the same
way as utilities and cooperatives. He explained that at times
IPP had to convince buyers when their power was cheaper.
SENATOR EGAN stated that the Fire Island Complex dealt with
initial "pull back."
MR. MITCHELL replied that individuals from Fire Island would be
providing their overview in the meeting and could provide
additional insight.
CO-CHAIR COGHILL noted that analysis would be done to see if
access barriers were built by the RCA or state statutes.
7:49:57 AM
SENATOR GIESSEL stated that a public utility was required to
assume responsibility for the power and received a certificate
of public necessity and convenience. She said a public utility
was held responsible if power went out. She asked what happened
to public utilities that agreed to purchase IPP power and the
IPP's power generation went down.
MR. MITCHELL responded that contractual obligations would
require IPP to prove reliability with engineering backup. He
stated that intermittent power like wind and tidal may have
different types of power sales agreement with a utility than a
"firm power" source from hydro or geothermal. He said IPP would
be required to be reliable when contractually obligated.
CO-CHAIR BISHOP asked Mr. Mitchell to include him in his
discussion with Senator Micciche.
7:52:09 AM
MIKE CRAFT, Owner, Delta Wind Farm (DWF), said DWF was a project
located in Delta Junction and within the Golden Valley Electric
Association (GVEA) service area. He explained that he got
involved with DWF because he saw an opportunity. He said five
years ago he saw the economy starting to fail in Fairbanks, real
estate development had dropped and that was what he did for a
living. He said he saw renewable energy as an opportunity to
stay engaged in the market. He explained that he partnered with
several businessmen in Fairbanks and put together Alaska
Environmental Power.
MR. CRAFT said he was a person that looked for opportunities and
liked to come up with solutions. He stated that Fairbanks and
the Interior were facing an unprecedented energy crisis. He
noted that people were leaving the area due to high energy
costs.
He said it became apparent to him that once he started to look
at DWF, it was going to be a key component to what was happening
in the Interior with respect to stabilizing energy costs and
creating jobs. He stated that Fairbanks' current energy status
had literally become a matter of life and death for a lot of
people due to respiratory problems from poor air quality. He
stated that Fairbanks did not know if their future energy was
going to come from the Dalton Highway, bullet-line, gas
generated power from Anchorage, or the Healy Clean Coal Power
Plant (HCCP). He noted that Fairbanks would have saved $650
million in rate savings if GVEA was operating HCCP since 1999.
7:56:58 AM
He declared that Fairbanks energy costs were 143 percent higher
than the national average. He addressed energy cost's impact on
military bases in Fairbanks. He stated that access to low cost
energy had a larger impact on the military individuals and
families that lived off-base. He said it was difficult for
individuals to survive on a military pay-grade in Fairbanks.
He addressed Fairbanks' "brown haze" pollution caused by
population density and atmospheric thermal inversions. He said
Fairbanks could not dissipate particulates generated by the
Aurora Power Plant located downtown, the Fort Wainwright Coal
Plant, and the University of Alaska-Fairbanks (UAF) Coal Plant.
He noted that Fairbank's coal plants were located within a seven
mile area and within the Environmental Protection Agency's (EPA)
non-attainment area. He added that GVAE's diesel power plant and
the North Pole Refinery also contributed to Fairbanks' pollution
issue.
He explained that one of his biggest concerns was that GVEA
annexed Livengood to power a gold mine. He noted that
Livengood's gold mine would require 100 megawatts (MW) of power
with the electricity generated at the North Pole Refinery, a 33
percent increase in production in the non-attainment area. He
said one of the reasons GVEA used as a reason for not accepting
the DWF project was due to decreased customers and a shrinking
grid, but GVEA was potentially increasing capacity by 33 percent
for a mining operation while increasing emission levels.
8:00:59 AM
MR. CRAFT showed the committee a photo displaying a cloud of
haze and smoke over Fairbanks.
He stated that when he was looking at renewable energy, no one
else was doing it. He said he bought five Skystream wind
turbines and placed them on the Parks Highway and referred to it
as Windworks 101, an $80,000 class. He explained that the
Skystream turbines were erected during the middle of winter and
the installation told him that wind energy was totally possible.
