[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
CHARTING A CLEAN ENERGY FUTURE FOR THE INSULAR AREAS
=======================================================================
JOINT OVERSIGHT FIELD HEARING
before the
SUBCOMMITTEE ON INSULAR AFFAIRS
joint with the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
Saturday, April 12, 2008, in Frederiksted, St. Croix, U.S. Virgin
Islands
__________
Serial No. 110-66
__________
Printed for the use of the Committee on Natural Resources
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
or
Committee address: http://resourcescommittee.house.gov
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41-819 PDF WASHINGTON : 2008
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COMMITTEE ON NATURAL RESOURCES
NICK J. RAHALL, II, West Virginia, Chairman
DON YOUNG, Alaska, Ranking Republican Member
Dale E. Kildee, Michigan Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American Elton Gallegly, California
Samoa John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii Wayne T. Gilchrest, Maryland
Solomon P. Ortiz, Texas Chris Cannon, Utah
Frank Pallone, Jr., New Jersey Thomas G. Tancredo, Colorado
Donna M. Christensen, Virgin Jeff Flake, Arizona
Islands Stevan Pearce, New Mexico
Grace F. Napolitano, California Henry E. Brown, Jr., South
Rush D. Holt, New Jersey Carolina
Raul M. Grijalva, Arizona Luis G. Fortuno, Puerto Rico
Madeleine Z. Bordallo, Guam Cathy McMorris Rodgers, Washington
Jim Costa, California Louie Gohmert, Texas
Dan Boren, Oklahoma Tom Cole, Oklahoma
John P. Sarbanes, Maryland Rob Bishop, Utah
George Miller, California Bill Shuster, Pennsylvania
Edward J. Markey, Massachusetts Bill Sali, Idaho
Peter A. DeFazio, Oregon Doug Lamborn, Colorado
Maurice D. Hinchey, New York Mary Fallin, Oklahoma
Patrick J. Kennedy, Rhode Island Adrian Smith, Nebraska
Ron Kind, Wisconsin Robert J. Wittman, Virginia
Lois Capps, California
Jay Inslee, Washington
Mark Udall, Colorado
Joe Baca, California
Hilda L. Solis, California
Stephanie Herseth Sandlin, South
Dakota
Heath Shuler, North Carolina
James H. Zoia, Chief of Staff
Rick Healy, Chief Counsel
Christopher N. Fluhr, Republican Staff Director
Lisa Pittman, Republican Chief Counsel
------
SUBCOMMITTEE ON INSULAR AFFAIRS
DONNA M. CHRISTENSEN, Virgin Islands, Chairwoman
LUIS G. FORTUNO, Puerto Rico, Ranking Republican Member
Eni F.H. Faleomavaega, American Elton Gallegly, California
Samoa Jeff Flake, Arizona
Raul M. Grijalva, Arizona Don Young, Alaska, ex officio
Madeleine Z. Bordallo, Guam
Nick J. Rahall, II, West Virginia,
ex officio
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
JIM COSTA, California, Chairman
STEVAN PEARCE, New Mexico, Ranking Republican Member
Eni F.H. Faleomavaega, American Louie Gohmert, Texas
Samoa Bill Shuster, Pennsylvania
Solomon P. Ortiz, Texas Bill Sali, Idaho
Rush D. Holt, New Jersey Adrian Smith, Nebraska
Dan Boren, Oklahoma Steve Scalise, Louisiana
Maurice D. Hinchey, New York Don Young, Alaska, ex officio
Patrick J. Kennedy, Rhode Island
Hilda L. Solis, California
Nick J. Rahall, II, West Virginia,
ex officio
------
CONTENTS
----------
Page
Hearing held on Saturday, April 12, 2008......................... 1
Statement of Members:
Christensen, Hon. Donna M., a Delegate in Congress from the
Virgin Islands............................................. 1
Prepared statement of.................................... 3
Costa, Hon. Jim, a Representative in Congress from the State
of California.............................................. 4
Prepared statement of.................................... 5
Shuster, Hon. Bill, a Representative in Congress from the
State of Pennsylvania...................................... 6
Statement of Witnesses:
Blaylock, Frazier, Director of Federal Government Affairs,
Covanta Holding Corporation................................ 51
Prepared statement of.................................... 53
Bond, D. Drew, Acting Director of Commercialization and
Deployment, Office of Energy Efficiency and Renewable
Energy, U.S. Department of Energy.......................... 69
Prepared statement of.................................... 71
Cole, Donald G., Vice Chair, Virgin Islands Public Services
Commission................................................. 23
Prepared statement of.................................... 24
Hodge, Hugo, Jr., Executive Director, Virgin Islands Water
and Power Authority........................................ 16
Prepared statement of.................................... 18
Miller, Darryl E., President, St. Croix Alliance to Protect
Utility Ratepayers......................................... 26
Prepared statement of.................................... 28
Nicholson, Robert J., III, President, Sea Solar Power
International, LLC......................................... 40
Prepared statement of.................................... 42
Powell, James R., Senior Policy Advisor, Southern States
Energy Board............................................... 54
Prepared statement of.................................... 57
Pula, Nikolao, Acting Deputy Assistant Secretary for Insular
Affairs, U.S. Department of the Interior................... 65
Prepared statement of.................................... 67
Resor, James P., Chief Financial Officer, groSolar........... 43
Prepared statement of.................................... 45
Richards, Hon. Usie R., Senate President, 27th Legislature of
the Virgin Islands......................................... 7
Prepared statement of.................................... 9
Smith,, Bevan R., Jr., Director, Virgin Islands Energy Office 11
Prepared statement of.................................... 13
Additional materials supplied:
List of documents submitted for the record................... 79
JOINT OVERSIGHT FIELD HEARING ON ``CHARTING A CLEAN ENERGY FUTURE FOR
THE INSULAR AREAS.''
----------
Saturday, April 12, 2008
U.S. House of Representatives
Subcommittee on Insular Affairs, joint with the
Subcommittee on Energy and Mineral Resources
Committee on Natural Resources
Frederiksted, St. Croix, U.S. Virgin Islands
----------
The Subcommittees met, pursuant to call, at 10:05 a.m., at
Frits E. Lawaetz Conference Room, Legislature of the Virgin
Islands, Frederiksted, St. Croix, U.S. Virgin Islands. Hon.
Donna Christensen [Chairwoman of the Subcommittee on Insular
Affairs] Presiding.
Present: Representatives Christensen, Costa and Shuster.
STATEMENT OF THE HON. DONNA M. CHRISTENSEN, A DELEGATE IN
CONGRESS FROM THE VIRGIN ISLANDS
Mrs. Christensen. Good morning. The oversight hearing by
the Subcommittee on Insular Affairs and the Subcommittee on
Energy and Mineral Resources will come to order. The
Subcommittees are meeting today to hear testimony on Charting a
Clean Energy Future for the Insular Areas.
Let me welcome everyone here this morning to this hearing.
As we have done in Guam, the Commonwealth of the Northern
Mariana Islands, and American Samoa, the Subcommittees today
are making history by having the first congressional hearing in
Frederiksted, St. Croix.
Thank you, Senate President Richards and the 27th
Legislature for making the St. Croix chambers available to us.
I want to also begin by welcoming my colleagues who join me
on the dais: The Chairman of the Subcommittee on Energy and
Minerals, Congressman Jim Costa from California, and
Representative Bill Shuster from Pennsylvania. I am grateful
that they have taken time away from their own districts to be
here for this important hearing.
And I want to acknowledge Chairman Costa's leadership of
his Subcommittee in working to maintain a healthy balance
between energy needs and conserving our nation's natural
resources. I believe we can all agree that the leadership that
he and the Subcommittee provides is more important than ever in
today's world of rising oil prices.
I am also very pleased to welcome my colleague,
Representative Bill Shuster. This is Mr. Shuster's fourth term
in Congress representing Pennsylvania's 9th District. In
addition to his membership on the Energy and Minerals
Subcommittee, Mr. Shuster serves on the Transportation and
Infrastructure Committee where he is the Ranking Member of the
Subcommittee on Railroads, Pipelines and Hazardous Materials.
The people of the Virgin Islands welcome both of you and
thank you for your interest in addressing these issues faced by
your fellow Americans living in the U.S. territories. And as we
go through this hearing, you will recognize that the residents
of the territories, in our case the Virgin Islands, will voice
concerns which are very similar to those of your own
constituents in California and Pennsylvania. And while the
entire country is feeling the pinch of increased utility costs,
you will also find that nowhere is it as severe as here in the
United States Virgin Islands and our fellow offshore areas.
I also want to welcome our witnesses, thank them for taking
time on this Saturday morning to present testimony at what I
expect to be the first in a series of hearings on the unique
energy challenges facing the insular territories.
In 2005, my colleagues and I worked with Natural Resources
Chairman, Nick Rahall, to update a 20-year-old energy
assessment done for the insular areas. The Department of the
Interior, together with the Department of Energy and
representatives of public power, completed that new assessment
in 2006.
This report should be viewed by all, as Congress has
renewed interest in seeing how well the challenges of reducing
energy cost to insular areas can be addressed. No one should
believe that Congress wishes for this report to sit for another
20 years before action is taken to lessen our territories'
reliance on imported fuel. Thus, our hearing this morning is
meant to further this process. Chairman Costa and I brought
local leaders, residents, industry representatives and
nongovernmental organizations together with Federal government
expertise to lay the groundwork in developing a plan which
would create a clean energy policy that can be implemented in
the future to benefit our U.S. territories.
To be frank, many in the U.S. mainland still view our U.S.
territories solely through sunglass lenses, but as we look
toward the future with clean and renewable energy in mind, the
attributes which bring tourists to our shores should also be
our sources of energy. Island breezes could power turbines, our
bright sun could charge batteries, our ocean and surf could be
the driving engines which bring unlimited energy out from our
sea onto our shores and into our homes.
I'm pleased that this hearing has generated a lot of
interest from my constituents. I want to thank Senator Ronnie
Russell of WSTX for carrying it live on radio so that it can
reach a broader audience. I'm also pleased that we have had the
active and meaningful engagement of our government industry,
NGO's and the Federal agencies.
And before I close, I just want to point out that despite
all of the obstacles and challenges that we do face, both WAPA
and the V.I. Energy Office have had their efforts recognized
nationally--and the Virgin Islands Department of Energy a few
years ago for its educational program for the NEED Project. A
few weeks ago, I was privileged to join Mr. Hodge, Mr. Rhymer,
and Ms. Dunn from WAPA as they received the Energy Star Partner
of the Year Award for Excellence in Energy Star Promotion.
Congratulations to both of you.
At this time the Chair would like to recognize Chairman
Costa, Chair of the Subcommittee on Energy and Mineral
Resources, for any statement that he might have.
[The prepared statement of Mrs. Christensen follows:]
Statement of The Honorable Donna M. Christensen, Chairwoman,
Subcommittee on Insular Affairs
Good morning.
I want to begin by welcoming all of our witnesses who agreed to
present testimony at this oversight field hearing convened jointly by
the Subcommittee on Insular Affairs and the Subcommittee on Energy and
Mineral Resources. I am joined on the dais by my colleagues, Energy and
Minerals Chairman Jim Costa (from California) and Representative Bill
Shuster (from Pennsylvania).
I want to acknowledge Chairman Costa's leadership of his
subcommittee to maintain a healthy balance between energy needs and
conserving our nation's natural resources. I believe that we can all
agree that the leadership he and his subcommittee provides is more
important than ever in today's world of rising oil prices.
I am also very please to welcome my colleague, Representative Bill
Shuster. This is Mr. Shuster's fourth term in Congress, representing
Pennsylvania's 9th District. In addition to his membership on the
Energy and Minerals Subcommittee, Mr. Shuster serves on the
Transportation and Infrastructure where he is the Ranking Member of the
Subcommittee on Railroads, Pipelines, and Hazardous Materials.
The people of the Virgin Islands welcome you to the Caribbean and
thank you for your interest in addressing the energy issues faced by
your fellow Americans living in U.S. territories. I believe that
throughout this hearing you will recognize that residents of the
territories, in our case the Virgin Islands, will voice concerns which
are similar to your own constituents in California and Pennsylvania.
However, the obvious challenges that residents of this and other
territories must overcome are isolation which prevents
interconnectivity or economies of scale; the lack of indigenous sources
of fossil fuels which has led to complete dependence of imported fuel;
and the ocean's corrosive environment which makes upkeep of energy
equipment difficult and costly.
In 2005, my colleagues and I worked with Natural Resources Chairman
Nick Rahall to update a twenty year old energy assessment done for our
insular areas. The Department of the Interior, together with the
Department of Energy and representatives of public power completed the
new assessment in 2006. This report should be viewed by all as a
Congress's renewed interest in seeing how well the challenges of
reducing energy costs to insular areas can be addressed. No one should
believe that Congress wishes for this report, to sit for another twenty
years before action is taken to lessen our territories' reliance on
imported fuel.
Thus, our hearing this morning is meant to further this process.
Chairman Costa and I have brought local leaders, residents, industry
representatives, and non-governmental organizations together with
federal government expertise to lay groundwork in developing a plan
which could create a clean energy policy that can be implemented in the
future to benefit our U.S. territories.
To be frank, many in the U.S. mainland view our U.S. territories
solely through sunglass lenses. But as we look toward the future with
clean and renewable energy in mind, the attributes which bring tourists
to our shores should also be our sources for energy. Islands breezes
could power turbines, our bright sun could charge batteries, our ocean
and surf could be the driving engines which bring unlimited energy out
from the sea--onto our shores, and into our homes.
I am pleased that this hearing has generated a lot of interest from
my constituents, but I am even more pleased that we have had the active
and willful engagement by industry, NGO's, and our federal agencies.
______
STATEMENT OF THE HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF CALIFORNIA
Mr. Costa. Thank you very much, Madame Chairwoman. It is
indeed our pleasure to be here this morning in the U.S. Virgin
Islands on the wonderful island of St. Croix to join with you
in focusing on a very important issue to not only the U.S.
Virgin Islands but to other insular territories that have
similar problems. I would go beyond and indicate that this is
also a matter of national security, especially when we look at
the importance of the refinery that is here in St. Croix, and
the role that it plays in providing energy to many of the
states in the mainland.
These islands truly are beautiful, and I have been most
welcomed since I've arrived, notwithstanding my head cold. The
fact is that we appreciate the Governor, and the President of
the Legislature, as well as other witnesses who will testify
before both Subcommittees here today and with our colleague,
Mr. Shuster, from Pennsylvania.
Your representative is a tenacious advocate on behalf of
the constituents of the U.S. Virgin Islands. I know because I
hear it on a weekly basis, and you should be proud of the hard
work that she does. She asked if we would be willing to bring
both Subcommittees together to come here to St. Croix for the
purpose of trying to deal with the challenges that we are
facing and the extremely high cost of energy rates that U.S.
citizens are facing here in the U.S. Virgin Islands, as was
noted by the Chairwoman, the second highest in the entire
United States--only exceeded by American Samoa.
So truly, when you look at the percentage of cost that
residents pay here as a part of their costs, their monthly
costs, a larger percentage of the family's monthly budget goes
to pay for the utilities. So, obviously, it's a pressing issue
that we must try to address.
It's important that we note that obviously these energy
challenges that we are facing are not just facing the U.S.
Virgin Islands, but they are facing the entire country of ours.
And at $100 a barrel of oil, it impacts our ability to deal
with our deficit; it impacts our ability to deal with
international issues. I submit that this war on terrorism that
we are fighting today, we are in fact financing both sides of
this war when we look at the costs that we are faced with in
Iraq and Afghanistan at $100 a barrel for oil because, of
course, countries that are not friendly to us are benefiting
from the high cost of that resource. There are a multitude of
reasons why we need to figure out strategies to reduce the cost
of energy for all U.S. citizens.
It's important that we look at the fact that the insular
territories' sky-high electrical rates and cost of foreign oil
are among the issues that are affecting these islands. While
these islands are not endowed as we know with an abundance of
natural--other types of natural resources--coal, oil or gas as
they have in Pennsylvania or they have in California--they are
blessed with some resources that the good Lord has shown a
willingness to provide and that, as the Chairwoman mentioned,
is this wonderful sun, the wind power, and the ocean power.
These if harnessed properly, I believe, can make major
improvements to the energy situation of these islands.
The second panel that we are going to hear from this
morning, as I understand, is going to provide testimony in
those areas of how we can reduce the dependency of oil as being
the sole source of electricity for the U.S. Virgin Islands.
And while there is a lot of work that is being done to
provide cleaner and more independency for the energy future of
the Virgin Islands, it's important that no matter how active
the government of the U.S. Virgin Islands is, and how tenacious
an advocate Representative Christensen is--because she
certainly is--you can't do it alone. And that's why she wanted
the Subcommittees to come here.
Our Subcommittees have different jurisdictions in natural
resources. We have the difficult challenge with the
Subcommittee on Energy and Mineral Resources, which I chair, to
protect public lands but, at the same time, try to take
advantage of the energy and the wealth that comes from them.
And that oftentimes is a difficult balancing act to perform.
But if we do our work well, it's essential to ensure that the
Federal government, the Department of Energy, look at all the
options.
One of the questions that I am going to continue to raise
this morning is the Memorandum of Understanding with Hawaii
that was established earlier this year, in January, to ensure
that Hawaii, which has a similar set of circumstances as the
U.S. Virgin Islands, obtain 70 percent of their energy from
renewable sources by the year 2030. I think a similar sort of
goal ought to be addressed as we look at the U.S. Virgin
Islands. I believe a similar partnership between the Governor,
the government in Washington and the insular areas is practical
and necessary.
The third panel we will be listening to this morning has
people from the Department of Energy and the Department of the
Interior who were instrumental in making that Hawaii
partnership happen. I am going to be addressing many of these
questions to them.
I look forward again to listening to all of you. I am
pleased to be in St. Croix. As I told your representative, when
I have come here in the past, it's strictly as a civilian with
my baseball cap on and my little sunglasses she talked about
earlier, as a sailor. One of my passions is to come to the
Caribbean and to kind of hide for a week or two and sail these
beautiful islands. Today I am here in an official capacity and
pleased to be so.
I thank you again, Madame Chairwoman, for allowing us to be
a part of your hearing. I yield back.
[The prepared statement of Mr. Costa follows:]
Statement of The Honorable Jim Costa, Chairman,
Subcommittee on Energy and Mineral Resources
Thank you very much, Chairwoman Christensen, and thank you for
inviting me to your beautiful islands for this hearing, where I have
experienced the most tremendous hospitality from everyone. I look
forward to the rest of my stay on the Virgin Islands, and in particular
hearing more about some of the challenges that you face with respect to
energy, and what we in Congress can do to try to ease some of those
burdens.
Because there is no doubt about it--those burdens are significant.
The energy problems that we face as a country are magnified in the
insular areas. The mainland produces about two-thirds of the energy
that it uses. But on the insular areas, you import essentially 100%.
Electricity prices are rising across the country, but here they are
over three times the national average. This situation is simply not
sustainable for the residents of the Virgin Islands and the other
insular areas. It is not sustainable for economic growth on these
islands. And, it is not sustainable for our environment or national
security. Guam, for example, hosts some of our most important military
assets in the Pacific, but it is entirely dependent on imported oil.
That's why we are here to talk about charting a clean energy future
for the insular areas ``a future that uses indigenous sources of energy
to lessen your dependence on imported oil and reduce your electricity
prices, while being friendlier to the environment at the same time.
I like the fact that we've titled this hearing ``Charting a Clean
Energy Future'' because I'm an avid sailor. But the title is more than
just an allusion to sailing. It also emphasizes that the reason the
Virgin Islands has such tremendous sailing--your beautiful ocean and
the winds that pass over it--can also hold the answer to your most
pressing energy challenges.
As Chairwoman Christensen pointed out, the same factors that make
this a paradise on earth--the sun, the breezes, the ocean--bless you
with a tremendous opportunity for generating energy from these
resources cleanly and sustainably. And whereas the small size of your
islands creates challenges, is also allows modestly sized renewable
energy projects to make a major impact.
I believe the Department of Energy recognized this when they signed
a Memorandum of Understanding to get the State of Hawaii to 70%
renewable power in just over twenty years. That is an incredibly
ambitious goal, but it is achievable. If the Department of Energy is
willing to come together with the governments of the insular areas,
then we can try to achieve similar goals for the U.S. Virgin Islands,
Guam, American Samoa, and the Commonwealth of the Northern Mariana
Islands. The energy situation faced by Hawaii and the insular areas are
similar, although in many ways the insular area challenges are even
more severe--a smaller infrastructure, higher electricity prices, and
even more frequent tropical storms. But if Hawaii can reach their clean
energy goals, then the insular areas can meet their energy goals as
well, and I look forward to hearing from our witnesses on how we can
best accomplish that together.
______
Mrs. Christensen. Thank you, Chairman Costa.
The Chair now recognizes Representative Shuster for any
opening statement he might have.
STATEMENT OF THE HON. BILL SHUSTER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA
Mr. Shuster. Thank you, Chairwoman. It's a pleasure to be
here back in the Virgin Islands. I'll start off just as Mr.
Costa ended. This is my first official visit here, but I've
been to the Virgin Islands many times. In fact, the last time I
was in St. Croix was in 1970. I was a young kid. We stayed at
the Grape Tree Bay Hotel. The second time to the Virgin Islands
was to St. Croix, but many times to St. Thomas and St. John
over the years. And for me I always have a warm spot in my
heart, if not on my skin, when I am in the beautiful sun here
in the Virgin Islands.
You have a very strong advocate in Washington in Chairwoman
Christensen in what she does. Not only is she an aggressive,
strong arm but, most importantly, effective in making sure that
the voice of the Virgin Islands is heard in the U.S. Congress.
So you should really appreciate all the efforts and work she
does--and she does a great job of it.
I am not going to repeat a lot of what my colleague said.
It's obviously critical, not only to the U.S. Virgin Islands,
but to the world what we are doing in energy, how we are going
to solve the crisis I believe we face in energy. I know that in
reading on the Virgin Islands the high cost of your electricity
here and what we need to do and what you have been doing trying
to reduce and conserve energy to help reduce those costs.
But in looking at new energy sources, I think it's
absolutely critical, not only the renewables, wind and solar,
but clean coal technology. I come from Pennsylvania, which is a
large coal producing state, and we want to find ways and we do
have ways today available to us and that we can use coal and
burn it clean and use it because we have a great source of it.
Coal gasification, turning coal into oil and gas to be able to
utilize that, it's something we must get serious about and
produce that in this country. And, of course, nuclear energy is
something we look at other countries around the world that's
producing--the French, for instance, produce 80 percent of
their electricity through nuclear power. It's safe, it's clean,
and we really need to pursue the development of a more robust
nuclear sector in this country.
And I know on these islands looking at smaller types of
facilities, talking briefly before about is it possible to
build a nuclear facility that's smaller. I know there are folks
out there looking at that. The Virgin Islands can be a
laboratory to develop those types of facilities, whether it's a
smaller coal-fired electric plant, whether it's a nuclear
facility that can be utilized, because there have been places
in the country that were able to develop it, we'll be able to
put that into practice.
And as Mr. Costa said, this is not just about the economy
and what it's doing to our economy, but it's a national
security issue. It should be very high, if not the highest on
our list of how we are tackling this challenge we have.
So I am pleased to be here. I look forward to learning a
lot today, look forward to hearing all our witnesses. With that
yield back. Thank you.
Mrs. Christensen. Thank you, Congressman Shuster.
I would now like to recognize the first panel of witnesses,
The Honorable Usie Richards, President of the 27th Legislature
of the Virgin Islands; Mr. Bevan Smith, Director of the Virgin
Islands Energy Office; Mr. Hugo Hodge, Executive Director of
the Virgin Islands Water and Power Authority; Mr. Donald Cole,
Vice Chair of the Public Services Commission; and Mr. Darryl
Miller, President of the St. Croix Alliance to Protect Utility
Ratepayers.
Mrs. Christensen. Thank you. The Chair now recognizes
Senate President Richards for his testimony.
STATEMENT OF HON. RAYMOND ``USIE'' RICHARDS,
PRESIDENT, 27TH LEGISLATURE OF THE VIRGIN ISLANDS
Mr. Richards. Pleasant good morning to one and all. It is
indeed a pleasure for me on behalf of the members of the 27th
Legislature to bring greetings to our Honorable Delegate, Donna
M. Christensen, in her position as Chairwoman of the
Subcommittee of Insular Affairs, along with your distinguished
Subcommittee members. And equally so, greetings are bestowed
upon The Honorable Jim Costa, Chairman of the Subcommittee on
Energy and Mineral Resources and his distinguished Subcommittee
members. I want to also say a pleasant good morning to
Representative Shuster. It's a pleasure to have you here from
Pennsylvania.
I believe that today it's most fitting that the Joint
Oversight Hearing on Charting a Clean Energy Future for the
Insular Areas be convened in the U.S. Virgin Islands, where
energy costs, existing resources, alternate sources and
revenues generated are paramount concerns for the Virgin
Islands and its residents.
I must therefore elaborate for a brief moment, because in
the Territory our most major concern is the factor that I am
sure will be discussed by the representatives of the Water and
Power Authority, the Levelized Energy Adjustment Cost, the LEAC
factor. Simply put, LEAC is the fuel charge, the cost to the
Virgin Islands Water and Power Authority to produce electricity
and water that is consumed by its customers. According to WAPA,
it does not profit from LEAC. The LEAC amount paid by each WAPA
customer is passed on directly to HOVENSA, the local oil
refinery formally HOVIC, a full subsidiary of Hess Oil.
Any Virgin Islander would tell you that LEAC makes up in
excess of one half of his or her monthly WAPA bill. The cost of
LEAC is ever-increasing. It's the foremost quandary affecting
the energy future of the Territory. Thus, it remains difficult
to chart the progression of LEAC costs and the projected future
impact on Virgin Islanders. This is due primarily to the fact
that as the cost of fuel increases worldwide, increases to the
LEAC becomes inevitable. At present, as all of us know, fuel
costs are well over $100 a barrel.
In December of 2007, the Virgin Islands Public Services
Commission approved WAPA's request for a LEAC increase for
electricity use from 19 cents per kilowatt hour to 25 cents per
kilowatt hour, resulting in a 34 percent increase in LEAC
electricity costs for every Virgin Islander. This means that
for every kilowatt hour a WAPA customer uses, WAPA charges 25
cents. LEAC costs for water use remained unchanged at 7.58
cents per kilowatt hour. WAPA's average customer uses
approximately 500 kilowatt hours monthly, and the average
customer's bill went up by 22 percent.
The question is what is being done today? There is
discussion on alternative sources of energies being explored.
WAPA is encouraging its customers to lower consumption of
electricity and water. Whether we speak of the alternative
sources that are existing today, charting a clean energy future
suggests that we should look toward alternative energy sources
which would, one, reduce pollution that is a by-product of
energy use; conserve non-renewable energy sources; help
preserve the ecological balance of the planet; help preserve
natural resources; and most importantly, promote the use of
renewable energy sources.
However, viable alternate energy sources must be researched
thoroughly before a commitment to use is made in the Territory.
Here I use the term ``viable'' because an alternate source of
energy has to be cost effective to the Territory. This would
include reasonable costs for start-up as well as reasonable
costs for required long-term maintenance. Moreover since the
Virgin Islands is now four distinct islands geographically, the
alternate source of energy must consider its capacity to be
applied on widespread basis to meet the needs of the
Territory's infrastructure and WAPA's residential and business
customers. Whether we speak of the alternate sources of wind
power, petroleum coke, solar power, and geothermal energy,
these are the ideas I think that we ought to consider.
But the proposal before WAPA to reduce the cost of energy
in the Territory are inclusive of some of these and possibly in
addition to those that I have mentioned. But at the end of
2007, they had released a request for proposals for alternate
sources of energy, according to WAPA and pre-qualified bid
responses were received from companies for wind, solar,
biomass, and ocean thermal energy. I believe approximately 18
companies expressed an interest.
But it should be made evidently clear by now that all of
the aforementioned proposed alternative sources of energy are
surely long term and have no impact on the current impact of
the pocketbooks of our residents. Today the most important
question to be addressed in the Virgin Islands is our ability
to immediately access the capital required to reduce the cost
of energy in the Virgin Islands.
This brings to me the often discussed and debated item of
gasoline excise tax. As you are aware, the HOVENSA oil refinery
on this island of St. Croix is one of the largest refineries in
the Western Hemisphere and has continuously served as a major
supplier of gasoline and various oil products to the U.S.
mainland. In turn, taxes collected from states on gasoline sold
within their states are collected by both the state and Federal
governments. A great percentage of these taxes are returned to
the states to support and finance their infrastructure
development. This act is of no controversy with the people of
the Virgin Islands.
What is of consequence to our people? It's heart wrenching
to acknowledge that existing Federal law mandates that products
produced in the Virgin Islands, shipped to the U.S. mainland,
where taxes are collected on this product, that the Virgin
Islands Government is reimbursed a percentage, if not all of
the taxes collected on these oil products.
It is evident that we must establish a mechanism to finance
the development, production, and distribution of clean energy
in the Virgin Islands. The Virgin Islands Government, despite
its willingness, does not possess the necessary capital to
assure a reduction in the current cost of energy, much less the
necessary capital to ascertain and retain clean, renewable and
sustainable energy. The time is now to begin the discussion and
take action on the return of gasoline excise taxes to the
Government of the Virgin Islands.
