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Home My WebLink AboutREFAC Collated Packet December 2019 813 West Northern Lights Boulevard, Anchorage, Alaska 99503 │ T 907.771.3000 │ Toll Free 888.300.8534 │ F 907.771.3044 REDUCING THE COST OF ENERGY IN ALASKA WWW.AKENERGYAUTHORITY.ORG RENEWABLE ENERGY FUND ADVISORY COMMITTEE MEETING (REFAC) Alaska Energy Authority 813 W. Northern Lights Blvd Anchorage, Alaska Tuesday, December 3, 2019 1:00pm – 4:00pm Teleconference: 1-888-585-9008, code 392-861-460# AGENDA 1:00pm-1:15pm Welcome and Introductions 1:15pm-1:20pm Approve minutes and agenda 1:20pm-2:10pm Refreshers A. Energy in Alaska B. REF Evaluation process C. REFAC Advisory Role D. REF impact to date 2:10pm-2:45pm Informational Items 1) Fund balance 2) One-page description for potential funders 3) Request for Application schedule 4) Business operations plan template/Best Practices checklists 5) Metering requirements 2:45pm-3:00pm Break 3:00pm-3:45pm Action Items 1) Change funding limits 2) Prioritize early stage projects 3) Increase local match weighting 4) Incentivize supply-side efficiency 3:45am-4:00pm Member comments 4:00pm Adjourn REDUCING THE COST OF ENERGY IN ALASKAREDUCING THE COST OF ENERGY IN ALASKA Renewable Energy Fund Advisory Committee (REFAC) Neil McMahon Program Manager Energy Planning REFAC Meeting December 3, 2019 REDUCING THE COST OF ENERGY IN ALASKA 2 Agenda 1-1:15 p.m.Welcome and Introductions 1:15-1:20 p.m.Approve minutes and agenda 1:20-2:10 p.m.Refreshers Energy in Alaska REF Evaluation process REFAC Advisory Role REF impact to date 2:10-2:45 p.m.Informational Items Fund balance One-page description for potential funders Request for Application schedule Incentivizing Operations and Financial Planning Metering requirements 2:45-3 p.m.Break 3-3:45 p.m.Action Items Change funding limits Prioritize early stage projects Increase local match weighting Incentivize supply-and demand-side efficiency 3:45-4 p.m.Member comments 4 p.m.Adjourn REDUCING THE COST OF ENERGY IN ALASKA 3 740,000 People 660,000 Sq. Miles 200 Islanded power systems Energy in Alaska REDUCING THE COST OF ENERGY IN ALASKA 4 Alaska Generation Infrastructure 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 Eligible Projects Must: Be a new project not in operation in 2008, and 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 6 REF Statutory Guidance REDUCING THE COST OF ENERGY IN ALASKA 7 Four Stage REF Evaluation Process Step 1 Step 2 Step 3 Step 4 Completeness/eligibility (AEA staff) Feasibility and public benefit (AEA, DNR, Contractors) Technical and economic evaluation Qualifications and experience of team Project management, development, operation Ranking projects (AEA/REFAC) Cost of energy single biggest criterion (30%) Levelized feasibility score from stage 2 (25%) Other criteria include public benefits, readiness, local support and match Regional spreading (AEA/REFAC) REDUCING THE COST OF ENERGY IN ALASKA REFAC Advisory Committee 8 NAME SECTOR APPOINTED BY Meera Kohler Small rural electric utility Governor Unfilled Representative of an Alaska Native Organization Governor Chris Rose Business/Organization involved in renewable energy Governor Alicia Siira Denali Commission Governor Lee Thibert Large urban electric utility Governor Natasha von Imhof Senate member 2 Senate President David Wilson Senate member 1 Senate President Adam Wool House member 2 Speaker of the House Tiffany Zulkosky House member 1 Speaker of the House REDUCING THE COST OF ENERGY IN ALASKA 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 9 REFAC Roles REDUCING THE COST OF ENERGY IN ALASKA REFAC Input Since Inception Includes: 10 Increase focus on high energy cost communities Encourage heat projects Encourage energy efficiency points in scoring for heat projects Regional spreading of grant funds Support recommendations to the legislature REDUCING THE COST OF ENERGY IN ALASKA REF Appropriations ($ millions) $0 $20 $40 $60 $80 $100 I II III IV V VI VII VIII IX REF Round 11 Rounds I-IX: 851 total applications received 295 applications funded $268 million granted $165 million in direct project match REDUCING THE COST OF ENERGY IN ALASKA 12 REF Spending to Date by Region ($ millions) REDUCING THE COST OF ENERGY IN ALASKA 13 Approximately 30 active REF projects remain to be completed REF Projects Rounds I-IX REDUCING THE COST OF ENERGY IN ALASKA 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 $0.1 14 REF Spending to Date by Resource ($ millions) REDUCING THE COST OF ENERGY IN ALASKA 15 REF 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 Total fuel cost savings in 2017: ~$74M REDUCING THE COST OF ENERGY IN ALASKA 1616 $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 Value of diesel saved in PCE-eligible communities (2009-2017) Wind to Heat Wind Transmission Solar PV Hydro Heat Recovery REF Projects in PCE-Eligible Communities Total fuel cost savings to PCE- eligible utilities 2009-2017: ~$29M REDUCING THE COST OF ENERGY IN ALASKA 17 Fund balance One-page description for potential funders Request for Application schedule Business operations plan template/Best Practices checklists Metering requirements Other Informational Items REDUCING THE COST OF ENERGY IN ALASKA REF Balance and Potential Funding 18 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 19 One Pager and Potential Funders Requested by REFAC in November 2018 REDUCING THE COST OF ENERGY IN ALASKA 20 Action Expected Dates RFA release March 2020 Applications due June/July 2020 REFAC meeting July/August 2020 Evaluate applications July-November 2020 REFAC meeting December 2020/January 2021 Deliver recommendations to legislature January 29, 2021 Grants could begin July 1, 2021 RFA Release Schedule REDUCING THE COST OF ENERGY IN ALASKA 21 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] Incentivizing Operations and Financial Planning REDUCING THE COST OF ENERGY IN ALASKA 22 Template for business and operations planning Will be available through AEA’s website Assisting with Operations and Financial Planning REDUCING THE COST OF ENERGY IN ALASKA 23 Data Collection Recommended Language 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. Other –Metering Equipment, Cost of Energy REDUCING THE COST OF ENERGY IN ALASKA 24 Operational data What are we going to do with it Much simpler status report to the legislature to meet statutory requirement Other Changes REDUCING THE COST OF ENERGY IN ALASKA Action Items 25 Potential changes to the 2020 RFA based on 2018 REFAC requests: Change funding limits Prioritize early stage projects Increase local match weighting Incentivize supply-and demand-side efficiency REDUCING THE COST OF ENERGY IN ALASKA Change Funding Limits Goals and Justification 26 Currently: Average grant size ~$950,0000 61% less than or equal to $500k 12% between $500k and $1M 27% greater than $1M Possible: Fund more projects Probably more likely to be pre- construction and/or heating projects Might increase applicant match REDUCING THE COST OF ENERGY IN ALASKA Current Funding Limits 27 Phase Grant Limits by location Low Energy Cost Areas High Energy Cost Areas Phase I, Reconnaissance The per-project total of Phase I and II is limited to 20% of anticipated construction cost (Phase IV), not to exceed $2M.Phase II, Feasibility and Conceptual Design Phase III, Final Design and Permitting 20% of anticipated construction