He noted that he looked at all of the issues with the
electricity generated from the Skystream turbines for frequency
on the grid, voltage regulation, and dealing with GVEA. He said
after the Skystream installation, Alaska passed the Renewable
Energy Policy and he interpreted the legislation as a green-
light for the private sector to be involved and he created DWF.
He said he believed that additional room would be available for
DWF to play in the energy market because the RCA was told to
develop a regime that would entice the private sector. He
declared that the energy market changes he had hoped for did not
happen for the private sector.
He explained that the DWF Project was in its fifth year. He said
a proposition was made to GVEA in 2011 and the end result would
have saved GVEA $80 million over the 20 year life of the
contract. He detailed that his proposition offered electricity
to GVEA for $0.1250 per kilowatt hour (kWh) for 20 years flat.
He noted that GVEA's current average cost was $0.1320/kWh. He
explained that GVEA's highest energy cost facilities were the
Aurora Plant at $0.3600/kWh and the North Pole Refinery at
$0.1950/kWh.
He said DWF was a $54 million project that would create 200
direct construction jobs, provide wind turbine technician jobs,
and was fully permitted on a 320 acre site in an industrial area
with road access. He disclosed that GVEA turned the DWF
proposition down and limited the project to 2 MW, a level where
scale of economies did not work.
8:04:30 AM
He explained that one day of 25.5 MW service from DWF would save
GVEA $52,000 and conserve 37,500 gallons of diesel fuel. He
declared that DWF could add 25.5 MW of electricity to the
Interior, do it immediately, and do it for a lot less than what
was being done with oil.
MR. CRAFT explained that Fairbanks was facing an issue that
required an EPA Mitigation Plan to be in place by 2014 or
serious issues would result with highway funds and other federal
support. He asserted that DWF would help with Fairbanks' EPA
Mitigation Plan. He revealed that 4 million gallons of diesel
per year could be taken out of the environment, saved, and used
somewhere else in the market.
He said there was no need to build additional power transmission
lines for DWF. He explained that the Jarvis Creek substation was
three and a half miles away from the DWF site with an open-bus
on the 138 kilovolt line that went straight to Fairbanks. He
noted that the added power would maximize the transmission line
to Fairbanks and increase efficiency by seven percent without
having to upgrade the power lines.
He stated that DWF's ancillary benefits would include bringing
materials through the port of Valdez, shipping via Alaska West
Express to Fairbanks, procuring 800 truckloads of concrete to
build 16 wind turbines, and other indirect service jobs.
8:07:55 AM
He noted that Alaska had already invested in DWF by stating the
following:
When we bought the 320 acre site, we put up a 100 kW
turbine on our own, that was when I realized the
problems we were going to have with GVEA accepting our
project and willingness to do business with us. When
HB 152 came out, we decided to get the state involved
in this because we felt like what was happening was
not right. So we applied for a matching grant for $2
million and put up a EWT-900 wind turbine. We tried to
involve the Alaska Energy Authority (AEA) and the
Alaska Industrial Development and Export Authority
(AIDEA) in the negotiations with GVEA so that the
state could get an idea of the difficulties we were
facing as an independent power producer coming on line
and dealing with a utility. I want to thank the State
of Alaska for allowing us that opportunity through HB
152 and the turbines we have developed there. We are
using Skystreams, the Northern-100, and the EWT-900;
all of that technology has been used in the villages
and in remote communities. The technology that we
developed, the manufacturers that we brought to
Alaska, all that technology got shared with the rest
of the state, so we feel good about that.
SENATOR GIESSEL said she understood that wind turbines operated
in a fairly narrow wind speed parameter, if the winds were too
slow or high they would shut down. She asked if Mr. Craft had a
graph that showed what the wind looked like and what power was
reliably generated over the past year.
MR. CRAFT answered yes. He explained that DWF did a three year
wind study using a Met Tower and a program called Windographer,
a tool used to analyze wind resources. He explained that DWF was
looking at a 30 percent capacity factor and that meant an
average of 300 kW would come from a 900 kW turbine. He noted
that wind turbines were only at 100 percent capacity
approximately 3 percent of the year. He stated that electricity
was generated on DWF's 900 kW turbines when wind speeds ranged
from 6.5 miles per hour to 60 miles per hour. He explained that
turbines go into an environmental shutdown when wind speeds
exceeded 60 miles per hour. He noted that high wind speeds were
not typical in Delta Junction; the average wind speed was
approximately 15 miles per hour. He said Delta Junction was
different from other wind regimes due to barometric variances
from its inland location rather than coastal locations that were
influenced by storms.
