Legislature(2023 - 2024)BUTROVICH 205
04/05/2023 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Modernizing Alaska's Largest Electric System | |
| Presentation: Interior Gas Utility Update | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 5, 2023
3:30 p.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Cathy Giessel, Co-Chair
Senator Bill Wielechowski, Vice Chair
Senator James Kaufman
Senator Forrest Dunbar
Senator Matt Claman
MEMBERS ABSENT
Senator Scott Kawasaki
COMMITTEE CALENDAR
PRESENTATION(S): MODERNIZING ALASKA'S LARGEST ELECTRIC SYSTEM
- HEARD
UPDATE: INTERIOR GAS UTILITY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CURTIS THAYER, Executive Director
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Delivered the presentation, "Modernizing
Alaska's Largest Electric System."
BRYAN CAREY, Director of Owned Assets
Alaska Energy Authority
Anchorage, Alaska
POSITION STATEMENT: Participated in the presentation,
"Modernizing Alaska's Largest Electric System."
DAN BRITTON, General Manager
Interior Gas Utility
Fairbanks, Alaska
POSITION STATEMENT: Presented the Interior Gas Utility update.
ACTION NARRATIVE
3:30:42 PM
CO-CHAIR CLICK BISHOP called the Senate Resources Standing
Committee meeting to order at 3:30 p.m. Present at the call to
order were Senators Claman, Dunbar, Kaufman, Co-Chair Giessel,
and Co-Chair Bishop. Senator Wielechowski arrived during the
course of the meeting.
^PRESENTATION(S): MODERNIZING ALASKA'S LARGEST ELECTRIC SYSTEM
PRESENTATION(S): MODERNIZING ALASKA'S LARGEST ELECTRIC SYSTEM
3:31:32 PM
CO-CHAIR BISHOP announced a presentation on modernizing Alaska's
largest electric system by the Alaska Energy Authority.
3:32:12 PM
CURTIS THAYER, Executive Director, Alaska Energy Authority,
Anchorage, Alaska, introduced himself and Bryan Carey.
MR. THAYER began the presentation on slide 2, "About AEA."
AEA's mission is to reduce the cost of energy in
Alaska. To achieve this mission, AEA strives to
diversify Alaska's energy portfolio increasing
resiliency, reliability, and redundancy.
Railbelt Energy AEA owns the Bradley Lake
Hydroelectric Project, the Alaska Intertie, and the
Sterling to Quartz Creek Transmission Line all of
which benefit Railbelt consumers by reducing the cost
of power.
Power Cost Equalization (PCE) PCE reduces the cost
of electricity in rural Alaska for residential
customers and community facilities, which helps ensure
the sustainability of centralized power.
Rural Energy AEA constructs bulk fuel tank farms,
diesel powerhouses, and electrical distribution grids
in rural villages. AEA supports the operation of these
facilities through circuit rider and emergency
response programs.
Renewable Energy and Energy Efficiency AEA provides
funding, technical assistance, and analysis on
alternative energy technologies to benefit Alaskans.
These include biomass, hydro, solar, wind, and others.
Grants and Loans AEA provides loans to local
utilities, local governments, and independent power
producers for the construction or upgrade of power
generation and other energy facilities.
Energy Planning In collaboration with local and
regional partners, AEA provides economic and
engineering analysis to plan the development of cost-
effective energy infrastructure.
3:34:30 PM
MR. THAYER displayed slide 3 that shows the categories of AEA
active projects and services and their locations. He advised
that AEA has about 35 employees and more than 500 projects
ongoing on any given day that interface throughout the state.
3:34:57 PM
MR. THAYER advanced to slide 4, "Foundation of a Dependable
Transmission System." He spoke to the following:
Resiliency
Grid resiliency is defined as the
ability to withstand, manage,
and respond quickly to
disruptions such as severe
weather events, equipment
failures, or cyberattacks.
Reliability
Reliability defines standards
and system performance such
that the system is designed to
withstand sudden events.
Redundancy
An important aspect of grid
resiliency and reliability,
redundancy is the existence of
more than one means for
performing a given function.
3:35:46 PM
MR. THAYER advanced to slide 5, "Bradley Lake Hydroelectric
Project." He spoke to the following:
Owned by AEA, the Bradley Lake Hydroelectric Project
was energized in 1991 and is Alaska's largest source
of renewable energy.
• Location The project is located 27-air miles
northeast of Homer on the Kenai Peninsula.
