Legislature(2023 - 2024)DAVIS 106
03/14/2024 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| HB368 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 368 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 368-ELECTRICAL ENERGY & ENERGY PORTFOLIO STDS
10:18:28 AM
CHAIR RAUSCHER announced that the only order of business would
be HOUSE BILL NO. 368, "An Act relating to clean energy
standards and a clean energy transferable tax credit; and
providing for an effective date."
10:20:04 AM
STEVE COLT, Research Professor, Alaska Center for Energy and
Power (ACEP), University of Alaska Fairbanks (UAF), on behalf of
the House Special Committee on Energy, sponsor, provided a
PowerPoint presentation on HB 368, [hardcopy included in the
committee packet], titled "Analysis of Clean Energy electricity
generation and Clean Energy Tax Credit amounts under HB 368."
He displayed slide 2, which provided answers to questions and
read as follows [original punctuation provided]:
Q1. How much new Clean Energy (as defined by HB 368)
would be generated if the Clean Energy Standard [CES]
of 35 [percent] after 10 years and 60 [percent] after
25 years is met?
("after" means after 2026 or after
transmission upgrades are completed,
whichever is later)
Q2. What amount of Clean Energy Tax Credits would be
issued if the Clean Energy Standard is met, under
various credit rates?
Q3. How much electricity is used by schools?
10:23:21 AM
MR. COLT continued to slide 3, "Quick answer to Q1: How much new
Clean Energy to meet CES?" The slide depicted a graph and the
statement, "Answer: By 2050, about 4.5 million megawatt-hours
(MWh) statewide would come from Clean Energy sources deployed
after 2026 to meet the CES. That's about equal to current total
Railbelt consumption." He noted that under the bill version he
is working from, the clock for meeting the standard starts when
a sufficient transmission network is in place. Regardless of
the actual start date, he continued, the graph works for showing
the general pattern of what might be expected. Even if the
transmission network was declared adequate tomorrow, he pointed
out, there would be plenty of lead time because Alaska already
has a significant amount of existing clean energy as defined by
HB 368 [shown in blue], so there would be no immediate crisis to
comply with the 35 percent of sales by 10 years as laid out in
the bill. He explained that [the dashed line on the graph]
depicts the total amount of electricity needed to meet the
growth in demand as projected by ACEP and the gold area depicts
the CES targets in HB 368 of 35 percent and 60 percent of the
total electricity generated. The CES process would get 4
million megawatt-hours (MWH) of new clean electricity as well as
0.5 MWh from what he classifies as Alaska's power cost
equalization (PCE) communities.
10:28:05 AM
MR. COLT moved to slide 4, "Quick answer to Q2: How many CE Tax
Credit $$ would be created?" He stated that "at a tax credit of
0.2 cents per kilowatt hour, which is the same as $2 per
megawatt hour, ... the state would be issuing tax credits of
about $5-$6 million per year by ... 2050." He advised that the
credits would not start for several years because there would be
no immediate crisis. While people might deploy clean energy
right away, he added, they wouldn't have to.
10:30:03 AM
REPRESENTATIVE PRAX observed on slide 4 that the cumulative tax
credits would be $65 million over about 20 years, which seems
like a small amount compared to the capital investment that
would be required to achieve the $2 per megawatt hour. He asked
whether this would create a significant incentive.
MR. COLT offered his understanding that an amendment may be
offered to change the [proposed] incentive to 5 cents per
kilowatt hour, which is $50 per megawatt hour, for a limited
time. He advised that 5 cents per kilowatt hour is almost equal
to what Chugach Electric Association is paying for gas-fired
power. Chugach Electric could purchase wind power at 11 cents,
get 5 cents of tax credit, and be able to sell it to ratepayers
for less than what they are paying for gas now, and if gas
prices go up that will become even more attractive. So, he
said, 0.2 cents per kilowatt hour is probably not going to have
a dramatic incentive effect, but 5 cents would have to sway the
calculations that Chugach Electric would be making.
10:34:26 AM
MR. COLT displayed slide 5, which read as follows [original
punctuation provided with some formatting changes]:
The following slides provide:
1. More detail on the assumptions and methods used
to derive these "base case" results
2. Sensitivity cases:
S1: 2 cents per kWh instead of 0.2 cents
S2: 2 cents per kWh plus 1 cent/kWh rural bonus
S3: 5 cents per kWh in years 1-5, then decline to
zero by end of yr 10.
3. Schools: how much electricity do they use?
4. Regional detail and data tables
MR. COLT spoke to slide 6, which read as follows [original
punctuation provided with some formatting changes]:
Assumptions about future electric sales:
• Sales equal the demand or "load" at the customer
meter, including the load served by a customer's own
solar.