8:11:55 AM
CO-CHAIR COGHILL said DWF may have a barrier with GVEA due to
its energy supply variance. He noted that GVEA would have to run
their turbine in the North Pole area to modulate DWF's wind and
asked if that was a power agreement hang-up.
MR. CRAFT responded that GVEA required DWF to do an Integration
Study (IS). He explained that DWF's $100,000 IS was defined by
GVEA and showed DWF's modulation would swing the grid 10 MW in
10 minutes, GVEA's Eva Creek Wind Farm (ECWF) would swing the
grid at 25 MW in 10 minutes. He said DWF would be easier to
integrate due to a lack of wind variations. He noted that the
GVEA's North Pole Refinery would be the perfect swinging reserve
because like a car, the power could be throttled up and down. He
disclosed that a coal plant would be more difficult to vary due
to the need to get temperature and steam pressure up. He pointed
out that ECWF would be an excellent complement due to its
location in another wind regime, approximately 200 west of DWF.
He explained that times when ECWF was not windy, DWF was windy.
He summarized that DWF could be a spinning reserve for ECWF, a
point that was brought up in the IS.
CO-CHAIR COGHILL asked if it was cheaper for GVEA to buy power
from DWF rather than GVEA producing at a base-load-power.
MR. CRAFT replied yes.
CO-CHAIR COGHILL inquired if GVEA's savings would overcome the
cost of maintenance caused by throttle variance at their North
Pole Refinery.
MR. CRAFT responded that there would be a $0.0250/kWh variance
cost and DWF's total cost would be $0.1500/kWh. He stated that
$0.1500/kWh power was less than GVEA's incremental voided cost
of $0.1950/kWh in addition diesel fuel conservation.
CO-CHAIR COGHILL asked if DWF was able to get a docket before
the RCA to explain the information that was just presented to
the committee.
MR. CRAFT answered no. He explained that he had applied for a
Certificate of Public Convenience for 25.5 MW and the RCA
allowed GVEA to be the gatekeeper. He divulged that GVEA was
only willing to provide DWF with a 2 MW capped sales agreement.
He asserted that because GVEA would not give DWF a contract, the
RCA decided it was not in the public's interest to have 25 MW of
wind power in Delta Junction.
8:15:27 AM
SENATOR EGAN asked to clarify that DWF's issue was with GVEA and
RCA.
MR. CRAFT answered yes. He said the RCA basically told DWF that
the state energy policy decided by the legislature was
"aspirational."
CO-CHAIR BISHOP asked if the RCA's comment was in writing.
MR. CRAFT answered yes.
MR. MITCHELL explained that RCA's comment was in a transcript.
SENATOR EGAN asked if the committee could receive the
transcript.
MR. MITCHELL clarified that an attorney from a utility made the
"aspirational" comment on the energy policy. He said correcting
the RCA would require statute change.
CO-CHAIR BISHOP asked that a transcript copy be provided to the
committee.
SENATOR EGAN asked if DWF was receiving cooperation from AEA.
MR. CRAFT responded that AEA was not in a position to deal with
the situation between DWF and GVEA, but noted that AEA had not
addressed the situation. He explained that AEA's job was to find
projects.
8:17:41 AM
ETHAN SCHUTT, Senior Vice President, CIRI-Fire Island Wind Farm,
addressed the prior RCA discussions. He said the RCA viewed
itself as a body that enforced rate making and reviewed rate
cases. He explained that the RCA also reviewed propositions for
the creation of new utilities or the addition of authority to
certificate utilities. He said the RCA only reviewed the fitness
of utilities to have a certificate at the initial point and he
had never seen the RCA take a case where they reviewed the
fitness of a utility to continue to provide service unless there
was failure to provide power. He said the RCA viewed its role
very narrowly via the statutes that the legislature had passed.
He said the legislature would have to change the RCA's
responsibilities to address market oversight.
8:21:11 AM
MR. SCHUTT explained the Fire Island Wind Project (FIWP) as
follows:
· FIWP produced 18,039 megawatt-hours (MWh) of electricity.
· Caused no electrical system operational issues going to the
integration of a commercial wind project.
