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HomeMy WebLinkAbout5 REFAC_Meeting_Minutes_12NOV2013Renewable Energy Fund Advisory Committee Meeting Minutes Page 1 of 15 November 12, 2013 Renewable Energy Fund Advisory Committee Meeting November 12, 2013 Alaska Energy Authority Board Room Anchorage, Alaska 9:06 a.m. to 11:32 p.m. DRAFT MINUTES 1. Call to Order The Renewable Energy Fund Advisory Committee (REFAC) convened at 9:06 a.m., with Chairman Rose presiding. Chair Rose noted there was not a quorum at the beginning of the meeting. 2. Roll Call Committee Members Chairman Chris Rose Jodi Mitchell (phone) Representative Bryce Edgmon (phone) Brad Reeve (phone) Senator Anna Fairclough Representative Charisse Millett (phone) AEA Staff Sean Skaling Shawn Calfa David Lockard Alan Baldivieso Jed Drolet Josh Craft Cady Lister Yolanda Inga Sara Fisher-Goad Rich Stromberg Emily Binnian Helen Traylor Other Participants Maggie McKay, Marsh Creek, LLC John Lyons, Marsh Creek, LLC Jeff Turner, Representative Millett's Office Adam Berg, Representative Edgmon's Office Steve Gilbert, Alaska Village Electric Cooperative Wyn Menefee, Department of Natural Resources Sunny Morrison, Accu- Type Depositions Miranda Studsill, Accu- Type Depositions 3. Public Comments Ms. McKay, from Marsh Creek, LLC, advised she works on some of the grant projects for the Renewable Energy Fund. She stated she has a specific project that would benefit from expending funds prior to the July 1st grant funding availability date, creating substantial cost benefits and savings. Ms. McKay would like to work with AEA to allow for the funds to be Renewable Energy Fund Advisory Committee Meeting Minutes Page 2 of 15 November 12, 2013 spent at the grantee's contractor's risk and allow for submittal of reimbursement after the July 1st date. Chair Rose inquired if Ms. McKay would like to speak regarding the specifics of the project, so the Committee has a better idea of the kinds of issues she is addressing. Ms. McKay advised the specific project is the Village of Koliganek, which currently has a Renewable Energy Fund grant for a conceptual design and has applied for a design in Round 7. She reported that Rural Power Systems Upgrades is concurrently providing a new power plant and they will begin conceptual design and design in January 2014. Ms. McKay explained the Village of Koliganek project's funds will not become available until July 1st, 2014, which means they would miss a critical period of coordination of the conceptual design and design with Rural Power Systems Upgrades. Ms. Mitchell echoed Ms. McKay's sentiment because by the time July 1st comes around, they are missing half of the season. She commented she does not know how to fulfill Ms. McKay's request, but understands the problem and believes it would be beneficial if the Committee could act on this issue. Mr. Reeve commented trying to not lose a season through this process has been difficult and requested spending extra time to discuss ways to solve the issue. Mr. Reeve asked if everybody, to some degree, has the ability to pay in advance and then be reimbursed. Mr. Skaling responded he believes Mr. Reeve's comment is incorrect, unless the payment is at the project's own risk and its own match, but reimbursement cannot officially begin until the July 1 date. Mr. Reeve explained he meant that the payments would be at the project's own risk, but if the project wanted to, they could spend their own money early. Chair Rose stated he understands Marsh Creek is requesting AEA to consider allowing them to apply for reimbursement for funds that were expended before a grant is in place on July 1st, as long as Marsh Creek understands that if something went wrong with the grant and the money was not provided, the risk would be borne by Marsh Creek and would not be reimbursed. Chair Rose asked Ms. McKay if his understanding is correct. Ms. McKay agreed. Chair Rose commented this request is different than what has been previously allowed because a grant typically has to be in place before any reimbursement requests can occur. Chair Rose commented because the Committee does not have a quorum, it is difficult to advise AEA. He noted AEA is clearly taking this issue under advisement and a couple of the Committee members understand the predicament Marsh Creek is in. Chair Rose asked Ms. McKay if the Marsh Creek project is a wind project. Ms. McKay agreed. Chair Rose stated this is probably a question for AEA's lawyers to draft appropriate language addressing Marsh Creek's request. Mr. Skaling commented AEA is really interested in expanding the work performance time. He noted AEA it is within their purview to push back the application date, as long as the reviews are completed by the legislative session. Mr. Skaling stated AEA is aware of the challenging issues of construction seasons being lost and the timing of other project pieces. He stated AEA is working on the limitations they face. Mr. Skaling expressed his appreciation to Ms. McKay for Renewable Energy Fund Advisory Committee Meeting Minutes Page 3 of 15 November 12, 2013 addressing this issue and requested the Committee place this issue on the agenda for the January 2nd meeting. Chair Rose believes that is a reasonable request. Chair Rose asked for a point of clarification regarding when Ms. McKay is requesting to expend the funds, whether in January or in April. Ms. McKay stated the request for expending the funds would be closer to the month of April. She advised Marsh Creek still has some funding available in their current grant, which they are holding until this decision is made. Chair Rose commented it would be difficult for this Committee to advise that Marsh Creek act before the Legislature approves the grant list, which typically does not happen until the end of the legislative season when the budget is in place stating which projects are going to be funded. 