Legislature(2023 - 2024)BARNES 124

04/27/2023 10:15 AM House ENERGY

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10:15:28 AM Start
10:17:24 AM HB121
11:38:18 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         April 27, 2023                                                                                         
                           10:15 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative George Rauscher, Chair                                                                                           
Representative Tom McKay                                                                                                        
Representative Stanley Wright                                                                                                   
Representative Mike Prax                                                                                                        
Representative Calvin Schrage                                                                                                   
Representative Ashley Carrick                                                                                                   
MEMBERS ABSENT                                                                                                                
Representative Josiah Patkotak                                                                                                  
OTHER LEGISLATORS PRESENT                                                                                                     
Senator Löki Tobin                                                                                                              
Representative Zack Fields                                                                                                      
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 121                                                                                                              
"An Act relating  to a renewable portfolio  standard; relating to                                                               
electrical  energy transmission;  relating to  distributed energy                                                               
systems;  relating to  power cost  equalization; relating  to the                                                               
Alaska Energy Authority; and providing for an effective date."                                                                  
     - -- TESTIMONY <INVITATION ONLY> --                                                                                        
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 121                                                                                                                  
SHORT TITLE: UTILITIES: RENEWABLE PORTFOLIO STANDARD                                                                            
SPONSOR(s): REPRESENTATIVE(s) SUMNER                                                                                            
03/17/23       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/17/23       (H)       ENE, L&C                                                                                               
04/27/23       (H)       ENE AT 10:15 AM BARNES 124                                                                             
WITNESS REGISTER                                                                                                              
REPRESENTATIVE JESSE SUMNER                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As prime sponsor, introduced HB 121.                                                                     
JESSE LOGAN, Staff                                                                                                              
Representative Jesse Sumner                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Provided information  on HB 121,  on behalf                                                             
of Representative Sumner, prime sponsor.                                                                                        
CHRIS ROSE, Director                                                                                                            
Renewable Energy Alaska Project                                                                                                 
Sutton, Alaska                                                                                                                  
POSITION STATEMENT:  Gave a  PowerPoint presentation, titled "Why                                                             
the Railbelt Needs a Renewable Portfolio Standard."                                                                             
MARK GLICK, Chief Energy Officer                                                                                                
Hawai'i State Energy Office                                                                                                     
State of Hawai'i                                                                                                                
Honolulu, Hawai'i                                                                                                               
POSITION  STATEMENT:    Gave a  PowerPoint  presentation,  titled                                                             
"Hawai'i State Energy Office."                                                                                                  
ACTION NARRATIVE                                                                                                              
10:15:28 AM                                                                                                                   
CHAIR  GEORGE  RAUSCHER called  the  House  Special Committee  on                                                             
Energy meeting  to order  at 10:15  a.m.   Representatives McKay,                                                               
Prax,  and   Rauscher  were  present   at  the  call   to  order.                                                               
Representatives  Carrick,  Schrage,  and Wright  arrived  as  the                                                               
meeting was in progress.                                                                                                        
         HB 121-UTILITIES: RENEWABLE PORTFOLIO STANDARD                                                                     
10:17:24 AM                                                                                                                   
CHAIR RAUSCHER  announced that the  only order of  business would                                                               
be HB  121, "An Act  relating to a renewable  portfolio standard;                                                               
relating   to  electrical   energy   transmission;  relating   to                                                               
distributed energy systems; relating  to power cost equalization;                                                               
relating to  the Alaska  Energy Authority;  and providing  for an                                                               
effective date."                                                                                                                
10:18:25 AM                                                                                                                   
REPRESENTATIVE JESSE  SUMNER, Alaska State Legislature,  as prime                                                               
sponsor,  introduced HB  121.   He  explained that  HB 121  would                                                               
require  the Railbelt  utilities  to diversify  their sources  of                                                               
energy  production   and  increase   the  percentage   of  energy                                                               
generated  using   renewable  sources.    He   pointed  out  that                                                               
currently 15  percent of energy  generated on the  Railbelt comes                                                               
from  renewable  sources,  and  the  proposed  legislation  would                                                               
require an  increase of this to  80 percent by 2040.   Because of                                                               
the increase  in the price  of Cook  Inlet natural gas,  he said,                                                               
