Legislature(2019 - 2020)CAPITOL 17
04/16/2019 11:00 AM House ENERGY
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| Start | |
| Presentation: All Alaska Energy Project | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
April 16, 2019
12:31 p.m.
MEMBERS PRESENT
Representative Grier Hopkins, Chair
Representative Ivy Spohnholz, Vice Chair
Representative Zack Fields
Representative Tiffany Zulkosky
Representative Lance Pruitt
Representative George Rauscher
MEMBERS ABSENT
Representative John Lincoln
COMMITTEE CALENDAR
PRESENTATION: ALL ALASKA ENERGY PROJECT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
MEERA KOHLER, President and CEO
Alaska Village Electric Cooperative (AVEC)
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint, titled "More Than a
Pipe Dream."
ACTION NARRATIVE
12:31:14 PM
CHAIR GRIER HOPKINS called the House Special Committee on Energy
meeting to order at 12:31 a.m. Representatives Hopkins,
Rauscher, Spohnholz, and Zulkosky were present at the call to
order. Representatives Pruitt and Fields arrived as the meeting
was in progress.
^PRESENTATION: ALL ALASKA ENERGY PROJECT
PRESENTATION: ALL ALASKA ENERGY PROJECT
12:31:56 PM
CHAIR HOPKINS announced that the only order of business would be
a presentation titled "More Than a Pipe Dream."
12:32:28 PM
MEERA KOHLER, President and CEO, Alaska Village Electric
Cooperative (AVEC), presented a PowerPoint, titled "More Than a
Pipe Dream." She explained that this was a project that AVEC
had "been shopping and pursuing for several years now" and that
there was hope to start the project this year. She shared slide
1, "About Alaska Village Electric Cooperative," which read: "A
non-profit member-owned electric cooperative Electric service to
58 villages - 32,000 population 38% of Alaska's PCE population."
She noted that AVEC was headquartered in Anchorage. She moved
on and paraphrased from slide 2, which read: "90 full time
employees; 90+ part time employees; 11,400 services; 50 power
plants; 170+ diesel generators; 500+ fuel tanks; 8.6 million
gallons of diesel; 36 wind turbines serving 20 villages; Two tug
and barge sets." She shared slide 3, a map of Alaska with the
member communities marked.
12:34:08 PM
MS. KOHLER discussed slide 4, "The Cost of Rural Power" which
read: "11,400 Services residential and commercial; 118
million kWh sales; $52 million revenues; $28 million Total Fuel
Cost; $25 million non-fuel cost; 44? - Total revenue per kWh;
397 kWh - Average residential usage per month; 48? - Residential
revenue per kWh multiply Power Cost Equalization $10.7 million, 21% of
revenue, 41% of total PCE disbursed." She pointed out that the
average cost of power in Rural Alaska was very high while the
consumption was very low, with an average monthly residential
use of 397 kilowatt hours (kWh).
12:34:44 PM
MS. KOHLER explained slide 5, "What Alaska Spends on Heat and
Power," which showed the Alaska power statistics from 2011.
This slide depicted the total revenue received by electric and
gas utilities for energy, and how much was spent on diesel fuel
in the state. She shared that, at an average of $4 per gallon
for diesel, Alaskans spent more than $3 billion annually on
electricity and heat, with a total expenditure of more than $60
billion in 20 years. She pointed out that most of this money
went to the outside owners of gas resources and fuel refineries.
She moved on to slide 6, "Why an Alaska Grid?" She reported
that Alaska lacked a transmission grid that connected the state.
She paraphrased from slide 6, which read: "Large scale, high
efficiency gas-fired generation; HVDC transmission to move power
across Alaska; Lower emissions with large-scale renewables for
distant end-users; Abundant power for North Slope operations,
Fairbanks and other Railbelt communities, Remote mines, military
and processors, Heat and power for rural communities." She
added that the initial primary users would be the oil producers
themselves although there would be more than enough electricity
to ship it to major hub points using High Voltage Direct Current
(HVDC) technology. She explained that most conventional
electric utilities operated with alternating current (AC)
transmission because the power was primarily being shipped for
shorter distances and they could afford to correct the
imbalances created by AC power. She added that, although DC
power could go long distances with low loss, it could be a
challenge to convert the power back to AC. She reported that,
as technology had now made this relatively inexpensive, this was
becoming the transport mechanism of choice around the world.