4. Agenda Comments There were no agenda comments. 5. Approval of Meeting Minutes - June 17, 2013 Chair Rose noted the approval of the meeting minutes cannot happen without a quorum. This item was tabled. 6. Round 7 Review Update Mr. Skaling advised that included in the Committee's packets are the summary tables beginning on page nine and the actual preliminary application summaries beginning on page 13. Mr. Skaling noted 86 applications were received this year. Four of the applications did not pass Stage One. Mr. Skaling expressed his appreciation to Department of Natural Resources for returning their responses promptly and providing support to the program. Stage Two scoring began last week and 20 of the applications have been scored. Chair Rose inquired if he is reading page 10 correctly where half of the heat applications were biomass and about a third of the applications were heat recovery and 38 of the 86 applications were for heat. Mr. Skaling agreed and noted the dollar amounts were less because they are typically smaller projects. Chair Rose asked Mr. Skaling if he is correct is summarizing this process as follows: AEA will provide the Committee with two lists, one for the standard projects and one for the heating projects, which are scored without regard to the amount of funds within the Governor's budget. The Committee will then have to weigh heat projects against electric projects, which is different from what has occurred in the past, and then determine the recommendations of projects. Mr. Skaling agreed with Chair Rose's description of the process. Chair Rose commented the top $25 million is going to be an important threshold for a lot of projects to reach. He requested staff consider whether there are any other deciding factors or criteria the Commit tee can use to help determine which projects are within the top $25 million threshold, since the heating and electric projects are now competing. 7. Analysis of Funding in High and Low Cost Energy Areas Renewable Energy Fund Advisory Committee Meeting Minutes Page 4 of 15 November 12, 2013 Chair Rose advised this analysis was requested by Senator Hoffman. Chair Rose was sorry that nobody from Senator Hoffman's Office was on the phone and requested the information be provided to them. Mr. Skaling described the analysis of funding in high cost energy areas and low cost energy areas over the course of the program, which begins on page 104. Chair Rose noted for the record Senator Fairclough has joined the meeting and a quorum has been reached. Senator Fairclough stated she did not have the call-in number or the code. Chair Rose expressed his appreciation for her attendance. Chair Rose if the three columns, below 20, 20 to 40, and above 40, in the graph on page 104 represent the number of applications that were funded. Mr. Skaling agreed and noted the right - hand side lists the categories. Category One is funded. Category Two is recommended, but not funded. Category Three is not recommended and not funded. Chair Rose asked if the higher match in the below 20 category is typical because they are railbelt projects. Mr. Skaling noted they were railbelt projects and more commonly, Southeast projects. Mr. Reeve referred to the last column on page 105, the not recommended and not funded column, and requested staff provide analysis at the January 2 meeting explaining the reasons for these projects being placed under the not recommended and not funded column. Mr. Reeve asked if one of the reasons is that the communities do not have the technical expertise required for these projects. Mr. Reeve asked if any of these had shortcomings on the applications, but are good projects that aren't being funded because of technical expertise. Mr. Stromberg advised the two wind projects that did not pass Stage One were because they had not completed the necessary earlier stage design and analysis to be consider ed. Senator Fairclough commented the first column indicates a significant investment in wind projects and perhaps looking at a ratio comparing funded projects and not funded projects would be useful. Chair Rose stated he believes Mr. Reeve ' point is important because it goes to the heart of what Senator Hoffman was concerned about, which is the quest of why projects are not being funded. Chair Rose requested staff conduct further research on Mr. Reeve's question for the January 2 meeting and bring more information to the Committee. Mr. Skaling commented for this year's and last year's not recommended and not funded category, the number one issue that disqualifies projects is poor benefit/cost ratios, meaning the proposal is too expensive and does not beat the cost of what is currently available. Mr. Skaling noted sometimes that may occur because of a design flaw. He will provide more information to the Committee on this question for the next meeting. 