• Benefits Provides low cost energy to 550,000+
members of Chugach Electric Association, Golden
Valley Electric Association, Homer Electric
Association, Matanuska Electric Association, and
the City of Seward.
• Annual Energy Production ~10% of Railbelt
electricity at 4.5 cents/kWh (or ~54,400
homes/year) and over $16 million in savings per
year to Railbelt utilities from Bradley Lake
versus natural gas.
• Status In 2020, AEA completed the West Fork
Upper Battle Creek Diversion project, which
increased Bradley Lake's annual energy production
by about 10%.
3:36:35 PM
CO-CHAIR BISHOP asked what year the $400 million project was
completed.
MR. THAYER replied that the project was completed approximately
35 years ago and the bonds were defeased about two years ago.
Since then, AEA has been able to address some upgrades. He
described the Required Project Work provision that allows AEA to
use the $166 million that previously went to pay down the bonds
to start building out the transmission lines and installing a
battery system to benefit Bradley Lake. This revenue will cover
about one-third of the total cost. He also reminded members that
the bonds did impose additional costs on the ratepayers or the
state treasury.
3:38:06 PM
SENATOR CLAMAN asked what AEA's participation has been in the
Electric Reliability Organization (ERO) whose goal was to
improve transmission economies and efficiencies.
MR. THAYER answered that the ERO is in the process of being
stood up, and AEA is a voting member and active participant.
That process is lengthy and AEA decided to move forward with its
upgrades.
SENATOR CLAMAN said he wasn't criticizing the AEA decision; he
was frustrated that it's taken so long for the ERO to get going.
He encouraged Mr. Thayer to do what he could to get the
Regulatory Commission of Alaska and the ERO to move more quickly
toward approval.
MR. THAYER said AEA shares the frustration.
3:40:06 PM
MR. THAYER turned to slide 6 to describe the Bradley Lake
Project Management Committee (BPMC).
The Bradley Lake Hydroelectric Project is owned by AEA
and managed by the Bradley Lake Project Management
Committee (BPMC), which is comprised of a member from
each of the five participating Railbelt utilities:
• Chugach Electric Association,
• Golden Valley Electric Association,
• Homer Electric Association,
• Matanuska Electric Association, and
• City of Seward.
He pointed to the graphic that shows the allocations for each
utility. Financial decisions require agreement from 50 percent
of the water rights and at least two utilities. As the owner,
AEA has veto power.
3:41:08 PM
MR. THAYER turned to slide 7, "Dixon Diversion Project." The
aerial view shows that it is in the footprint of Bradley Lake.
He spoke to the following:
The proposed Dixon Diversion Project would increase
energy from Bradley Lake Hydroelectric Project by
potentially up to 50%.
• Location The Dixon Diversion Project is located
five miles southwest of Bradley Lake
• Components
- Diversion dam and intake below Dixon Glacier
- Five mile tunnel to Bradley Lake
- Raise dam elevation to store more water for
critical periods
• Benefits Could provide annual electric energy
for up to 28,000 homes on the Railbelt. (Bradley
Lake Hydroelectric Project: 54,000 homes)
• Status Feasibility (verifying energy and cost)
He noted the $5 million general fund request in the governor's
budget to help with the Dixon Diversion Project.
MR. THAYER directed attention to the bar chart on slide 8, "LCOE
of Dixon Economic Evaluations Compared to Possible Chugach
Short-Run Avoided Costs." He spoke to the following points:
Possible Economic Feasibility
• The Dixon Diversion economic evaluations indicate
a levelized cost of energy (LCOE) that is
competitive with some of the possible future
Chugach short-run avoided cost 50-year LCOEs,
depending upon the future cost of natural gas.
• This indicates that further feasibility
assessment is warranted to refine the projected
cost and energy production estimates until or
unless a determination is made that the project
is not economically viable.
3:42:36 PM
SENATOR DUNBAR said he supports the project and appreciates the
power from Bradley Lake, but he wonders about the environmental
impacts that might result. He mentioned fish stocks as an
example.
MR. THAYER conveyed that this was an amendment to the FERC
license for Bradley Lake. Glacier water will be diverted to
Bradley and the existing powerhouse will be used. Fish won't be
an issue at the lake, but salmon studies will have to be done at
the lower end. He opined that the environmental impact would be
minimal. He deferred to Bryan Carey to comment further.
