```

[Senate Hearing 111-130]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 111-130
 
       RENEWABLE ENERGY PRODUCTION, STRATEGIES, AND TECHNOLOGIES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   TO

CONSIDER RENEWABLE ENERGY PRODUCTION, STRATEGIES, AND TECHNOLOGIES WITH 
                      REGARD TO RURAL COMMUNITIES

                               __________

                 CHENA HOT SPRINGS, AK, AUGUST 22, 2009

                       Printed for the use of the
               Committee on Energy and Natural Resources

                  U.S. GOVERNMENT PRINTING OFFICE
53-003                    WASHINGTON : 2009
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20402-0001

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Dodson, Jim, President & CEO, Fairbanks Economic Development 
  Corporation, Fairbanks, AK.....................................    44
Donatelli, Barbara, Senior Vice President, Administration and 
  Government Relations, Cook Inlet Region Inc., Anchorage, AK....    39
Haagenson, Steve, Executive Director, Alaska Energy Authority, 
  and Statewide Energy Coordinator, Anchorage, AK................    10
Hirsch, Brian, Senior Project Leader, Alaska National Renewable 
  Energy Laboratory, Chena Hot Springs, AK.......................     5
Holdmann, Gwen, Director, Alaska Center for Energy and Power, 
  University of Alaska, Fairbanks, AK............................    16
Johnson, D. Douglas, Director of Projects, ORPC Alaska, LLC, 
  Anchorage, AK..................................................    49
Karl, Bernie, Proprietor, Chena Hot Springs Resort and Geothermal 
  Power Generation Facility, Chena Hot Springs, AK...............    36
Meiners, Dennis, CEO, Intelligent Energy Systems, Anchorage, AK..    52
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     1
Rose, Chris, Executive Director, Renewable Energy Alaska Project 
  (REAP), Chena Hot Springs, AK..................................    20

                                APPENDIX

Responses to additional questions................................    63

    [Due to the large amount of materials submitted, additional 
documents and statements have been retained in committee files.]

       RENEWABLE ENERGY PRODUCTION, STRATEGIES, AND TECHNOLOGIES

                              ----------                              

                        SATURDAY AUGUST 22, 2009

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                              Chena Hot Springs, AK
    The committee met, pursuant to notice, at 10:22 a.m. at 
Chena Hot Springs Resort, Milepost 56.5, Chena Hot Springs 
Road, Hon. Lisa Murkowski presiding.

  OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM 
                             ALASKA

    Senator Murkowski. All right. Good morning. We will call to 
order this hearing, this field hearing of the Senate Energy and 
Natural Resources Committee. The hearing this morning is 
concerning the potential importance of renewable energy power 
sources to meet our Nation's energy needs.
    It's wonderful to be here at Chena Hot Springs. It's 
wonderful to be outside, even if we are in a tent, but being 
here on a Saturday morning on a glorious Interior day is 
terrific.
    What we will focus on today is the importance of renewable 
energy power sources, as I say, to meet our Nation's energy 
needs, what types of technology we should be working to foster, 
what financial assistance may be needed from Congress to make 
these differing types of energy expand nationwide. Of course, 
of particular interest at this hearing is the use of renewable 
energy in high-cost rural areas.
    Before I move further into my opening comments, I want to 
recognize a few individuals. First, my colleague, Senator 
Stevens, has joined us here this weekend. Senator Stevens has 
long been a leader in advancing energy issues in this State, 
and I'm delighted that he is with us today. We have 
Representative Paul Seaton from Homer who is with us. We also 
have Representative John Harris--actually Speaker John Harris 
has joined us. As others come into the room, I'll hopefully be 
able to acknowledge them as well.
    We know that renewable energy has been a topic, a very 
popular topic, in recent years in Congress. Back in 2005 we 
passed the Energy Policy Act. We provided in that act a host of 
research and development grants and tax aid for renewables. 
Then in 2007, in the Energy Independence and Security Act, we 
went even further, providing more aid for geothermal and for 
ocean energy projects, and earlier this year we extended the 
renewable tax credits for a number of years. This winter the 
Obama administration suggested that this country should be 
spending $15 billion a year to expand renewable energy 
production.
    We know that we've got a long ways to go when it comes to 
furthering the use of renewal energy. Petroleum last year 
accounted for 39 percent of our total energy needs, natural gas 
accounted for 23 percent, coal 22 percent, and nuclear power 
was at 8 percent. All renewables together accounted for just 7 
percent of our Nation's total energy production, and what we 
think of as new renewable, which is the wind, the solar, the 
geothermal, and new forms of biomass, this is just at about 3 
percent. So we've got a long ways to go.
    But it is a real improvement in the past 5 years. Since 
2003 we've seen wind energy generation triple, up above 1 
percent of total energy generation. Biomass still leads all 
renewables, accounting for 53 percent of renewable energy with 
hydropower in second place at 36 percent. Wind and geothermal 
are holding in there at about 5 percent, solar electricity 
accounts for 1 percent of renewable energy, and ocean marine 
energy development is barely a rounding error at this point in 
time.
    But as Alaskans we know that renewable energy offers great 
potential in this State, where we see--particularly during the 
winter, our electricity from diesel generation costing about--
an average of about 65 cents per kilowatt hour. I was in Newtok 
yesterday. They're sitting at about 85 cents a kilowatt hour. 
Given those prices, anything that supports free fuel may 
produce real cost savings, if the capital construction costs 
can be financed and can be controlled.
    About 40 percent of the State might benefit from geothermal 
energy, either shallow vent geothermal, or the future enhanced 
geothermal systems that are now under study.
    Right now about 24 percent of our State's total electricity 
comes from hydropower. There's about 28 hydroprojects that are 
currently producing electricity statewide. But we've got about 
another 250 projects that are already identified sites for 
hydroelectric generation from lake taps to water diversion from 
streams and rivers.
    We lead the Nation here in Alaska in the amount of power 
that we could gain from ocean marine hydrokinetic projects, 
using the waves, using the currents to produce our power. Just 
the State's southern coast theoretically could produce 1,250 
terawatts of power a year. This is 300 times more power than 
Alaskans use each year.
    We also lead the Nation here in Alaska in traditional per 
capita biomass. Alaskans are burning about 100,000 cords of 
firewood each year for space heat. The State is already burning 
8 million gallons of fish oil a year down in Kodiak to power 
boilers to dry fish meal, and using some of that for 
electricity generation.
    We generate 650,000 tons of garbage a year, which Fairbanks 
is already planning to convert into energy. Anchorage is 
underway on generating 2.5 megawatts of electricity from 
methane gas produced by the Anchorage landfill. This is enough 
to power 2,500 homes. None of these forms of biomass take into 
account the 9.5 million acres of timber lands in the Tongass 
National Forest in the Southeast, or the lands and timber lands 
in the Chugach National Forest down in Southcentral.
    We all know about our enormous wind potential here in the 
State. Kotzebue has 17 wind turbines that are currently 
producing about 8 percent of the community's power. There's 
more wind turbines already erected in dozens of villages in 
rural Alaska. Most of southern and western Alaska possess the 
best wind potential in the whole country. We've got the Fire 
Island wind farm that's on the threshold of construction in 
Anchorage, there are good wind sites south of Fairbanks, and 
AVEC, the Alaska Village Electric Co-op hopes to install more 
than 50 turbines in 36 rural villages, if they can find the 
money, it's always about the money. But the plan is out there.
    All of these sites, particularly the large geothermal sites 
in the Aleutians and the hydro sites, offer the possibility of 
using renewable energy to generate hydrogen fuel or ammonia 
fuel that hopefully, someday, we could export, like we export 
our oil today, to fuel Alaska's economy of the future.
    Now, this hearing is meant to focus on the renewables, to 
look at what the development can mean for the State, and 
especially to look at the very innovative ways that technology 
can be used to generate renewable energy and energy 
efficiencies that will ultimately lower consumers' costs.
    You know, I mentioned the high prices that we're paying. 
When we think about what happened last year when Alaska as a 
State--actually the country as a whole, but more particularly 
the remote villages just got nailed with the high prices of 
fuel, and, you know, we don't have a lot of margin for error 
there.
    We've had congressional hearings back in Washington DC. 
Some of you have had an opportunity to speak at them. The 
congressional hearings are a little bit different breed than 
what you may have experienced if you have gone down to Juneau. 
Congressional hearings almost never permit unlimited verbal 
testimony, although someone can submit written testimony for 
the hearing record. I'll give you the address later if you 
would like to submit some testimony if what you hear today 
prompts something that you would like to submit.
    Today at the hearing we've got two panels of witnesses 
intended to provide a host of information. The witnesses will 
cover an overview of renewables, their need and potential, and 
what the Federal Government should be doing to increase their 
energy generation. I expect we're going to hear some innovative 
suggestions. I hope we will get some innovative suggestions for 
the technology in the future, and perhaps better information 
than what we get in Washington for how renewables can be 
harnessed to generate the power while we're producing less 
carbon.
    We have a court reporter here today, and everything that is 
said will be part of the record to be taken back to DC, and 
this testimony from the hearing will be made available to other 
Senators on the Energy Committee hearing. So the good ideas 
that are presented today will be reviewed and studied by the 
Senate members and staff. So I'm hopeful that this hearing will 
be a useful springboard to advance renewable energy 
development, both here in Alaska and nationwide.
    So hopefully, we're counting on it being a good sounding 
board to hear what we in Congress should be doing when it comes 
to both a policy and a financial aid standpoint to help 
renewable energy development.
    The sites today--when I spoke with Senator Jeff Bingaman, 
who is the chairman of the Energy Committee, and indicated that 
we wanted to hold this field hearing at the Chena Energy Fair--
we indicated that this was the perfect place to do it. Chena is 
the first site in the country, first site in the country, to 
sport a working low-temperature geothermal power plant. As you 
know, the plant is powering the PA system here this afternoon 
and everything else from the ice museum's chiller system to the 
greenhouse fans and lights.
    Then later this afternoon I will be participating, as I'm 
sure many of you will, in the christening of the first truly 
mobile, self-contained geothermal power plant. It's been built 
here, and it's awaiting field testing in Florida.
    The innovations here at Chena that have been developed by 
Bernie Karl, who will be one of our witnesses on the second 
panel, and those who have helped him, are truly an inspiration 
for a host of renewable projects that are under consideration 
throughout the State. Whether it's the Fire Island wind project 
or Mount Spurr or Naknek, Manley Hot Springs, or Atukan, 
geothermal projects. Whether it's the hydroprojects that we're 
talking about, Lake Chakachamna, Susitna, the Grant Lake 
hydropower near Dillingham, we've got Thayer Creek down in 
Angoon. There's so much out there.
    So I'm hopeful that with this hearing and what we gather 
today, we're going to be moving toward the day when there are 
the resources at the Federal, State, and local level to make 
these projects proceed. Later this afternoon at the energy 
fair, I'll talk a little bit more about what the Federal aid is 
and what's out there and available to further renewables. But 
right now I would like to hear from our witnesses about what 
more we should be doing to spur our renewable power generation, 
where we should be focusing those limited resources.
    So today, this morning, we have on our first panel Mr. 
Brian Hirsch. He's the senior project leader in Alaska for the 
U.S. Department of Energy's National Renewable Energy Lab. We 
also have a gentleman that is familiar to so many in the energy 
world, Steve Haagenson, who's the director of the Alaska Energy 
Authority. We have Gwen Holdman. Gwen has taken me around Chena 
here numerous occasions explaining all the wonders of what goes 
on. Gwen is now the director of the Alaska Center for Energy 
and Power at the University of Alaska Fairbanks. We also have 
Chris Rose. Chris has truly been a leader in renewable energy. 
He's the executive director of the Renewable Energy Alaska 
Project.
    So, ladies and gentlemen, it's a pleasure to welcome you 
here today. Without further adieu, why don't we start with you, 
Mr. Hirsch, and just go down the line. We'd ask you to try to 
limit your comments to about 5 minutes. Your full written 
statement will be included as part of the record. So if you 
want to summarize or add on anything, we'd certainly appreciate 
it. But welcome to you.

   STATEMENT OF BRIAN HIRSCH, SENIOR PROJECT LEADER, ALASKA 
  NATIONAL RENEWABLE ENERGY LABORATORY, CHENA HOT SPRINGS, AK

    Mr. Hirsch. Thank you, Senator. Thanks for the opportunity 
to discuss renewable energy technology and development, 
especially as it pertains to rural energy in Alaska, and the 
U.S. Department of Energy's involvement in these issues.
    As you stated, I am Brian Hirsch, on assignment here in 
Alaska with the National Renewable Energy Laboratory, which is 
the U.S. Department of Energy's primary National Laboratory for 
research and development on energy efficiency and renewable 
energy issues.
    In recent years DOE and NREL has been called upon to 
provide on location technical assistance and support to State 
and local entities, especially in locations like Alaska where 
there's high costs, complexities, and challenges around 
logistics and rugged climates.
    We face many challenges here in providing energy for the 
State and the Nation. My testimony here will look primarily at 
what we've been able to accomplish, and challenges and 
opportunities for the future.
    Alaska's well known for our substantial fossil fuel 
resources. We are less well known for our renewable energy 
opportunities, but they are equally abundant. We believe that 
with proper development, they can support vibrant communities, 
help the environment, and a prosperous future. We need look no 
further than Chena Hot Springs, as you mentioned.
    The U.S. Department of Energy has been involved very much 
with everything from the very initial wells and development of 
the lowest temperature electricity producing geothermal systems 
here, as well as the mobile geothermal system that will be 
unveiled today, and an experimental 3,000 foot well that is 
also looking at enhanced geothermal production that may have 
broader application throughout Alaska and the country.
    As you mentioned, Alaska has substantial tidal and wave 
potential. The Electric Power and Research Institute estimates 
that Alaska has 80 percent of tidal and 50 percent of wave 
potential for the entire country. Just harvesting a small 
portion of that would more than meet Alaska's needs and allow 
us to export and support energy needs in the Lower 48 and 
elsewhere and become a renewable energy exporting State, as 
well as a fossil fuel exporting State.
    Challenges associated with that have to do with converting 
the energy, delivering it to shore, and where it's needed, and 
storing it for the time of year. Because of our extreme 
seasonality, Alaska is the most challenged of any State in the 
country on these issues. These are the areas of our focus.
    So, for example, we've been partnering with the Denali 
Commission on an emerging energy technology grant program that 
both the National Renewable Energy Laboratory and the National 
Energy Technology Laboratory combined establishing the Arctic 
Energy Office is on the review committee, and we are targeting 
experimental technologies that really have the most potential 
benefit for Alaska around these storage and delivery issues.
    Alaska has considerable wind resources, as you mentioned. 
The U.S. Department of Energy has a cost share with the State 
of Alaska on an anemometer loan program that can measure the 
wind resources, and high-resolution wind maps to identify and 
pinpoint where those wind resources are. We've identified over 
100 communities, primarily on the coastal areas, that have 
commercially developable wind resource, or cost effective wind 
resource.
    Over the past several years, through congressionally 
directed projects, we have supported initiatives around in 
Kotzebue, on Saint Paul Island, in Selawik and other areas with 
the utilities in those communities. DOE's and NREL's early 
support of these projects help to answer important questions 
about wind turbine performance in cold weather, constructing 
foundations in permafrost, and integrating wind power into 
local electric grids.
    Because of these early and sustained efforts, Alaska is now 
widely recognized as a world leader in wind-diesel technology. 
We are working closely with the University of Alaska Fairbanks, 
Alaska Center for Energy and Power to help establish what's 
called the Wind-Diesel Application Center. I suspect you may 
hear a little bit more about that on this panel later. There's 
also several community scale wind energy projects now operating 
or under construction throughout the State as a result of some 
of these early efforts.
    DOE's Tribal Energy Program is quite actively fostering 
solutions as well. For example, one of the projects we thought 
of is a comprehensive biomass effort in the village of Fort 
Yukon with the Council of Athabascan Tribal Governments. That 
project is looking at everything from forest management and 
local business development to diesel fuel substitution for 
district heating, and eventually electricity production. Which, 
electricity production is really a challenge still. Heating is 
a lot easier to do, and so really the cutting edge of the 
technology is using biomass for these combined heat and power 
units. So that's another area of focus that once we figure that 
out will be widely transferrable to other parts of the State, 
and likely the Nation.
    Other Tribal Energy Program successes include photovoltaic 
or solar electric system installations in Arctic Village, the 
furthest north tribally owned tracking array in the world--
solar tracking array in the world in Venetie Village and Lime 
Village. I was personally involved in some of the installations 
prior to my work here at NREL in the Arctic Village and Venetie 
installations. DOE was a fundamental and important partner in 
both installation and some of the monitoring and distribution 
of the information and performance from those systems.
    Like early wind projects, installing solar panels in far 
northern regions, we've been able to answer questions about how 
well the solar panels perform in cold weather. What we've 
found, among other things, is that cold weather actually 
improves performance of the solar panels because there's less 
resistance in the panel itself. We haven't quite figured out 
how to get the solar panels to produce energy in the dark yet. 
We're working on that one. I think that's way out there in the 
future. But what we realize more so, seriously, is that 
obviously solar panels are not going to be a year-round 
solution. But for up to 8 months a year, they substantially 
improve the energy portfolio in many of the rural areas.
    In-stream hydrokinetic is another very promising 
technology. Also in my former life, prior to working at NREL, I 
was involved in the installation of the first in-stream 
hydrokinetic turbine in the country on the Yukon River in the 
Village of Ruby. There is an exact replica of the turbine, I 
noticed, out here for people to observe at the Energy Fair here 
today. So that was with the Yukon River Intertribal Watershed 
Council Consortium of 70 tribes and the First Nations in Alaska 
and Canada, along with the Ruby Tribal Council and the city of 
Ruby. There is tremendous potential of taping of power and 
moving water in Alaska's streams and rivers.
    The Alaska SeaLife Center in Seward is researching the use 
of ocean water as a heat source for heat pumps. This is another 
exciting and innovative project that has wide-scale potential 
for replication throughout the country--throughout the State 
and country in coastal areas.
    Emerging opportunity that probably is not widely recognized 
is improved energy efficiency with marine vessels. Alaska 
produces over 50 percent of the Nation's seafood, and is highly 
dependent on long-distance shipping for harvesting, importing 
and exporting, which adds significant costs to all goods that 
come from outside. Some new diesel engines, modern controls, 
and operational strategies such as replacing hydraulics with 
electric motors have the potential to save between 10 and 40 
percent of existing fuel. There's so many goods that come here 
from outside that we don't quite realize the hidden costs of 
some of that improved energy efficiency.
    Along those lines we're also looking at electric vehicles, 
in particular in the rural areas, for things such as four-
wheelers and snow machines. There's also an effort on designing 
site and culturally appropriate housing. There's a project that 
the Cold Climate Housing Research is doing--Cold Climate 
Housing Research Center, excuse me, is doing through their 
Northern Shelters Program--that is in Anaktuvuk Pass. That is 
combining traditional Inupiat design principles with modern 
technologies to create a low-cost, net zero energy home that is 
also--the process at least is widely applicable to elsewhere.
    My testimony is primarily focused on rural areas, but DOE 
and NREL have also been active in the Railbelt with our 
regional integrated resource planning effort and looking at 
some of those projects that you mentioned earlier, Senator, the 
Fire Island wind project and Mount Spur geothermal and Lake 
Chakachamma and Susitna hydroprojects. We're also working with 
developers and industry in Cook Inlet and Kachemak Bay looking 
at some tidal resource potential for the large urban areas of 
Alaska.
    So as we prepare for energy efficiency and renewable energy 
driven economic transition, we're also looking at work force 
development issues, and trying to nurture green jobs wherever 
possible. Also looking at smart grids which have tremendous 
potential in Alaska because the grid is of a size that we can 
actually manage. Some of the issues down in the Lower 48 are so 
large that it's very difficult to even run projects and say if 
that's going to actually have a real impact in a large scale, 
where here in Alaska from island communities to just small 
remote areas, there's much more of an opportunity to do so.
    Finally, I would just draw your attention to DOE's 
activities involving the administration of the American 
Recovery and Reinvestment Act. There's $18 million of 
Weatherization Systems Program, $28 million of the State Energy 
Program, $14 million of the Energy Efficiency and Conservation 
Block Grant Program, as well as another $12 million that's 
directly going to Tribal and--Tribes and Native Corporations 
through the Energy Efficiency and Conservation Block Grant 
Program, totaling over $72 million that DOE in distributing to 
the State and trying to work in partnership with the state to 
effectively use that money, or at least deliver it to them, and 
then it's up to them. We're very happy with how that's playing 
out.
    So I thank you very much for this opportunity to discuss 
DOE's and NREL's activities in the state, and I welcome any 
questions you have.
    [The prepared statement of Mr. Hirsch follows:]

   Prepared Statement of Brian Hirsch, Senior Project Leader, Alaska 
      National Renewable Energy Laboratory, Chena Hot Springs, AK
    Thank you, Senator, for this opportunity to discuss the status of 
renewable energy technology and development, especially as it pertains 
to rural Alaska, and the US Department of Energy's involvement in these 
issues. I am Brian Hirsch, on assignment here in Alaska from the 
National Renewable Energy Laboratory (NREL). NREL is the U.S. 
Department of Energy's (DOE) primary National Laboratory for research 
and development of renewable energy and energy efficiency technologies. 
My work here is supported by the DOE's Energy Efficiency and Renewable 
Energy Office, through NREL's Deployment and Industrial Partnerships 
division. In recent years, DOE and NREL have been called upon to 
provide ``on location'' technical support and assistance at State and 
local levels, especially in locations like Alaska, where there is a 
clear sense of urgency to accelerate the deployment of more efficient 
and renewable energy technologies.
    We face many challenges today in providing the Nation the energy it 
needs while protecting our environment. These challenges are even more 
difficult when we factor in the costs and complexities of meeting the 
energy needs of rural and remote communities. Much work is being done 
to adapt the most appropriate energy efficiency and renewable energy 
technologies to serve the needs of remote areas of Alaska. My testimony 
today will look at what we have been able to accomplish in this regard, 
as well as challenges and opportunities for the future.
    Alaska is well known for its substantial fossil fuel resources, 
such as oil, gas, and coal. Alaska's renewable energy potential is less 
widely recognized, but equally abundant. Over the long term, there is 
tremendous potential for developing renewable energy that will support 
vibrant communities, a healthy environment and a prosperous economy.
    The Electric Power Research Institute (EPRI) estimates that Alaska 
holds possibly 80 percent of the tidal energy potential, and 50 percent 
of the wave energy potential, for the entire United States. Even just a 
small portion of this energy would be sufficient to power all of 
Alaska, and leave substantial excess power for export. However, there 
are difficult and costly technical challenges to generating this power, 
moving it to where there is demand, and storing it for when it is most 
needed.
    Alaska also has considerable wind energy resources. Large areas of 
the State--primarily along the coasts--have Class 5 or greater wind 
regimes, a designation which qualifies them as potentially attractive 
sites for commercial wind power production. We know this because NREL's 
Wind Powering America (WPA) program has helped to fund an anemometer 
loan program and high-resolution wind resource maps, in partnership 
with the State of Alaska. This research has identified over 100 remote 
villages with a Class 5 or greater wind regime. NREL's WPA program has 
selected Alaska as a high-priority State, and has supported ongoing 
development of the Alaska Wind Working Group, through the Renewable 
Energy Alaska Project (REAP).
    Over the past several years, DOE Congressionally Directed Projects 
have supported innovative wind-diesel hybrid initiatives in Kotzebue, 
Selawik, and St. Paul Island, through utilities including Kotzebue 
Electric, the Alaska Village Electric Cooperative and TDX. DOE's and 
NREL's early support of these wind projects helped to answer questions 
about wind turbine performance in cold weather, constructing 
foundations in permafrost and integrating wind power into local 
electric grids.
    Because of this early and sustained effort, Alaska is now widely 
recognized as a leader in wind-diesel technology. This has led to, 
among other things, the establishment of the Wind-Diesel Application 
Center, or WiDAC, through the University of Alaska Fairbanks' Alaska 
Center for Energy and Power (ACEP). Several community-scale wind energy 
projects are now in operation or under construction throughout the 
State.
    DOE's Tribal Energy Programs have also been quite active in 
fostering renewable energy solutions for Alaskans. Support includes a 
comprehensive biomass project at Fort Yukon with the Council of 
Athabascan Tribal Governments, which addresses everything from diesel 
fuel substitution for district heating, and eventual electricity 
generation, to forest management and local business development. 
Lessons learned from this initiative could be transferrable to other 
communities and regions with significant biomass resources.
    Other Tribal Energy Program successes include the solar 
photovoltaic (PV) systems installed in Arctic Village, Venetie, and 
Lime Village. These ground-breaking solar initiatives, much like the 
early wind projects, are answering important questions about the 
performance of these solar electric systems in the rugged Alaskan 
climate.
    What we learned is that solar panels can actually perform up to 15 
percent better in cold weather. This is because there is less power 
loss due to heat, and there is more sunlight available due to 
reflection off of surrounding snow. Of course, in the dead of winter, 
there is essentially no light, and thus, no power production. So while 
solar power is not a complete solution for Alaska, it can be an 
important contribution to the power needs of many areas, for eight or 
more months a year.
    In-stream hydrokinetic turbines offer significant promise given the 
untapped potential of streams and rivers around the State. The Yukon 
River Inter-Tribal Watershed Council, a consortium of 70 Tribes and 
First Nations in Alaska and Canada, was the first to successfully 
install an in-stream hydrokinetic turbine in the United States. The 
system is deployed at Ruby, Alaska, in the Yukon River, and was 
completed in collaboration with the Ruby Tribal Council and the City of 
Ruby.
