Legislature(2021 - 2022)BARNES 124
03/15/2022 10:15 AM House ENERGY
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| Audio | Topic |
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| Start | |
| HB301 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 301 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 301-UTILITIES: RENEWABLE PORTFOLIO STANDARD
10:21:07 AM
CHAIR SCHRAGE announced that the only order of business would be
HOUSE BILL NO. 301, "An Act relating to the establishment of a
renewable portfolio standard for regulated electric utilities;
and providing for an effective date."
10:23:00 AM
SHERRY STOUT, Arctic Strategic Program Manager, Cold Climate
Housing Research Center, National Renewable Energy Laboratory
(NREL), U.S. Department of Energy (DoE), introduced NREL's
PowerPoint presentation on Renewable Portfolio Standards (RPS)
[hard copy included in the committee packet]. She introduced
herself, her colleague, and the core team, as seen on slide 2.
She gave an overview of NREL, as seen on slide 3 and slide 4.
She stated that NREL is the only laboratory in DoE with the
single mission of energy efficiency and renewable energy. She
noted that NREL also has the Cold Climate Housing Research
Center (CCHRC) in Fairbanks. She stated that NREL focuses on
the following renewable technologies: solar, wind, water,
geothermal, sustainable transportation, and energy efficiency.
She informed the committee that the presentation will focus on
energy systems integration. She defined energy systems
integration as how renewable energy systems are brought into the
U.S. electric grid. The process uses complex hybrid systems to
ensure energy resilience and security. The process also
involves economic planning, economic policy, and market
maturity. She reiterated that this is all under energy systems
integration.
MS. STOUT, moving to slide 5, stated that NREL has been involved
with RPS design and development since well before 1999. She
stated the Renewable Electricity Futures Study is now 10 years
old. The study reviews the process of obtaining 80 percent
renewable energy for the entire U.S. grid. She said the
laboratory has been working in this field for a very long time,
and current studies are looking at bringing grids to 100
percent.
10:26:57 AM
REPRESENTATIVE RAUSCHER questioned the amount of time and the
timeframe NREL has been doing research in Alaska.
MS. STOUT responded that her knowledge depends on digital
records, not paper files. She stated that digital records
indicate research goes back as early as 1995, but there had been
research before this point. She mentioned a wind-diesel hybrid
microgrid project in Wales, Alaska. She stated that NREL has
worked across the state for over 20 years but very little in the
Railbelt. She indicated that the research has been concentrated
on energy planning, energy resilience, and cost reductions in
microgrids. She added that CCHRC has worked on energy
efficiency in Alaska since 1999, before it became a part of
NREL. She stated that NREL has a history of work in the state
and is very familiar with the Alaska markets.
10:29:31 AM
MS. STOUT, in response to Representative Kaufman, explained that
NREL's funding primarily comes from DoE in the form of
congressional earmarks and competitive funding within different
offices in DoE. She added that NREL does not receive nuclear
funds, but rather it is funded from the Office of Energy
Efficiency and Renewable Energy. She said that NREL also works
with the Office of Electricity and the Office of Science. In
terms of Alaska, she mentioned the Arctic Energy Office and the
Office of Indian Energy, which are both part of DoE. She added
that funding also comes from agencies not connected with DoE,
such as military bases in Alaska and the Department of Interior.
She stated that the funding is mostly from a mix of federal
offices, but it is not exclusively federal. Private sector
funding includes large partnerships with Exxon Mobile and Shell.
10:31:31 AM
MS. STOUT, turning to slide 6, addressed the study's goals of
providing insight into the economic feasibility of 80 percent
RPS and identifying likely elements of the portfolio. She said
that giving every utility "a voice" was really important in the
study. The utilities and energy developers were involved with
the data clarification and information gathering. She stated
that the Alaska Energy Authority (AEA) provided a large amount
of data, along with other sources in Alaska, and this resulted
in a collaborative process. She indicated that the data used in
the analysis came mostly from Alaska.
