removing energy gridlock in · 2014-11-25 · ocean renewable power company • proven technology...
TRANSCRIPT
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Removing Energy Gridlock in Alaska
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Introductions of Panel Members
AIPPA Identification of Challenges and Opportunities
Question & Answer
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D. Douglas Johnson, Director of Business Development, Alaska
Independent Power Producers Role in Alaska’s Energy Future
Alaska Rural Energy ConferenceFairbanks Alaska September 24, 2014
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www.orpc.co
Ocean Renewable Power Company
• Proven technology generates clean, predictable, renewable grid-compatible power
• Designed, built and now operate the first federally licensed, grid-connected hydrokinetic energy project in North America.
• Highly experienced professional entrepreneurial team with proven track record in technology and project development
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www.orpc.co
ORPC’s Cobscook Bay, Maine Tidal Energy Project, 2012
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www.orpc.co6
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www.orpc.co
Rural Alaskan isolated diesel powered grids:The early adopter market opportunity for MHK
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Summary of AP&T’s Hydro Experience
AP&T has: Over 50 years of providing electricity to
Alaskans invested in and uses the latest technology to
operate efficiently to reduce costs built two storage and two run-of-river
hydroelectric projects with more planned throughout Alaska
gone from generating with about 95% diesel and 5% renewable energy (hydropower) for all the communities we serve to approximately 70% renewable energy today.
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Reynolds Creek Hydropower Project
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Reynolds Creek Powerhouse Site
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Reynolds Creek
Currently under Construction 5 MW single pelton turbine Approximately 750 feet of Head Average Annual Energy Production =
19.3 million kilowatt-hours Land Owned by Haida Corporation and Sealaska – both
Alaska Native Corporations Alaska Power Company will Operate, Purchase Power
and hopefully construct. Will Allow All Interconnected Portions of Prince of Wales
Island to be Supplied by Hydropower
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Alaska Rural Energy Conference
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SUZANNE GIBSON
• Sr. Director of Energy Development for CIRI• FIW P1 & 2, Capistrano, Palouse, CINGSA• Seeking new energy investment opportunities
• Asset Manager for Chugach Electric• Natural Gas contracting
• CFO/CCO $250 MM Energy Related Hedge Fund• Commodity Trader – Merchant Energy
• Dynegy• Kinder Morgan
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LTD MWh's
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Actual Actual LTD Budget LTD
Fire Island LTD Production
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Fire Island Wind, Phase 2
• 20.4 MW project • “B String” flanks the east ridgeline of island
• 11 General Electric 1.85 MW XLE wind turbines
• ~30% Net Capacity Factor (NCF)• P50 = 52,900 MWh• Offered at $0.062/kWh• Shovel‐ready project• COD 2015
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Independent Power Producers• CIRI: 1st in RB to develop commercial scale power• Privately sourced capital• Capitalize on federal tax incentives• Risk stays with private entity rather than ratepayer
• Development• Construction and Operations
• Can facilitate faster deployment of new technology• Allows utilities to focus on reliable power delivery to customer
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JUNEAU HYDROPOWER, INC.
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Duff MitchellVP & Business Manager, JHI Executive Director, AIPPA
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• Sweetheart Lake Hydroelectric Facility (Juneau). Largest Privately Developed Hydropower Project in Alaska to date.
• Juneau investor driven to provide energy capacity and security for the Capital City
• 19.8 MW; 116,000 MWh
• FERC License Submitted‐ Project will operate as a FERC Qualifying Facility (QF) as an Independent Power Producer (IPP) to provide power to underserved markets in Juneau.
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VP & Business Manager of Juneau Hydropower Inc. Manage and execute FERC licensing process and business development for the Sweetheart Lake Hydroelectric Project.
Co‐founder and Executive Director, Alaska Independent Power Producers Association.
MBA‐Norwich University, BBA Ohio University
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100% private. No federal or state funds invested.
50 to 80 Direct and Indirect Jobs during Construction.
$150 M private investment in Alaskan Energy Infrastructure that will produce energy 100 years from now.
Lowers operating costs for Juneau’s Mines, Cruise Ships and provide additional energy for Juneau’s future.
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Removing Energy Gridlock in Alaska
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Duff MitchellVP & Business Manager, JHI Executive Director, AIPPA
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The Alaska Independent Power Producers Association is comprised of Alaska Native Corporation and private Alaska energy developers and operators in Alaska’s wind, hydropower, ocean/ river kinetic and combined heat &
power sectors.
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FISHOOK RENEWABLE, LLC
ALYESKA RESORT
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Provides: Alaskan Private Investment & Jobs Alaskan know‐how & Risk taking Alaskan entrepreneurial spirit Alaskan Energy Independence from High Cost Energy
=Alaskans developing Alaskan Energy for
Alaskans29
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A type of competitive power supplier. The term is synonymous with merchant generator, cogenerator, non‐utility generator, private power producer, Qualifying Facility (QF) and exempt wholesale generator.
Our aim is to establish open and fair competition and market opportunities in the Alaskan electrical supply industry.
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Utilities Role‐ Provide reliable service, billing, maintenance to ratepayers either producing or purchasing the lowest cost power available.
