Legislature(2009 - 2010)Fairbanks
06/17/2009 05:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Statewide Energy Plan|| Hb218|| Hb219 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 218 | TELECONFERENCED | |
| += | HB 219 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
Fairbanks, Alaska
June 17, 2009
5:03 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Nancy Dahlstrom
Representative Jay Ramras
Representative Pete Petersen
Representative Chris Tuck
MEMBERS ABSENT
Representative Kyle Johansen
OTHER LEGISLATORS PRESENT
Representative John Coghill
Representative David Guttenberg
Representative Scott Kawasaki
COMMITTEE CALENDAR
STATEWIDE ENERGY PLAN
- HEARD
HOUSE BILL NO. 218
"An Act establishing and relating to the Department of Energy
and to the board of directors of the Alaska Energy Authority;
transferring the Alaska Energy Authority and the Alaska Natural
Gas Authority to the Department of Energy; and transferring the
home energy and weatherization program to the Department of
Energy."
- HEARD AND HELD
HOUSE BILL NO. 219
"An Act relating to the renewable energy grant fund."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 218
SHORT TITLE: CREATING DEPT OF ENERGY/AEA BD
SPONSOR(s): ENERGY
04/06/09 (H) READ THE FIRST TIME - REFERRALS
04/06/09 (H) ENE, FIN
05/29/09 (H) ENE AT 1:00 PM Bethel
05/29/09 (H) Heard & Held
05/29/09 (H) MINUTE(ENE)
06/17/09 (H) ENE AT 5:00 PM Fairbanks
BILL: HB 219
SHORT TITLE: RENEWABLE ENERGY GRANT REQUIREMENTS
SPONSOR(s): ENERGY
04/06/09 (H) READ THE FIRST TIME - REFERRALS
04/06/09 (H) ENE, RES, FIN
05/29/09 (H) ENE AT 1:00 PM Bethel
05/29/09 (H) Heard & Held
05/29/09 (H) MINUTE(ENE)
06/17/09 (H) ENE AT 5:00 PM Fairbanks
WITNESS REGISTER
HAROLD HEINZE, Chief Executive Officer (CEO)
Alaska Natural Gas Development Authority (ANGDA)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
MARY ANN PEASE, Contractor
to the Alaska Natural Gas Development Authority (ANDGA)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
219.
GWEN HOLDMANN, Director
Alaska Center for Energy and Power (ACEP)
University of Alaska Fairbanks
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
KATHERINE KEITH, Wind-Diesel Coordinator
Wind-Diesel Applications Center (WiDAC)
Alaska Center for Energy and Power (ACEP)
University of Alaska Fairbanks
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
TOM STAUDENMAIER
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
INGEMAR MATHIASSON, Energy Coordinator
Northwest Arctic Borough
Ambler, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
DAVID GARDNER, Vice President
Marketing & Member Services
Golden Valley Electric
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
GARY NEWMAN
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
JESSIE PETERSEN, Director
Issues and Energy
Northern Alaskan Environmental Center (NAEC)
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
RICHARD SEIFERT, Professor/Energy and Housing Specialist
Health, Home & Family Development
Cooperative Extension Service
University of Alaska Fairbanks
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
JEFFREY WERNER, Research Professional
Natural Resources and Agricultural Sciences
University of Alaska Fairbanks;
Director
Future Farmers of America (FFA)
University of Alaska Fairbanks
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
DAN RAYNES
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
DOUGLAS B. REYNOLDS, Ph.D., Professor
Economics
School of Management
University of Alaska Fairbanks
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
MARY WALKER, Project Coordinator
Alaska Interface Power and Light (AIPL)
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
BOB BEACH
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
GREG EGAN
Remote Power, Inc.;
Solar Wind Consultants
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
DEREK PRICE
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
MERRICK PIERCE
Fairbanks, Alaska
POSITION STATEMENT: Testified during the hearing on HB 218 and
HB 219.
ACTION NARRATIVE
5:03:01 PM
CO-CHAIR CHARISSE MILLETT called the House Special Committee on
Energy meeting to order at 5:03 p.m. Representatives Petersen,
Dahlstrom, Tuck, Ramras, Edgmon, and Millett were present at the
call to order.
^Statewide Energy Plan
HB 218-CREATING DEPT OF ENERGY/AEA BD
HB 219-RENEWABLE ENERGY GRANT REQUIREMENTS
5:03:11 PM
CO-CHAIR MILLETT announced that the only order of business was
the discussion on a statewide energy plan as it relates to HOUSE
BILL NO. 218, "An Act establishing and relating to the
Department of Energy and to the board of directors of the Alaska
Energy Authority; transferring the Alaska Energy Authority and
the Alaska Natural Gas Authority to the Department of Energy;
and transferring the home energy and weatherization program to
the Department of Energy." and HOUSE BILL NO. 219, "An Act
relating to the renewable energy grant fund."
5:03:56 PM
CO-CHAIR MILLETT reviewed the bills before the committee. She
related that HB 218 would create a Department of Energy in
Alaska. She noted that the committee has heard during its
meetings throughout the state that there is a need to centralize
the state's energy policy to make it a more user-friendly
system. Co-Chair Millett reviewed that HB 219 would serve as a
clean-up bill for House Bill 152 - a renewable energy bill
passed two years ago. The proposed legislation would allow
energy projects to be fully funded and supported, as well as
adding an economist to review those projects to ensure they are
financially sound.
5:06:43 PM
CO-CHAIR EDGMON remarked that as a rural legislator, he is
familiar with the challenges in not only coping with, but also
finding solutions to, the energy problem the state is currently
facing. He noted that a rally held in Fairbanks earlier in the
year helped set the tone for much of what is happening in the
legislature now. He stated that although he does not want to
make light of the dwindling gas supply issue in Southwestern
Alaska, he is pleased that the energy crises in rural Alaska and
Fairbanks is a "front burner issue" in the legislature right
now.
5:08:20 PM
CO-CHAIR MILLETT had each legislator present state his/her
district, then she reviewed the process by which the committee
would hear testimony.
5:09:37 PM
HAROLD HEINZE, Chief Executive Officer (CEO), Alaska Natural Gas
Development Authority (ANGDA), Department of Revenue (DOR),
complimented the committee for its efforts in traveling around
Alaska to hear residents voice their concerns about energy. He
said there is no silver bullet solution, but rather a number of
ideas and solutions will need to come together. He said ANGDA's
concern has been, "How do you keep working on several different
things simultaneously?" He said ANGDA is currently working on
propane from a North Slope facility, which is in reaction to the
price of oil jumping to $140 a barrel. He stated his belief
that there is opportunity to generate sizeable propane supplies
from the plentiful supply on the North Slope, and to do so
within a couple years, which would affect Fairbanks, the river
and maritime communities, private users, and industrial utility
users.
MR. HEINZE said even though ANGDA is a political subdivision of
the state, it has enough "business roots" that its focus today
is on the private sector. He expressed ANGDA's hope that
whatever the legislature does, it does not lose sight that it is
the private sector that motivates what is done. He said there
is nothing wrong with the government helping to facilitate and
play a positive and supportive role; however, it will be the
private sector which has the influence.
5:12:44 PM
MARY ANN PEASE, Contractor to the Alaska Natural Gas Development
Authority (ANDGA), Department of Revenue (DOR), told the
committee that "this propane project" could be up and running
within two years, delivering propane to many rural communities.
She suggested that propane could be used as a "bridge fuel."
She said the project was first envisioned to come down the
planned natural gas pipeline, with compressor stations every 75-
100 miles to extract the propane. The increased price of diesel
fuel - in some places up to $7 a gallon - has created a
compelling need for alternative solutions that can be
implemented within two years. She stated that propane will
eventually be a long-term opportunity for Alaska, because even
after the construction of a gas pipeline, there will be a lack
of alternative energy to diesel in many of the state's mining
operations. Propane is available on the North Slope and is cost
effective. She talked about having an open-access propane
facility on the North Slope, where there are opportunities for
barging on the Bering Sea, trucking on the Haul Road, and
shipping on the Yukon and other rivers.
