HOUSE BILL NO. 250 "An Act relating to the renewable energy grant fund and recommendation program; and providing for an effective date." 2:08:46 PM CO-CHAIR BILL THOMAS, SPONSOR introduced his staff who would discuss the bill. KACI SCHROEDER-HOTCH, STAFF, REPRESENTATIVE BILL THOMAS, explained that the bill reauthorized the Renewable Energy Grant Fund for an additional five years. The fund was established in 2008 and had funded approximately 200 projects statewide; 21 projects had come on line in 2011 due to the fund. The bill included intent language that would fund the program at $50 million per year, which was a continuation of the intent language from the enacting legislation. She relayed that department staff were available to answer specific questions. Co-Chair Thomas pointed out that the proposed legislation would bring in $100 million in federal matching funds. One community that had used the funds to retire debt had taken its cost from $0.80 down to $0.20 once its hydro facility had come on line. He noted that the displacement of diesel was huge and that an increasing amount would be displaced as renewable energy projects continued. SARAH FISHER-GOAD, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY (AEA), DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, was available for questions. Representative Doogan wondered why the proposal was to authorize the program for $50 million when it had only used $25 million for all but its inception year. Ms. Schroeder- Hotch explained that the bill extended the existing law. She added that the bill included intent language that could be changed by the legislature. Representative Doogan surmised that the bill did not make any changes to the current program. Ms. Schroeder-Hotch responded in the affirmative. Co-Chair Thomas noted that the legislature had the power of appropriation. 2:12:55 PM Representative Edgmon supported the legislation. He did not believe that the program should be considered the panacea for the energy situation in Alaska. He believed that while successful, the program was narrow in scope in terms of renewable energy project options. The program was helpful, but there were numerous areas in the state that did not have renewable energy options available. He believed the program should be recognized for "what it is and what it isn't." Co-Chair Thomas referenced that when he had first introduced the bill it had included nuclear energy, which had kept it from passing. He explained that at the time "renewable" had been a "hippie" word and that it had been a significant leap forward. He relayed that the Palin Administration pressed for the bill, which had been stuck in the Senate Finance Committee; as a result it had passed out of committee with an appropriation. Representative Edgmon remembered that many people had equated renewable energy with cheaper energy; however, in some cases renewable energy was more expensive and was not affordable. He asked the department to discuss the issue. Co-Chair Stoltze provided a hypothetical example of a wind project that may be successful in Kodiak, but could fail in Anchorage. 2:17:18 PM Ms. Fisher-Goad explained that there had been an earlier request from the House Finance Committee for one year's worth of data related to the payback period for several of the projects. She noted that she would characterize Representative Edgmon's comments slightly differently, but it was important to recognize that there were fuel cost savings that in current dollars may not necessarily be comparable or cheaper; however, fuel costs were expected to rise significantly for the next 20 years. The expectation was that the imported fuel would be traded to communities in rural Alaska for projects that were using local resources for the generation, which would stabilize fuel costs. She agreed that not all communities had renewable resources available for development. She believed there were challenges as well as opportunities for the program. Through the rural energy planning process (including the railbelt plan and southeast integrated resource plan) there was a community and region-wide approach to plan for energy. It was necessary to begin with a good rural power system in order to successfully integrate wind into the smaller systems. She opined that there was value and benefit in the process, but that work remained to be done. The agency was working to ensure that there was appropriate technical assistance for the projects to move forward. She relayed that a good diesel displacement metric had been shown related to the projects. There were currently 14 projects that had one full year of data. She expressed that her colleague would provide more detail on some of the projects that had not shown the payback in 2011 fuel costs, but had begun to show positive results. Representative Edgmon discussed that a significant amount of renewable energy projects came forward that did not make the cut for various reasons including lack of affordability. He had not meant to insinuate that AEA approved renewable energy projects that were not beneficial to consumers. Co-Chair Stoltze commented that the decisions were social as opposed to energy decisions. 