Energy Projects, Programs and Policy: Important Distinctions for Alaska’s Future

Chris Rose

Executive Director

Renewable Energy Alaska Project (REAP)

REAP Monthly Forum

Loussac Library

Anchorage, Alaska

January 9, 2014

Every year it’s estimated Alaskans spend at least $5

BILLION on energy

That’s $100 BILLION over the next 20 years, much of which will leave

Alaska’s economy

Renewable Energy is Risk Management:Worldwide Energy Use Expected to Double by 2050

800

600

400

200

01970 1990 2010 2030 2050

ProjectedTo Date

Year

QuadrillionBTUs

Doing More with Less

• Energy efficiency reduces the amount of energy consumed while still delivering the same quality of energy.

• Energy conservation requires conscious decisions and behavior changes that result in reductions in energy consumption.

Advantages of Renewable Energy

• Stably Priced (no fuel costs)

• Clean

• Local

• Inexhaustible

Alaska’s Emerging Technology Opportunities

• Hybrid systems

• Efficient Building Technologies

• Tidal and wave power

• Energy storage

• Electric transportation

The three “P” Words

Declaration of state energy policyAS 44.99.115 (HB 306) 2010

• The State of Alaska recognizes that the state's economic prosperity is dependent on available, reliable, and affordable residential, commercial, and industrial energy to supply the state's electric, heating, and transportation needs.

• The state also recognizes that worldwide supply and demand for fossil fuels and concerns about global climate change will affect the price of fossil fuels consumed by Alaskans and exported from the state to other markets.

• In establishing a state energy policy, the state further recognizes the immense diversity

of the state's geography, cultures, and resource availability.

Difference between a Goal and a Mandate

• 15% energy use reduction by 2020 goal

• 50% renewable electricity by 2025 goal

• 25% public building retrofit by 2020 mandate with $250 million revolving loan fund

What’s the State’s Implementation

Plan?

11

State of Alaska Energy Project Spending Commitments Since 2008

0

100

200

300

400

500

600

700

800

State Clean Energy Programs

• Renewable Energy Fund– So far $227.5 million appropriated through FY 2014– $20 million in Governor’s FY 15 budget

• Weatherization and Rebate Program– So far, $560 million appropriated through FY 2014– $46.5 million in Governor’s FY 15 budget

• Emerging Energy Technology Fund – So far, $12 million appropriated (including $5 million from

Denali Commission)– Nothing in Governor’s FY 15 budget

Criteria?

• Technical & Economic Feasibility– Life Cycle Cost Analysis

• Matching Funds• Cost of Energy• Economic and Other Alaska Benefit• Project Readiness• Local Support• Sustainability

Alaska North Slope Oil Production

Alaska legislature facing first budget deficit in nearly a decadeAlexandra Gutierrez, APRN

January 24, 2013

Deficit spending forecast jumps past $3 billion as Parnell lays out 2015 budgetAlex DeMarban, Alaska DispatchDecember 12, 2013

Spending in focus as revenue dipsTim Bradner, Alaska Journal of CommerceJanuary 9, 2014

Legislative Appropriations to AHFC Energy Efficiency Programs

2008 2009 2010 2011 2012 2013 2014 2015$0

$50

$100

$150

$200

$250

Weatherization ProgramHome Energy Rebate Program

Legislative Appropriations to Alaska Renewable Energy Fund

Round I (FY 09)

Round II (FY 10)

Round III (FY 11)

Round IV (FY 12)

Round V (FY 13)

Round VI (FY 14)

Round VII (FY 15)

$0

$20

$40

$60

$80

$100

$120

Alaska Renewable Energy Fund Ap-propriations (in millions)

What are others doing?