5:15:10 PM
MS. PEASE said "this chart" clearly shows the difference between
the Prudhoe Bay technical extraction and what the private sector
opportunity is "outside of that fence." She said ANGDA's role
ends at a metering facility, and it is at that point where the
private sector needs to build the gas extraction facility, the
distribution system, the storage facility, and provide trucking
to "bring it to those points as an alternative to what they're
delivering today." She talked about a conference that was held
today, during which participants expressed an interest in
"reviewing this further."
MS. PEASE discussed critical "next steps." First, she related,
it must be determined what an industrial load is, because that
will make the economics more viable. She spoke of the potential
conversion of, for example, Golden Valley Electric Association's
"LN 6,000s." She mentioned there are other associated private
sector opportunities, as well. Ms. Pease said during ANGDA's
lunch presentation several "financing giants" gave
presentations, including Macquarie group, First Southwest
Company, and J.P. Morgan. The themes covered included:
public/private partnership, public sector financing, and bonding
opportunities. "All of these factors will work together to
deliver what is a very cost-effective solution for Alaskans,"
Ms. Pease stated.
5:17:44 PM
MS. PEASE reported that the producer with which ANGDA has been
communicating has requested a detailed technical review. She
indicated that NANA Worley Parsons, an expert on the North
Slope, presented initial findings, and subsequent reports are
expected soon. The producer company also requires an economic
sustainability model, which shows that ANGDA has assessed the
demand of a "base load customer," as well as some villages and
communities. Ms. Pease said, "When that is done, we could
finalize the term and volume agreement."
MS. PEASE reiterated that "this propane opportunity" is a bridge
solution. She explained that once natural gas sales are
commercially available from the North Slope, "this project in
its current form will morph." Currently, the propane is captive
on the North Slope, and it is possible to "sell those molecules
as long as there's not a market price available for them." She
offered a conservative estimate that commercial gas will be
flowing in 10-12 years.
5:19:16 PM
MS. PEASE stated that ANGDA is acting as facilitator and has
negotiated terms that would deliver "an extremely favorable
propane molecule in this wholesale facility." The forecasted
price is about one-twentieth on an MMBtu basis of the price of
oil, and that price is critical, she said. The next step is to
ensure there is a private sector interest and commitment. She
indicated that ANGDA would like to communicate with the
committee and the conference participants within the next 30
days.
5:20:21 PM
MS. PEASE, in response to Co-Chair Edgmon, reviewed that the
purpose of the aforementioned conference was to engage Alaskans
in the discussion of using propane as a bridge fuel, to
demonstrate the project could be up and running within a two-
year period, to show that the price point of propane is
compelling as an alternative fuel, and to whet the appetite of
the private sector.
5:21:19 PM
MR. HEINZE used Golden Valley Electric as an example of an
entity that is not an efficient user of an oil-based product,
but potentially would be an efficient user of gas. He noted
that Scott Goldsmith, in his analysis, looked at the Fairbanks
residents who use fuel oil to heat their homes. He indicated
that the advantage of switching to propane may present itself
more quickly for some users than for others. He said Red Dog
Mine was present at the conference and may find that the most
efficient way to fuel itself is through the use of propane.
With any gas pipeline, there will be tremendous activity
exploring for and developing gas. Currently, diesel fuel is
being used to generate the equipment used for that exploration,
but using propane instead may be one of its best uses, he said.
Mr. Heinze stated there is not one case for which propane would
not be extraordinarily attractive should oil reach $140 a
barrel.
5:24:02 PM
REPRESENTATIVE RAMRAS shared that he was a propane user for 20
years, but switched to gas. He said that propane "gels" at
minus 42 degrees Fahrenheit - just when it is needed most. He
said he has found natural gas to be a superior feed stock with a
more reliable price. He said one of the problems with diesel is
that it is delivered by barge once a year, at which point the
price is set. He questioned whether [propane] would be
delivered throughout the year, whether it would be tied to a
commodity price, and how it would be prevented from liquefying.
MR. HEINZE responded that ANGDA has proposed making Arctic-grade
propane in Prudhoe Bay, which would have a little more ethane in
it and would continue to gasify at colder temperatures. He said
propane is coming from Canada, and it is priced in a way that is
directly tied to the oil refinery side of the business.
Furthermore, there is a long delivery route, which makes the
transportation cost high. He said he does not think anyone is
ripping off the state, but he expressed his disappointment that
there is no competition. Mr. Heinze said ANDGA anticipates a
discount in the pricing point on the North Slope as compared to
any oil price historically. Second, he stated, "If the
transportation system can take advantage of the closeness, the
logistics, and everything else, we believe it can be very
competitive." He related that Scott Goldsmith, based on
yesterday's oil price of $67 a barrel/$61 North Slope Crude,
calculated a delivered price in Fairbanks of $1.16. He added
that that price was based on Mr. Scott's estimates of the
capital requirements, as well as buying the raw molecules. He
continued as follows:
Now, that's a pretty healthy margin over what we would
see as a competitive price with, say, fuel oil, or
even naptha derived from $67 a barrel oil. That's
probably at least close to a dollar good on the
margin. And that is a lot of room for both profit and
for passing on a savings to the consumer ....
We think it's going to take new pricing cost model:
the realities of how you buy it, when you buy it - all
those types of things. We had a number of people at
the conference today who pointed out that the smart
move was to get ... a big "pickle tank" - not these
... 100-pound bottles, but at least maybe a couple
hundred-gallon tank - and fill it every year or two
years so you could kind of annualize the price and
maybe avoid some of the month to month instability.
MR. HEINZE said ANGDA believes that if [propane] is available,
plentiful, and reasonably priced, then it has a chance to be an
alternative solution. He clarified that ANGDA is not proposing
the state decide between propane and fuel oil, but is suggesting
that a person who presently uses wood to heat his/her home, for
example, add a propane stove. That way, the person has a choice
of which method to use. He suggested that may be a good
strategy for many Alaskans in the long term, if propane is
readily available.
5:31:00 PM
REPRESENTATIVE RAMRAS said he believes natural gas is the long-
term solution, but said he is pleased this discussion about
bridge fuel is taking place. He stated that there is not enough
demand in Fairbanks to justify building a pipe that would serve
only Fairbanks; the city requires the Anchorage market.
Likewise, he stated his understanding that in order for there to
be economical propane available to rural Alaska, Fairbanks needs
to be a hub user of propane. He said a stated timeline for a
natural gas pipeline is five years, while Mr. Heinze has said it
would take two years to deliver propane as a bridge feedstock.
He queried, "So, that would leave three years, and then what
happens to rural Alaska and what happens to the investment in
the propane manufacturing infrastructure if that demand goes
away by 50 percent after the first couple years?"
5:33:35 PM
MR. HEINZE said ANGDA's early focus has been on Golden Valley
Electric, because "anything you do to help them ... helps
everybody." He stated, "They are of a size of us that if they
alone wanted to go to propane, then that gives you the economy
of scale right there." He continued:
For instance, we've looked at Red Dog Mine, who is not
going to quickly enjoy the relief of anything other
than what can be barged to them, frankly, for a number
of years - maybe decades. ... Propane use there, for
instance, is not as much as Golden Valley, but it's a
large fraction of it. We have made no assessment at
this point of the use on the North Slope, for
instance. And it may turn out that use - just on the
basis of gallons of diesel - turns out to be even a
bigger number than what we're talking about here in
the Fairbanks area.
... So, on the one side, I think our focus has clearly
been that the Fairbanks market - in particular, Golden
Valley - and the heating market here is an important
element to include; but if it's not available, there
are other people who will not be served by any gas
line that still may represent more than a enough load
to move the project forward.
MR. HEINZE said part of the reason for today's aforementioned
conference was to round up all the players to find out who is
really interested in receiving gas, "because then we could start
in the form of propane and start to work with it." He
continued:
Certainly it is not lost on us that any gas pipeline
passing near this area provides an opportunity to feed
into Fairbanks natural gas. Certainly we're aware
that they proposed an LNG project from the North
Slope. But certainly we also know that in most of the
United States there are times when propane air is
introduced into natural gas distribution systems, and
it functions just like methane. And all those
potential trade-offs are there.
The definition out of this project will be whether
there is a long-term source of propane. At the level
of 2,000 barrels a day - 2,500 barrels a day of
propane - if that endangers the instate system, then I
would just simply say to you the instate system is not
robust enough to move forward ... - it is at too high
a risk.
