Legislature(2009 - 2010)FAHRENKAMP 203
01/29/2009 10:00 AM Senate ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Overview: Geothermal Energy in Alaska | |
| Bob Swenson, Division of Geological and Geophysical Surveys | |
| Gwen Holdmann, Alaska Center for Energy and Power | |
| Chris Rose, Renewable Energy Alaska Project | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON ENERGY
January 29, 2009
10:06 a.m.
MEMBERS PRESENT
Senator Lesil McGuire, Chair
Senator Albert Kookesh
Senator Bert Stedman
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Lyman Hoffman
OTHER LEGISLATORS PRESENT
Senator Charlie Huggins
COMMITTEE CALENDAR
Overview: Geothermal Energy in Alaska
Bob Swenson, Director, Alaska Division of Geological and
Geophysical Surveys
Gwen Holdmann, Director, Alaska Center for Energy and Power
Chris Rose, Executive Director, Renewable Energy Alaska
Project
PREVIOUS COMMITTEE ACTION
No action to report.
WITNESS REGISTER
BOB SWENSON, Director
Division of Geological and Geophysical Surveys
Department of Natural Resources (DNR)
Fairbanks AK
POSITION STATEMENT: Provided an overview of geothermal resources
in Alaska.
GWEN HOLDMANN, Director
Alaska Center for Energy and Power (ACEP)
Fairbanks AK
POSITION STATEMENT: Provided information on the Chena Hot
Springs geothermal project in Alaska.
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project (REAP)
Anchorage AK
POSITION STATEMENT: Provided information and made suggestions on
geothermal and other renewable energy policies.
ACTION NARRATIVE
10:06:35 AM
CHAIR LESIL MCGUIRE called the Senate Special Committee on
Energy to order at 10:06. Present at the call to order were
Senators Stedman, Wielechowski, Kookesh, and McGuire.
^Overview: Geothermal Energy in Alaska
CHAIR MCGUIRE said the hearing will cover how geothermal energy
fits into renewal energy as a whole, how other jurisdictions are
looking at it, what the state is doing, and where the state
needs improvements.
10:07:29 AM
^Bob Swenson, Division of Geological and Geophysical Surveys
BOB SWENSON, Director, Division of Geological and Geophysical
Surveys, Department of Natural Resources (DNR), Fairbanks, said
geothermal heat is not new, but recently there has been a better
understanding of how heat is generated and transmitted in the
earth's core. He presented a slide show to the committee. The
earth becomes incredibly hot with depth. Working with geothermal
in the United States has been a challenge.
10:09:44 AM
MR. SWENSON said geothermal heat, where technically and
economically accessible, is an excellent form of sustainable
energy. Hydrothermal systems are the most common form of energy
extraction from geothermal heat. It is rare to have the complex
geologic parameters necessary for a viable geothermal resource.
Certain settings are much more conducive. Alaska contains a
number of potential sites, but there are many hurdles. New
technologies are on the horizon but need extensive research.
10:10:55 AM
MR. SWENSON said temperatures in the earth are incredibly hot,
but one can't just drill deeper to get it. The deepest well on
the planet is "essentially touching the surface of the earth,"
and none have reached the really hot regions. Knowing the heat
is down there conjures up a number of different models to get
it. He showed possibilities including "the motion of water
heated up by this red, glowing source at depth." It is not that
simple, he stated.
10:12:31 AM
MR. SWENSON said the four fundamental ingredients for geothermal
energy include a geothermal gradient; porosity and permeability
for the migration of fluids (an incredibly important part of the
system); surface access; and sufficiently large hydrothermal
systems. Alaska has many volcanoes. He showed an illustration of
all volcanoes that have been active within the last 100,000
years. The next diagram showed large lineaments through the
center of Alaska and a smaller one. "This is the Denali fault;
this is what creates the Alaska Range." "...huge strike-slip
faults that come in through the middle of the state and create
all the deformation and a lot of the geology that we see -- big
strike-slip systems where this rock is moving to the left in
relationship to that rock. And so those are big crustal-scale
faults. When we take a look at where the geothermal sources are
in the interior part of Alaska, they're related to this system,
because we have crustal-scale faulting; we actually have the
possibility of allowing meteoric or surface waters to get at
great depth and be heated up and [brought] back to the surface
because of its buoyancy."
10:14:58 AM
MR. SWENSON said he will talk about all the different settings
that are conducive to geothermal energy and which of those are
in Alaska. He referred to a red line on a map that is related to
what is seen along the Aleutian chain. The center of the
Atlantic Ocean is a spreading center. That is where the two
oceanic plates are pulling apart. It is important to note the
Moho (Mohorovicic discontinuity) -- where rock changes from a
competent rock to a mushy rock. It's where the heat changes the
phase of the rock. The depth of that is important - "that tells
you how deep the hot rock is in any given area." In a spreading
center, the Moho comes to the surface because the plates are
pulling apart and the molten rock is coming to the surface and
creating new crust. Iceland is the only place that has an
oceanic spreading center at the surface, making it
geothermically conducive. "Anywhere you drill, you're going to
be very, very close to a geothermal source."
