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HomeMy WebLinkAbout12-14-09 Draft Meeting Minutes REFAC Page 1 of 1   Renewable Energy Fund Advisory Committee Meeting December 14, 2009 – AEA Boardroom 10:00am to 12:00pm Draft Minutes 1.) Call to Order The Renewable Energy Fund Advisory Committee convened at 10:08 a.m. Chairman Vince Beltrami presided over the meeting. 2.) Roll Call: Committee Members AEA Staff Other Participants Vince Beltrami, Chair Steve Haagenson Brian Bjorkquist, Dept of Law Jim Posey Mike Harper Kate Sangster, Chaninik Wind Group Representative Bill Thomas (phone) Sara Fisher-Goad Clint White, STG, Inc. Linda Hay – Senator Bert Stedman’s Peter Crimp Office (Phone) Butch White Sandy Burd – Senator Hoffman’s James Strandberg Office (Phone) Chris Rutz Devany Plentovich James Jensen Doug Ott Rich Stromberg May Clark 3.) Public Comments Clint White of STG, Inc. provided an update on a Renewable Energy Fund 600 kW wind installation project for the Unalakleet Valley Electric Cooperative (UVEC) (letter on file from Mr. James St. George, President of STG). STG has installed approximately 85% of the utility wind projects currently operating in the state. The project has been delivering wind generated electricity since November. In addition to the wind farm’s primary benefit of reducing diesel fuel consumption and electricity costs for the community, two other major benefits were noted: 1) State of Alaska’s financial commitment to the installation provided leverage for UVEC to access supplemental project funding. UVEC received additional funding from area entities to further expand the project with additional wind turbines; and 2) UVEC’s award and the resulting project implementation efforts have further developed numerous Alaskan based firms’ understanding of wind systems appropriate for the market. More than 50 Alaskan based firms, including STG, maintain workforces composed primarily of Alaska residents. Clint White further stated areas where improvements can be made to improve the efficiency of the REF program to include: 1) Short funding will stall development, particularly for rural Alaska projects, due to insufficient capital. Limit the number of projects recommended for funding but add assurances that viable ones are actually implemented; and 2) the execution of grant agreements and disbursement of grant funding needs to be managed more efficiently. It’s unreasonable and in many cases impossible for small, Page 2 of 2   rural utilities to implement projects on a reimbursement basis without the support of other partners willing to offer bridge financing for project expenses; and 3) Legislative scrutiny of the REF program has resulted in excess and inefficient oversight of REF project activities. Greater clarity needs to be established for AEA’s role with the REF in order to reduce administrative inefficiencies associated with the program. He commended AEA staff for their support in project activities, counsel, and reimbursement requests and presented Mr. Haagenson with a framed photograph of the completed project. Mr. Haagenson thanked Mr. White for the constructive criticism and advice. [Chairman Beltrami noted Mr. Posey’s arrival at the meeting] [10:16 am] Representative Thomas stated that we fought to get to where we are right now and wanted to thank everybody in the room that had been working on the REF. Introductions were made of the meeting attendees. 4.) Agenda Comments There were no changes to the meeting agenda. 5.) Approval of Meeting Minutes – August 21, 2009 MOTION: Mr. Posey moved to approve the meeting minutes from the August 21, 2009 Renewable Energy Fund Advisory Committee. The motion was seconded by Representative Thomas. A voice vote was taken and the minutes were unanimously passed as presented. 6.) Round I and II Update on Status Mr. Butch White distributed a pie chart on “RE Fund Grant Status” On Rounds I and II there are a total of 109 projects for $125 million. Seventy projects are currently under agreement, have already been amended for various reasons, or the grant agreement has been mailed out to the grantee. Another 24 (10 in draft – 14 draft internal) are being worked on and this past weekend two large wind projects got done. The last 15 are still waiting for items from the grantees. Of the $125 million, $68 million is obligated, with grants that are in place, this includes $17 million actually dispersed. The projects that have been capped and unable to move forward for various reasons will be discussed later in the meeting. Some are tied up with lack of financing to complete their project. Generally, they are rural projects that just do not have enough financing to move forward. For example, Kotzebue Wind is requesting new funding to go forward up and above the cap of $4 million provided last time. They haven’t been able to come up with the balance, neither has Nome Joint Utility. Some of the others have found funding, i.e., Nikiski Wind project, was capped but able to find additional financing. Some projects funded in Round I are coming back to the RE Fund for additional funding. A couple of applicants have come back and asked for Power Project Fund (PPF) loans. Even if they secure 80% financing, this hurdle could still delay the project as planned. The 100% funded projects are moving right along. Over the cap funding is a major issue to be discussed at this meeting. Page 3 of 3   Representative Thomas stated that his concern was the rural Alaska projects and whether they would be able to secure matching funds. There are projects in the rural areas that can’t move forward because of the $4 million cap. The metro areas have a $2 million cap and can’t move forward either. Fifteen projects are stalled and don’t have all of their funding. Kotzebue was capped at $4 million and they still have a shortfall, including what they offered as match. Chair Beltrami would like an estimate of the total the 15 projects are short. Another funding opportunity is the PPF, funded directly from the Legislature; however, it’s almost out of money, with less than $5 million and has requests already in for $9+ million. Representative Thomas emphasized “regionalization” of projects. Capping assures enough projects fit in all the regions and meet the requirements of most rural areas. It appears the $4 million cap hurts the largest but still rural communities, but if the PPF is an option for them, than perhaps getting some expedited funding from there would be an option. 