5:36:28 PM
MS. PEASE added that the assessment of this opportunity is best
ascertained by the business considering the use of propane as an
alternative. She said the people who run the Red Dog Mine are
savvy and are going to review their numbers - currently $17
million a year for fuel, which translates to approximately $4.05
a gallon - to figure out what the cost would be to put in the
mine's own gas extraction facility. The project provides an
alternative, and the business community can assess whether or
not propane use is economical. Ms. Pease stated that it does
make sense to "have an industrial load," because without it,
"using the very small communities along the Yukon/Kuskokwim for
the first phase of this is not going to make that much sense."
5:37:45 PM
REPRESENTATIVE TUCK spoke of the currently monopoly of one or
two diesel fuel suppliers to rural Alaska communities, and he
asked how more competition between providers of propane could be
fostered.
MS. PEASE answered that just by having propane available as an
alternative will create a more competitive market. She
explained that she thinks having the feedstock at a price that
is comparable or less than the price of that which is imported
from Alberta, Canada, or Seattle, Washington, will result in
"more players in the market."
5:39:13 PM
MR. HEINZE added that one of the strong reasons for ANGDA's
involvement is that it will ensure that there is "an open access
wholesale facility." The project will be a private sector
effort, but ANGDA believes that the competition that is
intrinsic to the free enterprise system is the best way to have
competitive pricing.
5:40:01 PM
REPRESENTATIVE TUCK said he is having a difficult time imagining
any entity other than Crowley being able to deliver the propane
to the communities, because that company is already so well
established both in providing diesel and containers. He
reiterated his desire to see competition in terms of the
delivery of both diesel and propane to communities.
5:40:47 PM
MR. HEINZE responded that Crowley is a fine provider, but it
would defeat ANGDA's purpose to make that company the only
provider of service. He noted that propane containers can be
moved on barges, and various communities could own those
containers, for example. He stated, "If you can get some
diversity of those, we believe you can create a competitive
situation out there." That competition will have an impact on
the pricing and availability of diesel, as well, Mr. Heinze
said, which "will not go away."
5:41:35 PM
REPRESENTATIVE COGHILL asked Mr. Heinze to help the committee
understand the equivalent of propane to diesel.
MR. HEINZE replied that there are a lot less Btus in propane
than in fuel oil or diesel. In a circumstance where fuel oil is
priced at $3 a gallon, it would make sense to charge around
$2.50 for the same amount of Btus of diesel and approximately $2
for the same amount of propane. He clarified that the consumer
would pay less for propane per gallon, because its Btu content
is less. He emphasized that the price of diesel and fuel oil is
driven directly by the price of oil. He continued:
If it's $35 oil, I can advise you right now: please
stay with your fuel oil system, okay? If it's $70 a
barrel, you might want to think about some alternative
if you haven't already turned the thermostat down a
lot already. And at $140 a barrel, you better be
looking for something other than a fuel oil/diesel-
type product to burn if you can.
MS. PEASE emphasized the importance of considering the carbon
footprint. Propane is an extremely clean burning fuel, she
noted, and for Fairbanks, with its tendency to not meet air
quality standards during each winter, having alternative fuels
to use is critical.
5:44:12 PM
REPRESENTATIVE COGHILL remarked that in Alaska, the road system
and off-road system have different dynamics. He surmised that
delivery of propane to market on the road system could be
consistent. Regarding the off-road system, he said huge amounts
of money have been put "into infrastructure for storage." He
asked, "Have you got a model that shows what the new investment
is going to be and what the divestment of the other is going to
be, so that the Btu equivalent somehow balances out?"
MR. HEINZE responded that the delivery and storage system have
to be one in the same.
5:46:02 PM
MS. PEASE noted that another benefit is the substantial
differential in the cost of insurance and bonding associated
with the transport of propane versus diesel. She reiterated
that propane is not a replacement fuel, but an alternative fuel.
MR. HEINZE told the committee that one of the people [at the
aforementioned conference] presented that the least expensive
energy idea that has been brought forth in Alaska is to use a
hybrid of propane and wind. When the wind is blowing, the
propane engine does not run; the propane turns on automatically
when the wind energy decreases beyond a certain point.
5:47:13 PM
CO-CHAIR MILLETT reminded everyone that the cheapest energy
available is the energy that is not used.
5:47:20 PM
REPRESENTATIVE RAMRAS pointed out that saying a propane and wind
hybrid is the least expensive does not demonstrate consideration
of the upfront capital costs of building such a system. He said
there is no easy solution, and he emphasized that it is
important not to make every community think it can have wind and
propane power when presently they are using diesel. Dumping
that capital cost on 200 communities, for example, would burden
the state.
5:48:20 PM
CO-CHAIR MILLETT said Representative Ramras has a good point.
She noted that the committee has been talking with the Denali
Commission about its tank farm diesel upgrades across the state.
That entity has put a lot of state and federal money into those
new tank farms. She indicated that it is worth questioning when
the state should stop capital infrastructure build up for diesel
fuel and begin supporting propane use, and whether it is a
reality to support all methods. She said there are a lot of
interesting ideas, including the need for transmission upgrades.
She stated that the committee hopes to hear more from ANGDA.
5:49:15 PM
CO-CHAIR MILLETT announced that the committee would hear
testimony from the Alaska Center for Energy and Power.
5:49:25 PM
GWEN HOLDMANN, Director, Alaska Center for Energy and Power
(ACEP), said ACEP does research involving fossil and renewable
resources, and its focus is on technology, as well as resource
and economic evaluation of "near-term opportunities for Alaska."
One of those opportunities is to develop a "wind-diesel system."
Ms. Holdmann said this is an area in which Alaska has the
opportunity to further its role as a world leader. She stated,
"One of the challenges with this type of technology is that we
have a lot of different people going in a lot of different
directions." She said the University of Alaska can play the
role of a coordinating entity to provide the information people
need to make smart decisions and put good projects together in
the state.
MS. HOLDMANN relayed that ACEP has developed and organizes the
Wind-Diesel Applications Center - a partnership comprised of a
number of different entities. She introduced Katherine Keith as
the coordinator of the center. She noted that Ms. Keith is from
the City of Kotzebue and "worked on" the Kotzebue Electric
Association - currently the leading system in the state.
5:51:06 PM
KATHERINE KEITH, Wind-Diesel Coordinator, Wind-Diesel
Applications Center (WiDAC), Alaska Center for Energy and Power
(ACEP), University of Alaska Fairbanks, stated that wind-diesel
technology can be a solution to high energy costs for over 116
communities, [as shown on the second slide of page 1 of Ms.
Keith's handout to a slide presentation]. She indicated that
the map on the slide was compiled by the Alaska Energy Authority
(AEA). The map also shows that there is a potential for up to
240 megawatts (mWh) of "installed wind."
MS. KEITH emphasized the importance of analyzing the past, and
she said Alaska is fortunate to be able to analyze the past
performance of existing systems, including those systems in the
City of Kotzebue, the City of Toksook Bay, the City of Wales,
and the City of Savoonga, for example. She relayed that there
are 35 proposed wind projects - many of which are wind-diesel
affiliated.
MS. KEITH said wind-diesel systems are classified as low,
medium, or high, [as shown on the second slide on page 2 of the
handout]. The more wind on the system, she explained, the more
diesel will be saved. However, as the wind on the system
increases, so does the complexity of the system, and, thus, the
capital cost. The goal in using a high penetration wind-diesel
system, she said, is to be able to shut off the diesel. She
stated, "Internationally this is recognized as the next
generation wind diesel system."
5:53:59 PM
MS. KEITH related that Alaska has three systems which could be
considered high penetration, and they are located in the City of
Wales, the City of Saint Paul, and the City of Savoonga. The
system in the City of Wales was installed in the 90s and uses
energy storage and a secondary load - a boiler. The City of
Saint Paul's system does not use energy storage, but does use a
boiler. The City of Savoonga does not shut down its diesel, but
is able to "see penetration of over 75 percent wind on the
system at any one point," which Ms. Keith said she thinks is a
major accomplishment. She relayed that one of the challenges of
high penetration wind-diesel systems is that the power stability
- frequency and voltage - are controlled by the diesel
generator; therefore, when the power is shut off, there needs to
be a lot of auxiliary equipment which is able to "do that in its
place."