8. Data Collection Progress Update Mr. Skaling commented data collection on the Rural Energy Fund projects is really important to understand what is being generated and how they are performing in order to report the Renewable Energy Fund Advisory Committee Meeting Minutes Page 5 of 15 November 12, 2013 information back to the Committee, to the Legislature and to the public. Mr. Skaling advised a trial is occurring with the expertise and support of Alaska Center for Energy and Power that provides a streamlined approach for the data collection system and the data management system. The information collected currently is monthly data, including total energy production, net energy production, operating and maintenance costs compared to expected performance. The intent is for this system to ultimately expand to include every applicant's data. Chair Rose commented he is very happy the system is being developed and is interested in the results of how the different technologies are being monitored. He noted the information collected is used to inform decisions made regarding loan activity, as well as how to optimize the systems technically. Chair Rose asked what the timeline is for this pilot system to be implemented for all projects. Mr. Skaling stated AEA is presenting at the Rural Energy Conference next fall on the projects utilizing the current data collection system. Mr. Skaling said his big question is in regards to how expensive the system is going to be, including the equipment cost and the data process and filtering aspect. Mr. Skaling commented he is hoping that by next fall at the presentation, he will have a good sense of how costs can be kept low, while maintaining accurate data collection. Chair Rose stated Mr. Skaling alluded to his secondary question of the cost of this system going and who is going to pay for it. Chair Rose believes it is worth having the system in place in order to know how the projects are working. Chair Rose recommended this item of Data Collection Progress Update be included in the agenda for the next meeting. 9. PCE and REF Presentation Mr. Drolet gave a detailed PowerPoint presentation on the overview of the Power Cost Equalization Program and its interaction with other programs, especially the Renewable Energy Fund. He noted the mission of AEA is to reduce the cost of energy in Alaska. This is accomplished through energy planning policy, infrastructure investments, diversification of the energy portfolio, technical training and assistance for rural communities, energy efficiency/conservation programs, and power cost equalization for rural communities. Mr. Drolet explained the Power Cost Equalization Program is a subsidy program for rural electric utilities with the purpose of lowering the rates to about the same level as in urban Alaska. He noted there are some exceptions, but generally the program pays for 95% of utility costs above the average rates in Anchorage, Fairbanks and Juneau. Ms. Mitchell asked if this presentation was included in the packet because she does not have it. Mr. Skaling noted he is preparing to send the presentation now to Committee members who are on the phone. Chair Rose asked if the left axis is the price per kilowatt hour up to two dollars. Mr. Drolet agreed and explained the left axis is in dollars price per kilowatt hour. Chair Rose asked if the effective rate for Lime Village is about 95 cents per kilowatt hour, which means they are getting Renewable Energy Fund Advisory Committee Meeting Minutes Page 6 of 15 November 12, 2013 about half. Mr. Drolet agreed and explained that is due to the structure of the funding formula. Chair Rose asked if the half is being applied only to the first dollar, which would mean they would get even more if the half were applied to the entire actual rate. Mr. Drolet agreed and explained the calculation is based on the actual numbers, so it would not necessarily be half, but some other percentage. Mr. Lockard inquired if it is important to distinguish that these are residential rates under 500 kilowatt hours per month. Mr. Drolet agreed and explained this data is based on residential rates under 500 kilowatt hours per month. Chair Rose asked what the monthly average use is in Anchorage because he believes it is well over 500 kilowatt hours per month. Chair Rose noted there is a difference between the effective rate and what people are actually paying, what it costs an average participant. Chair Rose asked what percentage above the 500 kilowatt hours per month does an average participant incur. Mr. Drolet responded there is a lot of variation, but in general, the average participant is staying well under the 500 kilowatt hours per month. He noted the average is about 300 kilowatt hours per month is most communities. Mr. Drolet advised that is a potential issue with the structure of the Power Cost Equalization Program, but it is generally swamped by income effects, which means people are poor enough that even with the subsidized rates, they are staying under the cap. Mr. Reeve commented the average residential usage in his area is between 540 and 560 kilowatt hours per month on an annual basis. He noted the participants who are most effected are those with larger families and children. Usage is also increased during the Christmas season with people being inside more. Cost is a major consideration due to the increased usage during the colder months of the year. Senator Fairclough asked if the orange bar has been audited to see if that is the same ratio as what the urban area has for management of the utility that is being considered. She asked for those costs to be explained. Mr. Drolet noted he does not know offhand when auditing has occurred. He noted there are a lot of fixed costs in maintenance, but the costs vary a lot depending on the community. Senator Fairclough commented if that number has not been reviewed and is equally impacting those communities, it might behoove us to know what those cost drivers are to see if there is a way that one-time upgrades could reduce those costs, rather than continually paying it on a power cost equalization basis. Chair Rose commented part of the issue is economies of scale. He requested Mr. Gilbert speak about the economies of scale Alaska Village Electric Cooperative enjoys. Senator Fairclough noted she understands cost per capita. Mr. Gilbert advised non-fuel costs include scheduled maintenance, emergency response maintenance, filters, parts, replacement parts, and travel costs. Chair Rose noted that outside of the Alaska Village Electric Cooperative