• Statewide electric sales in 2022 were about 6 million
megawatt-hours (MWh). 1 MWh = 1,000 kWh.
Railbelt: 4.4 million (75 [percent])
PCE places: 460,000 (8 [percent])
Rest of State: 1.0 million (17 [percent])
• ACEP projects that Railbelt sales will double to 8.8
million MWh in 2050. This projection includes
significant adoption of electric vehicles and modest
adoption of heat pumps by 2050. {see the ACEP Railbelt
2050 Scenarios study, Section 3.2 for more details.)
https://www.uaf.edu/acep/files/media/ACEP_Railbelt_
Decarbonization_Study_Final_Report.pdf
• For this analysis, non-Railbelt sales are projected to
increase by about 77 percent between 2022 and 2050.
MR. COLT showed slide 7, "Projected Electricity Load at customer
meter," and explained that the graph is a picture of the
assumptions and shows the electric sales projections. He
pointed out that the driver of the increased load in the
Railbelt would come from electric vehicles and heat pumps.
However, he qualified, if electric vehicles and heat pumps don't
materialize, then the load in the Railbelt and probably in other
places would remain almost flat.
10:37:14 AM
MR. COLT explained that slide 8 is a tally of the energy already
had in Alaska that would meet the definition of clean energy as
defined by HB 368. Slide 8 read as follows [original
punctuation provided with some formatting changes]:
Assumptions about Railbelt current and projected
electricity generation:
• Current Railbelt Clean Energy, as defined by HB368,
based on year 2022 data:
square4 543,557 MWh from coal (Healy 1, Healy 2, Aurora)
square4 567,393 MWh from hydro (Bradley, Eklutna, Cooper
Lake)
square4 102, 061 MWh from wind (Fire island, Eva Creek,
Delta Wind)
square4 1,577 MWh from utility solar (Willow, GVEA Solar
farm)
square4 About 10,850 MWh from customer-sited Solar (also
known as BTM solar or rooftop solar)
• Customer solar increases to 223,000 MWh by 2050.
• Coal generation equal to current Healy 2 output
(about 2120,0900 MWh) is retired at the end of 2040.
MR. COLT explained that slide 9 is a tally of the energy already
had in power cost equalization (PCE) places that would meet the
definition of clean energy as defined by HB 368. Slide 9 read
as follows [original punctuation provided with some formatting
changes]:
Assumptions about PCE places current and projected
electricity generation:
• Current PCE places Clean Energy, as defined by
HB368, based on year FY2022 data:
square4 32,609 MWh from hydro
square4 22,572 MWh from utility wind & utility solar
square4 55,024 MWh purchased hydro & wind
square4 Perhaps About 500 MWh from customer-sited Solar
• Customer solar increases to 11,138 MWh by 2050.
MR. COLT continued to slide 10 and explained that most of the
energy in the "rest of the state" is hydropower in Southeast
Alaska, so this region has already met the clean energy standard
and wouldn't have to do anything to meet the standard. Slide 10
read as follows [original punctuation provided with some
formatting changes]:
Assumptions about Rest of State current and projected
electricity generation:
• Current Rest-of-State Clean Energy, as defined by
HB368, based on year FY2022 data:
square4 1,083,000 MWh from mostly hydro
square4 Perhaps About 1,300 MWh from customer-sited Solar
• Customer solar increases to about 26,200 MWh by
2050.
• Current rest-of-state Clean Energy greatly exceeds
60 [percent] of sales until about 2050.
10:38:55 AM
MR. COLT paraphrased from slide 11, which read as follows
[original punctuation provided with some formatting changes]:
Assumptions about timing of the Clean Energy Standard:
• The CES "clock" starts on 1/1/2027 and the targets
are therefore 35 [percent] CE by 2036 and 60
[percent] CE by 2051. (This is optimistic, a
reference case).
• New CE generation is deployed along smooth
(exponential) growth pathways to hit the 35
[percent] and 60 [percent] targets. This is the "CES
Target Pathway".
• In this analysis, the pathway is calculated
separately for each region.
MR. COLT addressed slide 12, "The Statewide CES Target Pathway."
The graph, he explained, shows the task that Alaska's utilities
would face if they were to set out to meet the clean energy
standard and to hit 35 percent by 2036 and to hit 60 percent by
2051. He said the black line depicts what needs to be done and
the blue area shows that Alaska already has a head start with
existing renewables. He noted ACEP is projecting that free help
will be received from customer-sited solar. The white triangle
on the graph, he summarized, shows what the utilities will be
faced with to meet the targets depicted by the black line.