10:33:13 AM
PAUL DENHOLME, Principal Energy Analyst, Grid Planning and
Analysis Center, National Renewable Energy Laboratory, U.S.
Department of Energy, reviewed NREL's analysis. He provided an
overview of the integrated resource planning process, as seen on
slide 7. To achieve desired costs and reliability, he said,
utilities would go through this process to develop their power
systems. He indicated that the proceeding slides go into detail
about this process. Given the short timeframe of the study, he
related that [the scope of the study is limited]. He pointed
out that the following [two] slides provide an overview of the
planning process [to achieve 80 percent RPS]. Slide 8 outlines
an approach which concentrates on costs and reliability. Slide
9 outlines the 4 steps of the process.
10:34:50 AM
MR. DENHOLME, referencing the 4 steps in developing the system
model, stated that during step 1 an electrical model of the
Railbelt system had been designed. To achieve 80 percent RPS by
2040, step 2 had used various combinations of renewables to
develop 5 scenarios. He continued that [during step 3] each
scenario had been modeled, addressing issues until the
reliability standard was met. The final step confirmed that
fuel savings were evaluated [in each scenario] and 80 percent
RPS was achieved.
MR. DENHOLME, [in providing more detail on step 1], explained
that to create the electrical model, each of the five Railbelt
utilities were divided into three electrical zones, [as listed
on slide 10], and connected by two transmission systems, or
interties. He stated that the three zones were considered to be
a single balancing area, but each could also operate
independently. A critical element of this was testing each for
independent robustness and reliability if disconnected from the
[intertie].
10:37:27 AM
REPRESENTATIVE RAUSCHER, in reference to the evaluation of fuel
savings, questioned whether the study took into consideration a
capital-cost evaluation.
MR. DENHOLME responded that there had not been sufficient time
to evaluate the capital-cost savings. The primary focus of the
study was the savings from the avoided [use of] fuel. He
continued that a more comprehensive study could be performed at
a later time to compare the avoided-fuel savings with the
increase of capital costs associated with [implementing
renewables].
MR. DENHOLME, in response to a follow-up question, stated that
the timeframe for a future study of capital costs would be
relevant to the study's details, and he would follow up once
this is determined.
10:38:29 AM
REPRESENTATIVE FIELDS, for clarification, expressed his
understanding that capital costs of generation and transmission
were not quantified [in the study].
MR. DENHOLME responded in the affirmative. He moved to slide
11, [which details the base conditions considered while
developing the system model in step 2]. He addressed the
differences between [2020] and 2040. Based on data from AEA,
and other sources, he pointed out that an anticipated 12 percent
load growth had been used to increase the peak demand for the
system. He said the 2040 system had been modeled on the current
way electricity is used, but with an increased usage of electric
vehicles. Other adaptations in the model had been upgrades to
existing systems and age-related retirement of fossil-fire
energy, adding the replacement of new types of gas-fired
generation.
MR. DENHOLME, moving to slide 12, [addressed the scenarios
created in step 2 of the modeling process]. He stated that
scenario 1 was created using no new added renewables, while the
other scenarios were created using different mixes of
renewables. He stated that these scenarios are not considered
optimum, as the optimum would be determined in the future. In
developing the scenarios, he noted that an 80 percent standard
was applied to the entire Railbelt, not individual utilities.
The eligible renewables used are listed in the slide, with wind,
solar, and hydro being the primary sources. In slide 13 he
pointed out the 2020 base case depicting the existing mix of the
Railbelt's energy, and its growth to 2040 using fuel, but no new
renewables.
10:42:31 AM
MR. DENHOLME directed attention to scenario 1 on slide 14. He
stated that this scenario uses the largest amount of hydropower
and is based on the capacity of the Susitna-Watana project, but
any hydropower resource could have been used. The remainder of
the energy contribution in this scenario is mostly wind. On
slide 15, he pointed out scenario 3 with 60 percent of the
Railbelt electricity mostly coming from wind and solar. Slide
16 depicts the technologies that have not been significantly
deployed in Alaska. He pointed out that in this slide wind and
solar were replaced with tidal power and new geothermal. He
moved to slide 17 which shows the range of the scenarios and
their energy mixes. He stated this helps to understand the full
range of the evaluation.