3:44:04 PM
BRYAN CAREY, Director of Owned Assets, Alaska Energy Authority,
Anchorage, Alaska, stated that the Martin River itself is silty,
but salmon use the lower part of the river to get between clear
water sloughs. The feasibility studies will include fishery work
to determine the specific fisheries and the potential impacts.
3:44:57 PM
MR. THAYER continued to slide 9, "Energy Generation Comparison."
Project MWh/yr
Bradley Lake Hydro ~400,000 MWh/yr
Dixon Diversion ~160,000 MWh/yr
Fire Island Wind ~49,000 MWh/yr
Battle Creek Diversion ~37,000 MWh/yr
Net Metered Solar ~3,500 MWh/yr
3:45:32 PM
MR. THAYER directed attention to the chart on the right side of
the slide that has the modeled annual water flows for the Dixon
Diversion. The flows are greater in summer months than winter,
but the model shows the peaks and valleys based on what AEA
believes the daily acre feet of water would be.
CO-CHAIR BISHOP commented that not all of the water flows could
be retained in the lake during the peak flows in the summer. He
asked Mr. Carey if he had any comment on improving technologies
and the potential for battery storage that's generated with
thermal.
MR. CAREY responded that AEA would probably raise the height of
the dam so the excess water could be stored and used into the
winter months. He described large hydro projects like Bradley
Lake as a giant battery that costs a fraction of conventional
backup batteries. He cited Homer Electric's $50 million 42
megawatt battery that has the capacity to provide power for two
hours, and compared it to the more than 200 thousand megawatt
hours stored in Bradley Lake.
SENATOR DUNBAR asked how much of the adjacent land would be
covered if the lake were to rise.
MR. CAREY said that several hundred acres of flat land at the
head of the lake would be covered, but it wouldn't make much
difference in the area that is surrounded by steep cliffs. This
would be a FERC-regulated project so mitigation would be
required. AEA would probably acquire commensurate acreage in the
Homer or Kachemak Bay vicinity and do conservation work to
mitigate wildlife impacts.
CHAIR CLAMAN asked whether the net metered solar data that's
identified on the slide was referring to commercial solar
projects in the MatSu Valley, home solar projects, or a
combination.
MR. THAYER answered that it was net metering in the Chugach
system; it does not include the Houston and Willow solar
projects that MEA is purchasing power from. He noted that AEA
helped make those projects viable with power project loans
totaling $5.5 million.
SENATOR CLAMAN requested confirmation that the 3,500 MWh/year
net solar metering referred to businesses and homes with solar
panels in Anchorage.
MR. THAYER said that's correct.
3:49:32 PM
MR. THAYER reviewed the required project work for Bradley Lake,
starting on slide 11, "Sterling to Quartz (SSQ) Transmission
Line." He spoke to the following:
In 2020, AEA acquired the SSQ Transmission Line a
critical component of the interconnected Railbelt
transmission system located on the Kenai Peninsula, as
part of the Bradley Lake Hydroelectric Project.
• Location 39.4 miles of 115 kilovolt (kV)
transmission and out of use 69 kV transmission from
Sterling to Quartz substation (Kenai Lake)
• Benefits AEA ownership ensures better cost
alignment, increased reliability, and more timely
repairs and upgrades.
• Status Removal of decommissioned 69 kV line on
SSQ. Engineers are designing the upgrade of the
existing 115 kV line to 230 kV to reduce line
losses, increase line reliability and system
resiliency.
• Cost Estimated cost to upgrade line to 230 kV
standards is $62 million.
CO-CHAIR BISHOP asked whether the cable in the kV line was being
recycled if it had any copper.
MR. CAREY said he wasn't sure that the cable was copper, but the
contractor would surely look at recycling.
3:51:15 PM
MR. THAYER continued to slide 12, "Required Project Work
Summary." He described four project segments, the scope of the
work, and the projected timelines.
Bradley to Soldotna - The transmission line between the Bradley
and Soldotna substations will be upgraded with an additional 115
kV line or converted to 230kV. Homer Electric owns this line and
the original timeline was by 2033.
Soldotna to Sterling - The transmission line between the
Soldotna and Sterling substations will be upgraded from 115 kV
to 230 kV. AEA owns this line and the original timeline was by
2030.
Sterling to Quartz Creek - The transmission line between the
Sterling and Quartz Creek substations will be upgraded from 115
kV to 230 kV. The original timeline was by 2028.
Grid Stabilization - To ensure grid stabilization, the existing
Battery Energy Storage System (BESS) will be upgraded in Homer
and new BESS systems will be added in the Central and Northern
regions. Balancing is required when renewables are added. The
original timeline was by 2025.