communities, there is a wide range of the computed costs. Chair Rose asked Ms. Fisher-Goad to answer Senator Fairclough's question about previous audits or if there is a way to find out what those costs are. Ms. Fisher-Goad advised that as part of the Regulatory Commission of Alaska's evaluation, an audit is performed of the utilities every three years that includes non-fuel cost of the utility. Debt service is part of the non-fuel cost. The Regulatory Commission of Alaska makes the determination whether the non-fuel costs are allowable or non-allowable. Renewable Energy Fund Advisory Committee Meeting Minutes Page 7 of 15 November 12, 2013 Senator Fairclough requested the expenses get looked at through the lens of asking if there is a potential for energy cost savings. Senator Fairclough asked if there were cost drivers that are going unnoticed that could be brought to someone's attention to try to manage in a different way. She noted on page 105 that transmission is the second highest of the denied projects and inquired if this should be brought to someone's attention for further review. Ms. Fisher-Goad stated the two issues AEA is most concerned with and where the most impact can be made is the line loss issue and the system efficiency issue. Those are the two areas AEA has been working with our Rural Power Systems Upgrade representatives to make sure those issues are being addressed with the utilities. Training for utility operators has also increased. AEA is analyzing the program to determine how to manage the utility more efficiently to maximize the Power Cost Equalization program and to ensure the utilities are reducing the overall cost. Chair Rose asked if the graph showing the analysis of the rate base of the utility and who would be expected to see a benefit from a decrease in net cost is a prediction of expected benefits, rather than actual received benefits. Mr. Drolet noted the graph is a prediction. No analysis has been computed on actual projects. Mr. Drolet commented now that there are projects online, actual analysis should be possible. Chair Rose suggested using this graph's information to compare the communities' expected range of benefits with the communities' actual range of benefits. Chair Rose asked if the Power Cost Equalization Program is getting the benefit of lower payments, how does that state benefit circle back and benefit a community member. Mr. Drolet noted that is a question to think about going forward. He stated in communities with a large commercial rate base, the benefits to the community flow through by reducing the cost of living. Mr. Drolet noted in smaller, more residential communities, it is a trickier question to look at. Chair Rose inquired if there has been analysis to show that stabilizing commercial rates helps residents. Mr. Drolet stated lower commercial rates is one of the ways that lowering energy costs gets passed onto the customer of the rural business in lower prices, as well other environmental benefits. Ms. Fisher-Goad commented that in a dream world, everybody's rates would be at parity so that nobody would need to utilize the Power Cost Equalization Program. She does not know if that will happen in her lifetime. Ms. Fisher-Goad stated reducing residents' dependency on the Power Cost Equalization Program is beneficial for the program and for the state, with respect to limited resources. Mr. Drolet said AEA sometimes receives questions about whether adding renewable projects will make a community ineligible for the Power Cost Equalization Program. He clarified adding renewable projects will not make a community ineligible for the Power Cost Equalization Program. The eligibility for the Power Cost Equalization Program is based on what the utilities' usage was back when the program was established. Ms. Mitchell commented it cannot be overstated how difficult it is to have a business in the small communities and to make ends meet. She said her heart breaks every time she hears about Renewable Energy Fund Advisory Committee Meeting Minutes Page 8 of 15 November 12, 2013 another business closing. Ms. Mitchell noted she always keeps in mind the effect the Renewable Energy Fund projects will have on the business communities. Ms. Mitchell expressed her appreciation for the Power Cost Equalization Program, but stated it does not help the businesses at all. Chair Rose stated he has two questions. He asked how are the reduced costs thro ugh the Power Cost Equalization Program and the Renewable Energy Fund projects going to be spread around. Chair Rose asked how do we analyze the impacts of the Renewable Energy Fund projects on commercial rates. He believes this is important information for legislators to know regarding who is benefitting in their district from these Renewable Energy Fund projects. Chair Rose commented making the case for why the Renewable Energy program is important based on those savings is something to focus on. Senator Fairclough asked Chair Rose if his comment means that we have appropriately set outcomes and measured those goals. Chair Rose stated he does not know if the expectation has been created that the Power Cost Equalization Program benefits residents and t he Renewable Energy Fund projects benefit commercial rates. He believes the expectation has been created that the Renewable Energy Fund projects are going to help residential consumers. Chair Rose believes there is a benefit to residential consumers, but it is not a huge benefit, at least in the Power Cost Equalization areas. Ms. Mitchell recommended a possible benchmark that could be used is the average rate or cost of power for each community from before a project and after a project. She noted Form S even could be used to determine the cost of energy production in the