Legislature(2023 - 2024)BARNES 124

03/16/2023 10:15 AM House ENERGY

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10:15:15 AM Start
10:16:26 AM Presentation: Renewable Energy Alaska Project
12:00:02 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentations: TELECONFERENCED
- Renewable Energy Alaska Project by Chris Rose,
Founder and CEO
- Alaska Energy Authority by Curtis Thayer,
Executive Director
<Above Item Removed from Agenda>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 16, 2023                                                                                         
                           10:15 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative George Rauscher, Chair                                                                                           
Representative Tom McKay                                                                                                        
Representative Josiah Patkotak                                                                                                  
Representative Stanley Wright                                                                                                   
Representative Mike Prax                                                                                                        
Representative Calvin Schrage                                                                                                   
Representative Ashley Carrick                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                              
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT                                                                                   
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
CHRIS ROSE, Founder and CEO                                                                                                     
Renewable Energy Alaska Project                                                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Gave a presentation titled "Renewable                                                                    
Energy Alaska Project."                                                                                                         
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:15:15 AM                                                                                                                   
                                                                                                                                
CHAIR  GEORGE  RAUSCHER called  the  House  Special Committee  on                                                             
Energy meeting to  order at 10:15 a.m.   Representatives Schrage,                                                               
McKay, Wright,  and Rauscher were  present at the call  to order.                                                               
Representatives  Carrick,  Patkotak,  and  Prax  arrived  as  the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
^PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT                                                                                  
         PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT                                                                      
                                                                                                                              
10:16:26 AM                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER  announced that the  only order of  business would                                                               
be a presentation titled "Renewable Energy Alaska Project."                                                                     
                                                                                                                                
10:17:03 AM                                                                                                                   
                                                                                                                                
CHRIS  ROSE, Founder  and CEO,  Renewable Energy  Alaska Project,                                                               
(REAP), gave a PowerPoint  presentation, titled "Renewable Energy                                                               
Alaska  Project" [hard  copy included  in the  committee packet].                                                               
Showing slide 2  and slide 3, he stated that  REAP is a nonprofit                                                               
coalition  of businesses,  NGOs,  electric  utilities, and  clean                                                               
energy developers across the state of  Alaska.  He said that REAP                                                               
has  existed  for  20  years,  and its  mission  is  to  increase                                                               
renewable  energy development  and energy  efficiency in  Alaska.                                                               
The  project has  several  programs,  including promoting  energy                                                               
literacy, partnerships  with federal agencies to  bring technical                                                               
assistance to  rural Alaska, and  working to create  clean energy                                                               
careers across the state.  He  said that REAP played an important                                                               
role in the creation of the  Renewable Energy Grant Fund, as well                                                               
as establishing a  "green bank" to provide loans  to Alaskans for                                                               
the  purpose of  weatherizing their  homes.   He  said that  more                                                               
people  are needed  in  Alaska who  can  provide maintenance  for                                                               
these projects.                                                                                                                 
                                                                                                                                
10:25:11 AM                                                                                                                   
                                                                                                                                
CHAIR  RAUSCHER asked  whether a  journeyman  electrician has  to                                                               
work on each of these projects.                                                                                                 
                                                                                                                                
MR. ROSE affirmed that is correct.                                                                                              
                                                                                                                                
MR. ROSE  continued to slide 4  and gave a brief  overview of the                                                               
presentation,  focusing on  how electricity  rates in  Alaska are                                                               
rising faster  than those in the  Lower 48.  He  pointed out that                                                               
the cost of natural gas is  rising, and Hilcorp may not renew its                                                               
contracts with  Cook Inlet.   He said that importing  natural gas                                                               
would be  an expensive  option and rising  natural gas  prices on                                                               
the Railbelt  would prevent rural  Alaskans from  benefiting from                                                               
the power cost equalization (PCE) program.                                                                                      
                                                                                                                                