MS. KEITH stated that there are over a dozen systems in the
state that could be high penetration systems. The Cities of
Kotzebue and Nome are both expanding their wind farms. The City
of Kotzebue is considering the use of a flow battery to provide
power stability and "time shifting." The systems in the Cities
of Buckland, Deering, and Noorvik are presently in the design
phase. The systems in the Cities of Mekoryuk, Toksook Bay, and
Quinhagak are using no energy storage; they are using a
secondary load. Kwigillingok ("Kwig") and Kongiganak ("Kong")
are using smart-grade technology - possibly a fly wheel. The
City of Wales offers a lengthy report listing what that
community has learned about retrofitting a diesel power plant
with a high penetration wind system. The bottom line, Ms. Keith
said, is that a lot of these technologies are still "pre-
commercial." The topic of energy storage is foremost in the
discussions taking place not only in Alaska, but also in the
Lower 48. She listed the following methods used: flow
batteries, standard lead acid batteries, pumped "hydro,"
compressed air, and hydrogen. She said there are a lot of
methods, and "we don't want to ignore the thermal applications
or the transportation applications, both of which are as
important as the electricity in the rural communities." Once
there is excess wind, there is always a way to figure out how to
use the extra electricity. She stated, "The purpose of WiDAC is
to support the broader deployment of cost-effective wind-diesel
technologies to reduce or stabilize the cost of energy in these
rural communities."
5:57:40 PM
MS. KEITH said WiDAC has affiliations with the National
Renewable Energy Laboratory (NREL), the (indisc.) National
Laboratory, and AEA. She described WiDAC as a funnel - a means
of collaboration between wind-diesel stake holders, industry
partners, various research organizations, developers, and the
utilities in the state. Through discussion with stake holders,
she said, it is possible to find ways to optimize wind-diesel
systems and save more fuel and reduce or stabilize the cost of
power. As a result of discussions, WiDAC can: train engineers
in renewable energy technologies, put more wind technicians out
in the field, and ultimately come up with more innovations. She
stated that WiDAC focuses on three critical areas: research and
development, technical support, and workforce development and
education.
5:59:00 PM
MS. KEITH stated that WiDAC needs to: develop Alaska-specific
verification testing for wind turbines and control strategy;
find lower-cost methods to reduce the cost of wind turbine
installation and the cost of the foundation; develop crane-free
turbine erection; proof, test, and develop dispatch strategies
for medium and high penetration systems; and look at smart
grids. This work is best done in a laboratory setting, she
relayed, which is where a wind-diesel simulator is "coming in."
She explained that WiDAC is designing a system to be held at the
Fairbanks facility which will be similar to the one at the
National Renewable Energy Lab. The system will allow WiDAC to
simulate a village load scenario and wind resource, and from
that evaluate the control strategy. Data from that test can be
sent back to the developers and manufacturers so they can create
more robust renewable energy technologies for Alaska. Another
advantage of the simulator is that it can "characterize
hardware" to ultimately create a more accurate model.
6:01:01 PM
MS. KEITH said WiDAC has organized a summit to be held [June 22,
2009] to which she welcomed all legislators. Alaska is the
leader in wind-diesel technology across the world, she stated.
6:01:50 PM
CO-CHAIR EDGMON recalled taking a tour of the City of Nome's
Banner Wind Farm in January or February. He said there were 18
wind turbines. The whole project was built "ahead of time,"
under budget, and was purported to provide up to 10 percent of
the overall power load of the community, perhaps in cooperation
with the Rock Creek Mine, he said. He said he has since heard
there are problems with the system, and he asked Ms. Keith if
she could provide more details.
6:03:15 PM
MS. KEITH responded that any project installed in a new setting
is bound to have a "growing period." The percentage of energy
availability from wind turbines is always low during the first
few months. She reported that the City of Nome has experienced
technical problems with "the tip breaks" on the Integrity
turbines, which is the same problem experienced in the City of
Kotzebue. Of the two locations, the City of Nome has more
challenging weather conditions, she said. The City of Nome is
working aggressively with the manufacturer to find solutions.
She said, "It's just a lot of work keeping these things going."
She said one of the main focus areas for WiDAC is technical
support, because it is a major issue. She said she thinks the
City of Nome is an example of a project that is "not quite there
yet," but will be by this time next year.
6:05:03 PM
CO-CHAIR EDGMON offered his understanding that there are wind
turbines in disuse in the Cities of St. Paul and Sand Point. He
said there are situations in which utility companies, village
corporations, or private entities cannot come to an overall
agreement of who will provide power and who is going to "have
the base load to make it work." He asked if that issue - beyond
the infrastructure and application - would be discussed next
week.
6:05:38 PM
MS. KEITH answered that the topic of technical support will be
discussed within the context of how communities can be helped to
"put a successful project in the ground." She added, "Community
disagreement is one of the biggest hurdles out there."
6:08:05 PM
MS. KEITH, in response to Representative Tuck, said WiDAC is
aggressively considering energy source possibilities and
checking to ensure that manufacturers' claims are sound. She
said it does not make sense to invest in a large battery bank if
it has to be continually rebuilt every five years. She said the
advantage of running a slow battery is the ability to endlessly
"charge and discharge" it "without degradation." Batteries can
be tested on the aforementioned simulator, she noted.
6:09:46 PM
MS. HOLDMANN added that she had a long conversation with the
Bering Straits Native Corporation regarding its wind farm. She
said, "It would have been nice if they would have asked our
opinion, in terms of the type of turbine that they selected for
that project, because it may not have been really appropriate
for that site, and there's a good chance that we could have let
them know that they were going to have these kinds of issues."
6:10:27 PM
MS. KEITH said currently manufacturers work with utilities in
Alaska to fine tune their wind turbines. There is no
standardized process for making that happen, but WiDAC hopes to
develop a cold weather wind turbine verification process. She
said WiDAC is developing a "hub and spoke type method" for
testing in the best areas.
6:11:28 PM
REPRESENTATIVE TUCK expressed thanks for the tour of the
facility today and appreciation for the work of WiDAC. He
stated his vision is for prototypes to be developed in Alaska,
especially since the state is the forerunner in developing wind-
diesel technologies.
MS. KEITH opined that the state will have more success when it
thinks "big," develops economies of scale and prototypes, and
exports its technology.
6:13:04 PM
CO-CHAIR MILLETT opened public testimony.
6:13:44 PM
TOM STAUDENMAIER shared his experience in the military. He said
he was asked to get involved with the electric utility issue in
1982, but he emphasized that he does not and will not work for
any electric utility. He said his job was to create a program
that would cut people's electric bills "in half to 80 percent."
He talked about people who have been fired at Matanuska
Electric. He related that there are nine electric utilities in
Southcentral and Interior Alaska, with 75 board members, 9
computers, and $180,000 "at your monthly billing." He
multiplied that by the average three household occupants to get
$520,000, and added Southeast and Northwest Kodiak to get a
total human population of 670,000.
MR. STAUDENMAIER spoke of a proposal to combine utilities under
one cooperative in the Southcentral and Interior part of the
state, to rename it the Alaska Southcentral Interior Electric
Cooperative Incorporated, and to appoint a 16-member board. He
said "the people" would own the utility and control it, with
"the reinforcement of the Alaska State Senate." The proposal
also calls to tie the grids together in Southeast, Alaska, by
combining all the cooperatives in that area and reducing the
board to seven members. There are 1,500 miles of power lines
that need to be built. Furthermore, the proposal would have the
state use oil revenue money to "liquidate $3 billion in debt."
6:17:04 PM
MR. STAUDENMAIER continued:
Another issue that's [a] concern: Not only do you cut
your bill in half to 80 percent, but you roll the
interest back in the state at $300 million a year.
Dollar rolls five times, that's an extra buy-in pump
of about $1.5 billion.
We also have laid out every city's light bill, every
school district's light bill. You're from Anchorage?
The municipal light bill is right under $10 million
cash every 12 months. Lacking 50,000. The school
district is $10 million cash. Where does that money
come from? Property taxes. So, the trick here is you
clean it up, merge it out, tie the grid together, take
your own money, (indisc.) debt, and keep your cash in
your pocket.