    Geothermal energy could likewise play a major role in the future of 
Alaska. Here at Chena Hot Springs is the lowest temperature, 
electricity-producing geothermal facility in the world. This represents 
an important advancement in the technology that, as it develops, could 
make geothermal energy a practical alternative to many more areas of 
the country that have good, though not ideal, geothermal potential. 
Both Chena's initial geothermal project and its adaptation for process 
water from oil and gas fields--projects being highlighted at the Energy 
Fair here today--have been funded in part by DOE.
    The Alaska SeaLife Center in Seward is researching the use of ocean 
water as a heat source for heat pumps. This is another exciting and 
innovative project that has potential for application throughout 
coastal Alaska as well as other coastal areas throughout the Nation.
    The Denali Commission is a longstanding supporter of rural energy 
projects, including wind turbines, energy efficiency, and a new 
Emerging Energy Technologies (EET) grant program. DOE's Arctic Energy 
Office, which combines the resources of NREL and the National Energy 
Technology Laboratory (NETL), is working closely with the Denali 
Commission on a new EET grant program, funded at almost $4 million, to 
select the best technology projects for rural Alaska.
    One emerging opportunity lies with energy efficiency in marine 
vessels. Alaska produces about 50 percent of the Nation's seafood and 
is highly dependent on long-distance shipping for importing and 
exporting, which adds significant costs to goods throughout the State. 
New diesel engines, modern controls, and operational strategies such as 
replacing hydraulics with electric motors, together have the potential 
to save from 10 percent to 40 percent of total fuel use. Similarly, we 
are exploring options for electric vehicles, including ATVs and snow 
machines, that are commonly used in rural villages, to increase 
efficiency and reduce use of fossil fuels.
    Designing site- and culturally-appropriate housing is another area 
where we can make great strides for energy efficiency and renewable 
energy. The Cold Climate Housing Research Center, through its 
Sustainable Northern Shelters program, is blending modern technology 
with traditional Inupiaq design principles in the design of an 
affordable net-zero energy home in Anaktuvuk Pass. While the Anaktuvuk 
Pass project is unique, this work can become a model for other 
residences and communities throughout Alaska and beyond.
    While my testimony thus far has focused on rural areas of the 
State, we have also been participating in the Railbelt Integrated 
Resource Planning process, which is looking at potential renewable 
energy projects with greater economies of scale. These include large 
potential renewable energy developments in the Railbelt, such as 
Susitna and Chakachamna hydro, Mt. Spurr geothermal, and Fire Island 
wind projects. We are also supporting proposed tidal development in 
Cook Inlet and Kachemak Bay.
    As we prepare for energy efficiency and renewable energy-driven 
economic transition, we have also begun to look at workforce 
development, career and technical training potential in both rural and 
urban Alaska. As we expand our work here, we must look at every turn as 
to how we can nurture more green jobs in the State.
    I should additionally note that DOE is closely involved in the 
administration of the American Recovery and Reinvestment Act, ensuring 
that funds are properly directed to the State, and that they have the 
most impact, especially to help meet the clean energy needs of Alaska. 
The State is in the process of receiving more than $18 million in 
Weatherization funds, more than $28 million for the State Energy 
Program, and almost $14 million through the Energy Efficiency and 
Conservation Block Grant Program. Alaska Native Villages and Regional 
Corporations are to receive an additional $12.2 million. In all, Alaska 
will receive more than $72.2 million through the American Recovery and 
Reinvestment Act.
    Finally, DOE has shown its increased support for EERE activities in 
Alaska through establishment of my current position, overseeing and 
providing leadership on many of the projects discussed above.
    Thank you for this opportunity to discuss the work that I, my 
organization, the National Renewable Energy Laboratory, and the U.S. 
Department of Energy, are doing on behalf of clean energy in Alaska. 
I'd be happy to answer any questions you may have.

    Senator Murkowski. Thank you, Dr. Hirsch.
    Mr. Haagenson. Welcome.

STATEMENT OF STEVE HAAGENSON, EXECUTIVE DIRECTOR, ALASKA ENERGY 
   AUTHORITY, AND STATEWIDE ENERGY COORDINATOR, ANCHORAGE, AK

    Mr. Haagenson. Thanks, Senator. Senator Murkowski and the 
Democratic staff, thanks for the opportunity to talk to you 
today about this interesting topic of energy. It seems to be 
taking up a lot of time and a lot of interest because it's 
really our survival.
    But my name is Steven Haagenson, and I'm the executive 
director of the Alaska Energy Authority, and also the statewide 
energy coordinator. I was appointed about a year and a half ago 
to look at energy and come up with an energy plan for Alaska. 
As I look at Alaska, I found that we're--in knowledge, we're 
truly blessed in Alaska. Along with that blessing comes a 
little bit of a curse. The curse we have, which makes us 
different than most every other State, are our long distances 
and our low usage. A small population that can--and the long 
distance to deliver energy can make almost any project 
uneconomic, and it can really stress out a lot of the economics 
throughout the whole industry.
    So as we looked at that, we came up with a plan that would 
actually address that. So we went out in Alaska and we asked 
them three questions. We went out to about 28 communities in 
Alaska, and we said, what resources do you know of that are 
available to make energy in your backyard because you eat, 
sleep, play, hunt, and fish here? The second question is, what 
don't you want us to use? The third question would be, why not? 
Those three questions gave us a lot of information--from 
Alaskans that know more about it than we would from--as a State 
perspective.
    Then also--and then we said, OK, let's determine how much 
energy they need. Because you need--before you start planning a 
power plant or any source of energy--you need to know what your 
need is. So we went through and identified the amount of energy 
that was consumed across Alaska in each community and put it 
into a data base. The data base also put it into perspective of 
what it would cost to make those resources, if they were 
available to them, and make energy out of them.
    In January 2009, we issued a report called Alaska Energy, A 
First Step Toward Energy Independence, and it's being used 
across Alaska today. Many communities are looking at it and 
using it as a resource to kind of say, well, this--I know I 
have this available now, so now how can I make it real? As we 
look at the study also, we went through and we developed a map. 
The map of our community so we can see what resources are 
available in each community. It's nice to see that there's wood 
in this area, but remember the curse of distance. If it's more 
than 20 miles away, you may not be able to afford to get it 
there.
    So we looked very specifically at every community and said, 
what's in their backyard? We have a map of that. We found out, 
a little bit to my surprise, that there are some places that 
only have one resource. If you are looking at the lower Yukon--
down in the YK Delta, they may only have wind. There is no 
other resource for them to use. If you look up in the upper 
Yukon, they may only have wood. So--and there's some of the 
places that have many blessings, many different resources.
    But when we start thinking about what would you do if you 
only had wind and we're trying to replace our electricity, our 
heat, and our transportation fuels? So we said, well, let's 
use--obviously use a wind turbine. So how can we make 
electricity--we can make electricity very typically today. 
There's some challenges on how much you can penetrate into the 
system with wind-diesel coordination. So we wanted to jump past 
that and go to 100 percent wind.
    As we deployed the wind, that makes a lot of sense, when 
the wind is blowing, you make lots of extra energy. Then we 
thought of--you know, naturally I thought of Chena Hot Springs, 
and we've made an artificial geothermal. The rest of the energy 
would go into a big tank. We're looking at storage medium right 
now. The tank would basically store hot water. That way when 
the wind doesn't blow--now you have a source of hot water to 
heat your community, and you would have a source of hot water 
to possibly, if you wanted to, to use an ORC or a Chena Chiller 
to make electricity when the wind isn't blowing.
    The question is, what's the economics of that? We hired a 
consultant to actually go through that, look at the 
efficiencies, look at the economics, look at cost of that, and 
we are working on developing that technology right now. It's in 
the letter. We're looking at every community in Alaska to see 
what resources they have and how we can deploy them.
    We started listening to Alaskans, and we've been talking to 
Alaskans about what they really want. A lot of them are just 
saying, tell me what you can do now. This is not about 10 to 20 
years from now. It's very tempting to get up and--you know, and 
come up with a plan out there and do a--come up with a great 
plan. I guess my analogy is if a person comes to you and 
they're starving, you give them a few corn seeds and say here, 
plant these, and by the time they grow, then you eat that, and 
then you'll be fine forever. That works great as long as you 
can survive until they grow.
    So that's, I think, the situation that Alaska is in right 
now. We need to have an immediate plan, a short-term plan, a 
mid-term plan, and a long-term plan. We're developing that. 
We're also adding a stretch goal or an aiming stake at coal to 
say where do we want to be in the 20- to 30- to 40-year plan. 
That simply put is to be 100 percent renewable for all of our 
electric and all of our heat and all of our transportation. It 
sounds like a lofty goal, but it's a stretch goal. I think 
Alaska has the resources to do it, if we have the courage to go 
down that path.
    With this plan, what we'll do is develop a resource map for 
each community based on the resources available to them. It 
will be given to the community so they can see if that's what 
they want to--if they--you know, because at the end of the day, 
they need to own this. This is not about coming up with a great 
plan--and we've had many brilliant plans in the past for 
energy. This is about Alaskans owning the plan and wanting to 
go down the path.
    At the end of the day, the best plan will fail if you don't 
have ownership across the State. So our next step is to go out 
to Alaska and say, here's what we see from our perspective from 
what we know about your resources in your backyard, then we can 
deploy it, and we'd like--this is what we see, so what you--
what do you want us to do in the plan, then we'll make it 
theirs.
    So let's look at the--let's talk about what these steps 
are. We have the immediate plan, and what can we do in the 
immediate? Right now the immediate stuff is really energy 
conservation and the efficiency increases, both supply and 
demand side. There's a lot of things we can do on the 
efficiency side. But energy efficiency and conservation are two 
different things, and, you know, I'm going to take some of the 
resources end of it.
    Energy efficiency is something you can--it will happen 
whether we think about it or not. If you buy your energy 
efficient refrigerator and you plug it in and you're using it, 
you don't have to think about saving energy. It's just going to 
save energy. If you get compact fluorescents, you're going to 
save energy. If you decide--if you walk out of here and decide 
to turn the lights off, right, that's a choice. When--in Alaska 
when it gets 40, 50, 60 below, people make different choices 
than when it's 60 above. So you can't really rely on that. So 
that's a choice. We have education needs that have to be done, 
and make sure they're using energy wisely. Then we'll figure 
out ways to use it more efficiently, and then we'll go down the 
path.
    As you see, the short-term solutions are really what we're 
doing today. There's just way more of it. It's wind-diesel 
applications, it's using wood that's available, it's using the 
small hydrokinetic devices we can install. There's a lot of 
things we can do today that are pretty much proven, mature 
technologies. If you get into the mid-term, then you start 
getting more risk in the technology. When you get farther out, 
you get into the--it's artificial geothermal. You get into 
storage conversion technologies that's risk; it's going to come 
up. So it gets fuzzier.
    We're going to try to give an aiming State goal so people 
can go down the path to understand what their long-term future 
will look like in Alaska. This report, and I'm scared to say 
this, but it's--hopefully we'll have this--we have a lot of 
work to do between now and then, but we're hoping to have these 
out by the end of November so we can get it to Alaskans and let 
people work on it and soak on it and own it. This report will 
also have a concept in there for financing the plan. Because 
just showing them a path doesn't help them. We need to come up 
with methods that will allow them to go down the path and make 
it real.
    The other thing that we have is to mitigate risk. We need 
to mitigate the risk because--like gaining knowledge. Right now 
we have questions like how fast do willows grow? If you're 
going to use willows as a resource, you better know if it's 
sustainable. Is the land available? Can you--and it may be 
great to have a forest. In some places if you don't have access 
to land, you're sunk. So all the different technologies, you 
have to understand what you're going to rely on, how it can 
move forward, and we'll be developing that as best we can. But 
that's when you--as you move into the future, we'll get more 
information to answer those questions and identify an effective 
path you want to continue down.
    So remember that the aiming State concept--I'm a hunter, 
you know, so we're going to aim our--so we're going to start 
studying this rifle end. We're going to get it on paper first, 
and we're going to analyze the bull's eye later on, but the 
first step is today is a start. I think we can study this to 
death. I'm not a studier, I'd rather sit there and do 
something. But I think we need to make--look at our money use 
wisely and spend it correctly, because we don't have unlimited 
money. We need to very carefully focus our mission, get it 
about right, in the right quadrant or so, and move down that 
path to success.
    So I'll be available for any questions at your convenience.
    [The prepared statement of Mr. Haagenson follows:]

  Prepared Statement of Steven Haagenson, Executive Director, Alaska 
   Energy Authority, and Statewide Energy Coordinator, Anchorage, AK
    Chairman Bingaman, Ranking Member Murkowski and members of the 
Committee, thank you for the opportunity to appear before you today.
    The people of the State of Alaska are truly blessed with an 
abundance of natural resources. Surrounding all these resources is a 
shroud of beauty that on its worst day is breathtaking. There are vast 
areas dotted with communities with beauty at every turn. From an energy 
perspective, Alaska's attributes can be characterized as both blessings 
and curses. We are truly blessed with abundant energy resources, and 
somewhat cursed with long distances and low usages, which can strain 
the economy of scales in delivery as resources are transported to their 
point of use.
    Alaskans have long known there are local resources that can be used 
to power Alaska, but have moved toward the ease and convenience of 
energy-dense hydrocarbon fuels. Each Alaskan had their own reasons for 
looking for alternative fuels, some driven by rising costs, while 
others identified with new phases such as sequestration or carbon-
footprint.
                             alaska energy
    In January 2009, the Alaska Energy Authority (AEA) published a 
report titled ``Alaska Energy-A first step toward energy 
independence.'' This guide is now being used by communities to review 
the available resources and to help them determine their least cost 
energy options. The guide is available on the Alaska Energy Authority 
website, www.akenergyauthority.org.
    Alaska Energy--A first step toward energy independence contains two 
main sections. The first section contains a 245 page narrative that 
provides a statewide background on energy in Alaska, current policy and 
planning efforts and issues, and discussion of the various technology 
options that may be available across the State. The second document is 
an 888 page technology screening tool that was developed to allow each 
community to review locally available resources and determine the most 
cost efficient energy options based on the delivered cost of energy to 
residents.
    For the first time, energy use in each community was determined for 
three major components: electricity, space heating, and transportation.
    In the spring and early summer of 2008, AEA engaged Alaskans 
through twenty-eight town hall meetings that were held throughout the 
State. Three questions were asked at these meetings: 1) What resources 
do you know of near your community, where you live, play, fish and hunt 
that could be used for energy? 2) What resource don't you want to see 
used? and 3) Why not? AEA used this information to develop a resources 
matrix for each community, showing the available energy resources. 
Potential resources include hydroelectric, in-stream hydro, wind, 
solar, tidal, wave, biomass, geothermal, municipal waste, natural gas, 
propane, coal, diesel, coal bed methane, nuclear, and technologies for 
gasification and Fischer-Tropsch liquids.
    Technology teams were formed for each resource and technology to 
identify available technologies that could be deployed to use the 
identified resources. People with passion and expertise were brought 
into the technology workgroups to help determine the most appropriate 
technology. Alaska Center for Energy and Power was brought in to help 
guide the technology discussion and help with the plan development.
    The Technology workgroups are currently using the acquired 
information on usage, resources and technologies to determine the 
capital costs, and operations and maintenance costs for each 
technology. The capital costs and O&M will be adjusted to each 
community through the use of factors developed by HMS Construction Cost 
Consultants.
    The net result is a focusing tool that provides each community with 
the least cost options for their electric, spacing heating and 
transportation. Prices will be based on a delivered cost that includes 
capital cost for infrastructure and alternative infrastructure that may 
be required for alternative fuel options. Operations and Maintenance 
costs and fixed energy costs were included to determine the delivered 
cost of energy to the community. The delivered cost number is intended 
to identify the real cost of current and alternative energy sources.
                    developing an alaska energy plan
    A resource map was constructed that indicated the available 
resources for each community. As would be expected, every resource is 
not available in each community. It was a surprise, however, that even 
with all the resources in Alaska, there are regions that have only one 
viable local resource for fuel. For example, western Alaska communities 
may only have wind, or the Upper Yukon may only have wood.
    Costs for wind energy are included in the report, but in the 
electric wind-diesel systems wind energy is limited to 20-30% due to 
control complexity and system operations. The other observation was 
that even with a 30% wind penetration, the remaining 70% of the 
electrical energy would come from diesel. As Senator Murkowski knows 
very well, diesel can be extremely expensive in rural Alaska, so we 
searched for solutions that use 100% wind for both electric and heat.
    Energy Storage and conversion become critical when intermittent 
resources may be unavailable for days, months or even years. Let's look 
at this further.
                         artificial geothermal
    Wind can provide electricity and heat, but what do we do when the 
wind isn't blowing? The key is to store energy when the wind blows so 
it can be used at a time when the wind stops. For years, water has been 
used for energy storage and transfer in geothermal applications. There 
may be many storage mediums but for this discussion we will use water.
    A large wind farm could provide electrical energy directly to the 
distribution system with the excess electrical wind energy being input 
and stored in the water tank.
    When the wind stops, the hot water would provide heat and could be 
used to make electricity through a binary phase turbine, similar to the 
Chena Chiller Organic Rankine Cycle (ORC) generator used at Chena Hot 
Springs. Stored energy could be augmented through other renewable 
resources such as solar, hydrokinetic or tidal, or other fuel resources 
such as diesel or wood.
                                storage
    Storage allows the use of a resource when the need exists but the 
resource may not be available.
    Tidal power may require storage for a day, where wind may require 
storage for weeks, and solar energy may require storage for a year. 
Sizing of the storage medium is critical to ensure adequate energy is 
stored and can be released when required. Energy loss, conversion 
efficiencies, expected discharge durations can all affect the sizing of 
the storage device.
    Alaska Center for Energy and Power (ACEP) is investigating energy 
storage technologies.
    Tidal power is very predictable in the one-day storage duration and 
would allow for smaller storage capacity. Wind would require larger 
storage capacity that would be based on the mean time between wind 
blows. Solar and hydrokinetic would require seasonal storage that may 
be required for up to one year. Seasonal storage would have the largest 
capacity and would need to store energy with minimal loss for these 
long periods.
    Cold Climate Housing Research Center (CCHRC) is looking at use of a 
large insulated thermal mass that would be heated in the summer time 
with abundant solar energy, and used as a thermal source for a heat 
pump to heat buildings in the winter. There may also be opportunities 
to use a heat pump to store the heat in the thermal mass in the summer 
time and extract it when needed in the winter months.
                           energy conversion
    The selection of a specific conversion technology is critical for 
extracting stored energy and converting it to usable energy, but 
reliability is also a critical factor. Skill levels required to operate 
the overall system must be maintained. In this manner, communities can 
strive to keep operations and maintenance costs at a minimum
                            community plans
    The Alaska Energy Authority is now developing for each community a 
draft plan that will deploy technologies and storage mediums for 
locally available fuels. In talking to Alaskans it is clear that they 
want a recommendation for today, and a technology path to follow for 
the long-term. Our energy plan for each community includes:

   Current resource usage levels;
   Immediate (0-1 year);
   Short-term (1-3 years);
   Mid-term (2-10 years);
   Long-term (5-15 years) and a;
   Stretch Goal or aiming stake of 100% renewable energy for 
        our electric and heat.

    We developed these community plan components in response to the 
commonly heard and pressing Alaskan question, ``What can I do now?'' In 
the immediate timeframe, conservation and efficiency increases are key. 
Many Alaskans have already improved demand-side efficiencies by 
installing compact fluorescent bulbs or participating in the Alaska 
Housing Finance Corporation's weatherization program. On the supply 
side, Rounds I and II of Alaska's Renewable Energy Fund are providing 
$125 million to approximately 100 renewable energy projects across 
Alaska.
    Short-term and mid-term solutions are achieved by deploying 
technologies that have short construction times, for example: wind-
diesel systems for electricity; wind-thermal systems or highly 
efficient, clean burning wood stoves for heat.
    Long-term solutions are achieved by using mature technologies, such 
as hydroelectric, or with emerging technologies. Hydroelectric has an 
extended timeframe for permitting and construction, and emerging 
technologies require additional information before recommending 
commercial application. It is important to begin evaluating emerging 
technologies today, in order that we understand the application when 
our decision to deploy is made.
    Once AEA has prepared the preliminary community plans, we will 
share the plans with utilities, native corporations and municipalities. 
Alaskans have expressed great interest in participating in their 
community plan development. Local participation is critical to the 
success of energy planning. Each community and region will identify 
their preferences and ultimately make the plan their own.
                           what we don't know
    There are several areas where gaps exist in the application of 
storage and conversion systems. As in all energy supplies the resource 
needs to be gathered, converted into transportable energy and delivered 
to the point of consumption.
    More research and information is required to fill the gaps in our 
existing knowledge base, such as:

   Justification of a deployment philosophy;
   Assessment of wind resources with on-site anemometers;
   Assessment of willow resources to determine growth rates;
   Determine sustainable renewable resource rates;
   Assess the resource potential for wave and tidal power;
   Develop technologies for capturing wave and tidal resources;
   Land ownership research for access to resources;
   Transition between mediums without disrupting the energy 
        supply;
   Use of battery backup to transition between modes;
   Optimize delivery systems to provide redundancy and reduce 
        the costs;
   Evaluation of technology and storage efficiencies;
   Capital cost estimates based on required sizing for 
        technologies;
   Opportunities to reduce construction and operating costs;
   Identify opportunities for in-State component construction 
        and assembly;
   Identify opportunities for in-State operations and 
        maintenance personnel training;
   Development of model communities to demonstrate 
        technologies;
   Financing options.

    We are currently exploring these questions at a very high level, 
but more research is required before the gaps in our present knowledge 
base can be filled.
                        putting it all together
    The Alaska Energy Plan will provide direction and focus to the 
vision that all Alaskans should have access to affordable power. By 
making energy from locally available resources to meet local energy 
needs, Alaskans will change the curses of long distance and low usage 
into an expansion of our blessings.
    The aiming stake approach will allow Alaskans to create a renewable 
energy future on our own time frame as economic conditions allow. If 
Alaska gets even half way to this stretch goal, we will be well ahead 
of most States and Nations. Then, much like the North Star, we can 
serve as a steady, shining guide to others undertaking the path to 
energy independence.
    Thank you and I would be happy to take any questions that you may 
have.

    Senator Murkowski. Thank you, Steve.
    Let's next go to Gwen Holdmann. Welcome.

STATEMENT OF GWEN HOLDMANN, DIRECTOR, ALASKA CENTER FOR ENERGY 
         AND POWER, UNIVERSITY OF ALASKA, FAIRBANKS, AK

    Ms. Holdmann. Thank you, Senator Murkowski and the virtual 
members of the committee. I appreciate the opportunity to 
appear before you today.
    Senator Murkowski, I'd like to thank you personally for all 
that you have done to increase focus on renewable energy 
resources and the use of those resources to develop energy 
projects in the State and across the country. You've put a lot 
of work into this, and it is appreciated and valued. So thank 
you very much.
    I'd like to shift the focus a little bit about how we talk 
about energy. Energy is often discussed as a means to an end, 
but in actuality, energy is really a tool that we need to 
obtain the goods and services that we need in our lives every 
day. Stable priced energy such as what can be achieved from 
renewable energy projects are needed so that current and future 
Alaskans and Americans can benefit from high-paying jobs, and 
so that we can continue to develop our economy, and to build 
wealth for individual residents and for our State and country 
as a whole.
    Chena Hot Springs is a perfect example. Because it has the 
geothermal power plant out here, Bernie and Connie Karl know 
exactly what their energy costs are today. But also what 
they're going to be 10 and 20 years from now. Those stable 
prices allow them to build a business plan based on that 
certainty, and that provides a lot of value to them in terms of 
moving forward into that future.
    Alaskans are the highest per capita energy users in the 
country, in a country that is the highest per capita user of 
energy in the world. That should give us pause for thought. On 
average we use more energy per individual resident here than 
anywhere else in the world. There are a lot of reasons for 
this, and this does not mean that we are necessarily more 
wasteful than other people. But the point is is that we need a 
lot of energy. The cost of those energies are not necessarily 
born equally by all of Alaska's residents. Each region has 
particular challenges associated with it.
    Because we're talking about renewables today, I'll focus on 
the rural communities, and we are currently on a path right now 
to spend over $4 billion in diesel fuel alone--that's not all 
energy costs; that's just diesel fuel--in rural Alaska in the 
next 20 years. That's a big number, and virtually all of those 
dollars would go to interests based outside of our State. But 
with those kinds of big numbers can also come big 
opportunities.
    The high-cost of energy in Alaska, and particularly rural 
Alaska, make emerging technologies like distributed wind, 
biomass, geothermal, and tidal energy economic to deploy today. 
However, many of those technologies are more complex and 
expensive to install and operate than traditional diesel 
systems. Is the role of applied energy research like that 
conducted through the Alaska Center for Energy and Power at the 
University of Alaska to try and address the technical 
challenges associated with energy projects in order to bring 
the costs down and make renewable energy projects economic to 
install and reliable to operate.
    All energy projects are not created equal. We must be 
prudent in our investment and new technologies as Mr. Haagenson 
just mentioned. To this end, the university is working on 
improving the efficiency of diesel engines, testing advanced 
energy storage and control systems, and a variety of other 
renewable energy technologies.
