Legislature(2023 - 2024)BARNES 124
02/09/2023 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s):update by Utility Companies | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
PRESENTATION(S):UPDATE BY UTILITY COMPANIES
[Contains discussion of HB 50.]
10:20:09 AM
CHAIR RAUSCHER announced that the only order of business would
be the continued update on utility companies.
[The presentation was a continuation from 2/2/23.]
10:23:08 AM
ARTHUR MILLER, CEO, Chugach Electric Association, answered
questions on the PowerPoint, titled "Railbelt Electric Energy
System and Energy Transition." He gave a comparison analysis
for the price of Cook Inlet natural gas and the Henry Hub market
price. He stated that over the years the Railbelt utilities
have fared better in pricing than the Henry Hub market price.
Regarding renewable energy, he stated that the Railbelt
utilities are working together in some areas, while working
independently in others. He said that Chugach Electric has
placed a high emphasis on transitioning to renewable sources of
energy by exploring renewable energy opportunities. He stated
that it is currently studying the possibilities for a large-
scale wind and a large-scale solar project; however, one of the
challenges with renewable energy sources is integration with the
current system. He said that Chugach Electric has a goal of
reducing its carbon emissions by 35 percent by 2030 and 50
percent by 2040; however, this is providing the goal would not
create a substantial increase for the ratepayers.
MR. MILLER stated that Chugach Electric and Matanuska Electric
have collaborated on installing a 40-megawatt (MW) battery in
Anchorage. He said that Chugach Electric has increased its
number of customers in the net-metering program in order to
increase its ability to integrate renewable sources of energy
into the system.
10:33:05 AM
JOHN BURNS, CEO, Golden Valley Electric Association, stated that
the utilities are working together to add renewables to their
systems; however, the primary obligation of the utilities would
be to ensure the lowest rates possible to customers. He
maintained that the utilities would work to add renewable energy
sources, but they will not do so in a way that affects
reliability or cost. He said that in 2003 Golden Valley
Electric Association installed a 25-MW battery, the largest at
the time. Golden Valley is in the process of replacing this
battery, but the prices of batteries have continued to increase.
He stated that this is a problem because Golden Valley customers
already pay the highest rates on the Railbelt. He explained
that integrating 25 MWs of electricity generated by wind has not
brought down the rates for Golden Valley because of regulatory
and integration costs.
10:37:01 AM
MR. BURNS stated that Golden Valley built a solar farm in 2018
with a capacity of half a MW, and it is continuing with a
community solar program. Golden Valley currently has 681
members participating in the program. He said that the
utilities continue to pursue renewable sources of energy, but
they prioritize reliability and costs. He added that the
transmission of electricity would be a major factor in obtaining
the goal of using more renewable sources of energy. He said
that the greatest constraints on transmission are in
Southcentral Alaska, and he advised that this is where the
transmission work should begin. He stated that improving
transmission would require a large initial investment, and he
compared the eventual payoff to the initial cost of the Bradley
Lake hydroelectric project with its later payoff.
MR. BURNS, answering a question from the initial presentation,
stated that coal is the cheapest form of energy generation
currently available. He said that Golden Valley currently has
plans to shut down the Healy 2 coal power plant because of
issues with its reliability.
10:45:14 AM
TONY IZZO, CEO, Matanuska Electric Association (MEA), stated
that the four biggest issues facing the Railbelt utilities are
natural gas supply, diversification of energy generation,
transmission, and legislative action. He said that MEA has a
goal to reduce carbon usage by 28 percent by 2028 and has
already achieved a reduction of 27 percent. He said that a
major contributor to this is the Willow Solar Farm, which
provides 1.2 MWs of electricity generation. He said that the
Willow Solar Farm is a part of the Renewable Independent Power
Producers (IPP), which MEA has partnered with on renewable
energy projects. He said that MEA is working with Renewable IPP
to build a 6 MWs solar farm, which would be the largest in the
state. He said that the amount of energy generated by the new
solar project would not be a large amount; however, it would
still contribute towards the goal of energy diversification. He
said that the Renewable IPP projects allow MEA to have greater
efficiency without having to run its own sources of energy
generation at maximum capacity. He said that the shares of
energy for the utilities from Bradley Lake are based on the
historical demands of each system. The utilities are working
together to find the most efficient ways to generate energy
regardless of the source. He said that MEA will use Chugach
Electric's Anchorage battery because of the scale involved in
having its own battery.