This would create much lower emissions in Alaska as it would be
using high efficiency natural gas, and it would create abundant
power.
12:37:26 PM
MS. KOHLER presented slide 7, "HVDC has been in use since 1954,"
an overview which included the Pacific Intertie, in operation
since 1985, which moved power both ways.
12:38:06 PM
MS. KOHLER displayed slide 8, "The Footprint of HVDC is Smaller
than AC," which compared the footprints of AC and DC lines and
revealed that the same DC footprint could ship seven to eight
times the amount of power using AC. She pointed out that, as DC
lines had two independently operating wires, if one AC wire
malfunctioned, the entire system was down.
12:39:48 PM
MS. KOHLER presented slide 9, "In Europe," slide 10, "In North
America," and slide 11, "In Canada," reporting that entire
countries were being connected with DC. She declared that there
was "quite a bit of utilization in Canada," reporting that
Manitoba Hydro was considered a major developer of HVDC projects
and was currently feeding power into the United States. She
pointed out that this area had a similar construction climate as
Alaska, including permafrost and Arctic conditions.
12:41:23 PM
CHAIR HOPKINS asked whether it was possible to bury the HVDC
lines.
MS. KOHLER explained that this was a development of choice,
adding that the lines were also submersible with almost
unlimited range. She offered an example of a 650-mile project.
12:42:20 PM
MS. KOHLER shared slide 12, "In Asia," and explained the 1250-
mile Xiangjiaba - Shanghai tieline that had moved 6.5 giga watts
of power since 2010. She noted that there was now another
13,000 miles of HVDC transmission moving 85 gigawatts of power.
She emphasized that China had a huge demand for energy, as was
reflected in their transmission system. She reported on slide
13, "Alaska Grid - Phase 1," a 2000-megawatt (MW) power plant on
the North Slope and pointed out that the average load throughout
Alaska was about 850 MW. As the North Slope oil producers were
currently using their own power, this would allow for more
power.
12:43:47 PM
CHAIR HOPKINS asked if there was interest from industry on the
North Slope.
MS. KOHLER said that AVEC had spoken with the major producers
and that there was interest, noting that the equipment currently
used on the North Slope was very old and extremely inefficient.
She pointed out that the challenge was that the producers were
using free gas, so efficiency did not matter, although emissions
could drive the decision. She offered her belief that an option
to utilize energy from someone else would be well received. She
stated that this was a situation in which the producers "don't
want to get in the way of an administration that wants to
develop a gas pipeline, adding that there had been some
political pressures over the last several years. She offered
her belief that there would be a lot of interest from the North
Slope producers for this project. She returned attention to
slide 13 and shared that the projected capital cost of $2.5
billion was based on costs in the Lower 48 multiplied by 1.5
times to reflect the Alaska costs. She suggested that power
could be produced for about $0.05 per kWh.
12:45:38 PM
MS. KOHLER moved on and paraphrased slide 14, "Alaska Grid Phase
2," which read:
HVDC transmission to Fairbanks
Power for GVEA adequate to provide space heat
Adequate energy for Fort Knox
Adequate energy for Livengood mining district
Capital Cost: $1.65 Billion
Delivered cost of power: $.05 + $.015 = $.065/kWh
$18/mcf gas at 85% efficiency = $.072/kWh
MS. KOHLER pointed out that the cost at $.065 per kWh was 10
percent less than $18 per mcf gas at 85 percent efficiency in
the home, $.072 per kWh, declaring this was a viable option.
12:46:37 PM
MS. KOHLER shared slide 15, "Alaska Grid Phase 3," which read:
HVDC transmission to West Coast
Adequate energy supply for Ambler mining district
Power for Red Dog mine
Power for Kotzebue/Nome area (electricity and heat)
Pathway for West Coast wind power
Capital Cost: $900 Million
Delivered cost of power: $.065 + $.107 = $.172 (40% of
capacity) $.12 (85% of capacity)
$4.00 diesel with 85% efficiency for heat = $.125/kWh
MS. KOHLER said that this also opened up the ability to bring in
wind power from the west coast, as it was a vast resource that
was not being utilized. If there was an avenue to move that
renewable power, it would become feasible to develop. She
explained that the delivered cost of power from Fairbanks was
$0.65 with an additional $0.10 if only using 40 percent of the
transmission capacity, for a total of $0.172; however, if 85
percent of the capacity was utilized, the cost of delivered
power would drop to $0.12. She compared this to the much higher
cost of diesel. She clarified that these estimated costs were
predicated on the entire cost of construction being funded by
investors for 30 years at 7 percent interest. She noted that,
as the largest cost was this cost of money, any better rate of
interest would bring down the cost to the consumer.
