[Senate Hearing 114-308]
[From the U.S. Government Publishing Office]
S. Hrg. 114-308
ISLANDED ENERGY SYSTEMS: ENERGY AND INFRASTRUCTURE CHALLENGES AND
OPPORTUNITIES IN ALASKA, HAWAII, AND THE U.S. TERRITORIES
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HEARING
BEFORE THE
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
ON
ISLANDED ENERGY SYSTEMS: ENERGY AND INFRASTRUCTURE CHALLENGES AND
OPPORTUNITIES IN ALASKA, HAWAII, AND THE U.S. TERRITORIES
__________
TUESDAY, JULY 14, 2015
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Printed for the use of the
Committee on Energy and Natural Resources
______
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
LISA MURKOWSKI, Alaska, Chairman
JOHN BARRASSO, Wyoming MARIA CANTWELL, Washington
JAMES E. RISCH, Idaho RON WYDEN, Oregon
MIKE LEE, Utah BERNARD SANDERS, Vermont
JEFF FLAKE, Arizona DEBBIE STABENOW, Michigan
STEVE DAINES, Montana AL FRANKEN, Minnesota
BILL CASSIDY, Louisiana JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado MARTIN HEINRICH, New Mexico
ROB PORTMAN, Ohio MAZIE K. HIRONO, Hawaii
JOHN HOEVEN, North Dakota ANGUS S. KING, JR., Maine
LAMAR ALEXANDER, Tennessee ELIZABETH WARREN, Massachusetts
SHELLEY MOORE CAPITO, West Virginia
Karen K. Billups, Staff Director
Patrick J. McCormick III, Chief Counsel
Isaac Edwards, Senior Counsel
Angela Becker-Dippmann, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Allen Stayman, Democratic Senior Professional Staff Member
C O N T E N T S
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OPENING STATEMENTS
Page
Murkowski, Hon. Lisa, Chairman, and a U.S. Senator from Alaska... 1
Cantwell, Hon. Maria, Ranking Member, and a U.S. Senator from
Washington..................................................... 3
Hirono, Hon. Mazie K., a U.S. Senator from Hawaii................ 4
WITNESSES
Kia'aina, Hon. Esther, Assistant Secretary for Insular Areas,
U.S. Department of the Interior................................ 6
Underwood, Hon. Robert, President, University of Guam, and former
Guam Delegate, U.S. House of Representatives................... 20
Glick, Mark, State Energy Administrator, Department of Business,
Economnic Development, and Tourism, State of Hawaii............ 25
Hodge, Jr., Hugo, Executive Director/CEO, Virgin Islands Water
and Power Authority............................................ 33
Kohler, Meera, President and CEO, Alaska Village Electric
Cooperative, Inc............................................... 41
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
American Public Power Association:
Statement for the Record..................................... 83
Cantwell, Hon. Maria:
Opening Statement............................................ 3
Glick, Mark:
Opening Statement............................................ 25
Written Testimony............................................ 27
Responses to Questions for the Record........................ 67
Hirono, Hon. Mazie K.:
Opening Statement............................................ 4
Hodge, Jr., Hugo:
Opening Statement............................................ 33
Written Testimony............................................ 35
Responses to Questions for the Record........................ 75
Kia'aina, Hon. Esther:
Opening Statement............................................ 6
Written Testimony............................................ 8
Responses to Questions for the Record........................ 64
Kohler, Meera:
Opening Statement............................................ 41
Written Testimony............................................ 43
Responses to Questions for the Record........................ 80
Murkowski, Hon. Lisa:
Opening Statement............................................ 1
Underwood, Hon. Robert:
Opening Statement............................................ 20
Written Testimony............................................ 22
Responses to Questions for the Record........................ 66
Wittrig, PhD, T. Stephen:
Statement for the Record..................................... 85
ISLANDED ENERGY SYSTEMS: ENERGY AND INFRASTRUCTURE CHALLENGES AND
OPPORTUNITIES IN ALASKA, HAWAII, AND THE U.S. TERRITORIES
----------
TUESDAY, JULY 14, 2015
U.S. Senate
Committee on Energy and Natural Resources
Washington, DC.
The Committee met, pursuant to notice, at 10:06 a.m. in
Room SD-366, Dirksen Senate Office Building, Hon. Lisa
Murkowski, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM
ALASKA
The Chairman. Welcome, and good morning. We are at order
today in the committee. We are looking at the unique energy
challenges that face those who live in the remote and isolated
areas that are not connected to our national grid. Alaska,
Hawaii, and our territories--these areas are largely dependent
on imported diesel fuel for their energy needs. The cost of
importing that fuel adds significantly to the overall cost of
electricity, and in the case of Alaska, it also adds to the
cost of space heat.
Most remote locations pay at least twice the national
average for electricity. In parts of my state we see rates that
can reach 10 times the national average as a result of the need
to import fuel, so when we talk about energy challenges, for us
this is every bit as important as anything else that we face.
Alaska, of course, is not alone in this. In our isolated areas,
in our islands that are reliant on imported energy, this is
probably the most debilitating aspect of their ability to have
an economy at all.
While the nation's regional grids have a diverse set of
energy sources to draw from, most isolated areas simply do not
have that luxury. Instead their energy costs are directly tied
to the price of oil. Lower prices are providing some relief
right now, but energy source diversity is the best and most
stable option over the long term. In many parts of our state,
the fuel barge comes in once a year, twice a year maybe.
Sometimes it does not come when you expect it because you
cannot get the barges up the river, but effectively what
happens is the communities are locked into the price of fuel at
the time that it was contracted. So if you contract for the
fuel in July and the prices are reasonable, you enjoy those
reasonable prices until the next shipment comes, which may be a
year later.
I asked this morning to see what the people in Bethel paid
for their energy costs. In the summer of '13, heating fuel was
going for $6.09, diesel was going for $6.51 and gas was at
$6.85. In October of '14 we were looking at heating oil at
$6.20, diesel at $6.82 and gas at $6.79. We see the low prices
around the country. Everyone was benefiting from the low
prices, but not so much for those of us in Alaska. We are still
seeing price comparisons that simply do not add up.
It is important that we look at remote and isolated energy
systems in a holistic manner, not just from a cents per
kilowatt hour perspective. In all but a few of the communities
served by remote energy systems, economies of scale are simply
not a reality. Further, the isolated nature of these energy
systems means that they must bear the entire burden of ensuring
reliability within the community. The ability to support these
energy systems directly depends on the underlying economy, and
at the same time, the cost of energy drives that economy.
I was in Pelican over the 4th of July break. Pelican,
Alaska is down in the southeastern part of the state, a very
small community, with 100 or so people. It is only accessible
by boat or by float plane. It was founded as a commercial fish
processing site back in the mid-1930's. It processed one
million pounds of fish back in 1942, but over the years they
have languished as the fish went elsewhere, and they went
elsewhere for some pretty simple reasons: ice. If you do not
have ice to keep your fish chilled after you have harvested
them, you do not have a product.
Making ice takes energy, and without competitive energy,
the community could not provide the ice necessary to support
quality-based fisheries. The good news for Pelican is that they
have a small hydro project that has put Pelican back on the map
processing small bits of fish that are coming in, and the fish
are no longer going by this community. It is in part due to the
fact that they have energy to the school, to the water plant,
and now to the fish processors there.
Pelican, in my mind, is an example of how we need to think
about energy in these systems. We need to focus on solutions to
the problems at hand where energy sources match what the
community needs and what the community can sustain, and not
simply what is desired for them. From a Federal perspective, we
must ensure that our programs do not leave these areas on the
sidelines.
I note that the DOE's definition of a microgrid requires
the microgrid to be able to disconnect and connect to a larger
grid. Well, that is just not possible for those of us in the
non-contiguous parts of the United States. We have legislation
before the committee, S. 1227, to ensure that the development
of microgrid technology includes isolated communities, and
hopefully that will become part of our larger energy package.
Finally, I would note that this hearing occurs at the time
the Pacific Power Association, which is the umbrella
organization for the power companies in the Pacific Islands,
including those in the U.S. territories and freely associated
states, is holding its 24th annual conference in the Marshall
Islands. That is a coincidence, not a matter of coordination,
but it is good to know that the issue of remote and isolated
energy systems will be highlighted across the globe this week.
The issues associated with islanded energy systems deserve
our attention. Energy can be a staggering cost and a staggering
burden for the people who live in these areas, so I am pleased
that we have set aside time this morning to explore what can be
done at the Federal level to help find lower cost solutions to
them.
Senator Cantwell, I am going to now turn to you for your
comments, but I also want to recognize our colleague, Senator
Hirono, a fellow offshore senator. We have had an opportunity
in the past to discuss the challenges that are unique to your
smaller state and my larger state. While we are at least
connected to the mainland, we are clearly islanded in the sense
that we are disconnected from the rest of America. I do
appreciate working together with you, so if you would also like
to make a comment after Senator Cantwell, we would be certainly
happy to hear from you as well.
With that, let us go to Senator Cantwell.
STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Chairwoman Murkowski, for
holding this important oversight hearing, and I welcome the
witnesses, including our former colleague, Congressman
Underwood. Thank you so much for being here. And the Assistant
Secretary, thank you for being here. I look forward to hearing
everyone's testimony about the challenges of reliable and
affordable energy in remote communities in rural Alaska,
islands such as Hawaii, and a number of our U.S. territories.
To me this is very important because energy is the
lifeblood of any economy. Alaska and Hawaii have challenges as
it relates to reliable energy sources, and coming from a state
where we have seen cheap hydro build an economy over and over
again, I just think this is such an incredibly important issue
to how your economies grow in the future.
This committee has jurisdiction over relations between U.S.
and the communities of our fellow citizens and nationals who
live in the territories. Part of our responsibility is ensuring
that these communities have viable economies and that means a
need for reliable and affordable energy. We need to look no
further than Puerto Rico where electricity costs are over twice
the national average, and the public utility is carrying a debt
of about $9 billion, to see the consequences of high dependence
on costly energy and old equipment.
In other territories or in isolated communities in Alaska,
electricity costs are typically three to five times the average
of the lower 48 states, and this constitutes a significant
challenge to economic development. Two summers ago, Chairman
Murkowski and I traveled to remote areas of Alaska, and I saw
firsthand the challenges that they face in getting an energy
supply and building an economy with these energy challenges,
particularly in the winter months. It is a very, very
challenging situation.
These communities export cash to operate and maintain their
oil-based electric and transportation equipment. Newer, lower-
cost electricity generation and transportation technologies are
increasingly available, but there are typically two barriers to
deployment: a lack of technical expertise to operate and
maintain these new technologies, and these are typically lower
income communities which often lack the capital resources
needed to finance the transition to less expensive fuel and
equipment.
So, partnering with the Federal Government offers ways to
overcome these challenges. First, making sure that we tap into
technical expertise at the Department of Energy and its
laboratories. And second, assuring that these communities can
leverage the grant programs administered by the Interior
Department's Office of Insular Areas, such as the Empowering
Insular Communities Program and Maintenance Assistance
Programs. Similarly, the Office helped establish the Pacific
Power Association to help island utility officials to learn
more and to share their best practices in meeting the
challenges of reliable and affordable electricity in these
remote communities.
I am glad to have this important hearing today, and thank
you again for having this and affording our colleague, Senator
Hirono, a few minutes for her comments.
STATEMENT OF HON. MAZIE HIRONO, U.S. SENATOR FROM HAWAII
Senator Hirono. Thank you, Senator Cantwell. Thank you,
Chair Murkowski. I am glad that, Senator Cantwell, you
mentioned the high energy costs in Puerto Rico are twice what
the national average is. In Hawaii it is three times higher as
Alaska is well aware. Senator Murkowski, our two states could
become test beds for how we can provide affordable and, in our
case, renewable energy to remote areas, something that you and
I are very familiar with.
Aloha to my friend, Bob Underwood, President of the
University of Guam and former delegate to the U.S. House of
Representatives. And, of course, I am really pleased to welcome
Mark Glick, the Administrator of the Hawaii State Energy
Office, as one of our witnesses today. I am also pleased to see
our Assistant Secretary, Esther Kia'aina, another friend who
served as first deputy for Hawaii's Department of Land and
Natural Resources among positions of public service to the
State of Hawaii.
It is incredibly important that we are holding this hearing
on islanded energy systems. The people of Hawaii understand the
unique challenges that come with living on our islands, but our
energy challenges loom especially large. Families and
businesses in Hawaii are well aware that they face the most
expensive energy costs in the country.
With oil accounting for 80 percent of the energy needs of
our state, the people of Hawaii are acutely aware that there be
must new alternatives to the volatile prices and vulnerable
supply of the global oil trade. We can address our energy needs
in ways that are much cleaner using Hawaii's own renewable
resources.
In 2008, with the advice and support of the Department of
Energy, our state established the Hawaii Clean Energy
Initiative, a groundbreaking State/Federal partnership. We set
a goal for 40 percent of our energy to come from renewables by
2030, and in June of this year the Governor of Hawaii signed
into law an expansion of that goal to--listen to this--100
percent renewable electricity by 2045. This is the most
ambitious plan and goal in the country. Can we get there? Mr.
Glick is here to tell us how we are going to do that.
[Laughter.]
Hawaii has already more than doubled its use of renewable
electricity in 6 years to 21 percent. Hawaii also set a goal
requiring a 30 percent improvement in energy efficiency by
2030. According to the Hawaii State Energy Office, the standard
has resulted in the equivalent of $405 million in energy
savings for Hawaii's homes, farms, and businesses. Hawaii has
also established an on-bill financing program to help consumers
cut their energy costs by investing in clean energy.
Hawaii has benefited from the partnership of the state, the
utilities, and the military in finding solutions for an
affordable lower carbon energy future. It will help keep at
home more than the $5 billion per year that we currently spend
on importing energy. So not paying for importing oil and
becoming more energy self-sufficient will, of course, mean more
money; that $5 billion is circulating in our own economy,
creating jobs, raising wages, and helping families make ends
meet.
It is great that we are focusing today on how Hawaii and
other islanded areas deal with a high dependence on oil, high
energy prices, and the reduced reliability of energy supply
that comes from not being able to connect our electrical grids
and pipelines with neighboring states. At the same time, Hawaii
is on the forefront of addressing questions that will need
answers all across the state and territories of the U.S.: how
to use energy more efficiently in our homes, vehicles, and
businesses; how to get affordable energy from increasingly
renewable sources; and how to integrate new resources of energy
in the energy infrastructure that supports our daily lives.
Thank you, and I look forward to the testimony of our
witnesses. Thank you, Madam Chair.
The Chairman. Thank you, Senator Hirono.
We will now turn to our panel this morning, and welcome to
each of you. I will do quick introductions and then we will
hear testimony. I would ask that you try to keep your comments
limited to 5 minutes. Your full statement will be included as
part of the record, and then we will have an opportunity for
questions after that.
We will begin the panel this morning with the Honorable
Esther Kia'aina, who is the Assistant Secretary for Insular
Affairs. As head of the Office of Insular Affairs, Ms. Kia'aina
oversees the United States Government's relationship with
American Samoa, the Northern Mariana Islands, Guam, and the
U.S. Virgin Islands, as well as financial assistance to Palau,
the Marshall Islands, and the Federated States of Micronesia
through our Compacts of Free Association. Welcome.
We next have the Honorable Robert Underwood. Mr. Underwood
currently serves as the President of the University of Guam,
but, as has been noted, is a former colleague here. He was the
Delegate from Guam to the U.S. House of Representatives.
We are also joined by Mr. Mark Glick, who is the
Administrator for Hawaii's State Energy Office, tasked with
growing Hawaii's clean energy sector. Mr. Glick has been there
since 2011.
We also have Mr. Hugo Hodge. Mr. Hodge is the Executive
Director for the Virgin Islands Water and Power Authority, the
public power utility for the U.S. Virgin Islands. He is also on
the Board of Directors of the American Public Power
Association; the Co-Director of the Energy Development in
Island Nations, a U.S. Virgin Islands (USVI) Initiative; and,
the Chairman of the Caribbean Electric Utility Service
Corporation. Welcome to you.
Finally, we have Ms. Meera Kohler. Meera and I were on the
plane yesterday coming from Alaska, so I know that she also is
clearheaded and not foggy this morning from jet lag. Ms. Kohler
has come before this committee several times. She has been the
President and CEO of the Alaska Village Electric Cooperative
(AVEC) since 2000 and has 36 years in the electric utility
business. AVEC serves a population of about 30,000 people
across 56 communities with 49 power plants. She is a great
friend and one who clearly understands the challenges that we
face in Alaska. So thank you for making the long haul.
To each of you this morning, welcome, and let us begin with
the Honorable Esther Kia'aina. Welcome.
STATEMENT OF HON. ESTHER KIA'AINA, ASSISTANT SECRETARY FOR
INSULAR AREAS, U.S. DEPARTMENT OF THE INTERIOR
Ms. Kia'aina. Thank you so much. Chairwoman Murkowski and
members of the Committee, I thank you for the opportunity to
testify on the energy efforts of the Department of the
Interior's Office of Insular Affairs (OIA) in the U.S.
territories.
The U.S. territories face higher energy costs than the rest
of the nation, about three times higher than the U.S. national
average. The territories are also nearly 100 percent dependent
on imported fossil fuels for electricity generation. To combat
these high cost of electricity, the Office of Insular Affairs
entered into an interagency agreement with the U.S. Department
of Energy's National Renewable Energy Laboratory, or NREL, in
2010 to help the territories of American Samoa, Guam, and the
Northern Mariana Islands: (1) establish baseline energy system
data; (2) form energy task forces; (3) develop long-term
strategic energy plans; and (4) formulate energy action plans.
I am pleased to say that all of these objectives have been
completed, and we are in the implementation stages of the
energy action plans which are living documents that are updated
regularly as circumstances change.