10:41:20 AM
MR. COLT discussed the graph on slide 13, "New CE generation is
deployed to stay on the pathway, and it is eligible for CE Tax
Credits during the first 10 years of service." The gold area
depicts the new projects that are eligible for clean energy tax
credits, he explained, and the green area depicts the new
projects that have aged out of tax credit eligibility after 10
years, which helps to limit the expense of the money going out
the door for tax credits. The gold area extends above the CES
target pathway depicted by the black line, he further explained,
because each load serving entity must meet the CES and when all
those entities and Southeast Alaska are added together, the CES
is exceeded statewide.
10:43:31 AM
CHAIR RAUSCHER noted that, under HB 368, the accountability
starts after the transmission line is built. He asked whether
Mr. Colt is saying that [the utilities] will try to attain the
targets early because of the credits.
MR. COLT replied that he will be getting to that question at the
end of the presentation. He explained that the orange extending
above the black line reflects that the Railbelt would have to
put in "a lot of new stuff," whereas Southeast Alaska is in
surplus relative to hitting 35 percent because it [already] has
so much hydro.
10:45:32 AM
The committee took an at-ease from 10:45 a.m. to 10:46 a.m.
10:46:27 AM
CHAIR RAUSCHER requested that Mr. Colt finish his presentation
later in the day due to the upcoming House floor session.
MR. COLT agreed to do so.
10:47:25 AM
The committee took an at-ease from 10:47 a.m. to 10:48 a.m.
[HB 368 was held over and brought back before the committee
following a recess.]
HB 368-ELECTRICAL ENERGY & ENERGY PORTFOLIO STDS
1:34:51 PM
CHAIR RAUSCHER announced that the only order of business would
be a return to HOUSE BILL NO. 368, "An Act relating to clean
energy standards and a clean energy transferable tax credit; and
providing for an effective date."
CHAIR RAUSCHER requested Mr. Colt to resume his analysis of the
clean energy standard (CES) and the tax credits proposed by HB
368.
1:36:08 PM
MR. COLT continued his presentation with slide 14, "Base case:
CE tax credit equals 0.2 cents per kWh, or $2.00 per MWh:" He
explained that the graph depicts the clock starting in 2027 with
a tax credit of 0.2 cents per kWh and the utilities meeting, but
not exceeding, the [proposed] CES, which generates $65 million
in cumulative tax credits [by 2051].
MR. COLT turned to the graph depicted on slide 15, "Sensitivity
Case S1: CE credit equals 2.0 cents per kWh = $20/MWh." Under
this case, he related, the cumulative tax credits would be
[$655] million. The 2-3 cents per kWh, he advised, is at the
level that the federal government would reimburse, or would
subsidize, or would offer tax credits for those clean energy
developers who chose to take advantage of the federal production
tax credit under the [2022 federal] Inflation Reduction Act
(IRA).
1:39:04 PM
REPRESENTATIVE SCHRAGE requested clarification on whether slide
15 is meant to outline the federal incentive available to
utilities or to outline the cost of Amendment 8, if that
amendment were to be passed.
MR. COLT answered that he was asked to provide the math for 2
cents and was unaware of which amendment might invoke this
specific number. It was only while presenting this slide that
he recalled that 2 cents is in the ballpark of what the federal
government is offering through the IRA.
REPRESENTATIVE SCHRAGE requested confirmation that 2 cents is
what the federal incentive is. He further inquired as to
whether that federal incentive program will end in 2032.
MR. COLT replied that according to the IRA's webpages, the
number is 2.75 cents if [the utility] meets all the labor and
apprenticeship requirements and chooses to take the IRA credit
as a production tax credit, which then displaces [the utility's]
ability to take the investment tax credit. He confirmed that it
ends in 2032. However, he continued, an extension clause in the
IRA says that if the US has not reduced its carbon emissions in
the power sector by, he believes, 75 percent, then the credits
will continue. He said he and his ACEP colleagues think it
unlikely the US will meet that 75 percent reduction by 2032 and
have therefore modeled the credit as continuing.
1:42:47 PM
CHAIR RAUSCHER reiterated his previous statement that the
accountability doesn't start until after the transmission line
is completed. He further reiterated his question as to whether
the tax credits and incentives might cause businesses or
utilities to get a head start.
MR. COLT responded yes but said he doesn't have a slide because
he didn't consider it until after the 24-hour cutoff that he was
given.