7. Round III Update on Status POWERPOINT (Peter Crimp) Mr. Crimp stated the PowerPoint slide didn’t show the amount short funded, but showed the amounts funded and capped, but which have not progressed. Kodiak Electric progressed, although capped. Six projects were awarded $16 million. Nome Wind and Kotzebue Wind have not moved forward and by the end of the year action will be taken on those projects. We are considering Kotzebue’s request for additional grant funds in Round III and some direction is needed on that. It’s recommended allowing those projects move forward; the allocated funding up and above the Round I or II cap, then next time around consider whether we want to do that. It’s not known if the potential geographic spread and/or percentage rural vs. urban will change until the end of Round III proposal evaluation. We need to consider the PPF and Round III and evaluate which is the best way to proceed. Each financing alternative has its advantages. Legislative input and appropriations will be required to provide direction. Representative Thomas agreed and expressed concern about regional balance. Successes need to be shown, and we should lift the cap, but need to be careful to ensure for allocation between rural communities vs. smaller villages. It’s a good year to request more monies. We need to meet with the Governor and request $50 million for the fund this year. Mr. Strandberg stated one consideration to the committee is how the split between debt vs. grants for projects will influence the project’s energy rate, and further how this rate will play in the economics of the community. A further consideration is how this rate will compare with the long-term cost of power with diesel. Also remember that the focus of the program is to not only get off diesel but also to lower power rates in the community. Page 4 of 4   Mr. Posey stated that balancing of the PPF loans and RE Fund grants is important. We need to make sure the balance is maintained. Representative Thomas agreed. The PPF fund should fund some of the projects. We need to look at the regions and determine ones we need to do right away and proceed. We need to show two or three successes in each of the regions so the rural representatives can claim reduction of energy costs in their community(s). Nobody is going to be giving up their share of the regional money. Mr. Crimp stated the cost based rate is what was agreed on for IPPs. He suggested that AEA continue with Stage II review and not remove the projects such as Kotzebue, Humpback, Kenai, etc. and look at them again in geographic spreading. Not on that list is the Anchorage Landfill Gas project that was capped and hasn’t moved ahead. The Anchorage Landfill Gas Project has an extension until January and qualifies for PFF funding. We need to discuss projects like that in our January 13-14 meetings. In the PPF, if a project is under $5 million AEA can internally approve it if there’s funding available. If a state-funded project is over $5 million it must have legislative approval regardless of whether the loan amount is under $5 million. In Rounds I and II the capping mechanism happened but wasn’t addressed in the RFA, so the communities and applicants applied without knowing there was a cap. Capping was addressed in the RFA for Round III. Potential applicants didn’t apply because the caps were so low on some projects. Now we’re seeing applicants who were in Rounds I and II and knew about the caps and applied. We knew this issue would come up and we need to address it. Mr. Posey stated we want to show real progress and we should not destabilize the system set up in order to provide regionalization and urban vs. rural. The Legislature should deal with the PPF. Mr. Haagenson pointed out the statute talked about matching and it was never their intention for AEA to be a 100% grant program. Mr. Crimp noted AEA has brought on additional staff: • Devany Plentovich - Biomass and Heat Recovery Program • Neil McMahon and Audrey Alstrom, newly degreed engineers – Geothermal & Hydro Program • Rich Stromberg – Assisting with Wind Program • Katie Conway – Energy Efficiency Program • Emily Binnian – Energy Inventory Program We will be working through the Christmas holidays on the Stage II and III ranking and are planning to finish in time for the January 13 and 14 REFAC meetings, and we are planning to deliver our recommendations to the Legislature on January 29th. 8.) Current Evaluation Issues: Mr. Crimp described AEA’s technical and economic evaluation methods. There are five different economist firms and 10 different private economists performing economic analyses on the projects (for example, Mike Hubbard is working on hydro from Information Insights. Linda Snow in Juneau and Bob Page 5 of 5   Logan in Fairbanks are also involved). ISER is doing quality control, making sure price assumptions are the same, providing a template, etc. ISER employees Ginnie Fay and Nick Szymoniak are doing the majority of this work. We are a lot better organized on the economic review this time around. DNR is also assessing permit-ability and resource availability of projects. Wyn Menefee is not present today and Bob Swenson’s staff is working also. AEA has increased the weight for the benefits cost ratio. Regarding scoring methodology, a project proposal that has a less than .9 benefit to cost ratio was assigned a score of zero. One point was given to projects with a BC ratio of .9 to one, with the assumption that it’s close and given the fairly rough nature of the economic