MR. STAUDENMAIER said in order to industrialize the state it is
first necessary to create a need, "and then you have enough
juice to build the Susitna hydro-electric project for the next
200 years." He continued:
Now, nobody has ever done a study on this, but we have
it all -- on Governor Palin's deal: we're opposed to
that. They want to add a bureaucracy over and above
what you already have here. Now, I ... don't work for
the utilities. ... We are supported by a substantial
loan of business people from Southcentral, Interior,
Valdez, you name it. They're fed up.
CO-CHAIR MILLETT asked Mr. Staudenmaier to clarify his
affiliation.
MR. STAUDENMAIER responded that he was elected as a board member
to the Matanuska Electric Association, Inc. He spoke of being
re-elected numerous times, and being "gagged" to keep quiet
regarding a turbine bought illegally. The turbine, he related,
sat idle in the City of Soldotna, and after 15 years it "seized
up." Mr. Staudenmaier indicated that federal funds were cut
off, but there was an order to finance the turbine in 1984.
Eight years ago, he said, VECO Corporation got the contract to
pick that turbine up, and they took it to Nikiski and put it in
a fertilizer plant, which is now shut down. He said the cost
was $29 million. He said he met with the Federal Bureau of
Investigation (FBI) to uncover a "white-collared criminal
operation."
CO-CHAIR MILLETT asked Mr. Staudenmaier to return to the main
focus of his testimony.
MR. STAUDENMAIER said the bottom line is to "clean it up, merge
it out, tie the grids together, take our own money, pay off our
debts." The result would be an extra dividend check for
everyone between $25-50,000. He indicated that if the state
wants to industrialize, it should build power lines out to the
villages. He said there were a half billion dollars under
former Governor Hickel to do all the interties, but former
Governor Knowles cut off the money, with only one intertie
[remaining].
6:20:38 PM
MR. STAUDENMAIER contended that tying the grid together is a
matter of national security because of the missile system.
MR. STAUDENMAIER talked about ownership of utility companies -
both as a taxpayer and by being a board member. He continued:
So, the question is: why are we paying the
duplication process? And the problem is, it's called
duplicity. Debt service and interest has nothing to
do with the generation of a kilowatt of power, period.
You've got 400 people on a payroll you don't need.
MR. STAUDENMAIER said either the utilities will be kept under
local control or sold off to the highest bidder, the latter of
which he indicated would be crazy. He said there is going to be
a merger between Matanuska Electric and Chugach Electric, which
will save $500 million "by not building a new turbine." In
response to Co-Chair Millett, he said he would give the
committee his study information and he indicated that
information pertaining to this issue could also be found on
line.
6:23:42 PM
REPRESENTATIVE DAHLSTROM noted that Mr. Staudenmaier had used
the term "we" throughout his testimony, and she asked if he
could tell the committee the names of the other people involved.
MR. STAUDENMAIER responded that a variety of people donated
money "to bring this to [fruition] through Staudenmaier's
Electric Merger Committee."
6:24:22 PM
INGEMAR MATHIASSON, Energy Coordinator, Northwest Arctic
Borough, stated that electricity is not the problem in villages,
but diesel is. He said it is really a shipping issue. He
added, "That's where the [power cost equalization (PCE)]
belongs." He said, "If anything's going to happen with the
propane issue, as far as coming into the picture for electricity
generation, then the PCE has to be applied to that in some
fashion, so that that could happen."
6:25:32 PM
DAVID GARDNER, Vice President, Marketing & Member Services,
Golden Valley Electric, remarked that energy is both the
lifeblood of society and a scarce resource. He stated, "As
demand for energy increases in Alaska and around the world, as
stocks of oil and natural gas are depleted, and as new
regulatory structures establish physical ... disincentives for
carbon emitted by fuel, the cost of these fuels may rise
sharply." He said Alaskans accept the necessity of tightening
their belts during tough times; however, assuring continued
affordability and reliable energy is a problem that will call
upon the creativity and dedication of the private sector, as
well as the rigorous actions of local, state, and federal
governments.
MR. GARDNER stated that GVE strongly advocates the development
of a comprehensive energy plan for Alaska, which would be a
vision for the role that Alaskan utilities and state
governmental officials, agencies, and elected representatives
can play in solving the energy problem and shaping the energy
future. He acknowledged that the federal government has larger
issues to address, such as funding for energy research and
development and legislation or regulation of greenhouse gases;
however, there are steps that Alaskans can take to ensure more
stable independent patterns of energy generation and use.
MR. GARDNER listed those components that GVE believes a plan
should attempt to identify. First, he said, would be utility
scale renewable resources. He reviewed that statute requires
that Alaska's electric utility companies provide power to
consumers at the lowest possible cost and help keep electric
rates low in the state. However, certain features of this
structure in the state have acted as barriers to the amount of
electricity generated by renewable resources in the state -
especially on utility-scale projects. He said, "Alaska's law
makers and electric utilities will need to work together to
overcome these barriers as carbon emissions from traditional
fossil fuel power plants come under greater scrutiny in coming
months and years." He suggested one immediate step should be to
move forward with the Susitna hydro-electric project.
MR. GARDNER said the second component to a plan should be
electrical efficiency, which would include the reduction of the
demand for energy - also considered a resource. He reported
that reducing consumption by one kilowatt hour is equivalent to
increasing supply by the same amount, thus products and
practices, such as programmable thermostats, "smart meters,"
efficient appliances, efficient lighting systems, building
insulation, and simple common sense reductions to demand can all
play a role in meeting the state's electrical production needs.
MR. GARDNER said the third component would be to increase the
amount of electricity generated by renewable energy sources,
replace aging infrastructure, and develop a transmission grid
across the state - all which will require a significant
investment in the construction of new transmission lines.
Alaska must establish a power pool - like that in the Lower 48 -
to facilitate the planning and coordinates of transmission line
development throughout the state. The responsibilities of that
power pool would include: planning, siting, routing,
transmission line addition, and sources of financing for new
lines and line upgrades - difficult and expensive, but
achievable tasks if local, state, and federal official work
together with private and public utilities.
MR. GARDNER related that the fourth component would be energy
diversity. He explained that regardless of the future of
regulatory change, the focus of Alaska's energy utilities must
be on developing a diverse portfolio of generating sources, in
order to provide affordable and reliable energy to Alaskans in
the most environmentally responsible method possible. Because
of the state's vast natural resources, he relayed, the diversity
of energy portfolio must include coal, hydro-electric, oil,
natural gas, wind, solar, geothermal, and biomass [power].
MR. GARDNER said the fifth component would be a renewable
portfolio standard (RPS) or renewable energy standard (RES),
which he explained are statutory requirements that all utilities
operating within a state generate a certain percentage of the
electricity they distribute from renewable sources. Currently,
he noted, 28 states have adopted such legislation, and changes
in the federal government, including President Obama's renewable
initiative and shifts in congressional committees, indicate that
a nationwide RPS or RES may be enacted in the near future. Mr.
Gardner added, "However, Golden Valley opposes mandatory
legislation, because without careful consideration, these
requirements can lead to inequitable subsidies from one region
of the state to another, causing electric consumers to suffer
from low electric reliability and precipitous rate increases."
6:31:00 PM
MR. GARDNER said the sixth component would be comprised of a
number of resource utilization measures and actions. First, GVE
proposes partnering with the Alaska State Legislature and
Congressional Delegation to extend the federal production tax
credit for renewable energy. Second, GVE proposes that federal
tax credit for wind production be made tradable, which would
allow not-for-profit utilities, such as GVE, to capture tax
credits that are otherwise available only to investor-owned
utilities. Third, GVE proposes that annual appropriations to
the renewable energy production incentive be increased. Those
appropriations are designed to offer public utilities incentives
for the development of renewable generation capacity, in place
of production tax credit. Fourth, GVE proposes the expansion of
clean renewable energy bonds (CREBs). Under one congressional
plan, he noted, billions of dollars worth of CREBs would be
available to public utilities and electric cooperatives for new,
renewable energy projects. Fifth and sixth, GVE proposes that
continuation of federal tax credits for small-scale wind
production and residential "photo mosaic" electrical generation
systems be supported. Seventh, GVE proposes the support - in
partnership with the University of Alaska - of the development
and rapid low-cost implementation of carbon capture and
sequestration technologies at existing and future coal-fired
generating plants.