10:30:42 AM                                                                                                                   
                                                                                                                                
MR. ROSE, in  response to a committee  question concerning access                                                               
to  solar  panels,  answered  that  the  federal  government  has                                                               
extended tax  credits for solar  panel installation by  10 years.                                                               
He added that the credit is up  to 30 percent, and it is possible                                                               
for  solar  panel  users  to   sell  excess  power  back  to  the                                                               
utilities.   In response  to a follow-up  question, he  said that                                                               
building solar  panels is  one of the  biggest businesses  in the                                                               
world.                                                                                                                          
                                                                                                                                
MR. ROSE, in response to  a committee question concerning Hilcorp                                                               
not  renewing  its  contracts,  expressed  the  hope  that  other                                                               
companies  would have  the ability  to produce  natural gas  at a                                                               
greater  volume  and an  affordable  price.    In response  to  a                                                               
follow-up  question,  he  said that  renewable  energy  would  be                                                               
competitive even without  tax credits.  In  response to questions                                                               
concerning whether  Golden Valley Electric Association  buys fuel                                                               
to  power its  plants, he  stated battery  technology would  give                                                               
Golden Valley a greater chance  to integrate power.  He explained                                                               
Golden Valley's  battery cost  is paid by  "everyone."   He added                                                               
that it is  ultimately less expensive than buying more  fuel.  In                                                               
response to  a follow-up  question, he  said that  federal grants                                                               
are being sought  for upgrades to the  Bradley Lake Hydroelectric                                                               
Project.                                                                                                                        
                                                                                                                                
10:46:09 AM                                                                                                                   
                                                                                                                                
MR. ROSE  continued to slide 5  through slide 7 and  gave a brief                                                               
comparison of  electric rates  and natural gas  prices.   He said                                                               
that the  Matanuska Electric Association  (MEA) serves  his area,                                                               
and rates have increased by 50  percent.  The average increase in                                                               
cost in the  Lower 48 in the  last 10 years has been  2 cents per                                                               
kilowatt-hour (kWh)  compared to the  7-cent increase per  kWh on                                                               
the Railbelt.   He  said that  costs for  Cook Inlet  natural gas                                                               
have  increased from  $1.50 to  $7.50 in  the last  10 years,  an                                                               
increase of more  than 3 times compared to the  Henry Hub natural                                                               
gas  market.   He expressed  the understanding  that starting  in                                                               
2027 the amount of natural gas  being produced from Cook Inlet is                                                               
expected to fall below the demand.                                                                                              
                                                                                                                                
10:50:46 AM                                                                                                                   
                                                                                                                                
MR. ROSE, in response to  a committee question, stated that there                                                               
is a discrepancy between supply and  demand.  He pointed out that                                                               
there is gas; however, it needs  to be developed.  In response to                                                               
a follow-up  question, he  reemphasized that  it is  ultimately a                                                               
matter of developing natural gas.                                                                                               
                                                                                                                                
REPRESENTATIVE  CARRICK suggested  that  even with  the proof  of                                                               
natural gas,  it might not be  developed in the next  two to five                                                               
years.                                                                                                                          
                                                                                                                                
REPRESENTATIVE   MCKAY   expressed   the  opinion   that   proven                                                               
undeveloped  natural  gas  means   that  there  is  already  some                                                               
infrastructure in place, but additional wells would be needed.                                                                  
                                                                                                                                
REPRESENTATIVE  PRAX  expressed  the  opinion  that  evidence  of                                                               
natural gas means that development  is likely, and he compared it                                                               
to the development of oil on the North Slope.                                                                                   
                                                                                                                                
REPRESENTATIVE  SCHRAGE expressed  the opinion  that the  natural                                                               
gas available  will only become  more difficult and  expensive to                                                               
produce.                                                                                                                        
                                                                                                                                
MR. ROSE noted  that the current contracts for  natural gas begin                                                               
to expire  next year,  meaning that  further price  increases are                                                               
likely to begin occurring in the near future.                                                                                   
                                                                                                                                