MR. IZZO stated that MEA has created an electric vehicle
charging program, which provides 50 level 3 chargers at no cost
to the customer. He said that in exchange, the customer would
provide data to MEA in order to gain a better understanding of
how electric vehicle charging affects the power grid. He said
this effort would be to understand the demand for electric
vehicle charging at certain times so MEA can manage the load.
He said that MEA has chosen not to place a limit on net
metering, adding that 414 members now make up 3 percent of MEA's
total load.
10:54:13 AM
CHAIR RAUSCHER asked Mr. Burns when he expects the Healy 2 plant
to be fully shut down.
MR. BURNS answered that the original plan was to have it shut
down by the end of 2024; however, the plan is dependent on
securing another 30 to 50 MWs for Golden Valley Electric
Association. He said that both commercial and residential
members want Golden Valley to reduce its emissions, and he said
that one measure the utility is taking to achieve this is adding
a selective catalytic reduction (SCR) system to Healy 1. He
said that Golden Valley also plans on adding large scale wind
projects and a large battery for storage.
10:56:48 AM
CHAIR RAUSCHER asked about the effectiveness of Senate Bill 123,
passed in 2020, [during the Thirty-First Alaska State
Legislature].
MR. MILLER answered that the Railbelt Reliability Council (RRC)
is still in the process of being formed. He said that its
certificate of public convenience and necessity (CPCN) has been
approved by the Regulatory Commission of Alaska. The operating
tariff for the RRC is still under review, which he said is a
normal procedure. He related that there is a budget and
inception rate under review, which would allow the RRC to hire a
CEO and begin operations.
10:59:17 AM
REPRESENTATIVE PRAX asked if the transmission line upgrade was a
key component for the accomplishment of the utilities' other
goals.
MR. BURNS answered that transmission is "vitally important." He
added that the utilities are more focused on the efficiency of
the power generation than the specific location of its
generation. In response to a follow-up question concerning the
balance between the cost of power transmission and the cost of
power generation, he answered that a good transmission system
allows the different utilities the flexibility to use cheaper
forms of generation when it is available.
REPRESENTATIVE PRAX asked if transmission upgrades are necessary
to take full advantage of a conceptual project like the Susitna-
Watana Hydroelectric Project.
MR. BURNS answered that generating power is the first step, and
once this occurs the focus can shift to better transmission.
REPRESENTATIVE PRAX remarked that there were previous
transmission projects that had failed in the past and suggested
that the utilities should provide a picture of what the
transmission plan would really look like.
MR. BURNS answered that there is a plan in place for
transmission system upgrades.
11:06:38 AM
REPRESENTATIVE CARRICK asked if the three energy storage
facilities represented the full amount of energy storage, and
she asked if there is a point in which energy storage becomes a
barrier for transmission.
MR. IZZO answered that the Kenai and Fairbanks storage
facilities are operational, while the Anchorage facility is not
yet finished. He said that there is a deficit in energy storage
batteries partially because the majority of the Railbelt's
energy comes from natural gas. He said that there are currently
limitations with battery technology, and he noted that the
utilities do not have the same kind of resources available as in
the Lower 48.
REPRESENTATIVE CARRICK asked how the state should invest in
energy storage.
MR. IZZO answered that the utilities do not rely on a single
powerplant in a single location; however, he allowed that the
transmission system is lacking. He explained that having a
better transmission system reduces the burden of energy storage
and allows the utilities to receive energy generated by others,
and this helps lower the cost for members.
11:15:49 AM
REPRESENTATIVE WRIGHT questioned the life expectancy of the
batteries and whether there are any possible alternatives.
MR. BURNS answered that long-duration energy storage can last up
to 50 years.
11:16:43 AM
REPRESENTATIVE SCHRAGE asked what the RRC's role has been in the
discussions about energy storage and transmission.
MR. MILLER answered that the nine utility stakeholders are
represented on the RRC board. In response to a follow-up
question, he stated that the evaluation process is still
ongoing, and the other stakeholders' involvement has been
minimal. He said that the utilities have expressed interest in
transmission projects to the federal government.
11:20:00 AM
REPRESENTATIVE SCHRAGE expressed the importance of collaboration
within the RRC because of the natural gas situation.
MR. BURNS responded that the amount of collaboration has varied
and said that the goal is to lower electricity prices as much as
possible. He reiterated that transmission is important
regardless of timing or the source of the power generation used.
REPRESENTATIVE SCHRAGE asked about the overall cost benefit
analysis of building more transmission lines versus building
more smaller scale renewable energy projects. Considering the
move towards a higher usage of renewable energy, he asked about
the future cost of natural gas.
