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HomeMy WebLinkAboutREFAC Meeting minutes 1-7-2011Renewable Energy Fund Advisory Committee Meeting January 7, 2011 — AEA Boardroom 10:00 am to 4:00pm DRAFT MINUTES 1. Call to Order The Renewable Energy Fund Advisory Committee convened at 10:05 a.m. Chairman Vince Beltrami presided over the meeting. 2. Roll Call: Committee Members AEA Staff Other Participants Chair Vince Beltrami Mike Harper Denali Daniels, Denali Commission Jodi Mitchell Peter Crimp Rep. Paul Seaton/Homer (phone) Sen. Lyman Hoffman James Strandberg Mike Nave, Department of Law Brad Reeve David Lockard Pat Walker, Sen. Hoffman’s Office (phone) Hannah Gustafson (for Mr. Rose) Butch White Paul D. Kendall Jim Posey Douglas Ott Julie Frizzell, Dept. of Labor/Business Rep. Bill Thomas (phone) Emily Binnian Partnerships Wyn Menefee Audrey Alstrom Phillip O. Kairaiuak Richard Stromberg James Jensen Shauna Howell May Clark 3. Agenda Comments Chair Beltrami switched Agenda comments to Item 3 and Public comments to Item 4. There were no objections. 4. Public Comments Mr. Kendall spoke about a Letter of Understanding. He said the world’s major automobile dealers sent out to utility and oil companies asking to begin the “hydrogen highway” now. Suggesting it will occur sooner than 2015 — batteries and fuel cells look to be viable for the future. He cited several internet articles that may interest the Committee. He pointed out that 13% of major utility CEO’s believe that by the year 2050 power will be decentralized and Alaska, technologically, has a foot in both the new and the old world. 5. Alaska State Energy Sector Partnership (ASESP) Julie Frizzell, Program Coordinator, State of Alaska Department of Labor/Business Partnerships, spoke about grant applications that are available for training projects under ARRA in Renewable Energy & Energy Efficiency job training industries. The grant fund is in the amount of $3.6M and per grantee amount is $100,000. Filing will be electronic and there is no limit on eligibility. Specific areas of training include wind turbines, hydroelectric, biomass, geothermal and weatherization and rehabilitation of public facilities, commercial facilities and multi-residential facilities. RE/EE jobs require upgrading skills of incumbent workers; teaching new skills to workers in RE/EE technologies and preparing entry level workers planning to enter RE/EE jobs and careers. The first deadline for submission of grant applications for the first review is January 18, 2011, and they need REFAC assistance in spreading the word. Chair Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 1 of 11 Beltrami stated he is on the steering committee for the sector partnership grants and certain partners have already been allocated, such as AVTEC. The funds have to be spent in three years and $1.5M may still be available in the competitive process. Ms. Mitchell asked for examples of projects granted. Ms. Frizzell said AVTEC has installed a wind turbine and is creating a curriculum for training and hiring instructors to train technicians. Mr. Reeve asked if the smart grid would fall under this, i.e., EE advanced metering, in home displays, and different ways to get information out of the electric system. Ms. Frizzell said that was possible as other states are doing that. It was pointed out that RE Fund grant applicants could also apply and they would be notified. Mr. Harper stated AEA partners with DOL and works closely with AVTEC where AEA sends their village utility trainees. Mr. Reeve said he would inform the energy coordinator for wind projects in the Kotzebue area. Mr. Strandberg stated he would give this information to the SE Conference energy coordinator, as they are currently undertaking regional planning. Mr. Posey suggested military technicians might also fit into this program. 6. Approval of Meeting Minutes — November 9, 2010 Mr. Menefee clarified the statement on page 3 of 6, “DNR announced there was going to be a new fee schedule established to charge projects for the state permitting services.” to “DNR announced there may be additional fees charged for projects for the state permitting services.” The minutes were approved with the clarification. MOTION: Mr. Posey moved to approve the meeting minutes from the November 9, 2010 Renewable Energy Fund Advisory Committee as clarified. The motion was seconded by Ms. Mitchell. There were no objections. 7. Review AEA Round 4 Recommendations Mr. Crimp reviewed the meeting handouts. Round 4 activities to date were recapped. The RFA was released July 21 and 108 proposals were received on September 15 requesting $103.1M. Stage 1 review for eligibility and completeness was performed, resulting in not recommending four projects requesting $7.5M. Stage 2 & 3 reviews were done in November and December having three major components: 1) Economic Review was completed in December and was coordinated by ISER who managed five economic firms that AEA hired competitively. 2) DNR Permitting & Resource Review was coordinated by Mr. Menefee of DNR which included mining, geological and geophysical surveys and forestry. 3) AEA Technical Staff Stage 2 & 3 Review scores were entered into our database. A printed copy of the projects with AEA’s written review comments was provided the Committee. A ranking spreadsheet was also provided. Stage 2 resulted in recommending no funding of 29 projects at $45.2M. The 29 applicants who failed Stage 2, along with the four who failed Stage 1 review, were notified on December 21 by the Grants Administrator and appeals are due January 10. Partial funding was recommended for 31 projects at $56.5M. Total funding was recommended for 43 projects at $21.4M. Final construction and design allocation equals 73% of a targeted 80% - 20% recon and feasibility — 50% of the funding allocation is construction. The ranking list is preliminary subject to appeals and geographic spreading to be discussed at this meeting. Draft Methods for Proposal Evaluation & Grant Recommendation — January 4, 2011: Mr. Crimp stated this is the methodology established by the REFAC for proposal review and is basically the same as in the past with a few changes: Under ‘Recommendation Guidelines: Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 2 of 11 Page 8, Partial Funding Guidelines: Exception 1: “/f AEA believes project can be built for less, then lower figure can be recommended. AEA will provide justification for lower figure in its recommendations.” AEA found some projects too expensive so our best judgment was used and we recommended less money, (i.e., Cordova Community Biomass: $245K was requested for assessing buildings in Cordova, AEA recommended $75K. Bethel area: Chefornak Wind Feasibility, $250K was requested for wind feasibility, AEA recommended $137K. Chefornak already has a MET tower installed). Bethel is proposing a few projects on the same system. Since TDX is proposed to take over the Bethel system later this year, AEA felt it was reasonable for them to perform the feasibility on their large scale wind projects. The Housing Authority has proposed projects that we do not recommend funding. There’s also a construction project in Bethel from Rounds 0 and 1 for several turbines. AEA will not take back the funds but will ask the City to work closely with TDX and we will merge projects if local consensus is favorable to do so. Ossie Kairaiuak, who is from Chefornak stated Chefornak is the most populated of the 57 villages in the Bethel region located 82 miles from Bethel and pointed out that the climate of the villages are different and that should be considered. Mr. Posey pointed out that the discussion was centered on Bethel proper and not Bethel region and we are aware of the differences from one village to another. Mr. Crimp pointed out that the detailed recommendations show what AEA is trying to accomplish and that “one size does not fit all” in the review process. The evaluation guidelines lay out the rules. Page 13, Stage 3 Criterion Local Support: “Letters of support from legislators do not count toward this criterion.” This was discussed at the last meeting and agreed to. All present were in agreement, including Rep. Thomas. Rep. Seaton stated he would make a public comment if a separate issue arose. Page 13, Stage 3 Criterion Project Readiness: “Proposed work is reconnaissance level and is consistent with specific recommendations under the Alaska Energy Pathway.” If a Pathway specifically addresses, i.e., wood energy, in a community and the community comes up with a plan to implement it, they would receive additional emphasis, for a total of 14 points. Page 14, Stage 3 Sustainability: Text was added to address the capability of grantee to demonstrate the capacity, both administratively and financially, to provide for the long-term operation and maintenance of the proposed project, 2) likelihood of the resource being available over the life of the project, 3) likelihood of market for energy produced over the life of the project. Basically, what are the risks the project will not happen in the future? Mr. Posey asked how that analysis would affect some of the resource oriented projects such as fish plants — that would be difficult to evaluate. Mr. Crimp agreed and said the five points involved are important points. Another example would be a community rapidly losing population and availability of timber to support a mill. Mr. Posey asked if the criteria followed the Denali Commission's guidelines. Ms. Daniels, manager of energy programs for the Denali Commission, pointed out that the Denali Commission’s process of evaluation is non-competitive. As projects become ready to proceed, they look at sustainability and minimum requirements. Sustainability is measured through a business plan and a thorough due diligence process. Mr. Crimp stated AEA used the Denali Commission’s sustainability guidelines in writing our criteria. Mr. Reeve asked if there was a way to measure the fuel sources in the regions, i.e., biomass projects, to determine what the sustainable levels are regarding distances to travel and expenses. Stating it’s good to see more heat projects as they have an immediate effect and can that be measured into the sustainability equation. Mr. Crimp said yes, through a detailed land use plan. AEA program manager, Devany Plentovich, is working with State Forestry to set up a procedure of compiling the data which will be provided through the Alaska Data Inventory System. In the RE Fund, there are individual projects doing those type of resource assessments. Mr. Harper pointed out that one of the main elements of the Pathway was to visit the 228 communities to inventory their power, electricity, heat and transportation needs. Mr. Posey said since the Pathway assessment was not a complete assessment of the biomass available, it could be a large part of the heating question he discussed with Senator Hoffman; what could be done about heating on a project basis, how much is there and how much more work has to be done to look at heat versus electric. Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 3 of 11 It's a big piece for fuel use for the existing communities. Mr. Menefee pointed out that fuel sources are not just about the availability of the physical (biomass), but also about land management restraints — access through private lands to reach them. Mr. Posey said the state governments and private and federal interests should be open for business in dealing with the communities and solving the problems in working towards the same sustainability. With the price of fuel rising, there’s not a lot of time to solve the problems. We need to talk about those issues with Sen. Hoffman so that when he heads back to Juneau we need to know what resources are going to be here. Those from the outside look at our program as the best in the world for looking at these issues and trying to solve problems. We have put forth more effort in doing this than any other governmental entity and we should continue to move forward. Mr. Crimp stated the biomass availability is part of the DNR review and their work has been thorough. Mr. Posey questioned whether the new EPA rules that are being applied to Fairbanks and other regions on air quality have been left out; i.e., using catalytic converters and air filters. We need to use the best technology and not add to the air quality problems and to avoid being shut down by the EPA. Mr. Crimp said we are mindful of technology being promoted. The GARN stick-fired boilers are clean-burning and are being used in many communities and the large boilers have emissions systems and are higher tech. Mr. Menefee said BLM lands could be used for biomass collection, but there’s also a policy out now that will likely turn millions of acres of federal land into wilderness study areas. Mr. Lockard referenced two studies Devany Plentovich, AEA Biomass Program Manager, has recommended on this matter. The first is a fact sheet entitled “A Balanced Definition of Renewable Biomass and can accessed at http://www.ucsusa.org/assets/documents/clean_ energy/balanced- biomass-definition.pdf. The second is a National Renewable Energy Laboratory (NREL) Technical Report and can be found on their website under Technical Reports, March 2003, NREL/TP-510-33123, “Biopower Technical Assessment: State of the Industry & Technology,” Chapter 6, about air emissions comparisons with other technologies. Mr. Crimp proposed that Ms. Plentovich make a presentation to the Committee outlining the AEA biomass program. The Committee agreed. MOTION: Mr. Reeve moved that the REFAC approve the DRAFT Methods for Proposal Evaluation and Grant Recommendation dated January 4, 2011 as presented. Seconded by Mr. Posey. There were no objections. (Senator Hoffman joined the meeting in person at 1:06 p.m.) Page 8, Stage 4 Ranking of Applications for Funding Recommendations: Mr. Crimp referenced the ranking sheets and detailed write-up of the project recommendations. The preliminary ranking spreadsheets show projects ranked from numbers one to 74 and the other sheet shows projects separated by region. The Governor’s budget was submitted for $25M for the RE Fund and the top $25M projects are shown in green on the ranking sheet, adding up to $24.151M, the additional dollars will be added onto the first project in the yellow area, Reynolds Creek Hydro. The list is subject to geographic spreading and action on appeals due on January 10, 2011. Chair Beltrami said he understands the Governor's budget is $25M, but pointed out the REFAC, being in compliance with the statute, views the statute amount at $50M per year. All of the approved projects total only $36M, which the Committee will want to recommend. Senator Hoffman said last year the Governor's office justification on funding $25M was that we had prefunded $25M in the first year. Chair Beltrami said he recalls their saying that by doing so, “we are still keeping within the $50M per year allocation,” and we want to continue to recommend that amount. He said $36M does not come near the $50M, so the REFAC must decide in terms of recommendations how we should approach this. Mr. Posey said we are following the 80/20 geographic spread per legislative direction, but maybe we should consider taking the caps off in some categories to keep projects moving forward such as in reconnaissance, construction or actual Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 4 of 11 drilling, specifically as in the Ormat project, drilling is expensive. If we took the caps off and stayed within the guidelines, as our program is the best in the world for what we're doing, we must not step back from that now in funding. REFAC put the caps on to make sure the money went further and we need to think about what categories we could take the caps off, if the funding was available, or do we go beyond the $250M, which he recommends. Ms. Gustafson asked if there was an opportunity to take a look back at qualified applicants not funded in past years and could they be looked at for funding again. Mr. Crimp said AEA has generally shied away from going back in time for applicants as they become stale. Many are not stalled due to lack of funding, but are stalled for other reasons. In regards to capping, in Rounds 1 and 2 we have placed the caps on the fly and we agreed that was unfair because people didn’t know what they were applying for; therefore, in Round 3 we allowed them to apply for additional funding. However, in the Round 4 RFA we set a cumulative cap so that people would know before the fact the amount of their fund to allow them other ways to finance their project. Mr. Reeve agreed with staff procedure in handling this, adding that projects and conditions change over time and giving people the ability to reapply works. Mr. Crimp said some grantees knew they would be capped. For example, GVEA geared their application for the large Eva Creek wind project to bring them up to the combined cap for final design and construction. Mr. White pointed out that Yerrick Creek Hydro in the Tok area and the Kenai Winds projects are good examples of cumulative capping. Senator Hoffman said he supports the concept of lifting the cap, but there has to be another upper limit, because several projects could absorb just about all of the funds. Ms. Daniels said, as a question to Mr. Crimp, that before the RFA was out, Denali Commission received feedback from potential applicants that had vocalized disincentives regarding the availability of funds and construction timelines. They were not interested in proceeding because of non-clarity about when the funds would be available and like issues. She asked if that was a major issue since resolved, or does that continue to be an issue. Mr. Crimp pointed out that when we first started, we were slammed with work, so we didn’t get funds out as quickly as we wanted, but now we have plenty of staff to get the funds out, so that is not so much an issue anymore. Ms. Daniels clarified it was more a construction season question on legislative funding. Mr. Crimp said the problem is that by the time Legislature approves funding and the Governor signs the bill, the date is July 1 and the fact is the construction season is lost in most cases. Senator Hoffman said we can discuss this with Representative Thomas to see if we can get the appropriations expedited. Representative Thomas agreed. Mr. Reeve also agreed that was an interesting concept, which may not mean a lot of money had to be put into it, but $5M for example could be used as a reserve to get those approved projects going so they could be out the door immediately to hit a construction season that summer-fall. Senator Hoffman commented that could also put the Governor in a position of making a level of funding decision earlier. Mr. Crimp said the applications were sent in with the idea of certain timing and the feasibility analysis would be completed with permitting, etc. and questioned how many projects would move faster if more funding were to be made available as the framework has been set up for the applicants. It would be a good idea next time around if we could ask them if they would like to receive their funding earlier to allow a jump on the construction season. Senator Hoffman said that would be worthwhile to consider — so that we are ready when the appropriation is ready. Ms. Daniels said it was still unclear as to whether or not the lower number of applicants had anything to do with a potential disincentive with that timeline, which relates back to the total number we are considering for the program and is probably something AEA cannot confirm. Mr. Posey said the first principle to learn in dealing with the government is you must turn square corners, which is appropriation and timing when money is available. Mr. Crimp asked Senator Hoffman if he was suggesting we look at the projects to see which ones could be sped up if funding were available. Senator Hoffman affirmed this stating if a higher amount was put to Legislature it would be in place and when the Governor decides his amount or veto there’s less chance of reducing the amount in session. Mr. Crimp said AEA has seen money not spent and during this review we are trying to get it right third time around, we are not allocating funds for projects we don’t think are going to happen within a reasonable timeframe. AEA was stricter in Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 5 of 11 adhering to the guidelines and we feel that it reflects poorly on the program if projects don’t go forward, which therefore jeopardizes the program. We lay out our reasons for not recommending funding proposal by proposal. Senator Hoffman reiterated his concern that many projects are to reduce electrical costs and in rural Alaska the highest costs are still in heating, which was discussed at the last two meetings and asked the status of the “heating” topic. Mr. Crimp replied that as requested last time, in the last part of this meeting we will lay out the allocations for heat versus power and suggested at our next meeting that Devany Plentovich, AEA Biomass Manager, make a detailed presentation to the group. Mr. Posey commented to Senator Hoffman that before his arrival, he asked if we would be willing to look at additional money for this program, stating gasoline could be up to $5 or $10/gallon by 2012. A state effort was made on how to treat the heating issue in rural Alaska, however, he said he is not in favor of creating another group just to deal with heating, but is in favor of another $50M-$100M added to the program over the next three years using the same process, staff, economics and experts to do it; suggesting another meeting next month rather than in two months to deal with this issue, as Legislature needs to know what the