the Railbelt  energy costs  have increased  sharply; furthermore,                                                               
Cook Inlet  natural gas  is expected  to fail  to meet  demand by                                                               
2027.  He  stated that HB 121 would help  stabilize energy prices                                                               
by using available renewable sources  of generation to offset the                                                               
declining supply of natural gas.                                                                                                
10:20:51 AM                                                                                                                   
JESSE  LOGAN, Staff,  Representative Jesse  Sumner, Alaska  State                                                               
Legislature,  spoke  to  HB  121,  on  behalf  of  Representative                                                               
Sumner, prime sponsor.   He stated that the  governor has created                                                               
an energy task  force which will create a list  of energy related                                                               
recommendations   by  Fall   2023.     He   advised  that   these                                                               
recommendations  may  influence  the proposed  legislation  going                                                               
10:21:34 AM                                                                                                                   
The committee took an at-ease from 10:20 a.m. to 10:21 a.m.                                                                     
10:22:20 AM                                                                                                                   
CHRIS  ROSE, Director,  Renewable Energy  Alaska Project,  gave a                                                               
PowerPoint  presentation,  titled  "Why   the  Railbelt  Needs  a                                                               
Renewable Portfolio  Standard (RPS)"  [hard copy included  in the                                                               
committee packet.]   Moving from  slide 2 to  slide 5, he  gave a                                                               
brief overview, stating that the  Renewable Energy Alaska Project                                                               
(REAP) was  founded in 2004  as a statewide,  nonprofit coalition                                                               
of  over  60  energy   stakeholders,  which  include  developers,                                                               
consumer   groups,   electric   utilities,  and   Alaska   Native                                                               
corporations.   He stated that  REAP collaborates with  state and                                                               
federal agencies,  focusing on policy  and financing  in addition                                                               
to technology.  He reiterated  that energy prices on the Railbelt                                                               
are  increasing  because of  the  expected  upcoming natural  gas                                                               
shortage.    He  expressed  the  opinion  that  renewable  energy                                                               
generation will be  a cheaper and more stable way  to make up for                                                               
the shortfall.   He displayed two graphs showing  the increase in                                                               
residential electric  rates and the  price of Cook  Inlet natural                                                               
gas versus natural gas prices in other parts of the U.S.                                                                        
10:25:05 AM                                                                                                                   
MR.  ROSE, moving  from  slide  6 to  slide  9, displayed  graphs                                                               
showing  the  volatility  of liquified  natural  gas  (LNG)  spot                                                               
prices,  LNG  spot prices  in  Japan  versus average  Cook  Inlet                                                               
prices, and scenarios involving LNG imports  up to 2028.  He said                                                               
that 15  new natural  gas wells  are needed  annually to  keep up                                                               
with demand.  He advised that  imported LNG will be expensive, in                                                               
part,  because of  the natural  gas  market in  Asia, while  Cook                                                               
Inlet natural gas  contracts will continue to  become shorter and                                                               
more expensive.  He expressed the  opinion that even in the best-                                                               
case scenario for imported natural  gas, it will be significantly                                                               
more expensive than current natural gas prices.                                                                                 
10:28:08 AM                                                                                                                   
MR.  ROSE,  displaying  slide  10  and slide  11,  gave  a  brief                                                               
overview of avoided cost.  He  explained that avoided cost is the                                                               
cost  of generation  which is  avoided when  a utility  purchases                                                               
electricity  from  a  third  party.    He  showed  a  graph  with                                                               
different   avoided   cost   scenarios   for   Chugach   Electric                                                               
Association, Matanuska  Electric Association, and  Homer Electric                                                               
Association.   He  added that  these scenarios  are based  on the                                                               
potential prices  of LNG.   He said  that even  small-scale solar                                                               
projects  are  matching  the  avoided cost  of  natural  gas  and                                                               
creating  a   standard  which  has   been  addressed   but  never                                                               
10:30:55 AM                                                                                                                   
REPRESENTATIVE  CARRICK questioned  the  avoided  cost in  future                                                               
MR. ROSE  answered that  the graph  shows different  scenarios of                                                               
LNG  import prices.   He  said that  $12 would  be an  optimistic                                                               
price, if  a long-term  deal were signed,  and he  explained that                                                               
the higher the cost of imported  LNG, the higher the avoided cost                                                               
would be in  regard to RPS.  He added  that bigger projects would                                                               
avoid even more cost.                                                                                                           
10:33:35 AM                                                                                                                   
CHAIR RAUSCHER  asked how the  projections for future  costs were                                                               
MR.  ROSE answered  that numbers  came from  the current  market,                                                               
from  Chugach Electric  Association  possible  projects, and  the                                                               
Department of Natural Resources.                                                                                                