12:48:22 PM
CHAIR HOPKINS asked if the $900 million line would originate at
the plant on the North Slope and for how many miles, as
mentioned on slide 15.
MS. KOHLER explained that this line would come from the
Fairbanks area, although an option from the North Slope would
also be weighed.
12:49:04 PM
MS. KOHLER moved on to paraphrase slide 16, "Alaska Grid Phase
4," which read:
HVDC transmission to Y-K area
Adequate power for Donlin Gold
Adequate power for Bethel and surrounding area
Capital Cost: $510 million
Delivered cost of power: $.065 + $.058 = $.123 (40% of
capacity) $0.098 (85% of capacity)
REPRESENTATIVE FIELDS asked if this was an alternative to
building a gas line to deliver power to Donlin.
MS. KOHLER replied that it could be an alternative, and that
Donlin needed an option "to nail down." She added that building
the transmission line in the next few years would probably
persuade Donlin to go with it. She reported that an earlier
analysis in 2011 had stated that Donlin needed energy at about
$0.12 per kWh in order for the project to be feasible.
12:50:36 PM
MS. KOHLER paraphrased slide 17, "Alaska Grid Phase 5," which
read:
HVDC transmission to South-Central
Adequate power to supplement local generation
Pathway to move hydropower from Susitna
Pathway to integrate tidal/geothermal power
Capital Cost: $1.2 Billion
Delivered cost of power: $.065 + $.022 = $.087
MS. KOHLER reported that this would be the last phase and noted
that although the cost of power had been less than $0.08 kWh
when she arrived in Anchorage 20 years earlier, it was now
almost $0.20 kWh, which did not support economic development.
12:51:24 PM
REPRESENTATIVE FIELDS asked if Alaska was overbuilt because of
the lack of coordination among the different utilities.
MS. KOHLER opined that Alaska was not overbuilt as the gas fired
generation was aging, hence many of the plants had aged out.
She offered that this would replace those aged plants without
adding more capacity. She stated that this was keeping a lid on
demand as there was not yet the ability to serve very large
potential users at an affordable cost. She said that this was
an option to bring affordable power to developers that could not
afford to buy the current power.
REPRESENTATIVE FIELDS asked if there would be a shift in the
next generation.
MS. KOHLER replied that, in a transmission grid, as it was best
to have several sources of power, it would always be good to
have contributors from elsewhere in the Railbelt and not
mothballing any generation but, instead, supplementing what
already existed and putting the most efficient generation on-
line to serve current and future customers.
REPRESENTATIVE FIELDS asked if gas generated electricity was
more economical on the North Slope or in Anchorage.
MS. KOHLER posited that it was much more economical to develop
on the North Slope because the cost of gas in Cook Inlet was
expensive. As the demand was relatively low, the cost for the
producers was high. She offered her belief that the utilities
were buying gas at $7 - $8 per mcf, whereas the Henry Hub price
was under $3. She said that there were many iterations which
made it much more cost effective to generate on the North Slope.
She stated that moving gas by wire was far more practical than
moving gas by pipe.
12:54:12 PM
MS. KOHLER shared slide 18, "Combined Project Costs," and
reported that the current retail sales of electricity in Alaska
were about 6.3 billion kWh. She pointed out that Sacramento,
California, sold more than 14 billion kWh. She noted that, as
Alaska had a large potential industrial load that was not being
supported, there was a need for adequate energy.
MS. KOHLER directed attention to slide 19, "What Else is Under
Consideration?" She listed the Susitna-Watana Dam project,
Susitna Access, the Railbelt Transmission Upgrades, the
Fairbanks LNG trucking operation, and the Bullet Gas Line as
ideas still being considered. She noted that she had not
included the $45 billion gas pipeline as it was something that
would happen when it happened, and it would not impact Alaska as
a whole.