projections and possibilities are. Senator Hoffman said rural Alaska is already paying $5/gallon for fuel. (Mr. Posey left the meeting for another appointment at 11:36 a.m.) Mr. Crimp stated the regional summaries show actuals, not what was originally allocated. The Railbelt, SE, Lower YK and NW Arctic are the four largest allocation areas. Senator Hoffman said he is concerned, and has said many times, that legislation provisions state those areas of the state with the highest energy costs are given the most credence, but in Rounds 1 through 4 the areas at the top of the percentages are the Railbelt and SE and not the Bering Straits, Bristol Bay, etc. regions, stating that legislative intent does not seem to be working. Ms. Mitchell commented that, with all due respect, none of the SE areas pays 15 cents per kWh. Senator Hoffman said Lime Village pays 115 cents per kwh and he understands there are communities in SE that are not tied into the Railbelt and still have high costs as their primary source of heating is still oil, going back to what we need to do regarding the areas of the state that have high oil costs and are heavily dependent on oil for heating and what we can do to address those concerns. Ms. Mitchell agreed, but said the chart draws a different picture than what it is and maybe it should be a different category called rural SE. Senator Hoffman reiterated that legislative intent indicates areas of the state mentioned previously would be at the top of the list and the railbelt areas would be at the bottom of the list. Chair Beltrami agreed and said we have to try to answer the question for the number of projects being applied, do we have enough projects to try to meet that percentage in those areas. Senator Hoffman said no. Those areas of the state with the highest energy costs have the least capability of getting the paperwork in. Those areas of the state such as the Railbelt have the personnel and manpower to submit those applications. How can we mitigate that? The thrust of the program needs to be met. Chair Beltrami said that’s the biggest challenge. Mr. Reeve asked if there was a potential for somebody like AIDEA to provide a ready-made match for projects that are having more difficulty putting projects together in the rural areas. They feel they don’t have match resources and don’t have the ability to do it, but if it’s built in to a good economic equation where it lowers their costs and they get the payback on the loan, couldn’t they set up with AIDEA that there be pre-match dollars that could be available through a loan program to the YK area to look at potential projects there, have somebody assist to say that a good biomass project looks good, or whatever to lower some of heat costs could start to fly, but we need to start looking at other tools to make our successes and also to answer some of the Senator’s questions about why we aren't getting enough money out into those regions. If there are other tools that we can develop as a group here or make recommendations for, we can get more applications going into the areas that have the highest costs. Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 6 of 11 Mr. Harper said AEA is trying. We are not quite there, but agreed with Senator Hoffman that we need to find another way. AEA has worked out scoring (10 points) very well and higher cost locations are scored higher. He visited the Bethel region speaking before regional groups specifically about this program, and we have been trying to urge the communities to get involved in the renewable energy process; unfortunately there is not much interest or activity to generate applications from the area, certainly the Bethel community is good at getting their applications in. For the outlying areas, we need help. Senator Hoffman stated in the $360M EE program he instituted two programs through the Housing Authority and not legislative, to allocate to regions with boundaries, they knew they would receive the allocation so they applied and instituted. The distribution of those dollars throughout the state was much fairer and equitable than how the RE Fund has been in getting dollars to the areas of the state with the highest energy costs. Mr. Crimp said in this round of recommended projects there are 20 wind feasibility projects. All the rural area opportunities will be in heat recovery, wind generation — western Alaska and interior are the problem areas. We are doing well in the biomass program. Many of the wind projects are 15-20 year paybacks and are more marginal in terms of economics, but then when you look at them there’s not a whole lot else other than heat recovery which is also in generation efficiency. What we might be able to do some type of regional larger scale deployment technologies to speed things up. Senator Hoffman said the problem with wind projects for some of the smaller areas is it makes a community more reliable on the wind, but they have PCE so drastic reduction in rates aren’t seen, and because they're consuming less oil they're buying a smaller amount and not getting the volume break. Their heating costs go up and their electricity costs stay the same and the state saves money on PCE. (Lunch break was taken from 11:45 a.m. to 12:20 p.m.) Mr. Crimp introduced West High School students, Amber and Morgan Weimer. They are being mentored by AEA as part of the gifted mentorship program and are interested in becoming engineers. Mr. Crimp continued discussion on the ranking sheets. There are $36.5M in total grants for Rounds 1 through 4. There is an even split by population allocation on a regional basis. In the Round 4 $25M allocation, he explained the geographic spread. The cumulative Rounds 1 through 4 Table, cost of power was discussed. The average cost of power within the regions is weighted by population, based on the 2009 population count. He announced that AEA, in conjunction with ISER, is resuming publication of the yearly energy power statistics, adding transportation and heating fuel in terms of consumption and price, for all Alaska cities. Senator Hoffman asked if transportation costs would be spread. Mr. Crimp said we will try to, but it’s more difficult to do as opposed to power. Senator Hoffman again emphasized the problem of getting funding to those areas of the state with the highest cost of power, and attributed it to the time pressure to get the funding out. He suggested a better approach would be to allocate the funds by region and let those regions compete for the dollars and not worry about the implementation period. For example, if one region gets their projects accomplished in three to five years, and another region gets theirs accomplished in seven to 10 years, there’s no problem, we wouldn't be trying to adjust after the fact, but to allocate the funds up front would be the most fair and those regions would then compete. Ms. Gustafson stated that since we are very near the final year of the original program, we need to think about the future of the program and make recommendations and bring up ideas on the heating issue and addressing projects to those communities with the highest cost of energy. Chair Beltrami agreed, stating that is part of the REFAC role, and it would depend upon Legislature's wishes to continue or not continue the program. Senator Hoffman said he pushed strongly for the AHFC Energy Efficiency Program. The AHFC board met and they are coming up with additional request for funds this year when there's still another $100M available. He felt the Legislature will favor the request. If the current program shows Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 7 of 11 successes, there should be legislative support for an additional Round. He believes the savings will be vastly more in the 10-year full implementation then the original program cost. Chair Beltrami stated it will take time to see what the savings will be, and what will AEA do to monitor the outcome of the projects and how quickly can it be reported (to the Legislature). There will be a gap in the program, how do we keep it rolling. Mr. Crimp stated that the most important function that AEA will do is monitor the technical and economic performance of the projects. We are currently devoting resources to that end. James Jensen has taken the lead in our reporting system and we will work with UAF Alaska Center for Energy and Power, to get a handle on the systemic issues in terms of performance of the wind diesel complex issues. He pointed out it takes time for construction projects to come on line. Seven projects are done, which we have statistics on. We can measure what we know that has happened, and we can estimate future results by graphs. Chair Beltrami asked about the timeframe for legislative funding and was told it was five years at $50M per year. Mr. Reeve agreed that we should look at adding on to the program, but we need to act soon to request more funding and continuation of the program and not create something new. There is justification for doing so. Ms. Gustafson suggested the REFAC could assist the communities in the future with technical assistance (grant writers). Mr. Reeve said a key partnership has developed over the years between AEA and the Denali Commission and there’s a lot of knowledge base built into that organization. A lot of their processes are more adaptable and may be quicker to develop the partnerships in rural areas. Perhaps we can discuss this with the Commission to make it a priority. Chair. Beltrami said the Denali Commission energy advisory committee will meet February 3 and that will be a topic. Mr. Kendall said the RE Fund scope and scale is being underestimated. He said he was concerned about the mindsets, i.e., in speaking about $4-$5 gallon for oil, is for gasoline probably. When you look at energy converting to all electric, he calculates it comes out 10 to 17 times the normal use of electricity. The oil companies are not informing the public about the huge role energy is. You have to be prepared to go very large very quickly. Mr. Hoffman’s suggestion about regions is appropriate and looking at the 80 page application, cannot see how small business can operate under the grant conditions. Your very basis of innovation is the individuals in the small communities. We need to be bigger than we are. One of our biggest mistakes is we're not learning everybody up at the same time. All those villages have relevant capacity to generate but it’s unique because circumstances change with the seasons and other criteria. In 15 years we will see energy paradigms the likes we’ve never seen before. For the next 15 years you will see unparalleled chaos, not just high priced, but you will be lucky if you can get the energy. Alaska is unique and we have the resources to do it now. Senator Hoffman asked what type of reallocation we would be looking at if $36M or $50M was funded. Whatever it is, the same process could be used without us reviewing it. Mr. Crimp pointed out that $36.5M is the sum of all of the projects. Chair Beltrami said the REFAC would want to include all of the recommended projects. Mr. Crimp discussed the subject of appeals, stating that Mr. Harper, acting AEA Executive Director, has designated, along with himself, Sara Fisher-Goad, responder to the appeals received, of which we have received two this round. Some of the projects not recommended were discussed. 