I thank you for this opportunity and look forward to a
healthy discussion on this matter. And, Madame Chairwoman,
today I thought that I should wear brown, because in our local
vernacular, things in the Virgin Islands are very brown, but I
wore green just like you today to hope that it's a bright
beginning so we could begin to address some of the problems
that are facing the people of Virgin Islands. Again, thank you
for this opportunity.
[The prepared statement of Mr. Richards follows:]
Statement of The Honorable Usie R. Richards,
Senate President--27th Legislature of the Virgin Islands
On behalf of the members of the 27th Legislature of the Virgin
Islands, I am honored in my capacity as Senate President to bring
greetings to The Honorable Donna M. Christensen, the Territory's
Delegate to Congress who is here today in her position as Chairwoman of
the Subcommittee on Insular Affairs along with her distinguished
Subcommittee Members. Equally so, greetings are bestowed upon The
Honorable Jim Costa, Chairman, Subcommittee on Energy and Mineral
Resources and his distinguished Subcommittee Members. I welcome each of
you to our beautiful Island of St. Croix! Enjoy its splendor and while
here, you are encouraged to contribute to our local economy by dining
and shopping in our hospitable establishments.
It is most fitting that a Joint Oversight Field Hearing on,
``Charting a Clean Energy Future for the Insular Areas'' be convened in
the U.S. Virgin Islands, where energy costs, sources, alternate sources
and revenues generated are paramount concerns for the Territory and its
residents. Please allow me the opportunity to elaborate a moment.
LEVELIZED ENERGY ADJUSTMENT CLAUSE (the LEAC Factor):
Simply put, LEAC is the fuel charge: the cost to the U.S. Virgin
Islands Water and Power Authority (WAPA) to produce electricity and
water that is consumed by its customers. According to WAPA, it does not
profit from LEAC; the LEAC amount paid by each WAPA customer is passed
on directly to HOVENSA, the local oil refinery.
Any Virgin Islander would tell you that LEAC makes up in excess of
one half of his or her monthly WAPA bill. The cost of LEAC is ever-
increasing. It is the foremost quandary affecting the energy future of
the Territory. Thus, it remains difficult to chart the progression of
LEAC costs and the projected future impact on Virgin Islanders. This is
due primarily to the fact that as the cost of fuel increases worldwide,
LEAC likewise increases. At present, fuel cost is now over $100 per
barrel!!
On December 1, 2007, the U.S. Virgin Islands Public Services
Commission approved WAPA's request for a LEAC increase for electricity
use from 19 cents per kilowatt hour to 25 cents per kilowatt hour,
resulting in a 34% increase in LEAC electricity costs for every Virgin
Islander. This means that for every kilowatt hour a WAPA customer uses,
WAPA charges 25 cents! LEAC costs for water use remained unchanged at
7.58 cents per kilowatt hour. WAPA's average customer uses 500 kilowatt
hours monthly, and the average customer's bill went up by 22%.
What is being done?
Alternate sources of energy are being explored
WAPA is encouraging its customers to lower consumption of
electricity and water
ALTERNATE SOURCES OF ENERGY:
``Charting a Clean Energy Future'' suggests that we should look
towards alternative energy sources which would 1) reduce pollution that
is a by-product of energy use; 2) conserve non-renewable energy
sources; 3) help preserve the ecological balance of the planet, and 4)
help preserve natural resources. However, viable alternate energy
sources must be researched thoroughly before a commitment to use is
made in the Territory. Here, I use the term ``viable'' because an
alternate source of energy has to be cost-effective to the Virgin
Islands. This would include reasonable costs for start-up as well as
reasonable costs for required long-term maintenance. Moreover, since
the U.S. Virgin Islands is now four distinct islands geographically
(St. Croix, St. John, St. Thomas and Water Island), the alternate
source of energy must have the capacity to be applied on a widespread
basis to meet the needs of the Territory's infrastructure and WAPA's
residential and business customers.
Some alternate sources of energy being explored presently include:
Wind Power: Wind-powered generators are used to produce
wind energy. It is a renewable source of energy; as long as there is
wind, this source of energy can be generated. No pollution is produced
from wind power therefore the environment is not contaminated.
Petroleum Coke: Petroleum Coke is a waste-product of the
Hovensa Oil Refinery that is the result of the process utilized to
refine oil using the catalytic cracking plant. This material when
efficiently burned provides an opportunity to produce clean energy.
Currently this material is in demand by off-island entities and thereby
is collected and shipped off-island.
Solar Power: Solar energy is obtained when the sun's rays
are collected into solar cells or solar thermal panels for conversion
into electricity. Solar power also is a renewable source of energy and
is non-pollutant. I am aware that a St. Croix family on the East End
(Jan Mitchell and Steffen Larsen) was recently honored for use of solar
power in their home.
Geothermal Energy: Geothermal power is derived from heat
energy beneath the earth. GeoNet BioFuels is a company recently
established on St. Croix as an alternate source to gasoline.
PROPOSALS BEFORE WAPA TO REDUCE THE COST OF ENERGY IN THE VIRGIN
ISLANDS:
At the end of November 2007, WAPA released a request for proposals
for alternate sources of energy. According to WAPA, pre-qualified bid
responses were received from companies for wind, solar, bio-mass and
ocean thermal energy. Eighteen (18) companies expressed an interest and
financial capability to sell power to WAPA. The respondents' proposals
are due by May 1, 2008.
GASOLINE EXCISE TAX:
As you are aware, the HOVENSA Oil Refinery, on this island of St.
Croix, is one of the largest refineries in the Western Hemisphere and
has continuously served as a major supplier of gasoline and various oil
products to the U.S. mainland. In turn taxes collected from states on
gasoline sold within their states are collected by both the state and
federal governments. A great percentage of these taxes are returned to
States to support and finance their infrastructure development. This
act is of no controversy with the people of the Virgin Islands. What is
of consequence to our people? It is heart wrenching to acknowledge that
existing Federal Laws mandates that products produced in the Virgin
Islands and shipped to the U.S. mainland, where taxes are collected on
this product, that the Virgin Islands Government is reimbursed a
percentage, if not all of the taxes collected on the oil products
shipped to the mainland. It is evident that we must establish a
mechanism to finance the development, production and distribution of
clean energy in the Virgin Islands. Our territorial government, despite
its willingness, does not possess the necessary capital to ascertain
and retain clean, renewable and sustainable energy. I thank you for
this opportunity and look forward to a healthy discussion on this
matter.
______
Mrs. Christensen. Thank you, Senate President Richards.
That is the purpose for which we are being here today, to look
for better days.
I did not state at the beginning of Senator Richards
testifying that the timing light on the table indicates when
time is concluded. But I didn't feel that I could come into his
own chamber and cut him off before he was finished, so we
allowed you to go over. Thank you for your testimony.
The Chair now recognizes Mr. Smith to testify. Mr. Smith,
in addition to being the Director of the V.I. Energy Office, is
testifying on behalf of the Governor is my understanding as
well. We invite you to testify for five minutes.
STATEMENT OF BEVAN SMITH, DIRECTOR,
VIRGIN ISLANDS ENERGY OFFICE
Mr. Smith. Thank you.
Good morning, Madame Chairwoman Christensen, Chairman
Costa, Representative Shuster, other members of the
Subcommittees, members in the audience and those listening on
radio. My name is Bevan Smith, Jr., and I have been working
with the Virgin Islands Energy Office for 25 years and served
in the capacity of the Director since 2004. It is a pleasure to
appear before you today to offer testimony on such a timely
subject matter, Charting a Clean Energy Future for the Insular
Areas.
The Virgin Islands is an unincorporated territory of the
United States located in the Lesser Antilles islands group
between the Atlantic Ocean and the Caribbean Sea.
The Territory faces many of the same problems encountered
by all small island nations with our relatively small electric
power system, limited interconnection, and generation units
that are based on older petroleum fueled technology with
relatively poor heat rates. This is further complicated by the
reliability criteria that require online generation to maintain
high spinning reserve margins in the absence of a supply grid.
These conditions lead to excessive costs for the sole electric
utility which are further increased by the recent upturn in
petroleum prices.
The U.S. Virgin Islands currently relies on virtually 100
percent imported petroleum as its source of its energy. The
Territory's generating facilities are included in that slim
minority of just 1.6 percent of the total electricity generated
nationwide that utilizes oil-fired plants. Due to the
concentration of the majority of the world's oil reserve in
countries that are unfriendly to the United States, the growing
international demand for oil and the associated increase in the
price of oil, the economy of the U.S. Virgin Islands is highly
vulnerable to supply disruptions and energy price increases.
This vulnerability is further exacerbated since much of the
petroleum is imported from PDVSA, the state-owned petroleum
company of Venezuela. The current political instability of that
region of the world could result in a severe disruption or
curtailment of petroleum shipments from HOVENSA refinery on St.
Croix, which is partially owned by PDVSA.
Furthermore, the reliance on imported energy sources
creates a large financial burden on the United States Virgin
Islands economy. Typically, two-thirds of the price of
electricity in the U.S. Virgin Islands is attributed to the
fuel adjustment charges, all of which are derived from the
escalating cost of purchasing petroleum. The dependence on
imported fossil fuel forces our residents to pay a higher
percentage of their disposable income for energy than residents
of the mainland United States. An increasing number are faced
to make decisions to either pay for the food, medicine or
utility bill.
High energy costs are driving up the cost of living in the
Territory by fueling inflation. It serves as the deterrent to
business development, and is perhaps the greatest threat to the
Virgin Islands economy. It is imperative that this reality is
taken into consideration throughout all testimonies to the
Joint Oversight Field Hearing on Charting a Clean Energy Future
for the Insular Areas.
The United States Department of Energy has been
instrumental in the Territory's development of energy programs
over the past 34 years through its formula-driven Energy
Extension Service, State Energy Conservation Program,
Institution Conservation Program and the State Energy Program
grants. The former three grants have been phased and SEP
continues to supplement funding to the Territorial State Energy
Plan.
Over the past decade, the U.S. Virgin Islands has been
awarded an average of $235,000 annually in the U.S. Department
of Energy formula grant funds, which represents 8 percent of
the total budget. Program year 2008 will bring $174,000 to the
Territory to assist with the mission of the Virgin Islands
Energy Office. Low Income Heating and Energy Assistance
Program, LIHEAP, funds are awarded directly to the local
Department of Human Services, and that's to the tune of some
$122,000. Significantly, our focus on general education
programs earned the U.S. Virgin Islands the 2003 National
Energy Education Development State Program Award from the NEED
Project.
In charting a clean energy future for the insular areas, we
need both the Insular Affairs and the Energy and Mineral
Resources Subcommittees to address on behalf of all the
territories of the United States of America the funding
challenges, program priorities, and our unique energy issues.
An adequate resolution will bring self-sufficiency through
increased utilization of renewable energy technology and energy
sufficient measures. As it pertains to the funding issues, the
U.S. Virgin Islands is often inappropriately compared to the
continental U.S. when it comes to allocation of energy funds.
This comparison is grossly unfair since the United States
Virgin Islands is not as densely populated as the continental
U.S., therefore distributing electricity generation costs among
fewer utility customers.
Electricity rates in the southeast continental U.S.
averages between 5 to 10 cents a kilowatt hour, while
electricity in the U.S. Virgin Islands is currently at 35 cents
a kilowatt hour heading to 42 cents in the near future.
Additionally, the U.S. Virgin Islands is often compared to
Hawaii when it comes to energy. While the climates of the
Pacific and Caribbean islands are somewhat similar,
demographics are starkly different. Hawaii is densely populated
and has a highly sophisticated energy infrastructure.
Mrs. Christensen. I am going to ask you to wrap up. We are
going to get to some of your other points in the question and
answer.
Mr. Smith. Thank you. I just say that Section 251 of the
2005 Energy Policy Act authorizes the Secretary of the Interior
among other items to make grants to governments of insular
areas of the United States for project plans that include an
analysis of a range of options to address energy security
projects such as protecting electric power transmission
distribution lines or significantly reducing dependence on an
insular area on imported fossil fuel.
The Office of the Governor has taken a lead by example
posture by instituting an energy demand reduction program for
the central Government.
In closing, I would like to thank both Chairs of the
Subcommittees, and I would like to reiterate that the driving
factor in the economy of the U.S. Virgin Islands is the high
cost of energy. We are hoping that clean energy technologies
can be that solution. However, there are significant
impediments to the implementation, and the U.S. Virgin Islands
may not be able to overcome without assistance from the Federal
Government. This requires immediate Congressional action. Thank
you.
Mrs. Christensen. Thank you, Mr. Smith.
[The prepared statement of Mr. Smith follows:]
Statement of Bevan R. Smith, Jr., Director,
Virgin Islands Energy Office
Good Morning Madame Chairwoman Christensen, Chairman Costa and
other members of the two Subcommittees. My name is Bevan Smith Jr. and
I have been working with the Virgin Islands Energy Office for 25 years
and served in the capacity as Director since 2004. It is a pleasure for
me to appear before you today to offer testimony on such a timely
subject matter:
Charting a Clean Energy Future for the Insular Areas
The U.S. Virgin Islands is an unincorporated territory of the
United States located in the Lesser Antilles islands group between the
Atlantic Ocean and the Caribbean Sea.
The Territory faces many of the same problems encountered by all
small island nations with our relatively small electric power system,
limited interconnection, and generation units that are based on older
petroleum-fueled technology with relatively poor heat rates. This is
further complicated by reliability criteria that require online
generation to maintain high spinning reserve margins in the absence of
a supply grid. These conditions lead to excessive costs for the sole
electric utility which are further increased by the recent upturn in
petroleum prices.
The U.S. Virgin Islands (USVI) currently relies on virtually 100%
imported petroleum as the source of its energy. The Territory's
generating facilities are included in that slim minority of just 1.6%
of the total electricity generated nationwide that utilizes oil-fired
plants. Due to the concentration of the majority of the world's oil
reserves in countries unfriendly to the US, the growing international
demand for oil and the associated increase in the price of oil, the
economy of the USVI is highly vulnerable to supply disruptions and
energy price increases. This vulnerability is further exacerbated since
much of the petroleum is imported from PDVSA--the state-owned petroleum
company of Venezuela. The current political instability in that region
of the world could result in a severe disruption or curtailment of
petroleum shipments to the Hovensa refinery on St. Croix, which is
partially owned by PDVSA.
Furthermore, the reliance on imported energy sources creates a
large financial burden on the USVI economy. Typically two-thirds of the
price of electricity in the USVI is attributed to fuel adjustment
charges, all of which is derived from the escalating cost of purchasing
petroleum. The dependence on imported fossil fuels forces our residents
to pay a higher percentage of their disposable income for energy than
residents of the mainland United States. An increasing number are
forced to make decisions to either pay for food, medicine, or their
utility bill. High energy cost is driving up the cost-of-living in the
Territory by fueling inflation; it serves as a deterrent to business
development, and is perhaps the greatest threat to the Virgin Islands
economy. It is imperative that this reality is taken into consideration
throughout all testimonies to this Joint Oversight Field Hearing on
``Charting a Clean Energy Future for the Insular Areas''.
The U.S. Department of Energy has been instrumental in the
Territory's development of energy programs over the past 34 years
through its formula driven Energy Extension Service, State Energy
Conservation Program, Institutional Conservation Program and State
Energy Program (SEP) grants. The former three grants have been phased
out and the SEP continues to supplement funding to the Territorial
State Energy Plan. Over the past decade, the USVI has been awarded an
average of $235,000 annually in USDOE formula grant funds, which
represents eight percent of each fiscal year's total budget. Program
year 2008 will bring $174,000 to the Territory to assist with the
mission of the Virgin Islands Energy Office. Low Income Heating and
Energy Assistance Program (LIHEAP) funds are awarded directly to the
local Department of Human Services to supplement their Energy Crisis
Assistance Program. Significantly, our focus on general energy
education programs earned the USVI the 2003 National Energy Education
Development State Program Award from the NEED Project.
In charting a clean energy future for the Insular Areas, we need
both the Insular Affairs and the Energy and Minerals Resources
Subcommittees to address on behalf of all Territories of the United
States of America, funding challenges, program priorities, and our
unique energy issues. An adequate resolution will bring self-
sufficiency through increased utilization of renewable energy
technologies and energy efficiency measures. As it pertains to funding
issues, the USVI is often inappropriately compared to the continental
U.S. when it comes to allocation of energy funds. This comparison is
grossly unfair since the USVI is not as densely populated as the
continental US, therefore distributing electricity generation costs
among fewer utility customers. Electricity rates in the Southeast
continental U.S. averages between $0.05--$0.10/kWh while electricity in
the USVI is presently $0.35/kWh and forecasted to be $0.42 in the near
future. Additionally, the USVI is often inappropriately compared to
Hawaii when it comes to energy. While the climates of the Pacific and
Caribbean islands are somewhat similar, the demographics are starkly
different. Hawaii is densely populated and has a highly sophisticated
energy infrastructure and a large industrial base. The USVI is not as
densely populated and has an increasingly antiquated energy
infrastructure. The State Energy Program formula for allocation of
funds to the States and Territories has not been updated in over 20
years. The formula was developed when energy costs in the Territory
were much lower. To discontinue this inadvertent discrimination the
formula needs to be updated to include changes in energy costs, insular
location, climate, demographics, etc.
The U.S. Department of Energy's Weatherization Assistance Program
(WAP) is the nation's largest residential energy efficiency program.
Its mission is to insulate the dwellings of low-income persons,
particularly the elderly, persons with disabilities, families with
children, high residential energy users, and households with a high
energy burden, in order to conserve needed energy and to aid those
persons least able to afford higher utility costs. While the USVI does
not require funding to insulate against cold winter temperatures, low-
income citizens of the Territory can increase energy efficiency through
the insulation of conventional water heater tanks or the installation
of domestic solar water heaters to reduce electricity costs. The latter
program was successfully implemented by the sunshine State of Florida
using Weatherization Assistance Program funds. However, under current
law, the USVI cannot participate in the WAP. Even if we were made
eligible through an act of Congress, the USVI's portion would be
approximately $25,000 based on the existing formula. Here again is
another example of inadvertent discrimination against the Territories
when it comes to the allocation and distribution of Federal Funds. This
disparity should be corrected and the allocation formula for both
LIHEAP and WAP should be updated.
There are specific program priorities that must be addressed in
charting a clean energy future for the Territories. We need every
opportunity available to improve our energy efficiency, increase the
use of renewable energy and to reduce our 100% dependence on imported
fossil fuels. As previously mentioned, the USDOE formula grant makes up
a relatively small percentage of the overall SEP Territorial State
Plan's budget; therefore, participation in the USDOE Competitive
Solicitations is necessary. In many instances when the USDOE issues
solicitations the Territories are either excluded from competition or
the program areas for funding are not applicable or relevant to energy
priorities within the particular insular area.
Despite the difficulties of acquiring private partnerships,
matching non-federal grant funds, and competing with the 50 states, the
USVI has been successful in winning a handful of USDOE Special Projects
Solicitation grant awards. We formed partnerships and conducted
technical building audits through a Rebuild American Paradise grant;
the Building Energy Codes grant was instrumental in the Territory's
adoption of the 2003 International Building Codes. Plans are currently
underway for an upgrade to a tropical building energy code through a
grant to Hawaii on behalf of the Territories; a grant for the
development of a distributed generation policy led to a Net Metering
policy for the Territory; and a grant to conduct a Wind Energy Case
Study provided data that supplemented Wind Mapping efforts of the
National Renewable Energy Laboratory and the USDOE Wind Powering
America in a recent wind workshop with record breaking attendance by
residents of the USVI. The technical assistance was beneficial in
showing the potential of each category of the grant award, but due to
the lack of funding for actual implementation, no energy or cost
savings were realized.
Section 251 of the 2005 Energy Policy Act authorizes the Secretary
of the Interior among other items, to make grants to governments of
insular areas of the United States for project plans that include an
analysis of a range of options to address energy security projects such
as protecting electric power transmission and distribution lines or
significantly reducing the dependence of an insular area on imported
fossil fuel. There are authorized in the Act, but not yet appropriated,
$6,000,000 for each fiscal year after the enactment. Similar
authorization existed in previous EPACTs but no appropriations have
actual been made even though the Territorial Energy Assessment Plan has
been completed with its findings and recommendations. The Virgin
Islands Energy Office and the Water and Power Authority (WAPA) have
already employed many of the strategies or projects identified by the
Secretary of Energy as having the greatest potential for reducing the
dependence on imported fossil fuels. Through the appropriation of these
grants, the recommendations in the recently updated Energy Assessment
report and other subsequent reports can serve as the roadmap towards
reducing the Territories dependence on imported fossil fuel and begin
to chart a clean energy future for all.
The Office of the Governor has taken a lead by example posture by
instituting an energy demand reduction program for the central
Government. This project aims to reduce energy consumption in
government facilities and vehicles by at least 5 percent per year over
the next four years. The program will implement the best practices in
order to advance energy-efficiency throughout government, improve
utility management decisions in government facilities, and promote the
use of renewable and advanced vehicle technologies and/or alternative
fuel blends.
The Virgin Islands Energy Office was recently relocated to the
Office of the Governor to bring a serious focus on energy issues in the
USVI by commissioning the development of a comprehensive energy
strategy for the Territory with the collaboration of the Southern
States Energy Board, USDOE National Energy Technology Laboratory, and
Virgin Islands energy stakeholders.
The goal of the comprehensive energy strategy is to develop a
comprehensive energy strategy for the USVI that will increase the
standard of living of the citizens of the Territory by assuring the
long-term availability of affordable, secure supplies of energy. A
secondary goal is to become a Caribbean and worldwide showcase for the
development and use of renewable energy.
In closing, I thank both chairs of the subcommittees, and would
like to reiterate that the driving factor in the economy of the USVI is
the high cost of energy. We are hoping that clean energy technologies
can be the solution. However, there are significant impediments to
their implementation and the USVI may not be able to overcome without
assistance from the Federal Government. This will require immediate
Congressional action.
______
Mrs. Christensen. The Chair now recognizes the Executive
Director of V.I. WAPA, Mr. Hodge for 5 minutes.
STATEMENT OF HUGO HODGE, JR., EXECUTIVE DIRECTOR,
VIRGIN ISLANDS WATER AND POWER AUTHORITY
Mr. Hodge. Good morning, Madame Chairwoman Christensen,
Chairman Costa, Representative Shuster and members of the two
Subcommittees. My name is Hugo Hodge, Jr. I am the Executive
Director of the Virgin Islands Water and Power Authority. Let
me begin by thanking both Subcommittees on behalf of the
Authority for the attention to this extremely important topic
and for affording us the opportunity to inform you folks of
Virgin Islands Water and Power Authority's extended effort to
bring clean and economical energy to the islands and the
critical role that it believes the Federal government has to
play in this endeavor.
To this end, the Authority would like to describe for you
its considerable and ongoing efforts to control and reduce the
exorbitant costs of power and water to the citizens of the
Virgin Islands in this very difficult economic environment, and
to reduce our dependence on imported oil; outline some of the
more significant impediments that have made this goal so
difficult to achieve; and identify ways in which we believe the
Federal government and Congress in particular can provide
assistance that is critical to our success.
As you will see shortly from my presentation, I believe
that, while we have undertaken a number of powerful initiatives
and are actively exploring a broad range of alternatives to our
current generating system, assistance from Washington will be
critical in our ultimate success in these endeavors.
To begin, the Authority believes that it is extremely
important to understand the truly unique circumstances that
govern its efforts to secure clean and economical energy for
the residents of the islands, and to recognize that they are
far more constraining, both economically and geographically,
than anything that stateside United States face in these
endeavors. Unlike most stateside systems, the Authority is in
essence a nonprofit government owned utility that is the sole
source of public power and water in the island.
One of WAPA's most distinguishing characteristics is that
it operates in an insular environment where there is no power
grid from which it can gain access to electricity generated by
other utilities, or even generated by its own separate
generating plants on St. Thomas and St. Croix.
Among other things, this prevents the Authority from being
able to purchase power generated elsewhere by others that might
provide a variety of alternative, and possibly much less
expensive, sources of power. It also means that we must have
more generating units per megawatt of capacity, and incur the
high operating costs that entails in order to provide the
necessary on-site backup generating capacity that is typically
provided stateside by the regional power grids.
Our insular character and limited geographical resources
eliminates a number of other options that are available to
stateside utilities. For example, natural gas, hydroelectric
and nuclear power generation are simply resources not readily
available here. Similarly the absence of large areas for crop
production make reliance on biofuels impractical in the
islands.
Because the islands do not have any significant natural
sources of potable water, our power generating system must also
provide the power necessary for the operation of the
Authority's large desalination plants, which provide the vast
majority of the drinking water for the islands. Because of
this, anything that adversely impacts the cost of electricity
in the islands also increases the cost of drinking water.
It is also critically important to recognize that our
limited financial resources create major obstacles to our
efforts to develop and implement alternative sources of energy
that are environmentally sound, less costly and might
significantly reduce our dependence on imported oil.
Given that the Authority is funded 100 percent by its
customers, it's important to recognize the difficult economic
conditions facing the residents of the islands. The cost of
electricity to our residential customers is currently running
an exorbitant 34 cents per kilowatt hour. That is almost 350
percent above the U.S. national average of 10.8 cents per
kilowatt hour. The huge increases in the price of oil in recent
years and months have caused our rates to increase by over 118
percent since 2002. Consequently, stateside concerns about
increased power costs attributable to the increased price of
oil pale in comparison to what Virgin Islands residents already
experience, while further increases loom in the horizon.
We estimate that for every dollar increase in the cost of a
barrel of oil, the cost to our residential customers for a
kilowatt hour of power will increase by at least 1.75 cents.
Even though our citizens pay far more for electricity than
stateside customers, they are far less able to afford these
enormous prices. It often goes unrecognized that the per capita
income in the Virgin Islands is about $19,000, which is over 34
percent below the per capita income in the poorest of the 50
states.
The combined impact of extremely high energy costs and
limited financial resources can be seen in the dramatically low
power consumption rates of our citizens. Whereas stateside
households consume an average of 1,000 kilowatt hours per
month, the average in the Virgin Islands is a dramatic 50
percent lower, at only 500 kilowatt hours per month.
You want me to conclude?
Mrs. Christensen. You got about a minute.
Mr. Hodge. WAPA has been aggressively evaluating potential
alternative sources of energy and changes in the Authority's
system infrastructure that could reduce power costs and
dependence on oil.
On February 28 R.W. Beck, a consultant firm under contract
with the Authority, in collaboration with the Public Service
Commission, completed a major update of WAPA's plan for power
generation expansion. Wind power resources, efficiency
improvements, waste to energy options, utilization of slow-
speed diesels, increased implementation of combined cycle
generation, the use of liquefied natural gas, petroleum coke,
and ocean thermal technology are all being considered.
In conclusion, I want to thank the Subcommittees once again
for allowing us the opportunity to make this presentation. I
hoped that I have helped to increase your understanding of the
very unique circumstances that constrain our efforts to reduce
our dependency on oil, to reduce our exorbitant costs for
electric power generation, and to develop alternative sources
of energy in the Virgin Islands. I also hope that you
appreciate how hard we have been working to achieve those
goals, and how much we are in need of Federal assistance to
supplement the extremely limited resources we are able to
devote to this critically important effort. Thank you.
Mrs. Christensen. Thank you, Mr. Hodge.
[The prepared statement of Mr. Hodge follows:]
Statement of Hugo Hodge, Jr., Executive Director-CEO,
Virgin Islands Water & Power Authority
I. Introduction
Good morning, Chairwoman Christensen, Chairman Costa, and members
of the two Subcommittees.
My name is Hugo Hodge, Jr. I am the Executive Director of the
Virgin Islands Water & Power Authority. I am joined here this morning
by the Authority's Chief Operating Officer, Mr. Gregory Rhymer, who
will be available to assist me in addressing any question you might
have at the conclusion of my prepared remarks. Mr. Rhymer was
specifically responsible for the Territorial Energy Assessment update
in 2006 and has been the Authority's guide for the past 18 years in its
compliance with environmental requirements relating to its many past
modifications and future expansion projects. As you know, we provided
the subcommittees in advance with a detailed written statement, which I
will try to summarize for you now within the 5-minute time period
allotted for each of the oral presentations. For those in the audience
who might like to see our full written presentation, we have brought a
number of copies and will make them available when the hearing has
concluded.
As you may know, I assumed the leadership of the Authority on
January 1. Before that I was the Director of Griffin Power in Georgia,
where I was in charge of strategic planning, and led management teams
in all aspects of electric utility operations--including the evaluation
of alternative sources of power generation. Born and raised in the
Virgin Islands, I hold a bachelor of science degree in mechanical
engineering, have an MBA from Georgia State University, and am
nationally certified as a Power Quality Professional and as a Public
Manager.
Let me begin, by thanking both subcommittees on behalf of the
Authority for their attention to this extremely important topic, and
for affording us the opportunity to inform you of both VIWAPA's
extensive efforts to bring clean and economical energy to the Islands,
and the critical role that it believes the federal government has to
play in this endeavor.
