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A bill for clean energy
Railbelt electric utilities support intent of targets for future energy sources
Alan Bailey for Petroleum News
During its March 7 meeting the Alaska House Resources Committee gathered comments from Alaska Railbelt electric utilities on House Bill 368, a bill designed to enact a clean energy standard for the generation of electricity in the Alaska Railbelt. Officials from utilities Homer Electric Association, Matanuska Electric Association and Golden Valley Electric Association expressed positive views of the bill, which would set a target of 35% clean power generation by Dec. 31, 2036, and 60% of clean power generation by Dec 31, 2051. These target dates would be delayed if the Railbelt electricity transmission system is not upgraded to meet the minimum capabilities required to support the shipment of the clean energy.
The renewable energy portfolio standard During the 2023 legislative session two bills were introduced, Senate Bill 101 and House Bill 121, proposing a renewable energy portfolio standard, or RPS, for Alaska. The RPS would require all electric utilities in the state to supply at least 25% of their electricity from renewable sources by Dec. 31, 2027, 55% by Dec. 31, 2035, and 80% by Dec. 31, 2040. Financial penalties would be assessed for utilities that do not meet the RPS targets. These bills were strongly supported by advocates for the use of renewable energy, while electric utilities raised questions over the potential impacts on electricity costs and reliability. The Regulatory Commission of Alaska formed a docket to gather information relevant to the proposed RPS and in December passed a motion opposing the proposal.
Neither of the RPS bills has yet been reviewed during the current legislative session.
A different approach The proposals in HB368 differ significantly from the proposed RPS. Firstly, the clean energy standard would include nuclear power and generation using low sulfur coal, as well as renewable energy sources such as wind, solar, tidal and geothermal energy. If power generation produces carbon dioxide, the carbon dioxide emissions would need to be offset by an amount of carbon dioxide absorbed or removed from the atmosphere. Secondly, the implementation targets for the proposed clean energy standard are less aggressive than those in the RPS. Thirdly, it would be possible for the Regulatory Commission of Alaska to waive the clean energy standards under specific extenuating circumstances, including the absence of an electricity transmission system that is capable of supporting the clean energy goals. And fourthly, under the clean energy standard utilities could gain tax credits by achieving the required goals, rather than being financially penalized for not meeting the goals. One concern about the penalties associated with the RPS relates to the question of how the utilities would recover the associated costs.
During the March 7 House Resources meeting Brandon Spanos, acting director for the Department of Revenue Tax Division told the committee that at this stage the department did not yet have an estimate of the impact on state revenues of the tax credits proposed in the bill.
Perspectives of electricity utilities Daniel Heckman, regulatory manager for Fairbanks based Golden Valley Electric Association, told the committee that, while GVEA has yet to adopt a formal position on HB 368, he does think that the bill has addressed many of the concerns associated with the RPS bills. For example, the target dates in HB 368 are much more achievable than those in the proposed RPS. GVEA is also pleased that the proposed legislation recognizes the need to build out an adequate transmission system, Heckman said.
Keriann Baker, chief strategic officer for Homer Electric Association, characterized HB 368 as "a step in the right direction." She particularly commended the removal of the penalties associated with the RPS, saying that HEA would have to pass on the penalty costs to its members, some of whom would be struggling to afford them.
HEA is especially concerned about its high level of dependence on Cook Inlet gas, most of which comes from a single supplier. The utility has been seeking ways of diversifying its energy sources, while also recognizing that generation technologies are changing rapidly. And HEA has adopted a policy requiring the utility to become more fuel and energy diverse, Baker said.
Baker also commented on the limitations of only having a single transmission line that connects the Kenai Peninsula electrical system with the rest of the Railbelt. But, with a relatively small population, there is a significant issue with how to recover the cost of any major transmission system upgrade, she suggested. On the other hand, it should be possible to transmit electrons across the entire Railbelt, to be able to achieve economies of scale and to be able to buy power at the lowest cost.
MEA has similar goals Julie Estey, chief strategy officer for Matanuska Electric Association, said that MEA already has its own goal of achieving 50% clean energy by 2050. The utility supports the manner in which HB 368 specifies attainable goals that align quite closely with MEA's own goals, she said.
"MEA is supportive of a clean energy standard with incentives that can be a catalyst for change and not set up to fail," Estey said.
MEA views these goals as realistic but also an aspirational stretch because of a number of factors, including the limitations of the existing electric system, the realities of rate making, the current regulatory and permitting environment, and the harsh environment in Alaska, she commented.
Estey expressed MEA's support for a number of provisions within the bill, including a recognition that energy efficiency and the renewable energy production by consumers can offset some use of natural gas fueled power generation. And the proposed tax credits are a creative means of incentivizing change, she said.
In terms of the inclusion of coal within the clean energy specification, Estey commented that coal fueled generation could have a lower environmental impact and lower cost than the import of liquefied natural gas.
Both Estey and Baker commented that the cost of renewable power is now becoming competitive with natural gas fueled power generation. At the same time, power supply reliability is essential to everyone. The clean energy standard could be a catalyst for an energy transition, Estey said.
Need for matching state funds for transmission system Given the critical importance of the transmission system to the future of reliable, affordable and diverse energy supplies in the Railbelt, Estey strongly urged the Legislature to provide the necessary matching funds for a recently awarded $206-million Department of Energy grant for building a second transmission line from the Kenai Peninsula to the Anchorage region. The state has recently applied for a further federal grant for upgrading the transmission line from Southcentral up to Fairbanks, she said. Estey characterized the federal funding as a once in a generation opportunity.
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