comparison. Ms. Fisher-Goad appreciated Ms. Mitchell's comments and advised Mr. Darren Scott from Kodiak provided information on the stabilization of rates. He conducted analysis that showed what Kodiak's rates would have been if they did not have that additional renewable infrastructure. Ms. Fisher-Goad explained the analysis goes beyond what were the rates before a project and what are the rates after a project. She noted they are r eviewing the rates after the project, but also what the rates would have been if there had not have the project. The fundamental measurement has been the diesel equivalent displacement. Ms. Fisher-Goad advised that communities have been able to stabilize the rate and use the fuel savings to provide additional operating and maintenance services. AEA has been gathering information from the grantees and specifically asking them how the projects have benefited their rate payers and their communities. Chair Rose stated it is harder to calculate what that benefit is when determining how high the rate would have been in five, 10, 15 or 20 years if the community had remained so dependent on diesel. Chair Rose believes that is exactly what this program is doing by displacing diesel and displacing future costs. Chair Rose requested information regarding what the displacements of costs are actually doing for a community. He asked if it is allowing the community to perform more operating and maintenance tasks or something else that do not impact rates, but still provides a benefit to the community. Renewable Energy Fund Advisory Committee Meeting Minutes Page 9 of 15 November 12, 2013 Senator Fairclough asked, regarding the scoring criteria on evaluating projects for the grants, if there is a Power Cost Equalization overlap with the money currently invested, does AEA have criteria that measures the commercial benefit versus the residential benefit bar chart that is shown in the presentation. Mr. Skaling stated AEA does not consider that measurement in the evaluation. The expected impact to rates and expected overall economic impacts are considered. Senator Fairclough commented there is no expected impact to rates for lowering residential rates. These projects are providing stabilization to rates. Senator Fairclough believes the Legislature has the expectation this will lower energy costs for the individual and if, in fact, it is providing stabilization and insulation from volatility on changes, should there be a different measurement up front if we are trying to benefit communities that have larger commercial rates or are we still going to go to the smaller communities and try to put big projects in that they are not going to see any benefit from, as far as reduction. Senator Fairclough asked if appropriate expectations have been set for those communities if they do not see a lower cost at the end of the project. Chair Rose stated he does not want to describe Renewable Energy Fund projects as lowering rates. It is about stabilizing rates. He believes part of the problem has been the statements about lowering costs that were not achievable as saying the rates are going to be stabilized. Chair Rose recommends that the message should be that we are stabilizing costs. Senator Fairclough asked if any measurements have been taken to know if the upfront investment or the maintenance costs on renewable projects exceed the benefit to the local person who is paying their utility bill. Senator Fairclough asked if $10 million is going to be invested in a project that is benefitting a small base, does it make more sense to build the project or to give the money directly to the consumers to pay for diesel. Senator Fairclough stated she understand the carbon issue and is not suggesting this is a better way to go, but is interested in the financial consequence of the dollars being funded. Chair Rose noted from a renewable advocate point of view, a certain percentage of the diesel requirement for that village would be eliminated forever. Chair Rose commented on Senator Fairclough's example and said we might be able to afford to give money to consumers for diesel today, but will we be able to afford to give the consumer money for diesel in five years, 10 years or 15 years, as the price for diesel continues to rise. He advised the price of diesel has tripled i n the last decade. Chair Rose stated the question is how to translate the stabilization benefit into something measurable which can be pointed to as something important. He believes this can be done easier over time. An unidentified speaker commented in 2012, Alaska Village Electric Cooperative spent $258,000 on wind operations and maintenance, which saved $1.3 million. It is a single point of data, but it does underscore the benefit of displacing fuel burning from those communities. Senator Fairclough stated her bottom line question is if this is benefitting the utilities or benefitting the consumer. An unidentified speaker asked what is the difference in the case of the Alaska Village Electric Cooperative. Senator Fairclough stated the administrative cost in the orange bar provides the difference. Renewable Energy Fund Advisory Committee Meeting Minutes Page 10 of 15 November 12, 2013 Mr. Stromberg stated the benefits of some of the projects is on the heat side, which is either from a biomass project, heat recovery or excess power from hydro or wind that has been diverted to the heat load. On the heat side of the project, the residents and the community do see the benefits. None of those benefits go to reducing the state's Power Cost Equalization payments. Chair Rose believes data acquisition is key in being able to answer questions and explain the benefits of the Renewable Energy Fund program, because it is not easily measured or explained. Ms. Fisher-Goad