To this end, the Authority would like to----
1. Describe for you its considerable, and ongoing, efforts to
control and reduce the exorbitant costs of power and water to the
citizens of the Islands in this very difficult economic environment,
and to reduce our dependence on imported oil;
2. Outline some of the more significant impediments that have made
this goal so difficult to achieve; and
3. Identify ways in which we believe the federal government, and
Congress in particular, can provide assistance that is critical to our
success.
As you will see shortly from my presentation, I believe that, while
we have undertaken a number of powerful initiatives, and are actively
exploring a broad range of alternatives to our current generating
system, assistance from Washington will be critical to our ultimate
success in these endeavors.
II. Our Critically Important Insular Setting
TO BEGIN, the Authority believes that it is extremely important to
understand the truly unique circumstances that govern its efforts to
secure clean and economical energy for the residents of the Islands,
and to recognize that they are far more constraining, both economically
and geographically, than anything that state-side utilities face in
these endeavors.
VIWAPA is a quasi-public entity that is the sole source of public
electricity and water in the Islands. Unlike most state-side systems,
it is, in essence, a non-profit government-owned utility. It is run by
a governing Board that is appointed by the Governor (with the advice
and consent of the Legislature). That Board, both monitors its
operations, and selects its Executive Director--who, with his staff and
Authority employees, manages and conducts its widespread and complex
operations on a daily basis.
One of WAPA's most distinguishing characteristics is that it
operates in an insular environment where there is no power grid from
which it can gain access to electricity generated by other utilities,
or even generated by its own separate generating plants on St. Thomas
and St. Croix. This island isolation imposes significant operational
constraints on the Authority that are not shared by state-side
facilities.
1. Among other things, this prevents the Authority from being able
to purchase power generated elsewhere by other utilities or by private
entities that might provide a large variety of alternative, and
possibly much less expensive, sources of power.
2. It also means that, unlike state-side utilities, we must have
more generating units per MW of capacity (and incur the higher
operating costs that entails) in order to provide the necessary on-site
backup generating capacity that is typically provided state-side by the
regional power grids to which almost all other electric utilities have
ready access.
Geographic Limitations
Because of our insular situation, and limited geologic resources,
there are certain options available to other utilities that are simply
unavailable to the Authority. For example:
1. The use of less expensive and less polluting natural gas is
simply not an option, here. The same is true for coal.
2. Similarly, the absence of large areas for crop production makes
reliance on biofuels impractical in the Virgin Islands
3. Hydroelectric and nuclear power generation are also not options
here.
4. In addition, our insularity and remote location limits the
potential use of a number of emission control options that are under
active consideration elsewhere--like carbon sequestration that might be
used with the combustion of cheap coal for the control of greenhouse
gas emissions.
5. Water Supply--Because the Islands do not have any significant
natural sources of potable water, our power generating system must also
provide the power necessary for the operation of the Authority's large
desalinization plants--which provide the vast majority of the drinking
water for the Islands. Because of this, anything that adversely impacts
the cost of electricity in the islands also increases the cost of
drinking water.
Economic Constraints
It is also critically important to recognize that our limited
financial resources create major obstacles to our efforts to develop
and implement alternative sources of energy that are environmentally
sound, less costly and might significantly reduce our dependence on
imported oil.
Given that the Authority is funded 100% by its customers, through
its charges for power and water, it is important to recognize the
difficult economic conditions facing the residents of the Islands.
1. The Already Exorbitant Cost of Electricity--The cost of
electricity to our residential customers is currently running about 38
cents per kilowatt hour (kwh). To put this in stark perspective, that
is almost 400% above the U.S. national average of 10.8 cents per
kilowatt hour. Due to our heavy dependence on oil for power generation,
and the huge increases in the price oil in recent years (and months),
our rates have increased by over 118% in just the last 6 years. While
there are very legitimate concerns among U.S. mainland citizens about
increasing power costs attributable to the increased price of oil, they
pale in comparison to what Virgin Island residents already experience,
with further increases looming on the horizon.
We estimate that for each $1 increase in the cost of a barrel
of oil, the cost to our residential customers for a kilowatt
hour of power will increase by at least $0.0175.
2. Low Per Capita Income--Even though our citizens pay far more
for electricity than state-side customers, they are far less able to
afford these enormous prices. It often goes unrecognized that the per
capita income in the Virgin Islands is about $19,000, which is over 34%
% below the per capital income in the poorest of the 50 states.
3. Severely Reduced Household Consumption of Electricity--The
combined impact of extremely high energy costs and limited financial
resources can be seen in the dramatically low power consumption rates
of our citizens, in comparison to state-side customers. Whereas state-
side households consume an average of 1,000 kilowatt hours per month,
the average in the Virgin Islands is a dramatic 50% lower, at only 500
kilowatt hours per month.
Unique Dependence On Oil
State-side, only a minuscule percentage of the generated
electricity comes from the burning of oil. Consequently, while the
recent drastic increases in the price of oil have had some impact on
the state-side cost of electricity, is has been trivial in comparison
to the impact in the Virgin Islands.
State-Side, the breakdown in power generation is as follows:
48.6% Coal
21.5% Natural Gas
19.4% Nuclear
6.0% Hydroelectric
3.0% Other
Only 1.6% Oil
It is particularly noteworthy that the predominant state-side
sources of electric power (the first four I just listed--comprising
over 95% of the total) are not now, and never will be, available in the
Virgin Islands--due to the remote location and geographic features of
the Islands.
In stark contrast, literally 100% of power generation in the Virgin
Islands is currently derived from the combustion of oil.
Consequently, the dramatic increases in the price of oil over the
past several years (and particularly in the last several months), have
had a 60 times greater impact on the average cost of power generation
here than in the states.
The result is that the recent increases in the price of oil have
had a far more dramatic impact in the Islands than they have elsewhere,
and that the adverse impacts will only be further magnified as oil
prices continue to rise.
Under these circumstances, it is obvious that we have a tremendous
incentive to improve the efficiency of our power generation, to
encourage power conservation by our citizens, and to otherwise reduce
our dependence on imported oil by identifying and developing
alternative sources of energy that are both environmentally beneficial
and significantly less costly.
III. VIWAPA's Broad and Aggressive Initiatives To Achieve These
Important Goals
A. Improving the Efficiency of the Authority's Power Generation from
Oil.
Increases in Combined Cycle Operations--Obviously, to the extent we
can extract more power production from each gallon of oil we burn, the
more efficient we are, and the less it will cost our customers for each
kilowatt hour of electricity they purchase. To that end, the Authority
has invested a great deal in the addition of waste heat recovery
generators (sometimes called ``HRSG's or waste heat boilers) to its
facilities in recent years.
Waste heat boilers make use of the otherwise ``wasted'' heat that
is released from the burning of oil in its combustion turbine
generators, by converting it to steam which is then utilized in either
the production of electricity or the production of water by our
desalinization plants. This reduces the amount of oil that it would be
necessary to purchase in the absence of the waste heat boilers.
This mode of efficient operation is called ``combined cycle
operation.'' We currently have 2 waste heat boilers, which operate in
combined cycle mode with four of our combustion turbine generators.
Moreover, we are in the process of installing another waste heat
boiler on St. Croix, and are evaluating the addition yet another one on
St. Thomas.
Future Installation of More Efficient Combustion Turbines--In
addition, we have also taken steps via a Condition Assessment and Power
Supply Study update to identify and evaluate more efficient primary
combustion turbines when replacing older units or adding to our overall
generating capacity.
B. Improved Efficiency in the Use of Electricity by Our Residents
As part of its major effort to improve efficiency in the use of
electricity by our citizens, the Authority has been very active for
several years with its energy conservation public education program. In
2006, VIWAPA became an EPA-recognized ENERGY STAR partner in order to
better leverage the available tools and resources to enlighten our
residents and visitors on the importance of energy efficiency. Our
vigorous efforts in this regard earned us EPA's ENERGY STAR Partner of
the Year 2008 Award for Excellence in Energy Star Promotion, which was
presented to the Authority at an awards ceremony on April 1 in
Washington, D.C..
The goal of our energy efficiency program is to reduce energy
consumption, reduce associated greenhouse gas emissions, and reduce
demand on our power generation capabilities. As one example, we have
taken significant steps to increase consumer awareness of the benefits
of CFL lighting fixtures and other energy-efficient technologies and
practices. In 2006, the Authority purchased 60,000 Energy Star
qualified CFLs, and have already distributed most of them free of
charge in well-publicized educational events to our individual
customers and a broad array of public institutions. Our extensive
educational outreach program has included CFL distribution at our
offices, at over 40 other convenient locations via ``CFL Caravans,''
and at heavily populated community events. Ads and other educational
messages in local print media, on local radio and tv stations, in our
own newsletter and in presentations to our employees, community groups,
businesses, government agencies, churches and schools have also helped
to convey the energy-efficiency message to our citizens, and to
increase consumer awareness of the link between energy production and
greenhouse gas emissions.
IV. Aggressive Evaluations of Potential Alternative Sources of Energy
and Changes in the Authority's System Infrastructure That Could
Reduce Power Costs and Dependence on Oil
The Recent R.W. Beck Power Supply Study
On February 28, the R.W. Beck power industry consulting firm, under
a contract with the Authority, and in collaboration with the Public
Service Commission, completed a major update of VIWAPA's plans for
power generation expansion. The overarching objective of its Power
Supply Study was to provide an understanding of near- and long-term
power supply options that might reduce the Authority's cost of electric
power production and simultaneously reduce its dependence on fuel oil.
It provided a detailed assessment of the potential economic, geographic
and environmental compliance feasibility of a broad array of potential
technologies, including:
wind powered resources;
efficiency improvements;
waste to energy options;
utilization of slow-speed diesels;
increased implementation of combined cycle generation;
the use of imported Liquified Natural Gas (LNG);
the direct combustion of petroleum coke generated as a
by-product of the Hovensa refinery on St. Croix;
the combustion of methanol generated locally from the
gasification of petroleum coke;
Ocean Thermal Energy Conversion (OTEC); and
the interconnection of the St. Thomas and St. Croix
electric systems via a high-voltage submarine direct current
transmission line.
B. The Resulting RFP Process
Based on the analysis and recommendations in the Beck Power Supply
Study, the Authority moved aggressively to develop and publish a
Request For Proposals, that solicited proposals from well-qualified
companies for the implementation of one or more of the non-oil based
alternatives that were identified as potentially viable in the Beck
Study. Bidding was open on all such generation technologies, and
proposals were invited that would displace as much of our current
source of power as possible, under power purchase agreements that could
last as long as 20 years.
The RFP was communicated to relevant trade associations and was
advertized in a number of trade journals. Among other things, it
specifically referenced interest in power generation based on wind,
solar, ocean thermal, biomass, tidal, wave geothermal, and petroleum
coke technologies, and suggested that alternatives might include the
submarine cable interconnection of our plants on St. Thomas and St.
Croix, and LNG and methanol fuel options, most of which were
recommended in the Territorial Energy Assessment Report.
Twenty firms submitted pre-qualification forms, and were evaluated
by a technical committee consisting of a representative from Boston
Pacific Company, independent expert technology and financial
consultants, and the Authority's Chief Operating Officer, Mr. Gregory
Rhymer. In order to pre-qualify, bidders had to demonstrate experience
designing, constructing and operating generating facilities similar to
those they would be proposing. They had to demonstrate the ability to
obtain the financing for their proposals, and they had to demonstrate
that their non-oil based solutions are commercially feasible. Eighteen
bidders were pre-qualified by the technical committee, and we are
anxiously awaiting the final proposals, which are due on May 1.
Although we have not yet received the final detailed proposals
under the RFP, we know from the R.W. Beck analysis, and the other
information we have received to-date, that all of the potential
initiatives are extremely expensive, and will, at a minimum, severely
strain the Authority's limited resources (and the resources of our
citizens). In some cases, it appears almost certain that the Authority
will not be able to pursue promising approaches without significant
financial help--either because it has inadequate resources to invest,
or because the risks are just too great for it to assume on its own.
For some of the more promising alternatives, it appears all but certain
that we will not be able to pursue them without significant assistance
from the federal government.
V. Federal Assistance Is Critical
A. Financial Assistance
Due to the general economic conditions in the Islands, the high
cost of maintaining our generators and distribution systems in our
remote locations, and the already exorbitant cost of energy shouldered
by our citizens, the Authority has extremely limited resources to
devote to the exploration and development of viable alternatives to
oil. Our economic plight is exemplified by the fact that our largest
customer (the Government of the Virgin Islands) has had chronic
difficulties over the years in making timely payments for the power it
must consume on behalf of our citizens. Consequently, we are in urgent
need of financial assistance from Washington.
It is our understanding that in the Energy Security Act of 2005,
the Department of the Interior was obligated to fund power generation
initiatives in the insular territories of the type that VIWAPA is
currently trying to pursue. We understand that while Congress
appropriated money for that program, and Interior made promises that it
would be distributed, none of it was ever released. Congress obviously
recognized that financial assistance for this sort of program was
necessary and appropriate. Consequently, we would urgently request any
assistance you could provide in helping us to secure funding under that
legislation, or in securing future appropriations under new legislation
that would help to finance these important initiatives.
We would point to our potential development of an undersea
connection between St. Thomas and St. Croix as a good example of a
project that might be particularly appropriate for federal financial
assistance. The Beck study indicated that such a connection could
significantly reduce the redundancy in our systems due to the current
need for substantial on-site back-up capacity on both islands, and
would enable both of our facilities to install larger, more efficient,
generators, and to operate them more frequently at their most efficient
load levels. It might also serve as a pilot demonstration for submerged
connections that could be applied elsewhere in the Insular Areas.
B. Other Legislative Assistance- Global Warming Legislation
In the Clean Air Act Amendments of 1990, Congress and EPA
recognized (in the adoption of special provisions in what is now
Sec. 325 of the Act) that the unique geographical and economic
conditions in the Virgin Islands and other territories could make it
unreasonable to require them to comply with all of the emission control
requirements that are applicable state-side. Under that provision, EPA
has exercised its authority to grant relief on several occasions.
Both houses of Congress are currently considering legislation that
is likely to establish major requirements for the control and reduction
of emissions of greenhouse gases like carbon dioxide. Some of those
proposals would include requirements that emitters of carbon dioxide
either substantially reduce their emissions (through increased use of
alternative sources of power), or purchase costly emission reduction
credits. While we do not believe that it is intended that requirements
of this type be applied to small territorial facilities like those of
the Authority, we are concerned that language might ultimately be
adopted that could inadvertently sweep the Authority into such a
program. We hope that our presentation helps you to understand why that
should be avoided at all costs.
Due to the extremely high electricity costs borne by our citizens,
there is already far more than enough financial incentive than is
necessary for the Authority to reduce its greenhouse gas emissions as
much as it can. More importantly, due to its remote locations and
limited economic and geographic resources, the Authority simply does
not have the broad array of options for reducing greenhouse emissions
that is available to state-side utilities. And, of course, to the
extent it is not able to reduce its greenhouse gas emissions, neither
the Authority, nor the citizens of the Virgin Islands (who would have
to pay for any emission credits through increased utility bills), would
have the financial resources to purchase any credits that might be
required. Under these circumstances, and given the extremely small
contribution that the territories make to greenhouse emissions
generally, we would solicit your assistance in making sure that federal
greenhouse gas legislation does not require the Authority to purchase
emission credits that the citizens of the Virgin Islands will never be
able to afford.
CONCLUSION
In conclusion, I want to thank the subcommittees once again for
allowing us the opportunity to make this presentation. I hope that I
have helped to increase your understanding of the very unique
circumstances that constrain our efforts to reduce our dependence on
oil, to reduce our exorbitant costs for electric power generation, and
to develop alternative sources of energy in the Virgin Islands. I also
hope that you appreciate how hard we have been working to achieve those
goals, and how much we are in need of federal assistance to supplement
the extremely limited resources we are able to devote to this
critically important effort.
______
Mrs. Christensen. The Chair now recognizes Mr. Cole to
testify on behalf of PSC.
STATEMENT OF DONALD COLE, VICE CHAIR,
PUBLIC SERVICES COMMISSION
Mr. Cole. Thank you, Madame Chair Delegate Christensen,
members of the Subcommittees on Insular Affairs, Energy and
Mineral Resources and the listening audience. On behalf of the
Public Services Commission of the Virgin Islands, I thank you
on your attention to these important issues affecting the
residents and the economy of the United States Virgin Islands.
The Public Services Commission is the U.S. Virgin Islands'
regulatory authority with jurisdiction over all public
utilities, including electricity, water, waste management, and
ferry transportation. I'm the Vice Chair of the Commission, and
I have members of my Commission and my legal team sitting in
the audience.
We have submitted written testimony, Madame Chair, which we
kept brief. I have brought additional copies of that testimony
for your convenience. In keeping with your request, I will only
summarize our testimony in my comments.
The Public Services Commission is charged with balancing
the interest of the ratepayers with those of the regulated
utilities. For the past five years the Virgin Islands'
dependence on fuel oil for transportation and electrical energy
and even for water production has imbalanced the scale. The
only way these utilities survived has been to impose unending
increases in fuel on the ratepayers. The burden has become
unsustainable, and it does not yet appear to have peaked. Our
residents are paying 34 cents per kilowatt hour and 40 cents
appear to be on the near horizon. Compare those rates with
mainland rates from 7 to 15 cents per kilowatt hour, and the
extraordinary burden is obvious. The Water and Power Authority
is strapped for cash even at these rates.
As the maintenance suffers, the aging infrastructure
becomes less efficient, and the downward spiral worsens.
Meanwhile, our annual fuel oil bill at the Authority would be
more than $260 million on today's oil prices just for
electricity and water. And that burden is imposed on the
population of less than 120,000 people.
Families, the poor, and elderly simply cannot afford these
continuing extraordinary costs, and the very sustenance of life
is in danger. Conservation can only help reduce costs so far,
and Virgin Islanders already consume only about half of the
national average in electricity. Rates must be reduced to
maintain affordability.
The burden goes beyond individual suffering. Commercial
ratepayers are already paying even higher rates. Studies done
elsewhere, such as in Hawaii, indicate the damaging economic
effects of such high rates--extracting money that could be
reinvested and discouraging new investment.
The Commission has worked with WAPA over the past four
years to ensure that the existing infrastructure is examined
and new options evaluated. An updated studies on those issues
is on the way and it's due within weeks.
The Virgin Islands are well placed to replace much of its
existing infrastructure with more efficient and greener
technology. We are well placed to take advantage of wind and
solar power, and it may even be possible to connect with other
islands where geothermal resources will be present.
We now must move from studies to planning and
implementation of changes. WAPA currently has an RFP for new
power, but that is only the start. We must move rapidly in a
manner that can afford both short-term and long-term relief to
the ratepayers.
In doing so, we are seeking to fulfill the mandates of the
2005 Energy Policy Act, and the Energy Independence and
Security Act of 2007. We will be seeking assistance in reducing
our reliance on oil, as all of our oil is imported, and moving
toward power that is both economical and environmentally
sensitive. To do so, we will need your assistance, Madame
Chair, and the Congress.
The ratepayers are already incredibly burdened, which
financing will be critical to get the technologies in place. We
will be seeking assistance on the both of these acts, and we
require new appropriations. The economy of the Virgin Islands
is at stake, and we will continue to seek your assistance in
moving these islands forward to a clean and efficient,
affordable future.
Thank you very much, Madame Chair.
Mrs. Christensen. Thank you, Mr. Cole.
[The prepared statement of Mr. Cole follows:]
Statement of Donald G. Cole, Vice Chair,
Virgin Islands Public Services Commission
Dear Delegate Christensen, members of the Subcommittees on Insular
Affairs and Energy and Mineral Resources, and the Listening Public:
The Public Services Commission of the Virgin Islands thanks you for
your attention to these important issues affecting the residents and
the economy of the United States Virgin Islands. The Public Services
Commission is the U.S. Virgin Islands' regulatory authority with
jurisdiction over all public utilities, including electricity, water,
waste management, and ferry transportation.
The Virgin Islands are experiencing a serious energy crisis. It is
a crisis not of our making, but is the result of federal government
monetary and fiscal policies, international events, and other factors,
far beyond our control. Unlike the mainland, there are no indigenous
sources of oil, coal or natural gas energy available for use here in
the Virgin Islands. Neither are there large rivers which can be tapped
for hydro-electric power. And, nuclear energy, while in wide-spread use
on the mainland, is cost prohibitive given our size and isolation.
Accordingly, we are today totally dependent on imported oil. Because
oil had been relatively stable and economical until 2003, the Virgin
Islands had come to rely on this resource, not only for transportation,
but for electrical generation and water production have--all have been
powered by fuel oil here in the Virgin Islands. Oil prices have
increased five-fold, from $22/bbl to $110/bbl, in just five years. The
days of cheap oil appear to be irretrievably over, and changes must
occur and quickly.
The Commission has for several years worked with the Virgin Islands
Water and Power Authority (``WAPA'') to diversify its energy sources
and to increase its use of renewable energy. Today, WAPA is in the
final stages of completing studies on its current power generation and
water production facilities, its options for replacement and/or
rehabilitation of existing equipment, and the preparation of a long-
term plan. That process was initiated in 2004 and completion is
anticipated in a matter of weeks. The first study, the Condition
Assessment Study, was conducted based on $33/bbl oil; however, oil
continued its climb throughout the study period and by the time the
study was finished oil was above $50/bbl. As everyone is well aware,
that increase has only continued, and oil today is above $110. WAPA has
conducted an initial review of the 2005 study (called a ``Fatal Flaw
Analysis''), reviewing alternatives for new power generation, and is
presently working to complete the updated Condition Assessment Study.
We are happy to provide you with any of these documents.
At the present time, Virgin Islands residents pay nearly 34 cents/
kWh for power--to our knowledge, the highest rate in the nation. The
majority of consumer's cost is fuel oil, totaling more than 25 cents or
approximately 74% of the residential electric rate. It is important to
note that this rate is based on $92/bbl fuel--so we already know that
the rate will continue to climb even further. Moreover, as the Virgin
Islands do not have substantial surface or ground water, the majority
of our water supplies are through rooftop catchment and desalination.
Desalination is an energy intensive process, and the Virgin Islands
currently rely on an older distillation technology that requires steam
for the desalination process. As water is the very essence of life, its
cost is a matter of grave concern to the public welfare, and one to
which the Commission is paying acute attention.
Currently, the Virgin Islands spend more than $200,000,000 per year
just for fuel oil for its electricity and water. This staggering cost
is compounded by several additional factors which include the
relatively small size of the Islands' population, at just over 110,000
and the low per capita income and higher cost of goods and services to
Virgin Islands residents. This combination of factors creates a burden
that is simply not sustainable. On average, Virgin Island residents
consume less than half the electricity of mainland residents, yet an
average residential bill now exceeds $170 per month. To put this into
further perspective, mainland power costs for residential consumers
range from 6 /kWh to 15 /kWh--comparatively, Virgin Island consumers
pay more than twice that amount. Since the Virgin Islands per capita
income is well below the U.S. average, the extraordinary cost of energy
imposes a tremendous burden that simply cannot be continued for the
long term. Additionally, the Commission finds these costs especially
worrisome for those members of our community who are most affected by
these rates, particularly the high level of families with children
living in poverty and the numbers of seniors for whom these costs may
present an insurmountable burden.
In the Department of Energy's Memorandum of Understanding with the
State of Hawaii on the Clean Energy Partnership, the parties note the
enormous burden placed on the local economy by the increases in world
oil prices. Hawaii is estimated to suffer a 0.5 percent reduction in
GDP for every 10 percent increase in the price of oil--and given the
greater percentage reliance on oil here, there is no reason to think
that the Virgin Islands suffer less.
In addition to relying solely on oil-fired generation for the
generation of electricity and the production of water, the Virgin
Islands also suffer from an aged and outdated infrastructure, with much
of the Islands' electrical generation capacity being twenty-five years
or more old. The Commission views this both negatively and positively.
While antiquated plants presents a near term problem, in that our
generation facilities are not as efficient as newer equipment, it also
means that we are in an excellent position to develop a modern,
environmentally sensitive, and efficient electrical generation and
water production plan for the future.
While the Territory is currently dependent on oil-fired processes,
the Virgin Islands is ripe for receiving and implementing renewable and
environmentally sensitive power production. However, there are
additional challenges that must be taken into consideration in addition
to the overall need and desire for moving to alternative energy
sources. For example, while these Islands are located within the trade
winds and can produce steady wind power much of the year this benefit
must be weighed against the potential conflict with the Islands' major
source of revenue which is tourism. St. Thomas and St. John have little
available land that is not already occupied, and are tourist based
economies. There is a justifiable concern about the visual impact and
potential effects on tourism that are associated with wind energy.
Additionally, on St. Croix some of the prime sites for wind generation
are also highly visible and in environmentally sensitive areas.
Moreover, our location within the tropics also makes these islands
vulnerable to hurricanes and tropical storms, and the relative
isolation of the Virgin Islands creates additional concerns regarding
over-reliance on wind power. Performance guarantees and storm insurance
would make wind power a substantially more attractive option for
investment.
Solar power would also appear to be a logical addition to the power
generation options in the Virgin Islands but, until very recently, it
has been cost prohibitive, at least as to photovoltaic power. Solar
thermal, which has been successfully used in the desert Southwest also
carries some concerns about vulnerability to storm damage, and land
area requirements. Because it is so reliably sunny, and well within the
tropics, the Virgin Islands should be a prime candidate for any
demonstration project for large scale distributed solar project.
Only Hawaii and the Pacific Islands can offer anything comparable
to the Virgin Islands' ability to reach both warm tropical waters and
cold deep water; in fact, our surface waters are substantially warmer
than those surrounding Hawaii, resulting in an even greater temperature
differential. But ocean thermal technology does not appear to have
reached commercially viable status, and is unlikely to do so without
further research and support. The Virgin Islands is the best location
for a demonstration Ocean Thermal Energy (OTEC) project in the Atlantic
basin.
The Virgin Islands also have a problem addressing waste disposal,
which is not surprising given our limited land and many visitors.
Waste-to-energy would seem to be a logical response for a limited
portion of our energy needs, and this would assist in the resolution of
another environmental issue for the islands.
Finally, the Virgin Islands are home to the largest petroleum
refinery in the Caribbean, the HOVENSA facility on St. Croix. The
presence of this refinery provides a steady supply of petroleum coke,
which is a low cost fuel, but with a very high carbon footprint. The
Virgin Islands should be a prime candidate for a demonstration pet coke
plant with carbon recapture.
Concluding Remarks:
In order to make progress and overcome the dire energy needs of the
Territory, the Virgin Islands could benefit tremendously from federal
assistance with and guarantees for long term debt. The Virgin Islands
must replace aging plants that are cost effective to retire. This will
have the added benefit of retiring aging plants with new and greener
technologies that may make carbon credits available.
In addition, the Virgin Islands may require waivers from certain
standards--for example, diesel generators may be economically and
environmentally sound as back up generators in complement with solar
and wind power, but are difficult to permit within the United States.
Such units are however, vastly more fuel efficient than the current
generators within the Virgin Islands.
The Virgin Islands could also benefit from assistance in making our
current system more efficient as we transition to new technologies.
On behalf of the Public Services Commission, I thank you for
creating this important forum, wherein the dialogue on the challenges
and solutions of our present energy crisis could be discussed. It is
our greatest hope that the fruits of this discussion will mean a true
transformation for the territory, its infrastructure, and the people of
the Virgin Islands.
Thank you,
______
Mrs. Christensen. The Chair now recognizes the final
panelist, Mr. Miller, to testify on behalf of the St. Croix
Alliance to Protect Utility Ratepayers.
STATEMENT OF DARRYL MILLER, PRESIDENT,
ST. CROIX ALLIANCE TO PROTECT UTILITY RATEPAYERS
Mr. Miller. Good morning, Chairman Costa, Chairwoman and
Delegate Donna M. Christensen and other distinguished members
of the Committee on Natural Resources Subcommittee on Insular
Affairs and Subcommittee on Energy and Mineral Resources.
On behalf of the hard working ratepayers of the Virgin
Islands, I am privileged to appear before you to speak as the
voice of the ratepayers and to express in the most urgent
manner possible, the need for immediate and tangible solutions
to our extremely high and inefficient power production and
distribution system in the Territory.
The ratepayers of the Territory look forward with great
anticipation toward the results of this hearing in an effort to
alleviate the burden placed on us daily by the inefficiency of
our Water and Power Authority.
The extremely high cost of water and power production has
exponentially increased our cost of living. It greatly affects
every single commodity we purchase and consume on a daily
basis. As a result, an economic burden has been placed squarely
on the backs of each and every ratepayer territory wide.
On August 31, 2005, I testified before the 26th
Legislature's Committee of the Whole on this very same relevant
and critical issue at hand today--developing and implementing
immediate solutions to the problem of an inefficient and
extremely high electric and water production system in the
Territory. Needless to say, three years into the future, the
ratepayers of the Territory still face the exact same dilemma
of 2005, with additional increases in both water and power
costs, with no solutions in sight from the Governor, the
Legislature, the Public Services Commission, and the Water and
Power Authority.
To date there is absolutely no definite or clearly
intelligible sense of urgency to this problem. As a result,
ratepayers implore you, the oversight committee on Insular
Affairs, not to follow suit in inaction, but to posthaste use
all your resources and power to mitigate corrective solutions
to our outdated water and power production and distribution
system.