On a slightly different track, the U.S. Virgin Islands was
selected as the pilot project for the Energy Development in
Island Nations, or EDIN, an initiative of the Department of
Energy. Interior and the Department of Energy provided
technical assistance to the USVI throughout the initiative, and
in September 2011, NREL published the U.S. Virgin Islands
Energy Road Map which outlines a path for achieving the
territory's goal of reducing its dependence on fossil fuel by
60 percent by 2025. As of December 2013, the territory has
already achieved a 20 percent reduction in fossil fuel energy
consumption, a third of its goal.
OIA's current priority is assisting the territorial
governments with the implementation of their energy plans
through our Empowering Insular Communities Grant Program at
about $3 million annually. Some project highlights include
funding support for geothermal exploration drilling programs in
American Samoa and the Northern Marianas, a wind pilot project
in Guam, solar panel systems for the hospitals on Guam and
Northern Marianas, and the integration of a hybrid renewable
energy system in American Samoa to bring the Manu'a Islands
close to 100 percent renewable by 2016.
The greatest challenge we face is the lack of funding for
high priority projects identified in the energy plans. Some of
the projects must be supplemented with funding from our OIA's
Capital Improvement Project, Technical Assistance Program, as
well as our Maintenance Assistance Program, all which are
already stretched thin. Another challenge is funding for Puerto
Rico. Public Law 113-235 included a provision for energy
planning in Puerto Rico that would be funded by the Office of
Insular Affairs. NREL's cost estimate for including Puerto Rico
is $331,000 for planning purposes. With no appropriation for
this effort, OIA's Energy Grant Program would likely suffer for
the other territories.
Although the challenges are many, we feel there are still
significant opportunities for the territories to reduce the
cost of electricity, diversify their supply of energy, and
become less dependent on imported diesel fuel. The President's
2016 budget includes $4.4 million for pursuing sustainable
energy strategies already identified in the territories'
strategic energy plans. Solutions to energy issues are always
pressing with significance for the environment, financing of
territorial governments, and the well-being of island societies
as a whole.
Thank you so much for the opportunity to testify on our
energy initiatives in the U.S. territories. With me to help in
the answering of any technical aspects of my testimony is Scott
Haase, who is the NREL liaison to the Department of the
Interior. Thank you very much.
[The prepared statement of Ms. Kia'aina follows:]
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The Chairman. Mr. Underwood, welcome.
STATEMENT OF HON. ROBERT UNDERWOOD, PRESIDENT, UNIVERSITY OF
GUAM, AND FORMER GUAM DELEGATE, U.S. HOUSE OF REPRESENTATIVES
Congressman Underwood. Thank you. Hafa adai. Good morning,
Senator Murkowski, Madam Chair, and members of the committee.
It is an honor to be asked to share some ideas and perspectives
on energy issues in remote areas, especially island
communities. I am President of the University of Guam since
2008 and former Congressional Delegate, as has been mentioned.
Part of the initiative as President is to establish the Center
for Island Sustainability to kind of function as an honest
broker on issues related to the sustainability of the islands
in what we consider our greatest challenge, which is to try to
figure out how to sustain our economy, our way of life, and our
environmental resources at the same time.
Our greatest export from Guam is money. As soon as we get
it, we export it, and $300 million a year, which is roughly
seven and a half to 8 percent of our total, what we call our
gross island product, goes to fossil fuel. As you have pointed
out, Madam Chair as well as Senator Hirono, if we were able to
capture portions of that export through efficiencies and
through the establishment of renewables, we could keep the
money circulating in the Guam economy, generate jobs, improve
the quality of our lives, and make significant strides toward
energy independence. And that is the holistic approach that we
think is necessary for people to understand.
Power generation on Guam is provided by local companies
which face significant challenges to keep power constant and
consistent due to infrastructure issues, and the fact that we
are disconnected from a greater grid, a national grid, a
continental grid. They also must try to maintain policies which
are able to pay back their long-term indebtedness.
In most instances, the power companies are the drivers of
energy policy rather than the entire society, and this is
because they exist in a power vacuum. I hate to use that term,
but that is exactly what happens in many of the islands.
Consequently, strategic planning which engages energy issues as
a long-term social and economic issue as well as dealing with
technological innovations is incoherent and is really driven by
occasional Federal initiatives. Some of the initiatives
outlined by the Assistant Secretary have been very helpful, and
there are others by the U.S. Department of Energy, and
sometimes by the U.S. EPA. But looking at it from an island
perspective, what happens is that you see various initiatives
coming back and forth, and you are not sure which ones are
really indicative of the entire Federal policy toward energy in
the insular areas.
Financing innovative technologies is complicated by, of
course, capital shortages and the notion, very common, that
innovative technologies is a Federal or external
responsibility. Island power systems effectively must, of
course, function as micro or minigrids. While our solutions to
this are simple--well, they are simple to say, not simple to
carry out--we need strategic planning which is holistically
based and focuses on greater energy independence and the
positive consequences which include economic growth and
sustainability.
We need to understand the concept of ``indigenous energy,''
bringing back using technology to help build independence. In
the experiences of the islands, the introduction of technology
usually means greater dependence on the outside world. Energy
technology, renewables, actually reverses that trajectory.
We need to adopt strong, but achievable, goals which reward
innovation and spur participation rather than skepticism and
opposition. This means we need renewable energy portfolio
standards which are realistically arrived at but which have
rewards and consequences. We need capacity building which is
based on people, not just on infrastructure, and education for
the work force and community outreach which enhances energy
literacy, which goes further than just computing the dollars
and cents computation of kWs, as you mentioned in your opening
statement, Senator Murkowski.
Federal policy initiative and activities must be coherent
and consistent. A multiplicity of funding sources and
regulators and technical assistance possibilities do not
facilitate coherence in small communities, but rather the
creation of silos within those small communities. There is very
little followup on the ground by any Federal agency relating to
energy in spite of its importance, which means the deploying of
individuals from agencies to help us and to help those islands.
The Federal Government should provide not only seed funding and
technical assistance for some innovative projects but also the
establishment of green funds themselves which are sustainable.
Last, we want to call for development of not just an all-
island, but an all-islands, solution and network. Individual
communities must develop their own coherent policies and
initiatives for individual sustainability; however, we must
join all-islands networks to share best practices and to avoid
redoing what has been done before. We have done this through
the establishment of the Center for Island Sustainability and
our annual conferences. We have also reached out to remote
communities in Alaska through our relationship with the center
at the University of Alaska-Fairbanks, which I visited last
year.
The committee's efforts and the efforts of our partners,
particularly under the leadership of the Office of Insular
Affairs and other Federal agencies, will be greatly enhanced by
adopting policies which reward demonstrated collaboration,
successful projects, and which build that human capacity. A key
factor in this is to not just look at territories as political
jurisdictions, but to adopt an all-islands approach through the
participation of islands, whether they are in the Pacific, the
Caribbean, off the coast of Alaska, or the New England
coastline.
I will be happy to answer any questions. Thank you very
much.
[The prepared statement of Congressman Underwood follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Congressman Underwood.
Mr. Glick, welcome.
STATEMENT OF MARK GLICK, STATE ENERGY ADMINISTRATOR, DEPARTMENT
OF BUSINESS, ECONOMIC DEVELOPMENT, AND TOURISM, STATE OF HAWAII
Mr. Glick. Thank you. Good morning, Chair Murkowski and
members of the committee. Thank you for inviting me to testify
before you today about Hawaii's energy ecosystem and the
challenges and opportunities faced in operating islanded energy
systems in the Hawaiian archipelago.
First, the state views our annual expenditure of about $5
billion a year on imported oil as a tax on growth in Hawaii
that imposes a significant burden on our residents and
businesses. Economics and energy security have driven our push
for clean energy with substantial progress for energy
transformation finally taking root, once a bipartisan collage
of policymakers in Hawaii's congressional delegation and our
Statehouse decided to take bold action. This was embodied in
the 2008 Memorandum of Agreement between the U.S. Department of
Energy and Hawaii and the subsequent passage in 2009 of the
nation's strong renewable portfolio and energy efficiency
portfolio standards, something we call the Hawaii Clean Energy
Initiative, as Senator Hirono mentioned in her remarks.
In 2013, the Governor established energy policy directives
to offer guidance and clarity for actions necessary to fulfill
Hawaii's energy transformation. I would like to emphasize
directives calling for a diversified energy portfolio and
relying on clean energy solutions in which the market decides
winners and losers, and the results have been strong. The
renewable portfolio topped 21 percent at the end of last year,
well ahead of the 2015 interim target of 15 percent, and the
state has reduced electricity demand by more than 15,000
gigawatt hours. To do this, we used the winning strategy of
paying off infrastructure costs through energy savings, and
Hawaii has led the nation for three consecutive years in the
per capita value of energy savings performance contracts.