cost (Phase IV), and counting against the total construction grant limit below. Phase IV,Construction and Commissioning $2M per project, including final design and permitting (Phase III) costs, above. $4M per project, including final design and permitting (Phase III) costs, above. Exceptions Biofuel Projects Biofuel projects where the applicant does not intend to generate electricity or heat for sale to the public are limited to reconnaissance and feasibility phases only at the limits expressed above. Geothermal projects The per-project total of Phase I and II for geothermal projects is limited to 20% of anticipated construction costs (Phase IV), not to exceed $4M. Any amount above the usual $2M cap spent on these two phases combined shall reduce the total Phase III and IV grant limit by the same amount, thereby keeping the same total grant dollar cap as all other projects. REDUCING THE COST OF ENERGY IN ALASKA Change Funding Limits Impact on Application Types 28 $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 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 29 Prioritize Early Stage Projects Goals and Justification Project Phase Target Allocation – Percentage of Grant Funds Recommended I. Reconnaissance Study 50% II. Feasibility/ Conceptual Design III. Final Design and Permitting 50% IV. Construction and Commissioning Additional target Heat projects 30% of total funding Round 9 Targets REDUCING THE COST OF ENERGY IN ALASKA Prioritize Early Stage Projects 30 ConsPros More projects will be funded – Pre-construction projects average ~$327k vs. ~$1.5M for construction projects Potentially create a “pipeline” of projects Fewer projects constructed with REF funds Is it consistent with statute and regulations? Biomass projects would likely be represented less Other risks, such as access to capital, may limit the number of projects that make it to construction Assume smaller, less wealthy communities would be less likely to finance construction without state support May not know if projects are ever constructed REDUCING THE COST OF ENERGY IN ALASKA 31 $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 Awarded by Technology and Phase Construction Projects Pre-Construction Projects Prioritize Early Stage Projects Impact on Application Types REDUCING THE COST OF ENERGY IN ALASKA Increasing Local Match 32 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 33 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 34 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 being more successful in securing grants. REDUCING THE COST OF ENERGY IN ALASKA 35 Not precluded by statute or regulation Should be fair and consistent across all projects Limit unintended consequences Incentivizing Supply-and Demand-Side Efficiency REDUCING THE COST OF ENERGY IN ALASKA Incentivizing Supply-and 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 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 Improvement may be included in Sustainability, Readiness, Technical Feasibility, and/or Other Public Benefits NO Improvement may be included in Sustainability, Readiness, Technical Feasibility, and/or Other Public Benefits 36 REDUCING THE COST OF ENERGY IN ALASKA 37 Member Comments REDUCING THE COST OF ENERGY IN ALASKA 38 Next Meeting? REDUCING THE COST OF ENERGY IN ALASKA 39 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 Renewable Energy Fund Advisory Committee Meeting Minutes Page 1 of 8 November 21, 2018 Renewable Energy Fund Advisory Committee Meeting November 21, 2018 Anchorage, Alaska 9:00 a.m. to 12:00 p.m. DRAFT MINUTES WELCOME AND INTRODUCTIONS The Renewable Energy Fund Advisory Committee (REFAC) convened at approximately 9:14 a.m., with Chair Chris Rose presiding. Committee Members Present Chair Chris Rose Representative Adam Wool (phone) Meera Kohler Jodi Mitchell (phone) Meetings Attended of Total Meetings 10 of 10 1 of 10 1 of 10 9 of 10 AEA Staff Present: Josh Craft, Katie Conway, Devany Plentovich, Cady Lister, and Sam Tappen. Other Participants Present: Elaine Brown (AIDEA and AEA Board Member); Nils Andreassen (Alaska Municipal League - phone); and Kristen Arnold (Denali Commission). APPROVE MINUTES AND AGENDA MOTION: A motion was made by Ms. Kohler to approve the minutes from the summer meeting and to approve the agenda. Seconded by Representative Wool. The minutes and agenda were approved without objection. AEA FOLLOW-UP FROM AUGUST MEETING Chair Rose introduced Cady Lister, who provided the responses to Committee member questions from the prior meeting. 1. Outside funding for REF Ms. Lister informed the Renewable Energy Fund (REF) has the ability to accept monies from any sources, including federal, local, or private entities. The funding has to be appropriated by the Legislature through the statutory process. Ms. Lister gave examples of current AEA renewable activities outside of the REF. Ms Lister advised Senator Anna MacKinnon requested AEA develop a summary of the REF evaluation process with the intent to attract additional revenue streams from outside funders. The first draft of the high-level summary was distributed to Committee members. The REF has the program and expert staff in place. The economic evaluation is sophisticated. The REF has a statewide view with broad-based support and the Renewable Energy Fund Advisory Committee Meeting Minutes Page 2 of 8 November 21, 2018 potential to match funds. Ms. Lister invited Committee members to provide comments today or via email. Chair Rose expressed appreciation for the four-page summary and believes a one-page summary would likewise be beneficial. Mr. Andreassen believes the summary is a great start. He suggested the initial summary does not need to include details regarding the stages, criteria, and scoring elements. He requested the Committee be provided with the short list of potential funders. 2. Project failure points Ms. Lister discussed the reasons REF projects do not reach the construction and completion phase. The top two reasons are related to lack of funding. Challenged economics relate to the ability of the project to have a positive benefit-cost ratio, primarily due to the high cost of building projects in remote locations relative to the small market size. The third most common reason is a low community priority for the project or not having a community champion for the project. The other reasons include land use restrictions, insufficient load demand, technical issues, lack of agreement with utility, competing projects, and poor design. Ms. Lister reviewed the provided failure point analysis for all affordable energy strategies in Alaska, minus the Railbelt. Ms. Lister explained the highlights of the analysis. Operational and financing risks should be addressed during the project selection process. Project funding should be committed to projects that have community support and that have examined other potential technologies. State programs should use standardized criteria to approve projects at each stage of development. Projects should have a clear financing and business plan from conception through operation. Inadequate maintenance is the main barrier to performance after project completion. This can be mitigated through proper and full training. Climate change is expected to increase the need for infrastructure. Mr. Andreassen expressed appreciation for the analysis of risks and barriers. He