MR. THAYER advised that the timelines were uncertain because of
worldwide supply chain interruptions. He reported that the total
budget was about $379 million, although that too was subject to
supply chain logistics and permitting. To date, $166 million has
been bonded for the project.
3:52:33 PM
MR. THAYER advanced to the map on slide 13, "BPMC Required
Project Work." He conveyed that the area in yellow reflects the
Homer system; purple reflects the Chugach system; orange
reflects the MEA system; the dark bluish purple reflects the
Fairbanks system; and the aqua reflects Glennallen. The majority
of AEA's lines, which are shown in red, go north from Willow to
Healy. He deferred to Mr. Carey to discuss the specifics of each
of the projects.
MR. CAREY spoke to slide 14, "Upgrade Transmission Line from
Bradley Lake to Soldotna."
Upgrade Transmission Line from Bradley Lake to
Soldotna
• Scope This project will allow for increased power
flow from the Bradley Project through the upgrade of
this 67.8 mile segment to 230 kilovolt (kV) or a
second 115 kV transmission line from the Bradley
Lake power plant to the Soldotna Substation. This
transmission line will become part of the Bradley
Lake Hydroelectric Project.
• Schedule Estimated completion date is 2033
• Budget Estimated cost is $96 million
• Benefits Reduce energy losses and increase
resiliency to unplanned events
CO-CHAIR BISHOP commented that expansion is built into the new
line.
MR. CAREY agreed.
3:55:08 PM
MR. CAREY continued to slide 15, "Upgrade Transmission Line from
Soldotna to Sterling."
Upgrade Transmission Line from Soldotna to Sterling
• Scope This project will allow for increased power
flow and reduced line losses from the Bradley
Project through the construction of an upgrade of
the transmission line from 115 kilovolt (kV) to 230
kV from the Soldotna Substation to the Sterling
Substation. The SSQ Line (as well as the
transmission line between the Sterling Substation
and Quartz Creek Substation) are the sections of the
Bradley Project to Anchorage interconnection that
incur the most significant energy losses. This
additional transmission capacity will become part of
the Bradley Project.
• Schedule Estimated completion date is 2030
• Budget Estimated cost is $27 million
• Benefits Reduce energy losses and increase
resiliency to unplanned events
3:56:05 PM
MR. CAREY spoke to slide 16, "Upgrade Transmission Line from
Sterling to Quartz Creek."
Upgrade Transmission Line from Sterling to Quartz
Creek
• Scope This project involves the upgrade of the 39
miles of transmission line between the Sterling
Substation and Quartz Creek Substation (SSQ Line)
from 115 kilovolt (kV) to 230 kV. The SSQ Line is
part of the Bradley Project. All property rights and
obligations in the SSQ Line were purchased by AEA in
2020 and made part of the Bradley Project. Bradley
Lake output is significantly reduced as it
transitions these line sections.
• Schedule Estimated completion date by 2028
• Budget Estimated cost is $62 million
• Benefits Reduce energy losses and increase
resiliency to unplanned events
3:56:56 PM
MR. CAREY spoke to slide 17, "Battery Energy Storage Systems for
Grid Stabilization."
Battery Energy Storage Systems for Grid Stabilization
• Scope The BESS projects consist of an upgrade to
the existing BESS system in the North, and also new
BESS systems in the Southern, and Central regions of
the grid. The Northern BESS is located at Fairbanks,
the Southern BESS is located in Kenai, and the
Central Region BESS will be located at Anchorage.
BESS will be needed to fully realize the benefits of
a 230 kV bulk power supply system, regulate energy
from various generation, and increase resilience.
• Schedule Estimated completion date is 2025
• Budget Estimated cost is up to $194 million
(depending on technology choices and capacity)
• Benefits Increase system resilience, transfer
capability, more efficient use of system and
lowering impediments to additional renewable
generation development
CO-CHAIR BISHOP asked what type of batteries were and will be
used in the BESS projects.
MR. CAREY answered that the batteries for Anchorage and Soldotna
are lithium and Golden Valley is talking with Westinghouse about
what might be appropriate in the Fairbanks area.
3:58:52 PM
MR. THAYER continued to slides 18 and 19 and spoke to the
following:
Alaska Intertie
Constructed in the mid-1980s with $124 million in State
of Alaska appropriations, there is no debt associated
with the Alaska Intertie.