· Saved Chugach Electric Association (CEA) approximately 196
million cubic feet of Cook Inlet natural gas.
He explained FIWP data from January 2013:
· Produced 6,812 MWh of electricity.
· Average wind speed for the month was 19.0 mph.
· Predominant north wind.
He said FIWP's highlights were as follows:
· 25-year contract with CEA.
· Flat net price of $97/MWh, $0.0970/kWh.
· $65 million of private investment in the Anchorage energy
market.
MR. SCHUTT explained FIWP's facts as follows:
· 11 General Electric (GE) XLE 1.6 MW wind turbines with
total project nameplate capacity of 17.6 MW.
· Expected to annually generate 51,000 MWh.
· Primary production months would be November through March.
· Annual average for FIWP's net capacity factor was 32.5
percent.
He addressed the Fire Island site selection as follows:
· Wind resource was identified.
· Proximity to grid and load.
· Minimal environmental impacts.
· Lack of conflicting land uses.
· Available land for construction.
8:24:14 AM
He addressed FIWP's history as follows:
· CIRI obtained Fire Island property in the 1980s.
· Wind resource studied in 2000 by a utility group led by
CEA.
· CIRI became the project developer in 2005.
· Key permits issued in 2009.
· Federal Aviation Administration (FAA) issues were addressed
in 2009.
· Preliminary construction in 2010.
· CIRI received permits with project financing in 2011.
· RCA approval for CIRI's contract with CEA in 2011.
He explained the FIWP layout on Fire Island as follows:
· 11 commercially operating turbines.
· 22 additional turbine sites available for development.
· Additional infrastructure to support the first phase
operation and maintenance building, electric power system,
and roads.
He addressed FIWP's 2011 project timeline as follows:
· FAA determination of no hazard issued.
· Commercial contracts and Power Purchase Agreement (PPA).
· RCA approval of PPA.
· Project financing closed.
· On-shore transmission line construction.
MR. SCHUTT explained FIWP's 2012 project timeline as follows:
· On-island civil and electrical construction.
· Finished transmission interconnection.
· Erected wind turbines on Fire Island.
· Project commissioning completed and commercial operation
began September 2012.
He addressed FIWP's transmission line as follows:
· 3.1 miles of two parallel 34.5 kilovolts submarine cables.
· 8.6 miles of terrestrial transmission lines, 3 miles on
Fire Island and 5.5 onshore to get from Point Campbell to
the International Substation.
8:26:24 AM
He summarized FIWP construction as follows:
· Delaney Construction Group (DCG) was the Engineering,
Procurement, and Construction (EPC) contractor.
· DCG was a Tetra Tech company and constructed utility scale
wind projects in Alaska and the Lower 48.
· Significant subcontracts with local contractors, vendors,
and service providers.
· Significant activity at Port of Anchorage and Port
MacKenzie.
He provided wind turbine information as follows:
· Blade length was 131 feet.
· Hub height was 262 feet.
· Turbine rotational speed was 10 to 19 revolutions per
minute (RPM).
· Turbine foundation was steel reinforced concrete.
He presented the committee with a graphic that showed FIWP's
turbine height perspective versus Anchorages downtown buildings:
FIWP at 262 feet, Conoco-Philips Building at 296 feet, and
Atwood Building at 265 feet.
8:30:33 AM
MR. SCHUTT summarized that FIWP was difficult to accomplish, but
noted the early operational phase had gone well. He stated that
CIRI had a good working relationship with CEA with CEA realizing
the value of a non-gas resource within their system. He conceded
that FIWP's power was intermittent and not the easiest resource
for CEA to handle. He explained that FIWP's intermittent power
required coordination for hourly and daily wind predictions. He
said CIRI's hope was to build additional projects on Fire
Island.
SENATOR EGAN asked when FIWP would pay off.
MR. SCHUTT replied that the debt on FIWP was 20 years with the
cash-equity component at nine or ten years. He explained that
CIRI had a flat-net price agreement for 25 years and retained
operational risk for major maintenance issues. He explained that
one of the major maintenance issues pertained to gearbox
replacement that was projected to occur a little more than once
per turbine. He said gearbox replacement was an expensive
maintenance process and CIRI had a capital reserve built up over
FIWP's early years to fund anticipated gearbox replacement. He
noted that excessive gearbox replacement beyond projections
would have a significant impact on CIRI's returns in FIWP's
later years. He explained that CIRI's contract with CEA
benefited its customers by shifting risk of loss to a private
party. He stated that CIRI accepted the major maintenance risk
knowingly and based their decision on GE's input. He commented
that risk shifting was good for the market place and allowed a
utility to avoid rolling risk costs into their rate base.