12:55:59 PM
MS. KOHLER pointed to slide 20, "Recent Utility Projects," which
read:
GVEA - Healy Restart
CEA/ML&P - SCPP
CEA Beluga - Standby
MEA - Eklutna
HEA - Soldotna/Nikiski
ML&P Plant 2 - Replacement
ML&P Plant 2 - Standby
MS. KOHLER stated that these would add about 200 MW of capacity
at a cost of $1 billion because of the need to replace aging
plants, a necessity every 30 - 40 years. She added that this
did not create additional capacity, and that she did not believe
that Alaska was overbuilt.
12:56:33 PM
MS. KOHLER shared slide 21, "Possible Unmet Energy Needs," which
read:
North Slope Operations 300 MW
Gas Turbine Conversion 1000 MW
Pipeline Operations 100 MW
Ambler Mining District 300 MW
Red Dog/Nome 100 MW
Donlin Creek 180 MW
Refining/Smelting 500 MW
Processors 100 MW
Value-Add 200 MW
Server Farm 500 MW
Electric Heat
MS. KOHLER reported that the Alyeska Pipeline Service Company
would like to buy electricity from the utilities and not have to
generate their own, as this cost to processors was making the
cost of fish "uncompetitive." Pointing to the list, she stated
that an environment that fostered development would allow these
operations to exist.
12:57:52 PM
REPRESENTATIVE FIELDS asked if the processors in Naknek and King
Salmon were potential energy users.
MS. KOHLER replied that this was feasible although Bristol Bay
was working toward the development of a project for local
service. She explained that the proposed project could not
provide an HVDC line to "every nook and cranny of Alaska" as it
was not cost effective. She pointed out that development of the
HVDC line would benefit many communities and that power cost
equalization would no longer be necessary. She spoke about
value added processing in Alaska, instead of shipping fish out
in the raw.
MS. KOHLER, in response to Representative Fields, stated that
there were many other processors beyond Bristol Bay that would
benefit, including Dutch Harbor. She pointed to the year-round
jobs benefit of becoming "the fish supplier of the world."
1:00:03 PM
MS. KOHLER moved on to slide 22, "How Much Gas Would It Take?"
and pointed out that a 5.0 GW project, which was more than five
times what Alaska was currently using, would use 6.8 trillion
cubic feet of gas in 30 years, which was a very tiny fraction of
the gas on the North Slope. She declared "We can have our cake
and eat it too!"
MS. KOHLER paraphrased slide 23, "The Benefits of Connecting
Alaska," which read:
Reduce the number of power plants
Consolidated loads improve economics of
interconnection.
Larger loads make renewables like wind or hydro
feasible
A grid allows large scale development of renewables to
serve loads across the state
MS. KOHLER concluded with slide 24 and stated: "Let's ship
"Made in Alaska" not "Pieces of Alaska." She declared that we
treat ourselves like a colony state, a pathway that should stop.
1:01:26 PM
CHAIR HOPKINS asked how redundancy in the lines was built into
the plan.
MS. KOHLER pointed out that, in a DC transmission grid, each
wire could operate independently and was considered more
reliable than AC transmission because there was a degree of
redundancy. She declared that both DC lines would not go down
at the same time, that the primary suppliers guaranteed 98.5
percent availability. She explained that the lines were built
with the capacity to move a great deal more than what was being
demanded. She noted that some areas would be buried to avoid
avalanche and that transmission lines did not have the same
vulnerability to seismic activity as with a pipeline.
CHAIR HOPKINS asked if the transmission lines would go to the
regional hubs in Rural Alaska, and whether smaller lines would
go to neighboring villages.
MS. KOHLER acknowledged that villages were currently being
connected using AC and that there was development work for a
smaller conversion system to allow for longer distance
connections using single wire DC lines. She said that currently
the DC would only go to a conversion station at each hub, where
it would then be moved via AC to the villages. She offered her
belief that there would soon be a small-scale DC conversion
system which would make it more practical to send long
distances. She pointed out that large transmission lines did
not mean that all the communities along the way had use of that
power. It was necessary to have a substation with large
transformers, which could not be justified for all the small
communities.
REPRESENTATIVE FIELDS asked about any impact on the efficiency
of a large plant on the North Slope with an HVDC line to
Anchorage with the infrastructure in Fairbanks to convert to AC.
He questioned the amount of loss.
MS. KOHLER replied that the rule of thumb for losses over
distance was about 4 percent, about the same as a gas pipeline.