    We're also looking at the resources to make sure that 
projects that we're developing are sustainable in the long 
term. We're working with Bernie right here at Chena Hot Springs 
to monitor the reservoir, and to continue to work with him to 
develop strategies to tweak production and injection of the hot 
water that makes this place work. We're also looking at growing 
willows as a biomass crop and what that would take, and doing 
research needed to deploy in-river hydrokinetic turbines as 
part of our energy mix.
    Many of the proposed solutions we are working on are also 
more broadly relevant to achieving the U.S. goals for 
increasing renewables as a component of our national energy 
portfolio. For example, a major challenge in dealing with the 
high penetration of renewables is that a high amount of 
renewables on our grids, in particular wind, effect our 
electric grid infrastructure. Our grids were not designed for 
fluctuating power sources, and that has become a challenge not 
only in Alaska, but other parts of the country.
    For this reason, Alaska has the opportunity to serve as a 
model and as a proving ground for the country, and I hope that 
the Senate will recognize that role that Alaska can potentially 
play. As an example, we've been working with Kodiak Electric 
Association on modeling the integration of hydropower wind and 
diesel on their electric grid. Kodiak has a goal of 95 percent 
of their electric power being produced by renewable resources 
in the very near future. They are really on track to achieve 
that with the first megawatt-scale wind turbine Federal turbine 
installed in the State of Alaska.
    When we think about this 95 percent renewables, which is 
also something that Chena has achieved here, is a very lofty 
goal when you consider that, as you mentioned, Senator, that in 
the country only 8 percent of our power generation is from 
renewable resources. We have been working with them to 
determine how to reach this objective through the use of both 
short- and long-term energy storage. Achieving those kinds of 
high penetration is not a simple technical task, and it does 
require some additional infrastructure to make that happen.
    The work we're doing at Kodiak right now is very relevant 
to much--the much larger national grid as certain parts of the 
country are quickly ramping up installed wind power, too. The 
limited grid at Kodiak affords an opportunity to optimize and 
prove really high-powered models developed by Sandia National 
Lab for the much more complex grid in the Lower 48 and verify 
those so that we can be doing the same types of things in the 
rest of the country. At a later time, testing new energy 
storage options on the Kodiak grid to achieve that grid 
stability will also be relevant to stabilizing the national 
grid. At the University of Alaska, we've been testing the next 
generation of battery technologies to meet the needs of both 
Alaska and throughout the country.
    The U.S. also needs to rethink Alaska's role in the context 
of future global energy needs. Alaska is an exporting State, 
energy exporting State. Today we export our fossil energy 
resources, and those will be critical to Alaska's future for a 
long time. However, we must also begin to consider how we can 
develop our stranded energy sources, both fossil and renewable, 
to meet growing international demand for energy.
    There are ways to export energy other than through electric 
power and through natural gas pipeline. That's through the 
value-added processing of products and raw materials. This 
presents a very real opportunity for the United States to 
reshape and rethink how Alaska fits into the global energy 
picture in a world that will become increasingly hungry for 
cheap and stable energy prices. This is not just an economic 
issue, this is also an issue of national security. As we ship 
more and more of the processing of raw materials we use every 
day off shore to Nations with cheaper energy than our own, we 
become increasingly vulnerable to political upheaval and 
instability in other regions.
    We believe that it is our position that a long-range 
strategy needs to be developed for optimally using Alaska's 
energy resources for the benefit of both the State and the 
Nation. Thank you for your time. We recognize our future energy 
solutions will include a mix of renewable resources and fossil 
fuels. Alaska is a critical asset to furthering a national 
agenda of providing affordable and stable energy for the 
country, and we believe the energy research program such as the 
university's will have a key role to play in shaping that 
future.
    We ask you to continue to press for funding for these 
critical research programs so that we can develop more 
economically viable projects and continue to improve the ones 
that have already been built. We would like to ask you to also 
keep in mind that Alaska's particular needs sometimes differ 
from those of the rest of the country, and while we have a role 
to play, there can also be challenges for us to fit into some 
of the funding opportunities that are out there when we're 
looking at the specific issues that are needed to be addressed 
up here in Alaska. Thank you for your time.
    [The prepared statement of Ms. Holdmann follows:]

Prepared Statement of Gwen Holdmann, Director, Alaska Center for Energy 
             and Power, University of Alaska, Fairbanks, AK
    Chairman Bingaman, Ranking Member Murkowski and members of the 
Committee, thank you for the opportunity to appear before you today.
    The U.S. is the highest per capita energy user in the world, and 
Alaska has the highest per capita energy use in the country.\1\ 
However, these costs are not borne equally by Alaska's residents. Rural 
residents spend on average 12.7% of their annual income on energy 
related costs, compared to 3.6% for Anchorage and around 5% 
nationwide.\2\ If we continue along the path of the status quo for 
Alaska over the next 20 years, we are slated to spend $4,141,304,772 on 
diesel fuel for heat and electricity in rural Alaska.\3\ When this fact 
is put in the context of our patchwork of isolated grids and general 
lack of infrastructure, Alaska is clearly in a singularly unique 
position. In our dispersed population and limited infrastructure, we 
mirror 2nd and 3rd world countries, but in our energy use we are 
rivaled by no one in the developed world. Our situation is unique, and 
as such the solutions we seek must be similarly unique.
---------------------------------------------------------------------------
    \1\ From Energy Information Agency
    \2\ Symmary: Estimated Household Costs for Home Energy Use, May 
2008, ISER Publication Sharman Haley, Ben Saylor, and Nick Szymoniak 
Note No. 1 Revised June 24, 2008.
    \3\ Based on Alaska Energy Authority Energy Database using ISER 
fuel price estimates, PCE fuel consumption values, and assuming 
consumption and fuel price don't change and an interest rate of 3% over 
20 years.
---------------------------------------------------------------------------
    You have had the opportunity to see some of those solutions at work 
here at Chena Hot Springs today. Secretary of Energy Chu had a similar 
opportunity when he recently visited Bethel and Hooper Bay. After his 
visit, he made the comment that Alaska could serve as a proving ground 
for new energy technologies. I could not agree more with that 
assessment. The high costs of energy in Alaska--particularly rural 
Alaska--make emerging technologies economic to deploy today. In 
addition, Alaska is grappling with the challenges associated with high 
penetration of renewables, particularly wind, on our electric grid 
infrastructure. Many of the proposed solutions are also more broadly 
relevant to achieving the U.S. goals for increasing renewables as a 
component of our national energy portfolio. For example, The Alaska 
Center for Energy and Power has been working with Kodiak Electric 
Association on modeling the integration of hydropower, wind, and diesel 
on their electric grid. Kodiak has a goal of 95% of their electric 
power being produced by renewable resources, and we are working with 
them to determine how to reach this objective through the use of both 
short and long term energy storage. The work we are doing at Kodiak is 
also relevant to the much larger national grid as certain areas of the 
country are quickly ramping up installed wind power. The limited grid 
at Kodiak affords an opportunity to optimize and prove models developed 
by Sandia National Lab for the much more complex grid network in the 
lower-48. At a later time, testing new energy storage options on the 
Kodiak grid to achieve greater grid stability will also be relevant to 
stabilizing the national grid. At the University of Alaska, we have 
been testing the next generation of battery technologies to meet these 
needs both in Alaska and throughout the country.
    In addition to this type of modeling and testing of energy storage, 
The Alaska Center for Energy and Power (ACEP) at the University of 
Alaska is actively engaged in research related to hydrokinetics, 
biomass, wind and geothermal energy. In addition, we recognize that our 
future energy mix will include a combination of fossil energy and 
renewables, and as such the University is also conducting research in 
optimizing existing power generation systems, and in maximizing 
production of our know fossil energy resources through research in 
heavy oil recovery, methane hydrates, and ultra clean coal.
    Our partnerships with national energy labs are critical to 
addressing these issues. On the heels of Secretary Chu's visit and 
comments, we have sent the Secretary a request to develop more 
collaborative relationships with the national labs with the goal of 
using Alaska as a model and proving ground for the country. We welcome 
DOE's recent decision to establish a permanent NREL staff position and 
office in Alaska as an excellent starting point, and would like to 
request that specific researchers from NREL and SNL be assigned to work 
directly with the University of Alaska to address critical research 
questions.
    Alaska also has another key role to play on the national stage. 
Alaska is an energy exporting State. Today we export our fossil energy 
resources and those will be critical to Alaska's future for a long 
time. However, we must also begin to consider how we can develop our 
stranded energy resources--both fossil and renewable--to meet growing 
international demand for energy. There are ways to export energy other 
than through electric power, and that is through value added processing 
of products and raw materials. Last week a report came out that 
suggests the overall extent of sea ice in the arctic will continue to 
decline. While the debate continues regarding climate change, we can 
agree on one thing. This presents a very real opportunity for the U.S. 
to reshape and rethink how Alaska fits into the global energy picture, 
in a world that will become increasingly hungry for cheap and stable 
energy prices. This is not just an economic issue, this is also an 
issue of national security. As we ship more and more of the processing 
of the raw materials we use every day offshore to Nations with cheaper 
energy than our own, we become increasingly vulnerable to political 
upheaval and instability in other regions. By assessing whether Alaskan 
resources could be tapped to develop energy ports associated with new 
potential shipping lanes, the U.S. can position Alaska as a global 
energy broker and develop a strong, sustainable economy long after our 
fossil energy resources begin to decline. It is our position that a 
long-range strategy needs to be developed for optimally using Alaska's 
energy resources for the benefit of the State and the Nation. The 
Alaska Center for Energy and Power is interested in working with your 
committee and appropriate Federal agencies on this issue.
    Thank you for your time. We recognize that our future energy 
solutions will include a mix of renewable energy and fossil fuels. 
Alaska is a critical asset to furthering the national agenda of 
providing affordable and stable energy for the country, and we believe 
the University has a key role to play in shaping that future. It is our 
hope to work more closely with your national labs and other federal 
resources in addressing critical research questions necessary to 
achieving that future vision for Alaska and for the country.

    Senator Murkowski. Thank you, Gwen.
    Chris Rose, welcome.

   STATEMENT OF CHRIS ROSE, RENEWABLE ENERGY ALASKA PROJECT 
                 (REAP), CHENA HOT SPRINGS, AK

    Mr. Rose. Thank you, Senator Murkowski. Thank you, members 
of the committee. I appreciate the opportunity to speak here 
today. For the record, my name is Chris Rose. I'm the executive 
director of the Renewable Energy Alaska Project. REAP is a 
coalition of 67 organizations around the State, and also around 
the country that share the goal of increasing the production of 
renewable energy in the State and promoting energy efficiency.
    We are composed of almost 20 utilities, over 20 businesses 
and developers of renewable energy, 4 or 5 environmental 
groups, consumer groups, Alaska Native organizations, and we 
also have 10 local State and Federal agencies that act as 
advisory members so that we can have their input at our board 
meetings and in the work we do. We're an education and advocacy 
group. We do things like put on forums, renewable energy fairs, 
conferences, put together, along with the Alaska Energy 
Authority, the Renewable Energy Atlas of Alaska, which we have 
now printed and distributed almost 25,000 of over the last 3 
years. So those are the kinds of things we do, and we really 
focus on statewide issues, and so I appreciate the opportunity 
to talk about the Federal issues, but just keep in mind that we 
really focused a lot on the State things that are happening 
here.
    As many of the other members, the other witnesses have 
stated, we have some of the best renewable energy resources in 
the world, and you said that yourself, Senator. You went 
through the list. We do have some of the, and fortunately or 
not we've had so much oil and gas in this State that we've, I 
think, ignored our renewable energy resources up until 
relatively recently. They've just been in the background, 
because we haven't necessarily needed them, although we have 
been using our hydro resources for quite some time.
    We do have this huge opportunity now to seize, both here in 
the State and also at a national level. The way that we frame 
this issue of renewable energy when we're out there talking to 
people is in terms of risk management. Because there are lots 
of risks, and continuing on the status quo. The first one is 
already hitting us, and that's price. Worldwide energy demand 
is expected to double by the year 2050 and quadruple by the 
year 2100.
    We're looking at places like India and China where 
everybody wants to drive a car, everybody wants to have the 
same kind of lifestyle that we have. If everybody in China used 
the same amount of oil per capita as Americans, Chinese today 
would use every drop of oil that's produced, and there would 
not be anything for the Europeans or the Americans or anybody 
else.
    So we're facing a future where worldwide demand for energy 
is increasing quite rapidly. At the same time, the fossil fuels 
that we have really built our civilization on are a finite 
resource. So they're diminishing, so price is going to go up. 
It's going to trend up, and that's a real risk if we don't 
diversify our portfolio and put in flat-price renewable energy 
resources, and that's, I think, what Gwen and other people are 
talking about, is we can predict the price of these renewable 
energy resources, and that is a huge boon for investors and for 
the business community.
    Of course, another big risk is climate change. I included 
in the testimony that I--the written testimony, a small article 
that I pulled off the Internet just 2 days ago about some 
research that's just been done here in Fairbanks, the 
University of Alaska Fairbanks, about ocean acidification, 
which I think is probably the biggest concern we have right now 
in terms of the short term. Right now we're looking at a 
situation where pteropods and other small creatures are unable 
to form shells because of the increasing carbonic acid 
concentrations in the ocean. Of course, that could really 
impact our fishing industry.
    But the biggest insurance companies in the world see this 
and an economic issue. They're the ones who are paying for 
these climactic events that are occurring around this country 
and around the world. So another driver, and that's what's 
driving us toward carbon regulation, which is going to cause 
the price of fossil fuels to go even higher.
    I think that one of the biggest risks is that this is $150 
billion a year business right now, and most of that business is 
happening elsewhere, not in the United States. It's expected to 
quadruple by the year 2015. We have this huge opportunity here 
to be a part of that clean energy revolution. A lot of people 
are looking at this as the next industrial revolution, and, in 
fact, it has to be, because energy is the lifeblood of any 
economy. We can't do anything, we can't grow food, we can't 
transport ourselves, we can run businesses without energy. So 
we're talking heat transportation and electricity.
    As Gwen and others have pointed out, we've got this testing 
bed in rural Alaska, whether we recognize it or not. When you 
can produce hydrokinetic energy, for instance, at 50 cents a 
kilowatt hour, which is demonstration technology, that's not 
going to really save anybody money in the Lower 48. That saves 
people money today in Alaska. So this is the perfect place to 
be testing these kinds of things that are relatively expensive, 
with 90 percent of the tidal and 50 percent of the wave energy 
and all this geothermal and wind, we should be leaders in this 
technology.
    There's 2 billion people on the planet right now with no 
electricity. That's almost a third of the world. That's a huge 
market. All those people wanted electricity yesterday. If we 
can perfect these technologies like wind-diesel hybrid systems 
and hydrokinetics and solar, we can then be exporting that 
technology around the world. So we have this huge opportunity 
that we see.
    Solar, for instance, is one thing that's really exciting 
for me. It really hasn't taken off in Alaska because it doesn't 
follow our load. We don't use a lot of air conditioning, we 
don't have a lot of lighting in the summer, and yet, when plug-
in hybrids come in next year, I'll be buying one of those cars, 
I'll be putting solar panels on my house, and I'll be running 
my car off of solar. So when you start applying solar to 
transportation, all of a sudden the whole game changes in terms 
of how we might be able to use that.
    So with hydro, solar, all these other opportunities up 
here, we clearly have a huge opportunity for Alaska. I just 
want to hit a few Federal policies, and like I said, we're 
not--we're not concentrated on those, but there are a few 
Federal policies that are important to mention right now.
    There's a Renewable Electricity Standard that's in front of 
Congress. One thing that the REAP board has talked about quite 
extensively at one of our board meetings is the definition of 
hydro. Right now--and I know you've been working very hard on 
this, Senator--I think the Lower 48 sees hydro as something 
that has been kind of past its life, and also is a--can be of 
concern to fish. Of course, we're concerned about fish up here, 
too. But we have many, many hydroprojects or possibilities up 
here that the Lower 48 doesn't have. So if there's an RES and a 
renewable electricity credit market, we want to make sure that 
our hydroprojects get those RECs.
    Also, regarding RECs, we want to make sure that any policy 
that is formed at the Federal level for renewable electricity 
as standard does not squash inadvertently the voluntary REC 
market. Because the voluntary REC market right now is really 
helping renewable energy grow. So we want to make sure there's 
no double counting, and that if there's voluntary RECs out 
there, that they're not used for compliance. We also want to 
make sure that if there are RECs that are sold before an RES is 
actually instituted, that the--those RECs vest in the purchaser 
and not the entity that produced the power. Because otherwise 
if we don't do that, it can inadvertently squash that voluntary 
REC market.
    The Clean Renewable Energy Bonds have been a really 
fantastic program. Kodiak Electric, which has been mentioned 
here several times, used those bonds. They're one of the first 
entities in Alaska to really use those successfully. That 
program should be expanded, and maybe more various types of 
projects could be included in that program.
    I just had a meeting with John Goll, who's the regional 
director of MMS the other day, and we were talking about a 
forum maybe later in the fall about the new MMS leasing 
program. That's something we really have to look at very 
closely, because any offshore wind industry, hydrokinetic 
industry that's going to be evolving offshore could really be 
hurt if this program is not setup correctly.
    Right now I think MMS is in a difficult position to figure 
out how to actually evaluate those resources. Because for one 
thing we don't have a lot of baseline information about what 
the resources are, and I think there might be an inherent 
conflict in extracting revenue through those leases, and at the 
same time having policies like the Federal Product Tax Credit 
that are actually rewarding and incentivizing renewable energy. 
So there's a little tension there between those two, and 
especially with hydrokinetics and offshore wind which are 
nascent industries. We really want to make them get off the 
ground and grow. We don't want to hold them back, but we're 
really pleased overall that FREC and MMS have resolved the 
jurisdictional conflict over that issue.
    Twenty percent wind. DOE has had a 20 percent wind goal now 
for about 2 years. There's a very extensive report. As Brian 
Hirsch pointed out, NREL's been working on this. The Wind 
Powering America program, which is part of NREL has been 
working--we've been working very closely with them over the 
years. That's a very important program to educate people about 
wind.
    There's no doubt technologically and physically that we can 
do 20 percent wind by 2030 in this country. But there's going 
to be a lot more transmission, there's going to be a lot more 
education that's going to have to precede that, and so we're 
really looking at DOE's goal of 20 percent wind as a doable 
goal. We would like to see as many resources put into that as 
possible, because that is the most mature and commercially 
viable of all the new renewable energy resources past hydro. 
Forty-two percent of all installed new electrical capacity in 
the United States last year was wind. So it's a very, very 
fast-growing industry.
    On the issue of job training, research and development, 
there's a lot to do there. We're going to have to prepare all 
our workers, and we're going to have to really be leaders in 
this. The things that Gwen's doing at the Alaska Center of 
Energy and Power could really have world ramifications if we 
can provide--if we can get better storage, if we can really 
work on these wind-diesel hybrid systems, if we can perfect 
hydrokinetics. We have this opportunity here in Alaska to help 
not only the United States, but also the world.
    I guess I would just close with the discussion of vision, 
and that is--and on the State level working on the same thing, 
which is we need an overall vision and policy about where we're 
going. Without that vision and where we're going in 100 years, 
we're not going to be able to draw the road map to see how 
we're going to get there. But the fact is that we're probably 
going to run out of fossil fuels sometime in the next 100 
years, or at least they're going to become so expensive it's 
going to be difficult to use them.
    So where are we going to go? How are we going to get to a 
place where we are 100 percent renewable like Steve Haagenson 
says? It's the economies and it's the cultures and the 
societies in this world that see that like Iceland, like Brazil 
and other places that have that vision that are going to be the 
most economically competitive, and the ones that are going to 
prosper. So we're really hoping that Congress can look 50, 60, 
70 years down the road for the United States and say, how are 
we going to get there? Because we have tremendous renewable 
energy resources in this country, and especially in Alaska.
    I think it's crazy in some ways in Alaska that we're 
looking at exporting this natural gas that we have that for 
Alaskans could last 1,000 years. But if we pipe it to Chicago, 
we'll run out of it in the same time the Chicagoans run out of 
it. So we got to think about ways that we're going to be able 
to preserve some of our resources here in Alaska and the United 
States, our fossil reserves, and at the same time really push 
hard on the renewables. We really do appreciate all the work 
that you've been doing on this, Senator Murkowski. Thank you 
very much. Thank you for the opportunity to testify.
    [The prepared statement of Mr. Rose follows:]

   Prepared Statement of Chris Rose, Renewable Energy Alaska Project 
                     (REAP), Chena Hot Springs, AK
    Members of the Committee, for the record my name is Chris Rose and 
I am the Executive Director of the Renewable Energy Alaska Project, 
also known as REAP. Thank you very much for the opportunity to testify 
at this hearing.
    After introducing REAP I would like to describe how REAP approaches 
the issue of renewable energy, then briefly touch on some federal 
issues that impact renewable energy development.
    REAP is a coalition of 67 entities, including organizational 
members consisting of Alaska electric utilities, businesses, 
environmental and consumer groups and Alaska Native organizations that 
share the goal of increasing the production of renewable energy in 
Alaska and promoting energy efficiency. Besides those members REAP also 
includes local, State Federal Agencies and institutions that also have 
an interest in renewable energy. Examples of those Advisory members are 
the Alaska Energy Authority, the Alaska Center for Energy and Power, 
the Denali Commission the National Renewable Energy Laboratory (NREL).
    Over the last 5 years REAP's work has primarily focused on the 
State level. As an education and advocacy group we have five primary 
objectives which are to:

          1) promote energy efficiency;
          2) foster and promote stakeholder unity in support of 
        renewable energy;
          3) work to get viable renewable energy projects in the 
        ground;
          4) work to implement policies that promote more renewable 
        energy and;
          5) build a market for renewable energy in Alaska.

    Each year REAP hosts several events, including the annual Alaska 
Renewable Energy Fair, the Business of Clean Energy in Alaska 
conference and numerous forums on renewable energy and energy 
efficiency.
    At the State level we have worked hard to educate policy makers 
about the benefits of renewable energy and energy efficiency. Besides 
several bills that are now pending in the Alaska legislature, our work 
has resulted in the creation of the Alaska Renewable Energy Grant Fund 
into which the legislature has appropriated $125 million over the last 
18 months for over 100 renewable energy projects across Alaska. It is 
one of the largest clean energy funds in the Nation, and represents the 
highest per capita spending on renewable energy in the United States.
                  renewable energy as risk management
    REAP sees the issue of renewable energy in the context of risk 
management. The risk is continuing to rely on the status quo for our 
energy, with its heavy reliance on fossil fuels.
    The first risk is affecting us already, and that is price. World 
energy demand is expected to double by 2050, and quadruple by 2100. 
Meanwhile the fossil fuels that have built our economy are finite 
resources that are diminishing. The laws of supply and demand are 
pushing fossil fuel prices higher, especially in places like rural 
Alaska where diesel, heating oil and gasoline prices are significantly 
higher than in the rest of the country. As we move into the 21st 
century and Nations like China and India develop economies with higher 
per capita energy use, the price of fossil fuels will go even higher. 
However, with renewable energy the ``fuel'' is free, whether it is 
wind, sun or flowing water, resulting in the generation of flat-priced 
power.
    A second and related risk is geopolitical. Many would argue that we 
are already suffering from the fact that roughly 65% of the world's 
proven and conventional oil reserves are in five countries in the 
Middle East: Saudi Arabia, Kuwait, Iran, Iraq, and the United Arab 
Emirates. Increasingly, the entire world is competing for this 
relatively inexpensive oil that lies in an area of the world where the 
United States' access is getting more and more difficult to obtain. 
Renewable energy is local and inexhaustible energy.
    A third risk is climate change. With each of its successive reports 
the Intergovernmental Panel on Climate Change (IPCC) has concluded 
there is an increasing chance it is we humans and our carbon emissions 
that are causing climate change. Even without conclusive proof of the 
cause, it is clear that climate changes are occurring much more quickly 
than scientists have been able to predict, and that we must do 
something about it.
    Perhaps the most disturbing change that we are facing is the 
buildup of carbonic acid in the oceans that is rapidly changing their 
chemistry. As reported by The Daily Climate on August 20, 2009, by some 
estimates the oceans have absorbed 30% of the carbon dioxide emitted 
since the beginning of the industrial revolution. The ocean's pH has 
dropped nearly 30 percent over the past 250 years to levels not seen in 
800,000 years, and if emissions continue unchecked in 40 years, the 
oceans could be more acidic than anything experienced in the past 12 
million years, according to some climate models.
    According to The Daily Climate story, as ocean pH drops and acidity 
rises, organisms such as corals, oysters, clams and crabs have trouble 
pulling from seawater the minerals to create protective shells. New 
research from the University of Alaska Fairbanks suggests Arctic oceans 
are particularly susceptible to acidification because cold water 
absorbs more carbon dioxide than warmer water. The newest data from the 
Gulf of Alaska shows that acidity levels far higher than expected might 
already be impacting the food web. In several sites the increasing 
acidity has changed ocean chemistry so significantly that the pterapods 
at the base of the food web that support the state's salmon runs are 
unable to form shells. According to Jeremy Mathis at the University of 
Alaska Fairbanks, ``[t]he increasing acidification of Alaska waters 
could have a destructive effect on all of our commercial fisheries. 
This is a problem that we have to think about in terms of the next 
decade instead of the next century.'' For this and many other reasons, 
scientists and Nations around the world are looking for ways to decease 
carbon emissions. Renewable energy does not emit carbon dioxide when it 
is generated.