10:16:54 AM
SENATOR WIELECHOWSKI asked how deep a geothermal facility must
go in Iceland and how that compares to Alaska.
MR. SWENSON said in Iceland it is very shallow -- at the surface
even or to 2,000 feet. He will discuss Alaska's situation in
great detail. Other good areas are called "hot spots." There are
a number of them around the globe and he noted the Hawaiian hot
spots that cause volcanic eruptions. There are also "oceanic
arcs." The Philippines, for example, has that, and it is a
relatively thin crust. Rift zones, where continents are getting
pulled apart and the crust becomes thin have heat toward the
surface. Nevada and Baja have rift zones. "Unfortunately, we
don't have these in Alaska. What we have in Alaska is what you
see here, and it doesn't mean we don't have geothermal
resources." It has to be put into context of other areas.
10:19:13 AM
MR. SWENSON showed a map of heat flow in Alaska. It is related
to the geothermal gradient and shows how fast heat is coming to
the surface. The map shows slightly elevated heat flow across
all of the state, which is good. "That makes us excited."
However, the devil's in the details. He zoomed in on the map and
looked at actual data points "that they're making this map on."
He said, "That triangle, right there, constrains that whole
area. There's only one data point in that whole area that tells
you that. The hot springs are used in that, of course, however,
again, I told you those big faults that run through the center
part of the state, those hot springs are localized because of
those big faults; that doesn't mean you have heat flow
associated like that across the entire state or across the
entire area. So, again, you have to put these things into
context." He showed a map of the Aleutian Peninsula and of the
wells drilled looking for oil and gas. The wells provide data
showing temperature at depth, which will "help us constrain what
our heat flow is, help us constrain what those gradients are."
10:20:27 AM
MR. SWENSON said the gradients show a tremendous amount of
variability. He pointed to a gradient of 3.56° C per 100 meters
and said it is a very common geothermal gradient. There is also
a gradient of [2.2 ° C per 100 meters], which is relatively cold.
Most of the wells in that area show a normal continental
gradient because of the thick crust and the depth to the Moho.
But right in a volcano, one gradient is 5.43° C, and that is
relatively high. "So you can assume that these are actually
getting closer to some type of heat source, obviously the
intrusions that come up through the crust in the volcanic
areas." He showed those gradients on a plot. He added Chena and
Makushin points on the graph. Makushin is in the Aleutian chain,
and it is by far the best chance for geothermal power in the
state. The shallower it is the less it will cost to produce
electrical power. Drilling costs are in the packet. The average
drilling cost in the Prudhoe Bay area is about $1,800 per foot.
A 10,000-foot well would cost $18 million at a minimum. In a
remote area, costs rise to $3,500 per foot. [Geothermal] works
well in Chena because it is shallow and hot enough to produce
kilowatts. But finding heat near the surface is just part of the
story. Porosity/permeability is another factor.
10:24:02 AM
MR. SWENSON showed a slide of a microscopic view of sandstone,
and he pointed out the spaces between the grains, which define
the porosity and is where the fluid will reside. The
interconnection of the spaces defines the permeability. "That's
how you can flow water through rock." It is very important. Each
rock will have different porosity and permeability, so he showed
a graph of Cook Inlet sandstones. "Tight sands" have low
porosity and very low permeability, and they house a lot of
resource, but it is incredibly hard to get at. He pointed on the
graph where the hot rock will lie. He said to look at a place
with natural fractures that will allow fluids to move through
the rocks. The big faults in the state are very good. The fluid
moves through and picks up the heat. There are "direct
indicators" of a resource, like hydrocarbon. He showed an image
of a natural oil seep in southern Alaska. It was the first oil
field in the state. Another direct indicator would be a flat
spot that denotes contact between gas and water. Those
indicators tell explorers where to drill. He showed a hot spring
that has gas bubbling out of it in the Port Moller area. The
water coming out is about 160 degrees. There is a pile of
clamshells that Native Alaskans had cooked on the heat.
10:27:23 AM
MR. SWENSON spoke of direct geothermal indicators. Geysers like
the one he showed is one. The geologic survey is taking all the
subsurface information that it can find that has temperature
information with it. It is making geothermal gradients and
looking for any anomalies - or hot rocks closer to the surface.
Most of the North Slope has relatively constant gradients, but
there are elevated temperatures that need to be analyzed.