Federal Production Tax Credit (PTC)

• Enacted in 1992 to level energy playing field• Production based incentive• 2.3 cents/kWh for wind• Expiration date varies by technology

• Wind expired December 31, 2013

• PROVIDES NO CERTAINTY TO INDUSTRY AND IS NOW EXPIRED

Business Energy Investment Tax Credit (ITC)

• 30% up-front tax credit in lieu of 10 year PTC• Multiple Technologies• Expired for wind December 31, 2013

• PROVIDES NO CERTAINTY TO INDUSTRY AND IS NOW EXPIRED

Feed-in Tariffs• Designed to accelerate rapid investment in renewable energy

• Performance based

• Offers long-term (20 year) contracts to producers based on the cost of generation of the technology

• Technologies such as solar PV and tidal power are offered a higher prices, reflecting costs that are higher at that moment

• Provides guaranteed grid access

• Often include "tariff degression,” a mechanism that ratchets down the price paid (or tariff) over time.

• PROVIDES LONG-TERM PRICE CERTAINTY TO INDUSTRY

Germany’s Policy has Been Copied by Others, for Better and Worse

Feed-In tariffs have been enacted in over 50 countries including:

Algeria, Australia, Austria, Belgium, Brazil, Canada, China, Cyprus, the Czech Republic, Denmark, Estonia, France, Greece, Germany, Hungary, Iran, Republic of Ireland, Israel, Italy, Kenya, the Republic of Korea, Lithuania, Luxembourg, Japan, the Netherlands, Portugal, South Africa, Spain, Switzerland, Tanzania, Thailand, and Turkey

Challenges• FIT policies do not address the barrier posed by the higher up-front costs of

RE systems, in contrast to rebate programs and other up-front "capacity-based" incentives.

• FIT policies can put near-term, upward pressure on electricity rates, particularly if high-cost technologies like PV are included in large amounts

• Well-designed FIT policies require a significant up-front administrative commitment to design the policy and to establish FIT payments based on the levelized cost of renewable energy generation.

• FIT policies designed to include guaranteed grid interconnection, regardless of location on the grid, can lead to less-than-optimal project siting.

• Accounting for changes in technology costs accurately remains a challenge.

Feed-In Tariffs in the United States

• Municipal Programs in California and Florida

• Small pilot programs in Vermont and Oregon

• State legislation being considered in Maine, New York, Michigan, Illinois, Minnesota, and Indiana

Efficiency and Conservation

It is the policy of the state to…

(1) Institute a comprehensive and coordinated approach to supporting energy efficiency and conservation by:

(A) Encouraging statewide energy efficiency codes for new and renovated residential, commercial, and public buildings;

(B) Decreasing public building energy consumption through conservation measures and energy-efficient technologies; and

(C) Initiating and supporting a program to educate state residents on the benefits of energy efficiency and conservation, including dissemination of information on state and federal programs that reward energy efficiency;

(2) Encourage economic development by:(A) Promoting the development of renewable and alternative energy resources, including geothermal, wind, solar, hydroelectric,

hydrokinetic, tidal, and biomass energy, for use by Alaskans;

(B) Promoting the development, transport, and efficient use of nonrenewable and alternative energy resources, including natural gas, coal, oil, gas hydrates, heavy oil, and nuclear energy, for use by Alaskans and for export;

(C) Working to identify and assist with development of the most cost-effective, long-term sources of energy for each community statewide;

(D) Creating and maintaining a state fiscal regime and permitting and regulatory processes that encourage private sector development of the state's energy resources; and

(E) Promoting the efficiency of energy used for transportation;

(3) Support energy research, education, and workforce development by investing in:(A) Training and education programs that will help create jobs for Alaskans and that address energy conservation, efficiency, and

availability, including programs that address workforce development and workforce transition; and

(B) Applied energy research and development of alternative and emerging technologies, including university programs, to achieve reductions in state energy costs and stimulate industry investment in the state;

(4) Coordinate governmental functions(A) By reviewing and streamlining regulatory processes and balancing the economic costs of review with the level of regulation necessary

to protect the public interest;

(B) By using one office or agency, as may be specified by law, to serve as a clearinghouse in managing the state's energy-related functions to avoid fragmentation and duplication and to increase effectiveness; and

(C) By actively collaborating with federal agencies to achieve the state's energy goals and to meet emissions, renewable and alternative energy, and energy production targets.