Hawaii also leads the nation in solar capacity per capita,
even though our isolated grid cannot absorb the percentage of
intermittent renewables through the interconnection with the
regional grid as is done on the mainland. So to address these
technical challenges and costs associated with incorporating
this increasingly large percentage of renewables, our electric
utilities are working with the host partners to test and work
on specifications of fast trip, inverter functionality to avoid
transient over voltage events, Midwich distribution circuit to
determine proactively the amount of distributed energy
resources that can be hosted on each circuit, and work with
inverter manufacturers to bring to market advanced inverter
functionality to manage voltage levels to customers.
Now, to support these solutions, our office, the Hawaii
State Energy Office, focuses more these days on utility
resource planning, rate design, and price signals to inform
energy stakeholders on the optimal configuration to achieve a
growing portfolio of renewable resources. One example I would
like to cite is our modeling of load balancing and storage
resources from higher penetrations of electric vehicles.
If we assume 120,000 electric vehicles are operating when
we achieve a 70 percent renewable portfolio, peak energy
demand, electric demand, would increase by as much as 20
percent, resulting in a 10 percent increase and our need for
energy storage. However, if those 120,000 electric vehicles are
supported by smart charging and advanced systems to be
connected to the grid, energy storage requirements might
actually be decreased by 10 percent.
Now, the fact that we are the most isolated population
concentration in the world makes energy resiliency and disaster
recovery an even greater concern. Renewable energy and
distributed energy offers great energy resilience, and we have
also taken concrete steps to ensure that Hawaii's clean energy
transformation is realized by all demographics and communities
throughout the state. That is why our new securitized rate
reduction bond and On Bill Repayment Green Financing Program
targeting the undeserved residential customers, renters and
non-profits, is so important.
So in conclusion, Hawaii has been able to leverage our
isolation and the challenges faced in the arena of clean energy
to great advantage. Hawaii has been able to attract
international investment from governments and corporations who
see Hawaii as a bellwether for renewable energy solutions
before rolling out to international markets, and this success
has prompted the state to rethink the potential of Hawaii's
clean energy transformation.
The offshoot was the passage of the bill that Senator
Hirono had mentioned signed by Governor Ige in June of this
year calling for Hawaii's electric utilities to accelerate the
2020 interim RPS target or renewables from 25 percent to 30
percent, and, of course, go to 100 percent renewable energy by
2045. Our continued refinements of these targets assist in
resource optimization and prevents costly overbuilds, and sets
a clear, unambiguous goal of generating 100 percent electricity
from its renewable sources. Our approach in setting targets for
utilities is a practical approach to furthering the state's
energy policies.
So thank you for this opportunity to highlight Hawaii's
clean energy leadership and to share some of the lessons we
have learned in pursuing our clean energy transformation.
[The prepared statement of Mr. Glick follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Mr. Hodge, welcome.
STATEMENT OF HUGO HODGE, JR., EXECUTIVE DIRECTOR/CEO, VIRGIN
ISLANDS WATER AND POWER AUTHORITY
Mr. Hodge. Good morning, Honorable Chairwoman Lisa
Murkowski and other honorable members of the Committee on
Energy and Natural Resources. My name is Hugo V. Hodge Jr., and
I am the Executive Director/Chief Executive Officer of the
Virgin Islands Water and Power Authority (VIWAPA). On behalf of
the Governor of the Virgin Islands, the Honorable Kenneth E.
Mapp, the Virgin Islands Delegate to Congress, the Honorable
Stacey Plaskett, and the members of the 31st Legislature of the
Virgin Islands, and the Governing Board of the VIWAPA, we thank
you for this invitation.
To say that volatile oil prices have placed an undue burden
on the businesses and residents of the U.S. Virgin Islands and
the overall economy of the territory is an understatement.
Since approximately 2003 when fuel oil prices began an
unprecedented climb, electric customers have struggled to pay
for electric services, spending approximately 9 percent of
their income on these services versus the 2-percent paid by
their mainland counterparts.
At one point in time, the average price of energy paid by
the U.S. Virgin Islands consumer climbed to a high of $0.51 per
kilowatt hour, five times the U.S. average. While the territory
has received some relief in recent months due to the recent
decline in oil prices which has reduced the current electric
rate to $0.32 per kilowatt hour for residential customers and
$0.35 per kilowatt hour for commercial customers, analysts are
divided on how long this respite from high fuel prices will
last. One thing is certain, however. Prices will elevate again,
so the urgency remains the same.
Like most other Caribbean islands, the USVI has no
conventional energy resources to meet its energy needs. While
U.S. mainland utilities can connect to grids to purchase power
from other utilities in the continental United States, island
utilities are small, isolated, and are not interconnected to a
grid comprised of other utilities. This is primarily due to
their separation by water and the depth of the ocean floor,
which makes interconnection via underwater electric cables
technologically and economically unfeasible. As a result,
island utilities have historically purchased small simple cycle
generating units that are oil-fueled.
From the mid-1980's to approximately September 2003, the
inflation-adjusted price of a barrel of crude oil on the NYMEX
was generally under $25 a barrel. The attraction of low cost
fuel, combined with the economies of scale, provided the
framework for island utilities to purchase these small
generating system. In many islands that are comprised of
several small islands separated by water, duplicate generating
systems and increased reserves are required to meet the need
for electrical services. VIWAPA, for example, has two separate
generating systems--one to serve the islands of St. Thomas, St.
John, Water Island, and Hassel Island, and another separate
system serves the island of St. Croix.
During 2003, oil prices globally began to steadily rise.
The price per barrel paid for by the Authority was
approximately $22 a barrel. At its highest, we have paid $141
per barrel. The result of these massive spikes caused operating
cash shortfalls, flat to declining sales in electricity, and
larger outstanding receivables, resulting in deferred
maintenance on our generating equipment. I provide a table
showing the rise of fuel prices.
So what we have done since that point is we have pursued
every available option to reduce the cost of electric services
to our customers and jump start the economy. We have pursued
alternative and renewable sources tirelessly for almost 10
years now, and tangible relief is finally on the horizon.
VIWAPA could not, however, have made the advances it has
without a number of public and private partnerships.
Chief among our supporters have been the Department of
Interior, the Department of Energy through its National
Renewable Energy Laboratory, the Federal Emergency Management
Agency, and the U.S. Department of Agriculture, and RUS, which
have provided the following assistance. DOE through NREL helped
to identify the territory's baseline energy use and how the
USVI could best meet its goal to cut fossil fuels by 60 percent
by 2025. VIWAPA, as an EDIN partner, has been able to tap into
a broad spectrum of technical assistance and project
development support from DOE and NREL. DOI provided a $500,000
grant for VIWAPA to prepare an Integrated Resource Plan that
will provide the roadmap for responding to future generation
needs. FEMA has provided funding for hazard mitigation projects
that have assisted VIWAPA with burying power lines that serve
areas critical to the territory's infrastructure. RUS has
approved a loan that will allow VIWAPA to implement Distributed
Automation Technology, a smart grid capital improvement
project, and AMI, Advanced Metering Infrastructure. The closing
on this loan has, however, been delayed. Any assistance the
committee can provide to close the loan would be appreciated.
Throughout the rest of the testimony I highlight some of
the things we have implemented. We were 100 percent dependent
on fuel oil. Now we have about 8.2 megawatts of grid type solar
and about 15 megawatts of net metering, bringing our renewable
portfolio to just about 22, 23 percent currently. We also have
another six megawatts of solar power we have contracted for to
be built on the island of St. Croix. We have a seven-megawatt
biofuel project on St. Croix contracted to be built by the end
of 2016, and we are currently doing a massive undertaking of
converting all of our power generation to use of LPG, or
propane. The conversions of the units allow for both LNG and
LPG, and we expect to see a significant reduction in costs as a
result.
The Island of St. Croix will be benefiting from that
project as early as next month. We plan to introduce propane to
the storage facilities the end of July and produce energy in
August. I am pleased to report that. The St. Thomas project is
behind waiting for the issuance of an Army Corps of Engineer's
permit, and we know they are doing their utmost to produce the
permit. However, the permitting staff for the region, which
reviews the permits, is inundated with other requests.
I would like to thank you for the opportunity to appear
before the committee, and I am here to answer any questions you
may have.
[The prepared statement of Mr. Hodge follows:]
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The Chairman. Thank you, Mr. Hodge.
Welcome, Ms. Kohler.
STATEMENT OF MEERA KOHLER, PRESIDENT AND CEO, ALASKA VILLAGE
ELECTRIC COOPERATIVE, INC.
Ms. Kohler. Thank you. Good morning. My appreciation to
Chairwoman Murkowski for inviting me here today and to all the
members of the Committee for tolerating hearing a little bit
about Alaska.
You have already had a brief introduction to AVEC, the
Alaska Village Electric Coop. We are a non-profit electric
utility that serves 56 communities, and we do so by operating
49 independent power plants. The reason we have to do that is
because none of our communities are connected to each other, or
very few of them are, although we have been on a mission for
the last several years to try and interconnect our communities
because that is how we can achieve economies of scale as well
as allow us to integrate some wind power.