MR. GARDNER moved on to the seventh component, which is related
to the work of the Alaska Center for Energy and Power. He said
researching new energy technology is crucial for the continued
availability of affordable, reliable energy in Alaska. He
stated that research which leads to advances in the viability of
efficiency of renewable energy technologies can create jobs,
lessen dependency on foreign fossil fuel, and reduce greenhouse
gas emissions. Furthermore, research that identifies new means
of conservation can help lower demand for energy, thereby
reducing its cost.
MR. GARDNER said the eighth component would be to plan today for
tomorrow's energy solutions. He said GVE supports the efforts
of both the House Special Committee on Energy and the Senate
Special Committee on Energy to develop a vision for Alaska's
energy future. A vision would be instrumental in establishing
both a state energy policy and plan that would streamline
current energy programs, as well as developing future energy
solutions for the state.
6:33:45 PM
MR. GARDNER said GVE has provided draft language as its
suggestion for an energy policy, which he read as follows:
It is the policy of the state that Alaska, through a
statewide energy plan, have adequate, reliable,
affordable, sustainable, and clean energy resources,
by promoting the development of nonrenewable energy
resources, including natural gas, coal and oil, and
renewable energy resources, including geothermal,
solar, wind, biomass, and hydro-electric. Alaska will
promote the development of resources and
infrastructure sufficient to meet the state's growing
energy demand, while reducing dependency on foreign
energy sources through energy conservation, energy
efficiency, energy research, energy related workforce
development, and state regulatory processes that
balance economic cost with environmental quality.
6:34:49 PM
MR. GARDNER, in response to Representative Ramras, explained
that propane was not overlooked in GVE's consideration, but
rather is considered with natural gas. In response to Co-Chair
Millett, he said GVE would support geothermal energy, but
"Susitna seems to be the one that's in the public eye right now"
and GVE believes [that project] would have the greatest long-
term benefit for the state.
6:35:44 PM
GARY NEWMAN told the committee that he has been involved in
energy issues since the mid to late 70s, and he offered his
related work history. He clarified that he is testifying on
behalf of himself. He stated that the legislature has a big job
in trying to come up with an energy plan for the state. He
suggested that the state first needs to have a mission in order
to come up with a plan. He observed that HB 218 contains
"marching orders for the Department of Energy." He said the
following factors are involved in this issue, which are not
always compatible: economic, from the perspective of both the
state and the private sector; environmental, which is
contentious; and political. He said, "Everybody has their stake
in it in one form or fashion."
MR. NEWMAN remarked that he is pleased with some of the ideas he
heard from Mr. Gardner, but does not understand other ideas.
For example, he mentioned GVE's work to get $300 million in
federal and state money invested in a coal plan in partnership
with Usibelli Coal Mine, Inc., which is still not up and running
more than a decade later. The point, he said, is that there was
public investment in that project that was promoted by the
private sector. He added, "And when you folks are investing in
the public, we don't have an unlimited supply of funds." He
indicated that coal gasification/liquefaction is guesswork,
because it has not been done commercially. He mentioned an
amount of $3-$5 billion. He said, "I think if you invest in
that, you're going to say you don't have the money for something
else." "Susitna's even more over the top," at $10-$20 billion,
he estimated.
6:39:12 PM
MR. NEWMAN charged the legislature to come up with a plan that
will be best for the state in the long term. He cited House
Concurrent Resolution 56 "from many years ago," which "said we
should be doing something towards dealing with CO2 mitigation."
He said to date that has not really happened. He mentioned
burning nonrenewable energy, and spoke of the role of regulatory
environment. Mr. Newman made suggestions, which he said are
partly addressed in [AS] 44.38.020, with the exception of the
aforementioned reduction of CO2. He said conservation is the
cheapest path - "the less you use, the more efficiently you use
it." He noted that Representative Ramras had spoken of propane
as a bridging fuel to natural gas, and he said 20 years ago,
natural gas was being considered as a bridging fuel "toward
renewable." He recalled a discussion with a resource economist
who estimated there was enough instate proven reserves of
natural gas to last 500-1,000 years. Mr. Newman indicated that
he may not be able to see 500 years ahead, but he can picture
what is best for the state in the next 50 years.
MR. NEWMAN mentioned "cap and trade" and carbon tax. He said
part of the reason renewable [energy] has "had a hard time," is
because "you're not valuing the full and true cost of whatever
energy you're using." He highly recommended that the
legislature find some way of "balancing that." He urged the
committee to take a look at House Concurrent Resolution 56 as
"something that never happened despite the legislature's request
to the executive branch."
6:43:25 PM
JESSIE PETERSEN, Director, Issues and Energy, Northern Alaskan
Environmental Center (NAEC), said Alaska can reach Governor
Palin's goal of 50 percent renewable energy by 2025 if the state
looks to the future for real solutions. He related that people
who live in the Interior are ready and willing to work with
legislators to find a solution to the energy problem. He said
it is possible with Alaska's vast renewable energy sources and
new technology to meet the state's energy needs, save money,
revitalize the state's economy, and reduce greenhouse gas
emissions, without having to "look through past technologies for
our answers." Ms. Petersen stated her belief that in order to
achieve these goals, Alaska will first need state leadership on
an energy vision, which is what the legislature is showing by
being present in Fairbanks today. She urged leadership to work
with GVE to create an energy vision that can be beneficial to
utilities while still focusing on energy efficiency and
renewable energies.
MS. PETERSEN suggested utilizing "decoupling" measures, and
"other policies to remove the traditional formula that more
energy use equals cheaper rates." She also suggested that the
state implement a renewable portfolio standard. Other states
that have done so have had great success. She said Alaska's
energy plan should: reduce carbon emissions; provide affordable
and reliable base load power for communities; reduce dependence
on nonrenewable fossil fuel; implement energy efficiency and
conservation programs that save energy, thus saving money that
can be given back to communities; invest in new technology; and
empower Alaskans to be part of the solution, for example,
through workforce development and training programs.
MS. PETERSEN thanked the legislature for supporting the numerous
energy efficiency and renewable energy bills that were
introduced during the 2009 session, and for consideration of HB
218 and HB 219. She opined that HB 218 would be "wonderful."
She stated support of the idea to have a centralized entity to
address energy issues. She urged the legislators to work to
"get some of those bills finalized and passed" in 2010. She
said it is time for Alaskans to reclaim their position as
leaders, and the state is blessed with an abundance of diverse
renewable energy options and innovative leaders. An investment
in renewable energy and energy efficiency will create new
economic opportunities, while helping to address climate change
- "the challenge of our lifetime," she stated.
6:47:25 PM
RICHARD SEIFERT, Professor/Energy and Housing Specialist,
Health, Home & Family Development, Cooperative Extension
Service, University of Alaska Fairbanks, stated that the
legislature's consideration of creating a Department of Energy
is "both optimistic and terrifying." He explained that he has
been in Alaska for 39 years, was appointed at a young age by
then Governor Hammond to a group called, "The Alaska Energy
Center," which was formed to attempt to do "many of the types of
things" that Senate Bill 152 did. He said he was also in
Governor Cowper's Energy Policy Committee, and he worked in a
Division of Energy and Power Development in the 80s, which acted
like a Department of Energy, but was "scattered to the winds
like the fall of the Roman Empire." He suggested that there is
an entire history of which he is aware, of which today's
legislators are not. He explained that is why he looks today
upon the proposed legislation with trepidation. He credited
Yogi Berra as having said, "You can learn an awful lot just by
watching." He added, "You can also learn an awful lot just by
asking the right questions."
MR. SEIFERT said a primary question is: Just how much can
renewable provide? He indicated that much of his study has been
in an effort to answer that question. He said whether or not
the state could sustain itself on renewable energy should be a
question for the state to answer and an overarching goal to
reach when developing its energy policy. He recommended
electrifying Alaska's entire energy grid with renewable energy
sources to the degree possible, which would result in the
state's not being "vulnerable from pressures to taxing carbon"
or "using electricity at the expense of possible climate
change." He emphasized the importance of the climate change
issue.
