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Home My WebLink AboutREFAC PPT 2019REDUCING THE COST OF ENERGY IN ALASKA Renewable Energy Fund Advisory Committee (REFAC) Neil McMahon Program manager—Energy Planning REDUCING THE COST OF ENERGY IN ALASKA SAFE, RELIABLE, & AFFORDABLE ENERGY SOLUTIONS December 3, 2019 REDUCING THE COST OF ENERGY IN ALASKA 2 Welcome and Introductions SAFE, RELIABLE, & AFFORDABLE ENERGY SOLUTIONS REDUCING THE COST OF ENERGY IN ALASKA 3 Agenda •1:00pm-1:15pm Welcome and Introductions •1:15pm-1:20pm Approve minutes and agenda •1:20pm-2:00pm Refreshers •Energy in Alaska •REF Evaluation process •REFAC Advisory Role •REF impact to date •2:00pm-2:30pm Informational Items •Fund balance •Request for Application schedule •Incentivize supply-side efficiency •Increase local match weighting •One-page description for potential funders •Business operations plan template/Best Practices checklists •Metering requirements •2:30pm-2:45pm Break •2:45pm-3:45pm Potential changes to REF program: •Change funding limits •Prioritize early stage projects •3:45am-4:00pm Member comments •4:00pm Adjourn REDUCING THE COST OF ENERGY IN ALASKA 4 Energy in Alaska 740,000 People 660,000 Sq. Miles 200 Islanded power systems REDUCING THE COST OF ENERGY IN ALASKA 5 0% 25% 50% 75% 100% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Percent of electricity generated by fuel source Source: Energy Statistics, EIA, and PCE data (2008-2017) Coal Natural gas Oil Wind Hydro18% 29% Alaska State Energy Policy (2010): Goal of 50% of electricity generated by renewable source by 2025 REDUCING THE COST OF ENERGY IN ALASKA 6 Alaska’s generation infrastructure REDUCING THE COST OF ENERGY IN ALASKA REF Statutory Guidance Eligible projects must: Be a new project not in operation in 2008, and 1.Be a hydro, direct use of renewable energy, a facility that generates electricity from fuel cells that use hydrogen from RE or natural gas (certain conditions for natural gas), or be a facility that generates electricity using renewable energy. Evaluation process Develop a methodology for determining the order of projects that may receive assistance, •most weight being given to projects that serve any area in which the average cost of energy to each resident of the area exceeds the average cost to each resident of other areas of the state, •significant weight given to a statewide balance of grant funds and to the amount of matching funds 7 REDUCING THE COST OF ENERGY IN ALASKA Four Stage REF Evaluation Process 1.Completeness/eligibility (AEA staff) 2.Feasibility and public benefit (AEA, DNR, Contractors) A.Technical and economic evaluation B.Qualifications and experience of team C.Project management/dev/operation 3. Ranking projects (AEA/REFAC) A.Cost of energy single biggest criterion (30%) B.Levelized feasibility score from stage 2 (25%) C.Other criteria include public benefits, readiness, local support and match 4. Regional spreading (AEA/REFAC) 8 REDUCING THE COST OF ENERGY IN ALASKA REFAC Advisory Committee 9 NAME SECTOR APPOINTED BY Kohler, Meera Small rural electric utility Governor Unfilled Representative of an Alaska Native Organization Governor Rose, Chris Business/Organization involved in renewable energy Governor Siira, Alicia Denali Commission Governor Thibert, Lee Large urban electric utility Governor von Imhof, Natasha Senate member 2 Senate President Wilson, David Senate member 1 Senate President Wool, Adam House member 2 Speaker of House Zulkosky, Tiffany House member 1 Speaker of House REDUCING THE COST OF ENERGY IN ALASKA REFAC Roles Statutes (AS 42.45.045) •AEA “in consultation with the advisory committee…develop a methodology for determining the order of projects that may receive assistance….” •AEA “shall, at least once each year, solicit from the advisory committee funding recommendations for all grants.” Regulations (3 AAC 107.660) (a) To establish a statewide balance of recommended projects, the authority will provide to the advisory committee established in AS 42.45.045 (i) a statewide and regional ranking of all applications recommended for grants. (b) In consultation with the advisory