noted the ongoing and challenging issue of communities who pursue projects that are unlikely to be cost effective only in order to obtain funds. Mr. Andreassen believes engaging communities’ approach to official local policies and energy cost is helpful. Chair Rose agreed there is a relationship between training, education, and champions in the community and the risk perceived by financiers. Ms. Mitchell inquired if the regional energy planning effort will assist to ensure the appropriate projects are prioritized. Ms. Lister believes the regional energy plans have helped in some places. Ms. Mitchell indicated her support for the regional energy planning efforts. Chair Rose recognized the challenge of updating the plans to reflect relevant changes in technology, community champions, and interest. The need for increased efficiency remains constant. Ms. Lister commented on the difficulty for smaller communities to maintain plan continuity without a full-time staff person focused on the planning efforts. Chair Rose indicated regional planning and having a regional planner could help with continued plan focus. Renewable Energy Fund Advisory Committee Meeting Minutes Page 3 of 8 November 21, 2018 3. PCE historic fuel/non-fuel costs Ms. Lister explained utility costs for PCE eligible utilities from fiscal year 2007 (FY07) to FY17. In FY16, for the first time, total non-fuel costs were higher than total fuel costs. Chair Rose discussed communities cannot claim grants as non-fuel costs. Ms. Kohler informed the trend in rising non-fuel costs reflects additional operational costs related to projects and inconsistent utility reporting. She noted the cost of fuel decreased dramatically in FY15, FY16, and FY17, and is anticipated to now increase. Ms. Kohler requested a line be added to the graph representing the total gallons of fuel used. Ms. Lister believes the upward trend in non-fuel costs could potentially be due to utilities taking on more debt, thus increasing interest expenses and depreciation expenses. Another factor may be that utilities are doing a better job of accurately accounting for their actual costs. Ms. Lister discussed fuel is being displaced because of the greater renewable penetration. Ms. Lister informed the number of active communities in the PCE program increased from 171 in FY07 to 179 in FY17. Representative Wool asked for the program’s overall cost per kilowatt hour. Ms. Lister noted she does not have that graph with her today and will provide the information to the Committee. Ms. Lister described a graph previously requested showing the total kilowatt hour sales over the 11-year period from FY07 through FY17 has grown 11.2%, and the PCE eligible kilowatt hour sales has grown 9.7% during that same period. BREAK - none GUIDANCE FOR MARCH RFA CONSIDERATIONS Chair Rose advised the next agenda items pertain to Committee guidance for staff consideration regarding the scoring and overall evaluation process to be implemented during the upcoming request for applications (RFA) opening on March 1, 2019. All previous applications and unfunded projects must resubmit applications. 1. Efficiency points Ms. Lister stated efficiency points are currently considered and given for heat projects to improve the overall scoring. Efficiency points are not currently used in the evaluation process for electric projects. Chair Rose directed the Committee’s focus on two questions:  Should efficiency points be given to electric project applicants for increasing generation efficiency and/or demand side efficiency?  Is the number of points given for heating projects at the appropriate level? Ms. Lister noted the lion’s share of benefits ascribed to a project is displaced diesel. Improved generation efficiency is significant and will add points to the economic evaluation component. Chair Rose requested comment by Mr. Craft, Wind Program Manager. Mr. Craft reported on an analysis of diesel efficiency before and after the installation of wind projects. The evidence Renewable Energy Fund Advisory Committee Meeting Minutes Page 4 of 8 November 21, 2018 showed a slight increase is diesel efficiency. He believes the increased efficiency resulted from the supply side by installing new generators and upgrading switch gear. Mr. Craft feels supply side efficiencies measures could be used in the overall evaluation. Chair Rose asked if additional points could be given during the technical feasibility analysis for the project designs that upgrade the generators and/or utilize different sized generators. Mr. Craft advised the current technical modeling evaluation provides a greater diesel offset for establishing up-front efficiency. He noted increased up-front efficiency through generator upgrades increases the cost of the project, which may negatively impact the project’s benefit-cost (B/C) ratio. Ms. Lister explained the model compares the proposed project to a base case scenario. Chair Rose inquired if applicants feel penalized for increased total project costs due to generator upgrades. Ms. Lister does not believe that specific complaint has ever been filed and believes it could be a legitimate complaint, if it ever occurred. Chair Rose requested Ms. Lister continue to work on this option for the next meeting. Chair Rose requested comments regarding the possibility of giving points in the scoring process to an electric project applicant for demand side electrical efficiency. Ms. Kohler noted demand side electrical efficiency is a separate and complicated arena and not appropriately related to REFAC proposals. She gave anecdotal illustrations of intricacies of the energy structure of communities in which these projects will assist. Ms. Kohler feels a parallel program would be a better way to address electrical energy efficiency issues. Ms. Mitchell expressed agreement with Ms. Kohler’s comments. She noted a decrease in utility sales may result in an increase in customer rates. Ms. Kohler supports energy efficiency. She wants to be mindful the projects do not hurt the customers who are least able to pay. Representative Wool believes renewable energy projects need to be viewed holistically and include review of energy efficiency of heat, electricity, and diesel. He expressed understanding the utility companies do not want to lose sales and believes there is a way to move forward with energy efficiency. Chair Rose shared his consideration of incentivizing electrical demand side efficiency includes options such as LED lighting. Ms. Kohler inquired as to the assessment of the LED lighting consideration. Chair Rose stated he does not have an assessment plan, but believes the holistic goal should be to eliminate potential unnecessary energy generation. He agreed incentivizing electrical demand side would be difficult. Ms. Mitchell requested staff provide feedback regarding ways to incentivize efficiency in the REF. Ms. Lister suggested additional clarity for the supply side stating the cost of the upgrade of the diesel powerhouse is not included in total project costs during review of the B/C ratio of wind/diesel projects. She believes the clarification would help the projects score better through a supply side efficiency measure. Ms. Lister explained the demand side efficiency incentives for the electric side would be similar to incentives on the heat side, and could offer points for match, if efficiency