    The last risk is a business risk. The clean energy industry is 
estimated to be about a $150 billion business this year, and it is 
expected to at least quadruple by 2015. One example of this growth is 
the wind industry, which has been the world's fastest growing energy 
sector for over a decade. Last year 42% of all new electrical 
generation installed in the United States was wind. The risk is that 
the United States and states like Alaska will largely miss out on what 
many believe will be the next industrial revolution. For example, today 
General Electric is the only American company that ranks in the top ten 
of wind turbine manufacturers. If the United States is to remain 
competitive in an increasingly competitive world, we must anticipate 
trends like carbon regulation and the desire by business and industry 
to have access to predictably priced and local power.
    In Alaska we have a unique opportunity to be part of the new clean 
energy economy that is coming our way. We need to recognize that 
village Alaska can be a laboratory for energy innovation. Only in rural 
Alaska, where electricity rates often exceed $1/kWh, can a 
demonstration project that produces 50 cent/kWh actually save residents 
money at the same time that a technology is tried. Alaska is already 
seen as a world leader in wind-diesel hybrid technology, and Kodiak 
Electric Association just installed the first wind-diesel-hydro hybrid 
project in North America. There are currently over two billion people 
in the world with no electricity at all, many of whom live in remote 
villages in the developing world that will likely leap frog the 
standard central power station model straight to distributed energy 
systems like the ones we are developing in remote Alaskan communities. 
If we can perfect those systems in Alaska, the state has the 
opportunity to export that technology and know-how across the planet.
                         federal policy issues
    Because REAP is primarily focused on State issues, our 21 member 
board of directors has not yet taken an official position on most 
federal energy policy. However, I will make some brief comments on a 
few issues.
             national renewable electricity standard (res)
    The RES is the only federal policy that the REAP board of directors 
has taken up and voted to support, with certain provisions. Because SB 
433, as drafted last spring, would exempt Alaska utilities because of 
their small size, REAP supported it because Alaska entities could still 
take part in the Renewable Energy Credit (REC) market that it would 
create. The provisions that would given extra credits for renewable 
energy produced on tribal lands was particularly supported, as long as 
it did not apply to electrical grids of less than 10 MW. This exclusion 
was something that small village utilities in particular believe is 
important to prevent independent power producers (IPPs) from coming 
into a village and competing with small village utilities that are 
already in fragile economic States.
    The other provision of interest to REAP members in any RES is the 
definition of hydroelectric power as renewable energy. REAP believes 
that properly permitted hydroelectric power in Alaska should count as 
renewable energy for purposes of the REC market that would be created. 
Alaska has many potential hydro locations that have not been developed, 
and Alaskans will be the first to scrutinize any impacts that a hydro 
facility will have on fish.
                     federal production tax credit
    REAP is pleased with the recent extension of the federal production 
tax credit (PTC). It remains to be seen what shape the various 
renewable energy industries will be in 2012, but it is likely that many 
of them, including tidal, wave and solar, will need another, longer 
term extension of the PTC. It is very difficult for U.S. markets to 
compete in the renewable energy space with countries in Europe, several 
of which provide 20-year market certainty with feed-in tariffs.
                  clean renewable energy bonds (crebs)
    CREBs have already helped Kodiak Electric Association build the 
largest wind farm in the Alaska. The program should be expanded, and 
perhaps restructured to fund a greater variety of projects.
                             the rec market
    Currently, many organizations, households, government agencies, 
farms, and businesses voluntarily purchase ``green power'' in the form 
of renewable energy certificates (RECs), or install on-site renewable 
electricity generation like solar as part of their commitment to 
reducing their global warming footprint. The voluntary market has been 
an important driver of clean energy development across the United 
States, responsible for millions of dollars in new investment. The 
voluntary market grew by 62% in 2004, 37% in 2005, 41% in 2006, and 53% 
in 2007. If the voluntary market continues to grow at an annual rate of 
40% (based on recent experience), it will reach nearly 50 million MWh 
by 2010.
    The Senate RES provisions of American Clean Energy and Security Act 
(ACESA) should be amended so that the Act does not inadvertently 
undercut the thriving voluntary renewable energy market. Specifically, 
the amendments should 1) expressly prohibit voluntary renewable 
purchases to be used toward RES compliance and 2) clarify federal 
renewable energy certificate (FREC) ownership for contracts involving 
unbundled RECs created prior to enactment.
    It is an essential principle that double counting of claims be 
disallowed. Either a voluntary or a compliance claim can be made for 
each MWh of clean energy sold, not both. To prevent double counting, 
ownership of and rights to Federal RECs should be clear. When a 
renewable generator has sold electricity and/or renewable energy 
credits, certificates or attributes associated with such generation 
under a contract that was entered into before the date of enactment of 
the federal RES, ownership of the Federal renewable electricity credits 
associated with such generation should vest in the party that purchased 
the renewable energy certificates. This clarification of ownership 
rights to federal RECs will provide essential market certainty 
necessary to maintain a thriving voluntary renewable energy market.
    Unless addressed this issue would not only seriously undercut 
voluntary green power marketers, but could also compromise the 
standard's fundamental goal of increasing renewable energy deployment, 
since voluntary purchases have been major drivers of such growth.
                            20% wind by 2030
    A great deal of work at the federal level is necessary to reach the 
DOE's stated goal of 20% wind by 2030. The DOE has produced a 
comprehensive report on this goal. However, outreach efforts, like 
those led by NREL's Wind Powering America (WPA) program, need to be 
strengthened. WPA has supported REAP in its outreach efforts in Alaska, 
and has selected Alaska as one of its 13 priority States. As such, WPA 
has worked aggressively with REAP and the Alaska Energy Authority (AEA) 
to share the development of a high resolution wind map of the State to 
identify the quality of wind resources along the Railbelt as well as 
the hub and remote communities. Additionally, WPA funded the anemometer 
loan program to prospect for wind in rural communities.
    NREL, AEA and REAP held the international wind-diesel conference in 
Alaska in 2008 in recognition of both the progress and need for a 
robust wind-diesel market in Alaska villages. The cost-shared early 
wind-diesel pilot projects in Wales and Selawik developed many lessons 
learned that were incorporated in successful commercial projects in 
other AVEC villages. The cooperation on the emerging wind-diesel 
research center at UAF will be important in training new engineers in 
the controls and design challenges remote electricity systems.
    WPA has been effective across the country in helping to educate the 
public and policy makers that wind is a mature and commercially 
competitive technology. While wind currently provides just over 1% of 
the Nation's electricity today, it is clear that the 20% goal is 
achievable when one looks at countries like Denmark which is already 
20% wind electricity. Iowa currently leads the United States, at 15% 
wind.
                        mms and offshore leasing
    REAP is pleased that Interior Secretary Salazar has recently helped 
resolve the jurisdictional dispute over hydroelectric and hydrokinetic 
resources that existed between the Minerals Management Service (MMS) 
and the Federal Energy Regulatory Commission (FERC). However, the 
leasing system that Congress has now asked MMS to develop for renewable 
energy resources more than three miles offshore sets up some real 
challenges for the agency in how to evaluate those resources during the 
leasing process. It is going to be very difficult to value offshore 
wind and hydrokinetic (tidal and wave) resources without more baseline 
information about those resources. Furthermore, too high a leasing 
price could effectively kill the nascent and currently undercapitalized 
offshore wind and hydrokinetic industries before they have a chance to 
get off the ground. There also seems to be an inherent conflict between 
the federal production tax credit that is designed to incentivize 
renewable energy development, and a leasing system that is designed to 
extract revenue from renewable energy developers.
                        research and development
    As already alluded to, the United States trails behind Europe, 
Japan, and many other Nations in the development of clean energy 
technology. In order to catch up and become a leader in this incredibly 
important field, the United States must help fund research, development 
and deployment of new technologies. As noted, Alaska is a perfect place 
to test technologies because we can save people money at the same time 
we demonstrate technology. With over 90% of the Nation's tidal energy 
potential, 50% of the Nation's wave energy potential and incredible 
wind, geothermal, biomass and solar resources, Alaska should be a 
leader in renewable energy development. Such development should extend 
beyond electricity to heat and transportation. Today heating bills in 
rural Alaska are more of a problem than electric bills. Communities in 
Southeast Alaska which have excess hydroelectric capacity and short 
road systems are perfect to demonstrate how an all-electric 
transportation system could work. More electric transportation should 
also be considered in Alaska's Railbelt, where today large hydro 
projects are being considered and citizens are exporting hundreds of 
millions of dollars outside the State each year to purchase gasoline. 
With plug-in hybrid automobiles on the near horizon, Alaska should also 
be working to utilize our excellent summer solar resources to save on 
fuel from March through October.
    In the area of hydrokinetic energy, the federal government should 
consider helping to fund basic environmental research to study the 
technology's possible impacts on marine life. The cost of that research 
is now being borne by a nascent industry that is having trouble paying 
for it. Other Nations, like Canada, are cost sharing in this research, 
making them more attractive places for tidal and wave energy companies 
to do business.
                              job training
    In order for the United States to be ready for the energy 
challenges ahead we must train our workforce. Renewable energy and 
energy efficiency will create jobs and help the United States compete 
in the world economy. Federal grants to States and institutions of 
higher learning to establish workforce development programs will help 
accelerate the clean energy economy in the United States.
                           carbon regulation
    As already noted, the REAP board of directors has not taken any 
position on the various proposals to set up a cap-and-trade program or 
carbon tax. However, it is clear that economic price signals do often 
work, and the more expensive a commodity is, the less demand for it is 
created. Higher prices for one commodity also give space to competitors 
selling another. In the case of carbon, it seems likely that carbon 
regulation will help promote the development of more renewable energy. 
Establishing a price on carbon would also recognize its true costs, and 
discourage a simple reliance on the status quo. Depending on what 
legislation might be passed, it is likely that money would flow to the 
State of Alaska in the form of emission allowances that the State could 
use to further promote renewable energy and energy efficiency.
                               conclusion
    The federal government's role in expanding the clean energy economy 
in the United States and in Alaska is pivotal. Energy is the lifeblood 
of our economy. Unless we aggressively seek ways to increase the 
percentage of clean, local and stably-priced renewable energy in the 
Nation's portfolio, the country will become increasingly uncompetitive 
with other Nations and economies that are anticipating that supply and 
demand of finite fossil fuels and concerns about climate change are 
going to continue to make fossil fuels more expensive in the future.
    Because energy is such a huge and important area, and because of 
the limited time that I have had to prepare for this testimony, it 
cannot be exhaustive. However, REAP appreciates the opportunity to 
testify, and looks forward to working with the Committee in any way 
possible in the future. Thank you.

    Senator Murkowski. Thank you. Thank all of you for your 
testimony this morning. It's been very interesting, good 
discussion, and I think a very important part of our committee 
records. So I thank you for that. I've got several questions 
that I'm going to ask of you, and probably submit a lot more to 
you as your homework, and we'll include that as part of the 
record, but in the interest of moving through the panel to the 
second panel today, I'll let you off the hot seat on some of 
it.
    I want to acknowledge a few of our State leaders that have 
joined us since the initial introduction. We've got Senator 
Therriault in the back. I see Senator Bob--or excuse me, 
Representative Bob Herron back there as well. Representative 
Dahlstrom, Representative Charisse Millett. I think that's all 
that I've seen. Who else? Representative John Coghill. So 
welcome to all of you, and thank you for your leadership on 
energy interests. Representative Jay Ramras is in the back as 
well, so pleased to have you all here. Who else am I missing.
    Audience Member: Senator Thomas--I mean, Paskvan. Senator 
Paskvan.
    Senator Murkowski. Senator Paskvan right back there. OK. 
Who else is back there. Thank you for joining us, and for your 
leadership at the State level on these issues. I know that 
there has been more than a few energy field trips this summer 
for our legislators, and I think that that's a very important 
part of what we're doing here at the State.
    I want to ask a question. We're here at Chena Hot Springs, 
where you have one guy, basically, with a vision and a plan and 
a sense of energy that made good things happen, and he got a 
little bit of help from a DOE grant at the outset. But a lot of 
this was shoestring stuff and just really believing in the 
potential of what we have here.
    So much of what happens from a policy perspective back in 
Washington, DC, is we've got a tendency, through our policies, 
inadvertent or not, to pick winners and losers when it comes to 
energy and how we advance it. Chris, you suggested that, you 
know, wind is one that we've seen real advances, and we can 
meet that goal. I think part of that is because we've really 
put those Federal dollars and those grant opportunities toward 
wind. But they look at geothermal, for instance. When I say 
they, I mean the Department of Energy and others at the Federal 
Government. They look at geothermal and say, well, that's a 
mature technology. As a mature technology, you don't fit into 
these nice, neat opportunities where you can get these 
emergency--excuse me, emerging energy technology grants.
    So you've got something going on here at Chena Hot Springs 
that what we're dealing with is not mature technology, it is a 
completely different process. It would qualify as emerging, but 
we've decided that we're going to go with those more proven 
technologies. Steve, I think you mentioned that in your 
assessment statewide of what potential is out there, we got a 
lot of everything throughout the whole State, but in some areas 
you just have wind, or you just have biomass. So through our 
initiatives and how we direct grant funding, to a certain 
extent, we're kind of defining what's going to be good and 
what's going to be bad, and it may not be what works best in 
the YK Delta. It may not be what works best in Southeast.
    So help me out a little, and I'll start with you, Mr. 
Hirsch, when we're talking about how we advance, meaningfully 
advance some of these more cutting edge energy vision--
visioning things, how do we do it so that it's more than just a 
pilot project that gets a little bit of funding and you get 
some interest, but it doesn't have any follow through in terms 
of the funding to really put this in the ground and make a 
difference?
    Mr. Hirsch. Thank you. It's a really excellent point, and a 
very insightful question to add. It's something I personally 
have been wrestling with for many years, and it's primarily our 
developer and the contractor prior to my recent appointment 
here at NREL. Something I mentioned briefly earlier as far as 
some of the projects I've been working on that are very small 
scale. There's several approaches, I think. From the government 
perspective, what seems to make sense is nobody wants to fund a 
loser. So there is a challenge about putting a lot of money 
into something that doesn't work very well. We all know that 
anytime even when you fund a grant, there's a risk that they're 
not going to perform the way it's presented. So what I've seen 
happening, what I've actually personally been promoting a lot, 
is this sense of this emerging energy technologies.
    My sense of it in Alaska, more than almost anywhere else, 
has these challenges that we have that are more difficult--and 
that we can benefit most greatly from. Around, for example, 
this tidal and wave energy. We have so much energy that we 
don't quite know how to handle it even if we were to get it. So 
I think what we need to do is have a multi-tiered approach. 
Understandably, for example, the Alaska Renewable Energy Fund 
at State level that AEA is overseeing excellently. That's 
really for commercial, off-the-shelf proven technology. That's 
the focus on reducing power costs with things that we know.
    At the same time, and what several of us have been pushing 
for, Chris Rose, all of us really, have been identifying this 
need for this emerging energy technologies fund where it's--and 
there, you know, pretty strict definition where the concept 
makes a lot of sense. It's something that's 3 to 5 years out 
roughly for developing this technology to the point where it 
could become commercial. It's proving grounds.
    So Denali Commission has taken the first step in funding 
some of their own money, putting their skin in the game to 
develop that--to essentially gamble on high risk, but 
potentially very high payoff-type projects. Looking at some of 
the energy storage issues around anhydrous ammonia that you 
mentioned in your initial discussion, as well as energy storage 
around wind to really increase the high-penetration rates.
    Then we're working on a State level--or many people are 
working on a State level mirror image of this emerging energy 
technologies fund for--similar to the Renewable Energy Fund 
that the State is doing to--and it's probably not going to be 
as much money, and it will have very targeted projects. It's 
a--this could be a game changer. That's, I think, really what 
we're looking for at this stage. At the same time, we have to, 
I think, believe, to some degree, in the American history of 
innovation and really--what I've seen is a real opening of 
peoples' ideas. It used to be you talked about solar thermal in 
Alaska, and people laughed you out of the room. Now they're 
serious about this heat pump in Seward, and Chena Hot Springs 
here is distributing vacuum tubes with solar thermal that a few 
years ago you would be--you wouldn't be taken seriously.
    So a lot of it has to do with hearings, such as what you're 
holding here and the attention from the national level and the 
real education that policymakers--I've seen an incredible 
increase of policymakers' understanding of these issues. So 
everybody who's getting involved really ought to be commended. 
I think together we're working through those solutions, but 
they're absolute difficulties. So thank you.
    Senator Murkowski. I appreciate your perspective on that. I 
will, I guess, ask for your encouragement within the 
administration. As you know, back in 2007, we were successful 
in including within the Energy Independence and Security Act a 
provision that allows for the authorization of renewable energy 
deployment grants here in Alaska where the Federal Government 
kicks in and helps with matching funds there for construction 
of some of these projects. Authorization is good. It's 
absolutely important, it's necessary, but we'd sure like to 
make sure that there is support within the president's budget 
to allow for the funding to go forward.
    Because I think all of you have discussed, in one way or a 
shape or a form that the vision is good, but we've got to have 
the financial aid, whether it's at the State, local, or Federal 
level to help facilitate. So we appreciate your encouragement. 
I don't know whether you can speak for Secretary Chu, but if 
you can and you can give me the affirmative answer now, I'd 
really appreciate it.
    Mr. Hirsch. I'd only do that once, and then that would be 
over.
    Senator Murkowski. Yes, yes, yes. OK. We don't want to put 
you in that----
    Mr. Hirsch. Just very briefly there, you mentioned this 
geothermal situation, for example, where it wasn't viewed as a 
mature technology. Just this year there's been a new 
understanding of that, and there has been a recent solicitation 
on what they call enhanced geothermal systems where there was 
exactly that issue where they realized all of the technologies 
around geothermal are not mature. There has been new funding 
for that. Similarly with hydropower where it's been recognized 
as mature. Just this month, I believe, there was a solicitation 
that came out on upgrading hydropower facilities that already 
exist. So there's a beginning recognition of what you're 
talking about, but more of this discussion will absolutely 
help.
    Senator Murkowski. I want to ask a question, and I'll throw 
it out to any of you. When we talk about the technologies that 
are out there, whether it's for wind or solar panels or 
anything else that we might be doing, we recognize that our 
climate up here, our environment adds some difficulties or some 
challenges. Steve, you mentioned the fact that the solar panels 
actually enhance the energy efficiency if it's cold. That's 
something that I didn't know.
    How much more of a challenge is it operating in an Arctic 
environment when we're talking about our renewable energy 
sources? I know that, for instance, with the wind turbines, 
what we have up north has to be a little bit different than 
what they're utilizing down there in California. How unique is 
our market in terms of the technologies, and how much more do 
we have to refine them in order for them to really--to work 
well here?
    Mr. Haagenson. Senator, I think Alaska's always different, 
right?
    Senator Murkowski. Always different.
    Mr. Haagenson. That's the----
    Senator Murkowski. We tell everybody, but they don't 
believe it, so they come up here.
    Mr. Haagenson. So starting at that point, I think we do 
have some different challenges up here. I think one of the 
things we--like right now we have a lot of energy, right? In 
the wintertime we don't. Like Chris mentioned, they don't peak 
at the same times we need them. So I think that one of the 
things that we need to look at is storage, right. If we can 
solve this problem in storing energy for a day for tidal, for a 
month for wind, or for a year for solar or hydrokinetic or 
something like that, if we can solve that problem, we can 
deploy it anyplace in the world. Because this is one of the 
toughest environments to operate in.
    Senator Murkowski. You actually mentioned in your comments 
that--I think you said we are working on developing that 
storage technology now. Who--can you give me a little more 
detail on that?
    Mr. Haagenson. Yes, I can. We've hired a consultant, WH 
Pacific, to actually take that concept and make it real and 
find out if we have any operating deficiencies, the storage, 
the size it would take, the costing effort. HMS is helping us 
come up with a cost estimate. Then we'll deploy that out to 
every community, you know, in our big model. So we'll see it as 
part of the costs, to see what the best operating options would 
be.
    So we're developing that. We're looking at one other thing. 
I was talking to a friend of mine at the Cold Climate Housing 
Center the other day, and we said we're going to put a heat 
pump at Weller School. In my days in Fairbanks, I remember that 
the ground is about 38 degrees, and you're trying to take it to 
38-32 degrees and it's going to stop working. He said, well, 
what we want to do is we want to put thermal cells in--I mean, 
thermal cells, not the portable tape, but thermal and heat--
solar cells, and we're going to collect, you know, a big slab 
of concrete in Weller School parking lot, we're going to 
insulate that slab, and we're going to just take that slab up 
to about 190 degrees, say, and then in the wintertime, it'll be 
hot, we'll then put a heat pump on that and take it from 190 
down to 32. So and they're thinking they can get a lot of 
energy out of that slab.
    Again, it's a storage technology. So there's a lot of 
challenges here, but I think--and I'm going to go back to your 
first question that--about the first answer, I think what we 
need is passion, OK, in Alaska. If you think about Bernie for a 
second, I don't know how many of you have had the pleasure of 
saying no to Bernie.
    Senator Murkowski. It doesn't work.
    Mr. Haagenson. It doesn't work, right. So why is that? 
Because he's passionate. He's the most passionate guy I know. 
You tell him no, and he's going to tell you the five reasons 
why you can't say no. He's going to go forward without you. So 
we need more Alaskans like Bernie. I'm saying that with a 
little hesitation. We need more Alaskans with passion like 
Bernie. Nothing personal, Bernie.
    Senator Murkowski. We all understand.
    Mr. Haagenson. Thanks. So I mean, that's--and that's not a 
question do you have passion, you don't want unbridled passion, 
but you need to--now the question is how do you handle risk. 
Like Dr. Hirsch mentioned, you don't--you know, you don't want 
to reward failure. You don't want a bad budget, but the 
question is how can you fund things like that, and who should 
fund it until you make the next step? Because a lot of 
breakthrough technologies need risk. Bernie took risk. He--you 
know, he was told many times that wouldn't work, it's too cold. 
One man told him that over and over again. He went and found a 
solution, and they're wishing that they would have listened to 
him one today.
    So how do you encourage risk, and how do you--you know, how 
do you get people with passion to move the risk forward? You'll 
find solutions in Alaska. There are a lot of passionate people 
in Alaska. There's a lot of creativity across Alaska happening 
today. How do we get that and share it, share the successes, 
and then learn from the mistakes and don't repeat them?
    So Brian also mentioned the Renewable Energy Fund. I'm on 
record on that--on those projects as zero failure. OK. Now, 
he's--and I think we can pull it off. But that's not the 
program designed to look at technology, to look at advanced 
technologies. It's just designed to deploy technology. ACEP is 
very good at looking at technology, looking at the risk, 
evaluating, bringing the issues to the forefront and solving 
them. That's really one of Gwen's strong points.
    So we need to, as Alaskans, come together and figure out 
what we really value, how we want to move forward, how are we 
going--how we deal with risk, and don't hammer the guy who has 
a little failure, and encourage him to say well, OK, if that 
didn't work, tell me another way it will work. So, you know, in 
my prior life, I was--I was told I would--had to make two 
mistakes a day. If I wasn't making mistakes, I thought I wasn't 
doing anything. I think we need to get that attitude in Alaska. 
Thanks.
    Senator Murkowski. OK, Gwen, you looked like you wanted to 
hop in there.
    Ms. Holdmann. I did. I've just been thinking about the 
project here at Chena, and maybe--I'd like to give a little bit 
of history on the very, very early pre-Chena history of the--of 
this low temperature geothermal power plant. I think that it 
might be illustrative in the way this project was brought 
together in the private sector and how we may be able to shift 
some of the ways that things are done at a national level in 
terms of having more collaboration between different fields.
    We tend to have stove pipe technologies a little bit. The 
wind guys are wind guys. They work on wind. The hydrokinetic 
guys, they work on hydrokinetics. You know, that's also a 
challenge I've been dealing with at the university. Energy is 
an interdisciplinary problem, it's a--and the solutions are 
going to be interdisciplinary, too. We need to get more kinds 
of cross collaboration between different programs at the 
national level, and especially I think within the national 
labs, I'd like to see that happen as well.
    To give you a little background on how this Chena chiller 
came to be is that United Technologies is a very large company. 
They have a number of different subsidiaries. What they do from 
time to time, and this is at the risk of telling this story 
without representatives from United Technologies here, but they 
bring different engineers, their top level, brightest guys from 
different programs together and to kind of think tank sort of 
circumstances. So guys that really have nothing to do with each 
other in their areas, don't have anything in common, to sit 
down and figure out what they might be able to do together to 
come up with a new product or a new idea that could ultimately 
become a marketable product and make the company money.
    So in this case, they took some of their bright guys from 
Carrier Refrigeration that had this very, you know, standard, 
off-the-shelf, 100-year-old refrigeration technology, mixed it 
with a guy that had designed a new turbine for a jet engine, 
and literally out of that thinking came to say gee, we're 
actually--this waste heat recovery, this low-temperature waste 
heat recovery system using a new turbine design, coupled with 
the Carrier Refrigeration system. So essentially this is 
running a refrigeration system in reverse where you're taking--
where you're taking a temperature difference, a hot and a low 
temperature, and then you're using that to make power rather 
than electric power to create a temperature difference. Which 
is how roof power refrigeration systems work.