We actually are leaders in the development of wind power in
Alaska. We own 34 wind turbines that serve 15 communities. We
are able to achieve capacity reduction or diesel reduction of
up to 30 percent in some of those communities, which is
technologically a very challenging feat. Nonetheless, it is a
mission that we do have to reduce our diesel consumption
substantially.
I think, as was pointed out, the export of Alaskan dollars
for fossil fuels is considerable. A very brief study that we
did a few years ago shows that we are exporting $3 billion a
year in fossil fuels used to power electricity and heat in our
communities. We are, of course, an Arctic state, and as a
result, heat is a very critical factor that has to be provided.
What we will find in Village Alaska and some of our
smallest rural communities, over 20 percent of the population
spends literally 50 percent or more of their disposal income on
energy, and that is just electricity and heat. That is not
supportable. You cannot have any type of economic development
when you have energy that is crippling the economy.
Across the State of Alaska we have electric rates ranging
from $0.10 a kilowatt hour in southeast Alaska where they have
renewable hydro electricity up to over $1 a kilowatt hour in
many of our communities where fuel has to be flown in. As
Senator Murkowski mentioned, our river systems are changing.
They are becoming shallower, and more and more communities are
unable to be reached by barge traffic during the very brief
summer season when we are ice free. So as a result, our
challenges in Alaska truly are formidable.
These small local facilities do not have economies of scale
because you are serving populations of just a few hundred. Our
average village community in AVEC is 450, but if you look
across the state where we have more than 200 microgrids as it
were that are completely islanded, the average population in
those villages really is more like 200. So when you are trying
to develop a reliable energy system to serve such a small
population, you actually wind up with a huge amount of
redundancy.
We have typically three to four diesel generators in a
village. They are sized such that they can pick up the loads
during any one part of the season of the year. You have to be
able to count upon having one generator down for planned
maintenance and having another one break down unexpectedly, so
you have to have at least triple redundancy in each of these
communities.
As a result, our actual installed cost per service in our
villages is five times or more that of the lower 48. So
typically over here, the lower 48, you see a capital cost of
about $2,500 per service. In our villages, it is more than
$17,000 per village--per service. Those disparities result in
very high non-fuel costs of power as well, so typically in one
of our villages we are looking at over $0.60 per kilowatt hour
for the first thousand kilowatt hours, as it were.
We must have affordable energy if we are going to have
economic development. We must have jobs. We must be able to
provide essential services. The State of Alaska has been a
significant player. They have funded several programs to
improve the cost of electricity. They have a renewable fund
that has been in operation since 2008 and has plugged almost
$300 million into developing renewable energy systems. They
have innovative financing options for large-scale construction,
they have a revolving Power Project Fund, and they have the
power cost equalization to reduce the cost of residential
electricity for the first 500 kilowatt hours, but Federal help
is desperately needed in Alaska. We do not have a transmission
grid. We would love to have a grid to be able to connect and
disconnect to, so that is something that certainly should be on
the plate in the future. The Energy Independence and Security
Act has got the potential to be a huge player in Alaska, so we
urge you to consider funding elements of that act so that we
can have the Federal support that we need across Alaska.
With that, I stand ready to answer questions, and yield the
floor back to Chairman Murkowski.
[The prepared statement of Ms. Kohler follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you, Meera. I appreciate you being here
and for your testimony this morning.
I have several questions this morning. Let me start with
you first, Assistant Secretary. Under the Omnibus
Appropriations bill from 2015, the Secretary of the Interior
was directed to establish energy action plans for the
territories which you mentioned in your comments. It also
included Puerto Rico, but Puerto Rico is not yet included in
the process. Where are we with Puerto Rico's inclusion?
Obviously Puerto Rico is clearly and keenly in the news
right now. We are all very engaged in these issues that are
very, very difficult for Puerto Rico. I have noted that as
difficult as the economy is right now, unless we can deliver
and work with the people of Puerto Rico on some energy
solutions, it is going to continue to be a tough set of facts
there. So where are we on the energy action plan for Puerto
Rico?
Ms. Kia'aina. Thank you, Chairwoman, for that question.
When the law was passed, our Fiscal Year 2015 budget did not
take into account Puerto Rico, so the $3 million that we
received went to other areas in the other territories. As I
stated in my testimony, the plan estimated by NREL will cost
$330,000. We believe that if we received our full funding for
Fiscal Year 2016, which is $4.4 million, we would be able to
accommodate Puerto Rico in the upcoming Fiscal Year.
The Chairman. So to this point in time, there has been
nothing done to pursue an energy action plan for Puerto Rico.
Is that correct?
Ms. Kia'aina. That is correct; however, there is NREL and
there is the U.S. Department of Energy. I have been in contact
with the U.S. Department of Energy, and they actually have told
me that a plan may not be necessary because they have already
done a lot of work in Puerto Rico. So I commit to you after
this hearing--well, first, let me just say for Fiscal Year
2016, we can fund it if we get an increase in appropriation.
With regard to what can DOI and U.S. DOE do now, I need to
followup with my colleague at the Department of Energy, who is
already active in Hawaii and the Virgin Islands and has said
that a lot of ground work has been made in Puerto Rico. And so,
they may have the discretionary authority to do that plan. That
is something I will followup with your staff as well as with
the Department of Energy.
The Chairman. I would appreciate you doing that. We had
invited representatives from NREL or DOE to attend this morning
to speak to some of these issues, so hopefully they are on
alert that these are questions that we would like to have
addressed. I am sure that the people of Puerto Rico would like
to know that there is a plan that is out there.
Nobody has really talked this morning about storage
capacity, and I know that for the areas that you all represent
and are engaged in, the ability to store energy from these
intermittent sources is really going to be the future here.
What level of engagement have you had with the Department of
Energy on these microgrid technologies that you are working on
to improve storage capacity? Has there been much work either in
Alaska, Hawaii, or the territories? Mr. Glick?
Mr. Glick. Chairman Murkowski, the Department of Energy has
provided a great deal of technical assistance through some of
the analyses that we talked about. The Oahu wind integration
study, as well as the solar integration study did talk about
amounts of storage that would be necessary to smooth out
frequency disruptions and other technical problems created
through intermittent power. So there have been RFPs that have
been put together by the utility to solicit that amount of
storage for our systems, but we also believe that it is
important to do grid modernization, which will relieve a lot of
demand for storage through these trip inverters and other
technologies I discussed, which are a lot less expensive. So we
have to do both.
The Chairman. Mr. Hodge?
Mr. Hodge. Yes, good morning again. We have been talking to
the Department of Energy about a microgrid system for the
island of St. John. It is an isolated part of our grid, it is
served by underwater submarine cables, it is about eight
megawatts in total, and we believe that the island is ideal for
a microgrid system with distributed generation and storage. We
have asked for their assistance, and I believe we are just
about close to getting some technical assistance in studying
how we can do our microgrid system for that island.
We also look at other mechanisms for our utilities scale.
Solar, we use some of the European standards, the low voltage
ride through, the frequency support, and some of the other
technologies that are in the inverters that are not predominant
in the U.S. markets, but that are more prevalent in the other
countries that utilize the renewables.
The Chairman. Let us go to Senator Cantwell.
Senator Cantwell. Thank you, Madam Chair. The Napaskiak. Is
that where we----
The Chairman. That is where we were.
Senator Cantwell. So Senator Murkowski and I were at
Napaskiak two summers ago. Ms. Kohler, one of the things that
you said that struck me is this nexus between economic
development--energy costs and economic development. You are not
going to grow an economy if you do not have basic energy costs
that are competitive for people to establish businesses there.
So this is, to me, a very critical issue. One of the things I
mentioned in my statement was about the two challenges that we
have, both the technical barriers on the ground and in the
workforce and then the financial investments or the structure
to deploy that.
Of the programs that we currently operate at the Federal
level, what are the holes? Why does this not work to try to
test or deploy other technologies, or maybe you think they are
working fine?
Ms. Kohler. Well, I would like to say they are working
fine, but the reality of the matter is that when you are
looking at--you mentioned Napaskiak, and that is a standalone
community that operates their own electric system. When you are
that small you do not have access to technical resources that
you can afford, and so you rely upon other entities, such as
the State of Alaska through the Alaska Energy Authority, for
assistance.
Now, on the other hand, in our communities, the AVEC
communities, because we are headquartered in a single location,
we have the technical staff and the engineering resources and
so forth to provide the support services we need for our own
communities. You still have a real issue with local capacity.
When we install wind turbines, for example, in our communities,
we actually send individuals that are residents in those
communities, typically one or two people, to extensive wind
training so that they actually become wind smiths, as it were.
They are supported by journeymen level staff out of our own
office, but it makes for very expensive alternatives.
U.S. DOE has not really played a major part, but the Denali
Commission has been a very strong supporter and has provided
funding for renewables and for training as part of the
operation of those renewables. I know that very recently the
Alaska Center for Energy and Power is working with U.S. DOE to
put together a modest innovative program to develop storage
alternatives.