MR. IZZO answered that the U.S. Department of Energy has invited
the utilities to create a formal application on two of the
proposals, and the utilities are waiting to hear back on another
application. He said that the utilities do not expect to
receive the full amount of money; however, he expressed the hope
that they receive an amount to allow transmission upgrades,
which would open the door to future projects.
11:27:44 AM
MR. IZZO, returning to the battery storage question, stated in
addition to lithium-ion battery storage, there is thermal
storage, pumped hydro storage, and nuclear storage. He said
that thermal storage is a longer duration type of storage.
11:29:11 AM
MR. MILLER, returning to the natural gas situation, stated that
this is the greatest challenge facing the utilities. He stated
that transmission is "critical," and the utilities have already
contributed $166 million towards upgrades on the transmission
and energy storage systems on the Railbelt. He said that the
utilities' preference is for in-state natural gas, and storage
facilities would continue to be needed for natural gas. He said
that the current storage facilities have a capacity of 11
billion cubic feet (Bcf) but that the current demand is 70 Bcf.
MR. MILLER stated that the utilities continue to look for new
technologies. He said that with the current technology, the
utilities are "driven by economics" and rushing to 100 percent
renewable energy could have an adverse impact on rates. He
expressed the desire to see the usage of renewable energy
increase, but at a rate that will not affect the cost.
MR. BURNS added that the utilities benefit from acting as a
system rather than on their own. He said that without upgrades
to the transmission system, the utilities will continue to be
stuck in their own areas.
11:35:51 AM
REPRESENTATIVE PRAX asked if a smaller scale natural gas
pipeline from the North Slope had been reconsidered.
MR. MILLER answered that there are two natural gas pipelines
currently being considered.
REPRESENTATIVE PRAX commented that the previous Artic Fox
pipeline proposal was on a smaller scale than the two currently
being considered. He expressed the opinion that Artic Fox also
warrants consideration.
11:39:07 AM
CHAIR RAUSCHER asked what percentage of the utilities' energy is
being generated from renewable sources versus carbon sources.
MR. IZZO answered that MEA generates approximately 16 percent of
its energy from renewable sources and 84 percent from natural
gas. He said that the percentage can vary slightly because of
factors such as the amount of rainfall affecting the amount of
hydroelectric power generated.
MR. MILLER answered that Chugach Electric generates
approximately 21 percent of its energy from renewable sources
and 81 percent from natural gas. He concurred with Mr. Izzo
that the percentage has the potential to vary and stated that
the numbers he gave are the average.
MR. BURNS answered that Golden Valley Electric Association
generates approximately 17 percent of its energy from renewable
sources and approximately 83 percent from coal and diesel.
11:41:12 AM
CHAIR RAUSCHER asked what a "realistic" percentage of energy
generated by renewable sources would be by 2040.
MR. MILLER answered that Chugach Electric tied its carbon
reduction goal to something it believes to be achievable. He
said that Chugach Electric has a goal of 24 percent renewable
energy by 2030 and a 42 percent reduction on carbon by 2040.
MR. BURNS answered that Golden Valley has a carbon reduction
goal of 26 percent by 2030, but this number is dependent on its
ability to effectively manage costs.
MR. IZZO answered that MEA supported Senate Bill 123 and the
RRC. He said that MEA does not plan to build new generation on
its own. He suggested that working with the other utilities
would create better reliability and efficiency. He said that
these factors make him hesitant to place a specific number on
carbon reductions.
MR. IZZO stated that even if MEA were to achieve 40 percent
renewable energy generation by 2040, it would still need 4.4 Bcf
of natural gas. He said that this shows the importance of
finding new sources of energy generation and upgrading
transmission. He maintained that without this the utilities
will continue to have issues in the future.
11:50:12 AM
CHAIR RAUSCHER asked what the effect would be if the government
"got out of the way" and allowed the RRC to regulate new plans
for the utilities going forward.
MR. IZZO answered that it would be beneficial, as RRC has the
technical knowledge and tools to face the issues of Railbelt
energy transmission.
11:51:04 AM
REPRESENTATIVE MCKAY asked what the effect would be if HB 50
were passed, and the utilities were mandated to buy carbon tax
offsets.
MR. MILLER answered that the costs would have to be passed on to
the ratepayer.
MR. IZZO concurred.
MR. BURNS concurred.
11:52:54 AM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 11:53 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Railbelt Legislative Presentation.FINAL v2.pdf |
HENE 2/9/2023 10:15:00 AM |
Railbelt Legislative Presentation |