10:34:36 AM                                                                                                                   
MR.  ROSE, on  slide  12  through slide  14,  stated that  rising                                                               
energy   costs   on   the  Railbelt   negatively   affect   rural                                                               
communities,  as  it decreases  the  amount  rural costs  can  be                                                               
equalized by the  power cost equalization program.   He displayed                                                               
a  graph showing  the amount  which  would be  lost annually  per                                                               
rural households  in different  LNG price  scenarios.   He argued                                                               
that  imported LNG  should not  be the  answer and  showed a  map                                                               
displaying the  different states with  some type of  renewable or                                                               
clean energy standard.                                                                                                          
10:37:17 AM                                                                                                                   
REPRESENTATIVE   CARRICK  asked   for  an   explanation  of   the                                                               
difference between a portfolio goal and a portfolio standard.                                                                   
MR.  ROSE explained  that states  with a  portfolio standard  can                                                               
issue  fines  for noncompliance.    In  response to  a  follow-up                                                               
question, he  said that Alaska  does not have  codified renewable                                                               
energy goals.                                                                                                                   
10:39:12 AM                                                                                                                   
CHAIR RAUSCHER asked whether any  state without codified goals or                                                               
standards is in a similar situation to Alaska.                                                                                  
MR.  ROSE answered  that Alaska  is in  a unique  place, although                                                               
Hawai'i has the similar situation  of being disconnected from the                                                               
rest of  the U.S.   He added that Texas  is not connected  to the                                                               
national grid.                                                                                                                  
10:40:17 AM                                                                                                                   
MR.  ROSE showed  slide  15  and slide  16,  pointing out  graphs                                                               
depicting  the decreasing  costs of  renewable energy.   He  said                                                               
that the decrease in costs  is directly related to states putting                                                               
renewable  energy standards  in  place.   He  continued that  the                                                               
manufacturing  of solar  panels is  increasing, and  this further                                                               
reduces the  costs of generating  energy using solar.   He stated                                                               
that  solar   and  wind  energy  generation   are  becoming  more                                                               
competitive with  natural gas in terms  of price.  He  added that                                                               
natural gas is  cheaper in the Lower 48, and  renewable energy is                                                               
becoming less expensive to generate, even without subsidies.                                                                    
10:43:04 AM                                                                                                                   
CHAIR  RAUSCHER asked  whether the  reduced  prices of  renewable                                                               
energy accounts for the need for battery storage.                                                                               
MR. ROSE  answered that  renewable energy  prices would  still be                                                               
competitive when accounting for the  cost of battery storage.  He                                                               
added that battery storage costs are decreasing.                                                                                
10:45:22 AM                                                                                                                   
MR.  ROSE,  moving from  slide  17  to  slide 19,  showed  graphs                                                               
depicting  the following:  percentage by  state of  generation by                                                               
solar in  2022; states with  RPS which include  solar provisions;                                                               
and the  net capacity added  in gigawatts by energy  source type.                                                               
He remarked  that Massachusetts, a  state which is  not typically                                                               
sunny,  generates 20  percent  of  its energy  using  solar.   He                                                               
expressed  the opinion  that Alaska  has a  great opportunity  to                                                               
capitalize on the  amount of sun in the summer,  and HB 121 would                                                               
allow homeowners to sell excess  energy generated by solar panels                                                               
at  the current  market rate.   He  said that  83 percent  of new                                                               
energy generation in the U.S. last  year came from solar and wind                                                               
generation, and more  fossil fuel power plants  are being retired                                                               
than built.                                                                                                                     
10:48:35 AM                                                                                                                   
MR.  ROSE, moving  from  slide 20  to slide  23,  stated that  in                                                               
Alaska  a similar  bill was  proposed  by the  governor in  2022,                                                               
which passed  two committees  before the  legislature ended.   He                                                               
stated that  a study has found  RPS of 80 percent  achievable and                                                               
would  result  in a  significant  reduction  in energy  and  fuel                                                               
costs.    The estimated  cost  to  achieve 80  percent  renewable                                                               
energy  is   approximately  3.2  billion,  and   there  would  be                                                               
approximately $6.7  billion savings before the  10-year extension                                                               
of federal tax credits for renewable energy.                                                                                    
10:51:45 AM                                                                                                                   
MR. ROSE,  continuing to slide  24 through slide 26,  stated that                                                               
the 2022 study did not  include federal production tax credits or                                                               