8. Status of current grants Mr. White stated that the grant application contains 25 pages and not 80 pages as previously suggested. We have disbursed $44.4M to date. For Rounds 1 and 2 all grants are in place, except for two from Round 1 that have specific issues. He pointed out that the grantees are not spending the money, and that is not any fault of AEA. Funding available for reallocation has increased due to schedule updates. Reallocation will be done by Legislature. Mr. Reeve said the reason projects like ours (Kotzebue Electric Association) aren’t spending grant funds; this is one of those projects from Round | that was capped at $2M, KEA is waiting to get more of the design completed, up to the 65% design. It’s not like funds aren’t being expended, we just aren’t Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 8 of 11 charging to the grant yet. There may be another way to depict progress on these projects that have not drawn grant funds yet to show where they currently stand. KEA is waiting for our clean renewable energy bonds as an additional part of our match and to complete the design. As you know, down payments on turbines and other costs are moving targets. This might possibly be something that would help entities like us understand. If AIDEA could provide financing, if they had a pool of funds that could also be used as a pre-funding for getting design completed for the smaller systems like ours. Making cash available for these small systems would be the type of help we need. Mr. White agreed and said he would see if he could work this progress into the table under funds obligation, to depict what's really committed. Mr. Crimp said AEA is not entirely comfortable with the pace of a lot of the projects. We are starting to send letters to grantees expressing our concern and giving them a drop dead date and asking for a concrete schedule. Our project managers are working closely with them. Ms. Gustafson asked what we heard back from the recipients as to why they haven’t sent paperwork. Mr. White said two had a 12/31/2010 drop dead date and neither bothered to respond. This is a recommendation program, we can't reallocate funds. Senator Hoffman said he didn’t think it has to go back to Legislature, as long as we fulfill the obligations of lowering energy costs in those areas of the state that have the highest costs, if we initially went out and allocated by region and a region wasn’t performing and the region lowest on the list would the funding. We really don’t have a way to address where those dollars would go under the current system. In the next allocation process we need to look at a better system of allocating dollars to those areas of the state with the highest energy costs. Areas of the state that are more organized can react much quicker and get things accomplished. We shouldn’t be worried about the timeframe if we feel that it’s going to get accomplished; some areas of the state may be able to get theirs done in four years, where other areas may take 10 years. We need to keep our eye on the ultimate goal of reducing costs of energy in those areas of the state that have the highest energy costs. We have to be responsible in the way we administer the fund, because the Legislature is looking for the success of the program as well. Mr. Crimp pointed out that these are not easy projects to build, they are very difficult and there are many barriers. We need to keep this in mind. Mr. Reeve asked Senator Hoffman if it would be worthwhile for the committee to go through the project phases step by step so we can understand the process. Senator Hoffman said Representativel Thomas can address that as well, but how we convince the Legislature that the program is working is a problem and the best way to do that is to look at the annual fuel savings chart, which shows 83% power projects, but the high cost of energy in rural Alaska is in heating. We can’t continue the way we’re going, somehow the program needs to be modified. To sell the program, it's easy to show the fuel savings in the communities and not get down into the intricacies of each project. 9. Charts/Reports Requested by REFAC - PCE Savings, Heating Projects, Projected Fuel Displacement by Region Mr. Crimp said at the last meeting the REFAC requested a breakdown of cumulative annual fuel savings. They are shown two ways, by resource, around $7M gallons per year displacement, includes natural gas per year after 2013. Additional projects are not counted which are faltering and will likely show more displacement. Senator Hoffman said that showing gallons is impressive, but showing dollars would be more impressive. Mr. Crimp said we could do that, we’d have to give a date, 2012 or something. The second graph totals the same but is shown by region. Chair Beltrami said to get the support of the railbelt legislators they need to see annual savings in fuel. Mr. Crimp said that in Round 4 Eva Creek Wind Project, with a $2M allocation into final design and construction, will show many gallons to be added on. Much of the funding has gone to power projects at 83% (mostly wind) - 13% heat and 4% heat and power. Regarding estimate to impacts on the PCE, found it would be difficult to do and we will need a more rigorous way to do that. He suggested our PCE department could take on the task; however, two examples are Gustavus Falls Creek Hydro Project started up on 8/9 in FY10 hydro produced 90% of the Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 9 of 11 energy. In FY09 the PCE payment to Gustavus was $306K and in FY10 was $101K and the price of oil went down by 25%. (Mr. Posey returned to the meeting at 1:10 p.m.) Mr. Posey asked what the effect was of fuel switching from oil to electric due to the hydro power costs in Gustavus. Mr. Lockard said after the hydro was completed, the residential rate dropped to 29 cents/kWh, about $9/gallon equivalent for heating oil, however, the local utility is very interested in a creative rate structure using energy spilled at the hydro. We have been sharing information about ways of putting in an electric boiler that would provide cheaper heat for the school, and would also improve the operations and capacity at the hydro facility because of better control frequency and increased capacity of the generation system in dispatch mode. They are also working with the National Park Service on an intertie to Bartlett Cove at Glacier Bay that would increase the load by 50%, and on possible time of day rates to incentivize electric vehicles which matches better the extra energy available at the hydro to focus in summer rather than winter. Mr. Crimp said there’s been a lot of concern by Southeast Alaska Power Agency (SEAPA) power grid about fuel switching using load increases, because the cost of power will be much lower in Gustavus. Mr. Strandberg will be dealing with this in the SE IRP. Mr. Posey suggested that before we encourage fuel switching, we need to do as much as we can in conservation. Mr. Kendall told Mr. Posey he took an average home of 8900 kWh and took an Enstar average annual gas usage, 1,000 gallons of gasoline and converted all of those to electricity to BTU formulas, and came up with 10 to 17 times the amount of electricity normally used and did he come up with the same figures. Mr. Posey said he hadn't done the calculations. With agenda items completed, Chair Beltrami opened up the meeting to questions. Mr. Posey said it’s important that we look at the heating issue and not wait for an emergency. We need to look at it now and let Legislature and Governor know that we think it’s important and it’s also important to fund things like this. Senator Hoffman said we could look at the legislation to see if there’s any way that this board can submit RFP’s for reducing energy costs in rural areas of the state and maybe we could allocate some of the additional $14M for heating costs in those areas. Chair Beltrami said he’s concerned we are recommending total projects of just $36M, as we're falling short of legislative allocation. It's important that we add on to that in terms of a recommendation to address the heating issue. Senator Hoffman said after we take a look at the legislation, we should see if there are industry solutions for the next Round, instead of just specific people that are providing heat or electricity in a community. Mr. Crimp questioned whether our regulations would allow us to do that. Senator Hoffman said he was not worried about the regulations, but about the legislation. Mr. Posey said we need to state that $14M shortfall isn’t a shortfall in need, but is a shortfall in the things that we have set out and had come back to us. But there are the needs that we talked about for heating and we need to look at those and take a look at why we have caps if the Legislature and Governor are willing to fund it all the way or put some additional money in it. No one is doing as well as we are and we shouldn't slow down. Chair Beltrami said we have never been faced with this and we've not taken action other than recommending the projects. Given the fact that there is a shortfall and that we do have a concern, we need a recommendation forwarded with (and put this on the record) i.e., a one page letter that articulates that to go along with the $36.5M recommendation. Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 10 of 11 Mr. Posey said we need to take a look at the AHFC conservation effort because all the money's been put in the pot for the same reasons and we need to be as good as AHFC in getting money out there appropriately. We have a good number for legislators who are listening about how well this process is working, once again because we're $14M short and because of our regulations and our operating procedures, but not in needs to the state. Chair Beltrami suggested he put those thoughts in a letter to circulate back to the Committee for comment. Mr. Crimp said as part of the package of recommendations, AEA will produce a comprehensive status update with graphs, construction schedules, and estimated draw down. Mr. Harper suggested that when (a Board) wishes to make a major policy statement, typically a resolution is the best approach. Mr. Posey and Mr. Reeve will compile the resolution. Mr. Crimp stated we will meet with LB&A on January 14, 2011 and we will update our construction schedule with due dates and send them to the Committee. Mr. White announced that the RFA for Emerging Energy Technology Fund grants is out and completed applications are due March 2, 2011. The Legislature appropriated $2.4M to the fund for FY2011. In addition, the Denali Commission contributed $2.4M. Mr. Crimp added that AEA released the RFA for commercial energy audits on January 5, 2011. Owners of eligible public buildings (under 125K square feet) in Alaska may be reimbursed up to $6,500 for a qualifying energy audit. Non-profit buildings are included. Completed applications are due February 15, 2011. 