Corrective solutions must result in an implemented dynamic
energy strategy that will help us meet our energy needs based
on highly informed decisions about how our energy is purchased,
consumed, and managed. This requires a robust energy management
system with data analysis and reporting capabilities to
proactively manage energy production, consumption, and cost.
No longer should it be allowed for our Water and Power
Authority, with the assistance of the Public Services
Commission, to pass the cost of inefficiency on to the
ratepayers of the Territory without accountability. Business
intelligence must replace party politics if corrective measures
are to be implemented.
In the past, our Territory has been burdened by elected
officials who lack competence in understanding the
modernization of energy production and distribution. These
officials would then appoint board members to the Water and
Power Authority who similarly lack the knowledge of modernizing
energy production and distribution. This has resulted in
limited knowledge of how to wisely invest, plan and forecast in
the most effective and cost-effective energy efficiency
portfolios for overcoming common marketplace barriers to energy
efficiency. The solution is business intelligence. Business
intelligence is the most effective way to continue successfully
negating change. This translates into energy efficiency.
Utilities, states, and others across the United States have
decades of experience in delivering energy efficiency to their
customers. Thus, it is the duty of this oversight committee of
Insular Affairs to work with our government and Legislature to
enact policies and programs to capture the benefits of energy
efficiency and address underinvestment in energy efficiency.
This can only be done by providing the funding necessary to
deliver these programs, and by examining policies governing our
Water and Power Authority to ensure that these policies
facilitate, not impede, cost-effective programs for energy
efficiency.
Our power production infrastructure is overburdened and
outdated. Overburdened and outdated systems significantly limit
the availability of low-cost electricity, and our sole reliance
on fossil fuel raises energy prices and potentially compromises
energy system reliability, resulting in frequent outages with
no compensation for damaged goods to the ratepayers.
The ratepayers of the U.S. Virgin Islands hereby
respectfully request the Committee on Insular Affairs to take
immediate visible action to establish a timeline of
implementation and completion to modernize the Water and Power
Authority; to establish a team of competent individuals to
recover, analyze, and implement existing studies already done
by both the Public Services Commission and the Water and Power
Authority with taxpayers' money that have clearly expressed
solutions and corrective measures to our current energy crisis.
In conclusion, the past four years has resulted in nothing
but higher utility cost to the ratepayers of the territory with
no visible, tangible signs of sense of urgency to mitigate the
problems of high energy cost by our elected officials. Charting
the future requires complete understanding of the precise
problem of energy production and distribution, then
implementing solutions unique to the Virgin Islands. It is said
that the solution to our high energy cost and inefficiency
would take at least two years. Chairman Costa, ratepayers
cannot simply afford two more years without relief.
The St. Croix Alliance to Protect Utility Ratepayers would
like to thank you, Chairman Jim Costa and Chairman and Delegate
Donna M. Christensen, for this opportunity to appear before the
respected Committee on Insular Affairs and on the Subcommittee
on Energy and Mineral Resources. Thank you for your attention
and time.
Mrs. Christensen. Thank you, Mr. Miller.
[The prepared statement of Mr. Miller follows:]
Statement of Darryl E. Miller on behalf of the Ratepayers of the U.S.
Virgin Islands and the St. Croix Alliance to Protect Utility
Ratepayers--SCAPUR
Good Morning, Chairman Nick J. Rahall, Chairwoman and Delegate
Donna M. Christensen, and other distinguished members of the Committee
on Natural Resources Subcommittee on Insular Affairs and Subcommittee
on Energy and Mineral Resources.
On behalf of the hard working Ratepayers of Virgin Islands, I am
privileged to appear before you to speak as the voice of the
Ratepayers, and to express in the most urgent manner possible, the need
for immediate and tangible solutions to our extremely high and
inefficient power production and distribution system in the Territory.
The Ratepayers of the Territory look forward with great
anticipation, towards the results of this hearing in an effort to
alleviate the burden placed on us daily by the inefficiency of our
Water and Power authority.
Members of the Committee on Natural Resources Subcommittee on
Insular Affairs and Subcommittee on Energy and Mineral Resources, let
me inform you if you do not already know, we the Ratepayers of the U.S.
Virgin Islands are currently paying the highest cost per kilowatt for
electricity under the U.S. flag, coupled with the additional high cost
of water production.
The extremely high cost of water and power production has
exponentially increased our cost of living here in the Territory, as it
pertains to every single commodity we consume on a daily basis,
resulting in nothing short of a burden on the backs of each and every
Ratepayer territory wide.
Members of the Committee and Subcommittee, on August 31, 2005, I
testified before the 26th Legislature's Committee of the Whole, as it
pertained to the very same relevant and critical issue at hand today,
developing and implementing immediate solutions to the problem of an
inefficient and extremely high electric and water production system in
the Territory. Needless to say, three years into the future, the
Ratepayers of the Territory still face the exact same dilemma of 2005,
with additional increases in both water and power costs, with no
solutions in sight from the Governor, the Legislature, the Public
Services Commission, and the Water and Power Authority.
To date, there is absolutely no definite or clearly intelligible
``sense of urgency'' to this problem, and as a result, the Ratepayers
of the Territory implore you the Oversight Committee on Insular
Affairs, not to follow suit in inaction, but to post haste use all your
resources and power to mitigate corrective solutions to our outdated
water and power production and distribution system.
Corrective solutions must result in an implemented dynamic energy
strategy that will help us meet our energy needs based on highly
informed decisions about how our energy is purchased, consumed and
managed. This requires a robust energy management system with data
analysis and reporting capabilities to proactively manage energy
production, consumption, and cost.
An investment in the latest computer software the energy industry
has to offer to track energy use, would enable our Water and Power
Authority the ability to build a comprehensive energy database, over a
period of years, to collect and analyze historical utility data to
proactively manage energy production, consumption, and cost. ``The
historical energy data also play a pivotal role in performing a host of
energy management operations; particularly load forecasting for
procurement purposes.'' The result is the ability to forecast daily,
weekly, monthly, and yearly energy needs, as well as potential peak
demand periods and associated energy costs, increasing efficiency.
No longer should it be allowed for our Water and Power Authority,
with the assistance of the Public Services Commission, to pass the cost
of inefficiency onto the Ratepayers of the Territory without
accountability. ``Business Intelligence'' must replace party politics
if corrective measures are to be implemented.
In the past, our Territory has been burdened by elected officials
who lack competence in understanding the modernization of energy
production and distribution. These officials would then appoint board
members to the Water and Power Authority who similarly lack the
knowledge of modernizing energy production and distribution. This would
result in limited knowledge of how to wisely investment, plan, and
forecast in the most effective and cost-effective energy efficiency
program portfolios and programs for overcoming common marketplace
barriers to energy efficiency. The solution is ``Business
intelligence''.
``Business intelligence is a combination of technology and
management practices that prioritizes collecting, providing
access to, and analyzing large amounts of unstructured data in
ways that help people make better decisions.''
``The key to effective energy intelligence is transforming the
large amount of energy and enterprise data into information and
knowledge that can help achieve specific business objectives, such as:
Avoiding surprises in energy costs and management
Recovering costs through end user rebilling
Reducing costs through identifying inefficiencies
Reducing costs through demand response
Reducing price risk through hedging and sourcing
strategies
Creating a culture of conservation through increased
energy accountability.''
``Business intelligence is the most effective way to keep
successfully navigating change'', this translates into energy
efficiency.
``Recognizing energy efficiency as a high-priority energy resource
is an important step in efforts to capture the benefits it offers and
lower the overall cost of energy services to ratepayers.''
Utilities, states, and others across the United States have decades
of experience in delivering energy efficiency to their customers. Thus,
it is the duty of this oversight committee of Insular Affairs, to work
with our Government and Legislature to enact policies and programs to
capture the benefits of energy efficiency and address underinvestment
in energy efficiency. This can only be done by providing the funding
necessary to deliver these programs, and by examining policies
governing our Water and Power Authority to ensure that these policies
facilitate, not impede, cost-effective programs for energy efficiency.
Our power production infrastructure is overburdened and outdated.
Overburdened and outdated systems significantly limit the availability
of low-cost electricity; and our sole reliance on fossil fuel raises
energy prices and potentially compromises energy system reliability,
resulting in frequent outages with no compensation for damaged goods.
The Ratepayers of the U.S. Virgin Islands hereby respectfully
request the Committee on Natural Resources Subcommittee on Insular
Affairs and Subcommittee on Energy and Mineral Resources take immediate
and visible action and establish a timeline of implementation and
completion in order to:
Modernize the Water and Power Authority; it's water/
electrical energy production and distribution, and other assets, to
drastically improve overall water/electrical systems efficiency
Establish a team of competent individuals to recover,
analyze, and implement existing studies already done (by both PSC and
WAPA) with taxpayers money that have clearly expressed solutions and
corrective measures to our current energy crisis
Establish an Energy Management Division with a robust
energy management system and a comprehensive energy database
Develop a comprehensive and dynamic energy strategy/plan
that establishes how energy from 2008 and in the future is Purchased,
Consumed, and Managed in the U.S. Virgin Islands
Manage WAPA's electrical and water production and
distribution by improving meter reading efficiencies and implementing
automatic meter reading technology and data collection
Manage outage response, by implementing outage detection
technologies to reduce the frequency of outages, improve response and
restore times for outages
Subsidize the Water and Power Authority for the expressed
purpose of eliminating substantial rate increases
Audit the Water and Power Authority to correctly assess
financial inefficiencies and determine the true financial picture.
Apply ``business intelligence'' to control our energy costs
Once and for all, direct the Water and Power Authority to
negotiate the RFP to secure Alternative Energy Solution, in accordance
with the Public Utility Regulatory Policies Act, no more stalled talks
Allocate money that would liquidate outstanding
Government Water and Power Authority bills owed, set clearly defined
and stable energy budgets, and mandate that government agencies pay
their utility bills annually
Develop investment strategies and planning that would
convert government buildings into ``green buildings'' that utilizes
solar technology
Place technologically competent people on the boards of
the Water and Power Authority and the Public Services Commission
Establish and mitigate safe, reliable, efficient, and
affordable services and rates for the ratepayers of the U.S. Virgin
Islands to reduce consumption and cost
Restore Ratepayers faith in the oversight of the Water
and Power Authority, and all other utilities of the Territory, that our
trust and tax dollars are being well spent
Establish the National Action Plan for Energy Efficiency
Recommendations and Options in the U.S. Virgin Islands (see figure ES-
2)
In conclusion, the past four years has resulted in nothing but
higher utility cost to the Ratepayers of the Territory, with no visible
or tangible ``sense of urgency'' to mitigate the problem of high energy
cost, by our elected officials. The St. Croix Alliance to Protect
Utility Ratepayers would like to thank you Chairman, Nick J. Rahall,
and Chairwoman, and Delegate, Donna M. Christensen, for this
opportunity to appear before the respected, Committee on Natural
Resources Subcommittee on Insular Affairs and Subcommittee on Energy
and Mineral Resources.
Thank you for your attention and time.
______
Figure ES-2.
National Action Plan for Energy Efficiency Recommendations & Options
Recognize energy efficiency as a high priority energy resource.
Options to consider:
Establishing policies to establish energy efficiency as a
priority resource.
Integrating energy efficiency into utility, state, and
regional resource planning activities.
Quantifying and establishing the value of energy
efficiency, considering energy savings, capacity savings, and
environmental benefits, as appropriate.
Make a strong, long-term commitment to implement cost-effective energy
efficiency as a resource.
Options to consider:
Establishing appropriate cost-effectiveness tests for a
portfolio of programs to reflect the long-term benefits of energy
efficiency.
Establishing the potential for long-term, cost-effective
energy efficiency savings by customer class through proven programs,
innovative initiatives, and cutting-edge technologies.
Establishing funding requirements for delivering long-
term, cost-effective energy efficiency.
Developing long-term energy saving goals as part of
energy planning processes.
Developing robust measurement and verification (M&V)
procedures.
Designating which organization(s) is responsible for
administering the energy efficiency programs.
Providing for frequent updates to energy resource plans
to accommodate new information and technology.
Broadly communicate the benefits of and opportunities for energy
efficiency.
Options to consider:
Establishing and educating stakeholders on the business
case for energy efficiency at the state, utility, and other appropriate
level addressing relevant customer, utility, and societal perspectives.
Communicating the role of energy efficiency in lowering
customer energy bills and system costs and risks over time.
Communicating the role of building codes, appliance
standards, and tax and other incentives.
Provide sufficient, timely, and stable program funding to deliver
energy efficiency where cost-effective.
Options to consider:
Deciding on and committing to a consistent way for
program administrators to recover energy efficiency costs in a timely
manner.
Establishing funding mechanisms for energy efficiency
from among the available options such as revenue requirement or
resource procurement funding, system benefits charges, rate-basing,
shared-savings, incentive mechanisms, etc.
Establishing funding for multi-year periods.
Modify policies to align utility incentives with the delivery of cost-
effective energy efficiency and modify ratemaking practices to
promote energy efficiency investments.
Options to consider:
Addressing the typical utility throughput incentive and
removing other regulatory and management disincentives to energy
efficiency.
Providing utility incentives for the successful
management of energy efficiency programs.
Including the impact on adoption of energy efficiency as
one of the goals of retail rate design, recognizing that it must be
balanced with other objectives.
Eliminating rate designs that discourage energy
efficiency by not increasing costs as customers consume more
electricity or natural gas.
Adopting rate designs that encourage energy efficiency by
considering the unique characteristics of each customer class and
including partnering tariffs with other mechanisms that encourage
energy efficiency, such as benefit sharing programs and on-bill
financing.
Sources:
Itron White Paper, Business Intelligence for Enterprise Energy
Management
National Action Plan for Energy Efficiency, July 2006
______
Mrs. Christensen. I'd like to thank all of the panelists.
We are also under a five minute limit for questions, and I am
going to begin my questions, and I would ask for as concise
responses as possible so that I can get at least three
questions in my five minutes.
One of the reasons of course we scheduled this hearing is
to establish a record which would serve as a basis for my being
able to request assistance, and all of you have spoken to that.
Mr. Smith, there are a number of programs out there to
assist, as you mentioned, but some are being funded, some are
not, some we are eligible for, some we are not eligible for.
What, in your opinion, would be the most useful thing the
Federal government could do--increase funding to state energy
programs or, under Sections 251 or 252 of Energy Policy, a
partnership similar to Hawaii, the financing program? Maybe you
could start with your recommendations as to the grants that are
available that you might have some recommendations on.
Mr. Smith. Most definitely, Madame Chairwoman Christensen,
we can definitely see an increase in the overall SEP formula. I
urge Members of Congress to look at the formula for the
Territory and really consider updating them. This formula has
not been updated for over 20 years.
When it comes to special solicitation, the territories are
usually inadvertently discriminated against because many of the
program priorities of the United States mainland are not the
same for the insular areas. So, therefore, I suggest having a
solicitation that let the territories compete among each other,
if it must be competitive grants. For instance, there is a
Solar America Initiative. These initiatives start where the
population must be 250,000. From the very start, we can't
qualify.
Our programs in the Territory as it relates to solar has
been very successful. The report--as most people referenced--
said that the Virgin Islands is in the best position to move
these programs. Therefore, I think a program such as a Solar
America Initiative should start with the territories and
funding adequately should be available.
Mrs. Christensen. Thank you.
Senator Richards, you have already heard about the Hawaiian
Clean Energy Initiative--mentioned by Chairman Costa--and it is
expected that the State of Hawaii would have to take some
legislative and regulatory actions in order to make them more
attractive to renewable energy investors. If the Department of
Energy were to enter into a similar partnership maybe uniquely
tailored to Virgin Islands, would you be willing to consider
the legislative and regulatory changes that might be
recommended?
Mr. Richards. Thank you, Madame Chair. I think at this
particular point in time, at least as a member of the body, it
would be premature for me to respond to that without knowing
what the contents and the commitment is that would be required
in the legislation.
Mrs. Christensen. But I'm sure that you--if it meant
helping the Territory, that the Legislature would--and I think
you have already started to address some issues by I think--did
I read that you are providing some funding to seniors and low
income.
Mr. Richards. Yes, we have. I can simply respond to you
that if in the majority of the members mind that it is going to
help the energy crisis, I suspect that would be something the
Legislature can address.
Mrs. Christensen. Thank you for your answer. I think they
are currently reviewing that in Hawaii, and we wouldn't expect
you to give a blanket OK.
Mr. Hodge, question to you. We've heard you make reference
to inefficiencies at WAPA. Could you tell the Subcommittees a
little about what WAPA has been doing to reduce those
inefficiencies.
Mr. Hodge. Yes, Madame Chair. Currently WAPA is embarked on
efforts to achieve the efficiency, not only on the generation
but on the distribution side and on the metering throughout the
broad spectrum of the Authority. We invested in some waste heat
boilers on St. Croix. The new one is being built on St. Thomas.
We are refurbishing the one that was off line for the last
several months. The one on St. Thomas alone, we are able to
fast track the repairs of it and it will be coming back on line
somewhere in late June, early July, which is about six months
ahead of schedule. That itself allows for a combined cycle
effort, which means it will be able to power a third unit by
the exhaust from this waste heat boiler, which is a unit being
spun without burning oil.
It's about 1.2 to 1.4 million dollars of savings when that
unit is running, and by it coming on line in July, June, six
months ahead of schedule, you are looking at 14 to 18 million
dollars of savings in oil purchases. The one that is being
built in St. Croix is also the same, and that's based on
today's prices of oil.
So, you know, the infrastructure needs to be maintained.
There is a cash flow problem. The government has indicated that
they are intent on satisfying their debt to the Authority, and
with that we will be able to maintain the equipment and
dispatch the units in the most efficient manner.
Mrs. Christensen. Thank you.
My time is up. I will now recognize Mr. Costa for his
questions.
Mr. Costa. Thank you very much, Madame Chairwoman. And
thank all the witnesses for your testimony. You obviously
caused myself and I think members of the committee to ask a lot
of questions, but time is limited.
Mr. Smith, why do you believe that there was--the insular
areas were left out of the weatherization program?
Mr. Smith. As a colleague of mine said, it seems to be some
time of folklore. They said in the initial program when the
territories were asked, we declined. I checked every Energy
Director prior to me, and no one has such recollection.
Mr. Costa. Let's try to follow up on that. The
comprehensive energy strategy that has been discussed with the
Department of Energy, I was looking here in our handouts, and
there seems to be a plan that's at least been partially focused
on. And I would like to get a better idea of where you are on
that effort that talks about a staged approach, the work plan;
it talks about project funding and planning, assessing the
future U.S. VI energy situation. It goes on and it has six
tasks. It seems to be a logical way in which to pursue this
effort. Where would you describe you are in this process?
Mr. Smith. If my recollection serves me right, I think
project funding was one of the first tasks in the work plan.
And we have had some meetings. We have met with all the
stakeholders that we have identified to include HOVENSA, the
Water and Power Authority, we have met with the Alliance, Mr.
Darryl Miller's group, we have met with the St. Croix
Environmental Association, and we have taken their
recommendations of what they can see as to be very profitable
and viable within an energy strategic plan. We have catalogued
those suggestions, and we kind of run out of money. And two
days ago we did get an award from the Department of the
Interior to continue that study. So we are moving----
Mr. Costa. I think that plan is important in terms of
helping get all the, for lack of a better term, the ducks in
order in terms of how to proceed. I mean, you have a very
tenacious and passionate representative in my colleague,
Congresswoman Christensen, but she has to have a plan in place
to say, look, we got our act together, this is what we think we
can do to reduce these horrific rates that our citizens are
paying, but we need help in implementing the plan.
Let me ask you about landfill issues and gas. There was, I
guess, a state energy program for grants--I mean in landfill.
How many tons of trash does the Virgin Islands----
Mr. Smith. Our numbers say that territorially we generate
about 400 tons per day. I hear recent numbers we can get up 500
tons a day.
Mr. Costa. Has serious waste to energy been considered as a
part of a solution?
Mr. Smith. Yes, it has. We are in the process of reviewing
some proposals from several companies who are offering to
provide waste to energy solutions. The Energy Office is also
doing a demonstration project with the Waste Management
Authority to extract some of the methane from Bovinity
landfill.
Mr. Costa. Because we are doing that a lot. I would like to
go back to that, but my time is going quickly.
Mr. Hodge, you talked in your testimony--not in your oral
statement--about an electrical cable between St. Thomas and St.
Croix to help reduce the distributive cost of power. How much
would that cost and how serious is that proposal?
Mr. Hodge. There is a study being done right now, I
believe, through the Department of the Interior as to tell you
what the actual cost would be to develop such a conductor
between those islands. The benefits are a reduction in the
amount of spending reserve that you have to run independently
by each plant, and reliability by having the systems connected.
In the event the FPI comes up with a possibility of a large
generating facility, you could have it on St. Croix where it
has land space and would benefit all the Virgin Islands. It's
critical to determine where the future should go for the Virgin
Islands. The price is being determined as we speak.
Mr. Costa. You haven't determined the cost effectiveness
yet?
Mr. Hodge. No.
Mr. Costa. It strikes me as the percentage of electricity
that you are currently using to desalinize your water. What
percentage of the electricity usage here in the islands go
strictly for desalination of water? Can you give me that
breakdown?
Mr. Hodge. It's hard to say strictly because the units that
are spinning to produce power, steam is extracted to run the
desal units. I would guess somewhere in the neighborhood of
steam for maybe 60 percent of the unit is going toward the
desal plants. It's a conjunction, while it's generating
electricity, we are using the extracted steam for water at the
same time.
Mr. Costa. My time is expired, Madame Chairwoman, but there
are a couple of questions, if we have a second round, I would
like to come back to. And because of the water issues we have
in California, I would like to get it separate from this
hearing, but I would like to find out how much it cost per acre
foot for you to desal water, because something we need to look
at in greater effort in California.
Mrs. Christensen. Do you have an answer for that question?
Mr. Hodge. Per acre cost I have to get that, but we can
determine it.
Mrs. Christensen. The Chair now recognizes Mr. Shuster for
his questions.
Mr. Shuster. Thank you, Chair, and thank all the witnesses
for testimony today.
First question, Mr. Hodge, you talked about the efficiency,
the things you are doing to increase the efficiencies of the
plant. Can you spend enough money to really make that more
efficient, or is it just the cost of oil so expensive that you
are going to get little benefit out of those efficiencies?
Mr. Hodge. The cost is simply prohibitive for a lot to
happen, but you have to get efficient with what you have while
you release your dependency from oil. If you have a combined
effort, increase your efficiency, get rid of your dependency on
oil all at the same time.
Mr. Shuster. With the current plant you can't get the
tremendous increase in efficiency that you really need?
Mr. Hodge. There is a lot that can be gained from the
current plant, because there are some units that aren't running
due to lack of maintenance and need. Some of them have actually
new parts that can be refurbished and perform in a better
manner. If you can dispatch the units in an efficient manner
and utilize both the No. 6 and No. 2 oil in a manner that's
best for the plant, you can see a significant savings.
The problem is you have units down, so you are running your
most expensive units, and the larger ones aren't running as
well, and you are using more units to achieve the same amount
of power. With the influx of revenue of cash, we will be able
to get the units in a situated dispatched more efficiently.
Mr. Shuster. Even with a older plant, you can see some
efficiency?
Mr. Hodge. That's correct. The plant is older, but you do
have a lot of units that have new generators, new turbines.
There is a lot of new parts in those old units.
Mr. Shuster. This LIHEAP program, coming from the
northeast, Pennsylvania, we benefit greatly, our low income
seniors especially with the LIHEAP. Do you receive any of that
LIHEAP money down here in the Virgin Islands? I don't know who,
maybe, Mr. Smith, I don't know if you know the answer to that.
Mr. Smith. Yes, we do receive LIHEAP to the tune of roughly
$122,000, and we have matched I think a million dollars to help
with our Energy Crisis Assistance Program. What happens with
the lack of funding, we usually have to take off a lot of
qualifying people and only focus on the elderly and senior
citizens.
Mr. Shuster. There was some talk by some of you about solar
and wind. Solar power, what percentage of the territory
generates electricity through solar power presently?
Mr. Smith. I'd say less than 2 percent.
Mr. Shuster. Even if you had a significant increase in
solar, you are doubling, it would still only be 4 percent.
Mr. Smith. We do have a net peering program which is
helping to increase that. The cost of solar panels is still
very high for the average citizen.
Mr. Shuster. What about wind?
Mr. Smith. Wind is growing very much. We are working with
our permitting, and there is strong interest. I think there are
at least a dozen people right now ready for the sky streams and
similar turbines.
Mr. Shuster. What percentage of wind produced electricity?
Mr. Smith. Even less than solar.
Mr. Shuster. That brings me to my question, I see you put
an RFP out on small power providers, and I read that's soon to
come in.
Mr. Hodge. May 1.
Mr. Shuster. As I mentioned the statement about coal
producing electric plants and nuclear power, are those
alternatives that have been considered? I know they are long-
term. I know you talked a little bit short-term and long-term.
These are long-term solutions. What are the prospects of coming
up with a design for a smaller coal-fired and electric plant or
taking the technology out of a nuclear sub, a smaller nuclear
generator? Is that something to be considered or would it be
something feasible here in the Virgin Islands?
Mr. Hodge. There is a respondent that is proposing a coal
solution to the territory's needs, so that is one option. There
is an existing facility in the Virgin Islands that has a coal-
fired unit. So they are responding to the RFP.
As far as nuclear, the economies of scale are a little
tricky when you get to this size for a nuclear reactor. It has
to be something that incorporates both the Virgin Islands and
Puerto Rico for it to make sense from my knowledge of nuclear
facilities, and that would still require an interconnection
under water between the Virgin Islands and Puerto Rico. It has
been mentioned and we are trying to get a alliance with PREPA
right now in Puerto Rico to see where we could further evaluate
those scenarios.
Mr. Shuster. The grid right now doesn't connect to Puerto
Rico?
Mr. Hodge. No, sir. St. Thomas is connected to St. John,
and that's the extent of the connection of the grid in the
Virgin Islands.
Mr. Shuster. I'm sorry.
Mr. Hodge. St. Thomas and St. John are connected, but
that's the extent of any interconnection in the area.
Mr. Shuster. The question is how difficult is that? How
expensive is that? Is that prohibitive or is it something that
can be done?
Mr. Hodge. St. Thomas and St. Croix the problem with the
connection there is that those are some of the deepest waters
and the undulating at the bottom of the floor of the water
there as well. There is a study being done right now of the
topography of the seafloor to see if it can actually be done at
a decent price. St. Thomas and Puerto Rico might be even more
affordable than the one through St. Thomas and St. Croix. It's
all being done through a study right now so we can get accurate
numbers on it. The benefit would be tremendous.
Mr. Shuster. Thank you. I see my time has expired.
Mrs. Christensen. Thank you.
As requested by Chairman Costa, we are going to have a
brief second round of questions.
Senator Richards, as you listed possible alternative
energy, you didn't list voltaic. Was there a reason, or was it
just an oversight?
Mr. Richards. No, Madame Chair, it's not a particular
reason. My sole purpose of being here is regard to the
statement that I made that we can speak about all these other
alternative energies, until we get to the bottom point of
finding some time and some energy, getting the financial
capital that we believe should be returned to the Virgin
Islands, we are looking farther down in the future not dealing
with today's crisis that the residents and our constituents are
faced with today in the Virgin Islands.
Mrs. Christensen. I think it's a matter that we can also
take up in another hearing, but part of the purpose for this
hearing is looking at what is needed so that the capital--so
that we can go back to Congress and see where we can capitalize
the needs of WAPA and the territory in general.
Mr. Miller, you spoke at one of my town meetings a couple
of years ago, and I was--can you point to couple of areas where
you seen some improvement?
Mr. Miller. Congress Lady, to be honest with you, when I--
when we as ratepayers look at improvement by our Authority, we
want to see or feel it in our pockets. And there is--feeling it
in our pocket is where we would assess improvement, and we
don't see--we don't feel it in our pockets, so we are not
saying the improvement has been, if any, significant enough for
us to say that improvement is working.
Mrs. Christensen. That is the bottom line. That is the
bottom line. As you said in your testimony, it is severely
impacting the quality of life here in the territory.
Mr. Hodge, just to follow up a little on the coal issue. In
your testimony I think you mentioned that coal would really not
be an option for the Virgin Islands, but you did have a request
for proposals for coal on the petcoke or dual fire units, and
we have the availability of petcoke here in the territory. With
the environmental problems that come from coal and coke burning
and the likelihood that Congress is going to be enacting more
climate change legislation, is that a viable solution for the
territory?
Mr. Hodge. It's viable, especially if we can get through
your help some relief from any possible carbon tax that might
come in the future, if we can get the insular areas exempted
from such a program, it's even more viable at that point. So we
look forward to your help and your efforts to help us with
that.
But coal is a viable option. And I apologize, but I did
resubmit my testimony for you having made some changes to it.
You should have it in your presence by now. The clerk has
received it. But coal is a viable option for us.
Mrs. Christensen. Thank you. Your answer allowed you to
bring in the other issue about the credits. Thank you.
I now recognize Mr. Costa for his questions.
Mr. Costa. Thank you very much. That was one of the areas I
wanted to follow up with regards to petcoke, which is a by-
product with regard to the refinery capability here and how
carefully and cost effective that might be as part of the
solution.