2:21:26 PM Vice-chair Fairclough asked about the geographic spread of the 14 projects and whether the kilowatts produced had met expectations. PETER CRIMP, DEPUTY DIRECTOR, ALTERNATIVE ENERGY AND ENERGY EFFICIENCY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, responded that the 14 projects were evenly spread throughout the state including hydro in Southeast, biomass in the Interior and Southcentral, and wind in the Southwest. Vice-chair Fairclough asked whether the total kilowatts produced in the 14 projects had met expectations. Mr. Crimp explained that the assessed projects were at approximately 84 percent of their goal for 2011. He noted that the heat versus power projects had not been broken out by per kilowatt hour. Vice-chair Fairclough asked whether the state was looking to partner with federal and/or private sector partners. Ms. Fisher-Goad replied that AEA was always looking for federal partners that would provide matching funds. Additionally, the Denali Commission was currently very active with the programs. Independent power producers were also eligible program applicants; any additional private sector investments in the program were welcome. There had been increasing discussion related to the development of a loan program; there was a power project loan program that allowed entities to borrow in order to help them gain increased matching funds. Vice-chair Fairclough asked whether AEA was looking at power generation regionally to allow areas to develop plans and transmission proposals in order to provide sustainable and affordable energy into local communities. She wondered whether AEA was working to ensure that there were beneficiaries of the program award process throughout the state. Ms. Fisher-Goad answered that the renewable energy fund program had helped to focus the issues and dovetailed nicely with the regional planning approach. The agency had been building on its pathway document that had been published the prior year and was moving towards regional planning; Sandra Moller, Deputy Director of Rural Energy was heading up the efforts. The entity had a contract with Nuvista Light and Power in the Calista region to spearhead the approach. The agency was looking for regional entities that could do most of the coordination; AEA would help fund the work and would provide technical resource and support for the regional development. She added that any type of transmission system and interconnection between communities should be coming together. 2:27:00 PM Representative Guttenberg wondered whether there was a chart that showed the displacement of diesel by the alternative energy over time and expectations on how to continue the savings into the future. He discussed alternative ways for coming up with power in the past. At one time Representative Joule had illustrated that coal would be a reliable energy source for some rural areas. He referred to a letter from the Alaska Power Authority (copy on file) stating that fuel displacement was 3.4 million gallons in 2013 and that by the end of 2016 it would be 11.6 million. He noted that the data showed a tripling of the displacement savings and believed that the use of oil would be eliminated if savings continued to increase. Mr. Crimp responded that AEA had provided legislators with a CD that included a program status report and a chart that showed fuel displacement based on rounds 1 through 4. Representative Guttenberg wondered whether the disk included information on what it would take to increase the displacement going forward. Mr. Crimp replied that AEA had projections based on projects that had been funded to date. He relayed the agency would add data to the projections for round 5 if funds were appropriated for the continuation of the program. Representative Gara wondered whether the current renewable energy fund allowed the state to pay for transmission if it would result in a more efficient renewable energy project. He discussed the efficiency of large projects that could transmit energy to numerous villages. 2:30:44 PM Ms. Fisher-Goad replied that a transmission line connecting to a renewable resource was an eligible project. Representative Gara queried whether AEA had worked to maximize the state's ability to train people locally who could maintain the energy projects. Ms. Fisher-Goad replied that AEA had a training program that included hydro training; it was currently expanding to include training on wind diesel systems. The agency also had technical assistance to work with local power house operators on the integration of the diesel systems. Representative Gara asked about a wind power project in Anchorage. He believed the cost of the wind energy produced at Fire Island would have been lower if the city had participated. Mr. Crimp did not have enough information to answer the question. Ms. Fisher-Goad added that AEA was working with Chugach Electric Association and the other railbelt utilities including Golden Valley Electric Association on a regulation wind study to help integrate the Eva Creek and Fire Island projects into the system. She detailed that some of the work would help any future wind development projects in the railbelt system and potentially with the expansion of the Fire Island project. Representative Gara advocated for any expansion of the Fire Island project. Co-Chair Stoltze wanted to make sure consumers were not tagged with an expensive project. 2:33:31 PM Ms. Fisher-Goad responded that the agency was participating in a regulation study in order to address the issues. Representative Wilson asked why Delta had not been mentioned in the wind project study. Ms. Fisher-Goad responded that Delta project had been included, but was much smaller than the Eva Creek and Fire Island projects that were coming online. Representative Wilson noted that the Delta project had the potential to be larger. She discussed studies that had been done and items that the company had learned that could be utilized. Ms. Fisher-Goad answered that the intent of the regulation study was to help put some guidance around how larger wind systems could be integrated into the railbelt system. 2:34:50 PM Co-Chair Thomas pointed out that the hydro in Metlakatla was over 100-years-old. He stressed that the facilities did not wear out and would last for many years. He communicated that the bill provided a balance of funding for regions across the state. He remarked that regional capital budget funding requests could be entered into the Capital Project Submission Information System (CAPSIS). He discussed that some projects AEA mentioned were further along because an energy consultant/ardor had been put in Southeast Conference. He recommended that communities with ardors should make sure the ardor was capable to help obtain funding for projects. HB 250 was HEARD and HELD in committee for further consideration. 2:38:28 PM AT EASE RECONVENED 2:39:00 PM