agreed with Senator Fairclough with respect to asking the question of is the Renewable Energy Fund targeting the areas the Legisl ature wants it to target. AEA is following the broad statutory direction to give the most weight to the high cost areas and a significant weight to the match and statewide spreading. AEA has always looked at the cost before the Power Cost Equalization Program independently and perhaps the policy question would address if there should be a closer link to Power Cost Equalization communities to see what benefit that program provides versus a benefit of the Renewable Energy Fund. Ms. Fisher-Goad stated the issue becomes more complicated because of how significant the Power Cost Equalization Program is at a $42 million appropriation every year. She believes there is work to be done and there would be much more of an impact on residential rate payers if the Po wer Cost Equalization Program was not as strong. Senator Fairclough noted the purpose of this Committee is to understand the challenges and the benefits of these programs and then to make policy recommendations to the Legislature. Senator Fairclough stated her constituents are going to say to her in five years, "I haven't seen it go down, so what's up? You've spent tens of millions of the state money and it's a waste of government money." Senator Fairclough requested a way to balance the issue in an effort to preclude that conversation. She commented she is in favor of displacing diesel. Senator Fairclough believes the state is going to face some really challenging financial times within the next 10 years. She asked for solutions to how we are going to stand up these communities so that they can sustain the costs and the pay for the maintenance on their renewable projects. Ms. Mitchell stated she is disturbed by the way the conversation is going as to whether or not the Renewable Energy Fund Program is valuable and worthwhile. Ms. Mitchell noted were it not for the Renewable Energy Fund Program, the Inside Passage Electric Cooperative would not be building the hydro project in Hoonah right now because it would not be economically feasible without grant funding. Ms. Mitchell commented she strongly believes in the Renewable Energy Program and the alternative is not building any infrastructure and not being able to stabilize rates. Ms. Mitchell responded to the question of whether the utilities are benefitting or the customers are benefitting from the Renewable Energy Fund Program and noted regulated utilities are allowed very thin margins for the sale of electricity. She commented regulated utilities, especially cooperatives, are not here to make money. Ms. Mitchell advised that the utilities are required to submit to regulation for any project, which provides great protection. Ms. Mitchell state she is very grateful for the Renewable Energy Fund Program. Chair Rose explained he is not hearing anybody say that the Renewable Energy Fund Program does not have benefits. He believes the issue is how do we translate and explain those benefits, particularly in relation to the Power Cost Equalization Program. Chair Rose commented it Renewable Energy Fund Advisory Committee Meeting Minutes Page 11 of 15 November 12, 2013 makes sense to look at the Power Cost Equalization Program and the Renewable Energy Fund Program together and review how the programs are interacting to determine what to spend on each program to meet the final purpose of stabilizing communities. Ms. Mitchell suggested looking at the average revenue per kilowatt hour, which is a measure that can be reviewed and calculated every year, along with the cost of power. Chair Rose commented he does not disagree with Ms. Mitchell at all and he believes there are more benefits than ju st the revenue per kilowatt hour. The issue is how to articulate the other benefits. Ms. Fisher-Goad explained that Round 7 is the first year that applications between electricity and heat have been divided. Electricity has a Power Cost Equalization Program correlation. Heat does not have a Power Cost Equalization Program correlation. Ms. Fisher-Goad stated the purpose of the Renewable Fund Advisory Committee is provide feedback on the submitted projects, their scores, how we can do better, what should we be looking at differently, and ultimate recommendations to the Legislature. She noted this is a recommendation process and not just funding projects. 10. Presentation on 3 Completed Projects Chair Rose noted there are not going to be three presentations, but Mr. Craft is going to give one presentation on the Banner Peak Wind Farm in Nome. Mr. Skaling stated he included this presentation on the agenda to get a better understanding of a completed project that is underway and how it is doing, see some pictures, discuss the financial impacts and impacts to people. He believes this is a nice segue to the last conversation in delving deeper into a particular project showing the tremendous economic evaluation which occurs on the front end. Mr. Skaling requested keeping this item on the agenda for the next few meetings in order to describe to the Committee how different projects are doing. Mr. Skaling stated he saw some of the Committee members' heads nodding in agreement to keeping this on the agenda and asked the members on the phone to respond if they would like to see this item remain on the agenda. Mr. Reeve and Ms. Mitchell were both on the phone, but neither commented whether they were interested or not interested in keeping this as an agenda item. Mr. Craft began his detailed PowerPoint presentation on the Banner Peak Wind Farm in Nome, which was first developed by the Bering Straits Native Corporation and then the Nome Joint Utilities is expanding the project. It has come in three different