It seems to me--and I'm new to the challenges that you are
facing here, but you are the experts, and while Congresswoman
Christensen has indicated at great length the challenges and
the difficulty, the great difficulty it's causing for citizens
of the U.S. Virgin Islands on these utility rates, that like
the strategies that we are attempting to pursue in the states,
that there is no one silver bullet. Just seems to me that there
is a combination of strategies that you are going to have to
try to employ here as you look at renewable sources of energy,
as you look at what you are currently using and how the
refinery that exist here might be a part of that solution as
you look on transitioning with other technologies. I know we
haven't even begun to talk about the potential for waste
technology.
But speaking of renewables, Mr. Cole, I know among other
wonderful islands that I enjoy frequenting when I can get some
free time, in Hawaii they have done a great deal with wind
power, and I'd like to get your take as to the acceptance and
utilization here. One of the things that the islands have in
abundance it seems to me is wind power, and I would like to
know what studies have been done and what the current view is
from the Public Services Commission on the availability of wind
power and its applicability.
Mr. Cole. Thank you, Mr. Costa. Mr. Smith, Bevan Smith, who
is the Director of the Energy Office held a conference about a
month and a half ago where it was a wind energy conference, and
the statistics have shown that here on the island of St. Croix,
on the south shore of St. Croix and in St. Thomas that wind can
be a viable renewable energy. The thing is the cost going into
getting this energy up and running.
The Public Services Commission has always advocated with
the Water and Power Authority through a regulatory authority
that RFPs went out, and wind was one of the winners in the RFP
that went out earlier, but it's an avoided cost issue. I'm sure
Mr. Smith can speak more to the facts of the study on wind, and
Mr. Hodge in terms of the avoided cost in terms of that type of
energy.
Mr. Costa. Mr. Smith, you care to comment briefly?
Mr. Smith. Yes, sure. As Mr. Cole said, we did conduct a
wind energy workshop, and the attendance was overwhelming. It
was one of the best workshops I have seen on energy. We had
some 251 very interested attending.
With wind, we have steady marginal winds. However, the
strong interest in the territory is for small wind, unlike most
of the states, and because of that we have to really look at
the balance of our tourism product and putting up small wind
turbines throughout downtown Charlotte Amalie or Christiansted,
St. Croix. So the Department of Planning and Natural Resources
are carefully trying to see what areas, how we are going to go
about putting small wind.
Definitely wind is an option at the utility scale, and I
know for sure WAPA is considering utility scale wind in the
RFP.
Mr. Costa. I would just from my own experience suggest that
the concern about tourism and the impacts, Maui is a wonderful
island like St. Croix is, as well as St. Thomas or St. John,
but they have been experiencing--not just on Maui but other
islands of the Hawaiian chain--wind. And they've got a series
of large scale generation wind plants down one of the ridges of
the mountain there between the heel valley between Makawao and
on the way over to Lo'ihi, and I don't think it has one impact
on the level of tourism for the people wanting to go to Hawaii.
In California, we are blessed with much of course, but
tourism, believe it or not, is one of our major industries in
California, and we have series of regions where we have wind
farms that, some would think they are rather ostentatious. I am
not suggesting you put it here, but they are very productive.
Almost excess of 4 percent of California's energy needs now are
from wind.
So I think that it's not going to solve all your problems,
but it does provide I think an important balance and mix. I
don't think it's going to--I would be very doubtful that it
would impact tourism here in the islands.
Mr. Smith. May I respond?
Mr. Costa. I agree with you, and I think the Office of the
Governor does also, but they were very surprised that our
interest here is small wind. Therefore, we are talking about
residential and small commercial areas putting individual
towers on their property.
When we look to the states, there are not many districts
that deal with small wind. We are trying to really see how we
can still satisfy the individual residences and protect our
tourism product. But we do want to see wind power here in the
territory. We are working very hard to see that happen. Thank
you.
Mrs. Christensen. The Chair recognize Mr. Shuster for his
questions.
Mr. Shuster. Thank you.
One brief question, this is follow up to grid. You said the
water is very deep between St. Croix and St. Thomas. What about
the other islands in the Caribbean, are there other islands--I
got to believe they have similar type problems. Can you connect
to any of those other islands?
I think sometimes we all sit here and think, well, we are
all the U.S., we got to connect to a U.S. territories and
states, but in Europe, the grid is all connected throughout
Europe. The French sell to Germans and the British sell to
Dutch. Is there another island or other islands that are close
enough without the deepwater problem?
Mr. Hodge. There is a long-term plan that is out there that
discusses the connection of underwater grid between the
Caribbean island that goes down the same route as the
communication cables. So there has been some discussions and
talks about it.
We used to be a member of CARILEC, which is the
organization for all the Caribbean electric companies, and
previously the Authority had removed itself from the
membership, and I have recently reapplied for membership. So
that would again foster that kind of discussion again to see if
we could get some kind of agreement worked out between all the
islands.
Mr. Shuster. Is my assumption correct that all these
islands throughout the Caribbean have this energy situation?
Mr. Hodge. That's correct. We all generate pretty much the
same way. Some of the islands have subsidy from the government,
and that's how they combat their problems. And then you have
other islands that some are blessed with geothermal, some are
blessed with different resources; but pretty much most of the
Caribbean islands generate using oil in the same way.
Mr. Shuster. Thank you.
Mrs. Christensen. Thank you. I want to thank the first
panel for their valuable testimony. And members of the
Subcommittees will likely have additional questions which will
be submitted in writing, which we will ask for you to respond
in writing as well. Thank you very much.
I would like to now recognize the second panel of
witnesses: Mr. Robert Nicholson of Sea Solar Power
International; Mr. James Resor, the Chief Financial Officer of
groSolar; Frazier Blaylock, the Director of the Federal
Government Relations, Covanta Holding Corporation; and Mr. Jim
Powell, Senior Policy Advisor to the Southern States Energy
Board.
Mrs. Christensen. We are ready to resume our testimony with
the second panel. The Chair now recognizes Mr. Nicholson to
testify for five minutes.
STATEMENT OF ROBERT NICHOLSON,
SEA SOLAR POWER INTERNATIONAL
Mr. Nicholson. Madame Chairwoman Christensen, Mr. Chairman
Costa, Representative from the Commonwealth from Pennsylvania,
Mr. Shuster, staff of the Subcommittee, listening audience,
renewable energy enthusiasts, my name is Robert Nicholson. I am
President of Sea Solar Power International, and we are a
leading firm in the commercial development of OTEC.
OTEC takes advantage of the solar energy that's stored in
the upper layers of the ocean and surrounds the various islands
of the Caribbean. St. Croix, for example, can be supplied
entirely with OTEC 100 percent of the time with about 30
megawatts of installed power.
The ocean is the largest solar collector in the world. It
absorbs the sun 24 hours a day. The energy is stored. We use
the surface water as the heat source, we use the cold bottom
water which is 40 degrees, 3,000 feet below the surface as a
heat sink, and we can develop 10 megawatts of electricity.
This power plant is designed specifically for small
tropical islands. It will produce 3 million gallons of
desalinated water per day. It will produce a whole variety of
fish, vegetables that could be grown with the upper lining of
the nutrient rich water from the bottom of the ocean. It would
support 500 acres of mariculture. St. Croix, the tropical
islands throughout the equatorial zone can become energy rich
with this technology.
We have our own financing. We are proposing to build, own
and operate and install these plants. We have proposals in ten
other small islands. We have proposals for the Hawaiian
Electric Company, Puerto Rico, and the Persian Gulf for 100
megawatt floating plants. We are convinced that we can supply
most of the tropical world equatorial zone with low cost clean
energy using only solar energy, producing enormous quantities
of freshwater.
Each 100 megawatt power plant would support an annual fish
harvest of $100 million a year. This is a technology that is
ready for today. We have a team that we have assembled that can
design, build, own and operate each plant. We have full funding
from private investors, and we are in the position to provide
St. Croix with a proposal May 1st for a 10 megawatt land base
plant.
Once the island becomes renewable energy dependent, it can
then convert its automobiles to electric plug-ins, and at that
point you become energy rich, energy self-sufficient, and no
longer do you have a goal vein on your treasury for money going
to import foreign oil. We can do this in American Samoa. This
can be applied to Guam, all the territories, all the islands
throughout the tropical equatorial zone.
At the moment we have a proposal to the Hawaiian electric
company for 100 megawatt plant. The whole idea for the future
is to build eight 200 megawatt power plants, surround Oahu with
these solar energy generating facilities, and at that point
again convert to electric plugs-in. They become energy rich.
One of the best examples to site in the Caribbean and
everyone knows this, and you think you have problems in St.
Croix, St. Thomas, St. John, Haiti is in dire straits. It is a
country in ruin. This technology can make them very energy
independent.
The lower the cost of energy in any given economy, the
higher the standard of living for its citizens. So now is the
time to take advantage of this unusual situation. You are
surrounded by energy, you are rich in your own natural
resource. We have the technology that can convert that solar
energy into electricity 24 hours a day, enormous quantities of
fish and food production and automobile transportation as well.
We are currently working with research laboratories, and we
have two ways to generate liquid fuel from the seawater using
only solar energy. We believe that from a national security
standpoint, we can make our country, United States, energy
rich, energy independent. We don't have to be relying on
foreign produces who are not our friends. This is a fantastic
opportunity for everyone.
We've been working with WAPA. We realize that this is a
tremendous opportunity now with the new director who's fresh,
who has new vision. We have dynamic leadership with Donna
Christensen, the representative to the islands. And I am
pleased that Chairman Costa with his interest in renewable
energy just makes it a fantastic opportunity to move this
forward.
So in conclusion we are getting ready to submit the
proposal May 1st. We will have a very attractive competitive
price. This will I'm sure get the attention of everyone. We
have our own financing. There is no risk to the host client. We
bear that risk. However, in the future at any time should the
WAPA, the U.S. Virgin Islands want to purchase the power plant
from us, we will sell it to them. So we are not a threat to oil
or coal or to the operation that's now underway. This is just
an incredible opportunity to ease in to renewable energy and
get off in a phased out manner with fossil fuel. Thank you.
Mrs. Christensen. Thank you, Mr. Nicholson.
[The prepared statement of Mr. Nicholson follows:]
Statement of Robert J. Nicholson III, President, SEA SOLAR POWER
INTERNATIONAL, LLC, Owned by the Abell Foundation
``FEED THE PEOPLE--SAVE THE WORLD''
WHAT IS OTEC?
ocean thermal energy conversion
OTEC is an economically and environmentally efficient
means to convert the solar energy of the tropical oceans into low-cost
electricity.
A large floating vessel similar to an ocean drilling rig
or large tanker houses the power cycles. Small, land based plants are
also available.
Warm 80 degree F surface water is pumped through heat
exchangers in order to boil the working fluid, propylene, into a vapor.
Propylene boils under pressure at 67 degrees F. The vapor then expands
through vapor turbines which drive generators.
Cold 40 Degree F bottom water is pumped up from 3,000
feet below the surface to condense the vapor back into its liquid
state. The liquid propylene returns to the evaporators where the cycle
starts all over again.
OTEC
renewable energy
Oceans are largest solar collectors on earth
They are already built and paid for
Manmade solar collectors only work when the sun shines
OTEC - base load power operates 24 hours per day
Stored solar energy throughout the equatorial zone could
provide 300 times the world's consumption of electricity
THERMAL ENERGY
A pound of water raised one degree is lifted to an
equivalent height of 778 feet
OTEC operates on a delta-T of 40 Degrees F
40 degrees x 778 feet = 31,120 feet
Best possible Carnot cycle designed by SSP is 3.25%
3.25% x 31,120= 1,011 feet
Warm water, cold water--divide 1,000 by 2 = 500 feet of
head--constant heat source
TWO STANDARD OTEC MODELS
10 MW land based OTEC plant--3 million gallons of fresh
water per day
100 MW floating OTEC plantship--32 million gallons of
fresh water per day
Both small and large plants can be dedicated to produce
only fresh water
Small land based plant: 10 million gallons of fresh water
per day--large plantship--130 million gallons of fresh water per day
Large quantities of ammonia for fertilizer
STUDIES CONFIRM TECHNICAL FEASIBILITY
Fluor Daniel
Lehigh University Energy Research Center
EA Engineering / Abell Foundation
Indian Government Appraisal
Southern States Energy Board's Special Report to Puerto
Rico
Stone & Webster / Kvaerner- John Brown
SEA SOLAR POWER INT., LLC, TEAM
Sea Solar Power International, LLC: OTEC cycle designed
by J. Hilbert Anderson
Abell Foundation: equity funding
AON Risk Insurance: guarantee performance of each SSP-
OTEC plant
Burns & Roe Enterprises, Inc: mechanical engineers--
design OTEC cycle
Whiting-Turner Contracting Company: construction of
complete OTEC plant
Mele Associates, Inc: environmental permits
Loria Emerging Energy Consulting: OTEC expert
Dr. Pierce Linaweaver: OTEC expert
Alion Science & Technology: marine architects--design
marine platforms
Healy Tibbitts Builders, Inc., Division of Weeks Marine,
Inc: install cold water pipe
PROPOSAL
SSPI is prepared and eager to install OTEC plants
throughout the equatorial zone
SSPI has the most advanced OTEC design, the team in place
to deliver and the financing from private investors to begin now
SSPI is seeking sincere clients to enter into signing
contracts for both power and water
This includes both the land based OTEC for small islands
and the large floating OTEC plantships for continental applications
ACTION
Identify decision makers--coordinate with their technical
advisors
Select ideal site
Negotiate power and water contracts
Secure operating permits
Install OTEC plant--3 years
Additional plants as desired
______
Mrs. Christensen. The Chair recognizes Mr. Resor to testify
for five minutes.
STATEMENT OF JAMES RESOR, CHIEF FINANCIAL OFFICER, GROSOLAR
Mr. Resor. Thank you. First, thank you to Honorable
Chairwoman Christensen and Chairman Costa, Representative
Shuster, and particularly I note staff has worked hard to pull
together these hearings.
My name is James Resor. I'm the Chief Financial Officer of
groSolar. We are a distributor and installer of photovoltaic
systems for residences and also commercial enterprises. We
operate in about 40 states, and we are based in Vermont but
obviously have field offices throughout the mainland. In our
experience we also work with a lot of different utilities, so I
very much appreciate hearing the perspectives of WAPA earlier
today.
A couple of comments. One is when we look at solar, since
we are involved in solar projects throughout many different
situations from the northeast to California to Colorado, there
are a couple variables that we look at that make it more
compelling than other places. Probably the most important is,
what are the electricity rates that ratepayers have to pay from
a conventional source of electricity.
So clearly, as we have heard many testify, when you are
paying more than 30 cents a kilowatt hour right off the bat,
regardless of your sun quality, even if that was 35 cents in
Massachusetts or Alaska, it would still be a relatively
compelling opportunity for solar. Clearly here when you add an
addition that you have ample sunlight, the opportunity for
solar as a true distributed source of energy in small doses for
residences or commercial enterprises is compelling.
In addition, there are certain site characteristics that
are important. A very important feature is the cooperation with
the local utility. And fortunately there is a lot of data and
experience that you can draw from other parts of the United
States in terms of net metering and how those programs are
implemented to make streamline the implementation so it doesn't
become a barrier, but it really encourages the installation of
solar.
The other aspect terms of net metering, which I understand
has recently been put in place for the Virgin Islands, which is
very positive, is to be careful that you don't exclude
commercial enterprise. Sometimes if the cap is only 10
kilowatts, you may effectively exclude some opportunities for
solar for food distributors and hotels and other commercial
enterprises which have the same--are feeling the same pinch of
the high electricity prices.
In our experience a lot of our clients in the commercial
sector are big box retail stores, food distributors that have a
lot of air conditioning and food refrigeration electricity uses
and are often very attractive customers for solar solution.
One other piece which I addressed in my written testimony I
think the timing of this hearing is very critical, and that as
you probably all know, last week the Senate passed a bill
particularly for solar and wind renewing the investment tax
credit and other features that have been discussed in the House
already, in fact passed in the House under different forms. But
the bill under--that was introduced by Senator Cantwell did
pass the Senate I believe 88 to 8. Again, showing strong
bipartisan support. Now the interest will turn back to the
House.
I think your Subcommittees taking up this issue--and that's
a bill that helps the U.S. Virgin Islands as it does any part
of United States because it basically allows businesses to have
that longer term horizon to drive the commercial investment tax
credit. In addition, it helps at the residential level by
extending the 30 percent tax credit that's available to the
residence owner and removing the cap. Right now it's capped at
$2,000 per system. So I think those are both--and there is more
detail of that in my written testimony, but again I think the
extent that the hearings from these Subcommittees can provide
additional momentum and support for those discussions in the
House, that will be extremely timely.
And then last, again I will be happy to take any questions
on solar, but we feel there is a tremendous opportunity here in
the U.S. Virgin Islands, and I think as Chairman Costa pointed
out, there is no one silver bullet. You really need to look at
a mixed strategy over time that you can start to address the
acute needs that the people of U.S. Virgin Islands are
experiencing. Thank you.
Mrs. Christensen. Thank you, Mr. Resor.
[The prepared statement of Mr. Resor follows:]
Statement of James Resor, Chief Financial Officer, groSolar
Introduction:
Thank you, Mr. Chairman and Members of the Committees, for
providing me the opportunity to testify today.
My name is James Resor. I am the Chief Financial Officer of
groSolar, Inc. groSolar (www.grosolar.com) is a national distributor,
integrator and installer of solar photovoltaic systems for residences
and commercial enterprises. We are active in more than forty states and
Canada with offices and distribution centers in several northeastern
states, New Jersey, Colorado, California, Oregon and Canada.
In addition to our diverse residential solar experience, groSolar
has designed and installed solar systems for a wide range of commercial
and government enterprises and other property owners. These
installations include: food distribution centers, agricultural
operations, schools, municipal buildings, general office buildings,
multi-unit residential complexes, sports stadiums and resort
properties. These solar installations are tied to the local electric
utility (``grid-tied''). Customers retain access to their electric
utility while generating electricity from solar power.
Solar energy systems (photovoltaic for electricity or solar thermal
for water heating) can be used in most places throughout the United
States. Photovoltaic (PV) and solar water heating systems are
distributed generation (DG) technologies. Like other DG technologies,
they provide energy at the point of consumption rather than at a
central power plant hundreds of miles away. As such, DG does not rely
on vulnerable regional transmission lines and local distribution
networks. By producing energy at the source of consumption, solar power
alleviates stress and vulnerability on the grid. It also ensures power
generation should transmission facilities or generating stations fail
due to terrorism, accidents or natural disaster. Solar power is a very
flexible solution that can be added in targeted or widespread doses for
residential and commercial purposes to meet the needs of consumers and
utility grid reliability. 1
---------------------------------------------------------------------------
\1\ See Appendix 1 for overview of PV, solar thermal and other
solar technologies
---------------------------------------------------------------------------
Where Solar Energy Makes Sense:
The relative attractiveness of solar installations depends upon
three sets of variables: (I) geographic/economic factors, (ii) site
characteristics, (iii) and program objectives:
1. Geographic/Economic Factors:
Utility prices for conventional electricity vary greatly
among different parts of the country. High cost areas like the
Northeast, much of California, Hawaii and Insular Areas such as the
U.S. Virgin Islands make solar systems look relatively more attractive
than in low cost areas such as parts of the Southeast or certain
Western states. When electricity prices are approaching $0.20 per kwh
or even higher (versus the U.S. mainland average of $0.13 per kwh),
this makes solar energy that much more attractive. Thus, in places like
the U.S. Virgin Islands or Hawaii, prices greater than $0.30 per kwh
offering a compelling opportunity to install solar energy systems.
Favorable local regulations such as the existence of
``net metering'', which allows customers to sell excess power back to
the grid at the same price as they purchase power, are critical.
Local/utility financial incentives provided by the state
or local government or utility company that can augment federal
incentives. An example of this can be where the local utility is
willing to provide incentives to homeowners or businesses to install
solar in order to address peak demand or grid congestion issues. This
can help the utility mitigate risks of brownouts and/or avoid expensive
grid or generation capacity enhancements. For example, groSolar is
working with several utilities to provide ``distributed generation''
near the demand points to work around grid congestion points and thus
avoid expensive grid upgrades.
Amount of sunlight. While Arizona is obviously better
than Massachusetts in terms of sunlight, other variables such as
relative utility prices and local regulations are more critical and
usually outweigh the significance of the amount of sunlight. Consider
the fact that Germany and Japan have been the leaders in solar capacity
with far less solar resources than the U.S. Acceptance of solar energy
in southern California has more to do with high electric rates and
supportive local incentives than plentiful sunlight.
2. Site Characteristics:
Various site-specific characteristics affect the
productivity and/or installation costs of solar systems. It is
preferable to have:
Unobstructed southerly site exposure
Flat roof or low-angle slope (or nearby fields or parking
lots for ground-mounted or canopy arrays)
Less than 60 feet above ground for roof mounted systems
(preferably 1-2 stories)
Structurally sound roof to bear weight of solar array
without significant obstruction from dormers, mechanical equipment,
vents or shading from sunlight
3. Program Objectives (some of these apply more to commercial
opportunities):
Property owner/manager objectives
Lock in long-term, predictable energy costs to mitigate
risks of electric rate increases, particularly for those areas that are
highly dependent upon petroleum-based sources for electric generation.
Reduce carbon emissions
Use solar energy as part of broader energy conservation
measures (e.g. with efficient lighting, recycling, etc.) to reduce
overall energy costs
Public relations value to residents, employees, customers
and other constituents
Sufficient scale of project to provide economies of scale
for design, permitting, financing, installation of multi-residential
sites or office buildings. A portfolio of smaller projects or
residential installations, which share a common owner/manager and other
characteristics, can also provide attractive economies of scale and
reduce the all-in cost of solar installations.
Long-term financing potential
Good credit quality of owner/user of power (or use of 3rd-
party credit enhancements/guarantees) to facilitate long-term financing
Ability of owner or third-party to use commercial
investment tax credits which are currently 30% in year one
Current Legislation:
I would now like to direct my testimony to current discussions
within Congress. The timing of this joint hearing is excellent. Earlier
this month, Senators Cantwell and Ensign proposed the Energy Tax
Stimulus Act of 2008 (S. 2821). It contains key items that are
necessary for continued rapid growth of solar energy in the U.S.,
including Insular Areas such as the U.S. Virgin Islands. The proposed
legislation draws on strong bipartisan support for solar. For example,
two important provisions are:
1. the extension of the 30% Investment Tax Credit (ITC) for
commercial solar investments for eight years (and allowing electric
utilities to claim the ITC)
2. the extension of the 30% personal tax credit for one year for
residential solar investments while also repealing the current $2,000
cap
Further information on the components of this important legislation
is included in Appendix 2. The short and long-term benefits of enacting
this legislation would be significant. The benefits include:
Increased energy security: Solar energy is a domestic and
abundant energy source in the U.S. The U.S. has the best solar
resources of any developed country in the world. Proportionally, U.S.
solar energy resources exceed those of fossil, nuclear or other
renewable energy resources. Despite this tremendous advantage, the U.S.
has failed to capture and harness this free and readily available
energy. In 2006, solar energy produced just 1/30th of one percent of
all electricity in the U.S.; Germany in contrast, with the solar
resources no better than those of Alaska, installed seven times more
solar energy property than the entire U.S. 2 Solar
technologies help stabilize the nation's electricity grid, provide
clean, reliable power, and reduce the impact of natural disasters and
terrorist acts. By generating electricity at the point of consumption,
the effects of natural disaster or terrorist attacks can be mitigated.
Producing these home-grown technologies in the U.S. will reduce our
dependence on foreign sources of energy, while simultaneously lowering
the cost of energy to consumers.
---------------------------------------------------------------------------
\2\ EIA, Net Generation by Energy Source by Type of Producer,
October 2006.
[GRAPHIC] [TIFF OMITTED] 41819.001
.eps Reduction in the use of high cost natural gas (and
other petroleum-based fuels): In most parts of the U.S., peak
electricity demand occurs when solar electricity is near optimal
efficiency (9 AM--6 PM). This demand load is almost exclusively served
by central station gas generation (or other petroleum-based fuels) that
can be easily cycled on and off and is often highly inefficient. Given
the high price of natural gas to key industrial sectors and consumers,
the U.S. can no longer afford to neglect its abundant solar resources.
Analysis conducted by the Solar Energy Industries Association (SEIA)
concludes that an eight-year extension and expansion of investment tax
credits for solar energy will displace over 5.5 trillion cubic feet
(Tcf) of natural gas, providing an economic value to consumers in
excess of $50 billion. 3 This is enough energy to displace
the need for all new LNG terminals by 2012.
---------------------------------------------------------------------------
\3\ Solar Energy Industries Association Natural Gas Displacement
Model
[GRAPHIC] [TIFF OMITTED] 41819.002
.eps Hedge against rising energy prices: In the last five
years, consumers have seen electricity prices escalate between 20 and
78 percent. At the same time, we have seen the price of natural gas
triple and the price of gasoline routinely exceed $3.00 per gallon.
Each year the cost of energy is taking a larger percentage of a
family's income than at any other time in U.S. history. This energy
inflation vulnerability especially impacts the poor and elderly on
fixed incomes. Solar can help address this vulnerability because it
requires no fuel to operate. Although a solar system is more expensive
up front in many cases, there are no additional costs for operating a
system once installed. Furthermore, solar panels are guaranteed for 20-
25 years, allowing consumers to ``lock in'' their electricity prices
for decades.
Job creation: Solar systems require high-tech
manufacturing facilities and produce well paying, high-quality jobs.
Extending the tax credit will create an estimated 55,000 new jobs in
the solar industry and over $45 billion in economic investment.
groSolar has doubled its workforce in the last 12 months, including
some hires who had been recently laid off from construction related
employment due to the downturn in the U.S. housing market.
Clean energy and environmental benefits: Solar energy is
the cleanest method of energy generation, in terms of avoided air,
waste and noise pollution, energy payback, water conservation,
radiation, harm to wildlife, or environmental risk in the event of an
accident. Solar energy produces no greenhouse gases, no acid
precipitation or toxic emissions, and no other air pollution of any
kind. Over the 40-50 year life of a solar electric system, every
kilowatt (kW) of solar electric power reduces 217,000 pounds of carbon
dioxide, 1500 pounds of sulfur dioxide, and 830 pounds of nitrogen
oxides emissions as compared to electricity produced by conventional
generation. 4 Photovoltaic solar energy generates
electricity without using any water. In contrast, fossil fuel and
nuclear based electricity generation use substantial amounts of water
to run steam turbines. Across the U.S., approximately 40% of fresh
water withdrawals are used for electric generation. 5 If
water-starved communities like Phoenix and Las Vegas are to continue
growing, we must place greater emphasis on water-free electricity
generating technologies.
---------------------------------------------------------------------------
\4\ NREL report, ``Distributed Energy Resources for the California
Local Government Commission,'' October 2000.
\5\ Sandia National Laboratories, Energy-Water Nexus, http://
www.sandia.gov/news-center/news-releases/2006/environ-waste-mgmt/
mapwest.html
---------------------------------------------------------------------------
______
APPENDIX 1
OVERVIEW OF SOLAR ENERGY TECHNOLOGIES
photovoltaics (pv)
Technology
Photovoltaic (PV) devices generate electricity directly from
sunlight via an electric process that occurs naturally in certain types
of material. Groups of PV cells are configured into modules and arrays,
which can be used to power any number of electrical loads.
Crystalline silicon--the same material commonly used by the
semiconductor industry--is the material used in approximately 90% of
all PV modules today. PV modules generate direct current (DC)
electricity. For residential use, the current is then fed through an
inverter to produce alternating current (AC) electricity that can power
the home's appliances.
The majority of PV systems today are installed on homes and
businesses that remain connected to the electric grid. Consumers use
their grid-connected PV system to supply some of the power they need
and use utility-generated power when their power usage exceeds the PV
system output (e.g., at night). In 41 U.S. states, when the owner of a
grid-connected PV system uses less power than their PV system creates,
they can sell the electricity back to their local utility, watch their
meter spin backwards, and receive a credit on their electric bill--a
process called net metering. The electric grid thus serves as a
``storage device'' for PV-generated power. Net metering is a critical
requirement to facilitate adoption of PV systems.
Markets
The global PV market has averaged 38% annual growth over the last
five years. Yet PV still accounts for a small percentage of electricity
generation worldwide and less than 1/30th of 1% in the U.S.
Furthermore, the U.S. lags behind Germany and Japan in installations as
well as in manufacturing. Germany and Japan have surged to the lead
with coherent, long-term national incentive policies, despite
dramatically inferior amounts of sunshine.
The U.S. possesses the best solar resources in the world, and yet
Germany installs seven-times as much PV as the U.S. Germany and Japan
have taken the lead in solar manufacturing and installations because of
long-term national incentive policies designed to make solar power
mainstream. Japan instituted a carefully designed rebate program that
lasted over ten years, while Germany incentivizes solar installations
by paying 3-4 times retail electric rates for the electricity generated
from PV systems for 20 years. The surging player in the industry,
China, has gone from having no PV industry to manufacturing twice the
level of the U.S. in just three years. While California is the dominant
U.S. market for PV, with 73% of the grid-tied installations in 2006,
there is substantial activity in other states.
solar thermal systems
Technology
Solar thermal systems provide environmentally friendly heat for
household water and space heating. The systems collect the sun's energy
to heat either air or a fluid. The air or fluid then transfers solar
heat to your home or water. In many climates, a solar heating system
can provide a very high percentage (50 to 75%) of domestic hot water
energy. In many northern European countries, combined hot water and
space heating systems are used to provide 15 to 25% of home heating
energy.