• AEA owns the 170-mile Alaska Intertie transmission
line that runs between Willow and Healy. The line
operates at 138 kV (it was designed to operate at
345 kV) and includes 850 structures.
• A vital section of the Railbelt transmission system,
the Intertie is the only link for transferring power
between northern and southern utilities.
• The Intertie transmits power north into the Golden
Valley Electric Association (GVEA) system and
provides Interior customers with low-cost, reliable
power between 2008 and 2021, the Intertie saved
GVEA customers an average of $37 million annually.
• The Intertie provides benefits to Southcentral
customers as well through cost savings and
resilience to unexpected events.
4:00:40 PM
MR. THAYER advanced to slide 20 which shows a color-coded
schematic of the transmission lines and service areas in the
Alaska Intertie. The MEA service area is shown in pink and
Fairbanks is shown in green. AEA owns the heavy black
transmission line that primarily runs north from Willow.
4:01:14 PM
MR. THAYER mentioned slide 21, "Modernizing the Railbelt Grid,"
and spoke to slide 22, "Railbelt Transmission System Urgently
Needs Modernization," and the unique opportunity the revenue
from the [Infrastructure Investment and Jobs Act (IIJA)]
provided. He briefly described the competitive grants.
Railbelt Transmission System Urgently Needs
Modernization
The majority of the Railbelt transmission system was
constructed more than 40 years ago. A resilient,
reliable, and redundant Railbelt transmission system
is not only achievable but also necessary to create
the needed capacity to integrate additional renewable
energy in the future.
Grid Forming
A grid with alternate paths
will increase reliability,
resiliency, and fuel
diversification
Fuel Savings
Upgrades and alternate
paths will reduce line
losses.
Energy Security
Natural or other events
can isolate cities or
regions from energy
Generation Changes
New renewable energy projects are not located in
existing cities. New transmission to connect new
renewable projects to existing transmission paid for
by projects. However, existing transmission must be
upgraded to transmit energy to and between the
Railbelt regions.
MR. THAYER deferred to Mr. Carey to describe the specifics of
the competitive grants.
4:02:48 PM
MR. CAREY spoke to slide 23, "Infrastructure Investment and Jobs
Act (IIJA) Railbelt Transmission Funding Opportunities."
AEA and the Railbelt utilities submitted for the
following IIJA: Grid Resilience and Innovation
Partnerships (GRIP) competitive grants:
• GRIP Application Topic 1 Application for upgrading
existing transmission Bradley Lake to Susitna
Valley. Request: $100 million; Required Match: $100
million
• GRIP Application Topic 2 Application for Battery
Energy Storage System/High Voltage Direct Current
coordinated control system. Would coordinate actions
of batteries in the South (Kenai), Central
(Anchorage, and North (Fairbanks). Request: $15
million; Required Match: $15 million
• GRIP Application Topic 3 Application for
transmission upgrades to connect Kenai (new
submersible line), northern (Susitna Valley Line),
and Copper Valley with central and northern.
Request: $299 million; Required Match: $299 million
MR. CAREY continued to the graphic on slide 24, "Modernization
Work Phases."
Upgrades to Railbelt transmission line are needed to
increase resiliency, reliability, and redundancy, and
decrease line losses.
Work Phase 1 Upgrade
existing southern transmission
backbone first which will
reduce losses from Bradley
Lake and allow new Renewable
Energy Projects.
Work Phase 2 - New lines to
add reliability, resilience, and
redundancy. Additional time for
upfront activities required.
Battery Energy Storage
System (BESS)/High Voltage
Direct Current Controls
(HDVC) Increase resilience,
transfer capability, and efficient
use of electrical system.
4:05:09 PM
CO-CHAIR BISHOP asked Mr. Thayer if all three GRIP applications
get to the Roadbelt Intertie that's been discussed previously.
MR. THAYER said that would be a viable option.
SENATOR DUNBAR asked where the required match would come from
and if the authority itself could potentially raise the funds.
MR. THAYER said one option is for the state to provide the
match, but there are also conversations about what the utilities
might be able to contribute, and pass to ratepayers, and whether
the existing $166 million in bonding, which is state money,
could be leveraged as the match. He noted that $10.5 billion was
available in the different buckets and AEA was looking at what
the state might possibly qualify for.
4:06:54 PM
CO-CHAIR BISHOP commented on the possibility of a future
overview to show how the different buckets of money might be
applied.