The storage that we use to operate our wind turbines really
is a diversion off that excess electricity into heat sources.
We actually use the electricity as heat to supplant diesel in
public projects, water treatment plants and so forth. So we do
effectively use it, although the best value for that
electricity would be as electricity. But until storage becomes
more of a mainstream event, as it were, we cannot afford to
invest in it.
Senator Cantwell. So financing really is an issue.
Ms. Kohler. Financing is the hugest issue of all, yes.
Senator Cantwell. And that seems to me to be the crux of
this--I am not saying the complexity of Alaska and its
temperature is not a very challenging issue, but it does not
seem to me that these problems are about getting a national lab
to tell us what we need to do here. It is more about whether
the tools are there for the communities to build capacity that
they do not have to begin with because of remoteness or the
lack of a business interest. It seems to me that the financial
tools that we are making available seems to be a very critical
issue. You are nodding your head. You agree?
Ms. Kohler. I am agreeing with you 100 percent.
Senator Cantwell. Okay. Mr. Underwood, Mr. Glick, or Mr.
Hodge?
Congressman Underwood. Yes, that is exactly it. I think the
main issue we are--and certainly in small island societies, you
are waiting for some technological innovation to come along to
solve your problem instead of--and what happens is that the
shifting of the responsibility of, well, how do you finance
some of these things, and how do you finance innovations and
adopt them into your island society that has shifted. It
shifted to other places, and you are just kind of waiting for
something to happen. I would argue that and I would urge that
Federal agencies spend as much time giving some island
communities as much technical assistance on how to finance
things as much as technological advice or advice on new
techniques.
Also, just to speak briefly to the point about storage.
That is also a very critical issue, and I am eager to hear what
the others have done with this issue because the inability to
store from solar panels is one of the biggest reasons why some
people argue you should not adopt solar panels now until you
get that level of technology. I just--I do not accept that. I
think there must be ways of managing that grid and power
consumption throughout the day in order to manage that, so that
storage issue.
But just to speak briefly again to the issue of technical
assistance, and financing, and developing models for that is
really as much a key as is advice on new technologies.
Senator Cantwell. Well, I am a big--oh, Mr. Hodge, did you
want to say something?
Mr. Hodge. Yes. I would like to say that having the utility
be a part of the plan is critical because how we have tackled
the issues of financing is by using the PPA model. So where the
utility or the government could not outright finance the
project or do the borrowing for the project, our utility can
use a mechanism called a power purchase agreement to pledge the
repayment over a period of time via the rates for that
reduction in cost.
For our LPG conversion, we had a worldwide company, VITOL,
put up all of the upfront costs, the $150 million, the
conversion, of all of our units, all the facility, build all
the infrastructure. And then over a period of just 10 years, we
can repay this debt via a small add-on to our cost of buying
the propane from the Gulf, so it is U.S. fuel. And the PPA
model we have used for our solar projects with 25-year PPAs. We
have got $0.13, $0.14 for solar energy on a utility scale. We
have utilized it for our bio fuel project.
We do not have the capital to go out and do large purchases
or utility-owned systems, but by using the PPA model, which
does require that you maintain investment-grade, which is a
challenge for some utilities but that is the way we handle that
issue.
Senator Cantwell. Well, I was going to say I am a big fan
of public power in general, and we had one utility in our area,
Parkland, which is in Pierce County, that basically put all its
utilities underground. So here is a little utility that decided
what was in the best interest of those rate payers was an
investment in securing their delivery system because of our
winds and storms. They decided to finance that and move ahead.
So I like having the public models in the marketplace,
because I think that they keep a keen eye on the interest of
cost-based power in delivering the resource to the community
that allows the community to grow. While I am a very big
supporter of Power Africa in the context of the United States
doing all it can to take U.S. technology and promote it in
other areas, it is an embarrassment that we are not spending
more time and energy in the United States of America and our
territories providing real solutions to the people that live
within our boundaries. We have got to do this.
Madam Chair, I am all ears about the solutions that we can
seek to do this. This is something that we should do, and it
should be a commitment by this government to get it done. Thank
you.
The Chairman. Well, you are singing to the choir here.
[Laughter.] Let us have Senator Hirono join.
Senator Hirono. Thank you very much, Madam Chair, and I
echo those sentiments about singing to the choir.
I am a proponent of the setting of national renewable
energy and efficiency standards to encourage the private sector
to step forward with R&D. Mr. Glick, I note in your testimony
that you say that Hawaii has been able to attract international
investment from governments and corporations. They see Hawaii
as a bellwether for renewable energy. So I wanted to have you
talk a little bit more about how Hawaii has spurred this kind
of activity on the part of the private sector.
Mr. Glick. For us, clean energy, as you know, Senator
Hirono, has been all about rebuilding our economy and creating
this new clean energy sector. Part of it is attracting
innovation. With us in Hawaii as being an emerging test bed,
companies like Hitachi with support from the Ministry of
Economy and Trade and Industry in Japan have been funneling
dollars. About $40 million came to Maui for the smart grid
project called Great Maui that is building a microgrid and a
smart grid network--also developing bigger networks of electric
vehicles and fast charging networks. A very important project
which we expect will expand.
Through the Hawaii-Okinawa Agreement which was just signed
last week, we are hoping to identify additional projects that
could be brought to Hawaii and also shared resources, some that
would be developed in Japan as well. I think that is the kind
of model that we see in the future continuing to find
collaborative projects to test the boundaries of how we
integrate more renewables, how do we build smarter clean
transportation systems using clean energy, and trying to track
those dollars on very large-scale real world demonstrations.
Senator Hirono. We have heard from some of the other
witnesses how expensive energy is in their localities. So,
again, Mr. Glick, Hawaii created the Green Energy Market
Securitization Program, or GEMS, to help more people invest in
renewable energy. This is particularly important to people who
do not have the money up front to buy solar panels, for
example, but who are interested in saving money in the long
term by generating their own power. Can you elaborate on how
the GEMS Program works in engaging with the public and
providing financing options to people, including renters and
non-profit organizations, and do you think this approach could
be used in other territories and other states?
Mr. Glick. Thank you, Senator Hirono. Certainly the GEMS
approach, we use rate reduction bonds that are securitized.
They are backed in our case by security from the Public
Benefits Fund, which comes from everybody's electricity bill, a
small surcharge. We are able to utilize some of that back,
repay the loans. We are able to get triple A financing, so
very, very low cost of money.
We then build loan programs around it. It is hard getting
small commercial non-profit organizations and also the
residential market. Those loan products have just been rolled
out this summer, and we expect a lot of people to take
advantage of that. Very low interest rates on the low side,
five to six percent, on the high side, nine percent. But
compared to other programs, particularly for those who have had
difficulty getting financing for solar projects, it is really
the only way that they have been able to get financing.
And then, of course, tying it to your electricity bill
repayment really reduces the risk of default, so I think that
is another thing that can be incorporated. I know many states
have had difficulty getting on bill programs instituted, and
that is done pretty much on state-by-state level so far. But on
bill does reduce risk of repayment, so we see that as an
important model.
As far as the overall capitalization and how bond programs
like GEMS could be expanded, we know that the State Energy
Program through states and the state energy offices have
managed $2.1 billion in loans. Perhaps the State Energy Program
through some kind of mechanism like GEMS could funnel
additional dollars. In Hawaii, we think our clean energy
installations will exceed $20 billion in capitalization, so we
need to find more means of financing to make it more
affordable.
Senator Hirono. Madam Chair, it seems as though my time is
up, although it did not feel like five minutes. Is this right?
Do you mind if I just ask Ms. Kia'aina whether a GEMS kind of a
model could work in the other areas, territories?
Ms. Kia'aina. I think some of my other colleagues in the
territories might be better able to answer that question, but
just let me say in general our energy program is so small, $3
million. So I would promote greater dialog with the private
sector, and I took notice of Hitachi, Mr. Glick, because in the
Pacific territories, Japan is a close neighbor. They have
committed $450 million just recently for climate change and
other types of funding specifically for independent Pacific
Island nations, including Micronesia. And so, my head was
thinking here with regard to some Kokua we could use for our
energy initiatives.
That is something we will contemplate, but, again, I defer
to my other colleagues directly from the territories because
they are on the front lines, and they are probably already
working with the private sector.
Senator Hirono. If it is all right with the chair, if
anybody else wants to chime in.
Congressman Underwood. Yes, I think that is a--that is a
possibility, and it goes back to the whole point about how to
finance these things in the small island territories. I think
there is kind of a common perception that OIA is going to fund
some of this, or that they are going to create some kind of
financing mechanism. But it is not there, and we recognize
that. At least I recognize that. I am not sure that everyone
does.
But this is the kind of promising thing that I think could
come from an all-islands approach where we are constantly
having these dialogs. I should not have to go to Washington,
DC. to hear about it when I can just go to Honolulu.
[Laughter.]
Senator Hirano. Mr. Hodge.