8:33:32 AM
CO-CHAIR BISHOP summarized that CIRI owned FIWP and sold
electricity to CEA for $0.0970/kWh for 25 years.
MR. SCHUTT answered correct.
CO-CHAIR COGHILL stated that another risk factor was related to
FIWP's power intermittency for CEA. He asked what the power
sales agreement on CEA's cost of ramping up and down to follow
FIWP.
MR. SCHUTT replied that CIRI and CEA had a reciprocal
intermittency payment of $0.01/kWh. He explained that $0.0970
was a net price to CIRI and the $0.01/kWh was considered
additional to cover the integration operational issues to CEA.
CO-CHAIR COGHILL recalled a debate on FIWP's transmission line
and the state's contribution towards the project. He asked who
had responsibility for other parts on FIWP's transmission line.
MR. SCHUTT answered that the state made a $25 million
appropriation to construct FIWP's transmission line from the
project to the system. He said CIRI built the transmission line
and was in the process of turning over the line to CEA. He
explained that CEA would own and operate the transmission line
during for the 25 year life of FIWP, the same as the power
purchase agreement. He said the transmission line cost was a
little more than $25 million and CIRI funded the remaining
amount.
CO-CHAIR COGHILL summarized that the state kept the cost from
going above $0.09/kWh.
MR. SCHUTT responded correct. He said the state basically built
the transmission interconnection and CIRI asked for the
appropriation to buy-down the cost of power to CEA. He explained
that the state had previously participated with appropriations
that were similar to FIWP's transmission interconnection.
CO-CHAIR COGHILL replied that the state also participated in the
transmission line for GVEA's northern end. He noted that access
was one of the problems with DWF and asked if access was a
problem for FIWP.
MR. SCHUTT answered that access was not a problem. He said
FIWP's transmission line came into a substation that was jointly
owned by CEA and Anchorage Municipal Light & Power. He noted
that the substation puts the power from the new Southcentral
Power Project (SPP) into the grid. He explained that the
legislature also participated in GVEA's wind project by
effectively building their interconnection substation.
CO-CHAIR BISHOP noted that everyone was interested in how to
save either natural gas for Cook Inlet or fuel oil in Fairbanks.
8:37:37 AM
BOB GRIMM, CEO, Alaska Power & Telephone (AP&T) Company,
addressed creating an IPP market with access to domestic and
export markets. He said IPP required the transmission system to
be open-access with a level playing field in order to provide an
energy cost benefit for Alaska.
MR. GRIMM said AP&T was unique due to being an independent power
producer and a regulated utility. He explained that AP&T was
investor owned with the majority owned by 123 employees. He
explained that AP&T consisted of experienced project
identification people with 17 years of operational experience on
newly built hydroelectric projects. He said AP&T's professional
engineering staff consisted of an aggregate 199 years of energy
industry experience. He noted that AP&T had been operating in
Alaska for 55 years and started in Skagway in 1957.
He stated that AP&T demonstrated its ability to identify,
design, and build cost competitive hydroelectric projects. He
said AP&T had built and operated two storage and two Run-Of-
River (ROR) hydroelectric projects using the IPP model with
additional projects planned for the future. He detailed that
AP&T's energy mix started at 95 percent diesel and was currently
at 70 percent renewable hydroelectric in just 16 years.
He addressed AP&T's future IPP projects as follows:
· 5 MW project near Hydaburg on Price of Wales Island, a
joint venture between AP&T and Haida Corporation.
· 9.6 MW Mahoney Lake Hydro Partnership of City of Saxman,
Cape Fox Corporation, and AP&T. He said the intent was to
have the project sell into the Southeast Alaska Power
Agency (SEAPA) system.
· 77 MW project near Hyder with the intent to be the first
project in Alaska to connect to the North American
electricity grid and export power out of Alaska.
· AP&T was performing development work on Kootznoowoo's
Thayer Creek Hydro project in Angoon.