MR. THAYER mentioned an outstanding GRIP 3 application that
looks at microgrids in small communities in rural Alaska,
particularly borderline communities that can transform on to
more renewables. Previously, even with the REF program, these
small grids were too small to qualify for grants or federal
loans, but grid resilience allows for that.
CO-CHAIR BISHOP identified REF as the Renewable Energy Fund.
4:08:36 PM
MR. THAYER continued to slide 25, "Statewide Grid Resilience and
Reliability IIJA Formula Grant Program, 40101(d)." He spoke to
the following:
Per IIJA section 40101(a)(1),8 a disruptive event is
defined as "an event in which operations of the
electric grid are disrupted, preventively shut off, or
cannot operate safely due to extreme weather,
wildfire, or a natural disaster."
• These federal formula grant funds will provide $60
million to Alaska over five years, including $22.2
Million for the first two years allocation, to
catalyze projects that increase grid resilience
against disruptive events.
• Resilience measures include but are not limited to:
- Relocating or reconductoring powerlines
- Improvements to make the grid resistant to
extreme weather
- Increasing fire resistant components
- Integrating distributed energy resources like
microgrids and energy storage
• Formula-based funding requires a 15% state match and
a 33% small utility match.
MR. THAYER turned the discussion to the Susitna-Watana Hydro
Electric Project, noting that the state had been talking about
this since the 1950s. He reviewed the data on slide 27,
"Susitna-Watana At-A-Glance."
The proposed Susitna-Watana Hydroelectric Project is a
large hydro project that would provide long-term
stable power for generations of Alaskans. The project
would result in approximately 70% of the power
generated in the Railbelt originating from renewable
sources, up from the current 15% a nearly four-fold
increase.
• Dam Height 705 feet
• Dam Elevation 2,065 Feet
• Reservoir Length ~42 miles
• Reservoir Width ~1.25 miles
• Installed Capacity 618 MW
• Annual Energy 2,800,000 MWh
• Cost ~$5.6 billion (2014$)
MR. THAYER reminded members that the state had already spent
$200 million for permitting and another $100 million would bring
a FERC license. He noted that Mr. Carey was the project manager.
4:10:50 PM
MR. CAREY continued to slide 28, "Why Susitna-Watana?" and spoke
to the following:
50 percent of the estimated supply of current Railbelt
energy demand
100+ years is the project life providing long-term,
stable rates
$11.2 billion is the estimated energy cost savings
($2014) over the first 50 years
The reduction of carbon dioxide emissions from
displaced coal and natural gas-fired generation would
amount to 1.3 million tons a year, which 2 equates to
removing approximately 250,000 cars from the road.
4:11:47 PM
MR. CAREY advanced to slide 29, "Susitna-Watana History." It
shows the following timeline along a rendition of the Susitna
River.
1950s - The Bureau of Reclamation recognized the location and
conducted the first studies. The area was set aside as a
power reserve.
1980s - The state studied the project using revenue from oil
production, but interest waned due to cheap gas in Cook
Inlet. Projects such as Bradley Lake went forward.
2010 - The legislature passed the goal to achieve 50 percent
renewable energy by 2025.
2011 - The legislature unanimously authorized the Alaska Energy
Authority (AEA) to pursue the Susitna-Watana
hydroelectric project.
2012 - Studies on the Susitna River and surrounding areas began.
2017 - The license was put in abeyance.
2019 - The abeyance was rescinded.
CO-CHAIR BISHOP commented on putting a drill bit in a reservoir
and the gift that keeps on giving.
MR. CAREY responded that many of the studies that were done
years ago are still accurate and useful.
4:13:36 PM
SENATOR WIELECHOWSKI joined the committee.
MR. CAREY briefly discussed slide 30, "Susitna-Watana Employment
Opportunities." The employment impact prior to and during
construction will last about 15 years. The lower rates that will
be realized will also have economic impacts.
MR. CAREY continued to slide 31, "Susitna-Watana Timeline." He
relayed that the pre-application phase would include due
diligence to understand any changes since the studies were done
and additional geotechnical work to get to the final design.
Once the application is submitted, FERC review and determination
would take two years. The project execution phase includes
financing and power sales agreements, and the current estimate
for the construction phase is 15 years.
CO-CHAIR BISHOP asked whether the license has a shelf life once
it's approved.
MR. THAYER said it's about 10 years. Acknowledging that it was a
policy call, he continued to advocate for moving the project
forward with third-party support.
4:17:34 PM
SENATOR DUNBAR asked for the approximate end cost of the project
and the amount the third party investors would contribute.