committee established in AS 42.45.045 (i), the authority will (1) make a final prioritized list of all recommended projects, giving significant weight to providing a statewide balance of grant money, and taking into consideration the amount of money that may be available, number and types of projects within each region, regional rank, and statewide rank 10 REDUCING THE COST OF ENERGY IN ALASKA REFAC input since inception has included: •Increase focus on high cost energy communities •Encourage heat projects •Encourage energy efficiency points in scoring for heat projects •Regional spreading of grant funds •Support recommendations to the legislature 11 REDUCING THE COST OF ENERGY IN ALASKA REF appropriations •Rounds I-IX 851 total applications received •295 applications funded •$268M granted •$165M in direct project match $0 $20 $40 $60 $80 $100 I II III IV V VI VII VIII IXMillions REF Round 12 REDUCING THE COST OF ENERGY IN ALASKA REF spending to date by region 13 REDUCING THE COST OF ENERGY IN ALASKA REF spending to date by resource Wind $91.5 Hydro $84.8 Biomass $27.0 Heat Recovery $20.3 Heat Pump $16.4 Transmission $12.5 Ocean/ River $3.9 Solar $0.5 Other $0.1 FUNDED GRANTS BY ENERGY RESOURCE ($ millions) 14 REDUCING THE COST OF ENERGY IN ALASKA 15 RENEWABLE ENERGY FUND PROJECTSROUNDS I-IX Approximately 30 active REF projects remain to be completed REDUCING THE COST OF ENERGY IN ALASKA 16 Total fuel cost savings ~$74M In 2017 Renewable Energy Fund Fuel Savings from construction projects 0 5 10 15 20 25 30 35 Fuel Displaced (diesel equivalent, gallons)MillionsBiomass Heat Pump Heat Recovery Hydro Biofuel Solar Transmission Wind Wind to Heat REDUCING THE COST OF ENERGY IN ALASKA 1717 Total fuel cost savings to PCE-eligible utilities ~$29M 2009-2017: Renewable Energy Fund & PCE $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 REF Projects Value of diesel saved in PCE-eligible communities (2009-2017) Wind to Heat Wind Transmission Solar PV Hydro Heat Recovery REDUCING THE COST OF ENERGY IN ALASKA Informational Items 18 •Fund balance •One-page description for potential funders •Request for Application schedule •Business operations plan template/Best Practices checklists •Metering requirements •Other REDUCING THE COST OF ENERGY IN ALASKA Renewable Energy Fund Balance and Potential Funding 19 Uncommitted •~$8.58M as of 9/30/2019 Fiscal Year PCE endowment fund earnings Excess earnings from PCE Endowment potentially available to REF Action FY20 $76.6M $454,000 Vetoed by governor FY21 $74.1M <$200,000 Operating Fund Commitment •$1.948M (FY20) •$1.4M (FY21 proposed) REDUCING THE COST OF ENERGY IN ALASKA One-pager & potential funders •Requested by REFAC in November 2018 20 REDUCING THE COST OF ENERGY IN ALASKA RFA release schedule 21 Action Expected Dates RFA release March 2020 Applications due June 2020 REFAC meeting July 2020 Evaluate applications July-November 2020 REFAC meeting Mid-December 2020 Deliver recommendations to legislature January 31, 2021 Grants could begin July 1, 2021 REDUCING THE COST OF ENERGY IN ALASKA Incentivizing Operations and Financial Planning 22 Current rules •Statute •No reference •Regulations •Public benefit… •“ability to ..operate and maintain the project for the life of the project.” Recommended additions to Scoring Criteria and Grant application Stage 2 Criterion 2 Qualifications and Experience (20% of Stage 2) •The applicant, partners, and/or contractors have sufficient knowledge and experience to successfully complete and operate the project. •The project team has staffing, time, and other resources to successfully complete and operate the project. •For construction projects, include the final operational and business plan completed under Phase III--Final Design & Permitting, including financial and operational plans for end-of-life. Operational plans should be detailed and include labor and material costs, training needed, minor and major repair schedules, etc. [This would be added to 4.1.2 Expertise and Resources in grant application] Stage 3: Section 7—Sustainability •The capability of the grantee to demonstrate the capacity, both administratively and