    So they got these guys together, they engineered this 
system, and then in talking about it a little bit more, they 
realized there's geothermal applications. That's really how 
this happened, but it really started from this cross seeding of 
different technology areas. I don't see that we're doing that 
enough in this country. If there's ways that we can kind of 
facilitate that in order to find new solutions, and I think 
improve all of our systems and the challenges that we have, 
that would really be something that would be worth taking a 
look at.
    I should also note that there's a critical juncture in 
there, too, where DOE stepped in and kind of funded that 
project here at Chena. Without that, I don't think that there 
would be a United Technology pure cycle, geothermal, low-
temperature power plant today. I don't know if that's true, but 
it certainly was a critical juncture where that Federal funding 
has now moved us into a commercially available technology that 
hopefully will benefit a lot of other people.
    Senator Murkowski. Your point about kind of the silos that 
we have within the energy world I think is very apt. We see 
that, and it's--so much of it, unfortunately, is about the 
funding that comes to you. If you're working wind and you're 
competing with all of the other energy sources for those 
dollars. Those Federal dollars, unfortunately, are limited, and 
they're limited at all other levels as well. So instead of the 
sharing and the collaboration that you're talking about, and 
that I absolutely agree must happen in order to facilitate some 
of the ingenuity that has to go on in order to accomplish some 
of these difficult tasks, our systems are not set up to really 
allow for that.
    I've actually had a conversation with Secretary Chu about 
that. You know, he's coming at it from the researcher/scientist 
point of view, and I think he appreciates the difficulty of it. 
Our challenge is to do what we can to really help facilitate a 
greater level of collaboration. Because we don't have it. So 
maybe rather than starting from the Secretary's position and 
working on down, we need to force it from the bottom up. I 
think you see that, and I appreciate you giving the history and 
the background on this, because I think it does demonstrate 
that if you have the passion that Steve talks about and enough 
people that are willing to think outside the box in terms of 
the solutions, we can get there. Again, jumping in with the DOE 
grants at the appropriate time doesn't hurt the situation 
either.
    Chris, I'll let you make a comment, and then we're going to 
have to move to the next panel.
    Mr. Rose. Sure. Just a quick comment that reflects on both 
of your questions. There are winners and losers that are chosen 
on the generation side for a number of reasons, and we have 
unique challenges here, but as Gwen pointed out, we're the 
highest energy users per capita in the world here. So what we 
really should be focusing on is energy efficiency. There are 
many reports out there and studies that point out we could 
reduce our energy load by 20 to 25 percent.
    So that's 20 to 25 percent of the future generation we 
don't have to build. So the more we can focus on the energy 
efficiency part up front, the less we have--generation we have 
to build. If we're the highest energy per capita users in the 
world, we should be leaders in energy efficiency. If we were 
looking at ourselves as a business, we would call that waste, 
and we would say, we're going to make more money because we're 
going to waste less. So I think we have to kind of look at 
ourselves that way and say, we're going to waste less, but 
we're going to keep all that money in our economy and we're 
going to let it multiply. Thank you.
    Senator Murkowski. I think when you remember and you 
appreciate that we are the No. 1 consumer, and you also 
appreciate the extent to which energy costs impact us in this 
State--you go outside to the Lower 48 and the average American 
household spends about 3 to 6 percent of their income on energy 
costs. In some of the rural parts of this State, we have 
families that are spending, you know, close to 47 percent of 
their income on energy costs.
    When you put it in that perspective, we've got an 
obligation as a State to figure it out, how we're going to do 
it here. Because yes, it impacts--it impacts people all over 
the country, but there's a huge difference between 3 to 4 
percent of your family budget going toward energy costs, and 
when the price spikes, boy, you deal with it. But when you're 
paying close to 50 percent of your family income on energy and 
price spikes, we don't have anywhere to go. So this is an 
initiative that, again, should consume all of us. It should 
make us passionate about how we can really make a difference in 
reducing those costs, working toward an energy efficiency and 
conservation. But really using the ingenuity that I think makes 
Alaska wonderfully unique and wonderfully independent and 
figure out how we can do better by all those who live here.
    So with that, I want to thank you for your comments. If you 
have additional input that you want to provide for the record, 
we'd certainly welcome that. You will be receiving some 
additional questions from me that if I could have you respond 
in writing, we will incorporate that as part of the record, as 
well. So thank you for your time and your leadership on energy 
issues.
    Let's go ahead and invite up the second panel, if we can, 
please.
    OK. I would like to go ahead and get started with our 
second panel. We probably have about an hour to move through 
this second group. I know that we've got a whole schedule of 
events after this, and so I want to make sure that we have 
sufficient time to hear from, again, this distinguished group 
of individuals. We have on the second panel, Mr. Bernie Karl. 
Bernie has been mentioned repeatedly this morning. So I'm glad, 
Bernie, you were here to take all the comments, compliments, 
and be here to defend yourself if necessary. Bernie Karl is the 
president of Chena Hot Springs Resort here, and the head of 
Chena Energy, LLC. We also have with us Barbara Donatelli. 
Barbara is the vice president of CIRI, and is very involved 
with the Fire Island wind farm. Next to Barbara we have Jim 
Dodson, who is president of the Fairbanks Economic Development 
Corporation. We also have Doug Johnson, who is the Alaska 
project director for the Ocean Renewable Power Company. The 
final individual on the panel on the panel rounding us out is 
Dennis Meiners of the Intelligent Energy Systems. So it's a 
pleasure to have the five of you with us this morning.
    Bernie, we will begin with you. As a thanks to you and to 
your wife, Connie, for hosting the Renewable Energy Fair, and 
allowing us to conduct this field hearing at Chena. We 
appreciate it a great deal.

STATEMENT OF BERNIE KARL, PROPRIETOR, CHENA HOT SPRINGS RESORT 
AND GEOTHERMAL POWER GENERATION FACILITY, CHENA HOT SPRINGS, AK

    Mr. Karl. Senator Murkowski, thank you for the opportunity 
to address both you and the committee on what I believe is 
probably the most important issue facing the world today: 
energy. I'd like to--a special thank you today to Senator 
Stevens, who's been involved in all of our energy fairs so far, 
and who has been one of the strongest supporters of renewable 
energy in the country. So my thanks to Senator Stevens for 
being here today, and for all that he's done for the State of 
Alaska, because it has been tremendous, and without his help 
there would be a lot of--a lot of rural Alaska that would not 
have water, would not have sewer, and would not be looking at 
renewable energy today.
    With that being said, what can we do? I think that Einstein 
says it best. Einstein says that imagination is more important 
than knowledge. I think our problem is, is that we don't teach 
imagination. We don't teach that to our children to use it. If 
you have an imagination, you can imagineer. Without imagination 
there's no imagineering going on.
    Gwen didn't have it exactly right when she talked about 
United Technologies, because we were already going to build a 
power plant, but not with them. We were building it with 
Barbara Nichols. There would have been a power plant built, so 
she was wrong about that, because it would have been built 
because I had already signed a contract with them with a 
handshake. We already had the $750,000 to do it. It would have 
worked on this low-grade temperature, because they were already 
doing it.
    But what happened is United Technologies called us and 
said, hey, we understand you're going to do this. You heard of 
us? I said, no, I haven't heard of you. Who are you? We own 
Sikorsky Helicopter. I know about Sikorsky. We own United--we 
own Carrier Refrigeration. I said, well, I've got some of those 
rascals. We own Otis Elevator. I said, I was on one this 
morning. Hamilton Sundstrand. I said, well, I went to school 
for Sundstrand Pumps. OK, you're calling, how can I help you?
    You see, even though you have all of these brilliant people 
doing brilliant things, sometimes you still need a little 
imagination to go with it with all this brilliance. So when 
they called, they said, hey, we got this idea, would you want 
to be involved in it. I said, we already have a deal going. So 
no, I don't think we want to be involved. Well, my contract 
with Barbara Nichols, I was released from it because he said 
he's an engineer and he also worked for Pratt & Whitney many 
years ago. He said, I believe this is a better idea, I believe 
you should go with them. I believe this will be better for more 
people.
    Today you're going to find out it will be better for more 
people. With a portable unit that will be able to go to an oil 
well and hook up in 1 hour. There's 250,000 producing oil and 
gas wells just in Texas alone. One State--just one State--
150,000 oil wells that are not even producing. They're capped 
off. If we just took that, we could make 5- to 10,000 
megawatts. Not my number. Not my number. Comes from MIT.
    If we harness 2 percent of the earth's energy, just 2 
percent of it, that's a thousand times more than the world 
consumes. We talk about solar, we talk about wind, we talk 
about the money they get. Senator, as you know, the geothermal 
budget was zeroed out. Zero. With your help and with Senator 
Steven's help, you were able to get back some money, a small 
amount. Thank you for that. Thank you for what you've done. But 
it was zeroed out. It's not like--it's not like we care about 
zero. Try that on for size.
    Why do we have serial number 1, serial number number 2? Why 
do we have the first portable unit here if it's such a mature 
industry? I say the geothermal is every bit as important, or 
maybe even more important because you can base load on it. It 
is the only renewable energy that you can base load on. But yet 
it gets the least amount of attention; even to this day it gets 
the least amount of attention. Shame on us. It's because we're 
addicted to oil in one arm, and we're addicted to greed that 
somehow we have convinced people that we can't do it. The word 
can't is not in my vocabulary. It shouldn't be in our 
children's vocabulary.
    Webster's got to be an idiot. Webster says that failure is 
if you don't succeed. So we have these projects, you give them 
a grant, and they don't succeed, so you say it's a failure. I 
say failure is if you don't try. I say failure is if you give 
up. If you don't give up, you could never be a failure. But yet 
we teach our children that failure is if you don't succeed. 
Shame on us.
    I've not heard one person mention hydrogen, or mention 
carbon. The 2 most prevalent elements on earth. The good Lord 
builds everything out of carbon, and builds everything out of 
hydrogen. The only one that doesn't use it very well right now 
is man. The only mammal on earth that deliberately destroys his 
environment and then denies it is us. What is wrong with that 
picture? Something is wrong with it.
    I mean, we should be the world's leaders. Alaska should 
lead this parade. Why do you want to follow a parade when you 
can lead it? With our high energy costs, we should be leading 
the parade. My wife and I are motivated by huge debt load. 
That's what motivates us. We have $2 million of our money, and 
$650,000 that we borrowed. If anybody thinks he's a self-made 
man, he's a fool. Because all of these people have helped you 
all through your life, starting with your maker, and then with 
your parents, and then all these people around us.
    United Technologies has been a tremendous partner. The 
University of Alaska Fairbanks has been a tremendous partner. 
The food that you see growing here, none of that would be 
happening without the university. There's a lot of knowledge at 
the university. Go use your universities. Do I think they 
should be funded? Absolutely. Do I think we can overstudy 
stuff? Absolutely. Do I think we need to have projects that are 
successes? Absolutely. Do I think that the future is the 
brightest it's ever been in the history of man? Absolutely. 
There's more opportunity now than there's ever been in the 
history of man. But it's in reinventing ourselves. It's not as 
business as usual.
    Right now you'll notice when you look around this Energy 
Fair, not only are there a lot of vendors that have a lot of 
good ideas, but go look at the LEDs, the light-emitting diodes. 
These have the same kelvin, they have the same spectrum as your 
light bulbs. They will reduce your power costs by--for lighting 
by at least 50 percent. We will guarantee it. We will guarantee 
it. You look at the new lights in the greenhouse. They're red 
and blue spectrum, because that's what the plants want. It's 
going to cut our lighting load by 90 percent. By 90 percent. 
We've spent 3 years of our life looking into it. Now we are 
importing them. They'll be available for Alaska. I believe that 
Alaska can cut its lighting load for all of Alaska in the next 
2 years by 50 percent. In 2 years' time. What can you do now? 
You do that. You do it now, not tomorrow, today.
    What was the best time to plant a tree, a Chinese proverb? 
Thirty years ago. What's the best--second best time? Today. 
Change your light bulbs. Look at the solar heating out here. 
Why do we have it here? Because it makes infinite good sense. 
That's why. Because technology has come that far. It's here 
today. Change today. Do what you can do today. Remember that if 
you take just a hug, just a hug from the earth, there is enough 
energy there to take care of all of our needs. All of our 
needs. I'm not saying that it is the silver bullet. I'm just 
saying there's enough there, and there's been very little 
effort put into it. Thank you for the opportunity.
    [The prepared statement of Mr. Karl follows:]

Prepared Statement of Bernie Karl, Proprietor, Chena Hot Springs Resort 
    and Geothermal Power Generation Facility, Chena Hot Springs, AK
    My name is Bernie Karl, and I run the Chena Hot Springs Resort and 
Geothermal Power Generation Facility in Chena Hot Springs, Alaska. My 
wife and I have been devoted to this project for many years; have 
invested much of our own resources, time, energy and imagination into 
making this happen.
    What is it exactly that we want to have happen, and why are we so 
devoted to our project at Chena Hot Springs? Alaska is known for its 
vast quantity of natural resources, fossil fuels, and minerals. We have 
a long history of energy development that continues to lead us in the 
direction of fossil fuels. Times are changing however. Petroleum has 
peaked in worldwide production, and the price of this commodity is 
hardly stable. The price of a barrel of crude went over $150 last 
summer and is now $70. Stable gas prices and the hope for renewed 
petroleum discoveries at workable costs are gradually vanishing. Any 
business argument concerning fuel would say that we should diversify to 
the use of other fuels, to be better prepared when our prospects become 
poor. We feel that the force of these developments and continued high 
prices must turn us towards a new and active consideration of renewable 
energy sources, new biomass energy generation, as well as food 
production.
    We feel that Chena Hot Springs is well positioned to test, develop, 
and otherwise exploit these possibilities: from the ``old'' days when 
geothermal energy was considered viable only at temperatures of 230 F 
and our temperatures of 165 F were considered a joke, we have succeeded 
in generating 250 kW from relatively low temperature water. We are 
currently testing a mobile geothermal Organic Rankine Cycle Unit which 
draws off of an oil well with a mixed oil/water effluent stream which 
will soon be sited in Florida. Texas, for example, has 250,000 oil and 
gas wells which produce 95% hot water along with 5% oil and gas. 
Geothermal opportunities abound and will expand with the introduction 
of this mobile unit. The further we explore, the more we find, and we 
have only just begun. Chena Hot Springs is at the cusp of this research 
and development effort.
    Aside from worldwide considerations, the needs for alternative 
power specifically for rural Alaska are enormous. The exhaustion in 
late winter of petroleum resources which come to Alaska villages by 
barge up the rivers and the need then to fly replacement fuel by plane 
to interior villages, the chronic high fuel and PCE costs, several 
times that of Anchorage or Fairbanks, and all of the associated high 
village expenses which flow from these high basic fuel prices, are 
nothing less than criminal. This must change.
    This project and its possibilities for rural Alaska represent not 
just thinking up a new strategy or thinking outside of the box. Such 
metaphors are far too meager. Changes in energy use and the resultant 
possibilities for rural Alaska are immensely difficult because they are 
so monumental. These changes embrace an overturning of cultural norms, 
the acceptance of a western business model, and changes in styles of 
living. Our efforts should be of the same magnitude as the Nana 
Regional Cooperation, which used to say in signing off their radio 
stations, ``This program was brought to you by the Nana Regional 
Cooperation, doing business in Alaska for Ten Thousand Years.'' We have 
to `make corresponding changes in energy use and respect the earth's 
bountiful gifts.
    Things have, however, started to change. I am thankful to the 
Department of Energy and to the Obama Administration for their 
leadership in providing the much needed funding to get some of these 
projects off the ground. It was three years ago that I testified before 
this committee in Washington D.C. At that time, there was a threat of 
eliminating the Geothermal Technologies Department within the DOE. 
Today, there is funding available to further geothermal projects, one 
of man's longest used renewable energies.
    Nevertheless, in this land of massive oil, natural gas, and coal 
development our goal is to bring to light the development of non-fossil 
fuel resources: geothermal, biomass, wind, hydro, and solar. Alaska is 
our country's last frontier, but has the potential to be first in 
renewables. I would like to thank this committee for hearing my 
testimony, and personally thank Senator Lisa Murkowski for making this 
field hearing possible.

    Senator Murkowski. Thank you, Bernie. I appreciate your 
vision and your passion.
    Barbara Donatelli.
    Ms. Donatelli. Yes.
    Senator Murkowski. Welcome.

    STATEMENT OF BARBARA DONATELLI, SENIOR VICE PRESIDENT, 
  ADMINISTRATION AND GOVERNMENT RELATIONS, COOK INLET REGION 
                      INC., ANCHORAGE, AK

    Ms. Donatelli. Thank you very much, Senator Murkowski.
    I really appreciate the opportunity to be here today and 
give an update on the Fire Island Wind Farm. That's currently 
the largest renewable energy project under development in 
Alaska, and we're really pleased to be able to be a part of 
working on bringing this project online.
    CIRI and its partner, enXco formed Wind Energy Alaska in 
2007 to develop and operate commercial-scale renewable projects 
in Alaska. The company is developing Alaska's first commercial-
scale wind farm on Fire Island three miles west of Anchorage in 
Cook Inlet. The 36-turbine, 5-megawatt project will produce 
clean renewable electricity, and serve as an anchor to help 
additional railbelt wind projects to achieve national goals for 
energy independence and reduction of greenhouse gas emissions. 
We expect to generate enough power to--enough power for more 
than 18,000 homes in Anchorage.
    Southcentral Alaska currently relies on natural gas from 
the Cook Inlet basin for most of its electricity and heating 
energy. In 2008, Railbelt Utilities, excluding Golden Valley 
Electric, generated more than 93 percent of their power with 
natural gas. However, as we all have heard, the Cook Inlet gas 
production is in steep decline, down from 205 billion cubic 
feet in 2005 to 146 billion cubic feet in 2008. An alarming 29-
percent drop in only 3 years. At the same time, price 
volatility is increasing.
    In 2008, natural gas prices fluctuated from a high of 
$13.32 per million cubic feet in July to a low of $5.38 in 
December. Fluctuations of this magnitude make planning 
difficult and have a devastating impact on both residents and 
businesses. The Fire Island project will generate flat-price 
renewable power. That will diversify Southcentral Alaska's 
energy resources to increase reliability, and decrease rate 
payer's vulnerability to natural gas shortages and price 
swings.
    Developing the Fire Island project has not been without its 
challenges. A key challenge we still must overcome is securing 
approval from the FAA to relocate the aviation navigation 
equipment, commonly referred to as the VOR, off of the island. 
As it currently stands, FAA restrictions necessitated by the 
VOR will not permit us to build an economically viable project.
    On July 15, 2009, Wind Energy Alaska filed new applications 
with the FAA to expand the proposed Fire Island Wind Farm to a 
financially viable 36-turbine project. Then just this week, in 
anticipation of receiving a notice of presumed hazard, Wind 
Energy went to Washington DC and delivered a VOR relocation 
plan. We believe that plan will provide the FAA the data it 
needs to determine that the potential interference caused by 
the turbines can be mitigated by relocating the VOR and thereby 
allowing the project to move forward.
    Our plan is to construct an upgraded digital doppler VOR on 
property at Ted Stevens Anchorage International Airport. Then 
after FAA certification of the new equipment, the existing Fire 
Island VOR facility will be decommissioned. Analysis indicates 
that the VOR can be relocated with no adverse impact to 
airspace operations, and with the benefits of increased 
facility security, reduced operation and maintenance costs, and 
equivalent or improved air navigational services for pilots.
    Importantly, Wind Energy Alaska is not asking the FAA to 
move the VOR. Instead we are asking FAA to enter into a 
memorandum of agreement that would allow the project to move 
the VOR with FAA support on an expedited basis. If we can meet 
this schedule, the Fire Island project will begin delivering 
power by the third quarter of 2011.
    Now, a little bit about rural Alaska energy needs. As we've 
heard already from many other folks who've testified, currently 
most rural heat and electricity needs are met with heating fuel 
and diesel. These costs have risen sharply in recent years. 
Some communities are trying to find ways to reduce their energy 
costs by improving efficiencies, and by developing renewable 
energy sources.
    Currently the lowest cost renewable energy available today 
is wind. There are nearly a dozen communities around the State 
with combination wind-diesel systems displacing diesel fuel 
burned in those communities. As we've also heard, the energy 
storage is one of the biggest challenges to renewable energy 
development. Electricity produced by wind generation must be 
used pretty much at the same time it's produced. It can't 
really adjust to changing demand. Consequently, a system is 
needed to store that excess energy when demand is low, and then 
to supply extra power when demand is high.
    Currently, electricity storage is difficult, inefficient, 
and expensive. Commercial batteries, for instance, run into the 
millions of dollars per megawatt capacity. Other hurdles to 
broader development of rural wind systems include lack of 
availability of village-scale turbines, lack of availability of 
spare parts, and lack of a trained work force in many cases.
    Unfortunately some of our communities in Alaska lack 
adequate wind sources necessary for the existing turbine 
design. Research into low-speed wind turbines could lead to the 
development of a machine capable of serving communities that 
currently don't have sufficient wind resources for wind 
generation.
    There are some potential synergies between the Fire Island 
wind project and rural renewable energy initiatives. The Fire 
Island project could include several smaller-scale turbines 
that could be used to teach Alaskans to install, maintain, and 
operate wind projects in their own communities.
    Finally, some recommendations about what can be done to 
promote wind development. On the policy side in locations where 
wind development has proposed potential hazards to aviation and 
must be approved by the FAA, we believe the current process 
could be streamlined to help bring projects online on a more 
timely basis. This could possibly be accomplished through 
establishing an office within FAA, or assigning a project 
manager to potential wind development. That could help navigate 
the wind developer amongst the various FAA directorates and 
help, you know, get it through the approval process in a more 
timely manner. We think that would be area that could--we could 
really be a help to not only wind projects in Alaska, but 
potentially around the country.
    On the technology side, research into the development of 
energy storage systems that really address this intermittent 
nature of most renewable energy technologies would be a real 
boost to not only wind generation, but to other renewable 
projects. We think the development of work force training 
centers that support the implementation, operation, and 
maintenance of renewable energy technology--technologies would 
be an important factor as well. The development of enhancements 
to existing wind turbine designs to extract more energy at low 
wind speeds.
    So thank you again for allowing us to testify about our 
project and some of the challenges and--that we've encountered.
    [The prepared statement of Ms. Donatelli follows:]

    Prepared Statement of Barbara Donatelii, Senior Vice President, 
   Administration and Government Relations, Cook Inlet Region, Inc., 
                             Anchorage, AK
                              introduction
    My name is Barbara Donatelli. I am the Senior Vice President of 
Administration and Government Relations for Cook Inlet Region, Inc. 
Thank you for providing CIRI an opportunity to testify today about the 
largest renewable energy project currently under development in Alaska.
    CIRI and its partner enXco Inc. formed Wind Energy Alaska in 2007 
for the purpose of developing and operating commercial-scale renewable 
energy projects.
    CIRI is one of 12 Alaska-based corporations established by the 
Alaska Native Claims Settlement Act of 1971 to benefit Alaska Natives 
who had ties to the Cook Inlet region. The Anchorage, Alaska-based 
company is owned by more than 7,500 Alaska Native shareholders. CIRI 
and its subsidiaries have a well-diversified businesses portfolio that 
includes energy and resource development, real estate development, 
oilfield and construction services, tourism, telecommunications and 
government contracting.
    enXco has been a leading wind energy project developer and operator 
for more than two decades. The company develops, constructs, operates 
and manages renewable energy projects nationwide. It is a significant 
owner and developer of wind energy installations in the United States 
and is North America's leading third-party provider of operations and 
maintenance for wind farms.
    CIRI and enXco each own a 50 percent interest in Wind Energy 
Alaska.
                        fire island wind project
    Wind Energy Alaska is currently developing Alaska's first 
commercial-scale wind farm. The project is located on Fire Island, 
which lies three miles west of Anchorage in Cook Inlet. The 36-turbine, 
54-megawatt project will produce clean, renewable electricity and serve 
as an anchor for additional Alaska Railbelt wind projects to help 
achieve national goals for energy independence and reduction of 
greenhouse gas emissions. The project will generate enough power to 
meet the annual requirements of more than 18,000 residential customers.
    Unlike any other region in the United States, Southcentral Alaska 
relies almost exclusively on natural gas from the local Cook Inlet 
basin to generate electricity. In 2008, Railbelt utilities, excluding 
Golden Valley Electric, generated more than 93 percent of the region's 
electricity by burning natural gas produced from Cook Inlet. However, 
Cook Inlet gas production is in steep decline, down from 205 billion 
cubic feet in 2005 to 146 billion cubic feet in 2008--an alarming 29 
percent drop in only three years.
    Clean, renewable wind energy will help diversify power generation 
resources, increase reliability and decrease ratepayers' vulnerability 
to supply shortages and price volatility of natural gas. In 2008 alone, 
natural gas prices fluctuated wildly setting a high price in July of 
$13.32 and subsequently tumbling to $5.38 per million cubic feet in 
December. Price fluctuations of this magnitude have a devastating 
impact on both the citizens and businesses in Southcentral Alaska.
    As the natural gas supply situation tightens, it is foreseeable 
that volatility, as well as the absolute price, will increase. The Fire 
Island wind project can generate 54 megawatts of clean, predictably-
priced renewable energy within two years, if the project goes forward.
    Developing the Fire Island wind project is not without its 
challenges. One of the critical challenges is securing approval from 
the Federal Aviation Administration (FAA) to relocate the navigation 
equipment, commonly referred to as the VOR, which is currently located 
on the island.