MR. SWENSON showed a map of all the surface manifestations of
the geothermal resources in the state, color-coded by
temperature. Most have a low temperature. The higher
temperatures tend to be out in the Aleutian chain or in
Southeast Alaska. How is this going to help people in rural
Alaska? There are viable opportunities for geothermal. He
plotted all Alaska villages with more than 100 people. "It's not
going to impact a tremendous number of communities in Alaska,
but there are opportunities."
10:29:42 AM
MR. SWENSON said the types of geothermal systems are categorized
by temperature, depth, and steam or fluid type (steam has the
best BTU per unit of fluid). Most of what Alaska has is low
temperature; however, there are things like Makushin, which is
steam and hot water at relatively shallow depths. There's lots
of research going on; a lot of the "frac technology" is actually
being developed within the oil and gas industry. Geothermal
surface manifestations are very odd; one doesn't always see
geysers. Such things get put in national parks, like
Yellowstone, where the geothermal potential is incredible. The
same thing is going on in Alaska, like Katmai National Park.
10:32:54 AM
MR. SWENSON referred to geo-hazards, and said that most of
Alaska's volcanoes have eruptive histories with some very
violent eruptions, and that is a problem. He noted three that
erupted this last summer, and Mt. Redoubt is on watch right now.
He showed photos of Kasatochi prior to this summer's eruption
and after the eruption. "It was a great bird rookery; it was a
beautiful little island, but this is what it looks like now. So
we have to be very, very careful about where we do site any
types of geothermal facilities because of the geo-hazards
associated with that." In summary, there is geothermal
potential, but there is a lot of work to do and a lot of
hurdles. It should make up part of Alaska's energy portfolio
over the next 15 to 20 years.
10:34:15 AM
SENATOR STEDMAN suggested Mr. Swenson come back to the committee
and discuss the regions in greater detail.
CHAIR MCGUIRE agreed, and she asked that he specify the areas in
rural Alaska that could use geothermal energy.
SENATOR WIELECHOWSKI asked about Mt. Redoubt.
MR. SWENSON said currently there is a sustained group of tremors
below the earth that are related to fluid movement. The fluid
movement could just be hydrothermal fluid moving up from a magma
source. But experts say that an eruption is "pretty imminent."
This type of fluid movement doesn't occur without something
happening at the surface, and it is most likely within a few
days. "Even from what they're seeing, they can't tell you how
big of an eruption it's going to be." There was very little
seismic activity prior to the Kasatochi eruption, and "it was a
huge eruption." It could just blow out a bit of ash or "it could
be something like 1982."
10:36:57 AM
SENATOR HUGGINS asked what the prevailing winds are.
MR. SWENSON recommended the website for the Alaska Volcano
Observatory (AVO). Real-time data is presented there.
10:38:02 AM
The committee took an at-ease.
10:38:45 AM
^Gwen Holdmann, Alaska Center for Energy and Power
GWEN HOLDMANN, Director, Alaska Center for Energy and Power
(ACEP), Fairbanks, said ACEP is a program of the University of
Alaska. The first geothermal power was produced in Italy in 1904
from a dry steam field and is similar to the "the Geysers" in
California. Those are the two world-class geothermal resources
and are the easiest resources for power generation. The dry
steam coming out is used directly in a steam turbine cycle. The
water-dominated systems, like in the Imperial Valley of
California, were not brought on line until 1979. That is the
technology used at Chena Hot Springs. She showed a graphic of
how geothermal power is generated, "and the important thing here
is to note that there is both production and injection wells."
The wells produce a geothermal fluid to be used in some kind of
power-generation schedule. Most of the time the fluid is
reinjected in the ground to make sure the reservoir is developed
sustainably. "You're mining heat out of the earth, and you want
to be careful to do that in a sustainable way, and the injection
part of this system is actually super, super critical ... in
terms of maintaining heat and not overdeveloping the system."
10:41:02 AM
MS. HOLDMANN said steam power-plant technology is similar to
plants that use things like coal or nuclear power as a heat
source. The heat develops steam that drives the turbine. A
binary power plant, developed in the late 1970s, is a little
different, and that is the one used at Chena Hot Springs. The
water is not hot enough to boil, so steam can't be generated at
atmospheric pressure. Instead, a fluid with a lower boiling
point than water is boiled into a vapor to drive a turbine. A
hydrocarbon or refrigerant is used.
10:42:11 AM
MS. HOLDMANN said geothermal energy is definitely on the rise
world wide - "pretty dramatically." The United States is the
only country where geothermal energy use has dropped, and that
is because of problems developing the Geysers in California,
which is the largest developed field in the world. There are
problems. It is now injecting waste water from sewage plants to
sustain the steam production.
MS. HOLDMANN noted the Chena Hot Springs site. Geothermal is one
of the few sustainable energy sources that are truly
dispatchable. It is there when you need it and can be used as a
base load, in contrast to wind, solar, or hydro power, which
have daily, hourly, or seasonal fluctuations. United
Technologies built and designed the plant at Chena Hot Springs.
