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HomeMy WebLinkAboutDraft REFAC Meeting Minutes Jan. 7, 2011 Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 1 of 11 Renewable 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/Bus. Partnerships Rep. Bill Thomas (phone) Emily Binnian Phillip O. Kairaiuak Wyn Menefee Audrey Alstrom 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 that the world’s major automobile dealers sent out to utility and oil companies asking to begin the “hydrogen highway” now. It suggests that 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 (RE/EE) 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 Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 2 of 11 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 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 the Divisions of 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 for 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: Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 3 of 11 Under „Recommendation Guidelines: Page 8, Partial Funding Guidelines: Exception 1: “If 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 for which 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. 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 four 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 referred to 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. He stated that 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 Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 4 of 11 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. 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. Larger 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 Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 5 of 11 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 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. With regard 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 have the ability to assess need to additional financing. Therefore, in Round 3 we allowed proposers 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 supplemental financing necessary 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 Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 6 of 11 money not spent and during this review we are trying to get it right on the third time around, so we are not allocating funds for projects we don’t think are going to happen within a reasonable timeframe. AEA was stricter in 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 He suggested another meeting next month rather than in two months to deal with this issue, as the 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.) Referring to the regional allocation summary spreadsheets, 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, many of the SE areas pays over 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? We need to start looking at other tools 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 and make recommendations to implement, we can get more applications going into the areas that have the highest costs. Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 7 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, but 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. 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 and generation efficiency. We might be able to do some type of regional larger scale deployment of wind 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 is $36.5M in total grants for Rounds 1 through 4. In the Round 4 $25M allocation, he explained the methods for geographic spreading. 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 power statistics, and plans to add transportation and heating fuel consumption and price, for all Alaska communities. 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. 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 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. He asked what will AEA do to monitor the outcome of the projects and how quickly can outcome be reported (to the Legislature). There will be a gap in the program, so how do we keep it rolling. Mr. Crimp stated that one of the most important functions of AEA is to monitor the technical and economic performance of the projects. We are currently devoting Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 8 of 11 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 of performance of the wind diesel systems. 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 in developing 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 are being underestimated. 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 plays. 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. The very basis of innovation is the individuals in the small communities. One of our biggest mistakes is not teaching everybody at the same time. All those villages have capacity to generate energy but 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 we will see unparalleled chaos, not just high priced energy, but you will be lucky if energy is available in the first place. 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 due to delay by 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 I 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 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 be something that would help entities understand. AIDEA could provide financing, if they had a pool of funds that could also be used for getting design completed on the smaller systems like ours. Making cash available for these small systems would be the Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 9 of 11 type of help we need. Mr. White agreed and said he would try to demonstrate progress made in 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 receive 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. 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 they can understand the process of developing a project. Senator Hoffman said Representative Thomas can address that as well, but how we convince the Legislature that the program is working is a problem. 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 estimates on impacts on the PCE, he found too difficult to do and concluded that we need a more rigorous way to do that. He suggested our PCE department could possibly take on the task. Mr. Crimp noted that fuel prices dropped greatly between FY09 and FY10, masking the impact of developing the hydro in Gustavus. (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 Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 10 of 11 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 load increases due to electric heating. 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 that assuming an average home of 8900 kWh, and an Enstar average annual gas usage, and 1,000 gallons of gasoline: converting all of those to electricity he comes up with 10 to 17 times the amount of electricity normally used. 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 this issue that should go along with the $36.5M recommendation. 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, because we’re $14 million short due to our regulations and operating procedures--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 said they will compile the resolution. Renewable Energy Fund Advisory Committee Meeting January 7, 2011 Page 11 of 11 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. 11. Adjournment The meeting was adjourned at 1:34 p.m.