IPP Role‐ Developing Private Power with private investment and risk to produce electricity at the most economical and reasonable possible price…or IPP’s are out of business
These Roles are well defined and work everywhere in US, but Alaska legislation and regulations
discourage this relationship.
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Do we take the simple approach and continue to throw money at every energy problem with our diminishing oil revenues?
Or, do we fundamentally change our way of thinking and allow competition and competitive market forces to exist in Alaska that encourages and attracts private capital to assist us in meeting our in‐state energy challenges?
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ALASKA ELECTRICAL CHALLENGES
Challenge #1 Alaska has the 2nd Most Expensive Electricity in the Nation
Challenge #2 Alaska non‐oil Industry is Energy Intensive Challenge #3 Alaska High cost power has social costs Challenge #4 Government “energy fix” monies are dwindling or
nonexistent Challenge #5 Alaska’s In‐state energy potential is untapped Challenge #6 Alaska is ranked last in Competitive Energy
Environment Challenge #7 Legislation and regulation is holding Alaska back
from energy solutions.
THE HIGH COST OF ELECTRICITY IS IMPAIRING ALASKA’S ECONOMY AND COSTING ALASKAN’S JOBS
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Alaska has the 2nd Highest Rates of Electricity in the U.S. hurting Alaska’s non‐oil economy and unnecessarily raising Alaskans household costs and costing jobs.
AK 2014 cents/kWh
US 2014 cents/kWh
% difference Alaska higher
over US
Average Retail Price (cents/kWh)
Residential 17.88 12.84 39%Commercial 14.93 10.51 42%Industrial 16.82 6.76 149%Total 16.33 10.04
From Alaska EIA Average Retail Price by Sector, May 2014
U.S. Energy Information Adminis tration, Form EIA‐861, "Annual Electric Power Industry Report."
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S0me Railbelt Utilities have applied for or will be applying for double digit rate increases while the US is flat.
Alaska Rate Growth and Inflation is one of the highest in the Nation
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Alaska Mining Industry‐ Electricity is up to 50% of a mine’s Operating Cost
Alaska Seafood Processing Industry‐Electricity is up to 35% of a seafood plants Operating Cost
Timber Mills 7.5% and Biomass up to 25%Operating Cost
Hotel, lodging and Tourism Industry 15%+ Hospitals and Universities‐Government and Military Bases 10% to 20% Operating Cost.
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Eat or Heat
Stagnant Rural Alaskan Economies‐No Jobs
High Energy Costs + Lack of Jobs = High unemployment, alcoholism, suicide rates, and social problems.
High Cost Electricity has created a legacy of dependency on governmental subsidy programs.
“Energy Refugees”‐ Alaskans move from high energy cost communities to lower cost communities with jobs.
High Cost Electricity creates a negative downward spiral affecting all Alaskans
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Susitna Watana $5.2 B? Fairbanks In State Gas Trucking $350 Million? Railbelt Intertie Maintenance $900 Million+? Southeast Intertie $400 Million? Unmet Rural Community Energy Projects >$? Gas Lines A, B, or C $? In next 15 years 67% of existing generation will need to be replaced or upgraded…requiring $9 to $19 billion dollars (RIRP‐2010).
More Demand on Government resources than $$ exists for next 20 years.
38We simply cannot pretend that we have the money
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Potential Hydropower in Alaska is 40% of U.S. untapped hydropower (192 billion kWh energy potential)‐ACEP‐ Alaska Center for Energy and Power
Alaska is blessed with a phenomenal Wind Power Potential based on our enormous coastline.
Tidal and wave – over 90% of the total US tidal and wave resource‐NREL‐ National Renewable Energy Laboratory
Biomass – over 20% of the total US Resource‐NREL
“We have more energy potential than just about anywhere in the world.”
U.S. Sen. Lisa Murkowski, R‐Alaska39
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Alaska Ranks 50th out of 50 States for percentage of independent power production‐ Source EIA June 2014
Census Divisionand State
IndependentPower Producers
June 2014 YTD
June 2013 YTD
PercentageChange
June 2014 YTD
June 2013 YTD
June 2014 YTD
June 2013 YTD
Percent of total Generation
Alaska 2,994 3,154 -5.1% 2,720 2,918 126 125 4.2%U.S. Total 2,010,193 1,959,358 2.6% 1,182,108 1,142,203 752,428 738,895 37.4%Source: U.S. Energy Information Administration, Form EIA‐923, Power Plant Operations Report.
EIA Table 1.6.B Net Generation by State, by Sector, Year-to-Date through June 2014 and 2013 (Thousand Megawatthours)
Electric Power Sector
All Sectors Electric UtilitiesIndependent
Power Producers
How empty is theory in the presence of facts‐Mark Twain
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In Comparison, Alaska’s percentage of electricity supplied by IPP’s is only
4.2%
The Chinese, State Energy Regulatory Commission (SERC) is increasingly supportive of privately funded IPP projects as a
means to increase competition, to lower energy
costs and to develop renewable energy technologies.
Which Market is a Command Economy and which Market is
more Open for Competition?