It is the only [geothermal] power plant in Alaska. United
Technologies is a Fortune 500 company and is very interested in
Alaska, "and it's been interesting to see how they fit
developing kind of cutting-edge emerging technologies into their
business model." This is their number one product that it has
developed over the past couple of years, and the company if very
excited to talk about it being "Alaska tough" while marketing
it.
MS. HOLDMANN said the University of Alaska is a big participant
in the geothermal exploration programs and the greenhouse
project. The power plant project was funded with a $250,000
grant from the Alaska Energy Authority. The Denali Commission
was involved. The Department of Energy funded the exploration
program at Chena. The first well was drilled in 1998, and all of
the buildings on the property are heated with geothermal water,
which is 165° F. The temperature is low on the spectrum of
geothermal heat. Yearly energy savings are about $500,000 just
in heating.
10:45:08 AM
MS. HOLDMANN said Chena Hot Springs also has greenhouses and
gardens with crops grown year-round. The green house project was
completed in 2006, and it is 5,000 square feet. It requires 60
kilowatts for lighting. Without the geothermal plant, the
project would not be possible, even with the geothermal heat.
The Aurora Ice Museum was her favorite project that she was
involved in. It uses heat to drive a refrigeration cycle instead
of electric power to drive a compressor. It is not new
technology but it has never been applied to such a low-
temperature resource. It is the only place in the world using
geothermal heat for absorption refrigeration. She showed a photo
of the equipment, which is only four feet wide and six feet
high. It is state of the art. It can run off of any kind of heat
source. "Waste heat at 165° F is available from every single
diesel generator in rural Alaska, and we can be doing things
like that." Kotzebue uses a similar kind of absorption chiller
to make ice for the local fish industry.
MS. HOLDMANN said resource exploration is very important. The
original reports on Chena all said that it could not be
developed for power generation because of not enough heat. She
said to keep that in mind. There may be a need to reevaluate
existing resources in light of newer technologies. A big part of
the Chena project was extensive resource exploration to make
sure that the injection wells were sited properly and
sustainably.
10:47:55 AM
MS. HOLDMANN said the power plant at Chena is comprised of two
200 kilowatt units. A third was installed. They are prototypes
and the first ones in the world ever built by United Technology
for the purpose of power generation. But several hundred units
were sold "in the meantime." The plant in Chena was installed in
2006 using about 900 gallons per minute of the hot water. It is
air and water cooled. Alaska has good cold water and air. The
power is made from the difference between the hot and cold
temperatures, or delta-T. "If you don't have that much on the
high side, if you've got a really low cold temperature that you
can reject heat to, then you can actually still produce quite a
bit of power. And that's actually something that's pretty
interesting to Alaska." Even though Chena doesn't have high
temperatures, the cold can be used to an advantage. The plant
has reduced the cost of power from about $0.30 (using diesel) to
about $0.05. The project cost about $2.2 million, and the
savings are about $500,000 per year. So payback will take about
six years. There are additional revenue opportunities because of
the draw to visitors to see the project.
10:49:21 AM
MS. HOLDMANN said a binary power plant is like a refrigeration
cycle in reverse. Hot water comes in to the evaporator side and
boils the refrigerant, which generates vapor. The vapor drives
the turbine. The spent vapor is recondensed back into a liquid
in a condenser. It could be with cold air or cold water.
10:49:56 AM
SENATOR WIELECHOWSKI said 160°F will not boil water.
MS. HOLDMANN said the hot water is not boiling, so the heat is
boiling a refrigerant that has a lower boiling point. It boils
at about 20°F. It is a closed cycle, "so you would hope that you
don't ever lose the refrigerant." It is simple technology. It
will work off of any low-grade heat source: waste heat, biomass,
and a number of different options.
10:50:31 AM
CHAIR MCGUIRE asked if anyone has considered replication of this
plant in rural Alaska.
MS. HOLDMANN said there has been much discussion. Her program is
assessing smaller units for waste heat recovery on diesel
generators in rural Alaska. Chena Hot Springs and the university
are involved in testing this equipment using biomass in North
Pole as a demonstration project.
10:52:14 AM
CHAIR MCGUIRE said this committee will look at biomass next. She
talked to people from Ocean Beauty Seafoods about its plant at
Naknek. It is running off of diesel, and there was discussion
about using fish wastes.
MS. HOLDMANN replied that that is a really great topic. Her
program has done a lot of research in using fish byproducts for
power generation and heating in rural communities. Fish oil
can't be thought of as a fuel the way that hydrocarbons are; it
has a shelf life so it needs to be thought of as food. Once it
oxidizes it can destroy diesel engines. It needs to be
stabilized as a fuel if it is not used "in the near term."