measures are conducted on the buildings that will use the electricity. Efficiency Renewable Energy Fund Advisory Committee Meeting Minutes Page 5 of 8 November 21, 2018 measures could include an LED lighting exchange program or on-bill financing for lighting retrofit in community buildings. Ms. Lister agrees to the importance of ensuring the projects are not negatively impacting vulnerable populations. This concern exists in every electric market in the country. Ms. Lister believes these considerations are worth a deeper review. Mr. Tappen informed points are also awarded to key projects for efficiency in the State III Sustainability score, and similar language could be easily added for electric projects. Mr. Andreassen commented addressing the technical risks and barriers identified in the project failure points earlier are a higher priority to the success of projects and the purpose of the REF. 2. Increase match Chair Rose noted increasing local match has been discussed since the statute originated. He posed the question to the Committee regarding modifying the statutory criteria to include an increased local match. Ms. Lister cautioned this consideration could potentially run contrary to part of the intent of the program by being more favorable to communities who can increase their local match. Ms. Lister discussed the single biggest measure in the evaluation process is the cost of energy in the community, which tends to favor small, stand-alone communities. However, these small communities tend to be the least able to offer a significant match. Ms. Kohler commented if cost of energy in the community is the primary consideration, then funding will go to the outlier communities that do not have the ability to control costs and leaves the other parts of the state gasping for the remains. Ms. Kohler noted the cost of energy in the community and the matching funds total 50% of the evaluation. She suggested that percentage be equally split to 25% cost of energy in the community and 25% matching funds. Ms. Lister informed the current split is 35% for cost of energy and 15% for match. She noted the cost of energy is also reflected in the calculation of the B/C ratio within the evaluation process. Ms. Kohler requested the formula for scoring cost of energy in the community be provided to the Committee. Chair Rose requested comments regarding the proposal to decrease the current weight of final scoring for the cost of energy from 35% to 25% and increase the current weight of matching funds from 15% to 25%. Ms. Mitchell asked for explanation of the goal of the REF and AEA. Ms. Lister discussed there are multiple goals of the REF. Primarily, it is a balance between reducing diesel consumption and helping to stabilize the cost of power. The mission of AEA is to reduce the cost of energy in Alaska. The statute also provides directional goals for regional spreading. Ms. Lister commented Senator Hoffman is not in attendance today and he is the champion for maintaining the focus on the high cost of energy in smaller communities. She requested consideration be given during the discussion regarding his stance. Chair Rose conveyed it is unknown what sorts of impacts would occur to the selection process if equal percentages for cost of energy and matching funds were implemented. Part of the reasoning for the suggestion of increasing the local match is the desire for communities to have more skin in the game and the hope to improve operation and maintenance (O&M). He discussed one way to incentivize a higher local match is by increasing the amount of points given for matching funds. Mr. Tappen explained the current matching fund criterion contains the Renewable Energy Fund Advisory Committee Meeting Minutes Page 6 of 8 November 21, 2018 possibility of a total of 15 points, 10 of which come from the percentage of match provided and the other five comes from the type of match provided, including cash, federal sources or local in- kind. To receive the maximum of 10 points for the match, the community needs to provide over 49% of total project cost match. Chair Rose asked staff to review the possibility of new match weighting criteria based on a 30%/20% split and bring the suggestions back before the Committee at the next meeting. Ms. Mitchell expressed she is unable to agree to that suggestion and would like to hear comments from Senator Hoffman. Ms. Lister advised the State has a flexible loan program for power generation projects that can be provided to project developers or utilities to be able to provide the match. Chair Rose asked for the scoring percentage criteria for the current evaluation. Ms. Lister noted the information is listed on the summary handout; 35% cost of energy, 15% match, 20% project feasibility, 15% public benefit, 5% project readiness, 5% sustainability, and 5% local support. 3. Focus on specific phases of development Chair Rose began the discussion regarding establishing a focus for the upcoming RFA for a specific project phase. The RFAs will be conducted every other year and the available funding amount is anticipated to be low compared to previous years. Ms. Kohler cautioned against precluding demonstrating the need for funding for all phases of projects. She added the amount the Legislature is going to allocate is unpredictable. Ms. Mitchell agreed to the importance of communicating to the Legislature the increased need for funding and the progress made. Ms. Lister feels past discussions regarding this issue culminated in a philosophical bent, in terms of wanting to use government grant funds in the highest risk component of project development to try to create a pipeline of bankable renewable energy projects, rather than spending larger amounts of money in construction to build the projects. She noted it is very difficult for any developer to get loan monies to complete a reconnaissance or feasibility study. Chair Rose agreed. Ms. Plentovich commented the biomass sector has access to government funding for feasibility work and relies upon the REF for the biomass construction funding. Ms. Lister suggested wording be included in the RFA to indicate the applications will be considered for the next two years. The amount of funding that will be available each year will be unknown at the time of the RFA submittal. However, the available funding amount will be known at the time of the final project evaluation process. She proposed the RFA include verbiage that would outline the focus on different phases based upon the final amount of funding received. Ms. Kohler agreed a qualifier could be included in the application explaining applications will be taken for any phase of project development and all funding is at the discretion of the Legislature. Renewable Energy Fund Advisory Committee Meeting Minutes Page 7 of 8 November 21, 2018 Ms. Mitchell asked if there were excess PCE funds remaining from fiscal year ending June 30th that might be assigned to the REF. Ms. Lister believes there was approximately $480,000 remaining after the Community Assistant Program was funded, which is not an adequate level to conduct a REF solicitation. She believes the amount is slated to go toward maintenance and improvement (M&I) projects in the RPSU Program. The Governor’s budget will be revealed next week. Ms. Mitchell expressed confidence that some of the operating REF projects have saved