Active solar water heating systems can be either ``open loop,'' in
which the water to be heated flows directly through the rooftop
collector, or ``closed loop,'' in which the collector is filled with an
antifreeze solution that passes through a heat exchanger mounted in or
around your normal water heater. During the day, in good weather, your
water can be heated entirely by the sun. In any weather, the heating
system can back up your existing heater, reducing overall energy costs.
[GRAPHIC] [TIFF OMITTED] 41819.003
.epsMarkets
In the absence of coherent national policies, from 1997 until 2005,
the U.S. solar water heating and solar space heating market showed
little growth, averaging about 6,000 installations per year. In the
past couple years, numerous states have created or expanded incentives
to complement the new federal tax credits. Accordingly, the market is
has increased quite a bit. Solar water heating can be done at same time
as PV.
concentrating solar power
Technology
Concentrating solar power (CSP) plants are utility-scale generators
that produce electricity by using mirrors or lenses to efficiently
concentrate the sun's energy. Two principal CSP technologies are
parabolic troughs and dish-Stirling engine systems.
Using curved mirrors, parabolic trough systems concentrate sunlight
to drive conventional steam turbines. The mirrors focus the sun's
energy onto a receiver pipe or heat collection element. From there, a
high temperature heat transfer fluid picks up the thermal energy and
uses the heat to make steam. The steam drives a conventional steam-
Rankine power cycle to generate electricity. A typical collector field
contains many parallel rows of troughs connected in series.
thin film solar
Technology
There are four basic categories of thin film PV based on the
materials used to convert light into electricity. They are: i)
Amorphous Silicon ( a-Si ), ii) Cadmium Telluride (CdTe), iii)
Copper Indium (Gallium) di-Selenide (CIS/CIGS) and iv) Emerging (Dye-
sensitized, Organic or Nano-materials)
Not only can different materials be used to create the PV effect,
but they can also be deposited on different substrates. Currently, most
production technologies use glass as the substrate, as in the case of
all CdTe technologies, and many emerging a-Si technologies. But some a-
Si solutions use a flexible metal foil as the substrate, and many
emerging and CIGS technologies can be deposited on glass or metal foil
as well as lower temperature substrates like plastic.
Unlike today's traditional solar photovoltaic (crystalline PV)
technology, thin film PV uses very little or no silicon and other
material to build a solid state electricity generation device. Thus, a
whole new range of applications otherwise not possible using
traditional solar cells are enabled because thin film materials can be
applied to a multitude of surfaces such as glass, plastic and flexible
metal foils. Thin film PV can be manufactured using various deposition
and packaging methods that offer flexibility in scaling production and
addressing applications. Currently, commercial applications of thin
film PV are limited due to lower efficiencies and used predominantly
for large utility-scale PV projects where space is not a constraint.
______
APPENDIX 2
the clean energy tax stimulus act of 2008
On April 3, 2008 Senators Cantwell and Ensign announced the Clean
Energy Tax Stimulus Act of 2008 (S. 2821). It contains key items that
are necessary for continued rapid growth of solar energy in the U.S.
Here is a summary of key sections of the proposed legislation.
Purpose: To provide for the limited continuation of clean energy
production incentives and incentives to improve energy efficiency in
order to prevent a downturn in these sectors that would result from a
lapse in the tax law.
Title I--Extension of Clean Energy Production Incentives
Section 101. Extension and modification of the renewable energy
production tax credit (IRC Section 45). Under current law, an income
tax credit is allowed for the production of electricity using renewable
energy resources, like wind, biomass, geothermal, small irrigation
power, landfill gas, trash combustion, and hydropower facilities. A
taxpayer may generally claim a credit for 10 years, beginning on the
date the qualified facility is placed in service. In order to qualify,
however, facilities must be placed in service by December 31, 2008. The
bill extends the placed in service date for one year (through December
31, 2009). It also redefines small irrigation power to include marine
and hydrokinetic energy, and enables the credit to help reduce the cost
of renewable electricity that is ultimately sold to utility customers
when the utility itself is also a part owner of the renewable facility.
Section 102. Extension and modification of the solar energy and
fuel cell investment tax credit (``ITC'') (IRC Section 48). Under
current law, taxpayers can claim a 30 percent business energy credit
for purchases of qualified solar energy property and qualified fuel
cell power plants. In addition, a 10 percent credit for purchase of
qualifying stationary microturbine power plants is available. The
credit for qualified fuel cell power plant property is capped at $500
per 0.5 kilowatt of capacity. Credits apply to periods after December
31, 2005 and before January 1, 2008. The bill enables taxpayers to
claim the 30 percent business credit for the purchase of fuel cell
power plants and solar energy property and the 10 percent credit for
stationary microturbines, through December 31, 2016. In addition, the
bill repeals the $500 per .5 kilowatt of capacity cap for qualified
fuel cell power plant property, and allows electric utilities to claim
the ITC.
Section 103. Extension and modification of the residential energy-
efficient property credit (IRC Section 25D). Under current law,
taxpayers can claim a personal tax credit for the purchase of property
that uses solar energy to generate electricity for use in a dwelling
unit and qualified solar water heating property that is used
exclusively for purposes other than heating swimming pools and hot
tubs. The credit is equal to 30 percent of qualifying expenditures,
with a maximum $2,000 credit for each of these systems of property.
Section 25D also provides a 30 percent credit for the purchase of
qualified fuel cell power plants. The credit for any fuel cell may not
exceed $500 for each 0.5 kilowatt of capacity. The credit applies to
property placed in service prior to January 1, 2009. The bill extends
the credit for residential solar property for one year (through
December 31, 2009) and repeals the $2,000 credit cap for qualified
solar electric property. The bill also allows the tax credit to offset
Alternative Minimum Tax (``AMT'') liability.
Section 104. Clean Renewable Energy Bonds (``CREBs'') (IRC Section
54). Under current law, public power and consumer-owned utilities that
cannot benefit from tax credits can issue Clean Renewable Energy Bonds
(CREBs) to help them reduce the cost of renewable energy investments.
Under current law, there is a national CREB limitation of $1.2 billion
in bonding authority and CREBs must be issued before December 31, 2008.
This bill authorizes an additional $400 million of CREBs that may be
issued and extends the authority to issue such bonds through December
31, 2009. In addition, the bill allocates 1/3 of the additional bonds
for qualifying projects of State/local/tribal governments; 1/3 for
qualifying projects of public power providers; and 1/3 for qualifying
projects of electric cooperatives.
Section 105. Extension of the special rule to implement FERC
restructuring policy (IRC section 451(i)). The bill extends through
December 31, 2009, the present-law deferral provision that enables
qualified electric utilities to recognize gain from certain
transmission transactions over an 8-year period.
Title II--Extension of Incentives to Improve Energy Efficiency
Section 201. Extension and modification of the credit for energy-
efficiency improvements to existing homes (IRC section 25C). 1Current
law provides a 10 percent investment tax credit for purchases of
advanced main air circulating fans, natural gas, propane, or oil
furnaces or hot water boilers, windows and other qualified energy-
efficient property. The credit applies to property placed in service
prior to January 1, 2008. The bill extends the credit for one year
(through December 31, 2009), and specifies that certain pellet stoves
are included as qualified energy-efficient building property.
Section 202. Extension of the tax credit for energy-efficient new
homes (IRC section 45L). 1Current law provides a tax credit to an
eligible contractor equal to the aggregate adjusted bases of all
energy-efficiency property installed in a qualified new energy-
efficient home during construction. The bill extends the energy-
efficient new homes credit for two years (through December 31, 2010),
and permits the eligible contractor to claim the credit on a home built
for personal use as a residence.
Section 203. Extension of the energy-efficient commercial buildings
deduction (IRC section 179D). 1Current law allows taxpayers to deduct
the cost of installing energy-efficient improvements in a commercial
building. The deduction equals the cost of energy-efficient property
installed during construction, with a maximum deduction of $1.80 per
square foot of the building. In addition, a partial deduction of 60
cents per square foot applies to certain subsystems. The deduction
applies to property placed in service prior to January 1, 2009. The
bill extends the deduction to property placed in service through
December 31, 2009, increases the maximum deduction to $2.25 per square
foot, and allows a partial deduction of 75 cents per square foot for
building subsystems.
Section 204. Modification and extension of the energy-efficient
appliance credit (IRC section 45M). 1Current law provides a credit for
the eligible production of certain energy-efficient dishwashers,
clothes washers, and refrigerators. The credit for dishwashers applies
to dishwashers produced in 2006 and 2007 that meet the Energy Star
standards for 2007. The bill extends the credit to appliances produced
in 2008, 2009, and 2010 and updates the qualifying efficiency standards
in accordance with the Energy Independence and Security Act of 2007.
______
Mrs. Christensen. The Chair now recognizes Frazier Blaylock
to testify for five minutes.
STATEMENT OF FRAZIER BLAYLOCK, DIRECTOR, FEDERAL GOVERNMENT
RELATIONS, COVANTA HOLDING CORPORATION
Ms. Blaylock. Thank you, Chairwoman Christensen, Chairman
Costa, Mr. Shuster. We greatly appreciate your having us here
this morning. My name is Frazier Blaylock. I am the Director
the Federal Government Affairs for Covanta Energy Corporation.
Thanks for the opportunity to speak to you about how we could
help in restoring a clean energy future for the insular areas.
Covanta operates 34 energy-from-waste facilities in the
United States including three in Pennsylvania, one in
Stanislaus County, California. We also operate one in Honolulu,
four in Florida, and three on Long Island in New York. And I
mention those communities in particular because the geographic
similarities they share with insular areas we are discussing
today.
Energy from waste is a specially designed energy generation
process that uses household waste as a fuel and help solve some
of society's biggest challenges, including dependence on
foreign oil, solid waste management, climate change, and land
use, all of which have already been raised today.
Covanta serves the disposable needs of approximately twelve
million people in communities across the United States and
reduces the need for fossil fuels by generating over 1,200
megawatts of renewable energy and saving the equivalent of 15
million barrels of oil each year.
Every ton of trash processed at energy-from-waste
facilities generates between 500 and 700 kilowatt hours of
renewable electricity on a 24/7 base load basis, and our
operations recycle over 350 million tons of recovered metals
every year.
One key benefit of the energy-from-waste process is the use
of an indigenous, sustainable fuel called trash, which itself
creates management challenges for insular communities and
communities throughout the country. Unlike fossil fuel, garbage
is readily available and within short transportation distances
from these energy facilities and from the energy consumers. For
each ton of trash processed in energy-from-waste facility
enough electricity is generated to offset one barrel of oil.
It is particularly relevant for Covanta to be addressing
the energy future of the insular areas because of other
environmental benefits that we offer. Energy from waste is a
safe, reliable waste disposal method that generates renewable
energy, reduces greenhouse gas emissions, recovers metals from
recycling and reduces reliance on landfills. The energy-from-
waste process reduces the volume of solid waste received in our
facilities by 90 percent, and displaces one ton of greenhouse
gas emissions for every one ton of trash we process.
According to the Department of Energy, who is here today,
energy from waste makes important contributions to the overall
effort to achieve increased renewable energy use. And in 2003
the EPA stated that energy from waste produces electricity with
less environmental impact than almost any other source of
electricity.
I mentioned Hawaii, New York, and Florida earlier and
that's because island and peninsula communities share some
similar characteristics that present--share some similar
characteristics that are relevant to your island communities.
Limited drinking water supplies, a limited ability to import
power and export waste and finite land space are among those
challenges. Energy from waste, in addition to having a
potential to contribute significantly to energy independence
and renewable energy, has the benefit of positively impacting
those challenges.
Insular peninsula areas, they're depending on energy from
waste as part of their growing energy environmental
infrastructure. Hillsborough and Lee Counties in Florida has
expanded their existing energy-from-waste facility because of
population growth and limited landfill space. The city of
Honolulu is planning a 900 ton per day expansion of their
existing energy-from-waste facility, which we operate. That
expansion will increase the contribution of energy generated in
that Honolulu plant by 8 percent of all the power generated on
the island of Oahu. In addition, Florida and Long Island
communities also moved to energy from waste because it avoids
stress to drinking water supplies that landfilling presents.
More locally, Puerto Rico's solid waste management plan calls
for the construction of two energy-from-waste plants with the
combined capacity of 2900 tons per day.
Finally, another critical benefit these communities will
realize by generating renewable energy, energy-from-waste
plants is a net reduction in their greenhouse gas production,
the avoidance of methane gas generation from landfills,
avoidance of fossil fuel production, and minerals recycling all
contribute to energy-from-waste greenhouse gas avoidance.
We believe we would be an excellent choice for renewable
power for insular communities like the U.S. Virgin Islands for
all these reasons and be delighted to take any questions from
the committee. Thank you very much.
Mrs. Christensen. Thank you, Ms. Blaylock.
[The prepared statement of Ms. Blaylock follows:]
Statement of Frazier Blaylock, Covanta Energy Corporation
Good morning Chairman Christensen, Chairman Costa and members of
the committee. My name is Frazier Blaylock and I am the Director of
Federal Government Affairs for Covanta Energy Corporation. Thank you
for the opportunity to come speak to you today about the benefits of
Energy-from-Waste (EfW) in pursuing a clean energy future for the
insular areas.
Covanta Energy operates 34 Energy-from-Waste facilities in the
United States, including one in Honolulu, 4 in Florida and 3 on Long
Island in New York. I highlight these seven locations because of the
geographic similarities they share with the insular areas we are
discussing today. We also have a worldwide presence, with facilities in
Europe and China.
Energy-from-Waste is a specially designed energy generation process
that uses household waste as fuel and helps solve some of society's
biggest challenges including dependence on fossil fuels, solid waste
management, climate change, and land use. Covanta serves the disposal
needs of approximately 12 million people in communities across the
United States and reduces the need for fossil fuels by generating 1,265
megawatts of renewable energy, and saving the equivalent of 15 million
barrels of oil each year. Every ton of trash processed at an EfW
facility generates a significant 500-700 Kwh of renewable electricity
on a 24/7, base-load basis. And, our operations recycle over 350
million tons of recovered metals each year.
A key benefit of the EfW process is the use of an indigenous,
sustainable fuel which in and of itself creates management challenges
for insular communities. Unlike fossil fuels, garbage is readily
available and within short transportation distances from these energy
generating facilities and the energy consumers. For each ton of trash
processed at an EfW facility, enough electricity is generated to offset
one barrel of oil.
It is particularly relevant for Covanta to be addressing the energy
future of the insular areas because of the unique environmental
benefits that we offer. EfW is a safe, reliable waste disposal method
that generates renewable energy, reduces greenhouse gas emissions,
recovers metals for recycling, and reduces reliance on landfills. The
EfW process reduces the volume of solid waste received at a facility by
90% and displaces one ton of greenhouse gas emissions for every ton of
trash we process. According to the U.S. Department of Energy, EfW makes
``important contributions to the overall effort to achieve increased
renewable energy use and the many associated positive environmental
benefits.'' In 2003, the EPA stated that EfW produces electricity
``with less environmental impact than almost any other source of
electricity.''
I mentioned Hawaii, New York and Florida earlier, and that is
because Island and peninsula communities share some similar
characteristics that can present infrastructure challenges to
government. Limited drinking water supplies, a limited ability to
import power and export waste, and finite land space are among those
challenges. EfW, in addition to having the potential to contribute
significantly to energy independence and renewable energy, has the
benefit of positively impacting those challenges.
Insular and peninsula areas today are depending upon EfW as part of
their growing energy and environmental infrastructure. Hillsborough and
Lee Counties in Florida have expanded their existing EfW facilities
because of population growth and limited landfill space. The City of
Honolulu is also planning a 900 ton per day expansion of their existing
EfW facility. That expansion will increase the contribution of energy
generated by that renewable facility to approximately 8% the amount of
all the power generated on the Island of Oahu. In addition, Florida and
Long Island communities also look to EfW because it avoids threats to
drinking water supplies that landfilling presents. More locally, Puerto
Rico's solid waste management plan calls for the construction of two
EfW plants with a combined capacity of 2,910 tons per day.
Another critical benefit that these communities will realize by
generating renewable energy at EfW plants is a net reduction in their
greenhouse gas production. The avoidance of methane gas generation from
landfills, avoidance of fossil fuel production, and metals recycling
all contribute to EfW's greenhouse gas avoidance.
Energy from Waste is an excellent choice for renewable power for
insular communities because it can not only provide clean, reliable,
base load renewable power, but it does so by solving a second insular
infrastructure challenge which is uniquely met by EfW.
Thank you for the opportunity to speak with you today. I am more
than happy to answer any questions the Members may have.
______
Mrs. Christensen. And the Chair now recognizes Mr. Powell
representing the Southern States Energy Board for five minutes.
STATEMENT OF JIM POWELL, SENIOR POLICY ADVISOR, SOUTHERN STATES
ENERGY BOARD
Mr. Powell. Madame Chairwoman, Mr. Chairman, Mr. Shuster,
and other members of this committee, and I thank you very much
for the opportunity to be here today to testify on Charting a
Clean Energy Future For the Insular Territories. Special thanks
to the committee staff for arranging this.
The Southern States Energy Board is a nonprofit interstate
compact organization that was created in 1960 and established
under public law. I am here today representing the Southern
States Energy Board. The board's mission is to enhance economic
development and the quality of life in the South through
innovations in energy and environmental policies, programs and
technologies. 16 southern states and two territories including
the U.S. Virgin Islands are members of the Southern States
Energy Board.
We talked a lot today about the energy dilemma is what I
would like to call it. I am not going to repeat examples that
people have provided that preceded me. But the citizens of the
insular areas, including the Virgin Islands are currently
experiencing some of the highest energy costs in our nation,
perhaps even the world. Because of this, because of the high
prices, citizens of the insular territories are forced to spend
a higher percentage of their disposable income on energy as
compared to people in other parts of the continental U.S.
Energy dollars are leaving the insular areas. Every barrel
of oil that's brought into the insular territories is money
going out to politically unstable parts of the world that some
of us don't like to talk about. By using indigenous renewable
resources that are located here in this insular areas, energy
dollars stay in insular areas thus benefiting the local
economies by creating clean energy jobs not to mention the
benefits that it does to the environment. Many of the citizens
in the insular areas are forced to make quality of life
decisions such as purchasing food and medicine or paying a
utility bill. It's not the case in all parts of the U.S.
The Energy Policy Act, Section 251 of the Energy Policy Act
of 2005 produced the Insular Areas Energy Assessment Report,
which was prepared by the Pacific Power Association for the
Department of the Interior and released in the summer of 2006.
This important report is a comprehensive assessment totaling
453 pages that contains numerous recommendations designed to
reduce the insular areas dependence on imported petroleum and
to increase the use of renewable energy resources while
improving energy efficiency measures. The broad base assessment
should be used as the basis for all the insular areas to
develop a comprehensive energy strategy for the future.
Section 252 of EPACT 2005 directed the Secretary of Energy
in consultation with the Secretary of Interior to assess and
report to Congress on projects with the greatest potential for
reducing dependence on fossil fuels used to generate
electricity and to promote distributed energy.
DOE was authorized to provide technical and financial
assistance for feasibility studies and for implementation of
projects. Funding was authorized at 500,000 per year for
feasibility studies and 44 million for project implementation.
Unfortunately, Congress has not provided funding for the
implementation of this important EPACT provision.
The Southern States Energy Board urges Congress to fully
fund this EPACT provision so that insular areas would be able
to conduct studies of projects and strategies identified in the
assessment report that would significantly reduce their
dependence on imported fossil fuels. The economic future of the
insular areas depends on their ability to reduce their reliance
on costly fossil fuels by increasing the efficiency with which
we use such fuels and by exploiting the local renewable energy
resources.
In August 2007, Governor deJongh asked the Southern States
Energy Board to assist in the development and implementation of
a Comprehensive Energy Strategy that will be designed to
increase the standard of living for the citizens of the U.S.
Virgin Islands by assuring long-term availability of
affordable, secure supplies of energy.
A secondary goal of that study--of that strategy, the
Virgin Islands will be poised to be a Caribbean and worldwide
showcase for the development and use of renewable energy. The
Insular Areas Energy Assessment Report has proven to be an
important resource for the project team.
A bit on the State Energy Program. DOE's State Energy
Program provides grants for the states and territories for
energy efficiency and renewable energy programs and projects.
States and territories use the State Energy Program grant
funding to address their energy priorities and to adopt
emerging renewable energy and energy efficiency technologies.
State Energy Program is the only Federally funded energy
program that provides financial and technical assistance
directly to the states and territories. The State Energy
Program funding allocations to the states and territories is
based on an antiquated formula that needs to be updated to
reflect the current world energy and economic realities.
The insular areas receive only a minimal amount of funding
under the State Energy Program. For example, in 2007, Fiscal
Year 2007, the Virgin Islands received 259,000, while the State
of Texas received $2,782,000. In fact, the total insular area
SEP formula allocation for 2007 was $974,000 vice a total of
$44,456,000 for the states.
The Weatherization Assistance Program is another Department
of Energy program. Under current Federal statute, the insular
areas do not participate in that program. However, if they did
participate and used the same formula that's there now, without
an update they only receive a small amount of funding and
probably wouldn't make a worthwhile program in the insular
areas. That funding formula is very old as well and needs to be
updated.
The Southern States Energy Board urges Congress to include
the insular areas in the weatherization program and direct DOE
to update the allocation formula to include criteria such as
current energy costs, demographics and climate. And the
Southern States Energy Board also encourage Congress to provide
a minimum allocation of at least $2 million to the insular
areas for this program. This amount of funding will ensure
operation of a meaningful program.
The territorial energy offices are an important part of the
equation of the insular areas quest to reduce their dependence
on imported petroleum and to establish a clean energy economy.
The energy policies and programs of the territorial energy
offices are vital to ensure economic growth, increased energy
efficiency, and an increased reliance on clean----
Mrs. Christensen. I am going to have to ask you to wrap up.
Mr. Powell. Real quick. Thank you, Congresswoman. Just a
brief mention of the Hawaii Clean Energy Initiative. This is
exactly the type of effort that the insular areas need. We are
concerned that the insular areas have been left out of this
effort and why the effort was focused on Hawaii without
considering other insular areas. The insular areas need the
same type of attention. We are interested as to how Hawaii
actually got this award without the additional areas being
considered.
In conclusion, the Southern States Energy Board is proud of
the strong relationship we have enjoyed with the Virgin Islands
over the years. We are proud of the relationship with Mr.
Smith. He has done a marvelous job in the Energy Office in his
capacity as Director. Under his leadership, it's an award
winning office, and he's a great asset for the Virgin Islands.
Thank you for your leadership.
Mrs. Christensen. We allowed you to go over so that you can
speak highly of Mr. Smith. Thank you.
[The prepared statement of Mr. Powell follows:]
Statement of James R. Powell, Senior Policy Advisor,
Southern States Energy Board, Norcross, Georgia
Madame Chairwoman, Mr. Chairman and members of the Subcommittees,
thank you for this opportunity to testify on ``Charting a Clean Energy
Future for the Insular Areas.'' Mr. Nemeth would very much like to have
been testifying today, but he had a previous commitment outside of the
country and requested that I serve as his surrogate.
The Southern States Energy Board (SSEB) is a non-profit interstate
compact organization created in 1960 and established under Public Laws
87-563 and 92-440. The Board's mission is to enhance economic
development and the quality of life in the South through innovations in
energy and environmental policies, programs and technologies. Sixteen
southern states and two territories comprise the membership of SSEB:
Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Maryland,
Mississippi, Missouri, North Carolina, Oklahoma, Puerto Rico, South
Carolina, Tennessee, Texas, U.S. Virgin Islands, Virginia and West
Virginia. Each jurisdiction is represented by the governor and a
legislator from the House and Senate. Governor Joe Manchin of West
Virginia currently serves as the chair. The U.S. Virgin Islands (USVI)
is a member and Governor John deJongh is a member of the Executive
Committee.
On December 23rd, 1992, Governor Alexander A. Farrelly, signed
Executive Order Number 338-1992 authorizing the USVI to become a member
of SSEB. Executive order Number 341-1993 was signed on November 12th,
1993 and then Executive Order 364-1995 was signed on November 16th,
1995 by Governor Roy Schneider.
SSEB was created by state law and consented to by Congress with a
broad mandate to contribute to the economic and community well-being of
the citizens of the southern region. The Board exercises this mandate
through the creation of programs in the fields of energy and
environmental policy research, development and implementation, science
and technology exploration and related areas of concern. SSEB serves
its members directly by providing timely assistance designed to develop
effective energy and environmental policies and representing members
before governmental agencies at all levels.
SSEB's long-term goals are to:
perform essential services that provide direct scientific
and technical assistance to state governments;
develop, promote and recommend policies and programs on
energy, environment and economics that encourage sustainable
development;
provide technical assistance to executive and legislative
policy makers and the private sector in order to achieve synthesis of
energy, environment and economic issues that ensure energy security and
supply;
facilitate the implementation of energy and environmental
policies between federal, state and local governments and the private
sector;
sustain business development throughout the region by
eliminating barriers to the use of efficient energy and environmental
technologies; and
support improved energy efficient technologies that
pollute less and contribute to a clean global environment, and protect
indigenous natural resources for future generations.
The USVI clearly has opportunities today to move forward in
reducing dependence on foreign resources for its energy supply. Over
the past ten years, SSEB has provided the USVI with funding to conduct
numerous projects related to bioenergy. Most recently, SSEB funded work
in the amount of $48,000 to assess the feasibility of collection and
cleaning of the landfill biogas to insure the greatest possible use of
available biogas resources in the territory.
As all the Nation moves forward, it is important to realize that
the insular areas represent an important role and the USVI needs
assistance from Congress to work toward a sustainable and clean energy
future. Please refer to attachment A for comprehensive description of
the work that SSEB with the U.S. Virgin Islands.
Energy Dilemma. The citizens of the Insular areas, including the
USVI are currently experiencing some of the highest energy costs in our
Nation, perhaps the world. For example, citizens in the USVI are
currently paying around 35 cents per kilowatt hour for electricity
while citizens in most of the Southeast region of the U.S. pay between
5 to 10 cents per kilowatt hour. Gasoline sells for around $4.15 per
gallon on St. Thomas while the price per gallon in the metropolitan
Atlanta, Georgia area is around $3.25. With the world price of oil
hovering around $106 per barrel these high costs appear to be
increasing. Citizens of the Insular areas are forced to spend a higher
percentage of their disposable income on energy as compared to people
in parts of the continental U.S. Accordingly, many of the citizens of
the Insular areas are forced to make quality of life choices such as
purchasing food and medicine or paying a utility bill.
Energy Policy Act and Insular Areas Energy Assessment Report.
Section 251 of the Energy Policy Act of 2005 (EPACT) directed the
Secretary of Interior, in consultation with the Secretary of Energy and
the head of government of each insular area, to update insular area
energy plans to reflect findings, with the goals of reducing energy
imports by 2012, increasing energy conservation and energy efficiency,
and maximizing the use of indigenous resources. The Insular Areas
Energy Assessment Report was prepared by the Pacific Power Association
for the Department of the Interior and released in the summer of 2006.
This report is a comprehensive assessment totaling 453 pages that
contains numerous recommendations designed to reduce the Insular areas
dependence on imported petroleum and to increase the use of renewable
energy resources while improving energy efficiency measures. This broad
based assessment should be used as the basis for the Insular areas to
develop a comprehensive energy strategy for the future.
Section 252 of EPACT 2005 directed the Secretary of Energy, in
consultation with the Secretary of the Interior to assess and report to
Congress on projects with the greatest potential for reducing
dependence on fossil fuels used to generate electricity, and to promote
distributed energy, in the insular areas. DOE was authorized to provide
technical and financial assistance, on a matching basis with local
utilities, for feasibility studies and for implementation of projects
the Secretary of Energy determines are feasible and appropriate.
Funding is authorized at $500,000 per year for feasibility studies and
$44 million per year for project implementation. Unfortunately,
Congress has not provided funding for the implementation of this
important EPACT provision and should act to do so in an expeditious
manner. In a letter to Congress this month, the heads of government of
some Insular areas have requested Congress to ``fund feasibility
studies of projects and strategies identified in the Assessment that
would significantly reduce our dependence on imported fossil fuels, or
provide needed distributed generation in remote insular areas. The
economic future of our communities depends on our ability to reduce our
reliance on costly fossil fuels by increasing the efficiency with which
we use such fuels and by exploiting local renewable energy resources.''
Comprehensive Energy Strategy. In August 2007, Governor John
deJongh asked SSEB to assist in the development and implementation of a
Comprehensive Energy Strategy that will be designed to increase the
standard of living of the citizens of the Territory by assuring the
long-term availability of affordable, secure supplies of energy. A
secondary goal is to become a Caribbean and worldwide showcase for the
development and use of renewable energy. The Insular Areas Energy
Assessment Report has proven to be an important resource for the
project team.