phases and has displaced about 200,000 gallons of diesel since installation, which has a value of about $600,000. Chair Rose asked for an update on how the new EWT wind turbines are working. Mr. Craft stated he does not have any data on them yet, because they were still being commissioned up through late August. Mr. Skaling noted this is one of the trial wind locations for the data collection process. Mr. Craft advised the radio communications have been upgraded to a fiber optic cable from the power plant to the wind farm. Senator Fairclough asked what is going to happen to the other turbines that have broken tips. Mr. Craft stated there are a few turbines that have broken down and are being used for spare parts. There is a performance and maintenance contract in place with the company Ethos and Renewable Energy Fund Advisory Committee Meeting Minutes Page 12 of 15 November 12, 2013 they have brought the availability and the performance of those turbines up quite a bit. They are maintaining those turbines and trying to make them work as well as possible. Mr. Craft noted they have not seen the desired level of performance from the turbines, so they will not be used in the future. Senator Fairclough asked when was Tier One. An unidentified speaker responded Tier One was in 2008. Senator Fairclough commented we are not even getting a decade of use out of these turbines. Mr. Stromberg stated AEA and the state did not pay for those turbines. They we re purchased by Bering Straits Native Corporation. He noted 10 years earlier, they were the only option and that is what they used, but there are better options now. Senator Fairclough inquired if there are reclamation plans for the equipment in these projects to be taken down, so communities are not left with pieces of equipment that are not working. Chair Rose stated Mr. Craft or Mr. Stromberg could answer that question because decommissioning is part of the application process. Mr. Craft gave an example of the project in St. George that is under construction. Part of the project is purchasing a crane that will stay on the island to perform large maintenance issues or take down any turbines if necessary. Senator Fairclough asked if the crane will be secured or if it will be out in the elements. Mr. Craft stated the crane will be owned by the community and it will hopefully be used for other con struction projects. Mr. Stromberg advised one of the goals in the mission and value statement addresses how to treat the turbines at the end of life. He noted the turbine is expected to only have a 20-year lifespan. The transmission, the road, the foundation and the tower is expected to have a 40-year lifespan. So that when the generators and the rotor sets are no longer useable, a new project can fund replacement of those because everything down tower is still useable and the economics on that project is much better. Mr. Stromberg said it remains to be seen what the market is going to be for the availability of turbines that size, but that is the current approach. Mr. Reeve commented they experienced a wind event that put things over 25 meters per sec ond, which is the shut down speed on the EWT's. He noted the little turbines were the ones that survived the storm just fine. They were designed in the 1980's and they still seem to be working. One has been operating for 16 years now. They are not perpetual motion machines that last forever. They all need maintenance. Chair Rose asked for the Committee to answer Mr. Skaling's question regarding is this agenda item helpful in having a closer look into a particular project. Senator Fairclough believes it is great to see the hands-on presentation. She requested schematics that would be the same for each project, including how large the community is and what the total energy need is, so that projects can be compared using the same metrics. Chair Rose requested the presentation include total project costs, including what the state's investment was through the Renewable Energy Fund grant, what the matching investment was and what other ancillary costs were that might have been paid for by the state. Mr. Skaling stated he will develop a standard form including those recommendations. Senator Fairclough asked if a smaller community actually can compete if larger communities are drawing the money away. She asked if Nome got Round One money and Round Three mo ney, do they have great grant writers or are they further ahead or were there other communities that Renewable Energy Fund Advisory Committee Meeting Minutes Page 13 of 15 November 12, 2013 were waiting. Senator Fairclough asked if we are going to go back to communities multiple times even if smaller communities have not been granted any funding. Chair Rose commented that is a really good question and after five years now of the program, the Committee could help AEA set limits on the amount of each grant and limits on the cumulative amount given to each community. Senator Fairclough inquired how does the Advisory Committee provide policy makers feedback on the policy issue of deciding how much should be invested in individual communities in order to reach the state's goal of 50% renewables by 2025. Mr. Skaling advised projects that already have renewables and they add another renewable, they are not displacing diesel anymore. So the cost effectiveness is going to decrease the closer they get to 100% renewable. So they will tend not to rank as well or maybe not even past the Stage Two if there technical evaluations and economics are not tight enough. Chair Rose commented there are some communities who are not writing effective proposals. If they have a need and they have a renewable energy resource, the question becomes; how do we get them to write an effective proposal and then execute an effective project? 