10:53:24 AM
MS. HOLDMANN said in 22,000 hours of operation in two years,
there has been very little down time. It operates 95 percent of
the time. Capacity is lower: the average output is 175 kilowatts
when the boiler nameplate was 200 kilowatts, and that is because
of an engineering issue with getting enough water to it. But it
has still offset well over 200,000 gallons of diesel fuel and
CO2. The Chena project has gotten a lot of attention because it
was previously thought that binary power needed a temperature of
at least 230° F. Chena has "blown that out of the water and
literally rewritten the textbooks to say that 165 is now the bar
for that." It's gotten recognition. It got the top power-
generating project of the year award in the renewable energy
category by "PowerGen" magazine. It got an award from the
Department of Energy. It is nice to see Alaska on the map for
such a project.
10:55:21 AM
MS. HOLDMANN said there have been spinoff projects. She has been
involved in trying to deploy this on oil and gas wells using
heat that is also extracted. The wells on the North Slope are
about 10,000 feet deep where it is about 165 degrees. That is
enough to generate power. The oil and gas industry was
approached about demonstrating this technology. There was
hesitancy, so a private developer in Florida is going to do that
as a pilot project. Regarding a proposed bill, she suggested
thinking about this idea. She noted the biomass power plant
being built in North Pole, and she said United Technologies is
also building a 1-megawatt unit to test in Alaska and a 5-
kilowatt unit for waste heat applications for rural Alaska.
10:56:48 AM
Wielechowski asked how many houses could use 1 megawatt, and if
it is electricity and heat.
MS. HOLDMANN said a megawatt could serve a "hub" village.
Kotzebue or Nome would have about 5 megawatts of generation.
"We're not talking about heat here, and that's really
unfortunate." Heat is a big issue and there is so much
potential, but ground-source heat pumps need a hole drilled. In
rural Alaska it is difficult to be cost effective. But in
Juneau, there are two ground-source heat projects going in now
using heat from the first couple hundred feet of the earth,
"which is almost more stored in solar radiation from the
summer." It is popular in the Lower 48 and applicable to a lot
of Alaska, but not all of it.
10:58:06 AM
SENATOR WIELECHOWSKI asked how many more megawatts would be
needed to provide electric heat to a hub village.
MS. HOLDMANN guessed that it would triple the need.
10:59:11 AM
MS. HOLDMANN said Disneyland is getting most of its power from
the same plant that Chena Hot Springs is using - from a project
in Utah.
MS. HOLDMANN said enhanced [or engineered] geothermal systems
(EGS) create artificial geothermal systems. The U.S. Department
of Energy is betting heavily on it. Almost all of the funding
for geothermal is going into it. It involves waters percolating
through rock toward heat and coming back up to the surface
somehow. In several places in the world artificial systems are
being created. "So you're creating production and injection
wells and you're actually fracturing rock or finding natural
areas of high permeability and porosity ... and you're actually
pumping water into a reservoir and then reproducing it and
mining this heat from the reservoir for power generation." It
suddenly opens up a much broader area where geothermal is
possible. "Right now we're depending on natural hydrothermal
systems to basically mine this heat and bring water to the
surface that we can use and power generation cycles; if we can
create these kind of artificial cycles in different places, now
we're looking at areas that have just higher elevated
temperature gradients that we could be using for geothermal. And
that suddenly opens up a much bigger part of the state for
possible geothermal development." She calls it a "game changer"
and a pretty big deal.
11:01:12 AM
SENATOR HUGGINS asked about subterranean combustion of coal in
coalfield sites. "Injecting water on top of it."
MS. HOLDMANN said that has been discussed, especially with un-
minable coal seams. The coal gets combusted in situ, and the gas
is used for power generation. It is being done in a couple of
pilot projects around the world.
MS. HOLDMANN said EGS increases the potential for geothermal
energy "by an order of magnitude." MIT has done a lot of work
estimating the economics, and it predicts a cost of 3.5 cents
per kilowatt in the long term. It is not accurate for current
projects. There are no commercially viable projects in the
United States. There have been demonstration projects only. The
ones done elsewhere are based on incentive programs that don't
exist in this country. Alaska should look for potential areas
where an EGS project could be done and evaluate a pilot project
in a controlled setting with high resource potential. An EGS is
being developed in the Cooper Basin in Australia, and there is
the potential for 5 to 10 megawatts. That is like 5 to 10
nuclear power plants. There are six small ones in Europe that
are operating and are connected to the grid. The reason why they
work is based on policy and feed-in tariffs that give a good
price for that power. Those settings in Europe are similar to
places in Interior Alaska; they are associated with granitic
formations and elevated heat flow like at Chena, "but there's no
surface expression - they're creating this artificial geothermal
system."