1:43:59 PM
MR. COLT continued to slide 16, "Sensitivity Case S2: CE credit
equals 2 cents/kWh + 1 cent/kWh rural bonus (Here, "rural" is
PCE places a proxy for other definitions}." He explained that
the blue areas at the tops of the gold bars in the graph show
what would happen if a 1 cent/kWh bonus was added to all the PCE
utility generation that is clean.
1:45:22 PM
MR. COLT skipped slide 17, "Sensitivity Case S3: credit equals 5
cents/kWh for 5 years, then decline to zero by end of year 10."
He stated that he misinterpreted what one of the amendments
really says and therefore the slide should be discarded.
MR. COLT also skipped slide 18, which read as follows [original
punctuation provided with some formatting changes]:
Possible Role of Schools
• According to DEED [Department of Education & Early
Development] School Facilities database, there are
currently about 26 million square feet of school
facility buildings.
• According to CCHRC's [Cold Climate Housing Research
Center's] compilation in 2014 of good-quality data
from 313 schools, the average electricity
consumption of Alaska school buildings equals 8 kWh
per square foot per year.
• Multiplying, schools use 208,000 MWh per year, about
3.5 [percent] of statewide total load.
• Thought experiment: If all schools procured their
own Clean Energy, they might "collect" $562,000 per
year at 0.2 cents/kWh, or $5.6 million at 2
cents/kWh.
1:46:38 PM
REPRESENTATIVE MCKAY observed that according to the graphs the
State of Alaska would be spending hundreds of millions of
dollars in tax credits. He asked how many windmills the tax
credits would represent and how much would they reduce the
global temperature.
MR. COLT displayed slide 21, "Regional Detail: Railbelt," and
answered that under reasonable assumptions, 4 million MWh of
clean energy would be seen as defined by HB 368. He estimated
that if all of that was wind, it would be about 10-12 Shovel-
Creek-size (200-250 megawatts) wind projects. As to how much
that would reduce the global temperature, he said he cannot do
that math.
CHAIR RAUSCHER pointed out that in addition to solar and wind,
what is being talked about is coal, gas, hydropower,
microreactors, blue hydrogen, green hydrogen, and the like.
REPRESENTATIVE MCKAY asked how many windmills are currently at
Shovel Creek, Alaska.
MR. COLT replied that according to the filing with the
Department of Natural Resources (DNR), the proposed installed
capacity of the Shovel Creek Project is 260 MWh of wind.
1:50:33 PM
REPRESENTATIVE PRAX asked whether the calculations consider any
elasticity in the demand for or supply of electricity.
MR. COLT responded that the short answer is no. However, he
continued, the yellow wedge on [the graph on slide 7] represents
new loads coming on to the system in the form of electric
vehicles and heat pumps. To get that kind of new load on the
system, he advised, something will need to be done, such as off-
peak rates, to have favorable rates for those uses that benefit
the consumer, bring the load on, and benefit all the other
ratepayers by helping to spread the cost over more load. He
further noted that [ACEP] is not using a full-blown econometric
model that tries to directly measure price elasticity effect.
1:52:55 PM
MR. COLT returned to slide 21 and concluded his presentation.
He noted that the remaining slides provide backup to make the
record complete.
MR. COLT spoke to the potential effects of Amendment [33-
LS1170\H.9, Walsh, 3/13/24] [yet-to-be-offered to HB 368]. He
stated that the amendment's proposed credit of 5 cents per kWh
for four or five calendar years could really move the needle on
turning an uneconomic project into one that is immediately
economic for today's ratepayers, which would be a powerful
incentive. For example, he continued, Shovel Creek is an
"aspirational" project that isn't yet on the books. He
calculated that at a capacity of 200 megawatts, about 700,000
MWh of energy would be generated, which at a 5-cent credit would
be $35 million a year of state tax credit. Another example of
an "aspirational" project, he related, is Chugach Electric
Association's near-term goal of acquiring 100,000 megawatt hours
of energy by 2025. At 5 cents a kilowatt hour, which is $50 a
megawatt hour, Chugach Electric would get $5 million per year of
tax credit for however long the bill leaves the credit in place,
a substantial reward that ratepayers would love to see. These
two examples, he said, give an idea of what the fiscal impact
would be if there were to be a big uptake.
1:57:39 PM
CHAIR RAUSCHER thanked Mr. Colt for his presentation.
[HB 368 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| H.1 H.3 H.5 and H.6 - Rep. Schrage.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| H.8.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| H.9.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| H.10.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| H.12.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| H.13.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| H.14.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| H.15.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| HB0368 14Mar2024 testimony by S Colt ACEP.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| H.11.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |
| HB 368 3.24.14 Amendment Packet.pdf |
HENE 3/14/2024 10:15:00 AM |
HB 368 |