Mr. Hodge. Yes, we have used on bill financing for our
solar water heater program, so I am sure somewhat the model can
work. I am not familiar with the GEMS Program and what the
surcharge is on a per kilowatt hour basis that is used to
backstop the financing or the debt, and I guess it would be
also dependent on the scale and size of the billing. So if you
have two million customers, a small surcharge would be much
different with 50,000 customers to backstop that kind of an
endeavor. But I will do some more research to see if it is
applicable for our small territory.
Senator Hirono. Thank you. Did you want to add something?
Ms. Kohler. If I could just add, there really is not a lot
of private party interest in providing or looking for solutions
for our small villages because the economies of scale again are
so poor. The average village sells, you know, 1.3 million
kilowatt hours. There is just not enough to be able to amortize
an investment of any size, so I do not really see that it would
have a lot of potential application for our villages.
Senator Hirono. I think you definitely have a very unique
situation, and that is why you have a wonderful senator who is
going to address some of those needs. Thank you very much,
Madam Chair.
The Chairman. Thank you. I think it is valuable when we
have hearings such as this for us not only to hear the
different projects and proposals that are underway and the
challenges, but how you are facing those, and to share a little
bit of best practices. I would agree with you, Mr. Underwood.
You should not have to come all the way to Washington, DC. to
find these, but hopefully we gain from one another as we try to
find these solutions that are oftentimes very unique.
But then you think not necessarily so. Just because it is
perhaps colder and darker in Alaska when you are trying to make
application to an area that is so isolated, and remote, and
small, there are applications not only with our territories,
but I think about the value of what we are doing in Alaska and
sharing it with other Arctic nations who are also dealing with
cold, and remote, and small populations. Again, sharing some of
these best practices that are innovative to where we are.
You mentioned, Ms. Kohler, the triple redundancy that we
face in Alaska and the need to have the backup generating
capacity because if you are not part of anybody's else's grid
when power goes out, power goes out. If you are in a cold
place, if it goes out for a period of time, not only do you
face the loss of your infrastructure through broken pipes and
damage, but you could face loss of life. So for us, it is
pretty critical.
I am just curious with the other systems that we are
talking about whether it is in Guam or in our Caribbean
islands, are you also in a situation where it is effectively
triple redundancy for your backup generation capacity?
Mr. Hodge. Yes, ma'am, it is, and----
The Chairman. Tell me how that adds then to the cost to
your rate payers.
Mr. Hodge. We have to have that redundancy in our
generation. We use the N-minus-one criteria, so we have to be
able to serve all of our load if our two largest units are
offline, and you have to have that kind of criteria given that
you have no interconnection with the grid.
We are doing a conversion right now to LPG, and we are
converting units one at a time. Because there is no grid, we
are doing that while we are still trying to meet the N-minus-
one criteria, which is even that much more challenging to make
change and to affect change. We have not even discussed the
water side of it, because there are some synergies between
water and electricity that I know that everyone kind of gets
into on a regular basis.
But definitely there are reliability requirements on an
island grid, and we do collaborate. I think there is an island
and a grid in Alaska called Kodiak, Alaska that I have spent
some time speaking with their wind--that they have put out a
grid through DOE and NREL. They put us together since we have
some similar characteristics, so there are some synergies
between the territories and the State of Alaska as well.
The Chairman. Mr. Underwood?
Congressman Underwood. Yes. I cannot say that I do not know
whether we have double or triple redundancy, but we do have
redundancy because the--and we also have issues with resiliency
in connection with our natural disasters. That really leaves a
great deal of challenges to the power companies.
But part of that is, again, an issue of energy literacy,
people understanding that and then people changing their habits
on how the use power throughout the day so that you do not need
that level of redundancy. So, you know, we have a smart grid,
you also need smart people in order to use those grids, and
that speaks to the issue of capacity building and energy
literacy, which, of course, speaking as an educator, I am
really trying to present to all the authorities and
policymakers on that.
The Chairman. Senator Cantwell?
Senator Cantwell. Thank you, Madam Chair. Ms. Kia'aina,
this issue of financing or just where we are with current
programs and gaps, you obviously see this issue from the
perspective of the assistance provider, and you see what these
individuals are requesting. You know what we can and cannot do.
Do you have specific ideas about what you think we should do to
improve that?
Ms. Kia'aina. Well, the easiest answer, of course, is for
our energy program of $3 million, it would be nice to see an
increase not only just to help in the implementation of all of
the energy plans, but to take into account Puerto Rico.
Apart from our direct funding for energy initiatives, we
actually tap from our other programs right now maintenance
assistance, which is only a $1 million program. We provide
technical expertise, apprenticeship programs and staff
training. We also take money from our general technical
assistance program, as well as our capital improvement
projects. So what we are doing is pulling from other areas that
are already stretched thin.
I would also say that with regard to the Department of
Energy's involvement, whether it be the energy as a whole or
NREL, if there is increased funding to that Department, I ask
that it specifically by designated for the U.S. territories and
Puerto Rico because very often other agencies put it in the
national pot, and the territories are unable to compete. The
Office of Insular Affairs is one of the only unique programs in
the Federal Executive Branch that actually has the territories
competing for a set pot of funding.
So absolutely increased funding would help. I believe that
our energy program is the best return on investment for our
entire program, and helping the islands will not just help in
energy, but the totality of their economy.
Senator Cantwell. On this point about empowering them to
help secure financing, do you see solutions in these individual
territories or states that you think are just a matter of
whether they can be deployed?
Ms. Kia'aina. You know, that is a very difficult question
to answer because our mission is the overall Federal
relationship with the territories. So while we are talking
about energy, I believe that our government's failure to help
in the overall economic conditions of each of the insular areas
would be hurtful to energy initiatives because they are all
intertwined. For example, if a government does not have enough
revenues to fund its portion of energy initiatives, then the
burden will transfer to the Federal Government. So for my role,
I have a dual purpose. I not only help on energy initiatives,
but I help on the overall front on a multitude: health,
education.
Senator Cantwell. Which I think to your point then, says
you are uniquely qualified. I do not know if you have
quantified that in a study, the analysis of the lack of
investment in energy, then the consequences, cost, and expense
to the U.S. Government because we do not.
Ms. Kia'aina. That is correct.
Senator Cantwell. So if you have any data on that, we would
love to see it.
Ms. Kia'aina. Thank you so much. We will followup with
that, Senator.
Senator Cantwell. I did not mean to cut you off, but I had
forgotten that your position was so broad. You were covering
the consequences of lack of investment as well, so, if there
was anything you wanted to add about how we should look at
financing?
Ms. Kia'aina. Financing for me is making the territorial
governments efficient so that they could derive enough revenues
to help with funding their local government. It is promoting
economic opportunity so that their private sector could also
help. Part of our mission is also quality of life issues to
ensure that the health, education, and natural resources are
protected.
Our mission at OIA is formidable. We work across the
Executive Branch with other agencies, but part of the
challenge, quite frankly, is that we always get the answer from
every agency that if we do not provide funding, whether it be
for travel, or for detailees, or for money to do studies, for
example, GDP. We have to give the Department of Commerce money
to do GDP.
So in short, the OIA is being used as a funding source for
what the Federal Government in its totality should be doing. I
myself believe it is unfair. Some of it is statutory in nature.
It is only inclusive of the 50 states, and sometimes it is not.
It is the agencies that are telling us they will not do this
until we give them money. The GDP numbers, for example, in the
totality of the economy is nearly $1 million, and that pot is
taken out of our $50 million Technical Assistance Program, and
that is money that could be used for energy initiatives.
Senator Cantwell. Thank you for that illumination. I am not
sure I wanted to hear that, but nevertheless, I am glad to
understand it. Just mark me down as somebody who believes in
flat organizational structures. I think that an information age
is about empowering people at the lowest level, not a hierarchy
bureaucracy all the way from Washington, DC. trying to tell
somebody how to implement solutions. That is not going to work.
I think we see that in Puerto Rico at the moment, and it is not
going to be successful. So I think we need to rethink some of
these issues. Thank you.
Ms. Kia'aina. Thank you.
The Chairman. Senator Hirono?
Senator Hirono. Thank you, Madam Chair. Ms. Kia'aina, I am
glad that you mentioned our country's responsibility to do more
to invest in the territories and to help create more economic
opportunities there, because it is all interconnected. I know
that your mission also incorporates the concerns under the
compact of free association. Since that has been brought up, I
did want to make the point that I do not think that our country
is meeting its obligations under our compacts, and that this is
something that the State of Hawaii as well as Guam and other
impacted states because of these compacts, that we need to do a
lot more to provide resources to states such as Hawaii, and
places such as Guam, Arkansas probably.
The impact of compact migrants in our states is large, and
we do not provide enough resources to help a state like Hawaii,
as I mentioned, to meet our country's obligations toward our
compact migrants. So I did want to take the time to mention
that.
While I have you, Ms. Kia'aina, has the Department of
Interior applied any of the lessons that were learned from
DOE's planning and technical assistance in developing the
Hawaii Clean Energy Initiative in Interior's efforts to assist
the U.S. territories in their energy planning efforts? Perhaps
you could talk a little bit about those lessons learned that
enabled you to work with the territories?