    On July 15, 2009, Wind Energy Alaska filed applications with the 
FAA to erect 36 wind turbines on Fire Island. This week, in 
anticipation of receiving a Notice of Presumed Hazard, WEA presented 
the Fire Island Wind Project VOR Relocation Plan to FAA directorate OE/
AAA (Obstruction Evaluation/Airport Airspace Analysis). The intention 
of the plan is to provide the FAA with the necessary analysis and data 
to mitigate the hazard and allow the project to move forward.
    WEA's plan is to construct an upgraded, dopplerized VOR located on 
property at theTed Stevens Anchorage International Airport. Then, after 
certification from the FAA, the existing VOR facility located on Fire 
Island will be decommissioned. WEA's analyses indicate that relocation 
of the VOR can be completed without adverse impact on airspace 
operations and will offer the FAA and Anchorage International Airport 
increased security, reduced operation and maintenance costs and will 
provide equivalent or better air navigation services to the affected 
aeronautical community.
    Importantly, WEA is not asking for the relocation to be undertaken 
by the FAA. Rather, WEA requests an agreement for relocation and 
requests FAA support in completing the relocation project on an 
expedited timeframe.
    WEA has met with airport management, regional FAA management, 
aviation stakeholders and Federal, State and local government 
officials. None have opposed the project or the mitigation plan to 
relocate the VOR, and several have expressed strong support for 
relocation. A dopplerized navigational aid facility on Ted Stevens 
Anchorage International Airport property would benefit the FAA, 
aviation users, the airport, security interests and renewable energy 
proponents.
                           rural alaska needs
    While the cost of electricity in Southcentral Alaska is rising, the 
cost of living in rural Alaska is extremely high by national standards. 
Energy costs in rural Alaska exceed national averages by several orders 
of magnitude. Individuals and families are leaving villages, large and 
small, due in part to the overwhelming cost of energy.
                               technology
    Currently in rural communities, heat and electricity energy needs 
are met almost entirely with heating fuel and diesel. Liquid fuel costs 
have risen sharply in the last several years. Deploying technologies 
that increase efficiency and reduce or avoid the use of liquid fuels 
are needed to lower the overall cost of energy or at least reduce the 
rate of increase.
    There are a number of renewable energy technologies on the horizon 
in Alaska. Solar has been considered for rural Alaska and some 
experimental projects have been proposed. Hydro kinetic is being 
investigated for use in river applications. Tidal generation is being 
evaluated in several locations. Low temperature geothermal has been 
demonstrated as viable at Chena Hot Springs. Small hydro is being 
evaluated and shows promise in a limited number of locations.
    The lowest cost renewable energy available today is wind energy. 
There are nearly a dozen combination wind/diesel systems in Alaska 
today. All are deployed in rural settings and displace diesel fuel 
burn.
    One of the chief obstacles to greater use of all renewables is 
storage of the energy. Since electricity has to be used as it is 
produced, storage is difficult, inefficient and expensive. Batteries, 
for instance, are very expensive when used to store large amounts of 
electric energy.
    In at least three rural Alaska locations excess wind energy is 
stored in the form of hot water. During periods when more wind energy 
is being produced than a village can absorb, large water heaters 
automatically turn on. Water is heated and used for space heating in 
public buildings. Greater use of hot water storage will increase the 
use of renewable energy to meet more of the total energy needs in rural 
village settings.
                            existing studies
    The Institute of Social and Economic Research (ISER) in a December 
2008 study concluded that excess wind could be stored as hydrogen. The 
hydrogen could be used for heating and local transportation needs, i.e. 
small trucks, snow machines and 4-wheelers. The basic idea is to find 
ways to meet local energy needs with locally available resources.
    The study discusses handling, maintenance and sustainability issues 
as well. Studying energy storage to find ways to more reliably use 
local resources to meet the total energy needs of small rural 
communities would benefit the individual community as well as increase 
the use of renewables generally, whether the by wind, solar, 
geothermal, hydro or others underlying energy sources.
    Other basic hurdles to broader deployment of rural wind systems is 
lack of availability of small turbines for village applications, 
commonality of turbines among villages, spare parts and work-force 
training. In a 2004 report to the Denali Commission, BP engineers 
postulated that wind energy could benefit villages operating on diesel 
for electric power generation. The report suggested choosing a common 
turbine for a given region. The common turbine would allow for 
interchangeable spare parts and streamlined training for technicians 
performing turbine maintenance within a geographical region.
                               synergies
    Potential synergies exist between the Fire Island wind project and 
the renewable energy initiatives of rural Alaska. The Fire Island 
project could be used to train Alaskans to perform turbine maintenance 
for wind projects in rural communities. Wind turbines for rural Alaska 
are smaller but operate on the same principles as those used in the 
Fire Island wind project. By installing several smaller turbines on 
Fire Island the project could double as a work-force and technology 
implementation training site.
    Unfortunately many communities in Alaska lack the wind, hydro, 
solar, geothermal, hydro kinetic or tidal resources necessary to 
utilize a renewable energy resource. Research into low wind speed wind 
turbines could lead to the development of machines capable of serving 
villages with average wind speeds currently considered too low for 
energy extraction.
                          additional research
    Rural and urban communities across the Nation would benefit from 
additional research in the following areas:

          1. Development of energy storage systems that address the 
        intermittent nature of most renewable energy technologies as 
        well as help meet the broader needs of the community, including 
        transportation and heating.
          2. Development of a workforce training center to support the 
        implementation, operation and maintenance of renewable 
        technologies in rural Alaska.
          3. Development of enhancements to existing wind turbine 
        designs to extract more energy at low wind speeds.
                                summary
    Thank you again for providing CIRI an opportunity to testify today 
about the challenges of developing the Fire Island wind project. We 
look forward to working collaboratively with the community, the FAA and 
other State and Federal officials to make the first commercial-scale 
wind project in Alaska a long awaited reality.

    Senator Murkowski. Thank you for hanging in there. It's 
been a long process.
    Ms. Donatelli. It has.
    Senator Murkowski. We know that. Next let's go to Jim 
Dodson.
    Jim, welcome.

 STATEMENT OF JIM DODSON, PRESIDENT & CEO, FAIRBANKS ECONOMIC 
             DEVELOPMENT CORPORATION, FAIRBANKS, AK

    Mr. Dodson. Thank you, Senator Murkowski. Thank you for 
your continued commitment to all Alaskans and Alaska's energy 
needs.
    Alaska is blessed with vast energy resources. Beyond our 
conventional non-renewable resources of oil, natural gas, and 
coal, Alaska is also blessed with abundant natural resources--
renewable natural resources in the form of water, wind, 
geothermal, solar, biomass--renewable resources that could 
provide for Alaska's energy needs virtually indefinitely. 
Unfortunately, these renewable energy resources, most within 
easy reach of all Alaska communities, have been woefully 
underexplored and underdeveloped until only recently, while our 
vast conventional energy resources, particularly oil, have been 
a boon to State government, but have proven a drain on most 
Alaska citizens and most Alaska communities.
    Alaska is a sparsely populated State, only 680,000 
Alaskans. Our communities are spread across an immense State 
that covers 660,000 square miles. This makes the distribution 
of goods and services, like heating fuel and electric power, 
expensive and challenging. Over 50 percent of all Alaska homes 
are heated with fuel oil. Sixty-seven percent of their energy 
cost is from home heating.
    The cost of energy is crushing our economy. Many rural 
Alaska residents are leaving their communities, communities 
that have existed for hundreds of years are no longer 
sustainable because of the cost of energy. For Interior and 
rural Alaskans living in a winter Arctic environment, saving 
money by simply turning down the thermostat at 40 below, or 
turning off our lights when the sun only shines a few hours a 
day, is not an option.
    Alternative and renewable energy sources can be a part of 
Alaska's energy solution, but it is not the entire solution. 
Affordable, reliable, and sustainable alternative energy will 
take time, research, and investment if we are to achieve 
America's goal of 25 percent renewables by 2025. Twenty-five 
percent renewable, 75 percent conventional, but 100 percent 
affordable.
    Fairbanks Economic Development Corporation and the 
Fairbanks community has promoted energy issues from 
conservation, to biomass, to energy from municipal waste, to 
in-State use of natural gas, to hydroelectric power generation, 
to a biomass/coal to liquids project.
    When working on a biomass project we found that though the 
resource potential in the Fairbanks community, including woody 
biomass, crop slash, processed timber residue, land clearing 
and fire mitigation materials, and municipal solid waste were 
substantial. Only municipal solid waste was at a stage where it 
might be immediately used for energy production. For other 
biomass resources, questions regarding their true abundance, 
chemistry, cultivation, reforestation would all have to be 
answered before they could truly be utilized as a sustainable 
energy source.
    Alaska has vast forest lands. Its forest resource potential 
is immense. However, Alaska lags far behind other States in 
accurate, up-to-date forest inventory analysis. Neither the 
Federal Government nor the State have adequately invested in 
the necessary forest inventories. Surveying for forest type and 
tree species using on-ground techniques is critical for any 
sustainable use of biomass for energy resource.
    Also, just as a birch is different from barley, the energy 
output of different plant species can be radically different. 
Understanding the Btu output per volume of individual 
indigenous and introduced species is critical. We must 
determine what crops will produce more energy from use than 
they consume from production and transportation.
    When working on a waste-to-energy project, we found that 
existing commercial technologies were not scaled to be economic 
for similar communities. Communities such as Fairbanks, with 
just less than 100,000 people, and all of rural Alaska, cannot 
afford the heat and power generated from waste-to-energy 
projects that are currently--or equipment that is currently 
available commercially. Research, development, and testing, 
demonstration must be continued to allow waste-to-energy 
projects to become a viable part of the energy solution for 
small Arctic communities.
    In December 1958, an ad in the Fairbanks Daily News-Miner 
read: Coming, Natural Gas for Fairbanks, Nature's Perfect Fuel 
for Home and Industry. As you know today, more than 50 years 
later, that fuel source is still coming. With only 680,000 
residents, Alaska is not a large enough market to attract 
private investment in a gas line solely to service Alaska 
markets. That perfect fuel that could reduce Alaska's energy 
cost, that should be Alaska's fuel for 75 percent--be the 
Alaska fuel for communities use 75 percent of their energy 
needs, that would contribute to the reduction of Alaska's 
CO2 footprint, that can eliminate the Fairbanks 
PM2.5 issue. It is no closer to Fairbanks today or the majority 
of Alaska communities than it was 50 years ago. Conventional 
thinking will not solve this problem; simply hoping for private 
industry to make natural gas available to all Alaskans at an 
affordable price will not reduce our energy costs, meet EPA air 
quality guidelines, or reduce our CO2 emissions. 
Innovative thinking and bold leadership from our national and 
State officials is needed to make natural gas available to all 
Alaskans, and it is needed now.
    The first license request to build the Susitna Dam project 
was submitted to the Federal Regulatory Commission in 1984. 
That application was dropped within a year when the price of 
oil dropped and energy was perceived to be cheap.
    Hindsight tells us that the decision to drop the Susitna 
Dam application was wrong; energy produced from crude oil is 
not cheap, and our 1985 decision not to proceed with the 
construction of that project has contributed to today's high 
energy costs, increased CO2 emissions, and possibly 
global warming. Building Susitna Dam is a long-term project; it 
is not the answer for today's staggering energy costs, but it 
is an answer for future clean energy needs, and today is the 
time to restart the Susitna Dam project.
    In 2008, the Fairbanks Economic Development Corporation 
contracted with Hatch Limited for an engineering and 
feasibility study on a coal, biomass, and natural gas to liquid 
facility. That facility would take underutilized, low-value 
Alaska resources--biomass and coal--and produce jet fuel, 
Arctic-grade home heating fuel, no-sulfur road diesel. It would 
provide synthetic-blended liquid fuel for the United States 
military, firmly anchoring Alaska's military, a full 25 percent 
of our economy, to Alaska. It could be a base-load consumer for 
an in-State natural gas pipeline. Anccording to publications by 
Dr. Paul Metz of the University of Alaska and the United States 
Department of Energy, there is a strong indication that the 
CO2 produced in such a facility would be as valuable 
as a miscible injectant for enhanced oil recovery, sequestered, 
while at the--still at the same time allowing for the 
production of up to 12 billion additional barrels of North 
Slope crude from existing fields.
    Alaska is uniquely positioned to help America--to help 
America transition to a new energy future. No other people and 
no other State in our Nation are more reliant on energy for 
their survival. No other people have more to lose should we 
fail to succeed than the people of Alaska. No other people have 
more of a vested interest in seeing that these new and 
innovative technologies work. No other State has such a wide 
diversity of renewable, sustainable fuel sources at such a 
tremendous--at such an enormous abundance than Alaska. 
Therefore, no State is better positioned to drive the research 
on these new technologies than Alaska. If you create it, Alaska 
can power it. No other State has such a wide range of 
temperatures and climatic extremes, is as hard or unforgiving 
as Alaska. Therefore, Alaska is better positioned to serve as a 
test bed and proving ground for new energy technologies than 
anyone. Alaska tested, Alaska tough resonates for a reason. If 
you can make it work here, you can make it work anywhere.
    It is unfortunate that the national discussion on energy is 
often dominated by advocates of the extremes--those who say we 
can continue on forever with business as usual, or those who 
say we must chuck conventional energy sources and move 
wholesale into renewable. Alaska and America need both 
renewable and conventional energy. The president's goal is 25 
percent energy generated from renewable sources by 2025. In 
Alaska, if we were able to provide rural Alaska with 25 percent 
renewable energy for free, their energy bill would still be 
unsustainably expensive. Alaska--energy is a fundamental 
component of any economy. 25 percent renewable, 75 percent 
conventional, but 100 percent affordable. Growing our economy, 
creating jobs and opportunity for people, that should be our 
mission. The president's 25/75 target is bold, but it is 
realistic. At least in Alaska it is achievable. Together we 
must begin the journey that will complete our mission. Thank 
you for your time.
    [The prepared statement of Jim Dodson follows:]

 Prepared Statement of Jim Dodson, President & CEO, Fairbanks Economic 
                 Development Corporation, Fairbanks, AK
    Senator Murkowski, thank you for your continual commitment to all 
Alaskans and Alaska's energy needs, and please thank your follow 
members of the Senate Energy and Natural Resources committee for their 
willingness to learn more about our energy issues.
    Alaska is blessed with vast energy resources. Beyond our 
conventional non-renewable energy resources of oil, natural gas and 
coal, Alaska is also blessed with tremendous renewable energy resources 
in the form of water, wind, geothermal, solar and bio-mass--renewable 
resources that could provide for the Alaskan people's energy needs 
virtually indefinitely. Unfortunately these renewable energy resources, 
most within easy reach of all Alaska communities, have been woefully 
underexplored and underdeveloped until only recently, while Alaska's 
vast conventional energy resources, particularly oil, though they have 
been a boon for Alaska's State government, have proven a drain on most 
of Alaska's citizens and most Alaska communities.
    Alaska is a sparsely populated State: there are only 680,000 
Alaskans. Our communities and our people are spread across an immense 
State that covers more than 660,000 sq. miles. This makes the 
distribution of goods and services, like heating fuel and electric 
power, expensive and challenging. Over 50% of all Alaska homes are 
heated with fuel oil. Home heating accounts for 67% of Interior and 
Rural Alaska's energy cost. According to a State of Alaska survey 
conducted in June of 2007, Interior Alaskan residents were paying an 
average of $2.47 per gallon for fuel oil and Rural Alaskans were paying 
an average of $6.25 per gallon for the same product. Since June of 2007 
the price of crude has, at one point, more than doubled. Likewise, 
because oil is used widely in Interior and Rural Alaska to fuel 
electrical generation, electric rates, particularly in Rural Alaska, 
can be higher by a factor of twenty or more than in localities with 
access to a more diversified energy mix including natural gas, 
hydroelectric and coal. It was reported in the Anchorage Daily News 
that 20% of Rural Alaskans are paying 47% of their income for energy 
costs, while that same group living in Anchorage are paying 9% of their 
income for energy. Because of this, and the crushing effect it is 
having on their economies, many Rural residents are leaving their 
communities; communities that have existed for hundreds of years are no 
longer sustainable because of the cost of energy.
    For Interior and Rural Alaskans living in a winter Arctic 
environment, simply turning down the heat at 40 below, or turning off 
the light when the sun only shines a few hours a day, to save money is 
not an option.
    Alternative and renewable energy sources can be part of Alaska's 
energy solution, but they are not the entire solution. Affordable, 
reliable and sustainable alternative energy will take time, research 
and investment to accomplish America's goal of 25% energy from 
renewable sources by 2025. As we move towards alternative and renewable 
energy sources we must not forget, that even if we accomplish this 
ambitious goal, we still must find solutions to deliver conventional 
energy to all Alaskans so that the remaining 75% of their energy usage 
is affordable--25% renewable, 75% conventional but 100% affordable.
    The community of Fairbanks has taken a leading role in developing 
renewable energy sources for Alaska. Lead by the Fairbanks Economic 
Development Corporation and its' think tank organization, the Interior 
Issues Council, the Fairbanks community has promoted energy issues from 
conservation, to bio-mass, to energy from municipal waste, to instate 
use of natural gas, to hydro-electric power generation, to a biomass/
coal to liquids project.
    All of these initiatives present opportunities but also face unique 
challenges.
    When working on Biomass projects we found that, though the resource 
potential of the Fairbanks community--including woody biomass, crop 
slash, processed timber residue, land clearing & fire mitigation 
material and municipal solid waste--was substantial, only municipal 
solid waste was currently at a stage where it might be immediately used 
for energy production; being readily available in volume, and already 
economically collected and transported. For other biomass resources, 
outstanding questions regarding their true abundance, chemistry, 
agronomy, cultivation and reforestation, along with economic systems of 
harvest and transport, would all have to be answered before they could 
move to the type of commercial scale production required for sustained 
industrial use.
    Alaska has vast forest lands and, on its face, its forest resource 
potential is immense. However, Alaska lags far behind other States in 
accurate and up to date Forest Inventory Analyses. Neither the Federal 
Government nor the State of Alaska have adequately invested in 
necessary forest inventories. Surveying for forest type and tree 
species using on-ground techniques is critical for any sustainable use 
of biomass as an energy resource. Research needs to be funded that will 
link ground-truth data to remote sensing data allowing us to cut future 
costs for continuing inventories and provide a more complete biomass 
inventory of the State of Alaska.
    Also, just as a birch is different from barley, the energy output 
of differing plant species can be radically different. Understanding 
the Btu output per volume of individual indigenous or introduced plant 
species is critical both for estimating the energy potential of 
existing forests and for determining the best foliage to plant in its 
place once those existing stands have been cleared. Parallel to this is 
the necessity for ascertaining the growth rates of different species 
under varying conditions and varying regimes of fertilization and care. 
An economic system for harvesting the biomass must be identified. All 
this must be done in a way that allows for the economical transport of 
the harvested biomass from field to facility--producing more energy for 
use than is consumed in production and transport. It is only with this 
type of information in hand that we can optimize biomass cultivation 
and name it truly a sustainable energy resource. Therefore, research on 
species selection for Btu output, regeneration, harvest, transportation 
and reforestation needs to be funded.
    When working on a waste to energy project we found that the 
existing commercial technologies were not scaled to be economic for 
smaller communities. Communities such as Fairbanks, with just less than 
100,000 residents, and all of Rural Alaska, cannot afford the power and 
heat generated from what waste to energy equipment is currently 
commercially available. Research, development, testing and 
demonstration must continue to allow waste to energy projects to become 
a viable part of the energy solution for a small arctic community.
    In December of 1958 an ad in the Fairbanks Daily News Miner read: 
``Coming.Natural Gas for Fairbanks, Natures Perfect Fuel for Homes and 
Industry!'' As you know today, more than 50 years later, that fuel 
source is still ``coming''. With only 680,000 residents, Alaska is not 
a large enough market to attract private investment in a gas line 
solely to service Alaska markets. That ``perfect fuel'' that could 
reduce all Alaska's energy cost--that should be the fuel that Alaska 
communities use for 75% of their energy needs, that would contribute to 
the reduction of Alaska's CO2 footprint, that can eliminate 
Fairbank's PM2.5 issues--is no closer today to Fairbanks or the 
majority of Alaska than it was 50 years ago. Conventional thinking will 
not solve this problem; simply hoping for private industry to make 
natural gas available to all Alaskans at an affordable price will not 
reduce our energy cost, meet EPA's air quality guideline or reduce our 
CO2 emissions. Innovative thinking and bold leadership from 
our National and State officials is needed to make natural gas 
available to all Alaskans; and it is needed NOW.
    The first license request to build the Susitna Dam project was 
submitted to the Federal Regulatory Commission in 1984; that 
application was dropped within one year when the price of oil dropped 
and energy was perceived to be cheap. Hindsight tells us that the 
decision to withdraw the Susitna application was wrong; energy produced 
for crude oil is not cheap and our 1985 decision to not proceed with 
that project has contributed to today's high energy costs, increased 
CO2 emissions and, possibly, accelerated global warming. 
Building Susitna Dam is a long term project; it is not an answer to 
today's staggering energy costs but it is an answer for future clean 
energy needs and today is the time to restart the Susitna Dam project.
    In 2008, the Fairbanks Economic Development Corporation contracted 
with Hatch Ltd for a high level engineering and feasibility study of a 
Biomass, Coal and Natural Gas to Liquids facility. This facility would 
take underutilized, low value Alaska resources--biomass and coal--and 
transform them into ultra clean, high value liquid fuel products like 
jet fuel, arctic grade home heating fuel, virtually no-sulfur road 
diesel and naphtha. But more than that, the facility would establish 
Interior Alaska as a major producer of synthetic blended liquid fuels 
for the military, firmly anchoring Alaska military, 25% of our economy, 
to Alaska. This project could also be a critical base load consumer for 
an In-State Natural Gas pipeline. Additionally according to a white 
paper written by Dr. Paul Metz of the University of Alaska Fairbanks, 
basing his analysis on the 2005 U.S. Department of Energy report, there 
is strong indication the CO2 produced by such a facility 
could be valuable as a miscible injectant in Enhanced Oil Recovery--
sequestered, while at the same time allowing for the production of up 
to 12 Billion extra barrels of safe, secure, domestically produced 
North Slope crude from existing fields.
    Alaska is uniquely positioned to help transition America to a new 
energy future. No other people and no other State in our Nation are 
more reliant on energy for survival. No other people are more 
vulnerable should we fail to succeed than the people of Alaska and, 
therefore, no other people have a more vested interest in seeing that 
these new and innovative technologies work--we need them to work. No 
other State has such a wide diversity of renewable, sustainable fuel 
sources, in such enormous abundance, than Alaska and, therefore, no 
State is better positioned to drive the research on new energy 
technologies--if you create it, Alaska can power it. No other State has 
such a wide range of temperature & climatic extremes, is as hard or 
unforgiving, as Alaska and, therefore, no State is better positioned to 
serve as the test bed and proving ground for new energy technologies--
''Alaska Tested, Alaska Tough'' resonates for a reason; if you can make 
it work here, you can make it work anywhere.
    Having helped perfect these systems--simplifying, hardening and 
proving these technologies--Alaska will have acquired a body of 
experience and expertise that is itself highly valuable and eminently 
marketable--allowing it to remain not only an exporter of energy 
resources but an exporter of energy knowledge, long after its 
conventional energy resources have been depleted.
    It is unfortunate that the national discussion on Energy is often 
dominated by advocates of the extremes--those who say we can continue 
on forever with business as usual or those who say we must chuck 
conventional energy sources and move wholesale to renewable energy. 
Alaska and America need both renewable and conventional energy. The 
President's goal is 25% of energy generation using renewable sources by 
2025. That goal leaves 75% of our energy coming from conventional 
sources. We must not forget that even if we were able to provide Rural 
Alaska with the 25% renewable energy for free their bill would still be 
unsustainably expensive. Energy is a bedrock component and fundamental 
underpinning of any Economy. ``25% renewable, 75% conventional but 100% 
affordable''.protecting our economy while we advance it, creating jobs 
and opportunities for people--should be our MISSION.
    The journey of 1,000 miles begins with the first step and we will 
do ourselves a great service--greatly improve our chances of reaching 
our destination--if we simply accept that there probably aren't any 
short cuts; we will have to walk every step of the way. This 
recognition is inherent in the President's 25-75 target. It is bold, 
but it is realistic and, at least in Alaska, it is achievable. The 
experience of the Fairbanks community and Fairbanks Economic 
Development Corporation regarding energy--facing challenges but seeking 
opportunities, encountering barriers but working to overcome them, 
stumbling at times but always, always moving Forward--is a trail that 
must taken but together we can reach our destination.

    Senator Murkowski. Thank you, Jim. I appreciate your 
testimony.
    Doug Johnson, welcome.

  STATEMENT OF D. DOUGLAS JOHNSON, DIRECTOR OF PROJECTS, ORPC 
                   ALASKA, LLC, ANCHORAGE, AK

    Mr. Johnson. Good afternoon. To those of you that aren't 
Alaskans, welcome to Alaska. Thank you for taking your valuable 
time to hear our testimony today.
    I'm Doug Johnson, the Alaska projects director for Ocean 
Renewable Power Company. Our company is currently developing 
two projects here in Alaska and one in Maine. Our project in 
Maine is a tidal energy project in Western Passage, on the 
American side of the Bay of Fundy. Our projects here in Alaska 
are a tidal energy project in Cook Inlet adjacent to Anchorage 
and a river energy project on the Tanana River about 100 miles 
from here in the community of Nenana.
