House Bill 301 and Senate Bill 179 introduced by Gov. Mike Dunleavy to the Alaska Legislature would mandate the increased use of renewable energy for power generation in the Railbelt. The bills have started working their way through the legislative process. The bills, while promoting a major move towards the use of renewable energy in Alaska, raise interesting issues regarding the practicalities of making a major transition from traditional sources of electrical power.
Under the proposed legislation a renewable portfolio standard, or RPS, would apply to any Alaska electric utility that operates under the oversight of an electric reliability organization. In practice, this means that the RPS would apply to the Railbelt region, where the Regulatory Commission of Alaska has recently mandated the formation of an ERO, under the terms of Senate Bill 123, passed during last year’s legislative session.
Applications by companies to the RCA for certification as the Railbelt ERO are expected soon.
Up to 80% renewable energy mandated
The proposed RPS legislation would require each Railbelt electric utility to use renewable energy resources to supply 20% of its electricity by Dec. 31, 2025; 30% by Dec. 31, 2030; 55% by Dec. 31, 2035; and 80% by Dec. 31, 2040. The RPS implementation would be managed by the ERO and regulated by the Regulatory Commission of Alaska. Beginning on March 1, 2025, each utility would need to submit annual reports to the commission, documenting the utility’s progress towards meeting the RPS goals.
The proposed legislation would also require each utility to issue renewable energy credits in association with renewable energy sourced electricity that it delivers to its customers. And the commission would be able to fine a utility that does not meet the requirements of the RPS.
Under the terms of the legislation renewable energy includes wind power, solar power, energy from moving water and energy from waste from energy systems such as biofuels, landfill gas and geothermal energy. The use of fossil fuels and nuclear power are specifically excluded.
The bill requires the RCA to develop regulations for implementing the statute within two years of the passage of the bill.
Utilities support a carbon reduction standard
In a Jan. 21 letter to the governor the five Railbelt electric utilities said that the utilities are “aligned in our support around the concept of a sensible and carefully constructed renewable or carbon reduction standard for the Railbelt system.” The utilities said that they have commissioned a study to determine what it is possible to achieve in practice and are participating with the state in a study aimed at a better understanding of the physical capabilities of the electrical system. One issue that must be addressed is the need for investment in improving the capabilities of the Railbelt electricity transmission system, the utilities commented. The utilities also commented that there need to be measures to limit any electricity rate increases and any threats to electricity supply reliability. Other issues raised by the utilities include the need to prioritize the benefits and acceptable costs for ratepayers, and the need to remain flexible in response to the rapidly evolving nature of the electricity industry.
Proponents of renewable energy are clearly very supportive of the governor’s proposals. During a Feb. 16 RCA public meeting, Andrew McDonnell, vice president of Alaska Renewables, commented that the deployment of renewable energy systems across the Railbelt has lagged behind renewable energy deployment elsewhere in the United States.
“We see renewables as an important economic opportunity to lower electrical rates, retain money in our local communities, spur new business and citizen innovation, create new jobs, and reduce pollution, including greenhouse gases, and improve our air quality,” McDonnell said.
Dunleavy letter to RCA
In a Feb. 15 letter to the RCA, Dunleavy said that the dependence of the Railbelt on gas-fired power generation will drive escalating rises in the cost of electricity over the coming decades. And persisting along this path of increasing costs will inevitably lead to economic decline in the Railbelt, as businesses seek lower cost locations in which to operate, Dunleavy wrote.
The RPS target of 80% of electrical power coming from renewables equates to fuel costs savings of a little more than $500 million per year, Dunleavy wrote. He also commented that transmission infrastructure upgrades are already needed, regardless of whether the proposed RPS is mandated.
Although the proponents of increased renewable energy use see this as a long-term means of minimizing electricity costs in the Railbelt, the mandating of an RPS would presumably place a renewables policy as an overarching criterion in RCA regulation of the Railbelt electrical system. Traditionally, the primary objectives of RCA regulation are to minimize costs for electricity consumers while ensuring adequate electricity supply reliability.
In recent years Southcentral utilities have constructed new, efficient gas-fired power stations. The utilities are recovering the costs of these power stations through their electricity rates.
During the RCA’s Feb. 16 meeting the commissioners agreed not to take a policy position on the proposed legislation, nor will the commission open a docket on the issue. The commissioners anticipate providing testimony to the Legislature on the RPS bills.
AEA overview of the situation
In a Feb. 23 meeting of the Senate Labor and Commerce Committee, Curtis Thayer, executive director of Alaska Energy Authority, provided some of the background to the proposed legislation.
“Senate Bill 179 promotes energy independence, long term cost reductions and competitive markets in Alaska’s Railbelt,” Thayer said.
Thayer pointed out that back in 2010 the Legislature had passed an act requiring the state to obtain 50% of its electricity generation from renewables and alternative energy sources by 2025. At present 27% of electricity in the state as whole comes from hydropower and 2% from other forms of renewable energy. Natural gas primarily accounts for the rest of the power generation, Thayer said.
Currently the Bradley Lake hydropower facility in the southern Kenai Peninsula, with its recently completed Battle Creek diversion, meets about 10% of the Railbelt electricity needs. And, at about 4 cents per kilowatt-hour, Bradley Lake supplies the cheapest power in the region. AEA is currently investigating what it refers to as the Dixon Diversion Project, a development project that could increase the Bradley Lake contribution to Railbelt electricity supplies to 16% or 17%, Thayer said.
In 2011 the Legislature began a project aimed at building a major hydroelectric facility near Watana on the upper Susitna River. The project was put on hold in 2017 while in the process of preparing an application for a Federal Energy Regulatory Commission license. Dunleavy took the project out of abeyance in 2019, Thayer said. At this point a new cost-benefit analysis for the project is needed, he said.
It would be possible to obtain 60% of Alaska’s electricity from renewables during the life of a Susitna-Watana hydropower system or some other renewable resources, Thayer said. Possibilities for increased renewable energy include wind and solar farms at strategic locations in the Railbelt region.
Transmission upgrades needed
Whatever the eventual solution to the renewable energy conundrum, the Railbelt transmission system will require some significant upgrades. Thayer commented that, even without the Dixon Diversion, the aging transmission system on the Kenai Peninsula is now operating at full capacity - AEA is working with the electric utilities on a plan for upgrading the system. And the transmission intertie between Southcentral and the Fairbanks region suffers line loss of power. To accommodate the intermittency of renewable energy sources, a battery energy storage system in Fairbanks needs upgrading, and similar storage systems need to be installed in Southcentral and in Homer, on the Kenai Peninsula, Thayer said.
Thayer commented that, with the bonding for the original construction of Bradley Lake now having been paid off, there is some significant funding available that could be used for transmission system upgrades, possibly including a second transmission line between the Kenai Peninsula and Southcentral.
He also said that there will be future use for natural gas in the Cook Inlet region for some power generation and for home heating, with some potential also for in-state industrial and mining use. There could also be future use of natural gas for hydrogen production.
Thayer commented that the governor’s concept for renewable energy targets is bold and that the governor is open to ideas for changes to his proposal.
“This is a work in progress as we move towards this new, clean energy in Alaska,” Thayer said.