10. Next meeting date: March 1, 2011 in Juneau, AK. aa5 Adjournment The meeting was adjourned at 1:34 p.m. Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 11 of 11 /= ALASKA ENERGY AUTHORITY RENEWABLE ENERGY FUND ADVISORY COMMITTEE MEETING Friday, January 7, 2011 AEA Boardroom 10:00 am to 4:00 pm AGENDA Call to Order Beltrami Roll Call Public Comments (limit of 2 minutes) Agenda Comments (changes/additions/deletions) Alaska State Energy Sector Partnership (ASESP) Briefing by Department of Labor and Workforce Development Ore Not ee Approval of Meeting Minutes — November 9, 2010 Review AEA Round 4 Recommendations Crimp Status of Current Grants White Charts/Reports Requested by REFAC Crimp a. PCE Savings b. Heating Projects Ooo? c. Projected Fuel Displacement by Region 10.Next Meeting Date Beltrami 11. Adjournment Beltrami Renewable Energy Fund Advisory Committee Meeting November 9, 2010 — AEA Boardroom 1:00 pm to 4:00pm DRAFT MINUTES 1. Call to Order The Renewable Energy Fund Advisory Committee convened at 1:05 p.m. Chairman Vince Beltrami presided over the meeting and stated he would be leaving the meeting at 2:00 pm. Ms. Hall will represent him for the remainder of the meeting. 2. Roll Call: Committee Members AEA Staff Other Participants Chair Vince Beltrami Mike Harper Jodi Fondy, Denali Commission Jodi Mitchell Sara Fisher-Goad Joelle Hall, AFLCIO Sen. Lyman Hoffman (phone) James Strandberg Bob Baldwin, Kenai River Watershed Foundation Brad Reeve Peter Crimp Wyn Menefee, ADNR Division of Water Hannah Gustafson (for Mr. Rose) Butch White Mike Nave, Department of Law Jim Posey (phone) Douglas Ott Rep. Paul Seaton/Homer (phone) Emily Binnian Kaarle Strailey, AK. Center for the Environment (phone) May Clark Pat Walker, Sen. Hoffman's Office (phone) 3. Public Comments Kaarle Strailey, Alaska Center for the Environment, stated they are a local, non-profit environmental education and advocacy organization whose mission is to enhance Alaskans’ quality of life by protecting wild places, fostering sustainable communities and promoting recreational opportunities. ACE advocates for sustainable policy on behalf of over 6,000 Alaskan members. Referencing Agenda Item 6A and ACE's 8/23/2010 Valerie Connor letter to AEA regarding the REF evaluation guidelines, he reiterated their main concerns were that levels of community and public support should carry a greater weight in the grant application review process and more extensive environmental review impacts should be done before awarding grants. He said he would remain on the line during the meeting to answer any questions. 4. Agenda Comments There were no agenda comments. 5. Approval of Meeting Minutes — June 8 and August 13, 2010 The meeting minutes of June 8, 2010 were approved unanimously with minor typographical corrections. MOTION: Ms. Mitchell moved to approve the meeting minutes from the June 8, 2010 Renewable Energy Fund Advisory Committee. The motion was seconded by Mr. Reeve. The minutes were unanimously approved as presented, with minor typographical errors to be corrected. The meeting minutes of August 13, 2010 were unanimously approved with minor typographical corrections. Renewable Energy Fund Advisory Committee Meeting November 9, 2010 Page 1 of 6 MOTION: Ms. Mitchell moved to approve the meeting minutes from the August 13, 2010 Renewable Energy Fund Advisory Committee. The motion was seconded by Mr. Reeve. The minutes were unanimously approved as presented, with minor typographical errors to be corrected. 6. Round 4 Review Progress & Issues Needing REFAC Input Mr. Crimp announced that the “GoTo Meeting” online session will not occur for this meeting as previously planned. AEA received 108 proposals in mid-September and stage 1 review (eligibility and basic review) was completed later that month. Two proposers dropped out. AEA hired five economic firms. ISER updated fuel price projections, revised the economic analysis template, and both were posted on AEA’s website. The economic firms are selected through a competitive process and ISER is coordinating the review, providing assumptions for the economists and reviewing their work. To date they have delivered approximately three fourths of the economic review. Under agreement with AEA, DNR Division of Mining Land and Water, Division of Forestry, and Division of Geological and Geophysical Surveys (DGGS) provided comments on resource availability and resource management considerations for the proposals. All of that information was entered into our database. AEA has 10 staff involved in reviewing applications. They are about one-fourth of the way complete and are making good progress with no problems. Ms. Mitchell asked if there was a preliminary list of the Round 4 applicants available. Mr. Crimp said they were posted on our website and he would provide the REFAC with the Excel version. 6a) Alaska Center for the Environment Issue Mr. Crimp said Mr. Strailey of ACE summarized the concerns of the letter and noted the ACE reply was the only one received in response to our request for public input when the RFAs were sent out. Mr. Menefee reviewed the points brought up in the ACE letter. 1) ACE is concerned that the AEA project review does not provide adequate environmental review nor does it provide significant evaluation of local support. 2) ACE feels there is inappropriate weighting of environmental review on local support in the ranking. 3) ACE feels there should be adequate funding of ADF&G, DNR and ADEC to supply professional review of these projects. 4) ACE suggests we should not fund hydroelectric projects in the Kenai River watershed. AEA has drafted a response letter and agreed to bring the discussion to the REFAC. DNR provides basic environmental and social concern reviews of what is known during the Stage 2 review. Although it is not as in depth as in permitting, it is a high level review to find out if there are major concerns or major environmental hurdles in a project. AEA believes the ranking is appropriate with criteria discussed at previous REFAC meetings. AEA believes it has provided both the appropriate amount of weight for both the environmental review and the local support. Although there may be issues identified by DNR and/or by the project review committee when they are looking at these projects, unless there is an irreconcilable problem, the project still deserves consideration and ranking. There is an assertion in the ACE letter that if there is any sort of environmental problem or concern then the project is taken off the table. We believe there should be a consideration because the role of permitting is to go through and find out if issues can be mitigated as they arise. A project may be scored and ranked lower because of the issues that are raised. The permitting process provides in depth review of both environmental and social concerns through a public process with a comment and appeal period. AEA does not wish to make a duplicative or replacement permitting process and cannot afford the time or the cost for a full environmental review / full permitting process before ranking. Part of the funding is the feasibility to identify whether the project will work or not and that may mean going through the permitting stage. Phasing required by project grants also prevents too much funding being allocated to a project before knowing what the costs are. For instance, the State may invest in the feasibility assessment of a project to determine whether it is likely the project is going to work or not. Funding will not be granted thereafter if it is not going to work, so feasibility is an important stage when considering funding. The resource agencies need to be funded to absorb the additional permitting workload, but AEA is providing DNR enough funding for RE Fund application review. The resources agencies haven't received funding Renewable Energy Fund Advisory Committee Meeting November 9, 2010 Page 2 of 6 for actually doing the permitting review of the projects, but we agree with ACE that they should be funded for that. Ms. Mitchell agrees that we are doing what we can and has empathy for ACE, but said that’s not really our purview. Mr. Crimp stated when AEA scores the proposals, if there is a clear fatal flaw for a project and we know the project will not be permitted, we have the option of recommending no funding. Regarding the Kenai Hydro projects, Mr. Ott stated four applications were originally submitted in the Moose Pass area that were funded for preliminary study and after the preliminary studies the applicant ended up considering no further action on two of the sites. Two of the other sites were combined into a single project moving forward. They later dropped one of the two sources they were combining, resulting in the Grant Lake project. Mr. Menefee commented on the ACE request that we not fund any hydro projects in the Kenai area; he said we understand there are good and bad projects, but the newer hydro projects have gone through more sensitive permitting with an increase in salmon habitat returning to those areas after the project. It can be done well with appropriate permitting. Mr. Crimp stated there are many feasibility and reconnaissance analyses funded and most of them may not pan out. Under direction from the REFAC, AEA is allocating most funding towards construction. The smaller allocation for reconnaissance and feasibility may provide useful results by identifying projects that have problems and should not receive further funds. In response to Mr. Reeve’s question as to why the sponsors withdrew on the projects mentioned above, Mr. Ott said some reasons given were: less economic benefits involved with two of the projects, significant fish habitat issues involved, and local opposition concerns. Mr. Crimp stated AEA will respond to the ACE letter consistent to what was discussed. Mr. Reeve asked if everyone received a letter from Becky Long regarding concerns on funding biomass in the Mat-Su Borough. He gave the letter to staff to be placed on the next meeting agenda. Mr. Ott said at a meeting today on a hydropower project, DNR announced there was going to be a new fee schedule established to charge projects for the state permitting services. 