Integral to this direct service to the USVI is adequate funding to
truly implement an effective comprehensive energy strategy that is
sustainable for the future. As part of this service, SSEB works with
Mr. Bevan Smith, Director of the VIEO and others as designated to
establish clear, realistic goals. As a first step, the USVI has
assessed current and future types, amounts and sources of energy
imported into the Territory. Additionally, this work will assist in
identifying the amount of energy used by various sectors, the cost of
energy to the end users and to the extent possible an analysis of how
this energy is being used within each sector (e.g. domestic hot water,
diesel highway and off-highway use). The intent is also to project the
types and amounts of energy that will be required over the next 20 to
30 years in the USVI. Important to implementing the strategy is
identification of all potential energy options with a primary focus on
renewable energy, energy efficiency and conservation. Once data is
collected and analyzed the intent is that potential energy solutions
will result in a number of options for implementation in the future. Of
course, the implementation of energy plan requires resources and most
likely, policy incentives to achieve success.
State Energy Program. DOE's State Energy Program (SEP) provides
grants to states and territories for energy efficiency and renewable
energy programs and projects. States and territories use SEP grant
funding to address their energy priorities and to adopt emerging
renewable energy and energy efficiency technologies. SEP is the only
federally funded program that provides financial and technical
resources directly to the states and territories. With SEP funds and
the resources leveraged by them, the state and territory energy offices
develop and manage a variety of programs geared to increase energy
efficiency, reduce energy use and costs, develop alternative energy and
renewable energy sources, promote environmentally conscious economic
development, and reduce reliance on imported oil. The program was
funded at $36.6 million in FY 2006, $49.4 million for FY 2007 and at
S44.5 million for FY2008. However, DOE plans to include on $33 million
in the competitive allocations.
SEP funding allocations to states and territories are based on an
antiquated formula that needs to be updated to reflect the current
world energy and economic realities. The Insular areas receive only a
minimal amount of SEP funding under the current allocation formula. For
example, in FY 2007 the USVI received $259,000 in SEP funding while
Texas received $2,782,000. In fact, the total Insular area SEP funding
formula allocation for FY2007 was $974,000 vice $44,456,000 for the
states and the District of Columbia.
The Insular areas need every opportunity available to improve
energy efficiency, increase of use of renewable energy and to reduce
our 100% dependence on imported fossil fuels.
Weatherization Assistance Program. Under current Statue, the
Insular areas do not participate in the DOE's Weatherization Assistance
Program (WAP). The reasons why the Insular areas were not included when
the program began in 1976 is akin to folklore. However, if the Insular
areas were included in the program and received a funding allocation
under the current formula it would likely be a small amount. In fact,
some would question if the funding would be adequate to even operate an
Insular area WAP.
The formula used to allocate WAP funding is antiquated and needs to
be updated to reflect the current world energy and economic realities.
Legislation is required to include the Insular areas in WAP. Congress
should consider including the Insular areas in the WAP and direct DOE
to update the allocation formula to include criteria such as current
energy costs, demographics and climate, Congress should also require
DOE to provide a minimum allocation of at least $2 million to the
Insular areas. This amount funding would ensure the operation of a
meaningful and robust program.
DOE did not request any funding for the WAP in the FY2009 budget
request. This reduces heating and cooling costs for low-income
families, particularly for the elderly, people with disabilities, and
children, by improving the energy efficiency of their homes while
ensuring their health and safety. It is essential that Congress fully
fund this critical energy assistance program at the FY2008 amount of
$227.2 million.
Territorial Energy Offices. The Territorial Energy Offices are an
important part of equation in the Insular areas quest to reduce their
dependence on imported petroleum and to establish a clean energy
economy. The energy policies and programs of the Territorial Energy
Offices are vital to ensuring economic growth, increased energy
efficiency and an increased reliance on clean renewable energy sources.
These offices have become experts on researching, demonstrating and
deploying emerging clean energy technologies.
Under the leadership of Mr. Bevan Smith, Director, the VIEO has
grown into an award winning organization that manages a multitude of
meaningful energy efficiency and renewable energy programs that
directly benefit the citizens of the USVI. Some of these popular
programs are: building energy program, discretionary grants, energy
rebates, and solar energy. In addition, the VIEO holds a number of
education outreach events throughout the year that are designed to
increase the awareness of the general public on energy efficiency and
renewable energy programs and practices. Also, Mr. Smith was
instrumental in bringing the best practice of net metering to the USVI.
He worked in a collaborative manner with the utility and the Public
Services Commission to develop and implement a successful program. At
the request of Governor deJongh and the concurrence of the Senate, the
VIEO was recently relocated from the Department of Planning and Natural
Resources to the Office of the Governor. This important organizational
relocation sends a strong message to the Insular areas that the
Governor is keenly interested in USVI energy issues.
Hawaii Clean Energy Initiative. According to a DOE press release
dated January 28, 2008, DOE and Hawaii joined in a Memorandum of
Understanding (MOU) establishing the Hawaii Clean Energy Initiative
(HCEI), a long-term partnership designed to transform Hawaii's energy
system to one that utilizes renewable energy and energy efficient
technologies for a significant portion of its energy needs. The
partnership aims to put Hawaii on a path to supply 70% of its energy
needs using clean energy by 2030, which could reduce 72% of Hawaii's
current crude oil consumption. While a specific amount of funding was
not identified, DOE committed to the provision of technical and policy
expertise and capabilities to help demonstrate reliable, affordable and
clean energy technologies in Hawaii.
DOE agreed to immediately engage experts in clean energy technology
development to help Hawaii to launch several projects with public and
private sector partners that target early opportunities and critical
needs for Hawaii's transition to a clean energy economy, including:
Designing cost-effective approaches for the exclusive use
of renewable energy on smaller islands;
Designing systems to improve stability of electric grids
operating with variable generating sources, such as wind power plants
on the islands of Hawaii and Maui;
Minimizing energy use while maximizing energy efficiency
and renewable energy technologies at new large military housing
developments;
Expanding Hawaii's capability to use locally grown crops
and byproducts for producing fuel and electricity; and
Assisting in the development of comprehensive energy
regulatory and policy frameworks for promoting clean energy technology
use.
The HCEI is the type of attention and dedication that the Insular
areas desperately need to help reduce their dependence on imported
petroleum and to establish a clean energy economy. Congress should
inquire as to why Hawaii was selected non-competitively for this
initiative and why the Insular areas were not provided an opportunity
to compete. Congress should require DOE to engage the Insular areas
with an effort similar to HCEI. The same amount of attention and
resources should also be provided to the Insular areas.
Conclusion. SSEB is proud of the strong relationship we have
enjoyed with the USVI for over 16 years. We are committed to doing
everything within our ability to help the USVI attain a stronger
economy and improve the quality of life for its citizens. As mentioned
previously, we are working closely with Mr. Bevan Smith, Director of
the VIEO. We commend Mr. Smith for his outstanding accomplishments with
limited resources. We thank the committee for asking us to participate
in this hearing. We believe with Congresswoman Christiansen's
leadership equitable opportunities will enable the Insular areas to
work toward a sustainable clean energy future that will strengthen the
USVI's economy and improve the quality of life for all future
generations.
______
Mrs. Christensen. I'd like to thank everyone for their
testimony. I will recognize myself for five minutes of
questions.
Mr. Nicholson, let me start with you. Some people would say
that OTEC is still an unproven technology and maybe that's
something that ought to be considered maybe not now but later
on. How would you respond to that?
Mr. Nicholson. Well, that's true, it is unproven. However,
we have our own financing, so the risk is placed on us, not the
host client, and the rewards are so great. For example, in
Hawaii where we have a proposal for 100 megawatt plant, the
investment is $500 million. So the risk is much greater than
the one proposed here, which is a smaller plant. But we are
going forward with that, and that will probably happen before
the plant goes into St. Croix or could go into St. Croix.
I don't think that really should be a factor. I think the
decision makers should really try to plan and go forward. We
have an insurance company that would guarantee the performance
of our first plant. The fact that we have private investors
that would put up all the money, that in itself is a
confirmation of confidence.
Mrs. Christensen. Thank you.
Mr. Resor, one of the maps in your testimony shows parts of
Hawaii with less sun than parts of Maine, which is kind of
surprising. Do we have similar information for the insular
areas?
Mr. Resor. Yeah. It wasn't included in that particular map.
Generally the insulation for the U.S. Virgin Islands is very
good. I'm sure that data is available for the third party.
Mrs. Christensen. I am going to need everybody to speak a
little closer to the mike. I think we were able to hear you,
but just----
Mr. Resor. Just repeat. The same data I'm sure is available
from the same third party sources that would show it for each
of the insular areas.
Mrs. Christensen. Thank you.
Ms. Blaylock, I think the first panel said that the Virgin
Islands produces about 400 to 500 tons of trash per day. Does
that make waste energy feasible for us?
Ms. Blaylock. That's about the threshold that a waste to
energy facility would need in terms of trash volume. Ideally
you would--600 tons per day is really the true threshold. The
reason for this economies of scale, the more garbage that you
bring into the facility, the more energy you can generate, and
therefore the more electricity can be sold and offset the cost
of the facility's operation.
Mrs. Christensen. I would also imagine in that 4 to 500
tons there might be some kinds of trash that would not be able
to be used, or do you burn everything?
Ms. Blaylock. We can safely burn all municipal solid waste.
In the communities where Covanta has waste to energy
facilities, the recycling rates tend to be 20 percent higher
than communities that don't have waste to energy. Most of our
communities separate their recyclables; however, not all do.
And any of the materials that are disposed of at a restaurant
or at a private home would be safely handled at an energy-to-
waste plant. It's a much better place to send it than to a
landfill, certainly.
Mrs. Christensen. Absolutely. Thank you for your answer.
Mr. Powell, thank you for Southern States' partnership and
support of the U.S. Virgin Islands. We really appreciate it.
You mentioned in your letter that some insular areas are sent
to Congress asking for funding feasibility studies. Are there
specific feasibility studies that have been requested, do you
know, and what areas? What kinds of feasibility studies?
Mr. Powell. Madame Chairman, no, I'm not aware of specific
studies that have been requested. I'm aware of a letter that
some of the Governors of insular areas actually sent to
Congress requesting funding of that EPACT provision.
Mrs. Christensen. Is your knowledge of why the territories
were excluded from the weatherization program the same as Mr.
Smith's or----
Mr. Powell. Yes, ma'am. Very much, I have been around the
Weatherization Assistance Program since the early '90s, and
folklore is probably the best way to describe it. The
Weatherization Assistance Program when it was initiated was
focused on cold weather states. Since then it includes warm
weather states. And there is a formula that's designed for both
cold weather and warm weather states and which is more reason
why the territories should be included.
Mrs. Christensen. We will get to work on that. Thank you.
I now recognize Mr. Costa for his questions.
Mr. Costa. Thank you again, Madame Chairwoman.
Let me begin with Mr. Resor. What does it cost to implement
a solar system on the roof of an average family house? In
California we are doing a lot of this. As in other western
states, the utility companies are providing rebates, as you
know, for that purpose. With $19,000 per capita income here in
the U.S. Virgin Islands, obviously it would be more difficult,
but give me the breakdown.
Mr. Resor. Sure. It varies a bit on the scale operation.
Rough rule of thumb, if you do a 3 kilowatt system, which is a
pretty standard size of residence, you are probably looking at
$25,000 to $27,000 dollars for that. Now, if you are doing
that--that's the retail price. That's before any Federal tax
credit comes into play. If there is a state incentive, or
utility incentive, that price is reduced significantly, as it
is in California.
Mr. Costa. The Federal tax credit being?
Mr. Resor. Right now the Federal tax credit for the
residence is only $2,000.
Mr. Costa. It's 25,000----
Mr. Resor. 23. But in California, Massachusetts you are
often getting another 8 to 10 knocked off.
Mr. Costa. Knocks it down to about 15?
Mr. Resor. Right.
The other piece for the U.S. Virgin Islands in your comment
about the lower per cap income is I think an obstacle here that
would need to be addressed is if that can be financed upfront,
where the homeowner wasn't expected to shell that all out,
let's call it net $18,000 for the system on day one. And if the
same way that could be financed over time, the economics worked
out very well, if the electricity you are replacing is costing
you more than 35 cents a kilowatt and rising.
Mr. Costa. So then you would have a system in place for 3
kilowatt. If you implemented that, it will provide all the
electricity needs that you would have for your home?
Mr. Resor. It depends on the----
Mr. Costa. The system.
Mr. Resor. The electricity needs of that home. The idea is
typically the size of the system not to produce 100 percent of
the home's needs. With net metering you can provide the excess
factor in the day. Often you look to provide anywhere from 35
to 85 percent. And that just depends on the exact pattern usage
how you want to size it.
Mr. Costa. You speak a lot about net metering. Recently I
understand that the U.S. Virgin Islands have implemented a net
metering program. How do you think that program would work
with----
Mr. Resor. I think a lot of what we are experiencing
working with probably 30, 40 different utilities is the net
metering you have to be very careful to the implementation
details. What you want to avoid is inadvertently throwing up
roadblocks for the consumer, the business in terms of
application they have to fill out, how the metering is done. On
the surface the net metering looks fine. I don't know the
particulars of how it is implemented.
Mr. Costa. If you could get back to us on that. My time
is----
Mr. Resor. OK.
Mr. Costa. Ms. Blaylock, you talked about your efforts in
other parts of the country and the world. How far along is
Puerto Rico's plan to go to an energy-from-waste plant?
Ms. Blaylock. Their solid waste management plan has
suggested that that should be part of the future. There are not
bids out for----
Mr. Costa. Those projects that you are involved in, I
assume they are private/public partnerships?
Ms. Blaylock. Yes, sir, in every case.
Mr. Costa. We know what the challenge is economically that
the territories here have. How would you pursue or propose a
plan or have you for a private/public partnership on waste to
energy?
Ms. Blaylock. We haven't proposed one yet, but if we were
to do one, it would be a regional approach, which would take
trash from all the three islands and potentially depending on
the transportation costs from other sources, and----
Mr. Costa. Are you considering doing so?
Ms. Blaylock. We will be delighted to do so. Right now the
RFP that came out recently was just for a 12 megawatt facility
and was just looking at 200 tons per day.
Mr. Costa. I would suggest, in terms of the submission of
testimony today, that's one of the takeaways. You will be
delighted to provide a proposal?
Ms. Blaylock. Yes.
Mr. Costa. Very good.
Mr. Nicholson, where has your company successfully
implemented a plant? Obviously, it sounds wonderful the
description in your testimony. Where have you successfully
implemented one?
Mr. Nicholson. There has not been an installation of this
technology.
Mr. Costa. That's kind of problematic, don't you think?
Mr. Nicholson. First of all, the technology that was
invented in 1881.
Mr. Costa. No. No. I am very familiar with all of these
technologies, but you hate to have an area like this with
limited resources to be the first experience, because they
don't have the resources in terms of the R&D.
Mr. Nicholson. They don't need the resources.
Mr. Costa. I think they do need the resources. $19,000 per
capita and the constraints that they are facing, it's
important--I'm always looking for best management practices,
someone who has actually paved the way, if you understand.
Mr. Nicholson. We are putting up the $80 million. We will
own and operate the plant.
Mr. Costa. Have you submitted a proposal?
Mr. Nicholson. It's due May 1st.
Mr. Costa. To the U.S. Virgin Islands?
Mr. Nicholson. Yes. And the same thing is true in Hawaii,
it's a $500 million investment. We are putting up that money.
It's our money. There is no burden or risk to the host client.
Mr. Costa. It will be interesting to follow up on that. My
time has expired clearly.
Mrs. Christensen. The Chair recognizes Mr. Shuster for
questions.
Mr. Shuster. I would like to follow up on, Mr. Nicholson,
if you have not built any facilities and you say there is no
risk with the capital that you are going to outlay, you are
going to have to generate revenue, and you are going to do that
within the public utilities commission operation. I mean, are
you going to be able to get the return?
Mr. Nicholson. Yes. For an example, in Hawaii it's about
$109 million a year revenue stream. There is no energy cost. In
the Virgin Islands, it's about $10 million revenue stream for
water and--I'm sorry, for power, and about a $8 million a year
revenue stream for water. Plus, the island can benefit with
diversity by having 500 acres or less, whatever is desirable,
of mariculture. They can grow fish, they can grow vegetables.
They can become really energy self-sufficient and reduce
dramatically their importation of food. There are so many
benefits to this technology.
Mr. Shuster. I, unlike Mr. Costa, am not familiar with
these technologies, but I think I have a clear amount of
skepticism. Why hasn't one been built somewhere in the world to
date?
Mr. Nicholson. First of all, we are the modern-day pioneer
in the development of this technology on the commercial basis.
It was invented in York, Pennsylvania. We presented it to the
U.S. Government before the U.S. Department of Energy was even
established. This technology is over 40 years old. We had no
political representation or credibility. Senator Sparky
Matsunaga from Hawaii grasped the opportunity and hundreds of
millions of dollars went to Hawaii. U.S. Department of Energy
and Hawaii attempted to compete with our design and failed. We
lost 30 years.
We have continued to operate supporting ourselves, funding
our ourselves, and we have now raised the money to build these
plants throughout the equatorial zone. We don't need government
support. We are a private company, we have a private funding,
and we are going forward on a commercial basis. And St. Croix
has excellent operating conditions for this type of technology.
Mr. Shuster. That's music to my ears to hear that you don't
require government support. You have small scale testing that's
been out there? What have you built that is designed? That
always makes me skeptical when it's in design, when it's not in
practical application--even on a small scale.
Mr. Nicholson. That's a fair question. And the same
inventor invented the world's first commercial binder cycle
geothermal power plant, just went ahead and built it, and that
works on a commercial basis. The Eagle Foundation, which owns
my company, has spent millions of dollars developing to come up
with the components that go into this cycle. We built and
tested those components. We have a complete team of
professionals, large engineering firms, one of the largest
construction companies in the United States, Naval
architectural design firms, insurance companies that guarantee
the performance of the first plant.
The people who should be skeptical or worried are the
investors. They spent millions of dollars confirming that our
technology is sound. They are ready and eager to go forward.
It's so much larger than the small islands throughout the
equatorial zone. This is a major opportunity for shipbuilding.
For example, we are working with the Governor of Maryland. We
have shown the City of Baltimore shipbuilding industry where
building six plants per year in Baltimore creates 25,000 jobs.
We can do that in California shipyards; we can do that in
Philadelphia. We can revitalize the American shipbuilding
industry.
Mr. Shuster. It sounds exciting. I look forward to watching
closely what you do. The $80 million investment here in the
Virgin Islands, what percentage of the electricity would that
produce or generate?
Mr. Nicholson. I don't know that I have that for sure, but
it's probably a third. I am not suggesting--I mean, I have
suggested and I think it's possible and realistic to have 30
megawatts of OTEC in St. Croix. But, also, I think the trash is
a great idea, recycled trash, and Jaime's technology. It's not
a silver bullet for St. Croix or St. Thomas or St. John, but I
think OTEC can play a very significant role for this community.
It plays a much larger role in the world market and on the
national market.
Mr. Shuster. I see my time is winding down. I would like to
have an opportunity to submit questions.
Mrs. Christensen. I think that we would submit questions in
writing, unless you have a real burning one that you want----
Mr. Shuster. I do have one quick one. 3 kilowatts how big a
house is that? 3,000 square feet, how much energy would that--I
know it's going to vary from house to house.
Mr. Resor. 2,000 square foot house or even smaller, you can
have it on the roof or it could be ground level. It's very
flexible.
Ms. Blaylock, I will submit.
Mrs. Christensen. I want to again thank this panel for
their testimony and members for their questions, and we are
very likely to have additional questions that we will submit in
writing and ask for you to respond in writing. Thank you.
The Chair would now like to recognize the third panel, Mr.
Nikolao Pula, the Acting Deputy Assistant Secretary for Insular
Affairs, the U.S. Department of the Interior, and Mr. Drew
Bond, the Director of Commercialization, Office of Energy
Efficiency and Renewable Energy at the U.S. Department of
Energy.
Mrs. Christensen. I know folks are very interested in
learning more about the renewable forms of energy, but we need
to get started. Thank you.
The Chair now recognizes Mr. Pula for his testimony.
STATEMENT OF NIKOLAO PULA, ACTING DEPUTY ASSISTANT SECRETARY,
INSULAR AFFAIRS, U.S. DEPARTMENT OF THE INTERIOR
Mr. Pula. Good afternoon, Madame Chairwoman Christensen,
Chairman Costa, and Mr. Shuster and members of the
Subcommittees. This is a subject of overriding importance for
the insular areas. Well, thank you for the opportunity to
testify on charting a clean energy future for the insular
areas. This is a subject of overriding importance for the
insular areas and the free associated states.
In island communities we see very little air pollution. The
wind blows it away. What does not blow away is the escalating
cost of fossil fuels. When faced with the need to purchase
large-scale electric capacity, officials in the islands however
have found it more economic to continue to rely on oil based
fuel. Not any more. The high cost of oil means that alternative
sources of energy are increasingly attractive from an economic
point of view. High energy prices are currently the greatest
threat to all of the economies of the insular areas.
I think the last two panelists have said a lot already, so
I am going to really cut my testimony short. Besides the
potential for alternatives to oil, a second avenue for energy
improvement is focused on the management and maintenance
practices for existing electric generation facilities.
Potential efficiencies could be gained by, one, improving
operations and maintenance standards; second, improving load
balancing and distribution; and, three, replacing transformers
and other distribution systems with more efficient models.
The 2006 report identified steps to reduce overall
consumption including adoption and enforcement of building code
provisions used by Guam and the Virgin Islands; metered power
rates that reward savings and lower usage; promotion of the use
of energy efficient appliances and light bulbs; and extension
of publicity for the Energy Star programs and maybe more.
We encourage the insular governments and utilities to
explore new concepts that may alter energy consumption. For
instance, local retailers and wholesalers could arrange bulk
purchases of proven alternative systems with financing and
repay loans through the utilities' billing processes.
The Department of the Interior has supported efforts to
build the capacity and improve the efficiencies that lead to
lower costs and lower emissions for delivered electricity. For
example, our Operations and Management Improvement Program has
invested over $4.7 million in the last three years in the
Pacific Lineman Training Program.
Our Capital Improvement Program has supported numerous
power projects in the four United States territories. Under
Compact II funding, the free associated states are eligible to
spend infrastructure sector funds on power projects. Our
Technical Assistance program has been the source of funding in
the past for resource surveys similar to those outlined in the
2006 report.
The Energy Assessment Report contains valuable data and
ideas. A sustained effort is now required to ensure that the
options outlined in the study are more fully reviewed and the
residents of the insular areas receive any potential benefit as
quickly as possible.
In order to stretch the island energy dollar as far as
possible, officials from my office of Insular Affairs will be
visiting the other territories, including the free associated
states to discuss ways to implement the most promising energy
options.
On Thursday we met with Governor deJongh and presented him
with a $50,000 grant to aid investigation of realistic energy
measures that would benefit the Virgin Islands. Our Interior
team also yesterday met with and discussed promising technology
with government officials in the Virgin Islands to more
aggressively see these ways to help out.
Because of initiative shown by the Governor and with some
of his staff, we met with Bevan Smith and Carl Knight, and
other colleagues, including my colleague from the Energy
Department here, Drew Bond, and we had a very good meeting
yesterday discussing these issues.
We believe that effort expended in the energy area can
bring significant energy pay off in the form of lower utility
costs for residents and businesses, and may possibly pave a way
for new industry in some of the islands. As Co-Chairs you are
to be applauded for your leadership you have shown on this
critical issue on energy. And I thank you for your effort and
support and for inviting me to testify today.
Mrs. Christensen. Thank you, Acting Deputy Assistant
Secretary.
[The prepared statement of Mr. Pula follows:]
Statement of Nikolao I. Pula, Acting Deputy Assistant Secretary
of the Interior for Insular Affairs
Co-chairs and members of the Subcommittees on Insular Affairs and
Energy and Mineral Resources, thank you for the opportunity to testify
on Charting a Clean Energy Future for the Insular Areas. The Insular
Areas include the United States territories of the United States Virgin
Islands, Guam, American Samoa, and the Commonwealth of the Northern
Mariana Islands (CNMI); and the freely associated states of the
Republic of the Marshall Islands, the Federated States of Micronesia
(FSM), and the Republic of Palau.
In island communities, we see very little air pollution. The wind
blows it away. What does not blow away is the escalating cost of fossil
fuels. Most people in the islands would like to utilize clean energy.
When faced with the need to purchase large-scale electric capacity,
officials in the islands, however, have found it more economic to
continue to rely on oil based fuel. Not any more. The high cost of oil
means that alternative sources of energy are increasingly attractive
from an economic point of view.
High energy prices are currently the greatest threat to all of the
economies of the United States and affiliated insular areas. The high
cost of electricity depletes the wallets of island residents and the
finances of local governments and businesses. In those islands where
the cost of electricity is subsidized by the local government, we are
approaching a crisis. Increasingly substantial portions of the local
government budgets are being siphoned off for fuel to run their
electric power plants. In the CNMI, for example, where the annual
budget is approximately $160 million, $80 million is spent on fuel for
its power plants.
The rising price of oil has made alternative sources of power more
economic. It has also highlighted the long-standing need for existing
equipment to give us its best performance and efficiency.
Pursuant to the Energy Policy Act of 2005, the Department of the
Interior published the United States of America Insular Areas Energy
Assessment Report in 2006. Copies of the report were made available to
the Congress. The report analyzes the energy situation in each United
States territory and freely associated states, in detail. The report
deals with both the supply and the demand sides of the energy equation.
ENERGY SUPPLY
On the supply side, some alternative technologies already have been
proven to be commercially viable; others may be available in the
future.
Solar. Given current power costs, solar can be cost
effective for small scale and individual residential use. Solar sets
are already in use on isolated islands in the Pacific to power small
scale activities such as dispensaries and offices. Residential
customers everywhere in the insular areas could purchase solar sets to
place on their homes or property and connected to the local power grid
through a ``net metering'' system. The Virgin Islands and American
Samoa have already begun exploring such systems.
Wind. With constant wind, the islands hold a great deal
of potential for wind generation of electricity. This is a proven
technology that can be cost effective. There are, however, two issues
that must be addressed before pursuing wind generation projects in the
United States-affiliated insular areas. The first is a concern about
tropical cyclones; all four United States territories experience these
powerful storms, and careful consideration should be given to hardening
any wind generation project against them. The second issue to consider
is the need for detailed wind resource studies prior to embarking on
any deployment of the technology. This is explained in the 2006 report.
Geothermal. Geothermal is a technology that is coming of
age for volcanic areas. The United States Navy uses geothermal power
for some of its installations. Northern California, Iceland, and the
Philippines all have major geothermal installations that are producing
electricity. What California, Iceland and the Philippines all have in
common are active volcanoes that power their geothermal energy
production. The CNMI, and possibly Guam, may be able to benefit from
geothermal power over in the future. Feasibility studies are under way
to quantify the geothermal resource in the region.
OTEC. Ocean Thermal Energy Conversion (OTEC) is a
technology that, in the future, may play a significant role in
providing electricity on a large scale for our islands. Three of the
four territories and parts of the freely associated states are in
locations where the undersea topography is favorable for the
development of such systems. This technology, however, has not been
deployed on an industrial scale for power production. Until a
commercial project is completed, questions remain about the costs
associated with the development of these systems.
Biofuels and Biogas. Although the islands lack the land
area necessary for large-scale biomass production, several areas in the
Pacific already use copra oil to fuel vehicles and machinery. The 2006
report also noted that there was some potential in certain areas for
biogas recovery from solid waste and wastewater plants, and that
recovery systems should be considered for inclusion in future upgrades
and construction of these facilities.
Coal. It has been over 100 years since the chiefs of
Tutuila and Manu'ua ceded their islands to the United States, enabling
the United States Navy to use American Samoa as a coaling station.
While the energy assessment did not focus on coal, it may be time to
reconsider it.
Nuclear. The generation of electricity in nuclear power
plants is quite large scale but may not be cost effective for any of
our islands with their small populations.
Besides the potential for alternatives to oil, a second avenue for
energy improvement is a focus on the management and maintenance
practices for existing electric generation facilities. Most of the
insular areas have paid considerable attention to these issues in
recent years.
Potential efficiencies could be gained by (1) improving operations
and maintenance operations standards, (2) improving load balancing and
distribution on the existing grids, and (3) replacing transformers and
other distribution systems with more efficient models. The CNMI, for
example, is in the midst of an overhaul of most of its generating base.
When the overhaul is complete, CNMI officials estimate that they will
save over $2 million a month in fuel and lubrication costs.
ENERGY DEMAND
The 2006 report identified a range of steps that can be taken by
the insular areas to reduce overall consumption and create long-term
savings for utility customers. These suggested steps include:
Adoption and enforcement of building code provisions used
by Guam and the Virgin Islands.
Modification or institution of metered power rates that
reward savings and lower usage.
Promotion of the use of energy-efficient appliances and
light bulbs, which collectively represent some of the largest sources
of consumer usage.
Promotion of the use of systems, such as solar water
heaters, to replace electrically-heated systems, including the possible
financing of bulk purchases of systems that electric utility customers
could finance over time as they pay lower utility bills.
Expansion of publicity for the Energy Star program to
bring great savings to citizens in the insular areas because of the
exceedingly high cost of electricity.