money for the PCE Program. She asked if evaluation of this savings has occurred and if more funding is available from the endowment. Ms. Lister advised the savings associated with operational REF projects is estimated annually and reported to the Legislature. She agreed to communicate the savings of the program more explicitly. A portion of the PCE savings in communities is going to the PCE Program. Ms. Lister does not believe AEA will suggest different uses for the PCE Endowment Fund. Chair Rose stated that is a separate and distinct subject. He explained additional analysis is forthcoming and will be available to the Committee soon. 4. O&M plan evaluation Chair Rose noted the question for discussion is if more points should be given to the scoring criteria for O&M planning. Chair Rose asked staff for a description of what is considered a good O&M plan and what are some of the faults in O&M plans staff has seen. Ms. Lister noted the main area of O&M deficiency is not necessarily with the plan, but rather with the actual O&M execution of the plan. Lack of O&M to the system leads to poor performance. She explained funding after construction is not always available. Maintenance contracts in remote areas can be expensive and cost prohibitive. Discussion has occurred regarding the idea of allowing maintenance contracts to be included in the construction cost of a project that might allow a standalone utility to conduct high level maintenance and local training. Ms. Lister requested feedback regarding this consideration, particularly from Ms. Kohler and Ms. Mitchell. Ms. Lister acknowledged the specific resource is relevant to the O&M procedures and processes. Ms. Kohler explained the wind turbine maintenance contracts are executed for one or two years with the manufacturer. The O&M costs are not included in the construction costs because they are considered operating costs. Ms. Kohler does not agree it is appropriate to include the O&M cost component in the construction costs and including O&M in construction costs would decrease the B/C ratio of the project. Chair Rose mentioned another concept to consider is requiring or incentivizing applicants to contribute funds during the initial project application for instrumentation to retrieve data regarding the performance of the project and operation and maintenance. Ms. Lister added instrumentation could be considered outside of the project cost when the B/C evaluation occurs. Chair Rose requested Mr. Craft provide an overview of the current data retrieval system. Mr. Craft explained the data retrieved from a wind farm perspective is granular and can include average wind speed data and how much electricity was used to run the turbine. This data is provided through the annual performance reporting that is a condition of the grant agreement. It is separated into monthly components. The utility company provides statistics annually, including how many gallons of diesel was used and the price of the diesel. Most of the data Renewable Energy Fund Advisory Committee Meeting Minutes Page 8 of 8 November 21, 2018 collected fits within the PCE dataset. Ms. Lister commented on the difficulties in collecting data from communities. Chair Rose suggested staff develop a list of specific suggestions for applicants to always include in the applications that would not be considered part of the total cost, and therefore not decrease the B/C ratio. Ms. Kohler suggested a demonstrated O&M plan be included as part of the application under Stage II criteria for design and construction projects. Mr. Andreassen agreed this is an important issue that should be weighted appropriately in the application. Ms. Lister indicated staff can further develop this suggestion and report back at the next meeting. 5. Heat projects Ms. Lister indicated the suggestion from staff is to continue to receive both heat and electric projects within the RFA. She noted the discussion at the previous meeting focused on heat as a dominant issue in smaller communities. Ms. Kohler commented on the increasing nexus between heating projects and electric projects. 6. Others? There were no additional considerations presented to staff. Chair Rose requested staff to continue to work on the developments from today’s meeting and bring forth a clearer proposal of the RFA at the next meeting. Chair Rose asked for feedback on pushing the RFA release date to the middle of March rather than March 1st. Ms. Lister expressed moving the RFA date to the middle of March would be acceptable, but any date beyond that is disadvantageous. SCHEDULE AND LOCATION FOR NEXT MEETING The next meeting is tentatively planned for February 1st, 2019, from 1:00 p.m. to 4:00 p.m. in Juneau. MEMBER COMMENTS AND ADJOURN Ms. Mitchell expressed appreciation to staff for their diligent work. Chair Rose expressed appreciation to staff for their presentations and thanked Ms. Brown and Ms. Arnold for their attendance. The meeting was adjourned at 11:48 a.m. 813 West Northern Lights Boulevard Anchorage, Alaska 99503 T 907.771.3000 Toll Free 888.300.8534 F 907.771.3044 REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG RGYAUTHORITY.ORG Alaska Renewable Energy Fund Evaluation Process Summary The need for affordable, sustainable energy in Alaska is great. Relative to the rest of the nation, Alaska’s rural communities pay the highest energy costs and include some of the poorest places. To help communities reduce and stabilize their heat and electricity costs, the Alaska State Legislature established the Alaska Renewable Energy Fund (REF), a competitive grant program, in 2008. The program was established to help fund cost-effective renewable energy projects throughout the state. The Alaska Energy Authority (AEA) administers REF evaluation process and manages all REF grants. Since 2008, REF has funded $257 million worth of projects. So far, these projects have displaced the equivalent of roughly 150 million gallons of diesel — saving communities an average of $2.50 for every project dollar spent. The program also creates jobs, utilizes local energy resources, keeps money in local economies, and fosters economic development. Although the State of Alaska has been the only funder, REF can accept funds from private and federal sources. The REF program provides a unique, hassle-free mechanism for private-sector foundations, corporations, federal funders, and others to invest in responsible renewable energy development in Alaska. With the guidance of the nine-member Renewable Energy Fund Advisory Committee (REFAC), AEA has developed a robust and effective multi-stage evaluation process that is Alaska’s only statewide evaluation of renewable energy opportunities. The evaluation process that assesses the technical and economic risks and benefits of each proposed project to identify those projects with the highest likelihood for success. The assessment of projects’ technical and economic feasibility is at the core of REF’s evaluation process. AEA has expert staff who are able to provide technical and economic analysis of the innovative technologies and renewable hybrid systems being used in Alaska. AEA’s in-house staff of engineers, mechanics and renewable-resource-specific technology experts works with other state personnel and third-party contractors to provide unbiased assessment of renewable energy electricity-generating and thermal