6b) How to address letters from Legislators in local support score Mr. Crimp stated letters from Legislators were received in support of projects that will figure into the project scoring so REFAC direction is needed on this. Mr. White said a resolution received from a board, etc. for local support is given two points. An entity letter of support is given up to 3 more points. Up to five points are given for local support and the points are not cumulative. In Round 4, five projects (3 Peninsula, 1 Juneau, 1 Sitka) were received with letters of support from a local Legislator, so the approach was taken that a Legislator was counted as an entity. REFAC direction was asked on this matter. Mr. Reeve stated we like to see local support from the communities. Senator Hoffman said Legislators should not be counted as an entity and this was agreed to by the committee. 6c) How to address consistency with Energy Pathway in scoring Mr. Crimp stated the REFAC had previously decided to favorably score the projects that were consistent with the Energy Pathway. A proposal was received for reconnaissance feasibility biomass development and exactly corresponded to the Pathway. In the existing evaluation guidelines there is nothing to provide Renewable Energy Fund Advisory Committee Meeting November 9, 2010 Page 3 of 6 a higher score for that, so he wanted to bring up the possibility for modifying the project readiness score to benefit reconnaissance projects that are consistent with the Pathway. (A ten minute break was taken and the gavel was turned over to Mr. Reeve) The entire evaluation guidelines dated January 21, 2010 were provided to the committee and reviewed. An additional criterion would be added under Project Readiness to the effect that, if an applicant is proposing reconnaissance work consistent with the Energy Pathway, this condition would warrant a score of 4 points. Other Readiness criteria would remain the same and a maximum of 10 points would be given for Readiness. Mr. Reeve stated the Pathway is tying into existing State energy planning and has had local review by the communities to find an energy pathway that makes sense for them and will bring community involvement back into the process. Senator Hoffman stressed regional balance needs to be addressed again and shown in the allocation. Mr. Crimp stated the Stage 4 review on statewide regional ranking (on Page 8 of the guidelines) will still be followed for geographic balance and nothing will be changed from the protocols established previously. Another REFAC meeting will be held in early January to discuss the results of the scoring before Legislative session begins on January 18". Ms. Mitchell said the AFN passed a resolution supporting the Energy Pathway. 7. Round 1-3 Construction Project Schedule Review The handouts for the meeting were distributed. Mr. Crimp said we have seen a bit of slippage for some projects; however, most are progressing and the published construction schedule is our best estimate. The projects are generally on track but a few will not be completed until next year. The Juneau geothermal aquatic center won't occur until late winter. The heat pump project at the Sealife Center will occur next year. A few are not yet determined. Ft. Yukon district wood heat project needs organization. 80 percent of funding has gone into construction in the amount of $118.3 M. Much of the reconnaissance and feasibility of $18.4 M is for geothermal assessment data collection and physical activity. Estimated cumulative annual fuel savings for Rounds 1 through 3 were reviewed and the chart showed for projects that are constructed. AEA assumes fuel savings (in million gallons) are realized the calendar year after project completion. 10 million gallons of fuel per year are displaced by the projects following completion. The biomass fuel savings jumps in 2012 due to the Anchorage Landfill gas project being completed. Mr. Posey asked if negotiations were completed on the project. Mr. Crimp stated the Municipality came to AEA with a contractor, Doyon, that had proposed to make power in reciprocating generators and purchase landfill gas from the Muni (they will pay the Muni). AEA believes it is an excellent project that brings good benefit to the Municipality and they are proceeding. Senator Hoffman said the chart was excellent, but needs to be looked at from a regional standpoint as well, emphasizing rural Alaska. Mr. Crimp said a regional breakdown will be made and provided at the next meeting. Senator Hoffman said we need to look at how this program can assist in reducing costs with alternative energy for heating homes. Mr. Crimp said a similar chart can be prepared showing heating vs. electrical fuel displacement, and that the heat recovery and biomass projects are generally where we are seeing the heating fuel displacement in wood and heat recovery. He mentioned that perhaps Devany Plentovich, AEA’s Biomass & Heat Recovery Program Manager could address the committee on program strategy, as there’s a lot going on in program development. Mr. Posey wanted to know how much funds were for heat recovery and biomass and a chart would be helpful showing those. Mr. Crimp said those figures can be prepared. Ms. Mitchell commented that the graphs are useful to defend the program, but would like to see PCE savings shown. Mr. Crimp agreed. 8. Update on Existing Grant progress Mr. White referred to the handouts and said in Round 1, 78 projects were selected and all but four are in place due to grantee issues. In Round 2, all projects are in place. In Round 3, we are halfway through and are making progress in getting the grants in place. The money is being disbursed, and finance’s goal Renewable Energy Fund Advisory Committee Meeting November 9, 2010 Page 4 of 6 is a two-week turnaround. Some projects were given up for various reasons, including meeting all of the requirements and everything is on track, although the money may not be moving out as fast as some would like. Mr. Reeve agreed these projects take time and must be done right and the Committee needs to remind folks of what it takes to make successful projects. Ms. Gustafson asked what the reallocation procedure is for the $2 M accumulated from all of the rounds. Ms. Fisher-Goad stated the LB&A had directed AEA in Round 1 to have the money go to Takatz Lake and that project is nearly fully funded. Funds left over from canceled projects are reported to the OMB and Legislature. In Round 4 there is recommended funding of $50 M, but there is money in the fund for projects not moving forward. We cannot divert unallocated funds to a project. Mr. Crimp said AEA realizes some projects are not progressing and we will need to take action to have those funds returned and reallocated. Ms. Fisher- Goad corrected by saying we are not going to be seeking money back, we never gave them the money. There are two types of projects: ones where grants are issued, which we can move to cancel the grant if they are not making progress; and grants not in place which are easier to de-fund — money is obligated, but the grant is not in place. In Round 4 we stated in the RFA’s that if a grant is not in place in a year, it is presumed that we will reallocate the money — that was not explained in the earlier rounds. AEA desires to give the grantee the benefit of the doubt in these situations. Reallocation was discussed internally and the difficulty is that projects become stale and to reevaluate an old project would not work. So the most appropriate way to do it is to put the money forward to current projects. Our goal is to have the appropriations people understand what's available. In Round 2 there weren't enough projects for AEA to recommend more than $36.8 M. The REFAC needs to think about how this will work. 9. Frequency of progress reporting Mr. Reeve pointed out that, for example, the NWAB is spending a lot of time on the monthly reports, but aren't at a point where the project has progressed at all. AEA needs to decide if they want to do quarterly or monthly reporting. Quarterly is typical, but AEA staff desires adequate control for the amount of money going out. The REFAC needs to look at different reporting triggers, especially for the smaller communities with minimal staff. Mr. Crimp said it was just the construction projects where money can be flying out the door very quickly — a big concern for AEA is that even though it is on a reimbursement basis, once somebody has bought something, the decision has been made and if AEA finds the grantee has not fulfilled a milestone, it is a problem. Mr. Strandberg stated a monthly report or email stating there’s been no activity is helpful to keep things under control as there’s more projects than project managers. We need to know what's going on, but we also do not want a detailed and rigorous reporting process for projects with no activity. Usually the grantee makes the expenditure then seeks reimbursement, AEA makes sure it is within the scope of work for the project. We have the responsibility to make sure we have successful projects. There is that rational middle ground in having the grantee report to and keep in touch with us so we can keep our fingers on what is happening. We need to know there is no monthly activity. Mr. Crimp said a project trigger could be final design and permitting. A monthly report is not going to be necessary if there is not much money being spent. Before the REF, we required monthly reporting for construction projects. Mr. Reeve said the trigger idea could be based on milestones on large reimbursements, etc. to keep reporting down. Mr. Strandberg said on the larger more complex projects we are requiring a schedule of values and monthly reporting on each component’s percent complete link to the requested reimbursement so we can track the amount of money being spent is equivalent to the percent complete. If there is no activity or the level of activity is small we might be able to trigger into a lesser reporting requirement by email. Mr. Reeve agreed and stated the smaller projects need to have more meaningful reporting — quarterly or based on a trigger. Mr. Posey felt quarterly would work and incremented grant percentages could also trigger another report. Mr. Crimp said that would be good for some grantees but not for others. He said he would discuss this with the project managers and will look at making sure we are only requesting reporting to minimize the amount of paperwork. Ms. Mitchell said for larger purchases or large contracts Renewable Energy Fund Advisory Committee Meeting November 9, 2010 Page 5 of 6 in the Rural Utilities Service (RUS) program, they give finance an estimate of what will be spent for the month, and have always come under cost. Mr. Strandberg said AEA has been flexible for equipment purchases; either an advance is made or an arrangement is made on a purchase order so that the bill is sent directly to AEA. Although AEA doesn't necessarily like to pay bills directly, there are ways to do it. Mr. White agreed that we will work with grantees and some have reported by email that there is no activity for a period and the PM's are fine with that. Mr. Reeve said we can come back and respond to Mr. Posey’s questions, to see if there’ are ways to get meaningful reports to give you the tracking ability you are looking for to make it as easy on the grantees as possible. We've already judged their projects in a sense and said they are capable of doing this and trust them to do it right. We could report on this for the January meeting. 