financially, to provide for the long-term operation and maintenance of the proposed project •For construction projects, attach and describe how the applicant will implement the final financial and operational plan to provide for the long-term operation and maintenance of the proposed project. [This would be added to Section 7--Sustainability in grant application] REDUCING THE COST OF ENERGY IN ALASKA Assisting with Operations and Financial Planning 23 •Template for business and operations planning •Will be available through AEA’s website as a resource for next round (XIII) REDUCING THE COST OF ENERGY IN ALASKA Other—Metering equipment, cost of energy calculation 24 Data collection recommended language •5.4.5 Metering Equipment •Please provide a short narrative, and cost estimate, identifying the metering equipment that will be used to comply with the operations reporting requirement identified in Section 3.15 of the Request for Applications. Any identified metering equipment will not be included as a project cost. Energy cost calculation •The Household Energy Cost is calculated as follows: •HEC = (cost of power*6,000 kWh/yr) + (cost of heating fuel*regional mean HH gallons/yr) •The Cost of Energy Score is then assigned using the following formula: •COE Score = (HEC) / $15,254.77 x 10, Score cannot be greater than 10 •Communities with an average combined residential energy bill at or above $15,254.77 are assigned the maximum score of 10. This value is the cost that allows 10% of all communities in the state to receive full points for this criterion in the current year. REDUCING THE COST OF ENERGY IN ALASKA Other changes 25 •Operational data •What are we going to do with it •Much simpler status report to the legislature to meet statutory requirement. REDUCING THE COST OF ENERGY IN ALASKA Action Items 26 AEA suggested changes to the 2020 RFA based on 2018 REFAC requests: 1.Incentivize supply-and demand-side efficiency for standard projects? 2.Increase the scoring weight of local match? 3.Change funding limits? 4.Prioritize early stage projects? REDUCING THE COST OF ENERGY IN ALASKA Incentivizing supply-and demand-side efficiency •Not precluded by statute or regulation •Should be fair and consistent across all projects •Limit unintended consequences 27 REDUCING THE COST OF ENERGY IN ALASKA Incentivizing supply-side efficiency 1.Conditions for receiving credit: •Improve RE integration •Improve performance of RE project. 2.Proof required to receive credit: Documentation must be provided on the nature and cost of supply-side efficiency investments to be used as in-kind match, including: •Pre-and post-construction reports, •Invoices for work completed, •Photos of the work performed, and/or •Any other available verification such as scopes of work, technical drawings, and payroll for work completed internally. Applicant can decide if include in B/C •YES •Cost included as Match, •Efficiency improvement included as a benefit, •Cost is included in B/C •NO •Improvement may be included in Readiness, Technical Feasibility, and/or Other Public Benefits 28 REDUCING THE COST OF ENERGY IN ALASKA Incentivizing demand-side efficiency 1.Conditions for receiving credit: •Improve RE integration •Improve performance of RE project •Care was taken to not negatively impact vulnerable populations. 2. Proof required to receive credit: Documentation must be provided on the nature and cost of demand-side efficiency investments to be used as in- kind match, including: •Pre-and post-implementation reports, •Invoices for work completed, •Photos of the work performed, and/or •Any other available verification such as scopes of work, technical drawings, and payroll for work completed internally. Applicant can decide if include in B/C •YES •Cost included as Match, •Efficiency improvement included as a benefit, •Cost is included in B/C •NO •Improvement may be included in Sustainability, Readiness, Technical Feasibility, and/or Other Public Benefits 29 REDUCING THE COST OF ENERGY IN ALASKA Increasing local match 30 Current rules •Statute •Scoring must be significant •Cost of energy must have most weight •Regulations •“Significant” •Round 