MR. DENHOLME moved to slide 18, which displays step 3 in the
modeling process. He said that this is the most important step,
as the primary objective is to test systems for reliability,
"making sure we can keep the lights on." He explained that the
systems not meeting the reliability criteria were not reported.
When a system is not reliable, problems would be identified in
an interim step and fixes are attempted by adjusting mixes of
capacity. He pointed out the three tests for reliability on
slide 19, as listed: have sufficient generation resources to
meet the demand for electricity, have operating reserves, and
have sufficient generation for quick outage response. He stated
that power plants can rapidly fail and be out for extended
periods of time, either from unforeseen events or for needed
maintenance. He stated that these outages were simulated to
check the largest generator in each region for interconnection
and regional robustness. He pointed out slide 20 shows the
locations considered in the analysis for extended outages. He
added that while these interties reduce costs to ratepayers,
they would be vulnerable to outages like all elements in the
power grid. In these cases, he said, no two single large
elements were allowed to cause power outages. He added that
this is an example of things "we basically broke to test the
system." He said, "A big part of my job is to break things and
see if the lights stay on."
10:47:28 AM
MR. DENHOLME stated that slide 21 provides an overview of
electrical reliability with 80 percent depending on wind and
solar for energy. He stated that the system depicted does not
rely on wind and solar for capacity, as Alaska's energy demand
would peak in the winter when there is insufficient sun and
wind. He pointed out that the slide identifies the periods in
each of the scenarios when the grid would need to rely on fossil
fuel generators to meet the demand. He said that during these
periods hydropower and energy storage would also be used.
10:49:57 AM
REPRESENTATIVE FIELDS clarified his understanding that with the
use of gas resources, 80 percent renewables [could achieve
reliability] during the winter months. He questioned the
economics concerning the use of large amounts of natural gas
during the winter months while adding renewable generation,
which would have to be built.
MR. DENHOLME responded, "So that is a huge part of what I want
to talk about." He relayed that he would address this question
after the discussion of the current slide, [as this would help
detail the answer]. He stated that variability needs to be
addressed to confirm 80 percent renewable energy was obtained.
He indicated variability relates to any time "you are getting a
lot more than 80 percent or, in many cases, a lot less than 80
percent." He pointed to the line on the graph [on slide 21]
which depicts this and confirms 80 percent renewables was
achieved. He explained that once 80 percent is obtained, fuel
savings can be evaluated. He expressed the importance of the
role of an upgraded intertie, as seen on slide 23. He noted
that he passed over slide 22.
10:52:56 AM
REPRESENTATIVE KAUFMAN questioned whether Mr. Denholme has ever
provided an analysis of the most cost-effective and reliable
energy mix, as opposed to the analyses for a certain percentage
of renewables. He questioned whether a study of this has been
conducted in Alaska.
MR. DENHOLME responded that NREL has not done this study for
Alaska. He explained that NREL has done many studies on the
cost-optimization mix of resources, either under RPS or in cases
with no policy constraints. Directing attention [to slide 23],
he emphasized the role of the Alaska intertie and its use. He
commented that he has never seen a study when transmission did
not pay for itself, regardless of renewable energy. He stated
that not only would transmission reduce overall cost and
increase reliability, but it would also increase the integration
of renewable energy. He explained the details on the graph,
which depicts the Alaska Intertie ability to share resources.