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IPP GENERATION AS A PERCENTAGE OF MARKET
37.4% VS 6% VS 4.2%Source EIA 2014, SERC China 2007
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IN THIS REPORT, ALASKA IS LAST IN ATTRACTING PRIVATE CAPITAL INVESTMENT
AGAIN, ALASKA IS RANKED LAST
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Alaska Ranks LOW on all electricity metrics
Confirms that Alaska legislation and electrical regulation is outdated, discourage competition, rewards incompetency and inefficiency at the detriment of Alaskan ratepayers.
Wholesale Competition and market forces is legislatively and regulatory discouraged in Alaska.
Alaska Legislation and regulations are old school pre‐PURPA “utility centric” rather than “market force centric”.
As a result, State money is used to bail out problems again and again providing an artificial safety net for non ‐business based decision making.
The result is that collectively, Alaska is has unintentionally raised rates to Alaska’s ratepayers and utilities are insulated from healthy and beneficial market forces that would otherwise exert a downward pressure on Alaska’s
electrical rates..
Alaska’s outdated regulations have created a poor investment climate and a private capital flight away from developing Alaska’s in‐state energy resources.
Alaska receives what it incentivizes45
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State Energy Policy: encourages Private Investment and Private development of Alaska’s energy resources our
calls for streamlining of regulations and government processes.
State Legislation and regulations for competitive power have not been modernized since 1982…yes, before laptop computers, tablets, cell phones, mass adoption of the internet.
Current State Government agencies and processes are not conditioned to provide energy friendly “competition”.
Directional vs. Aspirational. Shall vs. May
Alaska violates PURPA that requires competition and purchase of IPP generation at a Utilities incremental avoided cost.
Temporary 1982 U‐81‐35 order still in effect today
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Section 210 of PURPA “is designed to promote the development of alternative energy resources by overcoming the historical reluctance of electric utilities to purchase power from nontraditional facilities.”
‐ Consol. Edison Co. v. Public Serv. Comm’n of New York, 470 U.S. 1075, 1076 (1985) (emphasis added).
Congress “directs FERC” to promulgate “rules requiring utilities to offer to … purchase electricity from qualifying cogeneration and small power production facilities.”
‐ FERC v. Mississippi, 456 U.S. 742, 751 (1982) (emphasis added).
Public Utility Regulatory Policies Act § 210
FERC’s rules “shall insure that … the rates for such purchase … shall not discriminate against qualifying cogenerators or qualifying small power producers.” 16 U.S.C. § 824a‐3(b), (b)(2) (emphasis added).
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FERC’s regulations expressly allow QFs to choose to either provide energy on an as available basis or pursuant to a legally enforceable obligation (LEO). See 18 C.F.R. § 292.304(d) (emphasis added);
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Alaska’s 1982 APUC Docket U‐81‐34 Order No. 4 effectively stamped out competitive energy development and private capital investments removing Alaska from market forces. Even this was supposed to be temporary until Alaska utilities were “sophisticated” enough to have competition.
“While marginal cost‐based purchase rates may be theoretically preferable, this approach goes well beyond the current state of the art of ratemaking for Alaskan electric utilities…” U‐81‐34‐4 pages 43‐44 Commission Findings and Conclusions
Now 32 years later…Alaska is suffering from a closed market anti‐competitive electrical regulatory system that was
supposed to be temporary.
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Incremental avoided costs are “avoided costs” …period.
• FERC regulations require states to ensure that utilities purchase power from QFs at a level that “equals” the utility’s “avoided costs,” unless the parties mutually agree otherwise. ‐ 18 C.F.R. § 292.304(b)(2).
• “[E]ach State regulatory authority shall … implement such rule … for each electric utility for which it has ratemaking authority.” ‐ 16 U.S.C. § 824a‐3(f)(1) (emphasis added).
PURPA and FERC Regulations
• Under both PURPA and FERC regulations, “avoided costs” are defined as the “incremental costs to an electric utility of electric energy or capacity or both which, but for the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source.”
‐ 16 U.S.C. § 824a‐3(d); 18 C.F.R. § 292.101(b)(6).
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Recognize that competition is good and that IPP’s play a vital role in lowering Alaskan’s electrical rates with Wholesale Energy Market Competition
Recognize that our State Energy Plan was only a first goal setting step that directs fiscal and regulatory regime to support private energy development.
Next Step is to collaborate, hear and pass a Competitive Energy Bill (similar to last year's SB 217) being circulated around by Senator John Coghill along with other Senators and Representatives.
All transmission in Alaska should be open access, at the same cost to all participants, in a non‐discriminatory system. Fair and equal Access to transmission lines built on public funds
Streamlining of red tape and reducing government regulatory costs
Reduce public risk and reduce public expenditures by statutorily encouraging and supporting privately developed and operated Alaska energy projects
These actions reduce Alaskans electrical costs now and in the future and will create incentives for private investment in Alaska
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Alaskans deserve a regulatory regime that is PURPA compliant (non‐discriminatory),
competitive, and fair and is within the spirit and intent of the State Energy Policy.
Clean, fair, open, judicious.
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Our aim is to establish open and fair competition and market opportunities in the Alaskan electrical supply industry
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