1-2 = 25% •Round 3-4 = 20% •Round 5-9 = 15% What will greater match do? •Will it increase match supplied? •Will it reduce or change access to program by region, project type, project phase? •Would it change order of selections? •Will it improve project outcomes? •What category(ies) will be decreased in importance? •Recommendation •Without identification of clear, specific need, don’t change things REDUCING THE COST OF ENERGY IN ALASKA Increasing local match Impact on Match provided 31 0% 5% 10% 15% 20% 25% 1 2 3 4 5 6 7 8 9 Average and Median Match Percent by Round All applications REF Round 1-9 Average Match Median Match Match weight Changing match weight does not appear to appreciably change the amount of match offered REDUCING THE COST OF ENERGY IN ALASKA Increasing local match Impact on application types 32 0 4 8 12 Lower Yukon-Kuskokwim Bristol Bay Aleutians Northwest Arctic Yukon-Koyukuk/Upper Tanana Bering Straits Copper River/Chugach Southeast North Slope Railbelt Average match score Average match score by AEA Energy Region Passed Stage 2, REF Round 1-9 0 3 6 9 12 15 HeatRecovery Biomass Solar Wind Geothermal Hydrokinetic Other Hydro Transmission Storage HeatPump Average match score Average match score by Technology Type Passed Stage 2, REF Round 1-9 0 4 8 12 Government Entity Local Government Utility IPP Average match score Average match score by Applicant Type Passed Stage 2, REF Round 1-9 Changing match weight will likely increase the likelihood of certain regions, applicant types, and technology type to be more successful in securing grants. REDUCING THE COST OF ENERGY IN ALASKA Change funding limits Goals & justification Currently •Average grant size ~$950,0000 •61% less than or equal to $500k •12% between $500k & $1M •27% greater than $1M Possible •Fund more projects •Probably more likely to be pre-construction and/or heating projects •Could increase applicant match 33 REDUCING THE COST OF ENERGY IN ALASKA Change funding limits Impact on application types 34 $0 $1,000,000 $2,000,000 $3,000,000 Kodiak Northwest Arctic Copper River/Chugach Southeast Bering Straits Lower Yukon-Kuskokwim Aleutians Railbelt Bristol Bay Yukon-Koyukuk/Upper Tanana North Slope Average Grant Amount Average Grant Amount by AEA Energy Region Round 1-9 $0 $500,000 $1,000,000 $1,500,000 GEOTHERMAL WIND TRANSMISSION HYDRO HEAT PUMPS HEAT RECOVERY BIOMASS OCEAN/RIVER SOLAR Average Grant Amount Average Grant Amount by Technology Type Round 1-9 REDUCING THE COST OF ENERGY IN ALASKA Prioritize early stage projects Goals & justification Focus on phases with most risk, i.e. pre-construction 1.Lack of capital to do pre-construction work 2.Risk of doing pre-construction work 3.Non-state funds are more easily secured after pre-construction activities 4.Create a “pipeline” of new projects 35 REDUCING THE COST OF ENERGY IN ALASKA Prioritize early stage projects Pros •More projects will be funded •Pre-construction projects average ~$327k vs. ~$1.5M for construction projects •Potentially create a “pipeline” of projects Cons •Is it consistent with statute and regulations? •Fewer projects constructed with REF funds •Biomass projects would be represented less •Other risks, such as access to capital, may limit the number of projects that make it to construction •Assume that larger, wealthier communities would be more likely to be finance construction without state support •May not know if projects are ever constructed 36 REDUCING THE COST OF ENERGY IN ALASKA Prioritize early stage projects Impact on application types 37 $0 $1,000,000 $2,000,000 $3,000,000 Average Grant Award by Technology and Phase Avg. Construction Avg. Pre-Construction 0 15 30 45 60 Number of Grants Award by Technology and Phase Construction Projects Pre-Construction Projects REDUCING THE COST OF ENERGY IN ALASKA Member comments 38 REDUCING THE COST OF ENERGY IN ALASKA Scheduling next REFAC meeting 39 REDUCING THE COST OF ENERGY IN ALASKA 40 SAFE, RELIABLE, & AFFORDABLE ENERGY SOLUTIONS ALASKA ENERGY AUTHORITY 813 West Northern Lights Blvd. Anchorage, Alaska 99503 Phone: (907) 771-3000 Fax: (907) 771-3044 Toll Free (Alaska Only) 888-300-8534