10. Performance driven / Strategic grant making Mr. Crimp had nothing to report. He said Chris Rose suggested having staff come up with proposals or some ideas for performance driven grants. We haven't had enough time to do that. AEA alternative energy and energy efficiency staff are preparing program plans that show our overall goals and objectives and how we would approach hydrokinetic wind, geothermal projects, etc. After the proposal review process is completed in January, it might be a good time to consider program strategy. Heating projects need to be discussed further. Mr. Reeve agreed and noted that in many of the villages, heating expenses are often more expensive than electrical. Mr. Posey asked staff if we expect another $40 M or $50 M in Legislative funding and we need to look at what the next two or three years looks like if so. Also, are we getting projects that fall within the 80/20 Legislative mandate split. We should consider caps coming off if there are viable projects that could make a meaningful difference in the Railbelt. Mr. Crimp said at the next meeting we will have a better idea of the quality of proposals and the amount of construction funding to go out. Then the possibility of increasing the caps could also be discussed. Tasks as a result of this meeting: 1) Geographical report to see how grants stand regionally; 2) Report on electrical versus heating grants; 3) Discuss options for reducing reporting requirements with AEA project managers; 4) Report on how grants are impacting the PCE Program; 5) Respond to Becky Long letter regarding funding biomass in Mat-Su; 6) distribute list of Round IV applications to REFAC; 7) Review Round IV grants at the next meeting; 8) Look at the performance driven/strategic grant making topic at a later date; 9) Respond to ACE letter; 10) Look at community “pooling” — see if we can pool communities together to combine them with expertise to get them to apply for grants at lower costs; and 11) Future legislative funding and capping of projects. 11. Next meeting date: January 7, 2011. 12. Adjournment The meeting was adjourned at 3:00 p.m. Renewable Energy Fund Advisory Committee Meeting November 9, 2010 Page 6 of 6 Alaska Energy Authority Renewable Energy Fund Round IV - Applications App # Project_Name 600 AVCP Regional Housing Authority 601 Waste Energy Powered Absorption Refrigeration Unit 602 Adak Renewable Diesel Project 603 Takatz Lake Hydroelectric Feasibility Analysis 604 Bethel Renewable Energy Project 605 Biomass Fuel Dryer Project 606 Jack River Hydro Project 607 Lime Village Photovoltaic System Retrofit 608 Renewable Energy Feasibility Study 609 Atqasuk Transmission Line 610 Kaktovik Wind Diesel 611 Point Hope Wind Turbine Design 612 Point Lay Wind Generation Design 613 Wainwright Wind Turbine Design 614 NWAB School Alternate Energy Solar Awareness Project 615 CEA Transmission Line to Renewable Energy Resources 616 GVEA Eva Creek Wind Turbine Purchase 617 Tok School Biomass Heating Project 618 CVEA Silver Lake Feasibility 619 Port St. Nick Fish Enhancement Hydropower 620 Whitman Lake Project 621 Akutan Geothermal Development Project 622 Cordova Community Biomass Feasibility Study 623 Susitna Valley High School Wood Heat 624 Wrangell Electric Vehicle Feasibility Study 625 Excursion Inlet Hydro Project Phases | and II 626 Carlson Creek Hydroelectric Project 627 Connelly Lake Hydroelectric Project 628 Neck Lake Hydroelectric Project 629 Reynolds Creek Hydroelectric Project Transmission Line 630 Schubee Lake Hydroelectric Project 631 Yerrick Creek Hydroelectric Project 632 Reconnaissance Study of Tenakee Inlet Geothermal Resource 633 Nushagak Community Wind Power Project 634 Nikiski Combined Cycle Conversion (NCCC) 635 Grant Lake Hydroelectric Facility 636 Thorne Bay School Wood Fired Boiler Project 637 Feasibility Assessments for Wood Heating in Interior AK Communities 638 Yukon River Debris Mitigation Project 639 Eek Wind Feasibility January 03, 2011 Applicant_Name AVCP Regional Housing Authority Valdez Fisheries Development Assn., Inc. TDX Adak Generating, LLC City & Borough of Sitka TDX Power, Inc. City of Craig, Alaska Native Village of Cantwell Lime Village Traditional Council Louden Tribal Council North Slope Borough North Slope Borough North Slope Borough North Slope Borough North Slope Borough Northwest Arctic Borough Chugach Electric Association, Inc. Golden Valley Electric Association Alaska Gateway School District Copper Valley Electric Association, Inc. City of Coffman Cove City of Ketchikan dba Ketchikan Public Utilities City of Akutan Native Village of Eyak Matanuska Susitna Borough City & Borough of Wrangell Haines Borough Alaska Power Company Alaska Power Company Alaska Power Company Alaska Power Company Alaska Power Company Alaska Power Company Inside Passage Electric Cooperative Nushagak Electric & Telephone Cooperative (NETC) Alaska Electric & Energy Cooperative Kenai Hydro LLC Southeast Island School District Interior Regional Housing Authority Alaska Power & Telephone Company Alaska Village Electric Cooperative, Inc. VUUUUYNUH YUH VUYUUNHUYNHHYH HUN YUH U UNH YUH UHHUNUHYHHNUYHUUY Grant_Fund_Request 3,045,000 1,021,287 250,050 2,000,000 3,961,638 350,000 190,000 69,000 100,000 210,000 132,000 400,000 400,000 400,000 137,209 1,700,000 1,463,200 754,651 637,500 158,400 2,000,000 2,695,000 245,065 750,000 112,500 317,130 540,000 1,040,000 1,844,000 2,000,000 160,000 4,000,000 2,579,200 3,199,400 2,000,000 1,500,000 300,000 154,477 1,190,876 142,500 Resource Wind Other Wind Hydro Wind Biomass Hydro Solar Biomass Other Wind Wind Wind Wind Solar Transmission Wind Biomass Hydro. Hydro Hydro Geothermal Biomass Biomass Other Hydro Hydro Hydro Hydro Transmission Hydro Hydro Geothermal Wind Heat Recovery Hydro Biomass Biomass Other Wind Alaska Energy Authority Renewable Energy Fund Round IV - Applications App # Project_Name 640 Elim Wind Feasibilityi 641 Kaltag Solar Construction 642 Koyuk Wind Phase II Feasibility 643 Marshall Wind Feasibility 644 Old Harbor Hydroelectric 645 St. Mary’s/Pitka’s Point Wind Construction 646 Scammon Bay Wind Feasibility 647 Selawik Hybrid Wind Diesel System Turbine Upgrade 648 Stebbins Wind Feasibility 649 Kenny Lake School Wood Fired Boiler 650 Chefornak Wind Feasibilitly 651 Southwest Alaska Regional Geothermal Energy Project 652 Mount Spurr Geothermal Project 653 Terror Lake Unit 3 Hydroelectric Project 654 Pilgrim Hot Springs Geothermal Resource Assessment 655 Triangle Lake Hydroelectric Project 656 Metlakatla-Ketchikan Intertie 657 AVTEC Hydro Training Facility 658 Organic Rankine Cycle Field Testing 659 Kachemak Bay Tidal Power 660 Cook Inlet TidGen Project 661 Turnagain Arm Tidal Electrical Generation Project 662 Gulkana Village Pellet Fuels Project 663 lonia Renewable Energy Training Center 664 Kwethluk Wind Feasibility 665 Upper Tanana Biomass CHP Project 666 Kenai Winds Expansion 667 Kotzebue Paper & Wood Waste to Energy 668 Upper Kobuk River Biomass 669 Akiachak Wind Feasibility & Conceptual Design 670 Thayer Lake Hydropower Development Generation 671 Thayer Lake Hydropower Development, Transmission 672 Snettisham Transmission Line Avalanche Mitigation 673 Atmautluak Wind Renewable Energy 674 Stetson Creek Diversion/Cooper Lake Dam Facilities 675 Battle Creek Diversion Project 676 Eska Creek Hydroelectric Project 677 Akiak Hydro Study 678 False Pass Wind Energy Project 679 Nelson Lagoon Wind Energy Project January 03, 2011 Applicant_Name Alaska Village Electric Cooperative, Inc. Alaska Village Electric Cooperative, Inc. Alaska Village Electric Cooperative, Inc. Alaska Village Electric Cooperative, Inc. Alaska Village Electric Cooperative, Inc. Alaska Village Electric Cooperative Alaska Village Electric Cooperative, Inc. Alaska Village Electric Cooperative, Inc. Alaska Village Electric Cooperative, Inc. Copper River School District City of Chefornak Naknek Electric Association, Inc. Ormat Nevada, Inc. Kodiak Electric Association, Inc. University of Alaska Fairbanks INE/ACEP Metlakatla Indian Community Metlakatla Indian Community Alaska Vocational Technical Center University of Alaska Fairbanks ACEP City of Homer ORPC Alaska, LLC Turnagain Tidal Energy Corporation Gulkana Village Council Alaska Mental Health Trust Authority Organized Village of Kwethluk Alaska Power & Telephone Company Kenai Winds LLC City of Kotzebue Northwest Inupiat Housing Authority Akiachak Native Community/Akiachak Ltd. Kootznoowoo, Inc. Kootznoowoo, Inc. Alaska Electric Light & Power Company Village of Atmautluak Chugach Electric Association, Inc. Chugach Electric Association, Inc. Bering Pacific Engineering City of Akiak City of False Pass Electric Utility Nelson Lagoon Electrical Cooperative VPUUNUYNHUYHUYHUNHHYHHHUDHHHH HUYNH VNU HUUNHUUNUUUNUY Grant_Fund_Request 142,500 90,000 142,500 111,150 237,500 4,000,000 142,500 85,000 137,750 565,485 250,000 4,000,000 1,999,972 7,000,000 1,330,467 500,000 9,405,200 703,800 472,787 620,811 2,000,000 2,000,000 955,000 241,623 145,000 380,000 2,000,000 85,000 250,000 110,000 4,000,000 4,000,000 3,215,680 225,000 2,000,000 500,000 37,000 350,000 128,625 158,625 Resource Wind Solar Wind Wind Hydro Wind Wind Wind Wind Biomass Wind Geothermal Geothermal Hydro. Geothermal Hydro Transmission Hydro Heat Recovery Other Other Other Biomass Biomass Wind Biomass Wind Other Biomass Wind Hydro Hydro Transmission Wind Hydro Hydro Hydro Ocean/River Wind Wind Alaska Energy Authority Renewable Energy Fund Round IV - Applications App # Project_Name 680 Cold Bay Wind Energy Project 681 Lake & Peninsula Wood Boilers 682 Fivemile Creek Hydroelectric Project 683 Cook Inlet Tidal Hydrokinetic Power Generation 684 New Koliganek Wind & Heat Recovery Feasibility Study 685 Napaskiak Wind, Power and Heat Recovery 686 Port Heiden Wind Turbine Project 687 Hoonah Heat Recovery Project 688 Pelican Hydroelectric Upgrade Project 689 Port Graham Biomass Waste Heat Demo Project 690 Hunter Creek Hydroelectric Project 691 Glacier Fork Hydroelectric Project 692 Elfin Cove Hydroelectric Project 693 Fourth of July Creek Hydroelectric Project 694 Southern Railbelt Small Hydro Reconn. Study 695 Indian River Hydroelectric Project 696 Merrill Field Landfill Gas Heating/Energy Project 697 Napakiak Wind Design & Construction Planning 698 Kongiganak Flywheel Energy Storage 699 Akiak Integrated Renewable Energy Projects 700 High Penetration Wind Diesel Power and Heat 701 Palmer Ice