projects for urban and rural communities. When an application passes the feasibility review, AEA, in consultation with the REFAC, evaluates the project’s merits according to criteria that reflect the intent and purpose of the REF grant program. These criteria include the cost of energy in the community, the amount of matching funds supplied by the applicant, with consideration given to balancing projects across AEA’s energy regions to ensure an equitable distribution of grant funds statewide. A more detailed explanation of how projects are scored for ranking is available at akenergyauthority.org/programs/renewableenergyfund in the most recent REF Request for Applications document. The final recommendation to the legislature is delivered in the form of the legislative status report that includes the final funding priority list, an update on the program, and information on the performance of all REF projects. Past status reports to the legislature can be viewed on the AEA website. The legislature has broad discretion in how, or if, it funds the recommended projects presented by AEA The legislature may choose to fund the projects in any order and in any amount. Any entities interested in participating in REF as a funding partner should contact the Renewable Energy Fund program manager, Neil McMahon, at (907) 771-3000. Community/Utility Name - [Tech type] Business and Operations Management Sustainability Plan Date Name and Contact Information [Coming into a new position, what would you want to know? Reference to make sure taking care of things. For smaller projects please keep plan concise, practical and to the point. This plan must be developed by the project’s Owner & Operator. AEA requires this plan to be completed before construction funds are released. As this template is meant to cover many different types of projects, there will be parts that are not needed for your project. Delete sections that do not apply.] All  are in place to help describe the type of information being requested and can be deleted from the final document. [Insert Photo of Project] Community/Utility Name - [tech type]  Business and Operations Plan Date  2 | P a g e Contents Project Overview ........................................................................................................................................................3 Project and Operational Finances ..............................................................................................................................3 Expected savings to customers ..............................................................................................................................3 Expenses and Revenue ...........................................................................................................................................4 Project Information ....................................................................................................................................................5 Pre-project readiness .............................................................................................................................................5 Project activities .....................................................................................................................................................6 Facility Management and Operation Plan ..................................................................................................................7 Staff & organization ................................................................................................................................................7 Training ...................................................................................................................................................................7 Operations planning ...............................................................................................................................................7 Inspections & Maintenance ....................................................................................................................................9 Financial Management ...........................................................................................................................................9 Potential Problems .................................................................................................................................................. 12 Monitoring & reporting ........................................................................................................................................... 12 Reporting ............................................................................................................................................................. 12 Operational performance monitoring ................................................................................................................. 12 Appendices .............................................................................................................................................................. 13 Community/Utility Name - [tech type]  Business and Operations Plan Date  3 | P a g e Project Overview 1. Describe the project, including A. the history of the project in a few paragraphs. B. In one paragraph, describe how the project is going to be/has been integrated into the community C. Describe the objectives of the project in a paragraph 2. Expected benefits A. Economic B. If done for operational reasons, explain why it was needed: I. For electric projects, operational reason might include:  Historical and expected change in load [peak loads, total kWh generation needs by month/year]  How generation has changed  Reliability issues—outages, voltage issues, etc.  Fuel insecurity II. For thermal projects, operational reasons might include:  Sources of heat in community (heating oil, natural gas, propane, electricity, biomass, etc.) by percentages  For individual buildings connected to thermal generation describe energy consumed for heat  Describe any changes in consumption over past five years for the buildings  If biomass: Describe the current use of biomass in the area including the current firewood market, number of people gathering wood, and the equipment used. Also, include the current price for a cord of wood delivered. Project and Operational Finances Describe the project & operations finance. Is this a new line of business or is this an addition to a current line of business (such as a new project at an existing utility)? If it is a change to a current business, explain how the project will change the finances of the existing business. Expected savings to customers To attract customers, it is likely that customers will need to save money. Explain how the project will save customers money. Project will likely increase some expenses, decrease other expenses. Total expenses should go down…If total expenses go up, explain why this is beneficial and why it will be good for customers and why they will choose more expensive option. If electric project at utility eligible for PCE, use table below to calculate savings by customer class. Table 1: Expected customer savings (PCE-eligible utility) CURRENT PRE-PCE RATE EXPECTED PRE-PCE RATE CURRENT POST- PCE RATE EXPECTED POST-PCE RATE EXPECTED SALES EXPECTED CUSTOMER