Outreach and education will be critical. Some may balk at the up-
front costs associated with adopting alternative energy solutions, even
if the longer-term savings far outweigh the up-front costs. We
encourage the insular governments and utilities to explore new concepts
that may alter energy consumption. For instance, local retailers and
wholesalers could arrange bulk purchases of proven alternative systems
with financing and repay loans through the utilities' billing
processes.
INTERIOR SUPPORT FOR ENERGY INNOVATION
The Department of the Interior has long supported electricity
producers in the islands in their efforts to build the capacity and
improve the efficiencies that lead to lower costs and lower emissions
for delivered electricity.
Our Operations and Management Improvement Program (OMIP)
has invested over $4.7 million in the last three years in the Pacific
Lineman Training Program and the efforts of the Pacific Power
Association to develop a cadre of knowledgeable, professional linemen
that provide their communities with safe and efficient electricity
transmission.
Our Capital Improvement Program (CIP) has supported
numerous power projects in the four United States territories. We are
currently reprogramming unused CIP funds, a good deal of which will be
used for power-related projects including the refurbishment of the
generators in the CNMI.
Under Compact II funding, the freely associated states of
the Marshall Islands and the Federated States of Micronesia are
eligible to spend infrastructure sector funds on power projects.
Our Technical Assistance (TA) program has been a source
of funding in the past for resource surveys similar to those outlined
in the 2006 report. Early this year, CNMI Governor Benigno Fitial
requested and received a TA grant (supported by the CNMI Washington
Representative Pedro Tenorio) for $300,000 to continue research on
fresh water production for agriculture by using the cold thermal
properties of deep ocean water. In March, the CNMI submitted a $500,000
TA request to undertake assessment of geothermal resources on the
islands of Pagan and Saipan that could yield low-cost electricity and
industrial potential for the territory.
FOLLOW-THROUGH
The Energy Assessment Report contains valuable data and ideas for
addressing the energy challenges that we are currently experiencing. A
sustained effort is now required to ensure that the options outlined in
the study are more fully reviewed and the residents of the insular
areas receive any potential benefit as quickly as possible.
In order to stretch the island energy dollar as far as possible,
officials from the Office of Insular Affairs will visit each of the
United States territories and freely associated states to discuss ways
to implement the most promising energy options outlined in the Energy
Assessment Report.
On Thursday, Secretary Kempthorne's Deputy Chief of Staff, Doug
Domenech, and I met with Governor John P. de Jongh, Jr., in St. Thomas
to present him with a $50,000 grant from the Office of Insular Affairs
to aid investigation of realistic energy measures that will benefit the
residents of the Virgin Islands. The grant was made in response to a
request from the Governor. Our Interior team then met with other local
government officials to discuss the Insular Areas Energy Assessment
Report and promising technology. The Government of the Virgin Islands
is to be praised for moving aggressively on the energy issue. Because
of the initiative shown by the Governor and his staff, we look forward
to a good working relationship as we seek out practical energy
solutions.
At the end of this month, staff and I fly to the CNMI to discuss
the CNMI portion of the report. OIA officials will later visit Guam,
American Samoa, and the freely associated states.
We believe that effort expended in the energy area can bring
significant economic pay off in the form of lower utility costs for
residents and businesses, and may possibly pave the way for new
industry in some of the islands.
We appreciate the leadership the co-chairs have shown on this
critical issue of energy. Thank you for your effort and your support. I
would be happy to answer any questions you may have for me.
______
STATEMENT OF DREW BOND, DIRECTOR, COMMERCIALIZATION, OFFICE OF
ENERGY EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF
ENERGY
Mr. Bond. Thank you, Madame Chairwoman, Mr. Chairman,
members of the Subcommittee. Thank you for the opportunity to
testify on behalf of the Department of Energy's Office of
Energy Efficiency and Renewable Energy. It's an honor to be
here.
My name is Drew Bond, and I am the Director of our
Commercialization and Deployment activities within DOE's Office
of Efficiency and Renewable Energy. First, let me give a brief
explanation of the commercialization team that I lead within
EERE, as we call ourselves. In 2006, Assistant Secretary
Karsner assembled for the first time a team of individuals
reporting directly to him, that focuses on aggressive
commercialization and deployment of our technologies. Briefly
what this means is that we are charged with the responsibility
of increasing the pace, the success rate, and the scale in
which renewable energy and efficient energy technologies move
from the R&D to the market changing products and processes.
Among our many initiatives, this is a consorted effort to
expand the use of clean energy in island communities.
My testimony today will discuss the Energy Policy Act of
2005 provisions relative to insular areas, as well as the
department's recent announcement of the Hawaii Clean Energy
Initiative, which is a model for the type of focused commitment
necessary to change the predominant source of energy in islands
and territories, nations, and insular areas from imported oil
to clean sustainable energy sources.
As you well know, Section 251 of the Energy Policy Act of
2005 required that the Secretary of Interior in consultation
with the Secretary of Energy and the head of the government of
each insular area to update the 1982 Territorial Energy
Assessment. The implementation of this EPACT requirement
resulted in an updated report developed and made available by
the Department of the Interior in the fall of 2006.
The report reaffirmed the original finding that insular
areas face unique challenges in the reliance of imported energy
as well as high fuel and energy prices. Island's coping with
these problems stand to benefit greatly from the end use
efficiency measures and the expansion of renewable energy
production. Territories can use the information from Section
251 assessment to develop an advanced energy plan, and use the
DOE State Energy Program grant funds to act on these findings.
I would like to share with the committee our work in
Hawaii, which serves as a possible example that could be
translated for use in insular areas. On January 28, 2008, of
this year, the Department of Energy and the State of Hawaii
signed a memorandum of understanding that launched the Hawaii
Clean Energy Initiative and put Hawaii on the path to supply 70
percent of its energy needs with renewable sources by 2030.
While this is a dramatic increase compared to the state's
legal renewable portfolio standard requirement of 20 percent by
2020. Hawaii is uniquely positioned to achieve the accelerated
goal because of its high electricity prices and dependence on
oil for energy. Oil supplies approximately 90 percent of
Hawaii's total energy and 84 percent of energy generation.
DOE's approach to performing its role in this partnership
is threefold. First, working groups; second, partnership
projects; third, clean energy transformation. First, the
working groups strive to integrate the department's technical
and policy expertise with Hawaii based knowledge and project
relation resources.
Second, partnership projects test and validate concepts
laid out by the working groups such as solving grid integration
and financing challenges for wind, solar, geothermal and ocean
thermal energy resources.
Third and most importantly, lessons learned through the
working groups and partnership projects will guide what new
regulations and laws may be needed to incentivize intelligent
investments by capital markets, by energy suppliers and by
energy consumers. Transforming Hawaii to have a cleaner more
diverse and sustainable energy portfolio.
These efforts are expected to help Hawaii progress toward
increased use of cleaner energy as well as to help demonstrate
existing and new technology at a significant scale, to help
stimulate new investment to promote rapid asset turnover, and
to help improve standards of service, energy service delivery
and energy security. Likewise, this model could be replicated
for territories.
Underpinning all of these efforts is the need for the State
of Hawaii to redefine its regulatory policy framework in a way
that transforms its own energy infrastructure. Current utility
regulations and rules in Hawaii and elsewhere make it difficult
for investor owned utility or co-ops to profit from things like
non-utility renewable generation from customer owned
distributed generation and from energy efficiency. All of which
are critical to the success of this partnership.
Achieving Hawaii's Clean Energy Initiative goals would
require reconsideration of how Hawaii's electric system is
regulated, redesigning electricity and gas rates and tariffs,
and changing the regulation and opportunities for electricity
substitutes, including energy efficient solar hot water
heaters, solar photovoltaic, and future grid-affecting
technologies, such as plug-in hybrid electric vehicles.
Cooperation between the Department of Energy and Hawaii to
achieve the objectives of this partnership will mean that many
people that visit the state for the scenic beauty that only
islands can provide will also be able to see a functional,
renewable energy economy. If successful, the Hawaii Clean
Energy Initiative would serve as an integrated demonstration
model for insular areas, for U.S. territories, and for other
island communities globally.
Madame Chairwoman, Mr. Chairman, this concludes my prepared
statement. I am happy to answer any questions.
[The prepared statement of Mr. Bond follows:]
Statement of D. Drew Bond, Acting Director of Commercialization and
Deployment, Office of Energy Efficiency and Renewable Energy, U.S.
Department of Energy
Madame Chairwoman, Mr. Chairman, Members of the Subcommittees;
thank you for the opportunity to testify on behalf of the Department of
Energy's (DOE) Office of Energy Efficiency and Renewable Energy (EERE)
regarding our efforts that contribute to Charting a Clean Energy Future
for the Insular Areas.
First, let me give the Committee a brief explanation of the
commercialization team that I lead in EERE. In 2006, Assistant
Secretary Karsner assembled for the first time a team of individuals
reporting directly to him that focuses on commercialization and
deployment of our technologies as part of the Department's balanced
approach achieving its goals and meeting its mission. Briefly, what
this means is that our program is targeted to help increase the pace,
success rate, and scale at which renewable and efficient energy
technologies move from R&D to market-changing products and processes.
Among our many activities is a concerted effort to help expand the use
of clean energy in island communities. My testimony today will discuss
the Energy Policy Act of 2005 provisions relative to insular areas. In
addition I will discuss the Department's recently established Hawaii
Clean Energy Initiative. Although Hawaii is not an insular area, DOE
believes this is an example of a type of focused effort that could be
translated to help change the predominant source of energy in island
territories, nations, and insular areas from oil to renewable or
alternative energy sources.
As you know, Section 251 of the Energy Policy Act of 2005 (EPACT)
required the Secretary of the Interior, in consultation with the
Secretary of Energy and the head of government in each insular area, to
update the 1982 Territorial Energy Assessment. The implementation of
this EPACT requirement resulted in an updated report developed and made
available by the Department of the Interior in the fall of 2006. The
report reaffirmed the original finding that insular areas face unique
challenges in their reliance on imported energy as well as high fuel
and energy prices. Islands coping with these problems stand to benefit
from end-use efficiency measures and the expansion of renewable energy
production. Territories can use the information from the Section 251
Assessment to develop an advanced energy plan, and use DOE State Energy
Program (SEP) grant funds to act on the findings. SEP provides grants
to the states and territories to design and carry out their own
renewable energy and energy efficiency programs and to fund energy
projects managed by state energy offices.
I would like to share with the Committee our work in Hawaii, which
could serve as a possible example that could be translated for use in
insular areas. The Department's work with the State of Hawaii is an
example of a collaborative effort to combat the energy issues
characteristic of insular areas. On January 28, 2008, The Department of
Energy and the State of Hawaii signed a Memorandum of Understanding
(MOU) that launched the Hawaii Clean Energy Initiative (HCEI) and put
Hawaii on a pathway to supply 70 percent of its energy needs with
renewable energy sources by 2030. Achieving this objective could reduce
the State's crude oil consumption significantly. Though not legally
binding, the HCEI significantly increases the commitment of Hawaii
beyond the State's legal renewable portfolio standard requirement of 20
percent by 2020. Hawaii is uniquely positioned to achieve the
accelerated goal and help demonstrate technologies that, once
demonstrated in a fully integrated way, could be used elsewhere.
Pocketbook issues are foremost in making Hawaii the ideal test bed
for a renewable energy economy. Islands are often hit the hardest by
high oil prices. Oil supplies approximately 90 percent of Hawaii's
total energy and approximately 84 percent of its electricity
generation. 1 Hawaii also has some of the highest
electricity prices in the nation, making it an apt proving ground for
clean energy technologies that are not fully cost-competitive elsewhere
in the country.
---------------------------------------------------------------------------
\1\ Sources: Energy Information Administration and State of Hawaii
Strategic Industries Division.
---------------------------------------------------------------------------
The Department of Energy's role in the HCEI is to provide
expertise, third-party objectivity, and resources to the process. DOE
provides expertise through Department staff, national labs, and private
partners dedicated to R&D in renewable energy, energy efficiency, and
electricity delivery; and most importantly, in the emerging area of
system level integration of clean energy technologies. DOE expects that
Hawaii will need to employ an integrated systems approach if it is to
achieve the HCEI goals. The Department can also assist in convening and
facilitating public/private sector collaborations that could help
address barriers to renewable and efficiency technology advancement in
the State.
DOE's approach to performing its HCEI roles is based on three
areas: working groups, partnership projects, and clean energy
transformation. First, the working groups are small, collaborative
teams focused on long-term, intelligent energy solutions. Convened
around topics of energy generation, energy delivery, transportation,
and end-use efficiency, these groups strive to integrate the
Department's technical and policy expertise with Hawaii-based knowledge
and project resources. Second, partnership projects test and validate
concepts laid out by the working groups, such as solving grid
integration and financing challenges for wind, solar, geothermal, and
ocean thermal energy sources. Third and concurrently, lessons learned
through the working groups and partnership projects are expected to
help Hawaii in its consideration of potential changes to state-level
regulations and laws, with the goal of promoting a clean energy
transformation that could help incentivize intelligent investment by
capital markets, energy suppliers, and energy consumers. These efforts
are expected to help Hawaii progress toward increased use of cleaner
energy as well as help demonstrate existing and new technology at
scale, help stimulate new private sector investment to promote asset
turnover, and help improve standards of service, energy service
delivery, and energy security.
To put the HCEI into action, immediately following the MOU signing,
DOE staff held meetings with utilities' and island co-ops' senior
management, business leaders, military officials, and policy and
regulatory leaders. These meetings were part of the effort to engage
experts in clean energy technology development to help Hawaii launch
several projects with public and private sector partners that target
early opportunities and critical needs for Hawaii's transition to a
cleaner energy economy, including:
Designing cost-effective approaches for the exclusive use
of renewable energy on smaller islands;
Designing systems to improve stability of electric grids
operating with variable generating sources, such as wind power plants
on the islands of Hawaii, Kauai and Maui;
Minimizing energy use while maximizing energy efficiency
and renewable energy technologies at new large military housing
developments;
Expanding Hawaii's capability to use locally grown crops
and byproducts for producing fuel and electricity; and
Assisting in the development of comprehensive State
energy regulatory and policy frameworks for promoting clean energy
technology use.
DOE believes that underpinning all of these efforts is the need for
the State of Hawaii to change its regulatory and policy framework to
drive the necessary changes throughout its energy infrastructure.
Current utility regulation and rules in Hawaii make it difficult for an
investor-owned utility or a co-op to profit from non-utility
generation, extensive renewable and distributed (customer-owned)
generation development, and energy efficiency--all of which are
critical to the success of the HCEI. Achieving HCEI goals will require
not only reconsideration of how Hawaii's electric system is regulated,
but also a redesign of electricity and gas rates and tariffs, and
changes in the state's regulation and opportunities for electricity
substitutes including energy efficiency, solar hot water heating, solar
photovoltaics, and future grid-affecting technologies such as plug-in
hybrid vehicles. Governor Lingle elevated the issue of advantageous
regulatory and policy changes in her State of the State Address, and
announced a separate cabinet agency to address Hawaii's energy future.
Cooperation between the Department of Energy and Hawaii to achieve
the objectives of the HCEI will mean that the many people who visit the
State for the scenic beauty that only islands can provide will be able
to see a functional renewable energy economy as well. Employing
renewable technologies at scale, in an integrated manner is an
important step toward attaining advanced energy goals. The HCEI takes a
preliminary step in the pursuit of clean, sustainable energy solutions
for an island setting. If successful, the HCEI could serve as an
integrated example for insular areas, U.S. territories and other island
communities globally.
Madame Chairwoman, Mr. Chairman--this concludes my prepared
statement, and I am happy to answer any questions the Committee Members
may have.
______
Mrs. Christensen. Thank you both for your testimony. And I
recognize myself for questions.
Mr. Bond, maybe you could answer the question about why--
what was it about Hawaii that made this initiative start there?
How did it come about?
Mr. Bond. That's a great question. The short answer is the
leadership at the state level. The Governor has been very
progressive in pushing for changes within the state, not only
at the policy level but at the State Regulatory Commission,
working with the legislature on a great bipartisan basis, and
also pushing the state utility to change its way of thinking.
Because what this really involves is, it requires the existing
state monopoly to change its business model so it actually can
make money off of the things that it's not use to making money
off of, things like using less energy.
Mrs. Christensen. And have there been any discussions about
changing the state's energy program formulas or including the
territories in the WAA program? And would Department of Energy
support that change? And are you in agreement--is that the
reasons that we heard, are those the only reasons that we might
have at some point said we did not want to participate as far
as, you know, those would be the only reasons why we would not
be in the program?
Mr. Bond. Madame Chairman, that's my understanding. With my
focus as Director of Commercialization and Deployment, that's
not really in my purview. I do understand that ESA 2007 did
apparently change the definition of the state and how--whether
or not a territory would be eligible for the programs. My
understanding is that that legislative fix has now happened to
allow territories to be able to apply.
Mrs. Christensen. And in many instances I tried to get
Homeland Security to put state and territories. They insisted
that when they put state, it meant state and territories. What
you are saying is in recent legislation state includes
territories?
Mr. Bond. That is my understanding, yes.
Mrs. Christensen. So we just need to work on the formula.
Mr. Pula, can we realistically expect more funding from the
Department of Energy to help in the development of
alternatives? With the Department of the Interior.
Mr. Pula. I was just going to say, absolutely yes.
Mrs. Christensen. Is the Department of the Interior
prepared to help the territories financially to a greater
extent of the development?
Mr. Pula. Thank you, Congresswoman. I think lately, as you
probably well know, our focus have been on economic development
and accountability; but with the energy situation, which is
basically kind of a crisis come up in the last year or so, in
my testimony I mentioned about, for example, in CNMI, their
budget was for '08 was 160 million, and cost of fuel for them
alone was 80 million. And so we've now received requests from
the areas. I am really thinking seriously of focusing the
resources that we have on the energy crisis.
As I also mentioned, that's why we had the meeting
yesterday. This is a great hearing, beginning of hearings, as
mentioned in your earlier statement. We are going to go over to
the other areas. Really Mr. Bond and I discussed yesterday that
when we get back to Washington, we are going to try to bring
our resources together, both departments to see what we can do
and help out.
Mrs. Christensen. That addresses the long-term problem, but
as you heard from Mr. Miller, the issue is lowering the cost.
Do either of you have any recommendations or in your opinion
what else can be done to help residents with the cost of paying
for this utility?
Mr. Pula. Let me yield to my colleague.
Mr. Bond. I guess one comment I would make, part of the
mindset change that's needed at the utility level is looking
beyond the first initial cost of investment in technology and
looking to the life cycle cost of technology. In other words,
renewable energy technologies, particularly wind and solar,
geothermal, even ocean energy, they--the feedstock is virtually
free once you make the initial investment of the capital. And
so I think you do have to be careful to make promises that this
will result in cheaper energy in the near term future. But I
think what's more important in the near term is diversifying
the energy mix to a securing reliability, and then lower cost
to energy certainly can come with the right investment.
Mrs. Christensen. Mr. Pula.
Mr. Pula. The only thing I would like to add, as you
emphasize on the word ``realistically'' and ``time,'' on any
budget cycle, as we know, if I were asked the question to bring
forward something that will go to the administration budget
process, I will have to work really hard with all the insular
areas, the territories to come up with a plan. If I was going
to propose something for the administration's plan through OMB
in the process, as you well know, we got to have something from
our areas that justifies being able to do that. And I think
that's the focus in my mind. So a lot relies on our
relationship in working with the folks in energy.
Mrs. Christensen. Thank you. My time is up.
I now recognize Chairman Costa for his questions.
Mr. Costa. Thank you very much, Madame Chairwoman.
Mr. Pula, the Office of Insular Affairs has a number of
grant programs for insular areas. Do you know roughly what
percentage of those grants has gone to power projects in recent
years and how they spread out over the territories?
Mr. Pula. I don't have the number off the top of my head,
but I can provide that for you.
Mr. Costa. Please find that information for the committee.
You talked about the necessity of developing a plan. Of
course, I have an interest of what I think are a host of
options that are available in terms of looking at renewable
resources. I do believe you have to have a plan first. I
understand that you been with the department for most of your
career, and that means you are not an appointee, so you are
going to be around after next year; correct?
Mr. Pula. Correct.
Mr. Costa. I believe you're happy as well.
But that means that you have some consistency. Don't you
think we really ought to be working with all the insular
territories to deal with this? I mean, we know that energy is
not going to get cheaper. We know that they have a host of
renewable resources, and as was spoken about a moment ago, the
Hawaii plant seems to really meet what we need to be doing for
the other insular territories.
Mr. Pula. Absolutely. I myself haven't heard of the Hawaii
plant until yesterday in our meeting. It was a great meeting--
--
Mr. Costa. We need to coordinate, and I will be happy to do
that with the Subcommittee Chairwoman to see how we can get
that same sort of comprehensive effort, so we could look at,
for example, whether or not the detailed resources of wind
studies have been performed here. You think they have been?
Mr. Pula. Over here?
Mr. Costa. Yes.
Mr. Pula. In our meeting yesterday, yes, there are some,
very little.
Mr. Costa. What about the unused Capital Improvement
Program, what funds are there and when do you reprogram? And do
you do that with the consent of the territories in which those
funds were originally intended for?
Mr. Pula. For the Capital Improvement?
Mr. Costa. Right.
Mr. Pula. There is a set amount. It's only 27 million for
the four territories.
Mr. Costa. If they are not used, how do you reprogram?
Mr. Pula. If they are not used?
Mr. Costa. Yes.
Mr. Pula. Primarily it goes sort of like a competitive way
that we have done in the last three years, and goes to the four
territories. Usually when they get it, then they use it for
their projects, but it's no year money.
Mr. Costa. What you are saying it's always used then? There
is never any unused funds?
Mr. Pula. In some of the territories, for example, CNMI,
they don't spend it as fast as they can, because of many other
problems. What we are trying to do--right now I just meant, for
example, in CNMI I met with the Governor in February and
basically told him that's where they need to spend their money
prioritizing, is power and water with their situation.
Mr. Costa. I think the old plan is what we got to get back
to, because it's how you integrate a comprehensive plan that
you ultimately find solutions. My time is moving here.
Mr. Bond, you ever think about changing your first name?
Mr. Bond. Several times. I tried to slip it in one of my
children.
Mr. Costa. My name is James. Maybe I need to change my
last.
I noticed that the Energy Information Administration
doesn't keep data for insular areas the way it does for states.
Why is that?
Mr. Bond. It's a good question.
Mr. Costa. I mean, you treat them almost like they are
foreign countries. I don't want to go too far down that road,
because I am sure I would be fighting for the home folks. I am
not running for election here. Please explain.
Mr. Bond. I would love to be able to explain. However, I
don't have an explanation just given my role.
Mr. Costa. Don't you think we ought to change that?
Mr. Bond. I think it's something I will be happy to explore
and report back to you with the energy division of the agency.
Mr. Costa. I think you ought to report to the Chairperson
of the Subcommittee. I will be willing to sign a letter and add
to that, because, frankly, it doesn't make any sense to me.
These are U.S. citizens we are talking about.
Maybe I might come down and run.
Wouldn't it be helpful if the EIA treated--I don't want to
belabor this point, but it seems to me frankly the Department
of Energy has a responsibility here, and we ought to pursue the
multi-strategy just as you explained in Hawaii. I mean, that's
what I would like to see as one of the primary takeaways from
today's hearing. When do you think we need to do that.
Mr. Bond. I think in terms of the partnership that we had
in Hawaii from the beginning, we have marked the success of
that partnership with how we are able to replicate that
success. So it doesn't benefit the rest of the United States,
and all of our citizens if it only benefits Hawaii. So to find
ways to further replicate that, we are happy to be able to work
with the committee and with any of the insular areas to do
that.
Mr. Costa. I just want to commit every resource that we
have within our Subcommittee on Energy and Mineral Resources to
working with the Chairwoman with her Subcommittee to see that
that happens.
And I want to thank you, Congresswoman Christensen, for
this hearing today and for allowing us the opportunity to be
better informed. I think it's clear what we need to do on our
part to try to better enhance our insular territories to deal
with these challenges and give my commitment to do whatever we
possibly can together.
Mrs. Christensen. Thank you, Mr. Chairman.
The Chair now recognizes Mr. Shuster.
Mr. Shuster. Thank you very much. My question is to Mr.
Bond. Your view on sea solar power technology, what's your view
on that? It sounds promising. Your view on that type of
technology, the OTEC technology we heard about earlier, what's
the Energy Department's view of that is?
Mr. Bond. It's actually an area where the Department of
Energy is just setting up its program as a result of the
Omnibus Bill that funded our '08 budget. There is $10 million
allocated for further research and development within this
area. Where I would come down is to say that our goal really is
to create an environment where any renewable and alternative
form of energy can be competitive.
And so we don't view our role as picking winners in
technology. We view our role as more trying to further the
commercialization of the technologies and ensuring that the
market exists. So rather than the Department of Energy
commenting specifically of which technology will and wouldn't
work, it really depends on many circumstances, and there is a
lot of factors that go into that.
Mr. Shuster. I guess, I don't know what to take away from
that. Is there a positive view toward that technology?
Mr. Bond. I think the potential within that sector is
tremendous, and studies have shown this in terms of where you
look at the different technologies and where they are in the
commercialization time frame. It's clearly when it's furthest
along the line of all the technologies. Solar is moving quickly
behind that, and so in terms of getting the technologies cost
competitive, which is our real goal within our programs, there
certainly are some technologies that have been out there,
tested and proven in the marketplace longer, that are farther
in the R&D stage, and more in the commercialization stage. The
potential is tremendous.
Mr. Shuster. Thank you.
Question to Mr. Pula on the grid we talked earlier a little
bit and I asked the question. And I don't know if you--probably
your department will be involved, but if we are talking about
attaching--connecting the grid with other Caribbean islands and
which means other countries, other locations. How would that
process work though? Because it just seems to me the economies
of scale, if you can band together, you can build one facility
and it will power seven islands, twenty islands. What's the
process for doing that, and is that something you are looking
at the Office of Insular Affairs to be considered?
Mr. Pula. Thank you for the question. Let me just say,
recently I was approached by the folks in CNMI, and they are
really interested in geothermal because in the Northern Islands
they have the volcanoes, and there is about 300 miles, if they
were to lay a cable to get, you know, the source, it cost about
a million dollars a mile. That's what they were telling me, in
that area.
And yesterday we kind of discussed the potential here with
some other islands that may have some geothermal energy. I was
asking those kind of questions. I think we don't have the
answers. We are looking into those kinds of things and seeing,
of course, with the limited resource we will have to look into
this.
And to answer your question, I mean, if the potential is
there, it is there and it could be worked in coordination with
the other areas, because I think the Navy was thinking about an
interest in Guam in getting their energy from CNMI, from the
northern volcanoes. That would be something to do. Here if
there is available energy in the same form from other islands,
we will be happy to look into that.
Mr. Shuster. Speaking of geothermal energy, in the
territories here--I am stepping out of bounds of myself and
knowledge. I have to stick closely to my script here. The
geothermal energy typically you think of larger plants, binary
plants. I understand there is--you can tap into geothermal heat
exchange system by drilling holes. Is that something that's
being explored here in the territories?
Mr. Pula. I haven't had time to ask those questions of our
folks here. But, again, they were drilling for water and they
came upon one of the holes and that steam came up, and they
always thought that volcanic line trenches were farther away.
So now the scientists at USGS are saying, well, maybe it is
closer and there is possibility to have that. Again, we are
asking people at USGS, we will be talking to our colleagues
here at Energy and see what we can come up with.
Mr. Shuster. Thank you very much.
Mrs. Christensen. I thank the witnesses for their
testimony. We will have questions submitted in writing, and we
will ask for you to respond to those questions in writing as
well.
I want to take this opportunity to thank all of the
witnesses for their valuable testimony and the members for
their questions.
In closing, I'd like to just make a brief closing
statement. Of course, the reason for this hearing is to be able
to establish a record in the Congress. This is a formal hearing
of the Congress of the United States in Frederiksted, St.
Croix. And this record will serve as the basis for our being
able to request the assistance from our colleagues in Congress
to help you, my constituents, as well as the residents of the
other insular territories to cope with the very high cost of
electricity, and many of course of who are on fixed incomes and
have to decide between buying food or paying their electric
bills.
There is really nothing like hearing from the leaders in
the field and the representatives of the constituents
themselves. So I want to again thank Chairman Costa and
Congressman Shuster for being willing to come and to listen,
and to thank those who testified for putting a face on the
issues here in the territory and helping to point out not only
some of the unique challenges that we face but some of the
equities that the territories face as we try to address the
needs and concerns of our constituents.
The record for this hearing will remain open--let me see
how long--for ten days. As you might recall from previous
hearings, we welcome written testimony, and that written
testimony if received within those ten days, becomes just as
much as an official part of this hearing record as the
testimony you heard this morning.
And so then if there is no further business, this hearing
stands adjourned.
[Whereupon, at 12:43 p.m., the Subcommittee was adjourned.]
[List of additional material submitted for the record
follows:]
List of Documents Submitted for the Record
Statements submitted for the record by the following individuals
and organizations have been retained in the Committee's official files.
Mr. Jason Budsan
Mr. Malcolm W. Ford
St. Croix Renaissance Group, LLP