    My great-grandfather came to Alaska in the gold rush. His 
cousin was one of the Three Lucky Sweeds that made the original 
gold strike in Nome. Today, like those pioneers of the past, a 
new generation here in Alaska is pioneering the development of 
the renewable energy industry.
    Never before has there been a greater opportunity for new 
sustainable economic development here in Alaska and across our 
country than today. The transition to low or no carbon 
renewable energy is inevitable. As the climate data is telling 
us, it's needed sooner rather than later.
    Currently in the arena in marine hydrokinetics, the 
Europeans are the world leaders. Fortunately it is still early 
in the game and we have the opportunity to leap-frog the 
Europeans using our native innovative abilities. If we don't 
take advantage of this opportunity, it will be another loss of 
stature for the United States in the global arena. More 
importantly, a loss of new jobs in a key emerging industry. The 
world looks to the United States as a leader in innovation, and 
we have the unique opportunity to demonstrate our leadership 
once again.
    To take advantage of this opportunity, our industry needs 
your help now. As a fledgling industry here in Alaska we see 
four key road blocks that government can remove. Without this 
help, we will not be able to realize the environmental and 
economic promise of marine renewable energy.
    Roadblock No. 1: Lack of Federal agency coordination. Lack 
of timely coordination amongst the agencies wastes scarce and 
valuable human and monetary capital, a luxury an emerging 
industry cannot afford. We need agencies to be well coordinated 
producing streamlined highly--high-quality development 
processes.
    Roadblock No. 2: Technology-stifling impact of baseline 
data collection requirements for pilot projects. We are 
spending a million dollars this year in Cook Inlet, with 
agencies requesting we do the same or more next year without 
ever having a device in the water. We believe that in Alaska a 
year of baseline combined with the substantial available data 
is adequate with the proviso that we continue extensive 
monitoring with our devices in the water. This is the best way 
to assess the potential environmental effects. If we find a 
serious problem, our devices can be shut down immediately and 
removed in days.
    Roadblock No. 3: Increased Federal and State research role. 
We need the Federal and State agencies to actively partner with 
us as stewards of the public resource to assist in a more 
fully--to assist in more fully characterizing our pilot sites 
energy resources, physical and environmental and marine life.
    Roadblock No. 4: Lack of continuity between pilot project 
license and full commercial license. Presently there is no 
clear pathway to go from a pilot project license to a 
commercial project license. We propose the development of a 
clear bridge from successful pilot to a commercial license.
    I have included a detailed discussion of each of these 
points in my written testimony, including our proposed 
solutions. The time is now, the opportunity is before us, and 
we in the marine renewable energy industry are ready to move 
forward. With your help, our country can take the leadership 
role in this exciting new industry. Thank you for the time to 
speak with you today.
    [The prepared statement of Doug Johnson follows:]

 Prepared Statement of D. Douglas Johnson, Director of Projects, ORPC 
                       Alaska, LLC, Anchorage, AK
    Good afternoon and for those of you who are not Alaskan's welcome 
to Alaska. Thank you for taking your valuable time to hear our 
testimony today.
    I am Doug Johnson the Alaska Projects Director for Ocean Renewable 
Power Company. Our company is currently developing two projects here in 
Alaska and one in Maine. Our project in Maine is a tidal energy project 
in Western Passage, on the American side of the Bay of Fundy. Our 
projects here in Alaska are a tidal energy project in Cook Inlet 
adjacent to Anchorage and a river energy project in the Tanana River 
about 100 miles from here in the community of Nenana.
    My great grandfather came to Alaska in the gold rush. His cousin 
was one of the ``Three Lucky Sweed's'' who made the original gold 
strike in Nome. Today, like those pioneers of the past, a new 
generation here in Alaska is pioneering the development of the 
renewable energy industry.
    Never has there been a greater opportunity for new sustainable 
economic development here in Alaska and across our country than today. 
The transition to low or no carbon renewable energy is evitable and, as 
the climate data is telling us, it is needed sooner rather than later.
    Currently in the arena of marine hydro-kinetics, the Europeans are 
the world leaders. Fortunately it is still early in the game and we 
have the opportunity to leap-frog the Europeans using our native 
innovative abilities. If we don't take advantage of this opportunity, 
it will be another loss of stature for the U.S. in the global arena 
and, more importantly, loss of new jobs in a key emerging industry. The 
world looks to the U.S. as a leader in innovation and we have the 
unique opportunity to demonstrate our leadership once again.
    To take advantage of this opportunity, our industry needs your help 
now. As a fledgling industry, here in Alaska we see four key road 
blocks that government can remove. With out this help, we will not be 
able to realize the environmental and economic promise of marine 
renewable energy.

                 1. lack of federal agency coordination
   Lack of timely coordination among the agencies wastes scarce 
        and valuable human and monetary capital, a luxury an emerging 
        industry cannot afford.
   We need agencies to be well coordinated producing a 
        streamlined high quality development process. D. Douglas 
        Johnson's Oral Testimony Thursday, August 20, 2009
   Need to ensure that FERC Pilot Project process is 
        implemented fully, and that the NOAA and USFW staff cooperate 
        fully with its streamlined permitting procedures, designed to 
        empower testing of R&D technology in temporary, low impact 
        projects. Currently some Services staff resist cooperation with 
        Pilot Project process, insisting on baseline data and review 
        which is equivalent to full project review.
2. technology-stifling impact of baseline data collection requirements 
                           for pilot projects
   We are spending 1million $ in Cook Inlet this year with 
        agencies requesting we do the same or more next year before we 
        ever get a device in the water o We believe that in Alaska a 
        year of baseline combined with the substantial available data 
        is adequate with the proviso that we continue extensive 
        monitoring with our devices in the water. This is the best way 
        to assess potential environmental effects. If we find a serious 
        problem, our devices can be shut down instantly and removed in 
        days.
              3. increased federal and state research role
   We need the Federal and State agencies to actively partner 
        with us as stewards of the public resource to assist in more 
        fully characterizing our pilot sites energy resource, physical 
        environment and marine life
     4. lack of continuity between pilot project license and full 
                           commercial license
   Presently there is no clear pathway to go from a pilot 
        project license to a commercial project license
   We propose the development of a clear bridge from successful 
        pilot project to a commercial license

    I have included a detailed discussion* of each of these points with 
my written testimony, including our proposed solutions.
---------------------------------------------------------------------------
    * Document has been retained in committee files.
---------------------------------------------------------------------------
    The time is now, the opportunity is before us, and we in the marine 
renewable energy industry are ready to move forward. With your help, 
our country can take the leadership role in this exciting new industry.
    Thank you for the time to speak with you today.

    Senator Murkowski. Thank you, Doug.
    Our final panelist this afternoon is Mr. Dennis Meiners. 
Welcome.
    Mr. Meiners. Thank you, Senator.

 STATEMENT OF DENNIS MEINERS, CEO, INTELLIGENT ENERGY SYSTEMS, 
                         ANCHORAGE, AK

    Mr. Meiners. Senator, thank you very much for the 
opportunity to speak with you and the committee today. My name 
is Dennis Meiners. I'm the CEO of Intelligent Energy Systems, 
and director of Power Corp. Alaska.
    Intelligent Energy Systems is a project coordinator and 
developer for rural energy projects. We work directly with 
villages to develop appropriate solutions to solve energy 
problems. Power Corp. Alaska is an integrator and advanced 
control system provider.
    But what I'm here to talk to you about is the group--the 
Chaninik Wind Group, and our Chaninik projects. I have been 
working in wind-diesel for the last 15 years, 10 at the Alaska 
Energy Authority. When it came to renewables, we were looking 
at using renewables to decrease dependency on diesel fuel at 
the Energy Authority.
    I think that there are three truths that are--or 3.5 truths 
that are self-evident about rural energy. The first one is that 
we must--there's no choice, we must end the dependency on 
fossil fuels. Two, right now with the current tools we have, we 
can decrease the use of fossil fuels by 40 to 50 percent in 
over 100 villages based on wind. That's not just for 
electricity, but that's for heating fuel, transportation, and 
electricity. The third truth is that village wind heat--I'll 
call it village high-penetration wind heat--is really a pathway 
to our national energy future.
    Now, some people may laugh at that, but we've heard from 
other panel members that villages are proving grounds for the 
integration, stability, and management of high levels of 
renewable energy. That's the truth. The 0.5 truth is wow, 
Bernie, I agree with Bernie.
    What we're doing in the Chaninik Group is a group of four 
villages between Kwigillngok, Kipnuk, Kongiganak, and 
Tuntutuliak at the mouth of the Kuskokwim River. They have a 
very good wind resource there. Their goal was to combine as a 
group to build wind-diesel systems to make the communities more 
self-reliant.
    We have three projects underway. Each of those projects has 
about one kilowatt of installed capacity per resident. We're 
taking that energy--that's a lot of wind power in relation to 
the population and the electric load. In fact, at most times 
the wind power will provide more energy than is needed to meet 
the electric load. That excess energy will be stored in thermal 
storage units in individual homes to decrease heating costs.
    One of the first things we did was to do an energy survey 
to find out how much energy individual homes were using, and 
where there energy budget was being spent. What we realized 
early on was that although electricity is expensive at about 65 
cents a kilowatt hour, the real impact on a household was 
paying the heating bill. You can have 1,000 square foot house, 
and they may have a heating bill that's 6- to $8,000 a year for 
a family that's maybe--has an income of around $40,000 total. 
Then when you look at a subsistence lifestyle that requires you 
to use outboards and snowmachines to go gather your food, and 
gasoline is expensive, what we see is that probably two-thirds 
of a home energy budget goes to heating fuel, and maybe 15 
percent goes to electricity, and the rest goes to 
transportation.
    So the major problem that we're trying to address is heat, 
we're--and when you look at the wind, the wind resources 
available, and when you need the heat, it's when the wind 
blows. Most of the wind blows at night in the wintertime, so 
you need to store it. So we're taking--we have installed excess 
wind capacity. We take that excess wind, and we store it in 
individual thermal devices in homes. These devices are about 
the size of a Toyo Stove, which is a common heating appliance 
in rural homes. It contains bricks that heat up to around 1,200 
degrees. Those bricks store the heat, and they're used 
throughout the day.
    We estimate that with our current projects we can only 
provide for about a 50 percent heating fuel displacement in a 
quarter of the homes. What we see in the next phase of projects 
in--we're looking at a project in Kipnuk where we would like to 
go to provide three to five kilowatts of installed wind 
capacity per resident and displace a total of 50 percent of the 
heating fuel and the fuel used to generate electricity in the 
entire community.
    We have to innovate with wind power. Current wind systems 
that are going in now have about one-third of a kilowatt of 
installed capacity of wind per resident. The energy produced 
from that--from those--from that wind is used to displace fuel 
at the powerhouse only. What we see is that that's not a 
solution. When you install a small amount of wind power, say 
one or two wind turbines, the economics don't favor a scaled 
construction effort to drive the individual cost of--per 
kilowatt down, and also the systems don't produce enough 
electricity to make the maintenance operations economic.
    If we put in large wind turbines in small communities and 
we focus on displacing the major portion of fuel, which is used 
for home heating, that changes the entire economics of 
renewable energy in rural Alaska. First of all, you're no 
longer sending dollars out of the community to the fuel 
companies. You're keeping those heating dollars in the local 
pockets of the residents. Too, we can sell that using advanced 
metering and control systems with grid stability. We can sell 
that electricity to a resident for at least 50 percent of the 
cost of the heating fuel. So not only have you reduced the 
heating cost to the consumer, but you've also increased 
revenues to the local utility.
    So the Chaninik Group was formed with a focus on 100 
percent displacement of fossil fuels with renewables. Now 
that's a long-term goal, but our short-term goal, it's in the 
church of the here and now. We're doing hand-to-hand combat 
with the technologies that we have, and we know that we can get 
to 40 to 50 percent. Now, if the Chaninik Group is successful, 
then that model should spread to at least half of the villages 
in Western Alaska.
    I think that if we look at wind not as supplying 
electricity, but if we look at the whole energy picture in a 
community, there's solutions here. Those same solutions apply 
across the Nation. Because if you look at wind--the wind 
resources available in the Midwest, there's a lot of excess 
wind at night. So the same wind heat storage solution is 
applicable throughout the country. The same backbone, the same 
control backbone, the same metering backbone that has to go in 
to manage that wind energy separate than diesel-generated 
electricity is the same backbone that's needed to provide 
lower-cost electricity or use renewable types of energy to 
provide power for plug-in vehicles.
    So the Chaninik Group, we see ourselves sort of as the 
little gnat out there that's annoying the tail that wags the 
dog. The big dog is the electric--the big boys with the big 
wind turbines and the big oil companies and the--you know, the 
major energy suppliers. We need solutions that are applicable 
for us now. We're pioneering those. We think they're going to 
be valuable for everyone.
    I know this is a national sort of a--a national issue. I 
just want to say that there are a lot of other small companies 
and small efforts across the country that are helping us. We 
have partners in South Dakota, North Dakota, North Carolina, 
Vermont. We're encouraging new--new wind manufacturers in 
Arkansas, we're buying software and engine generator controller 
parts from across the--from Colorado and Michigan, all across 
the country. We need the helps of--we need the help of many, 
many small businesses to assist our efforts. So this is not 
just an Alaska effort, this is a--this is a must for Alaska, 
but it's also important for the rest of the country.
    So thank you, Senator, for the opportunity to speak today.
    [The prepared statement of Mr. Meiners follows:]

Prepared Statement of Dennis Meiners, CEO, Intelligent Energy Systems, 
                             Anchorage, AK
                                abstract
    The Chaninik Wind Group was formed in 2005 by the villages of 
Kongiganak, Tuntutuliak, Kwigillingok, and Kipnuk with the objective of 
effectively capturing the wind resources of Western Alaska to foster 
self-reliance.
    The residents of these communities are completely dependent on 
fossil fuels, and can spend up to $8.00 per gallon for heating fuel, 
and $0.65 per kilowatt hour for electricity. Diesel fuel is needed to 
generate electricity to light and heat homes. Gasoline at $7.00 per 
gallon powers outboards and snow machines needed to gather food. Energy 
accounts for 25% of a typical household budget, which leaves little for 
food, health care, clothes and the necessities of supporting a family 
or community. Small communities can't survive without significantly 
reducing dependency on fossil fuels.
    Today Chaninik is in the beginning stages of implementing village 
wide wind-heat smart grids, designed to displace up to 50% of all the 
fossil fuels used for heating, power generation and transportation.
    Success of these projects reflects national goals of reducing 
dependency on fossil fuels, lowering energy costs, and improving the 
economic and environmental health of the Nation. The Chaninik projects 
are important because they are directly and rapidly addressing the 
technical challenges of stabilizing energy grids while effectively 
managing large injections of wind energy. These are challenges that we 
all need to address if we are to have a cleaner, stronger, safer 
country.
                    wind heat smart grids for alaska
    Electrical delivery in rural Alaska consists of over 170 isolated 
diesel grids, spread across a geographic area larger than the States of 
California, Texas and Montana combined. These communities are isolated 
from each other, unconnected by electrical interties, or accessible by 
roads. According the estimates by the Alaska Energy Authority, 100 of 
these communities have wind resources sufficient to generate 
electricity. Wind energy has the potential to displace 50% of the 
diesel fuel used for heating and power generation. This level of wind 
penetration would lower residential energy costs, increase revenues to 
local utilities, and stabilize local economies, by keeping dollars in 
the community and creating local jobs.
    To achieve this objective, village energy systems must move from 
current installed wind systems which represent \1/2\ kW of installed 
capacity per resident to systems with 3 to 5 kW of installed capacity 
per resident. The hybrid wind diesel power systems must be designed for 
grid stability at wind penetration rates of 400% or more, and with 
ability to capture, store and manage excess wind capacity. In the case 
of villages, distributed electric thermal stove storage, smart metering 
systems, and flywheel grid stability systems will be used to achieve 
these objectives. This same model could serve equally well for the 
implementation of plug-in vehicles, or widespread use of wind heat 
across the lower 48 States and Hawaii.
    In rural Alaska, there is a similar match between wind power and 
the need for heating fuel. Wind energy represents the single most cost 
effective and widely applicable source of renewable energy today. On 
windy winter nights, wind generation will drive off-peak electric rates 
down, making wind assisted heating the low cost heating option. Due to 
the variable nature of wind, as larger and larger proportions of wind 
are added to the village power system, sub second power fluctuations 
must be stabilized. This is done by rapid injection and absorption of 
real energy with a flywheel energy storage unit, which allows for 
smaller and smaller amounts of diesel generation as excess wind energy 
is stored for later use.
    Increased use of Electric Thermal Storage (ETS), referred to as 
Wind Assisted Heating, is one tool that is ready now to allow the 
electric grid to productively use higher percentages of renewable 
energy. This will ensure the new investment in wind generation is fully 
utilized, minimizing carbon emissions and keeping heating costs low.
    While the potential exists for the widespread and significant 
displacement of diesel fuel, much of the wind resource occurs at night 
in the wintertime. In the village systems, this wind energy will be 
stored in thermal stoves located in each residence. In another 
application the thermal stoves could be substituted for a plug-in 
vehicle. Heating requirements are greatest when the winter winds blow, 
and this method is estimated to lower home heating costs by 50% with 
the revenues flowing into the village owned utility rather than leaving 
the community with the fuel company.
                     chaninik wind heat smart grids
    The Chaninik Wind Group has begun construction of three medium size 
Wind-Heat Smart Grids (a diagram* of the system is below)
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
---------------------------------------------------------------------------
    Each system is designed to integrate, capture and store large 
amounts of wind energy whenever it is available, and use that energy 
cost effectively to displace diesel fuel usage. Each system will be 
equipped with a smart metering system to dynamically manage, price and 
account for the sale of wind energy separate from diesel, so that the 
customer can participate in the cost savings. The wind turbines, 
integrated control system, and flywheel energy storage module that 
rapidly injects and absorbs power fluctuations hold the grid stable as 
wind is made available to charge thermal stoves in homes and community 
buildings.
    The three medium size systems with 1.5 kW of installed wind 
capacity per resident are underway in Kongiganak, Kwigillingok and 
Tuntutuliak. These systems only have enough wind capacity to provide 
wind heat for 1/4 of the homes, while still displacing 40% of the fuel 
used to generate electricity.
    A fourth system proposed for the community of Kipnuk is based on 
the installation of 3 kW of installed wind capacity per resident and is 
designed to have sufficient wind capacity to displace 50% of all 
heating fuel used throughout the community for heating and power 
generation. This system is likely to be the model for the rest of rural 
Alaska.
    The ability to utilize high proportions of wind energy versus 
fossil fuels requires the same technical platform used in each Chaninik 
community: integrated controls, flywheel grid stability, smart 
metering, and appropriate energy storage devices. The only differences 
are the amounts of installed wind capacity and the extent of the 
metering and energy storage devices. The principles and methods being 
pioneered by Chaninik can be applied on larger grids and more extensive 
energy systems with thermal energy storage and plug in vehicles. For 
Chaninik the system is designed to maintain high fuel displacements for 
power generation even at lower wind speeds, because of the capability 
of the flywheel energy storage systems and reduced need for heating.
              cost savings: thermal storage vs. batteries
    A residential or small commercial heating system costs about $30 
per kWh installed compared to a recent installation of a 7mWh Sodium 
Sulfur (NaS) Battery at approximately $150 per kWh. Electric Thermal 
Storage systems are more cost effective because they work like the 
thermal battery with the heating system included.
    Thousands of electric thermal systems have been installed across 
North Dakota, South Dakota, Iowa, Minnesota and Wisconsin to take 
advantage of off-peak rates available from coal fired power plants. 
These systems are used as a primary source of low cost heat. Increased 
installation of wind will enable more wide spread use of Wind Assisted 
Heating systems.
             low carbon footprint and low cost of operation
    Opportunities exist to pair wind assisted electric thermal energy 
storage units with air source heat pumps (ASHP). This combination 
offers the possibility of displacing even more heating fuel with wind 
energy reducing the carbon footprint of the home heating system as more 
renewable energy is added.
                        dynamic demand response
    Dynamic device control and pricing through advanced metering is 
needed to enable devices such as electric thermal storage devices, 
plug-in vehicles, water heaters, and air conditioners to respond to the 
availability of wind energy. Maximizing wind resources involves being 
able to quickly respond to the availability of wind by providing 
pricing options for customers, while at the same time maintaining power 
quality through voltage and frequency control. The combination of 
flywheel grid stabilization, integrated generation control and advance 
metering are needed to manage the system.
                        the regional smart grid
    When completed, the combined four village project will have created 
a series of Wind Diesel Smart Grids that are linked together with a 
digital control and metering network. Advanced controls, metering, and 
communications tools represent a scalable backbone for extending this 
network to other communities, in the Chaninik region and throughout 
Alaska. The Smart Grid Network represents significant costs savings 
through remote technical and administrative cooperation.
    Wind Diesel Hybrid Smart grid tools include: supervisory generation 
and distribution controls, advanced metering infrastructure, wind 
turbines, thermal storage devices, and grid stability and control 
methods, in this case flywheel energy storage.
                               conclusion
    The success of the Chaninik wind group is both necessary for 
villages to survive and vitally important to this country. These 
projects lead the way to new, more productive and more cost effective 
uses of wind energy. Some examples of the value they create include:

          1. Expanded use of wind power for heating, power generation, 
        and transportation.
          2. Implementation of the smart grid tools to improve 
        management and link communities together.
          3. Stabilization of local economies, through creation of 
        jobs, and substituting local renewable resources for fuel 
        purchases.

    The successes of these projects can have an immediate impact in 
Washington State, Wyoming, Kansas, Indiana, Minnesota, Wisconsin, New 
York, California, Iowa, Texas, and Colorado.
    Progress in Rural Alaska is only possible with small business 
partners across the Nation, here are just a few:

          North Dakota--Electric Thermal Storage, Steffes Corporation, 
        Dickenson North Dakota
          South Dakota--Transformers, T&R Electric Supply Company: 
        Training: Airstreams Renewables, Inc., turbine supply and 
        maintenance; Energy Maintenance Services, Howard South Dakota
          North Carolina--Triangle Software and Elster meters
          Washington State--Pacific Northwest National Labs, Fluke, 
        Applied Power and Control, North Coast Electric, Lynden 
        Transport, Horizon Lines, Oak Harbor Trucking, Outback 
        Inverters, Itron, Weyerhaeuser, Schweitzer Engineering 
        Laboratories, Costco
          Arizona--Sandia National Labs
          Arkansas--AWE Windturbines
          Colorado--National Renewable Energy Laboratory, Woodward Ft. 
        Collins, Sustainable Automation,
          Vermont--Northern Power Systems, Draper laboratories
          Michigan--National Instruments, IXXTP.

    Senator Murkowski. I appreciate your testimony. Dennis, how 
much are the thermal units if it's in somebody's residence? 
What does the unit cost right now?
    Mr. Meiners. A thermal unit is probably around $2,000. But 
in rural communities, because the electric system is so--may 
not be up to code, some code improvements have to be made, so a 
typical installation for one of these systems is--could be 3- 
to $4,000.
    Senator Murkowski. You know, the conversation that we've 
had with this panel particularly, whether it's geothermal, 
wind, biomass, ocean tidal, or wind opportunities, wind-diesel, 
I think we recognize that unless we can be building things to 
scale to allow for the efficiencies in small communities, 
wonderful technology is happening all over out there, but if 
you can't figure out how you make it cost efficient in a 
village, cost efficient in a smaller community where, you know, 
we're not hooked into anybody else. One of the discussions that 
we haven't had which really gets people a little bit agitated 
when I bring it up because it's--it is something that we've got 
to deal with, if you're not living right where the energy 
source is, you got to move it to get it to the people, and it's 
al--the big issue about transmission, which, on a national 
scale, is something that, you know, some of my colleagues just 
don't even want to go there, because then we're really talking 
about some controversial issues. But I think it's important to 
recognize that we're going to have to figure out in this State 
how we can take a small community like Kipnuk, which, you know, 
maybe has 350, 450 people there--800 in Kipnuk? OK. So I'm down 
by half. But still, you've got an 800-person community, and for 
us to go in and say well, we're going to help you reduce your 
energy costs, but the cost of doing so is absolutely 
prohibitive, we haven't helped them out. So getting things to 
scale.
    The project that you described, Dennis, in how we can 
really be looking to the whole energy picture and how we reduce 
those costs is, I think, something that we need to key into 
with--particularly in this State. I was in Newtok yesterday, 
and they're moving that village to another spot on higher 
ground on Nelson Island. There's four different villages on 
that island, and the question now is how they tie into one 
another to utilize some of the energy opportunities that exist 
out there. But again, this is something that we haven't had 
much, if any, discussion here in these two panels this morning. 
But I think, again, we recognize that our geography makes it 
complicated and difficult, but we've got to be looking to how 
we deal with the transmission issues as well.
    As I mentioned with our first panel, I've got a whole host 
of questions that I will ask to each of you in writing and 
would ask for your cooperation so that we can include them as 
further part of the record. But I want to just kind of throw 
out to each of you--and I'm watching my watch, Bernie; I think 
we've got about 10 minutes before we got to cut it off here so 
we can move on to your program? Is that about right?
    Mr. Karl. You got all the time you want, Senator.
    Senator Murkowski. All right. I'm not going to mess with 
the schedule here. But from your perspectives, whether it's in 
geothermal or wind or ocean or biomass, how can we, from the 
Federal level, better help to facilitate some of the smaller-
scale projects? Because they're not nearly as interesting and 
intriguing on paper. If you're not supplying power to large 
regions, large numbers, how can we better help to facilitate 
that?