Arena Geothermal & Heat Recovery Improvements 702 Packers Creek Hydroelectric Project 703 Tuntutuliak Wind Energy Storage 704 Kwigillingok Wind Energy Storage 705 Japonski Island Boathouse Heat Pump 706 Sitka Renewable Energy Feasibility for Wastewater Treatment Plant 707 Sitka Renewable Energy Feasibility for Centennial Hall & Library January 03, 2011 Applicant_Name G&K Electric Utility Lake & Peninsula Borough Chitina Electric, Inc. Baker Hughes, Inc. New Koliganek Village Council City of Napaskiak Electric Utility Lake & Peninsula Borough Inside Passage Electric Cooperative, Inc. City of Pelican Port Graham Village Council Eklutna, Inc. Glacier Fork Hydro, LLC Community of Elfin Cove Utility Commission Independence Power, LLC Polarconsult Alaska, Inc. City of Tenakee Springs Electric Department Municipality of Anchorage Napakiak Ircinraq Power Company Puvurnag Power Company City of Akiak Kipnuk Light Plant City of Palmer Chignik Lagoon Power Utility Tuntutuliak Community Services Assn., Inc. Kwig Power Company City and Borough of Sitka City and Borough of Sitka City and Borough of Sitka UUUNNUUUUYNUNUUUNHH YUNUNUNUUNUNYHYHUNYHUNUY wn Grant_Fund_Request 158,625 369,900 3,602,000 400,000 105,050 17415275) 1,700,000 475,000 1,896,836 697,475 84,000 210,000 347,000 136,500 1,375,000 203,000 2,000,000 282,395 1,395,231 142,000 3,424,041 1,094,695 2,440,000 708,162 708,162 125,000 20,000 30,000 123,170,405 Resource Wind Biomass Hydro Other Wind Wind Wind Heat Recovery Hydro Biomass Hydro Hydro Hydro Hydro Hydro Hydro Other Wind Other Other Wind Geothermal Hydro Other Other Geothermal Geothermal Geothermal Ke oe pe “ZIDEN. j= wx OK Alaska Industrial Development aA Export Authority November 19, 2010 Valerie Connor Conservation Director Alaska Center for the Environment 807 G Street, Suite 100 Anchorage, AK 99501 Dear Ms. Connor, Thank you for your August 23, 2010 letter regarding the Renewable Energy Fund project evaluation guidelines. We appreciate the Alaska Center for the Environment’s support for increased development of renewable energy projects in Alaska. You expressed concern that the project evaluation guidelines do not adequately consider local support or environmental considerations. As you are aware, your concerns were discussed at the recent advisory committee meeting for the Renewable Energy Fund. This is to respond directly to your letter now that the committee has met. We believe that Alaska Energy Authority (AEA) provides sufficient review appropriate to the stage of the project proposed. As part of project technical review, the Department of Natural Resources provides a certain level of review to identify obvious hurdles with obtaining permits for environmental or social reasons. Unless a project has a clearly irreconcilable problem, it is inappropriate to prevent consideration for funding without a thorough review by appropriate agencies and the public. That in-depth process will occur during the permitting phase by the resource agencies. For projects that are requesting feasibility analysis, the grant funding provides project developers an opportunity to identify challenges and try to work through any hurdles. Note that permitting risk is a criterion for technical feasibility scoring. It is appropriate to allow projects full review under the existing permitting review processes prescribed by law, and not to duplicate that work in the Renewable Energy Fund program. During those permitting reviews, issues may arise and if they can be mitigated, the project could continue, but if not, it may require a change to the project or abandonment of the project. Permitting reviews also provide public review and opportunities for the public to appeal the decisions if they disagree. The resource agencies try not to prejudge the outcome of a permitting process before the permitting process begins. 813 West Northern Lights Boulevard * Anchorage, Alaska 99503 www.aidea.org * 907/771-3000 * FAX 907/771-3044 ® Toll Free (Alaska Only) 888/300-8534 * www.akenergyauthority.org Ms. Valerie Connor November 19, 2010 Page 2 AEA does not have the funding nor the time available to conduct as thorough of an environmental review or public comment survey as ACE suggested. The evaluation of the public support is based on the information provided by the applicant and knowledge of the review team. Additionally, AEA has received letters in support or against projects once the proposed projects were posted on the website. You stress that it is important that the ADF&G, ADNR and ADEC be funded at levels that will fully support professional review of renewable energy project proposals. We agree that there should be adequate funding as these projects will require appropriate public and environmental review during the permitting stage at the resource agencies. The additional influx of projects puts further demand on existing staff. Project funding is provided in successive phases—reconnaissance, feasibility/conceptual design, final design/permitting, and construction. In order to allocate funding as effectively as possible, each phase of work must be completed before AEA makes additional funding available. The evaluation methods that AEA utilizes to consider environmental risks or public support was agreed upon by the Renewable Energy Fund Advisory Committee, which is made up of representatives of the power industry, renewable energy advocates, and legislators. This process was later placed in regulation through a public process. We believe that the review is weighted appropriately and that the environmental and social concerns are adequately addressed as projects proceed to permitting. Thank you for your comments. If you have any further questions or comments please feel free to contact me. Sincerely, ALASKA) ENERGY/AUTHORITY Peter Crimp Deputy Director Alternative Energy and Energy Efficiency PC:mc H:AEAProjects/Renewable Energy Fund/Process/ACEResponse_11-19-2010.doc 10/12/10 To: | Members of the Renewable Energy Fund Advisory Committee of the State of Alaska From: Becky Long, PO Box 1088, Talkeetna AK 99676, issues320@hotmail.com Re: CONCERNS OF NORTHERN SUSITNA VALLEY RESIDENTS PROJECT NO. 623 SUSITNA VALLEY HIGH SCHOOL WOOD HEAT This project has been submitted by the Matanuska Susitna Borough in application for funds under Round IV of the Renewable Energy Fund. Contrary to media reports, there is not a groundswell of public support in the Northern Susitna Valley for this project. 1. There are many people who question the value of cutting old growth forests for cordwood for an industrial boiler and who are worried about the precedent that this could set. 2. There are fiscal public policy concerns about the economics of this project. This project does not pencil out economically unless an entity subsidizes it. We know this from the September 2009 Northern Economic/Dalson Energy, Inc. report “Susitna Valley High School: Wood Heat analysis that states, “Financial analysis indicates high initial system costs must be met by grants and supplemental or demonstration funds. Without such funding, wood fired system costs exceed the costs of current (fuel oil) system.” 2. Many residents question whether industrial biomass projects can be considered Renewable Energy. Biomass energy is being touted as carbon neutral because the carbon emissions from burning biomass are considered part of a natural cycle in which growing forests over time recapture the amount of carbon that was emitted. However, it is not as simple as that. According to the June 2010 study “Biomass Sustainability and Carbon Policy Study” commissioned by the state of Massachusetts, beginning in the 1990's researchers conducted studies showing more complex understanding of the carbon cycle implications of biomass combustion and atmospheric greenhouse gas implications. It will vary depending on the characteristics of the bioenergy combustion technology, the fossil fuel technology it replaces and the biophysical and forest management characteristics of the forests harvested. Assumptions of biomass carbon neutrality have been challenged on the ground that such a characterization ignores the differences in the timing of the carbon releases and subsequent resequestration in growing forests. There is also evidence from studies that older forests sequester more carbon than younger forests. We need to know when the carbon emissions from the proposed Susitna Valley High School Wood Boiler equal the same amount of carbon sequestered from the growing forests in the Matanuska Susitna Borough that would be cut for the 1 boiler. According to the September 22, 2010 Matanuska Susitna Borough Natural Resource Management Plan that was passed, the borough forests are being managed for the standard rotation period of 100 years for white spruce and 80 years for paper birch. Is there data on the carbon cycle for the timber harvest area? 3. There are also public health concerns. What are the emissions from this proposed boiler, and how will that affect the air quality of the Susitna River lowlands where the Su Valley High School is located? It is known that forest biomass energy generally emits more greenhouse gases than fossil fuels per unit of energy. Even with the best pollution control devices, biomass burning releases as much particulates as coal burning. A 11/15/07 paper entitled Air Quality and Wood Fired Heating Devices by the Director of the Division of Air Quality, Alaska Department of Environmental Conservation stated the following: 1. The ADEC Permitting and Emission Rules did not envision broad use of commercial wood boilers. 2. The expansive use of wood fuels deserves a strong look at combustion design, pollution control technology and attention to good site selection. 3. Health consequences are real: switching from diesel to wood may save money, but health costs may exceed fuel savings. THERE NEEDS TO BE A FULL DISCUSSION OF THE ENVIRONMENTAL IMPACTS OF BIOMASS INDUSTRIAL BURNING. 4. There needs to be clarification as to the process whereby borough public forests are cut for this project. The Matanuska Susitna Borough has said that there is a dedicated borough forest base for cordwood for this project. But it is my understanding that the timber harvests will have to go through the regularly established borough procedure of nominating timber land for harvest to be put on the Five Year Schedule. fi oe ing May Clark From: Peter Crimp Sent: Wednesday, November 10, 2010 11:40 AM To: May Clark Subject: RE: Becky Long letter Let’s hold off until we send them the minutes. In the meantime please send a copy to Butch, Devany and me. Thx, Peter From: May Clark Sent: Wednesday, November 10, 2010 9:44 AM To: Peter Crimp Subject: Becky Long letter Do we want to send out her letter to the REFAC today? Thanks, May Clark Administrative Assistant Alaska Energy Authority 813 W. Northern Lights Blvd. Anchorage, AK 99503 mclark@aidea.org 907-771-3074