SAVINGS RESIDENTIAL Community/Utility Name - [tech type]  Business and Operations Plan Date  4 | P a g e COMMUNITY FACILITIES COMMERCIAL STATE/FEDERAL TOTAL N/A N/A For heat projects…. Table 2: Heating costs for buildings CUSTOMERS CURRENT COST EXPECTED RENEWABLE ENERGY COST EXPECTED DIESEL COST SAVINGS BUILDING 1 BUILDING 2 BUILDING 3 BUILDING 4 TOTAL Expenses and Revenue Capital costs Describe the sources of funds that paid for project. Explain any reporting requirements for grants (what info needed, schedule). Tax implications of grants. Table 3: Capital expenses and sources Source of funds (Utility, state, federal, other) Amount ($) Type of fund (grant, loan, equity) Annual principal payment (Year 1) Annual interest payment (Year 1) $ - $ - $ - $ - $ - $ - $ - $ - $ - Total $ - $ - $ - Operating Revenue and Expenses Describe the sources of revenue, how it will cover the expenses and make a profit. Fill in table below Table 4: Operating Revenue Source of Revenue Volume (Btu, kWh, etc.) Expected rate ($/kWh, $/Btu, $/customer, etc.) Total Annual Revenue Community/Utility Name - [tech type]  Business and Operations Plan Date  5 | P a g e Sales (electricity) $ - Sales (heat) $ - Customer charges $ - Other (grants, etc.) $ - Total $ - Describe the change in expenses due to the project. Fill in table below Table 5: Annual expenses Expense category Current Annual Expense ($) Expected Annual Expense ($) Change in Annual Expense ($) Fuel expenses $ - $ - $ - Non-fuel Operating expenses $ - $ - $ - Interest expense $ - $ - $ - Principal payments $ - $ - $ - Other expenses $ - $ - $ - Profit $ - $ - $ - Total $ - $ - $ - Net Revenue Describe the change in net revenue due to the project—it is hopefully positive. If it is not positive, then look again at the expenses and revenues to determine how the project can at least break even. Fill in table below Table 6: Net revenue Current Expected Change Total revenue $ - $ - $ - Total expenses $ - $ - $ - Net Revenue $ - $ - $ - Project Information Pre-project readiness Describe what had been to prepare for the project. Including: 1. Electric infrastructure installed and/or improved before project: A. Generation efficiency, controls, distribution upgrades, demand-side management, storage 2. Thermal: Building energy efficiency measures A. List measures taken, dates of any measures completed and/or path forward for increased EE. Community/Utility Name - [tech type]  Business and Operations Plan Date  6 | P a g e Project activities Pre-construction documents [Where someone can find documents. Also provide a short summary of what was determined. This is not necessarily a complete list, and your project may not require all of the documents listed below] 1. Feasibility A. Documents 2. Conceptual design 3. Permitting & Site Control—anything continuing? A. Site control – lease and easement agreements B. Fire Marshall approval C. 40CFR63 NESHAP Rule (large projects) D. State Historic Preservation Office E. Forest Practices and Resources Act F. Insurance for wood harvesters G. Local ordinances if applicable H. Grant agreements 4. Final design documents 5. As-built drawings Physical infrastructure For electric generation projects give a general description of what will be built for generation, controls, transmission, and distribution. Fill out the table below Table 7: Electric generation units Generation unit Resource type Design capacity (kW) Make Model Serial # Expected life For thermal generation projects give a general description of what was or will be built for thermal generation, back-up heating, district heating, and harvest equipment (for biomass). If there are too many to track on this form, use another way to track units. Table 8: Thermal generation units Generation unit Resource type Design capacity (kW or MMBtu/hr) Make Model Serial # Expected life Community/Utility Name - [tech type]  Business and Operations Plan Date  7 | P a g e Facility Management and Operation Plan Staff & organization 1. Organizational chart- with contact information 2. Staff (New/existing) A. Primary and secondary Operators: I. Job description/announcement - tasks, experience/skills needed, training II. backup personnel plan B. Business Management: I. Job description/announcement - tasks, experience/skills needed, training II. backup personnel plan C. Other Positions: I. Job description/announcement - tasks, experience/skills needed, training II. backup personnel plan Training 1. Facility training plan a. Inspections & maintenance b. Operations i. Biomass only—Wood harvester training plan (not required if purchasing fuel from another entity) 2. Business management training plan, if needed 3. Schedule for refresher training Operations planning Safety considerations Safety Plan? Do you have a safety plan, or attach your safety plan to this document? Generation management strategy Describe your generation (thermal and/or electric) management strategy. When will it be used, when it not be used, why? When will generation be curtailed? Will there be energy storage? How will it be used? Describe how the Controls (engines, generators, programmable logic controller (PLC)) will be used to maximize the value of the project? How are your controls going to be set up? What will be the priority unit. Include controls manual and settings as appendix Expected output Where generation will go—electric and/or heat. Total expected to produce over year. Expected capacity factor (if electric generation) Table 9: Expected generation Month Electric Generation (kWh) Thermal Generation (Btu or kWh) Community/Utility Name - [tech type]  Business and Operations Plan Date  8 | P a g e January February March April May June July August September October November December Annual Total Resource & fuels planning 1. Reservoir management (hydro) a. Min/max water levels in reservoir (based on syphons, intakes, etc.) b. Flow restrictions by week, month, season per permits c. Bypass 2. Non-hydro storage [batteries, capacitors, etc.] a. Charge/discharge planning b. Control settings 3. Wood Fuel Sourcing Management and Operation plan I. Harvest Plans a. Attach forest inventory and detailed harvest plans. II. Harvest and processing capacity a. Detail the supplier(s) and quantities of wood expected for delivery, including harvest permits required by landowners. b. If self-harvesting, provide a narrative describing how the wood will be harvested and transported. c. What is the back-up supply for the wood? III. Wood Processing and Storage a. Describe how wood will be processed (split or chipped) and seasoned. How will moisture be measured and controlled? b. Detail where the wood will stored, the size of the storage area, and its proximity to the boiler. c. Describe the theft prevention considerations? (Cordwood) d. Describe how the wood inventory will be managed and who will be accountable? Community/Utility Name - [tech type]  Business and Operations Plan Date  9 | P a g e Inspections & Maintenance Infrastructure Inspections Who is responsible? How will manager make sure inspections are done? What needs to get done: Daily, weekly, monthly, quarterly, yearly. This should be included as a checklist that the responsible party can use to record inspection. See Appendix for examples… Maintenance Routine Maintenance Planning [Quarterly or more frequently] [see appendix for example maintenance checklists] 1. Who is responsible [job position and/or person]: what they do with info. If split ownership (such as a heat exchanger or electric boiler in building owned by someone else), be clear about who is responsible for what (this should go in heat sales agreement) 2. Provide a copy the annual maintenance schedule in the form of a chart and checklist, include maintenance needed on a 2, 3, or 4 year interval as well. (This information should be in the equipment manual) Non-routine Maintenance Planning 1. Include planned major maintenance, repair, and replacement of high value parts over the expected life of the infrastructure. (This information should be in the equipment manual.) 