MR. THAYER answered that in 2014 the cost was $5.6 billion,
which would provide power for about 6 cents per kilowatt. He
acknowledged that the cost estimate would have to be updated to
2023 dollars. Following that stage gate, serious conversations
with the people who would like to build the project or invest in
it would follow. He mentioned private equity firms, pension
funds, and international firms that have expressed interest in
an 8 percent return on investment for 50 years.
MR. THAYER thanked the committee for the opportunity to deliver
the presentation on the Railbelt.
SENATOR KAUFMAN asked about having the right program in place to
ensure that the right technology solutions are selected.
MR. THAYER responded that decisions about which technology to
employ are policy calls by the individual utilities. They are
member-owned co-ops with individual boards of directors. If the
state were to invest in battery technology, it would be the base
level and the utilities could pay the difference for newer
technologies like Tesla and Westinghouse offer.
MR. CAREY added that the utilities have electrical engineers who
are very knowledgeable about battery technologies and what works
for their individual utilities.
4:22:26 PM
SENATOR KAUFMAN asked what he knew about carbon polymer
transmission lines.
MR. CAREY responded that the new technologies aren't available
for the smaller transmission lines at this point; they're for
lines that carry more than 1000 megawatts.
4:24:00 PM
At ease
^PRESENTATION: INTERIOR GAS UTILITY UPDATE
PRESENTATION: INTERIOR GAS UTILITY UPDATE
4:24:34 PM
CO-CHAIR BISHOP reconvened the meeting and announced an update
from the Interior Gas Utility.
DAN BRITTON, General Manager, Interior Gas Utility, Fairbanks,
Alaska, Introduced himself.
ELENA SUDDUTH, Director, Public Relations, and Customer Service,
Interior Gas Utility, Fairbanks, Alaska, introduced herself.
4:25:34 PM
MR. BRITTON began the presentation by explaining that IGU is a
public corporation owned by the Fairbanks North Star Borough. It
has a seven-member board, four of which are elected at large and
three of which are appointed.
MR. BRITTON advanced to slide 3 to discuss the construction of
new service lines, adding new customers, and the expansion of
the distribution system through targeted main line extensions.
He spoke to the following:
2022 Construction Season
• 635 new service lines
• Nearly 500 of those already turned on
• More than 3 miles of main line extensions
2023 Construction Season
• 600 new service lines
• 330 approved for construction
• More than $1MM in main line extensions (proposed)
4:28:35 PM
MR. BRITTON advanced to the chart on slide 4, "Community savings
analysis." It illustrates the potential savings by expanding the
availability of natural gas. The net savings in FY2022 by
shifting from heating oil to natural gas would have been $7.3
million. Those savings stay in the community and drive
additional economic development. Anticipated savings in FY2023,
based on the last 12 month average oil prices, would be close to
$14 million.
4:30:06 PM
SENATOR WIELECHOWSKI noted that natural gas in the Lower 48
sells for $2-3/Mcf and this chart shows $2.16/Ccf, which is 10
times the cost in the Lower 48.
MR. BRITTON responded that the comparison to the Lower 48
probably was the cost at the hub, not the price the utility
charges. He acknowledged that Fairbanks pricing is probably in
the range of 30-100 percent higher than other utilities given
that the gas is liquefied, transported, and stored as opposed to
coming directly from a pipeline.
4:31:59 PM
MR. BRITTON advanced to slide 5, "Current Status," and spoke to
the following:
Feed Gas
IGU has a feed gas contract with Hilcorp in the Cook
Inlet that could meet the utility's current customer
needs until 2032.
Liquefaction
IGU operates an LNG liquefaction facility (Titan)
located in the Cook Inlet that has the capacity to
produce 50,000 gallons of LNG per day. The LNG is then
transported to Fairbanks and North Pole via truck on
the Parks Highway.
4:33:09 PM
SENATOR WIELECHOWSKI asked why the LNG wasn't shipped on the
Alaska Railroad.
MR. BRITTON responded that the primary reason has been scale and
economics. He explained that the liquefaction facility is not
adjacent to a rail line so the gas would have to be put in an
ISO container and trucked to a rail spur. Then it would be put
on a rail car to Fairbanks, unloaded and put on another truck,
transported to the storage facility, and offloaded. The
increased handling eats the economies generally associated with
rail transport.
4:34:32 PM
MR. BRITTON spoke to slide 6, "Future Needs:"
Liquefaction
In order to support its projected growth and to
continue fulfilling its mission, IGU needs additional
liquefaction capacity as soon as 2024.