any  other type  of  federal support.   The  study  also did  not                                                               
account for  higher LNG  prices, the decrease  in costs  for wind                                                               
and solar,  and the avoidance  of carbon  taxes.  He  displayed a                                                               
graph depicting planned  capacity additions in the  U.S. in 2023.                                                               
He  said  that wind  and  solar  will  make up  approximately  35                                                               
gigawatts (GW),  or 65 percent,  of added generation  capacity in                                                               
2023.   An  additional 9.4  megawatts  (MWs), or  17 percent,  is                                                               
expected  to be  added in  the form  of battery  storage to  save                                                               
excess power  generated during  peak times.   He stated  that the                                                               
Railbelt has  an annual load  of 535  MWs, and an  additional 348                                                               
MWs in  renewable generation  would meet the  goal of  80 percent                                                               
renewable energy generation.   He added that  there are companies                                                               
considering wind and  solar projects of over 100  MWs, making the                                                               
goal achievable if Alaska incentivizes investment.                                                                              
10:56:10 AM                                                                                                                   
CHAIR RAUSCHER asked whether 10  cents per kilowatt-hour would be                                                               
achieved by 2040.                                                                                                               
MR.  ROSE answered  that achieving  such prices  would require  a                                                               
significant reduction  in overhead costs  for the utilities.   In                                                               
response  to a  follow-up  question, he  said  that reaching  the                                                               
milestones laid  out in HB 121  would require an increase  in the                                                               
amount  of   renewable  energy  generation.     He  advised  that                                                               
renewable  energy generation  is  expected to  decrease in  cost,                                                               
whereas fossil fuel generation is expected to increase in cost.                                                                 
10:59:28 AM                                                                                                                   
MR. ROSE, displaying slide 27 and  slide 28, stated that in 2020,                                                               
a  bill was  passed requiring  the Railbelt  utilities develop  a                                                               
standards  and  regional  planning  council  for  cooperation  on                                                               
energy  generation and  transmission,  and this  resulted in  the                                                               
Railbelt  Reliability  Council (RRC),  which  is  made up  of  13                                                               
utilities  and  other  stakeholders.     He  continued  that  the                                                               
proposed legislation  would require RRC to  implement and enforce                                                               
RPS.  He said that the  utilities are asking for an investment of                                                               
$2.5  billion  to  create and  maintain  transmission  lines  for                                                               
increased  reliability.     He   stated  that  an   expansion  of                                                               
electricity transmission is necessary  to support the investments                                                               
being made in renewable energy transmission.                                                                                    
11:02:55 AM                                                                                                                   
CHAIR RAUSCHER  asked whether the  Railbelt utilities  would have                                                               
the ability  to build the  necessary renewable  infrastructure on                                                               
their own.                                                                                                                      
MR. ROSE answered no, explaining  that creating RPS would require                                                               
drawing from different sources, as  this is the only possible way                                                               
to achieve  the goal.   In response  to a follow-up  question, he                                                               
said  that  RRC would  need  a  standard to  implement  renewable                                                               
energy in Alaska.                                                                                                               
11:05:09 AM                                                                                                                   
MR. ROSE,  moving to slide  29 and  then to slide  30, reiterated                                                               
that creating  RPS would  diversify energy  generation, stabilize                                                               
and  reduce  energy  costs,  increase  energy  independence,  and                                                               
create additional jobs.   He emphasized that time  is running out                                                               
to pass RPS  before new contracts are  signed, possibly resulting                                                               
in the import of natural gas; thus, higher energy prices.                                                                     
11:07:37 AM                                                                                                                   
CHAIR RAUSCHER  asked whether  the utilities  would be  forced to                                                               
implement their own RPS if no legislation was passed.                                                                           
MR. ROSE  answered no, although  he expressed the hope  that they                                                               
would.    He  said  that  implementing RPS  would  not  mean  the                                                               
elimination  of  LNG  contracts;  however, it  would  reduce  the                                                               
amount of LNG  needed over time.  He added  that adding RPS would                                                               
attract more outside investment into renewable energy in Alaska.                                                                
11:11:04 AM                                                                                                                   
The committee took an at-ease from 11:11 a.m. to 11:16 a.m.                                                                     
11:16:35 AM                                                                                                                   
MARK GLICK,  Chief Energy Officer,  Hawai'i State  Energy Office,                                                               
State  of   Hawai'i,  gave  a  PowerPoint   presentation  titled,                                                               
"Hawai'i  State  Energy  Office"   [hard  copy  included  in  the                                                               
committee packet.   He began  on slide 2  and slide 3  and stated                                                               