2. List of critical spare parts 3. Explain your policy and procedures for unplanned major maintenance (i.e. things break unexpectedly). How are requests and/or work orders made, who processes the requests and decides if a fix will be made, gets quotes, and procures services and/or materials to make the required fixes. [reference also the process for making a budget amendment] Inventory management 1. Inventory requirements [supplies & materials] a. List the information needed to order supplies and maintenance parts, including manufacturer part numbers and contact phone numbers. b. Make/model, description, Part #s, Phone #s, emails, website, min # to keep on hand c. Tools required to perform O&M 2. When levels of supplies and materials will be checked—who is responsible, how frequently it will be done, how 3. Who is responsible for purchasing new supplies and materials Financial Management Sales agreements 1. Power sales agreements, if selling to a utility. 2. Heat sales agreements with all customers Purchase agreements 1. Provide signed purchase and supply agreements (attached in appendices) a. Timber purchase agreement, if buying from other entity Community/Utility Name - [tech type]  Business and Operations Plan Date  10 | P a g e i. Permitting 1. Attach signed permits in appendices 2. Ensure they have the legal right to harvest timber ii. Sale and supply agreements b. Other fuels Other financial agreements – attached in the appendices 1. Leases—land, equipment, infrastructure 2. Employee sharing 3. Other Insurance/Risk Management attached in the appendices 1. General Liability 2. Work Comp 3. Unemployment – if required Accounting and budget Describe your accounting system. What program is used? How much experience does the bookkeeper(s) have? How long has it been used? Do you use cash or accrual system? If entity has multiple businesses or enterprises, how do you separate the businesses/enterprises in the accounting system? Accounting codes 1. Explain how new and existing accounting codes will be used for determining fair rates and for internal/external reporting I. If applicable, provide a listing of expense codes specific to the project Budgeting process 1. Explain the budgeting process a. When is the budget determined? What is the timeline from start to finish? b. Who is responsible for developing the budget? c. How is it finalized? d. Where is the budget kept? Is it in the accounting system, a separate spreadsheet, somewhere else? 2. Method used for estimating next year’s expenses a. Personnel (pay, hours, bonuses, raises) b. O&M (including equipment, cost per hour to operate, labor details, storage, construction, theft prevention) c. Administrative costs d. Fuel costs I. Non-RE II. Wood Supply Financials a. $/cord and $/MMBTU equivalent (matrix provided) b. Delivery cost c. Payment method Community/Utility Name - [tech type]  Business and Operations Plan Date  11 | P a g e d. How is the delivered fuel cost developed? Are the people delivering the fuel making money? – see AEA spreadsheet developed to understand delivered cordwood costs. e. Outstanding liabilities I. Tax II. Fuel loans f. Taxes g. How to pay for future repair and maintenance (save ahead, loan at time, combination) h. Other I. Interest II. Depreciation or principal? i. Profit & retained earnings 3. Check budget-to-actuals, how frequently. Describe the process for budget amendments, and especially emergencies (such as unplanned maintenance and failures). Incurring & Paying Expenses I. How do employees request purchases a. Small requests (parts, materials) b. Big requests (work order) II. Who is in charge of getting cost estimates and purchasing? III. Who decides if a purchase will be made? IV. Who pays invoices for purchases? V. Who records invoices and payments? Revenue 1. Sales revenue a. Rates i. Describe how rates will be set. ii. When will rates be evaluated? 1. Planned (Never? yearly? Every 6 months? When new fuel is purchased?) 2. Unplanned (when sales are higher/lower than expected, fuel costs are higher/lower than expected, unplanned maintenance or emergencies) b. How are sales metered (kWh, Btu)? Who is responsible for reading meters? c. Adjustment clauses – should be in heat sales agreements 2. Other revenue sources a. Grants b. Customer charges 3. Charging and collecting on revenue a. Billing terms and conditions b. Who is responsible for invoicing c. How are invoices delivered (mail, email, etc.) d. How is payment accepted e. If payment is late, what collection policies are in place to encourage payment? Community/Utility Name - [tech type]  Business and Operations Plan Date  12 | P a g e Balance Sheet Describe how you will use account codes track Assets, including depreciation (where appropriate) Describe how you will use account codes to track Liabilities, and ensure that short- and long-term liabilities are manageable. Potential Problems 1. What are the challenges to keeping this project functioning as a sustainable business? A. Common difficulties include: I. Fuel supply & costs II. Demand for energy (higher or lower than expected) III. Personnel IV. Disagreements with project partners V. Environmental change VI. Cost of alternative energy source 2. What strategies will you put in place to overcome those challenges? Monitoring & reporting Reporting What operational and financial reporting is required by grant agreements, reporting agencies, and/or the board of directors? Board of Directors Reports 1. What a. Financial, performance, maintenance 2. When, how 3. Who is responsible 4. Why… a. Actions to be taken External reporting 1. Indicate project reporting timelines, who is responsible for reporting, where the info will come from, etc. a. REF b. AEA/RCA PCE c. Resource agencies? Permit requirements? Operational performance monitoring 1. Describe how the system’s physical performance will be measured A. Meters to use I. Inputs—fuel, resource base (wind speed, solar insolation, water flow, etc.) II. Outputs—heat, electricity B. Reading of meters [who, when, how] C. Maintenance performance will be recorded. Community/Utility Name - [tech type]  Business and Operations Plan Date  13 | P a g e I. Availability II. Downtime, reasons, etc. III. Include diesel and biomass fuel use, boiler O&M, harvest equipment O&M, BTU metering. 2. Describe how the performance will be saved and analyzed 3. Describe how you will identify and act on performance difficulties Appendices 1. Inventory checklist 2. Inspection checklists 3. Maintenance checklists 4. Major repair checklists 5. Infrastructure manuals 6. As-built drawings 7. Job descriptions 8. Repair manuals 9. Controls manuals, with settings 10. Detailed performance specifications 11. Other