ALASKA STATE LEGISLATURE  HOUSE SPECIAL COMMITTEE ON ENERGY  March 16, 2023 10:15 a.m. DRAFT MEMBERS PRESENT Representative George Rauscher, Chair Representative Tom McKay Representative Josiah Patkotak Representative Stanley Wright Representative Mike Prax Representative Calvin Schrage Representative Ashley Carrick MEMBERS ABSENT    All members present COMMITTEE CALENDAR  PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT - HEARD PREVIOUS COMMITTEE ACTION  No previous action to record WITNESS REGISTER CHRIS ROSE, Founder and CEO Renewable Energy Alaska Project Juneau, Alaska POSITION STATEMENT: Gave a presentation titled "Renewable Energy Alaska Project." ACTION NARRATIVE 10:15:15 AM CHAIR GEORGE RAUSCHER called the House Special Committee on Energy meeting to order at 10:15 a.m. Representatives Schrage, McKay, Wright, and Rauscher were present at the call to order. Representatives Carrick, Patkotak, and Prax arrived as the meeting was in progress. ^PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT PRESENTATION: RENEWABLE ENERGY ALASKA PROJECT    10:16:26 AM CHAIR RAUSCHER announced that the only order of business would be a presentation titled "Renewable Energy Alaska Project." 10:17:03 AM CHRIS ROSE, Founder and CEO, Renewable Energy Alaska Project, (REAP), began the PowerPoint presentation, "Renewable Energy Alaska Project" [hard copy included in the committee packet], on slides 2 and 3 and stated that REAP is a non-profit coalition of businesses, NGOs, electric utilities, and clean energy developers across the state of Alaska. He said that REAP has existed for 20 years and its mission is to increase renewable energy development and energy efficiency in Alaska. The project has several programs, including promoting energy literacy, partnerships with federal agencies to bring technical assistance to rural Alaska, and working to create clean energy careers across the state. He said that REAP played an important role in the creation of the Renewable Energy Grant Fund, as well as establishing a "green bank" to provide loans to Alaskans for the purpose of weatherizing their homes. He said that more people are needed in Alaska that can provide maintenance for those projects. 10:25:11 AM CHAIR RAUSCHER asked whether a journeyman electrician has to work on each of these projects. MR. ROSE affirmed that is correct. 10:26:44 AM MR. ROSE continued to slide 4 and gave a brief overview of the presentation, focusing on how electricity rates in Alaska are rising faster than those in the Lower 48. The cost of natural gas is rising, and Hilcorp may not renew its contracts in Cook Inlet. He said that importing natural gas would be an expensive option, and that rising natural gas prices on the Railbelt prevent rural Alaskans from benefiting from the power cost equalization (PCE) program. 10:30:42 AM REPRESENTATIVE WRIGHT asked about ease of access to using solar panels. MR. ROSE answered that the federal government has extended tax credits for solar panel installation by 10 years. He added that the credit is up to 30 percent, and it is possible for solar panel users to sell excess power back to the utilities. In response to a follow-up question, he said that building solar panels is one of the biggest businesses in the world. 10:34:48 AM REPRESENTATIVE PRAX asked whether Mr. Rose was aware of the other companies working in Cook Inlet to produce natural gas, and whether he believes that one of those companies would fill the void if Hilcorp reduced production. MR. ROSE answered that he hopes that one of those companies will have the ability to produce natural gas at a greater volume and an affordable price. In response to a follow-up question, he said that renewable energy would be competitive even without tax credits. REPRESENTATIVE PRAX asked why Golden Valley Electric Association is having to buy more fuel to power its plants. MR. ROSE answered that battery technology would give Golden Valley a greater chance to integrate power. 10:42:25 AM REPRESENTATIVE PRAX asked whether it is correct that Golden Valley is relying on an outside source to fund its battery. MR. ROSE answered that "everyone" is bearing the cost of batteries and added that it is ultimately less expensive than the buying of more fuel. In response to a follow-up question, he said that federal grants are being sought for upgrades to the Bradley Lake hydroelectric project. 10:46:09 AM MR. ROSE continued to slides 5 through 7 and gave a brief comparison of electric rates and natural gas prices. He said that he is covered by Matanuska Electric Association (MEA) and his rates have increased by 50 percent. The average increase in cost in the Lower 48 in the last 10 years has been 2 cents per kilowatt-hour (kWh) compared to 7 cents per kWh on the Railbelt. He said that costs for Cook Inlet natural gas have increased from $1.50 to $7.50 in the last 10 years, an increase of more than 3 times compared to the Henry Hub natural gas market. The amount of natural gas being produced from Cook Inlet is expected to fall below the demand starting in 2027. 10:50:46 AM REPRESENTATIVE CARRICK asked how great the discrepancy will be between supply and demand. MR. ROSE answered that the gas is there, but it needs to be developed. In response to a follow-up question, he reemphasized that it is ultimately a matter of developing the natural gas. REPRESENTATIVE CARRICK commented that even if that natural gas is proven to be there, it may not be developed in the next two to five years. 10:53:29 AM REPRESENTATIVE MCKAY commented that proven undeveloped natural gas means that there is already some infrastructure in place, but additional wells are needed. REPRESENTATIVE PRAX added that the inclusion of the data for the proven natural gas means that development is likely, and he compared it to the development of oil on the North Slope. 10:56:34 AM REPRESENTATIVE SCHRAGE commented that the natural gas available will only become more difficult and expensive to produce. MR. ROSE replied that the current contracts for natural gas begin to expire next year, meaning that further price increases are likely to begin occurring in the near future. 