10:59:27 AM                                                                                                                   
                                                                                                                                
MR.  ROSE continued  to  slide 8  through slide  10  and gave  an                                                               
overview of liquefied natural gas  (LNG) prices around the world.                                                               
He  showed a  chart including  the Henry  Hub price,  as well  as                                                               
prices  in  Japan,  the  Japan-Korea  market,  and  Europe.    He                                                               
explained that  the Henry Hub  price is a spot-market  price that                                                               
is currently the  lowest.  He said that Alaska  would likely have                                                               
to buy LNG on  the Asian market and pay the  same prices as those                                                               
markets.   The price of  Japan's spot  LNG has been  volatile and                                                               
has reached  as high as  $35 per thousand  cubic feet (Mcf).   He                                                               
said  that  the  Chugach  Electric   Association  is  looking  at                                                               
scenarios involving  gas with prices  as high  as $12 or  $18 per                                                               
Mcf.                                                                                                                            
                                                                                                                                
MR.  ROSE, in  response  to a  committee  question concerning  an                                                               
Alaska LNG  project, commented that  demand in Japan, one  of the                                                               
most  likely  investors,  is  decreasing,  and  Alaska  would  be                                                               
unlikely to receive  a "hometown discount" based on  the price of                                                               
other fuels in the state.                                                                                                       
                                                                                                                                
11:09:12 AM                                                                                                                   
                                                                                                                                
MR.  ROSE continued  to  slide 11  and slide  12  and showed  the                                                               
potential impact  of LNG import prices  on individual households.                                                               
He said  that those relying  on PCE  are being affected  the most                                                               
because of  the increases  in PCE's floor.   He  expressed REAP's                                                               
belief that  moving to  renewable energy  and saving  natural gas                                                               
for  heating  is the  best  path  forward  to avoid  reliance  on                                                               
volatile LNG imports.                                                                                                           
                                                                                                                                
MR. ROSE  moved to slide 13,  showing a chart comparing  the cost                                                               
of solar and wind power generation.   He said that wind and solar                                                               
power are cheaper  than natural gas, and he  suggested that these                                                               
prices are decreasing.                                                                                                          
                                                                                                                                
MR.  ROSE,   in  response  to  a   committee  question,  compared                                                               
renewable energy  projects in Alaska  with those in the  Lower 48                                                               
and  said that  a wind  project is  approximately 1.7  times more                                                               
expensive in  Alaska.   He added that  even with  that additional                                                               
cost, the  cost of wind  power still ends  up being a  lower cost                                                               
than natural  gas.  He pointed  out that the price  of wind power                                                               
produced  on Fire  Island  has decreased  since  the project  was                                                               
first built.   In response to a follow-up question,  he said that                                                               
parts for an offshore turbine would travel by ship.                                                                             
                                                                                                                                
11:21:58 AM                                                                                                                   
                                                                                                                                
MR.  ROSE  moved  to  slide  14  and  showed  a  chart  with  the                                                               
percentage of  solar power  generation in the  country.   He said                                                               
that in California,  a state with a population of  37 million, 25                                                               
percent of its energy is generated by solar.                                                                                    
                                                                                                                                
MR. ROSE continued to slide 15  and slide 16 and gave an overview                                                               
of net capacity  additions by their source.  He  said that in the                                                               
last  10 years,  more fossil  fuel plants  have been  closed than                                                               
opened, and  80 percent of new  power plants in the  Lower 48 are                                                               
either wind  or solar plants.   He  showed a chart  detailing the                                                               
percentages of capacity generation by source.                                                                                   
                                                                                                                                
MR. ROSE, in response to  a committee question concerning whether                                                               
the numbers would change if  each wind turbine was considered its                                                               
own plant, answered that a  project's capacity is measured by the                                                               
megawatt hours (MWh)  it can produce, even if it  does not always                                                               
produce this  amount.  He  added that fossil fuel  and geothermal                                                               
plants  have the  ability  to  operate at  times  in which  other                                                               
renewable energy sources cannot.                                                                                                
                                                                                                                                
MR. ROSE, in response to  a committee question, answered that the                                                               
capacity on the chart is nameplate capacity.                                                                                    
                                                                                                                                