6:51:54 PM
MR. SEIFERT said another piece of history that is repeating
itself is the idea of "doing energy development by project." He
stressed that this is a bad idea that has never worked well, and
he stated that Alaska must choose an energy policy that is not
driven by that legacy. He said he is asking the legislature to
adopt a scientific, holistic, durable, "reality" view that is
based on engineering, in order to optimize the entire state's
"resource mix and renewable potential." He stated, "We have
forced half-baked solutions and maladapted projects on our
defenseless communities, and we've got to stop that; we just
can't do that anymore."
6:53:21 PM
MR. SEIFERT outlined key elements of a good energy policy.
First, he said, "Always do the conservation." He thanked the
legislature for $3 million he received toward his conservation
work. He indicated that money toward conservation efforts is
not only the right thing to do, but the first thing that should
be done. Next, Mr. Seifert encouraged the state to "accentuate
the positive, look for the best renewable - wind on the coast,
hydro where it's available, and the least damaging biomass and
fossil fuels only when absolutely nothing else will suffice."
He told the legislature to place the highest value on the
highest value energy, to create renewably powered electric
utilities, and to develop renewable electrification as much as
possible. He recommended that the legislature always ask, "How
durable is the system? Will it last? Does it cause climate
change? Can it be sustained?" He encouraged the state to "pay
as you go," finance with its own collateral, and use the
permanent fund if necessary to bond for the state's energy
future. He said, "This is not only consistent, but it's
possibly the wisest use of our permanent fund." He warned
against using financial advisors, encouraging the state instead
to "use that permanent fund to make a permanent improvement in
the state."
MR. SEIFERT asked for budget support for education - the
University of Alaska, Alaska Center for Engine and Power (ACEP),
the Engineering Department, and Cooperative Extension. He
emphasized the necessity of a state energy policy in order to
prosper and have a comfortable standard of living. He mentioned
communication, Internet, and financial security, and said,
"Without reliable renewable electricity, none of these will
last."
6:55:34 PM
REPRESENTATIVE TUCK said it is true that whenever opportunities
present themselves, there are also dangers that come along with
them. He expressed his hope that Mr. Seifert would stay
involved with this process.
6:56:21 PM
MR. SEIFERT responded, "I'm your biggest fan and your biggest
critic." In response to Co-Chair Millett, he noted that he has
two web site addresses.
6:56:35 PM
JEFFREY WERNER, Research Professional, School of Natural
Resources and Agricultural Sciences, University of Alaska
Fairbanks; Director, Future Farmers of America (FFA), University
of Alaska Fairbanks, asked that the legislature pay particular
attention to the educational needs of youth as it works on an
energy plan. The number of students going into remedial English
and Mathematics is astounding, he noted. He said Alaska doesn't
even appear on the ranking for natural resource education in
high schools. He stated that science directly relates to energy
use. He related that 90 percent of people in Alaska do not know
how much they are paying for natural gas and electricity, and 50
percent of Alaskans do not know what they pay for gasoline at
the pump. He called that a "disconnect," and indicated that
"the giants" who provide the sources do not contribute to
educating Alaskans. He said people in Fairbanks do know how
much it costs to keep their houses warm, "because that's a real-
time thing." However, he remarked that young people do not know
the energy requirements to make that warmth available.
6:59:36 PM
MR. WERNER said FFA's students represent Alaska's agriculture,
fisheries, and forestry; the FFA tagline is "feeding, fueling,
and financing Alaska." The objective of FFA is to energize and
educate youth and excite them about the opportunities in the
state for "keeping Alaska for Alaskans." He said the young
people involved in FFA understand the relation of energy to
Alaska's future. Mr. Werner related that another important
issue is how Alaska will feed itself. He said the "Lake and
Peninsula Borough" does not presently have a way to feed its
communities there, and is looking for innovative ways to make
that happen. Mr. Werner said that is possible, but the
borough's limiting factor right now is energy. Without English,
Mathematics, and Science at the basic level, even starting with
first-graders, Mr. Werner questioned how the topics of energy
and natural resources would be infused into the educational
system. He opined that in Alaska, "every kid should know how to
build a fish wheel and how to use a chainsaw."
7:02:12 PM
MR. WERNER expressed excitement about the committee's proposed
energy policy, and said he and the FFA would like to be part of
the solution.
7:03:26 PM
MR. WERNER, in response to Representative Guttenberg, talked
about what attracts children to FFA and 4-H. He said children
come from all walks of life, and sometimes the experience they
have in either organization is "the one thing they find success
in." He offered further details, including his own experience
growing up.
7:04:49 PM
REPRESENTATIVE TUCK supported Mr. Werner's message regarding the
relevancy of exposing children to experiences in which they
become engaged. He talked about making connections with
students and expressed his appreciation for Mr. Werner's
testimony.
7:06:09 PM
DAN RAYNES relayed that he is an owner of a small automotive
shop in Fairbanks. He said he discovered on the Internet that
people in Australia are making an electromagnetic motor that
will pull 25 kWh and rates 500 percent efficiency. He said a
car only rates 40 percent efficiency. Mr. Raynes stated that
the electromagnetic motors are long-lived; the magnets are
expected to last 140 years. He said it would be possible to
make an electromagnetic [wind] turbine, which would end the need
for using diesel. He surmised that a motor could be made two to
four times as strong just by using bigger magnets and bigger
components.
MR. RAYNES said the problem in schools is that teachers think of
everybody as a number; there needs to be more one-on-one
attention. He said he only finished tenth grade, but has owned
his own shop since he was 16 or 17 years of age.
MR. RAYNES said oil companies are never going to be put out of
business, because oil will always be needed. He explained that
he is not trying to put anyone out of business. He said he
knows propane is a good deal and there is potential there.
7:10:47 PM
DOUGLAS B. REYNOLDS, Ph.D., Professor, Economics, School of
Management, University of Alaska Fairbanks, stated that there is
large economy of scale or there are small projects, and they are
almost mutually exclusive. He said backyard coal boilers are an
option. He said he doesn't think that "in this turbulent time"
the state needs to "worry about global warming right now,"
because the projected bullet line will "take care of things
eventually." Until that happens, there may be five to ten years
during which coal could be used.
DR. REYNOLDS suggested that the committee consider the use of
natural gas to run vehicles. He suggested this idea might need
some subsidizing.
7:14:00 PM
REPRESENTATIVE PETERSEN noted that the Country of Brazil uses
natural gas to run 20 percent of its vehicles. He also noted
that in Washington, D.C., the buses have signs on them to let
people know they run on natural gas. He said switching large
diesel engines over to using natural gas, which would reduce
pollution, may be a good first step. Such a conversion could
create a demand for Alaska's natural gas, he remarked.
DR. REYNOLDS suggested that if money is going to be spent to
study wind-diesel power, it could also be spent to reduce coal
particulates on backyard boilers. He added, "I mean, it doesn't
have to be that bad as a stop-gap measure."
7:15:17 PM
MARY WALKER, Project Coordinator, Alaska Interface Power and
Light (AIPL), clarified that AIPL is not a utility; it is an
entity that supports base communities in "carrying out the
theological imperative to serve as wise and prudent stewards of
our creator's earth." She said AIPL currently has 23 member
congregations - nearly 7,000 congregants all committed to serve
as stewards. She said she cannot speak to HB 218 and 219, but
can speak to AIPL's support of an energy vision that in the
short term encourages energy efficiency. She emphasized that
that support is not only because such efficiency is cost-
effective, but also because it is morally responsible not to
waste precious resources. She said AIPL hopes to see for the
mid to long term the use of renewable energy and nonrenewable
energy sources that "no longer externalizes the cost of green
house gas pollution." Also related to mid- to long-term
solutions, Ms. Walker said AIPL hopes to see "green jobs" for
low-income earners and [military] veterans. Regarding an energy
audit program, she stated, "We've got waiting lists for people
to do audits on our household, but we don't have the workforce
to go in and do the energy efficiency improvement."
7:17:07 PM
MS. WALKER related a story about a reverend who has a
congregation of 100 - a third of whom are out of work. She
suggested these people could be put to work in "green-collar"
jobs.