analysis it makes sense to give some score. The higher the BC ratio, the higher the score. The difference between that BC ratio value and the 25 points possible maximum means that in Stage II, 25% of the score is coming from the BC ratio. Financing Plan was added. Projects have applied in the past that had fairly unrealistic ideas of how they were going to finance. Five out of 100 points was added for the financing plan. Public Benefit review is the idea of addressing public benefits other than inherent economics of the project. Including things like “will the project result in developing infrastructure that can be used for something else,” and “to what extent it provides increased jobs, solve other problems, generate useful information, etc.” Worth 10 points. Project Readiness Stage 3 is overall ranking of projects, top to bottom. Stage 4 was added and addresses geographic spreading. Stage 4 will be done by the advisory committee and staff at the January 13 and 14 meetings. (Within Stage 3 are criteria added to Stage 3 for readiness, for instance if a project is under construction and just needs a little bit of funding to move forward, it should be scored and ranked higher.) Public Benefit score is part of Stage 3, the benefit to cost ratio does affect two scores within Stage 3. Sixteen percent of the total includes what is carried forward from Stage 3. Twenty-three percent is benefits and then 16% is BC and economics. Benefits are pretty heavily weighted this time around. The cost of energy and the amount of match remain very high. Evaluation Guidelines are the staff’s and contractor’s reference sheet for evaluation. They will be posted on the web after we get the cost of energy data input. We’re about 1/3 the way through the Stage II and Stage III review, but we have a lot of work to do. We’ll probably have over 25 people working on it over the next three or four weeks. 124 new projects were received requesting for $224 million. Mr. Posey reiterated we’re keeping the balance, but said if we start taking the caps off we will destabilize it for a lot of different reasons. The PPF is the way to go as long as the Legislature understands that this program is not unlike AHFC weatherization program - wherever they are on that $250 million, don’t think Page 6 of 6   they’re any further along than we are. He asked that someone find out the project status prior to the January 13 and 14 meeting, as he’s traveling to Juneau in February. Kootznoowoo, Inc. sent in two applications for Thayer Lake Hydro and Transmission. A transmission component of the hydro and for the hydro itself, each for $4 million. If there’s no objection from the Committee, it will be considered as one project. Humpback Creek, the engineering cost estimate was much lower than what the project that came in at. They’re requesting $4 million again. Kenai Winds is requesting another $2 million to go up to 15 MWs. That project was recommended in the Railbelt IRP. Reynolds Creek, on Prince of Wales Island, is also asking for another $2 million and trying to figure out how to finance the rest. It’s a complex project and the key will be the Power Sales Agreement and how the hydro power will be dispatched, because it will be going to an interconnected network. AEA is working with the parties on that aspect. 9.) Preparation for Legislative Session Mr. Haagenson and Ms. Fisher-Goad spoke at the House Energy Committee on December 11, 2009, and Mr. Haagenson testified on (the work draft ) energy policy legislation, which are committee bills that won’t be pre-filed. Several energy bills have been consolidated into a work draft called the Omnibus Energy Bill. Nothing in this bill should prevent us from moving forward. In the Renewable Energy Fund section there are some parts that address the REF process. In Round III we addressed many of the same issues responding to the audit and some of the economists’ concerns. Before and at start of session we will work with the Energy Committee legislators, especially Representatives Millett and Edgmon to further address concerns and what effect the legislation would have on the process and to seek clarification as to what they want from the economists’ report. Other economists in various areas of expertise are assisting us with the evaluation process. We may have to tweak some regulations, especially if the legislation states that significant weight would include the economic analysis or benefit cost. The legislation is addressing many points that we’ve already addressed, so the Omnibus Energy Bill is looking good. We need to address reallocation of funds for projects not moving forward. The Galena project will be turned back for further appropriation, with a few others and that’s subject to the Legislative Budget & Audit (LB&A) process. In Round II there’s $400,000 available for re-appropriation due to a typographical error. Representative Thomas stated the LB&A was meeting this week and would rather they move the funds with the assistance of Josh Applebee. Linda Hay stated the LB&A meets for a regular meeting on December 16 and also meets through the regular legislative session and just Round I monies remain under the purview of the LB&A. The Committee needs to determine what needs to be done with any remaining Round II money, allocation of Round III money and any interaction with the LB&A on Round I. Page 7 of 7   Representative Thomas said he spoke with Representative Millett about the changes to HB152 and she’s trying to address comments that Representative Hawker made at the LB&A meeting when he tried to not allocate the monies. Those changes were already made and she may have to take it out of the bill. The Committee will request $50 million and will give the Legislature a list recommended projects similar to last year. Mr. Beltrami would like to have the meeting minutes earlier for the next meeting. 10.) Next Meeting Date The next meeting date(s) will be January 13 and 14, 2010. 11.) Adjournment The meeting was adjourned at 11:30 a.m.