She said that AC was a little higher because the voltage of the
AC transmission had to be stepped up. However, there was not
the need to correct the quality of power for DC. She reported
that, as semi-conductors and computers had improved, the same
technology was used in the conversion stations and that there
could be DC to AC conversion at one end of the station and AC to
DC conversion at the other end of the station.
REPRESENTATIVE FIELDS asked if there was a 4 percent loss from
North Slope to Anchorage, regardless of any additional points of
conversion.
MS. KOHLER expressed her agreement.
1:07:49 PM
REPRESENTATIVE SPOHNHOLZ commented that, after many years of
associating a very high price tag with a gas pipeline, there was
the possibility for a much lower cost alternative which could
monetize the resource and "provide access to energy for that
swath of Alaska that are highly underserved." She compared the
projected cost of $6.7 billion for this distribution to the $45
billion for a gas pipeline that would still not distribute
energy to the communities. She declared that it was exciting
for this alternative. She asked for more information about the
potential to convert gas into electric energy. She added that
getting energy to parts of Rural Alaska created other economic
development opportunities, including mining and fish processing.
MS. KOHLER pointed out that, in Naknek, two large new generators
had been installed for the good quality freezing the processing
industry needed to occur. She noted that the primary purpose of
the gas pipeline was to export the gas, whereas the electrical
distribution project did not. She shared some history of the
project, reporting that ARCO had proposed a submersible cable
from the North Slope to California to move 20 gigawatts of power
created with gas from the North Slope. She acknowledged that
she was unsure how the State of Alaska would receive any
compensation from a similar project, although the state could
charge a tax on any electricity being shipped out of the state.
REPRESENTATIVE SPOHNHOLZ declared that the Alaska State
Legislature was "always willing to find a way to monetize these
things."
CHAIR HOPKINS asked about a role for the state in this endeavor.
MS. KOHLER offered her belief that the state needed to take a
primary lead, similar to their actions with the Interior Gas
Utility, by testing the feasibility of the project and serving
as the lead permitting agency. She pointed out that there would
be a lot of permitting required for the rights of way and to
develop the lines. She noted that, as the aggregator, the state
would lend the project credibility and would give the investors
a "sense of credibility" as there would be a "state player
that's involved at a high level." She declared that this was a
huge project that needed to be managed by professionals. She
shared her vision for the state taking the lead for the
feasibility analysis and "working with the key players to pull
together a pathway forward." She pointed out that many of the
end users would shelve their self-production ideas if they knew
the state was involved with the project. She reminded that the
costs presented were completely independent of any state
funding, pointing out that these costs would be lower if the
borrowing costs were lowered, and a potential role for the state
would be for bonding or bringing in large investors.
1:13:44 PM
CHAIR HOPKINS referenced a recent Legislative Research Services
report which indicated about 80 different energy plans since
1983 and asked if any of these had been incorporated into the
long-term energy plan.
MS. KOHLER said, "no," that the last energy plan had been an
effort in 2006 by the House Special Committee on Energy which
had put forth some euphemistic goals and targets, but not a step
by step plan. She declared the need for a concrete plan. She
referenced the 1981 Stone and Webster report, which had
identified the key hydro projects for development and declared
that power cost equalization was the only option for Rural
Alaska, as the last energy plan.
CHAIR HOPKINS spoke about smaller energy plans.
MS. KOHLER replied that they were all local or very small
regional plans.
1:15:19 PM
MS. KOHLER, in response to Chair Hopkins, spoke about the
potential for appointing a committee to produce a realistic
energy plan for all of Alaska with a goal for economically
enhancing what already exists. She suggested that the state
direct Alaska Industrial Development and Export Authority to
work on a comprehensive Alaska energy plan that included large
scale generation and transmission across the state. She
suggested a resolution from the legislature. She declared that
Alaska needs a grid.
CHAIR HOPKINS asked if it would be necessary to require
utilities to purchase the gas and to utilize it when it became
available.
MS. KOHLER offered her belief that it was best to offer a
product to which utilities could not say no and make this
product enhance what they were already doing. The utilities
needed an assurance that they could collect their fixed costs
through whatever process, such as non-fuel charges. It had to
be cost effective for all Alaskans.
1:18:07 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 1:18 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2019-04-16 - Kohler All Alaska Energy Project Presentation.pdf |
HENE 4/16/2019 11:00:00 AM |
Presentation |