11. Future Topics: Incentivizing Project Performance Chair Rose commented this is an issue that has been brought up over time that still needs to be addressed and it is related to a lot of things discussed today. Chair Rose inquired how do we set up this program so that we are incentivizing innovation and really good projects, rather than just saying send us any kind of proposal and we will evaluate it. Chair Rose stated moving into heat has been a great incentive to innovation. Chair Rose inquired if there are ways the Committee could assist AEA draft a request for proposal for Round 8 that adds an element of incentivization for some innovation so we get these projects moving to the next level of optimization. MOTION: Ms. Mitchell moved to approve the meeting minutes from June 17, 2013, Renewable Energy Fund Advisory Committee meeting. Seconded by Senator Fairclough. The minutes were approved unanimously. 12. Committee Member Comments Representative Edgmon stated he hopes to be in person at the next meeting because he was pulled away a couple of times by phone calls. He commented he was able to track most of the meeting. Representative Edgmon asked for clarification regarding the generation numbers in column two on page 108 and if those numbers factor in the fish processing facilities that are not tied to a local generation system. Mr. Skaling stated those numbers do not factor in the fish processing facilities. The numbers would include independent power producers and utilities. It does not include independent commercial loads. Ms. Mitchell expressed her appreciation for the update and all the hard work staff is providing. Mr. Reeve thanked everybody for all of their work. He requested more discussion at the next meeting about the ability of some of the smaller communities to be able to focus on grants. Mr. Renewable Energy Fund Advisory Committee Meeting Minutes Page 14 of 15 November 12, 2013 Reeve recommended addressing why some of the projects that hit the non-funded column are there and to discuss what can be done to increase the odds on good projects that did not have the technical support to reach the next level. Senator Fairclough stated she is thankful for being included in the discussion. She commented we all want great projects for Alaska and she will continue to ask questions to ensure her constituents, as well as others, can have those questions answered. Senator Fairclough commented she believes Representative Edgmon raises a good question about Naknek not being included on the energy source. She understands why that is not happening, but if there is potential for other power generation that is not being captured, then we may not have a clear picture of how much diesel could displaced. Mr. Craft stated the wind program encourages the commercial production to install metering on the equipment to provide an idea of what the commercial load in the community is and then the wind program tries to bring the commercial load into the community to increase the benefit. Senator Fairclough stated one of the concerns she has heard in rural Alaska is the issue of losing the competitive edge when information is provided that talks about how much oil, specifically, is being used and the cost of that oil. The issue becomes one of competition. Senator Fairclough gave the example if Bethel or a hub community is trying to access diesel, there is a cost advantage and if that is reported to government agencies, then it becomes known to everyone, at least on the transportation side. Senator Fairclough commented this may be a policy conversation that we need to have to protect the competitive edge, while still being able to collect the data, but not providing the data to the general population. Chair Rose commented this issue has been discussed in the context of energy efficiency because if we do not know how much heating oil a community is using, it is very difficult to measure how well efficiency programs are working. Chair Rose believes what Senator Fairclough suggested is a great idea to require reporting to AEA of the amount of heating oil and diesel sold, while still protecting the businesses' trade advantage. This would be a really helpful piece of baseline information. Ms. Traylor advised biomass does that and AEA requests suppliers to provide the cost of cords and the cost of pellets. The information is kept confidential and AEA does not provide the name of the entity providing the information. Chair Rose expressed his appreciation for all of the work staff has done and is really happy to see the data collection pilot is moving ahead. Chair Rose requested another update at the next meeting. He stated he is happy about the Power Cost Equalization and Renewable Energy Fund coordination presentation. He believes it raised some good questions that need to be answered, maybe not by the next meeting, but perhaps by the spring meeting and continue the discussion about other ways that we can be measuring the benefits of the Renewable Energy Fund Program. Chair Rose noted it would be good to continue having quick presentations on completed projects like the one Mr. Craft presented. He requested keeping the agenda item Incentivizing Project Performance on the table for the spring meeting. Renewable Energy Fund Advisory Committee Meeting Minutes Page 15 of 15 November 12, 2013 13. Next Meeting Date 13.a. Confirm January Meeting Date/Time The next meeting is scheduled for Tuesday, January 7th, 2014 at 10:00 a.m. Senator Fairclough noted she will be attending by teleconference. 13.b. Spring Meeting: Considering Kodiak The spring meeting is scheduled for Tuesday, May 13, 2014. Staff and committee are considering meeting in Kodiak. 14. Adjournment The meeting was adjourned at 11:32 p.m.