Feed Gas
Hilcorp informed all utilities sourcing natural gas in
the Cook Inlet that they should not rely on
contractual renewals moving forward.
MR. BRITTON continued to slide 7, "Gas Supply Expansion
Options." He spoke to the following options and noted that the
North Slope appeared to be the most viable:
Titan 2 or No Action
Expansion of the Titan facility as evaluated in 2019
(improbable) or no action
Pt. McKenzie Incremental Expansion
Installation of a modular, temporary plant next to
Titan
Canadian LNG Import
Purchasing LNG from Canadian producers
North Slope LNG Supply
Contractual agreement with a third party LNG produce
4:38:20 PM
MR. BRITTON advanced to slide 8, "North Slope LNG - Parties." He
said the focus on the North Slope led IGU to negotiate two
agreements. One is a gas sale and purchase agreement with
Hilcorp and the other is an LNG manufacturing service agreement
with Harvest Midstream.
MR. BRITTON continued to slide 9, "Major Terms.," He spoke to
the following to describe the terms for the two contracts.
Contract Term - Both contracts have 20 year terms with the
options to extend for two additional five-year agreements.
Capacity - The capacity of the liquefaction facility will be
150,000 gallons/day.
Commitments - As the priority customer, IGU has the right to 100
percent of the capacity.
Schedule - The targeted start date for deliveries from the
facility is October, 2024. IGU won't need full capacity in the
early years, so the plant will shut down in the summer.
Trucking - The options for trucking are being evaluated, but
it's likely to follow the historical approach. In that process,
IGU has maintained the LNG trailer and contracted the trucking
and drivers to a third party that specializes in that work.
Right Of First Refusal (ROFR) - IGU has the right of first
refusal in the event that Harvest decides to sell the LNG
facility. This secures the supply of LNG for IGU's customers
into the future.
4:41:26 PM
MR. BRITTON advanced to slide 10, "Historic Moment," and
paraphrased to the following:
This will be the first time natural gas from the North
Slope has been commercialized outside of the North
Slope.
MR. BRITTON advanced to slide 11, "Fort Wainwright EIS." He
noted that the environmental impact statement is in final form
but the record of decision has not been released. The preferred
alternative speaks to the following:
Current Status
The Combined Heat and Power Plant at Fort Wainwright,
completed in 1955, is one of the oldest operational
coal-fired power plants in the United States, and is
operating approximately 30 years beyond the average
design life of similar facilities
Next Steps
• Demolition of the existing power plant
• Installation of distributed natural gas boilers
• Purchase of electricity from the local electric
utility
• Targeted completion date: 2026
• Estimated natural gas load: 1.5 BCF
4:43:44 PM
MR. BRITTON advanced to slide 12, "IGU Priorities." He discussed
IGU's legislative priorities.
Storage Tax Credits - IGU was granted a certificate for an LNG
storage tax credit of $15 million for the facility that was
built in Fairbanks in 2019. IGA is last on the list of entities
that have eligible tax credits so it is a priority to see the
state fully fund and pay its outstanding obligations.
Capital Budget Request - This is a request for the Fairbanks
North Star Borough to continue the oil to gas conversion
program. It provides up to $7,500 to customers to offset the
cost of converting their appliances from oil to natural gas.
FNSB also contributes to that program.
SENATOR DUNBAR asked two questions. The first question was
whether FNSB was last on the list to apply for the tax credits
or last to receive the credits. He also asked how much FNSB
would receive of the 10s of millions of dollars in the House
operating budget if it were to pass as currently drafted.
MR. BRITTON answered that FNSB is last on the list because it
was the last to qualify for the tax credits, and payments are
based on that timing. To the budget question he said he
understands that the House is proposing far less than what the
governor proposed and what is needed to discharge the state's
obligations. In any event, FNSB is due $15 million.
MR. BRITTON thanked the committee for the opportunity to provide
an update.
4:48:54 PM
CO-CHAIR BISHOP thanked the presenters and the committee
members.
4:50:13 PM
There being no further business to come before the committee,
Co-Chair Bishop adjourned the Senate Resources Standing
Committee meeting at 4:50 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Presentation SRES AEA Railbelt Upgrades Presentation 04.03.23.pdf |
SRES 4/5/2023 3:30:00 PM |
|
| Presentation SRES Interior Gas Utility 04.05.23.pdf |
SRES 4/5/2023 3:30:00 PM |