that  the  mission of  the  Hawai'i  State  Energy Office  is  to                                                               
"promote   energy  efficiency,   renewable   energy,  and   clean                                                               
transportation  to   help  achieve  a  resilient,   clean  energy                                                               
economy."  He gave a list  of requirements from Hawai'i's RPS and                                                               
said each  utility in the state  will be required to  achieve 100                                                               
percent renewable energy generation by the end of 2045.                                                                         
11:20:22 AM                                                                                                                   
MR. GLICK,  moving to slide  4 and  slide 5, stated  that Hawai'i                                                               
also has a decarbonization program.   The state has established a                                                               
target  to  sequester  more  carbon  and  greenhouse  gases  than                                                               
emitted by the  year 2045, and limit greenhouse  gas emissions to                                                               
50 percent below the  2005 level by 2030.  He  said that the main                                                               
drivers of energy transition in  Hawai'i is the increasing prices                                                               
of fossil fuels, a sense of  urgency in regard to climate change,                                                               
and bipartisan collaboration.                                                                                                   
11:24:06 AM                                                                                                                   
MR. GLICK,  continuing to  slide 6  and slide  7, stated  that in                                                               
2021, 64  percent of  Hawai'i's oil imports  came from  Libya, 28                                                               
percent from  Russia, and  8 percent from  Argentina.   He stated                                                               
that, in response  to the Russian invasion  of Ukraine, Hawai'i's                                                               
only  refinery  shifted  from Russian  imports  to  imports  from                                                               
Argentina and Libya.   He displayed a graph  comparing crude oil,                                                               
gasoline,  and electricity  prices  in Hawai'i  since  2006.   He                                                               
added  that while  energy prices  have been  volatile everywhere,                                                               
they are  more volatile and  economically challenging  in Hawai'i                                                               
because of its remote location.                                                                                                 
11:27:24 AM                                                                                                                   
MR.  GLICK, moving  to slide  8 and  slide 9,  displayed graphics                                                               
depicting  the effects  of  the 2008  through  2009 recession  on                                                               
Hawai'i and the supply chain  vulnerabilities faced by the state.                                                               
He said,  during the  recession, tax  revenue in  Hawai'i dropped                                                               
significantly when compared with the rest  of the U.S.  He stated                                                               
that  Hawai'i  is  facing  a sharp  decline  in  tourism,  posing                                                               
economic challenges for  the state's biggest industry.   He added                                                               
that Hawai'i's oil  refinery closed, and the state  is facing the                                                               
challenge  of shipping  in resources.   He  added that  Hawai'i's                                                               
energy  system   is  at  much   greater  risk  when   faced  with                                                               
circumstances such as bad weather.                                                                                              
11:32:01 AM                                                                                                                   
MR.  GLICK moved  to  slide  12 through  slide  15, stating  that                                                               
Hawai'i  is the  first  state to  set  RPS at  100  percent.   He                                                               
displayed  graphs showing  future renewable  energy projects  and                                                               
progress towards meeting its RPS goals.   He pointed out that the                                                               
result is a  decrease in energy costs at a  time when fossil fuel                                                               
costs are continuing  to increase.  He stated  that Kaua'i Island                                                               
Electric Cooperative is currently  at 70 percent renewable energy                                                               
generation and is expected to reach 90 percent by 2025.                                                                         
11:35:32 AM                                                                                                                   
REPRESENTATIVE  SCHRAGE  asked  how closing  fossil  fuel  energy                                                               
generation assets before their expected lifespan was justified.                                                                 
MR. GLICK answered  that, in the early years  of Hawai'i's energy                                                               
transition,  there were  some increases  in costs  because assets                                                               
were being closed before the  expected life-expectancy.  He added                                                               
that  others  had  been  paid  off and  were  used  beyond  their                                                               
expected useful  life, and the  reduction in future  energy costs                                                               
has been worth the investment.                                                                                                  
11:38:01 AM                                                                                                                   
CHAIR RAUSCHER announced that HB 121 was held over.                                                                             
11:38:18 AM                                                                                                                   
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 11:38 a.m.                                                                 

Document Name Date/Time Subjects
HB 121 Letter of Support- Launch Alaska.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB 121 Letter of Support - Cold Climate Housing Research Center.pdf HENE 4/27/2023 10:15:00 AM
HB 121
CIRI Letter of Support HB 121.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB 121 DCCED RCA 4-23-23.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB 121 Sectional Analysis Version A.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB 121 Sponsor Statement.pdf HENE 4/27/2023 10:15:00 AM
HB 121
UCM Letter on HB121 RPS HENE.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB121-DCCED-RCA-04-25-23.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB121-DCCED-AIDEA-04-24-23.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB121-DCCED-AEA-04-25-23.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB 121 ROSE House Energy RPS 4-27-23.pdf HENE 4/27/2023 10:15:00 AM
HB 121
HB 121 HSEO_Alaska_StateLeg_04272023.pdf HENE 4/27/2023 10:15:00 AM
HB 121