8:41:38 AM
He addressed a study by UAF's Alaska Center for Energy and Power
(ACEP). He said ACEP's study was funded by the National
Renewable Energy Lab and published in June 2012. He said the
study's subject was on stranded renewable energy in Alaska and
quoted the following:
Alaska is home to significant renewable energy
resources. Geothermal, wind, tidal, wave, hydro,
solar, and biomass resources have the theoretical
potential to not only meet the majority of Alaska's
in-state needs, but also provide tremendous economic
and strategic opportunity for the state and the
nation. Despite the many opportunities for developing
these resources, there are also significant barriers.
Foremost among these challenges is the fact that many
Alaska renewable energy resources are stranded, just
like our natural gas on the North Slope. The study
went on to identify that Alaska had 677 megawatts of
geothermal. Alaska has the largest amount of class-
seven wind, which is the best. In the United States,
Alaska possesses 90 percent of the tidal potential and
50 percent of the wave energy potential of the nation.
Alaska also has tremendous hydro power potential with
a well-researched amount that is developable.
MR. GRIMM said an important observation was that the renewable
resources were currently stranded. He explained that Southeast's
resources were unique due to its shared boundary with Canada and
power connections currently existed. He noted Southeast's road
connections to Canada via Haines, Skagway and Hyder. He revealed
that Hyder was served by British Columbia (BC) Hydro and had the
lowest rates in Alaska. He divulged that an undeveloped
transportation corridor had potential near Wrangell due to a
nearby transmission extension by BC Hydro. He stated that the
barrier to un-strand Southeast's renewable resources was timely
and affordable.
8:44:29 AM
He summarized that Southeast had significant energy resources
that were documented. He said the barrier to development of the
stranded renewable energy resources were small compared to the
other areas within the state. He explained that a new renewable
industry would diversify Southeast's struggling economy and
create new green jobs.
CO-CHAIR BISHOP said the day's overviews had touched on
Interior, Southcentral, and Southeast. He stated that each
region had its own assets to lower energy costs, but there were
no silver-bullet solutions.
8:46:49 AM
JOEL GROVES, Project Manager, Fishhook Renewable Energy (FRE),
addressed the Fishhook Creek ROR Hydroelectric Project (FCHP) in
Southcentral.
MR. GROVES explained FRE's background as follows:
· A limited liability company formed in 2006 for the sole
purpose of pursuing FCHP.
· Owners consisted of five long-time Alaskans and
professional engineers who specialized in small hydro
development.
· An aggregate of over 100 years of experience in designing,
building, and operating renewable energy systems.
MR. GROVES addressed FCHP's hydro experience as follows:
· ROR hydroelectric project in Seward, a 5 MW project on
Fourth of July Creek located behind the Spring Creek
Correctional Facility, currently in the feasibility stage.
· Consulting on Indian River in Tenakee Springs.
· Consulting on Packers Creek in Chignik Lagoon on the Alaska
Peninsula.
· Design and upgrade of Pelican Creek on Chicagof Island.
· McRoberts Creek, the first independent power producer on
the Railbelt near Palmer, a 100 KW ROR hydro project that
has been in operation since 1991.
· Design for Chuniisax Creek in Atka that was commissioned in
December 2012, a 250 KW project.
· Several FCHP owners also owned South Fork Hydro Project,
another Railbelt independent power producer project in
Eagle River, a 1.2 MW project currently under construction
that was scheduled to be operational by the summer of 2013.
· FCHP owners had worked on 20 projects throughout Alaska
involving engineering work, reconnaissance studies,
feasibility studies, permitting, design, construction,
operations, and regulatory compliance.
8:49:20 AM
He explained the proposed FCHP as follows:
· 24-inch, 7,800 foot long penstock with 1,000 feet of
vertical head.
· 2 MW installed capacity that would provide full electrical
service to approximately 1,000 homes.
· Power would be sold to Matanuska Electric Association (MEA)
to offset their existing and future natural gas fuel needs.
He explained that FCHP would be located in the Talkeetna
Mountains' Hatcher Pass, approximately 60 miles northeast of
Anchorage. He said Fishhook Creek drained the basin where
Independence Mine was located, Mile 16.5 on Hatcher Pass Road.