10:59:27 AM MR. ROSE continued to slides 8 through 10 and gave an overview of liquefied natural gas (LNG) prices around the world. He showed a chart including the Henry Hub price, as well as prices in Japan, the Japan-Korea market, and Europe. The Henry Hub price is a spot-market price that is currently the lowest. He said that Alaska would likely have to buy LNG on the Asian market and pay the same prices as those markets. The price of Japan's spot LNG has been volatile and has reached as high as $35 per thousand cubic feet (Mcf). He said that the Chugach Electric Association is looking at scenarios involving gas with prices as high as $12 or $18 per Mcf. 11:05:43 AM REPRESENTATIVE PRAX asked what would happen if the Alaska LNG project comes online. MR. ROSE answered that demand in Japan, one of the most likely investors, is decreasing. He added that Alaska would be unlikely to receive a "hometown discount" based on the price of other fuels in the state. 11:09:12 AM MR. ROSE continued to slides 11 and 12 and showed the potential impact of LNG import prices on individual households. He said that those relying on PCE are being affected the most due to the floor of the equalization increasing. He said that REAP believes that moving to renewable energy and saving natural gas for heating is the best path forward to avoid reliance on volatile LNG imports. MR. ROSE moved to slide 13 and showed a chart comparing the cost of solar and wind power generation. He said that wind and solar power are cheaper than natural gas, and the prices are decreasing. 11:15:36 AM CHAIR RAUSCHER asked if the cost of renewable energy projects in Alaska are greater than in the Lower 48. MR. ROSE answered that a wind project is approximately 1.7 times more expensive in Alaska than the Lower 48. He added that even with that additional cost, the cost of wind power still ends up being a lower cost than natural gas. The price of wind power produced on Fire Island has decreased since the project was first built. In response to a follow-up question, he said that parts for an offshore turbine would travel by ship. 11:21:58 AM MR. ROSE moved to slide 14 and showed a chart with the percentage of solar power generation by U.S. state. He said that in California, a state with a population of 37 million, 25 percent of energy is generated by solar. MR. ROSE continued to slides 15 and 16 and gave an overview of net capacity additions by their source. He said that in the last 10 years, more fossil fuel plants have been closed than opened, and 80 percent of new power plants in the Lower 48 are either wind or solar plants. He showed a chart detailing the percentages of capacity generation by source. 11:25:31 AM CHAIR RAUSCHER asked whether the numbers would be closer if each individual wind turbine was considered to be its own plant. MR. ROSE answered that a project's capacity is measured by the megawatt hours (MWh) it has the ability to produce, even if it does not always produce that amount. He added that fossil fuel and geothermal plants have the ability to operate at times in which other renewable energy sources cannot. 11:29:05 AM REPRESENTATIVE PRAX asked if the capacity on the chart is nameplate or the amount the project can actually produce. MR. ROSE answered that it is nameplate capacity. 11:31:17 AM MR. ROSE continued to slides 17 through 19 and gave a brief overview of avoided cost. Avoided cost is a term that describes the cost avoided when a utility company buys generated fuel from a third party. He said that MEA's recent wind power project has an avoided cost that already makes it cheaper than natural gas. The Regulatory Commission of Alaska (RCA) requires a five-year projection of costs relating to utilities, including the avoided cost. He showed a chart detailing avoided cost scenarios with potential LNG spot prices. He added that using renewable energy projects would allow the private sector to be involved in lowering energy prices. All risk of a project not working is taken by the investors of those projects, and not the utilities. 11:38:10 AM MR. ROSE moved to slides 20 and 21 and continued his discussion of avoided cost. He showed a line graph with the same information as the previous bar graph. He stated that the avoided cost rises even if natural gas prices increase only to $12 Mcf. There is a target to reach a renewable portfolio standard (RPS) of 80 percent by the year 2040. He said that utilities would face a fine for every MWh not produced with renewable energy over the allotted amount. The estimated capital cost to reach 80 percent renewable energy is $3.2 billion, although the estimate was made before it was known that federal tax credits for renewable energy would be continued. 11:44:00 AM REPRESENTATIVE PRAX asked if the analysis includes the capital of independent power producers. MR. ROSE answered that it is based on a recent wind project built in Alaska. In response to a follow-up question, he stated that it is possible that tax credits for natural gas have the potential to help with the prices of natural gas. He added that it does not remove the volatility of prices for natural gas, while prices for renewable generation remain stable. 11:47:56 AM REPRESENTATIVE SCHRAGE asked why the cost of battery storage is not included in the analysis. MR. ROSE answered that the Railbelt utilities plan to build batteries regardless of the direction they take their power generation. 11:52:11 AM REPRESENTATIVE SCHRAGE asked if it is correct to say that less battery storage would be necessary if there were more interties between the utilities. MR. ROSE answered that it is generally correct to say that more transmission lines mean that less storage is necessary. He added that some battery storage would still be necessary, as batteries have other purposes, such as offering power during gaps in generation. In response to a follow-up question, he said that the status quo would result in the incurrence of additional costs due to LNG imports. 11:57:09 AM MR. ROSE continued to slides 22 and 23 and stated that an RPS: diversifies Alaska's generation portfolio and protects ratepayers from cost volatility; saves Cook Inlet natural gas for heating; utilizes local resources; create jobs; and increases Alaska's energy independence. He advised that Alaska can see where it is going and must act accordingly. 12:00:02 PM ADJOURNMENT  There being no further business before the committee, the House Special Committee on Energy meeting was adjourned at 12:00 p.m.