Heating Bills are Killing Alaskans

• Many people in rural areas are now paying more than 50% of their take-home pay on energy.

• Heating bills of $800-1,000 per month are not uncommon in rural areas. Fairbanks is not far behind.

• Fuel switching in Southeast Alaska is having unintended consequences.

• Almost all of the state except Anchorage is feeling the pinch.

Today, nearly 80% of rural communities are dependent on

diesel fuel for their primary energy needs.

How Alaskans Heat Their Buildings

Building Cost over 40 Years: Real World Costs*

Operation

Alterations

Financing

Construction

50%11%

14%

25%

*ASHRAE - American Society for Heating, Refrigeration & Air Conditioning Engineers

Energy Performance Contracting

Benefits of Efficient Buildings• Utility cost savings

• Maintenance cost reductions

• Increased value

• Tax benefits

• Risk mitigation

• Public relations

• Higher morale & improved productivity

AHFC Weatherization and Rebate Program Summary

• Over 32,000 homes completed

• Average rebate recipient has saved 34%

• $386.5 million expended so far

• Created a 2,500 - 4,000 jobs

• TOTAL ANNUAL SAVINGS: 19.2 MILLION GALLONS OF HEATING OIL EQUIVALENT

2012 State Energy Efficiency Scorecard

AEEE scores states based on:Utility Public Benefits Programs (40%), Transportation Policies (18%), Building Energy Codes (14%), Combined Heat and Power (10%), State Gov. Initiatives (14%), Appliance Efficiency Standards (4%)

American Council for a Energy-Efficient Economyhttp://www.aceee.org/sites/default/files/publications/researchreports/e12c.pdf

Property Assessed Clean Energy (PACE)..www.dsireusa.org / April 2013.

29 states, + Washington DC, authorize PACE (27 states have passed legislation and HI

permits it based on existing law).

29 states, + Washington DC, authorize PACE (27 states have passed legislation and HI

permits it based on existing law).

*The Federal Housing Financing Agency (FHFA) issued a statement in July 2010 concerning the senior lien status associated with most PACE programs. In response to the FHFA statement, most local PACE programs have been suspended until further clarification is provided.  

Property Assessed Clean Energy (PACE)

• Property owners receive 100% financing from local government, repaid as a property tax assessment

• Voluntary: those who choose not to participate see no change to their taxes or assessments

• 31 states and the District of Columbia have PACE enabling legislation

• Benefits: Saves consumers money on utility bills, tax neutral and no exposure to general fund, promotes local jobs

Statewide Integrated Residential Building Code

• Alaska’s structure of building codes is confusing and complex

• Energy Efficiency codes would be modeled after existing BEES and IRC standards

• Recognizes region specific efficiency and safety needs

• Provides increased simplicity, safety and savings that spur economic development and job creation

Alaska’s Challenge:

• Become the place with the most energy efficient building stock in the world in 20 years

• Increase the capacity already built by CCHRC and others

38

State of Alaska Energy Project Spending Commitments Since 2008

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100

200

300

400

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600

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Alaska North Slope Oil Production

Benefits of Long Term Policy

• Policy certainty lowers risk

• Lowered risk means:• Lower financing costs – up to 30% lower• More investment• Continued innovation• Economic prosperity

What RE and EE Can Do For Alaska:

• Reduce fossil fuel use and imports

• Stabilize energy prices

• Attract investment

• Diversify our economy and create jobs

• Help us remain an “energy state”

1,000 Alaska Energy StoriesWhy is REAP Sharing Stories?1. Personal stories humanize energy issues so people can relate. 2. Many people (in the railbelt) don’t know where their energy

comes from or the impacts of using energy.3. Our attention spans are short! 4. Videos are an effective way to spread our message: we can’t

expect people to read reports.

Our Objective:Maintain a steady stream of new stories to help foster

engagement in energy issues in Alaska.

Thank you!

www.realaska.org