10:56:30 AM
MR. DENHOLME, [addressing Representative Fields' previous
question on fuel savings], moved to slide 24. He stated that
[deploying renewables] would save the cost of fuel but increase
capital costs of renewable energy. Describing whether [building
renewable energy] would make economic sense, he cautioned that
the full analysis is not available, but some of the pieces
available will help to understand the potential fuel-cost
savings along with some insights into capital costs. In
example, he pointed out the avoided-cost calculation for the
Eklutna Power Plant on the chart. He stated this example is
used because of its flexibility and efficiency as a key source
of reliable energy for the Railbelt. He detailed the estimated
fuel-cost usage at 7 cents per kilowatt hour. He stated that if
a power purchase agreement (PPA) could be signed below this
price, the avoided-fuel cost alone would pay for the renewable
energy investments. Because of the variability of fuel costs,
he explained that any PPA at or below the estimated value would
produce net savings. He speculated that if fuel costs go down,
this should still be considered in the future. He reiterated
that any PPA for any renewable resource at or below this value
would produce net savings in cost, regardless of ongoing costs
associated with maintaining this resource for reliability.
10:59:39 AM
REPRESENTATIVE RAUSCHER expressed his understanding concerning
the fuel cost and ratepayers, but he pointed out that the
capital and maintenance costs would need to be paid. Because
ratepayers would be paying capital costs, he questioned the
benefit compared to what the ratepayers are paying today.
MR. DENHOLME responded that if a power plant is built, the
capital and fixed maintenance costs would be incurred regardless
of whether renewables were built. If the cost of building
renewables is less than the variable fuel cost, this would be a
fuel-cost savings. He pointed out that there would be some
bonuses. If renewables were built, power plants would be used
less; thus, the life of these plants would be extended. He
reasoned that the savings would not be much, but it would add to
the plus side of the balance sheet, with the primary benefit
being avoided-fuel cost. He added that maintenance and
investment in resources could also be deferred.
REPRESENTATIVE RAUSCHER stated that his question had concerned
"if the ratepayers win or lose."
CHAIR SCHRAGE suggested that Representative Fields' upcoming
question may provide an answer.
11:01:37 AM
REPRESENTATIVE FIELDS asked how long an optimized-cost analysis
would take, and if the necessary information to conduct the
analysis is available to NREL.
MR. DENHOLME responded that NREL is "really good at this." He
said that NREL has most of the information, but some of the
Alaska specific information has not been obtained. He offered
to follow up after the meeting with a timeline.
REPRESENTATIVE FIELDS said, "I think we are only looking at 25
percent of the picture." He expressed certainty that renewables
would save money, but he argued the right mix has not yet been
determined, and this cannot be understood until the costs are
known. He said, "It makes very little sense to advance this
when we don't have most of the information we need."
11:03:00 AM
MR. DENHOLME continued with the presentation, noting that the
effect [of deploying renewables] would be accumulative, with
benefits from multidecade investments taking a long time to
accrue. He pointed out the graph on slide 25, which depicts the
accumulation of fuel savings as renewables move to 80 percent.
He said that fuel savings would begin when renewable energy is
deployed, but savings in the beginning would be very little. In
conjunction with the slide, he provided the details of the
projected fuel savings. Speaking about avoided-fuel cost, he
said that every time a wind and solar plant is built, savings
would be locked in, and the electricity prices of ratepayers
would be fixed for 20-plus years. He explained that the portion
of [electricity] being served by wind and solar would not be
exposed to price volatility. He remarked that volatility goes
both ways, and if the price of fossil fuel decreases in the
coming decades, the negative-price rate would need to be
studied. To insulate against short-term price shocks, he
suggested deploying renewables would decrease the impact. He
said, "That is just math, and I'm not really trying to sound
like an advocate here." He added that [renewables] would be in
long-term contracts with a guaranteed price. He said, per the
committee's requested fuel-cost analysis, a study on the
accumulative fuel savings compared to capital costs would need
to be done, and then decisions would need to be made in terms of
benefits associated with avoided costs and the value of avoided-
price volatility.
11:05:46 AM
MR. DENHOLME explained that slide 26 summarizes the results of
the implementation of an 80 percent renewable standard. There
would be an increase in the capital costs of the renewable
infrastructure and a decrease in the costs of the fossil
infrastructure. Less fossil capacity would be built, which
would offset some of the renewable capital costs; however, the
capital costs would still increase. He explained that this is
really a comparison between the net increase of capital costs
and the net decrease in variable costs associated with the
fossil infrastructure. He advised that some of the questions
can be answered now, but because only variable costs are known
and capital costs are unknown, there is not a complete picture.