11:04:36 AM
MS. HOLDMANN said ACEP proposed a pilot EGS project to the
Department of Energy in January, 2008. It was in partnership
with several national labs that had developed this concept, and
the plan was to use supercritical CO2 instead of water. "So
essentially liquefy CO2 and use that as the heat transmission
fluid instead of water." CO2 has a much lower viscosity so it
will move through tight formations more easily. It doesn't gunk
up rock with mineralization, and it is more buoyant, so as it's
heated up, it wants to come back up to the surface, which takes
less energy to pump. This has never been done.
11:06:02 AM
MS. HOLDMANN said there is a high likelihood that the Arctic
Ocean will be seasonally ice-free in the next several decades.
The focus in the Aleutians has been on surface manifestations
and resources that are close to population centers. Iceland has
taken advantage of developing mineral processing industries
around stranded and renewable energy resources, and this is
something we should take another look at, because as Arctic
shipping routes open up, Alaska becomes part of a major shipping
route. There are issues with land ownership, but it is worth
taking a look at.
11:06:27 AM
The committee took an at-ease.
11:11:19 AM
^Chris Rose, Renewable Energy Alaska Project
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), Anchorage, noted that the previous speakers discussed
the resource and the technology, and he will give a broad
perspective of geothermal and policies of renewable resources.
Making policy needs consensus, so REAP has been bringing
stakeholders together, including small and large utilities,
environmental consumer groups, Native organizations, government
agencies, and businesses in support of increasing the production
of renewable energy. "We really see ourselves as a development
group to develop these resources." REAP has 21 board members and
many contributing members. There are 60 members statewide. REAP
is advocating for and educating people about six main types of
renewable energy: wind, geothermal, biomass, tidal/wave, hydro,
and solar. As the cost of conventional fuels goes up, the
stability of a nonfuel resource is showing its importance.
11:14:30 AM
MR. ROSE said there are upfront capital costs but no fuel costs.
Once those capital costs are in, there will be no fuel costs and
business can calculate the cost of power. That is very
attractive to businesses. Iceland has been successful in
attracting industry. Bauxite is being shipped from Australia to
Iceland to make aluminum because they can get a 20-year fixed
contract. Renewables are clean, and that plays into the carbon
risk. There will be prices on carbon. Renewable fuel is a local
resource, and it is inexhaustible. "We have been very blessed to
have all these fossil resources that we've been developing." But
looking at Chevron's data shows that it has used half of the
conventional oil in the last 150 years. The extraction of it
will peak and will drive the price up even higher. With
renewable resources, "you can be assured that once you start
investing in them, you're not going to run out of the wind;
you're not going to run out of the water. These are
inexhaustible resources." With geothermal, one needs to be a
little more careful.
11:16:56 AM
MR. ROSE said, "We really see renewable energy as risk
management." There are many risks, including price. He is
expecting a huge increase in demand for energy resources on the
planet, and he showed a graph of that increase. Currently the
planet is using 400 quadrillion BTUs, and that is expected to
double by 2050 and quadruple by 2100. Emerging economies like
India, China, and Brazil want to use as much energy as we do,
and that will cause a huge demand curve for energy. Oil is used
for transportation, and 2/3 of the world's proven conventional
oil reserves are in five countries in the Middle East. Saudi
Arabia has about 25 percent of the easy, cheap oil. There is
geopolitical risk and there is a finite supply of these proven
conventional reserves.
11:18:16 AM
MR. ROSE said another part of the risk involves climate change,
and that is why there will be a price on carbon. He finds it
interesting how insurance companies are thinking about that.
Swiss Re is the second largest insurance company in the world,
and it stated: "For Swiss Re, climate change is more than a
scientific issue. It is a financial issue." Swiss Re is a re-
insurance company that insures the State Farms and the All-
States of the world, and it has to pay for the erratic climactic
events around the world that are being associated with increased
emissions of greenhouse gases. Swiss Re has had a greenhouse-
reduction mismanagement unit for almost a decade, because it is
hitting its pocket book. Big companies all around the world are
saying that people have to do something. He showed photos of the
melting polar ice cap.
11:19:42 AM
MR. ROSE said the U.S. Supreme Court ruled that the
Environmental Protection Agency could regulate CO2 as a
pollutant under the Clean Air Act. EPA has acknowledged that it
may have to start looking at CO2 as a pollutant, and "we're
certainly going to see that in this new administration." There
are already many proposals in Congress - everything from a cap-
and-trade to a carbon tax. Big utility companies have been
looking at this for awhile and integrating the risk of carbon
into their plans. The price of carbon under the Kyoto Protocol
has been fluctuating over the past several years.
11:21:23 AM
MR. ROSE said there is a voluntary market for "green tags" or
renewable energy certificates that has put a price on carbon.
The renewable energy industry has been taking advantage of this
for some time by acknowledging that there is an environmental
benefit to producing renewable energy creating a market for the
displacement of emissions. REAP helped small villages get money
for their wind power. Those offsets are sold on the open market.