MR. GROVES explained that the FCHP's penstock route would follow
Fishhook Creek for several thousand feet and then head overland
down to the historic mouth of Fishhook Creek where the
powerhouse would be located with a half-mile underground power-
line extension to the existing MEA power-line.
SENATOR MICCICHE addressed Alaskans talking about the move to
renewable sources for energy throughout the state, yet two
projects were stymied because of environmental concerns on
streams that did not have anadromous fish. He asked how FCHP
received their permits and what struggles were possible in
moving forward with hydro in the future.
MR. GROVES replied that FCHP was still in the permitting phase.
He noted that permitting with fish for ROR hydroelectric plans
were project specific. He explained that projects could be large
with minimal fish impact or small with significant fish impact.
He said an example was the Indian River Hydroelectric Project
(IRHP) in Southeast near Tenakee Springs. He explained that IRHP
had proven to be a real win-win for the community in providing
low cost renewable energy. He noted that design changes were
made to IRHP's fish-pass to enhance the coho salmon fishery. He
noted on the other end of the spectrum was the Packers Creek
Hydroelectric Project (PCHP) in Southwest Alaska with a very
small population of resident Dolly Varden fish. He said PCHP was
having difficulty with the Alaska Department of Fish and Game in
obtaining a fish habitat permit due to the resident Dolly
Varden.
8:53:43 AM
He addressed the FCHP schedule as follows:
· Initial studies completed in 2006.
· Filed permit applications in 2007 and 2008.
· Project was entering its fifth year while permitting
continued.
· Project was a combination of easements and leases with the
state and Matanuska-Susitna Borough, none were in place. He
noted that the Alaska Department of Natural Resources (DNR)
had never leased state land to an independent power
producer before and there had been a lot of delay in trying
to get the project moving forward.
· Final design and financing completed in the fall of 2013.
· Construction during the summer of 2014.
· Operation by October 2014.
MR. GROVES addressed IPP opportunities in Southcentral as
follows:
· 50-plus MW ROR-hydro potential in Southcentral that was
environmentally, politically, technically, and economically
viable.
· Potential ROR projects would be greater than 25 percent of
MEA's existing load.
· Private sector would take the development risk off utility
books.
· Stable and long term competitive pricing.
· Sustainable renewable energy resource.
· Supply geographic and fuel diversity.
· Local construction, management, and operational jobs.
He explained IPP needs as follows:
· Predictable and timely regulatory environment.
· Access to public infrastructure and markets.
· Fair pricing and contract terms.
8:56:20 AM
SENATOR MICCICHE stated that he was a big fan of renewable
energy projects. He noted that people demanding a higher
proportion of renewable energy were often the very same people
that were opposing hydro projects. He said it was a little bit
frustrating as Alaska moved forward and it was a tough
stakeholder exercise with each case being unique. He stated that
some of the renewable projects were helping people to understand
that energy in any form did not come without impact and working
together was important.
SENATOR EGAN asked if the committee was going to invite Mr.
Mitchell back for a presentation on the Sweetheart Lake
Hydroelectric Project (SLHP) in Southeast.
CO-CHAIR BISHOP replied yes.
MR. MITCHELL stated that he was a developer working on SLHP, a
19.8 MW facility south of Juneau. He said he was working on
licensing with the intention of supply energy to Juneau by 2016.
He thanked the committee for the opportunity to show what the
private sector was trying to do to help resolve Alaska's huge
problem of bringing reliable and lower cost energy to the state.
CO-CHAIR BISHOP thanked AIPPA for their presentations.
8:58:38 AM
There being no further business to come before the Senate
Special Committee on In-State Energy, Co-Chair Bishop adjourned
the meeting at 8:58 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AIPP Alaska Power & Telephone Company 2-21-13.ppt |
SISE 2/21/2013 7:30:00 AM |
no1 |
| AIPPA Fishhook Renewable Presentation 2-21-13.ppt |
SISE 2/21/2013 7:30:00 AM |
no2 |
| AIPPA Presentation 2-21-13.pptx |
SISE 2/21/2013 7:30:00 AM |
no3 |
| CIRI Fire Island Wind--general public presentation (Feb 2013).pptx |
SISE 2/21/2013 7:30:00 AM |
no4 |
| DWF Senate Energy Presentation final.pptx |
SISE 2/21/2013 7:30:00 AM |
no5 |