11:31:17 AM                                                                                                                   
                                                                                                                                
MR. ROSE continued to slide 17  through slide 19 and gave a brief                                                               
overview of avoided cost.  He  explained that "avoided cost" is a                                                               
term that describes the cost  avoided when a utility company buys                                                               
generated fuel  from a third  party.   He said that  MEA's recent                                                               
wind  power project  has an  avoided cost  that already  makes it                                                               
cheaper  than  natural  gas.    He  stated  that  the  Regulatory                                                               
Commission  of Alaska  (RCA) requires  a five-year  projection of                                                               
costs  relating to  utilities, including  the avoided  cost.   He                                                               
showed a  chart detailing avoided  cost scenarios  with potential                                                               
LNG spot prices.   He added that using  renewable energy projects                                                               
would allow the private sector  to be involved in lowering energy                                                               
prices.   The  investors of  these projects,  not the  utilities,                                                               
take all risk of a project not working.                                                                                         
                                                                                                                                
11:38:10 AM                                                                                                                   
                                                                                                                                
MR.  ROSE moved  to  slide  20 and  slide  21  and continued  his                                                               
discussion of  avoided cost.   He  showed a  line graph  with the                                                               
same information as  the previous bar graph.  He  stated that the                                                               
avoided cost  rises even if  natural gas prices increase  only to                                                               
$12  Mcf.   He pointed  out the  target of  reaching a  renewable                                                               
portfolio  standard (RPS)  of 80  percent by  the year  2040, and                                                               
utilities  would face  a fine  for  every MWh  not produced  with                                                               
renewable energy  over the  allotted amount.   He  explained that                                                               
the estimated capital  cost to reach 80  percent renewable energy                                                               
would be $3.2 billion; however,  he allowed that the estimate was                                                               
made before it  was known that federal tax  credits for renewable                                                               
energy would be continued.                                                                                                      
                                                                                                                                
11:44:00 AM                                                                                                                   
                                                                                                                                
MR. ROSE, in response to  a committee question, answered that the                                                               
analysis is based  on a recent wind project built  in Alaska.  In                                                               
response to  a follow-up question,  he expressed  the possibility                                                               
that tax credits  for natural gas may have the  potential to help                                                               
with  natural  gas prices;  however,  this  does not  remove  the                                                               
volatility of these  prices.  He noted that  prices for renewable                                                               
generation remain stable.                                                                                                       
                                                                                                                                
MR. ROSE, in response to  a committee question, answered that the                                                               
cost of battery  storage is not included in  the analysis because                                                               
the Railbelt  utilities have plans to  build batteries regardless                                                               
of the direction taken for power generation.                                                                                    
                                                                                                                                
MR.  ROSE, in  response to  a committee  question, expressed  the                                                               
opinion  that  it is  generally  correct  that more  transmission                                                               
lines  would mean  less needed  battery storage.   He  added that                                                               
some battery storage would still  be necessary, as batteries have                                                               
other   purposes,  such   as  offering   power  during   gaps  in                                                               
generation.   In response to  a follow-up question, he  said that                                                               
the  status quo  would  result in  the  incurrence of  additional                                                               
costs due to LNG imports.                                                                                                       
                                                                                                                                
11:57:09 AM                                                                                                                   
                                                                                                                                
MR.  ROSE  continued  to  slide  22 and  slide  23,  listing  the                                                               
benefits  of   having  RPS,  as  follows:   diversifies  Alaska's                                                               
generation   portfolio   and   protects  ratepayers   from   cost                                                               
volatility; saves  Cook Inlet natural  gas for  heating; utilizes                                                               
local  resources; creates  jobs;  and  increases Alaska's  energy                                                               
independence.   He  advised that  Alaska should  see where  it is                                                               
going and act accordingly.                                                                                                      
                                                                                                                                
12:00:02 PM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 12:00 p.m.                                                                 

Document Name Date/Time Subjects
House Energy 3-16-23.pdf HENE 3/16/2023 10:15:00 AM
REAP