MR. ROSE showed a photo of a hydrogen filling station in
Reykjavik, and said, "I think this is the biggest risk we've
got. This is an exploding business. This is a $55 billion a year
market right now, expected to quadruple in the next six years.
This is a very big business opportunity, and because we have so
many renewable resources here in Alaska, we have a great chance
to get in on it." He showed a list of some companies - all
foreign companies - that are really into the clean energy market
and are making "lots and lots of money doing it." Mid-America
Energy, owned by Warren Buffet, is investing heavily in wind
energy in the Midwest. Companies that are in fossil industries
are investing heavily in wind. It is the fastest growing energy
sector in the world. Wind was 35 percent of all new electric
generation in the United States last year.
11:23:27 AM
MR. ROSE showed a photo of the Geysers, the largest developed
geothermal resource in the world. It has been near Calistoga,
California for the past 30 years. It provides 1,000 megawatts of
power for a million people. Geothermal power is being generated
at 22 different sites. A lesson was learned because water was
not re-injected and the resource became depleted. Production
declined, and now treated wastewater is being pumped back into
the ground. Especially in an arid climate, water must be
reinjected after it has been used to generate power. Geothermal
is available almost 100 percent of the time - the most available
of any resource. He showed a map of tectonic plate boundaries
around the world and a map of where developed sites are. Most of
the geothermal activity is in the west - close to the plate
boundaries. Sites are found in the Philippines, New Zealand,
Iceland, South and Central America, and the American west.
11:25:53 AM
MR. ROSE showed a photo from Iceland. There is a power plant
called Nesjaviller, about 20 miles from Reykjavik, and it makes
electricity and then pumps hot water in a pipe above ground to
Reykjavik. It pumps hot water 20 miles in a cold climate and
loses 2 to 3° F over that difference. Half of the water that
heats a population of 180,000 people goes to Reykjavik this way.
The other half comes from wells that are drilled right in town.
Alaska is not on top of such a zone and can't do that. He showed
a photo of six huge storage tanks that store the water. It is
then gravity fed to the rest of the city. There are 808 miles of
distribution in the city and 50 bore holes. A person in
Reykjavik will encounter little shacks with steam coming out,
perhaps in a bank parking lot. That is the well house for
collecting warm water. Mr. Rose noted that the town is extremely
expensive, but heating costs are extremely cheap. Iceland has a
"total well concept."
11:27:51 AM
MR. ROSE said that same water will be used many, many times.
When the water is the hottest, it is used to generate
electricity, then the water is used to heat homes and buildings,
then it is used for outdoor swimming pools, and then it is used
in the streets to melt snow, and then the water is dumped at a
"beach" in the summer for recreation. A lot of the water is used
for fish farming, industry, and greenhouses. Using the heat of
the water is called "direct-use" of geothermal. "There's a guy
in Idaho who's raising alligators and there's snow-capped
mountains in the background."
11:29:02 AM
MR. ROSE said the Federal Production Tax Credit is by far the
most important federal policy to support renewable energy
development in the United States. It was passed in the 1990s to
level the playing field between the subsidies that have been
given to the oil, gas, coal, and nuclear industries over many
decades. It is a production credit similar to the legislature's
bill. It is not an upfront subsidy or grant, it incentivizes
people to go out and produce the power, and then for every
kilowatt produced, "you give them something, and in this case,
you get a tax credit. This is very good for people who have tax
appetites; it doesn't really help the co-ops, for instance, in
Alaska because they don't pay taxes." But it has been an
important policy. It is 1.9 cents per kilowatt and that adds up
to millions of dollars for big wind farms, for example. Congress
has been authorizing this only one to two years at a time, so it
creates a "stop-start" industry. There is no long-term
certainty. A company building a $500 million wind turbine
factory would want some certainty in this policy.
11:30:46 AM
MR. ROSE said Europe has 20 years or more of certainty, which
gives investors a lot more confidence. It is the same thing when
dealing with Alaska's gas line. Congress supports a longer term
tax credit, but since everyone wants it, it is used as a
"sweetener" in a lot of deals made in Congress. It is a ten-year
tax credit, so the Congress that reauthorizes is "on the hook
for all the payments to go out for that next ten years. So once
you're in the ground before the deadline, it's a ten-year
credit." It was recently reauthorized again, and it included
wind for one year and geothermal for two years. "So there's not
even consistency between technologies."
11:31:49 AM
SENATOR HUGGINS asked what the annual price tag is.
MR. ROSE said he could get that data. As a result of the start-
stop activity, the states tend to lead the way on policy. There
are two kinds of policies. One is a renewable portfolio
standard, which is a mandate. He said 26 states have mandates
and 4 more have goals. Most of these were done legislatively and
a few were based on initiatives. California has the most
aggressive mandate: 20 percent [renewable energy] by 2010.
11:32:30 AM
CHAIR MCGUIRE asked how to distinguish between goals and
mandates.