He pointed to the conclusion on slide 27, which conveys multiple
pathways for reliable electricity. He said further analysis
would be needed to determine an optimum portfolio minimizing
overall costs while maintaining reliability standards.
11:07:17 AM
REPRESENTATIVE FIELDS expressed the opinion that the state
should be aggressively deploying renewable energy; however, the
best way to do this needs to be understood. He continued that
the Railbelt would need to maintain gas capacity and more
storage for periods of low wind and sun. He questioned the
optimum mix for those low renewable periods, referencing using
fuel or building a large amount of pumped-hydro storage. He
suggested that this analysis should be done. He stated that
AEA's shovel-ready costs for capital projects represent $7
billion, or $1000 per person. He stated that he pays over $200
for gas to heat his home. In conclusion, he said, the math may
work out, but still, he would like to see the analysis.
11:08:47 AM
REPRESENTATIVE KAUFMAN referenced a prior presentation to the
committee that discussed other states' implementation of RPS.
He remarked that some states have "lofty" goals and commented on
the differences in Alaska's opportunities. He said, "We have
tremendous hydrocarbon reserves, and ... we don't want to walk
away from them too soon, or at all, if that is the best mix for
us." He said the state can be very dark and cold, and fuel is a
solid energy source. He expressed the opinion that this
resource is dependable and produces jobs in the state. He
referenced that deploying renewables would require equipment
imports for infrastructure. He questioned whether a "prosperity
factor" concerning job creation and productivity in Alaska
should be considered in the mix.
MS. STOUT responded that Alaska has some of the best hydrocarbon
resources in the country but exports most of it. She stated
that the refined product primarily comes from Washington, versus
Alaska, so there is a reliance on a supply chain. She pointed
out the weaknesses in the supply chain should be considered. In
response to the jobs question, she referenced NREL's Jobs
Economic Development Impact Index. She said this tool looks at
jobs created in the various stages of renewable energy
deployment. She stated that initially there would be
construction jobs, and then operations jobs would be created.
She added that the index also considers ancillary jobs like
hotels, restaurants, and gas stations, which would support the
labor force. She stated that the short answer is the impact on
jobs would not be known until an analysis is done. She said if
Alaska pursues renewables, this could be a decision point for
job optimization and building a job market.
11:13:10 AM
REPRESENTATIVE KAUFMAN, with a follow-up comment, expressed the
belief that every state is endowed with a resource mix. He
reiterated the hope that Alaska would not ignore its resources
to pursue a "lofty" goal that may fit better elsewhere, or at a
different point in time. He said, "The adoption curve can be
the bleeding edge as opposed to the leading edge, if you deploy
technology that may be soon displaced by something even better."
He explained that the state should not lock into something which
would not be the optimal solution over the long term, especially
with resources in the state that could be developed.
11:14:22 AM
REPRESENTATIVE FIELDS questioned the process for NREL to be able
to start on the optimized-cost analysis as soon as possible.
MS. STOUT responded that, like state government, this would take
funding. All the funding streams are directly tied to certain
outcomes, research projects, and analyses. She said the expense
in these studies would be in the use of high-performance
computers, which take time. She stated that staff would need to
be reserved, and it would also take additional time to work with
entities within Alaska to obtain the needed data. She concluded
that, in terms of the request, NREL works with state governments
at any level.
[HB 301 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 301 NREL Presentation 3.15.2022.pdf |
HENE 3/15/2022 10:15:00 AM |
HB 301 |
| HB301. Supporting Document. NREL Feasability Study (2022).pdf |
HENE 3/8/2022 10:15:00 AM HENE 3/15/2022 10:15:00 AM |
HB 301 |
| HB 301 Testimony received as of 3.14.2022.pdf |
HENE 3/15/2022 10:15:00 AM |
HB 301 |