7:18:29 PM
BOB BEACH, regarding the issue of energy, said these are trying
times. He named some of the energy projects most recently
funded by the legislature, which use wind, solar, biomass,
landfill gas, ocean tidal, incremental hydro, or geothermal
power. He said it is important to show the younger generation
that "we have their best interests at heart," and that "some of
these are solutions for short term." He emphasized the
importance of manufacturing. He stated, "Resource extraction
without any kind of Alaska stamp of having to have built
something from this resource is like giving away 'salt and
egg.'" Mr. Beach said Alaska is consuming a lot of gas on the
North Slope. He talked about garnering that power into "a clean
way of manufacturing steel or any type of metal." He stated,
"The mainstay in any of our energy independence has to start
with manufacture of our product." Mr. Beach said Alaska is on
the cutting edge of energy technology. He talked about "all of
this abundance of gas going up the flare pit," and reiterated
that it would behoove the state to consider the steel industry.
7:23:56 PM
MR. BEACH spoke about the need in rural areas and villages for
alternative energy sources. He stated that [Hurricane] Katrina
was bad, but he said it seems like the villages "have been
Katrinas forever." He continued:
But with some of these credits that can be captured,
using the Indian country label, there would be like a
store house for these types of trades in credit, and I
think Alaska could benefit quite a bit from having
these on the market.
MR. BEACH told the committee to take heart because its members
are doing the right thing by considering bills to capture
energy.
7:26:02 PM
GREG EGAN, Remote Power, Inc.; Solar Wind Consultants, told the
committee that Remote Power, Inc. does solar wind power
projects, while Solar Wind Consultants conducts lifecycle cost
analyses, feasibility studies, and does engineering. He stated
that he would like to see a reversal of Governor Palin's
decision not to accept $28 million in stimulus funds, and he
would like that money used to promote small renewable energy
systems, conservation, and perhaps some research into a "smart
grid." He stated his understanding of a smart grid is that
[power] can be turned on and off remotely. He offered an
example of how it works, and opined that the system is
definitely worth research.
7:27:51 PM
MR. EGAN recollected that Mr. Seifert talked about durability
systems. He said solar power does not get much credit because
"the sun doesn't shine all the time." However, it is possible
to put a solar panel on a satellite and send it out to space,
and it will still [power the satellite] 50 years later. A solar
panel is warranted to put out 80 percent of its original output
after 25 years. It is possible to get a 15-year warranty for
panels, he said. For places where maintenance is not done very
often, "solar is not necessarily a bad way to go," he remarked.
7:29:09 PM
MR. EGAN mentioned the National Renewable Energy Lab's wind
resource map, which shows areas of high wind in the colors red
and purple. He said the entire coast of Alaska would be colored
in red and purple, because there is so much wind. Other areas
of the state do not have so much wind. He stated, "If you have
geographic diversity in your resources, and they're connected to
a grid, ... it doesn't negate the fact that the wind doesn't
blow all the time, but it blows a lot more of the time, because
you're spreading out over different areas." Mr. Egan said wind
is difficult to predict, and energy storage is a necessity. He
said if there is a dam, wind can be used when available; hydro
power from the dam can be used when there is no wind. A similar
plan could work with a combination of wind and solar power.
7:31:08 PM
MR. EGAN said his company deals with small wind power systems -
wind, solar, batteries, and inverters. Batteries work well, and
they are a technology that have been around for a long time.
They are approximately 97 percent recyclable. He discussed the
process of recycling. He noted that Ms. Walker had talked about
"real cost." He said as of 2005, there were 3,600 people in the
nuclear regulatory commission and 18,000 people with the
Environmental Protection Agency (EPA). He questioned how many
of those people are working stilts, solar panels, and wind
turbines. He said there is a lot of cost involved.
7:33:50 PM
DEREK PRICE noted that he has e-mailed testimony to the
committee. He thanked Mr. Seifert for his testimony. He
indicated his concern has to do with the history and future of
energy in Alaska. He said the only information he has from the
legislature is HB 219, and he said it is not clear whether the
goal of the legislature is to reduce costs or to "add
renewables." He asked how much money is in the renewable energy
grant fund, and whether any money would be added to it in the
future, because he said "that has a big effect on what it is you
do." The cost of projects always ends up being much greater
than anticipated, he remarked. He suggested that the state
could consider doing smaller projects. There are already a
number of agencies in the state "who do this exact same thing
with regard to grant money." He mentioned the Denali
Commission, USDA, and GDA, and said he is sure the other
electrical utilities also have similar programs.
MR. PRICE said he works for a large for-profit company in
Fairbanks, which would like to invest in renewable energy, but
must maintain profits and, thus, needs the stability in knowing
what the return is going to be. He said he has seen solar
studies. Wind information is harder to get, he noted. He
continued:
The [Sustainable Natural Alternative Power ("SNAP")]
program is very interesting. We would very much like
to participate in that, but again, you don't know what
the return is going to be. And I think for almost
zero administrative costs at a state level, you could
help fund a program like that where you would get
immediate results - and I mean immediate. You don't
need a five-year study to figure out that you can put
solar on 100,000 square foot of buildings - that you
can put up a turbine on your own property in Healy.
You just don't need those; you can start now. So, all
you need to do is have the information necessary and
the financial information to make that determination
or not.
7:38:26 PM
MERRICK PIERCE told the committee that he serves on the board of
the Alaska Gasline Port Authority (AGPA), but is speaking on his
own behalf. He pointed out that Alaskans, on multiple
occasions, have expressed their point of view of what the state
should do with the gasline. In 1999, the Fairbanks North Star
Borough voted overwhelmingly to build the all-Alaska gasline,
and the borough created AGPA. The City of Valdez and the North
Slope Borough did the same. A couple years later there was an
election in which the Alaska Natural Gas Development Authority
(ANGDA) was created by overwhelming support - to build a gas
pipeline to the City of Valdez.
MR. PIERCE stated his belief that the all-Alaska gasline is the
"only viable large-diameter that's going to be built." He said
there are insurmountable problems with the line into Canada.
First, he said, there are "gargantuan amounts" of shale gas.
Second, there are LNG "re-gas" terminals in "the Gulf" that are
at half capacity, so all ExxonMobil Corporation has to do if it
wants to bring more gas in the Lower 48 markets is to order more
gas "out of gutter." There are technological innovations
related to clean energy projects, such as solar power, as well
as developing technology with directional drilling, which makes
shale gas much more affordable to develop, he stated. There are
also high transportation costs associated with a 2,000-mile-long
journey, which would burn energy. Furthermore, there is the
increased prospect that there will be carbon taxes in the near
future. The all-Alaska gasline has multiple benefits: a faster
build time; the lowest cost clean burning energy for Alaska, the
West Coast, Hawaii, and America's important trading allies; the
improvement of the United States' balance of trade, which is not
balanced; gas to U.S. allies; the monetization of trillions of
dollars of gas that is in the North Slope Basin; and a
critically needed revenue source for Alaska government. Mr.
Pierce stated that as important as it is to have affordable
energy for Alaska, the state needs to have a diversified revenue
stream. He named some possible affects of not getting started
with a viable gasline.
7:41:54 PM
MR. PIERCE offered four ideas of actions for the legislature to
take: First would be to fund the port authority to conduct an
open season. Second would be to fund a gas infrastructure for
the Fairbanks North Star Borough. Third would be to work harder
for compressed natural gas (CNG) vehicle use - particularly
"sleet vehicle" use. He said CNG is a good energy source, which
is "about a 50 cent per gallon equivalent to gasoline," and is
cleaner burning. Furthermore, using CNG means being less
dependent on OPEC oil, which Mr. Pierce said is good for
national security. Fourth would be to fund the Susitna hydro-
electric project. He added, "And as we build Susitna, that
gives us the lowest cost energy, it's the cleanest burning
energy, and then that allows Alaska to export for dollars our
finite natural resources, like natural gas."
[HB 218 and HB 219 were held over.]
7:44:19 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 7:44 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0218A.PDF |
HENE 6/17/2009 5:00:00 PM HENE 8/26/2009 5:00:00 PM HENE 9/16/2009 1:30:00 PM |
HB 218 |
| Fairbanks Agenda.doc |
HENE 6/17/2009 5:00:00 PM |
|
| PROPANE June 2009.pdf |
HENE 6/17/2009 5:00:00 PM |
|
| HB0219A.PDF |
HENE 6/17/2009 5:00:00 PM HENE 8/24/2009 1:00:00 PM HENE 8/26/2009 5:00:00 PM HENE 9/16/2009 1:30:00 PM |
HB 219 |