MR. ROSE said it varies from state to state. A goal has no
teeth. The states with mandates can have weak enforcement for
utilities that don't meet the standards of the mandate.
California is driving a lot of technology development because it
is the sixth biggest economy in the world, and it is requiring
that 20 percent of all its electricity comes from renewable
sources by next year. The state laws have driven a lot of policy
changes. Some states collect surcharges on electric bills to
fund energy efficiency and renewable energy projects.
MR. ROSE said feed-in tariffs have been very successful in
driving geothermal, solar, and wind development in places like
Europe. A feed-in tariff is when a government mandates a certain
above-market price be paid for renewable energy technology or
resources. It will be a different price for different resources.
Most places are incentivizing solar energy the most. It is the
most expensive to begin with. In Germany, anyone who puts solar
electricity back into the grids gets about $0.50 per kilowatt
hour. "So everybody and their brother is putting up solar
panels." It has resulted in a lot of installations that are
distributing all around, which is important if there is a power
outage. It has driven the manufacturing of solar panels in
Germany. Half of the solar panels in the world go to Germany.
Germany has less solar insolation than Alaska. The utility
company has to pay those rates to people who put power into the
system, and it can spread that excess to all of the consumers.
So even though there is a huge premium being paid, the average
extra amount that the average German pays is about 0.5 cents per
kilowatt hour. It raises their total utility bill by 3 percent.
These policies work well because they are usually 20-year
contracts. Sometimes there is a de-escalating tariff, giving an
incentive for efficiency in power generation. It is very useful.
Denmark has 20 percent of its energy coming from wind because of
a similar policy. Germany has 5 percent of its energy coming
from solar. Spain gets 9 percent from wind. Feed-in tariff ideas
began in the United States, but it fizzled in the early 1980s.
Germany picked up the model and refined it. There is $2.5
billion extra in Germany that goes out to these resources, and
the program creates 170,000 jobs. Ontario is the first place in
North America to really get into feed-in tariffs.
11:38:36 AM
MR. ROSE said Ontario instituted the feed-in program in 2006
with a 20-year contract to incentivize smaller systems - 10
megawatt and smaller. Generators pay all interconnections and
licensing fees, and the price paid for wind, small hydro and
biomass begin at 11 cents per kilowatt hour, and it is 42 cents
for solar photovoltaic projects.
MR. ROSE said the fastest and the "biggest bang for our buck"
comes from energy efficiency and just using less. He noted an
excellent report with nine recommendations from the Cold Climate
Housing and Research Center. The cheapest energy is not using
energy at all.
11:39:15 AM
MR. ROSE said the Renewable Energy Fund is not set up to put
money into pilot or demonstration projects. "We really need to
have some kind of an emerging energy technology development fund
for Alaska." It could be for fossil and renewable projects. The
money could be leveraged with federal dollars to put into pilot
projects. In the Lower 48, no one would want to figure out how
to make electricity out of wood, yet Alaska villages could use
that. The same goes for battery storage for small utilities.
Alaska has 90 percent of the country's potential and 50 percent
of the nation's tidal power potential. Alaska is in a great
position to be a leader in that. There are 2 billion people on
the planet with no electricity at all. Bush Alaska is a
laboratory where we can perfect these kinds of systems that can
be marketed around the world. Icelanders are going around the
world and helping with geothermal plants. "We could be helping
people do these small distributed generation systems around the
world." Also, Alaska has such high costs for energy we could be
saving people money.
CHAIR MCGUIRE said absolutely.
11:41:00 AM
MR. ROSE said the long-term forecast for a barrel of oil is
$110. Alaska can't have a vibrant economy without energy. Alaska
has money and resources, and it should become a world leader.
"These are 20 to 100-year decisions." There is aging
infrastructure and demand for energy, so these decisions need to
be made in the next five years. Iceland's vision is a good
example. Icelanders are excited and proud of being on the
cutting edge. They are attracting a lot of development.
CHAIR MCGUIRE said Mr. Rose has been very patient with people in
the legislature who have taken a lot of time to catch up to this
vision. The committee looks forward to working with the
witnesses, and it should start crafting energy policy this year.
She saw an attitudinal commitment to innovation and to exporting
ideas that make the world a better place. There are four areas.
One is research and development and money that could have come
out of the Alaska Science and Technology fund. Secondly there
are proven technologies and ideas that state funds can support.
Thirdly is the transmission aspect, and fourthly is the consumer
role. There seem to be arbitrary numbers given to certain
projects that may or may not make them feasible.
MR. ROSE said he is looking forward to working with the
committee.
11:45:59 AM
SENATOR WIELECHOWSKI said this is an opportunity for the state
and this committee to really put together a plan. "I'm excited
about it."
11:46:21 AM
There being no further business to come before the committee,
the meeting was adjourned at 11:46 a.m.
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