Ms. Kia'aina. Sure. If you do not mind, I would like to
defer that question to our NREL liaison. NREL falls under the
Department of Energy, and so our whole direction for our energy
planning process is provided by NREL. Recently we have reached
out directly to the U.S. Department of Energy because they also
have their own resources. They have an Office of Energy
Efficiency, and that was the division that I spoke to with
regard to the chairwoman. There seems to be a disconnect right
now with regard to what the Department has done for Puerto
Rico, and we will followup on that.
Scott, could you please answer that question?
Mr. Haase: Thank you. Scott Haase. I am a senior program
manager with the National Renewable Energy Laboratory, and I
manage our relationship with the Department of the Interior.
So the team that worked on the HCI, EDIN, and the
territorial work, we all work together. It is many of the same
people that have been working across these island communities.
So there have been significant lessons learned that have
carried forward throughout from technical assistance, the
planning side, looking at financing options and mechanisms. So,
yes, there has been a great deal of cross-fertilization.
Senator Hirono. Well, Mr. Hodge, I note that the Virgin
Islands have been able to meet its energy reduction goals much
more quickly than anticipated. In 2011 you had a goal of 60
percent reduction of fossil fuel, and by 2013 you had already
reached a 20 percent reduction. How did you do that?
Mr. Hodge. We aggressively sought for diversification of
our resources. We issued some RFPs for renewable energy, and
the first one was a broad RFP for any kind of technology. That
one was failed, so we found that more concentrated requests
would be better served for our needs. So we did one for solar,
and we received some really good bids. We had assistance from
NREL and DOE in the evaluation of such, and we received eight
megawatts of grid-tied solar on the grid right now from that
process, and six more soon to come.
We also had an aggressive net metering program. I cannot
say that I think all aspects of the program are in the best
interest of all rate payers, but it has served the purpose of
jump starting the program. And we do have about 50 megawatts of
net metering on the grid right now, so between both of them we
are 23 percent of our peak demand. So those two have done that,
but we also have, like I said, six megawatts of solar in the
wings that have already been signed, PPAs, and seven megawatts
of biofuel that have been signed, as well as we are negotiating
about seven to ten megawatts of wind. So we are pretty much on
the right path of getting to our goals.
Part of the 60 percent is energy efficiency, and we have
done some advances in that arena as well. We definitely--you
know, I guess being that I sit on some positions in the region
in the Caribbean and whatnot, I see a lot of studies and a lot
of examinations of what can be done. To finally have somewhere
and it be ours that have the actual projects built, shoveling
dirt, construction on the way, and almost complete is something
that we need to see more of rather than just the studies of
what we can do, and spend a lot of money for those studies.
Senator Hirono. Yes, hear, hear. Thank you, Madam Chair.
The Chairman. Ms. Kohler, we talk a lot about the price of
energy, and we talk about per kilowatt hour, but we also have
the issue of heating. Can you speak to what you see as perhaps
some of the more innovative approaches to how we can deal with
space heat and the ways that the cost of space heating can be
brought down in some of the villages that are part of your
oversight with AVEC?
Ms. Kohler. Thank you, Chairwoman Murkowski. Space heat is
the primary consumer of BTUs at this particular point in time
and typically represents about three-quarters of the energy
consumption in a home or a business. So obviously it is a very
critical need to reduce that reliance.
In terms of alternatives to diesel fuel, we do not have a
lot of biomass in the State of Alaska. In parts of Alaska, of
course, is that you have got these beautiful forested sections
that must yield a lot of biomass, but that is not true in
Village Alaska. If there is any wood in the region at all, it
is typically just driftwood that is floating down the rivers
from more biomass intense communities. So that does not become
a very major alternative.
What we have seen happen is very high efficiency heating
systems going on where typically you may get something in the
order of 92 to 95 percent efficiency from a Toyostove, laser
electric stove. Extensive efforts at weatherization of homes
and businesses. We have actually partnered, we were able to get
a very modest $200,000 from USDA for Rural Business Enterprise
grants, and we have actually put together a commercial energy
audit program because we believe that there are efficiencies of
30-plus percent to be gained in terms of the BTU content of
space heating. That has moved ahead, and we have got some
really good results from that that tell you what can be done to
conserve heat. We believe that heat consumption can be reduced
by a third or better just through energy efficiency and
conservation measures.
We also utilize waste heat, so we recover heat from our
diesel gensets. It is a very high priority for us to recover
that heat and to distribute it to typically public buildings
that are nearby the power plant. We are looking right now at
what we can do to recover wasted heat from exhaust systems.
That is 30 percent of the heat utilization of a genset. It
comes out of the exhaust system or is just wasted up there. So
we are looking to recover that as well, the objective being to
drive down the overall consumption of diesel in a specific
community.
There are some biomass combined heat and power projects
that are very much experimental, emerging technology. We do
have some of those installed across rural Alaska, and we are
hopeful that they are going to yield some good results.
We are also looking at heat pumps. That typically, though,
is really more viable in the more temperate parts of Alaska, so
in south central. I am sure you are aware of the seawater heat
pump system that they have in Seward. That is a technology that
is potentially transferable. I believe that heat pump
technology is progressing rapidly. I think we are going to see
more air-to-air heat conversion where you can utilize recycled
heat within a building.
But those are all the emerging technologies, and those
emerging technologies have to be carefully fostered for them to
develop into something that is commercially viable across a
broad scale. Once they are commercially viable, the cost
becomes much more affordable, and then they can be deployed
much more ubiquitously.
The Chairman. Yes. I was out in Kwigillingok and was able
to celebrate with the community there. I think it was either
their first or their second day of being completely diesel
free. They had three wind turbines, and the wind was kicking
up. They had a little battery storage unit that was not much to
speak of in terms of size, and then they had--I believe there
were 25 different clay heating stoves within the homes, and you
go inside roasty toasty.
But you think about just this little microcosm out there in
an area where your costs up to this point are almost
prohibitive for sustainability of a village, and you see what
they are doing. I was in Egegik last week where they are
putting in a run of river hydrokinetic turbine. It is going to
be in the river. It should be in right now. It was in last year
for a brief moment in time.
Again, a private entity is making this investment and
realized that they needed to reconfigure. They went out and
adjusted it. It is going to be back in the water and plugged
into Egegik by the 15th, so that is just in a few days. You
combine that with the five wind turbines that they have, the
solar panels that they have, and, again, a sustainable
community where they have struggled for so many years.
Mr. Hodge, you mentioned Kodiak. Kodiak is an amazing
example of how you can utilize all of your renewable assets,
whether it is the wind, the hydro. They are blessed with great
hydro out there, but this is a major seaport, a major fishing
community. To know that they, too, can be off diesel is a
future for them that is really quite vibrant.
I think about all the technologies that we have being
considered in laboratories, and how you work to get them to
commercialization. And I say, okay, that is nice. We are
actually making things happen on the ground. I think that some
of our laboratories should be looking to what we are pioneering
because we have to, because the alternatives are just not
working for us. You cannot be a sustainable community if folks
cannot afford the heat or the electricity, so you figure it
out.
Sometimes it takes a little bit of duct tape. Sometimes it
takes begging for dollars from the state, and the tribes, and
the feds. But you piece it together with some really, really
bright innovative people and through your universities. We are
blessed with the University of Alaska, and I am sure we are
where you are, Dr. Underwood, in Guam. But we are really
pioneering this whole concept of microgrid, and Senator
Cantwell and I were just talking back here about we have got
this very generous eye to the rest of the world in how we can
help facilitate energy solutions in Africa and elsewhere.
Again, I think to a certain extent charity begins at home,
and I recognize that we definitely have energy needs that are
not being met yet, but with a little bit of assistance, and I
think looking to the experts, looking to the innovators, this
is where it is really happening. And so, I commend you all.
Mr. Glick, you have got a high standard up there to reach
Hawaii's renewable energy goals, how you are going to be
dealing with the distributed generation aspect of it and the
integration of all of your renewables. Many in the country are
looking to you for the example and the leadership. You are kind
of pioneering here, so we wish you well in that and are eager
to know how we can be helpful and be off assistance.
Meera, you mentioned resourcing and some of the programs
that are out there, and we have had a little bit of
conversation about that today. We have a Renewable Energy
Deployment Fund, a fund that I established through legislation
some years ago. It is a nice idea, but you have got to have the
dollars that are in it so that we can help our states, we can
help our territories, so we can help make a difference and
making sure that there is a level of sustainability that our
economies can thrive.
I appreciate the leadership from each of you and the
opportunity for you to share a little bit of the best practices
and some of the challenges. Hopefully you inspire not only
others, but you have learned from one another and you are going
to take some good ideas back to Guam, the Caribbean, Alaska,
Hawaii, and throughout all of our areas here.
With that, I thank you all, and we stand adjourned.
[Whereupon, at 11:44 a.m., the hearing was adjourned.]
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