    You know, Bernie, you have made your--the Chena Hot Springs 
here, it's a self-contained unit. You're doing everything for 
this little community. But again, when DOE is looking to move 
grants, you're competing against requests that look pretty good 
on paper in terms on supplying and meeting the needs. Now, the 
Fire Island project, you get that pulled together and the 
ability to offset some of our energy costs, particularly as we 
see costs rising in the future as we see the reserves coming 
out of Cook Inlet dwindling, we've got to be addressing that. 
How do we better facilitate some of these smaller-scale 
opportunities? I throw that out to any one of you.
    Senator Murkowski. Bernie, go ahead.
    Mr. Karl [continuing]. To start with, Senator, there's a 
tremendous opportunity right now with the administration and 
the money that--I don't know where you're getting it. I guess 
you're printing it because----
    Senator Murkowski. That's another hearing for another date, 
I think.
    Mr. Karl. But with that being said, right, wrong, or 
indifferent, the opportunities are tremendous right now. I 
think it's in reinventing ourselves, as I stated once before, 
but in Fairbanks, Alaska, right now with the help, again, of 
United Technologies, and with the help of Alaska Energy 
Authority, I can tell you the Alaska Energy Authority has been 
a tremendous--a tremendous resource for the State of Alaska. It 
has tremendously good leadership who gets it, who understands 
that there has to be an energy policy. They are helping Chena 
Power in Fairbanks, Alaska, to build a 500 kW power plant that 
will be running with no smokestack. It will be the first 
commercial power plant. It will scaled to work in any village 
in Alaska. I can assure you that any village in Alaska can be 
self-sufficient for all of its fuel, for all of its energy, and 
for all of its food in the next 10 years if it wants to be. You 
can be thankful to United Technologies, and you can be thankful 
to AEA for believing in the project and not being a hinderance.
    But you see, one of the biggest things was, well, you got 
to get this permit and you got to get that permit. Let's work 
at not having permits.
    Senator Murkowski. I think the ocean energy guys would like 
that. I know that for a fact.
    Mr. Karl. But let me tell you--let me tell you how you work 
at not having permits. You have to imagine it again. The Jay 
Florida project was going to fail. You want to know why--$1 
million for getting the permits, and another year of time. So 
Quantum Resources said forget it, we didn't buy into that. Mr. 
Karl, we told you our share was $348,000, now our engineer says 
another million for permitting, we're not going to do the 
project.
    So what do you do? You come back to Alaska and you tell 
them OK, we'll do it with no permits. They say, yeah, right. We 
made it portable. We have no emissions. It's legal height, it's 
legal width, legal weight for all 50 States. You have to look 
at what you can do. In Fairbanks, Alaska, we're building a new 
biomass plant with no smokestack. I don't need to worry about 
air permits because I don't have any emissions. I don't need to 
worry about disposal permits because I'm not going to dispose 
of anything. It's called biomimicry. You mimic what nature 
does.
    The Native populations of Alaska have been doing that for 
centuries. They've lived off of biomass. They've used their 
environment for 10,000 years. For 10,000 years they've used 
their environment. Cold is a wonderful thing if you use it. So 
is heat, it's a wonderful thing if you use it. What if we 
combine the two? What if we combine them? We can make a 
tremendous amount of energy on a Delta-T of just 100 degrees. 
With a company like United Technologies to help, it's pretty 
easy.
    Do we need the Department of Energy's help? Absolutely. 
Absolutely. Because when you're doing all of these so-called 
experimental things, there's a lot of risk. I've never, ever 
considered risk. Now, maybe I should. My wife tells me all the 
time, she says, you are no philanthropist. I said, some day I 
want to be. So--oh, she's like having a 50,000 pound anchor on 
the old rear end. But I need her, obviously.
    So with that being said, these opportunities right now are 
real. It takes--as Senator Stevens always said, money is going 
to evaporate for Alaska. We need to work together. There's 
going to be less funds. So you need the Federal Government, you 
need Alaska Energy Authority, you need the university, you need 
private sector, you need United Technologies, you need 
everybody working together as a synergy, as a synergy. You can 
get a lot done. You have to be willing to work together and 
share these ideas.
    I think that is the future for renewable energy. I don't 
say there's a silver bullet, I say you have to use it all. 
Storing energy is like a no brainer. The good Lord's been 
storing energy his whole life. Right? Right in the earth. We 
store energy all the time. It's ours to take, but to use it 
wisely.
    Senator Murkowski. I want to ask, too, a little bit more 
about the permitting issue, because that's where we at the 
Federal level--you say there's roadblocks out there.
    Mr. Johnson. Yes.
    Senator Murkowski. I think it's important for us to 
understand how we can realistically remove or perhaps soften 
some of these roadblocks. Because wonderful ideas on paper, but 
if the government is saying, OK, we got a great energy policy 
out here, we want to encourage all these renewables, and yet we 
put these hurdles up in front of you that are either so 
bureaucratically impossible or so incredibly expensive, we 
haven't facilitated anything.
    Mr. Johnson. Exactly. Thank you, Senator. I have an idea 
for you. I think we should be pitching Alaska as the laboratory 
for our country, the laboratory for developing renewables, and 
the laboratory for developing a process to facilitate this. We 
got an amazing innovation here. Just look around us and see 
what Bernie is doing, look at what Dennis is doing out in 
Western Alaska, look at what we're trying to do with the 
hydrokinetics. It's happening. But what we have to be able to 
do is facilitate the development of it. Yet that policy that's 
there, the permitting processes that are there, what we need is 
agency coordination. Because we can unleash the innovation that 
we have if we can have the agencies work with us and sit at the 
table and work through this and develop processes that don't.
    Senator Murkowski. Do you feel that you do not have that 
cooperation presently?
    Mr. Johnson. We're working toward it, but it's a--it's 
challenging because you've got people in, you know, different 
places in the country physically, and you've got different 
people in different sort of mind or thought processes or where 
they're at in terms of their ideas around renewables and how 
they ought to be developed. So it's policy and developing the 
coordination between the agencies.
    Like, in our instance, it's Federal Energy Regulatory 
Commission, or FERC, and the folks at NOAA. You know, trying to 
get NOAA and NMFS and FERC all working together so that we can 
get the permit process moving forward in a way that makes sense 
that we can participate, that doesn't bankrupt us in the 
process.
    Senator Murkowski. From the State perspective, do you feel 
that there is greater ability working within--at the State 
level?
    Mr. Johnson. Yes, the State of Alaska has been fabulous. 
This Alaska--our Alaska Energy Authority is a tremendous asset 
to us here. Virtually everyone that I've met in State 
government has been tremendously supportive of our efforts. I 
know in renewables in general. So the staff's been great to 
work with.
    Senator Murkowski. We've got some issues with it, and I 
think we heard a little bit of that from the first panel as 
well. But I know with the Fire Island project, this is 
something that has been in process for years, and it has been 
the Federal Government, which has been the impediment, whether 
it's the FAA issue. But it is--it really seems to be that the 
stumbling blocks are at the Federal level, even though we have 
put in place this huge initiative that we're going to advance 
renewable energy in a meaningful and significant way.
    Dennis.
    Mr. Meiners. Senator, and on the permitting issue, I think 
it's just--at least from the wind projects, if Federal money 
comes in and you use Federal money for a wind project, it spins 
you in a whole new parallel universe of permitting and agency 
interest. In these recent renewable energy projects, it was 
State funded. I think that there are certain agency 
representatives who are just not well educated about the 
impacts or the nonimpacts of these systems, say, on tribal 
lands or in communities. So they tend to slow the process down 
and try to spin it back into that whole permit process. So I 
think there needs to be a clear dividing line between where the 
jurisdiction is and where it isn't. They can say we have no 
jurisdiction here and be able to do it very quickly. So that 
would speed things up.
    Mr. Johnson. Absolutely.
    Mr. Meiners. Because there's a lack of ability to make 
decisions there, there are new people, so there needs to be 
some kind of reeducation, perhaps, at that level. Because I 
have projects--the projects in the Chaninik area do not require 
permits. You go to certain people, and they say, we don't have 
any jurisdiction here, and other people say, oh, I think we 
might have jurisdiction here, and so 6 months later they decide 
that you don't. So I just think there needs to be maybe some 
retraining on the permit level.
    Senator Murkowski. Certainly from the jurisdiction 
perspective, as we know, with the offshore energy issues, 
there's a huge controversy and fight between the FERC and MMS, 
and literally a process that took years to resolve, and, you 
know, we're hopeful that, in fact, now it has been resolved and 
that projects can be moving forward. But again, you've got good 
substantive projects on the drawing board that can't advance 
because of Federal agency issues that just shouldn't be there 
in my opinion.
    I am going to, again, submit a series of questions to each 
of you, but I want to thank you for your contribution here at 
this field hearing. I think it's been interesting to have a 
little bit from the various sectors that are making some good 
things happen within the State. If you don't--if you're not 
excited about what our potential is for renewable energy in 
this State, you haven't woken up yet this morning, because it 
is real and it is vibrant and it's a terrific thing.
    I want to close by reminding, not only the panelists, but 
any of you who have attended today, that if you have comments, 
if you wish to submit written testimony on any other Alaska 
Renewable Energy projects or ideas that you might have, you can 
submit them to the committee in writing. We will hold the 
record open for 10 days for you to do so. You can send them to 
the Committee on Energy and Natural Resources in Washington, 
DC, or you can e-mail them to Chuck Kleeschulte, who is on my 
energy staff here. Chuck's e-mail address--you can get it from 
Chuck. But you can e-mail him, or you can also send it to my 
Fairbanks office here. Althea St. Martin, who is standing up 
taking the picture there, is located in Fairbanks. Her number 
here in Fairbanks is 456-0233. She can get them to our 
committee's Washington staff and get them included in the 
formal record.
    I want to acknowledge and thank the committee staff that 
have joined us, both down from the Democratic side and the 
Republican side. They helped to facilitate these field 
hearings, and their advance work is greatly appreciated. So 
Mike and Chuck, thank you very much. With that, we will 
conclude.
    [Whereupon, at 12:46 p.m., the hearing was adjourned.]
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

  Responses of D. Douglas Johnson to Questions From Senator Murkowski
                          general ocean energy
    Question 1. Your testimony did a wonderful job of summarizing the 
key issues that the federal government needs to consider to improve 
marine renewable energy. I agree that there is a lack of timely 
coordination among federal agencies, and that there should be a 
streamlined permitting process between FERC, NOAA and USFW to get 
projects into streams. Can you give more detail on exactly how you 
envision such a permitting system to work once we get past pilot 
projects, and into regular licensing of renewable plants? How do we 
mesh such a system with the NEPA requirements for environmental impact 
statements before licensing of significant federal actions?
    Answer. A transition from the Pilot License process to a Commercial 
License process has not been defined by FERC and is greatly complicated 
by the conflicting statutory roles of the various Federal agencies 
involved in licensing and relicensing of hydrokinetic projects. The 
White House and Congress must assure that all federal agencies support 
reasonably scoped studies that both allow for the rapid and successful 
deployment of small scale FERC Pilot Projects and the subsequent 
commercial project build out, particularly given that traditional 
hydropower licensing regulations are being used for hydrokinetic 
projects and the much larger expanse of the marine environment as 
compared to traditional riverine systems. The White House Office of 
Energy and Climate Change Policy, working with the Council on 
Environmental Quality, Oceans Policy Committee, or other appropriate 
senior-level management coordination group, should address and rapidly 
resolve this issue in order to ensure that federal agencies coordinate 
effectively to advance the FERC Pilot Project license process and the 
development of marine hydrokinetic technology in order to protect the 
environmental, economic, and security interests of present and future 
generations of Americans. Ideally, a standard set of license conditions 
could be developed to further minimize the time and expense involved in 
Pilot Project Licenses and subsequent commercial build out of projects.
                            mms-ferc siting
    Question 2. One issue facing the marine renewable industry is 
getting rapid approval of permits for siting devices. While there has 
been a memorandum of understanding between the Minerals Management 
Service and the Federal Energy Regulatory Commission that hopefully 
will speed up permitting it is not clear how it will work. What in your 
view would be the best way to proceed to speed permitting and 
environmental impact statements and reviews for ocean energy 
permitting, if you have not already answered this from above?
    Answer. We have a number concerns about the outcome of the 
memorandum of understanding and the MMS process. Our concerns are major 
as We believe the current MMS structure is unworkable from a number of 
perspectives:

          1. The structure is based on oil, gas and minerals industries 
        where the resource is ``extracted'' forever. Hydrokinetic 
        technologies ``use'' a portion of the energy but when the 
        devices are removed, the energy of the tides and ocean currents 
        continue.
          2. Lease areas do not conform with the footprint needs of 
        alternative energy technologies and the process does not 
        provide for site control
          3. The proposed pricing and revenue sharing make renewable 
        energy projects uneconomic and it is not a process we can 
        afford to pursue.

    In summary FERC and MMS need to coordinate better to insure 
projects are permitted in a timely, responsible manner.
                        ocean policy task force
    Question 3. In August NOAA was in the State holding a hearing of an 
Ocean Policy Task Force that is considering how to improve data 
collection and conduct the science needed for environmental reviews for 
ocean energy projects. One of the recommendations was that agencies 
work with NOAA to close knowledge gaps and develop a single 
clearinghouse of information on the effects of marine hydrokinetic 
projects on fisheries and marine mammals to improve marine spatial 
planning decisions? Do you have any other suggestions on what can be 
done to improve and speed the planning/ approval process?

    Answer. We agree that a central clearing house for environmental 
information if designed and implemented properly, would help the 
process; under no condition should the Ocean Policy Task Force 
recommendations include a moratorium for ongoing projects; and we must 
stop the abuse of our oceans by slowing CO2 emissions and 
marine renewables can play a major role in this regard.
                                 ______
                                 
   Responses of Gwen Holdman to Questions From Senator Lisa Murkowski
    Question 1. General technology question.--I know that your center 
has applied for a number of grants under the so-called federal stimulus 
act. Can you talk more than you did in your testimony about them and 
what types of areas should be where the government focuses its research 
assistance? Where are the weak spots in our efforts to develop 
renewable energy at present?
    Answer. The Alaska Center for Energy and Power has been pursuing 
federal funding opportunities as appropriate to our mission of meeting 
State and local needs for applied energy research. In the past couple 
of months, we have applied to:

          1) DE-FOA-0000109.--Innovative Geothermal Exploration 
        Techniques. Our proposal was titled: `Validation of Innovative 
        Exploration Techniques at Pilgrim Hot Springs, Alaska', and 
        uses geophysical techniques designed for volcanology research 
        and applies them to geothermal exploration. We pioneered this 
        technique at Chena successfully, and think it could be expanded 
        to characterize other moderate temperature resources with a 
        discreet thermal surface feature.
          2) DE-FOA-0000090.--Wind Energy Consortia between 
        Institutions of Higher Learning and Industry. Our proposal was 
        titled `Proposal to Expand the Wind Diesel Application Center 
        at the University of Alaska', and was developed as a consortium 
        of a large number of industry partners, the Alaska Energy 
        Authority, and Renewable Energy Alaska Project (REAP).

    In addition to these two, we have submitted several other proposals 
for both research and curriculum development. We have also been making 
a significant effort to increase partnerships and projects with the 
State and private sector. Half of our currently funded projects are 
with private sector clients, and the majority of ACEP's funding (87%) 
is from State sources. ACEP has averaged 3 proposals per month since 
founded, and has had a success rate of 64% of proposals developed 
ultimately being funded.
    There have been 2 very significant challenges for ACEP in seeking 
federal funding opportunities. First of all, we have repeatedly found 
that the specific needs of Alaska do not entirely overlap the greater 
research needs of the Nation. For this reason, many funding 
opportunities are not applicable to the type of research we are most 
interested in conducting. This has been a challenge for us, and also 
for other research organizations focused on Alaska. It should be 
recognized that Alaska has some unique research needs that are in some 
ways more representative of 2nd and 3rd world countries than most parts 
of the U.S. We frequently need to tailor our proposals to ensure we are 
addressing the national research agenda, and this is often at the 
detriment of the work we are best positioned to complete and that has 
greatest relevance to the State. A perfect example is with the second 
proposal listed above, the `Wind Consortium' funding opportunity. This 
opportunity is specifically geared toward meeting a national goal of 
achieving 20% wind by 2020, and focuses on development of large 
turbines and wind farms that are not appropriate for Alaska. We 
tailored our proposal to focus on energy storage, modeling and system 
integration, and cold weather related research, but I think it is 
unlikely to be funded. That is too bad, because no one is doing the 
type of research with high penetration wind we can be doing in Alaska, 
and Alaska can in many ways serve as a model for the lower-48.
                      idea for research assistance
    Many States, including Alaska, have a tendency to not spend dollars 
on applied research, especially related to energy. Funding is being 
spent at the State level on projects, but often research is left to the 
federal government and private sector. Perhaps one way to encourage 
more research at the State level is to provide Federal match for any 
State grant fund developed for the purpose of encouraging innovation in 
energy and other industries--essentially an emerging technologies match 
fund. This would decentralize some of the focus and stimulate 
competition on a new level--to address the specific research needs of 
individual States or regions, without the necessity of trying to tie 
research objectives back to the country as a whole.
    Question 2. Storing renewable energy--I know that you are 
interested in working on the issue of how to make renewable energy fit 
better into the grid. How you develop systems to better mesh diesel 
generation, which is going to be around for a long-time in Alaska, with 
renewables like wind and marine hydrokinetic. What should Congress and 
the DOE be doing to help smooth out power production and reduce the 
cost of backup power needed as renewable energy increases in its 
percentage of generation in a utility system?
    Answer. These ancillary issues are absolutely critical to long-term 
grid stability (not to mention transportation applications), and is an 
area where I think Alaska can position itself to play a leading role. 
ACEP has a long history of working on the energy storage issue, and we 
have an extensive database of manufacturers and projects. The problem 
of energy storage is still a difficult challenge and is the type of 
problem that may ultimately require a disruptive technology--a major 
leap in innovation that perhaps is still on the drawing board--to truly 
effect the necessary advancement. For this reason, I think it is 
necessary to continue to invest in a suite of storage technologies at 
different levels of commercial readiness (or non-readiness).
    On the bright side, this is an area where Alaska can really play a 
leadership role and be a place to demonstrate technologies at early 
commercial stages. The issues we see in rural Alaska, and even the 
larger population areas, mirror the types of challenges we will see on 
our grids in the lower 48 as we push higher percentages of renewables 
onto the limited infrastructures that exist.
    For example, we are working with Kodiak Electric Association to 
model their electric grid. We hope to develop a plan to include both 
short and long-term energy storage in order to achieve 95% renewables 
as a percentage of generation (wind, hydro, and diesel). We are working 
with Sandia National Lab on this problem. They are interested in 
working on Kodiak because it is a way to test models they have 
developed for the lower-48 on a discreet, isolated grid. In addition, 
we have been testing an advanced flow battery manufactured by VRB in 
our lab for the last 2 years, and have developed proposals to test 
additional ones as well. We are working with utility partners on the 
energy storage issue, including Kotzebue Electric, AVEC, and Golden 
Valley Electric Association.
    It is really important to stress that Alaska already has some of 
the highest penetration levels of wind in the Nation. The opportunity 
this presents is significant, because many of the methods being 
pioneered to deal with these issues are scalable to larger grids. The 
National Renewable Energy Laboratory (NREL) has a wind-diesel testbed 
in Colorado, which is somewhat defunct at this time. We are working 
with their program managers to ramp up our capabilities here in Alaska 
and develop a more modern testbed at ACEP, with real data from our 
partner utilities used to test control and storage options and other 
optimization strategies. We think this is important work (so does NREL 
and our industry partners), but we need $4M to develop the facility. 
That was the purpose of the `Wind Consortium' proposal we developed, 
but I think it is unlikely to be funded because the focus was on larger 
turbines and wind farms than are appropriate for Alaska.
    Question 3. Cost of Renewables--As an engineer you have looked at 
the cost of renewable energy versus fossil fuel use. Do you have 
suggestions on how we make renewables economically competitive with 
fossil fuels without having to provide continuing tax subsidies? 
Outside of conventional hydro power and perhaps onshore wind, few 
renewables are close at present in construction costs to gas-fired or 
coal-fired electrical generation. What should we be doing to try to 
close that cost gap?
    Answer. One of the key points to understand is the difference 
between capital costs and lifecycle costs. I think it is going to be 
unlikely that the capital costs of renewable energy systems will drop 
to the level of traditional fossil-fuel based generation any time soon. 
This is largely due to economies of scale, the maturity of the 
technology, and the fact that it is really tough to beat the energy 
density you find in fossil fuels. But the capital costs are not the 
important factor--the lifecycle costs are. On that basis, renewables 
can often be quite competitive with fossil energy assuming that the 
cost of fossil-based fuels will rise in the future (the Energy 
Information Agency is currently predicting >$110/barrel average in 20 
years). The trick is that we can't know for sure if, or how much, those 
costs will increase. That means we can only guess at the long-term fuel 
costs, and thus life-cycle costs, of the fossil-fuel based generation 
whereas we have fairly good certainty for the renewable option.
    When it comes to energy, subsidies of some sort seem to be the rule 
rather than the exception throughout history. I have observed that as a 
country we have often subsidized all sorts of energy production, 
exploration, and development activities--both renewables and fossil 
fuel. Other countries take the approach of taxing fossil fuel heavily, 
thus making renewables more economically attractive on that side of the 
equation. The critical thing seems to be to try and be consistent with 
subsidies. Inconsistency reaps marginal benefits at best. For example, 
the production tax credit here in the U.S. would be far more effective 
had it been enacted for 10 or 15 years right from the start, rather 
than being constantly renewed.
    The bottom line is that renewable energy as a whole is a relatively 
new industry, and as such, the economies of scale do not yet exist. If 
we can enact policies to boost production and ramp up development, 
eventually subsidies could be phased out. But in the short term, they 
are probably needed if we want to transition away from dependence on 
foreign oil. If done properly, subsidized programs can result in 
significant public benefit--like the NASA program in the 1960's and 
1970's. Think of all the different types of products that were an 
indirect result of setting a national goal of being the first country 
to reach the moon. If we make a true national commitment to wean 
ourselves away from foreign energy sources, we can strengthen our 
position as a country from a national security perspective, build long-
term infrastructure that will benefit future generations, and begin 
moving toward the economies of scale needed to make renewable 
technologies economic when compared to fossil fuels.
                                 ______
                                 
      Responses of Jim Dodson to Questions From Senator Murkowski
                                general
    Question 1. Jim you talked in your testimony about two projects, 
the biomass, waste project to generate electric power for Fairbanks and 
the biomass, coal project to produce synthetic fuels for use in the 
Interior and for military use in Alaska. I personally support both 
projects and certainly backed the $10 million grant to the Air Force to 
study the latter project last fall--I just wish the money was being 
spent as it was intended when the grant was approved by Congress. But 
more generally, electricity in Fairbanks has become a real issue. At 22 
cents per kilowatt hour it is far higher than other major communities 
in the State are facing for power from natural gas, coal or hydropower 
sources. Why do you feel that biomass will be a cheaper and more 
dependable source for power and or fuel in the future for Alaska's 
Interior?
    Answer. My reference to biomass refers to the fact that many grants 
are being offered, both through AEA and DOE for biomass heat and energy 
generation. The problem is biomass mass is not currently being produced 
for energy in any kind of commercial sense and neither the State nor 
the Feds have done enough research on biomass inventory, crop selection 
for biomass reforestation, harvesting or regeneration for it to be so. 
All this needs to be determined before biomass is available for 
sustained energy use.
    As far as the CLT project, research suggests that, by using biomass 
with coal in the gasification stage, the CO2 emissions can 
be reduced by as much as 30%. Also, the direct combustion or, in the 
case of CTL, consumption of biomass is considered carbon neutral. As 
people are made to feel the ``cost of carbon'' in coming years, through 
either direct taxation or the impacts of cap-and-trade, it is likely 
biomass, still relatively under-competitive today, will become more so 
in future.
    I don't believe we are going to find a State-wide alternative 
energy source, including biomass, that will be less expensive than 
conventional energy and, as you know, many want to put money into 
alternatives and forget about coal, oil and natural gas. I am not one 
of them. I believe we must use both and phase in the one (alternatives/
renewable) as circumstance and economics cause us to phase out the 
other.
                               follow up
    Question 2. Given the shortness of time at the hearing I didn't 
have the opportunity to talk to you about this, but I recently received 
a letter from Lt. General Dana T. Atkins of the Air Force (Aug. 19th) 
saying that the Air Force is ``enlisting the assistance of the 
Fairbanks Economic Development Corp. in assessing local, State and 
national supporting and opposing organizations to determine what their 
core issues are and to develop strategies to ensure they are adequately 
addressed.'' What is your understanding of what the Air Force is asking 
of the FEDC and does it provide any financial assistance for the second 
phase study of the town's coal/biomass to liquids project?
    Answer. I will call you (Chuck) about this answer.
                        gasification technology
    Question 3. Both of your projects involve gasification of waste, or 
biomass or coal. That technology is well known, the Fisher Tropsch 
process being around since before WWII being a part of the equation. It 
is more expensive, but does allow for the more convenient 
sequestration--capture--of carbon dioxide. Should the federal 
government in your view be pushing to bring down the costs of carbon 
capture and storage too--and what should we be doing to aid that 
technology to become more cost effective?
    Answer. I think it is foolish to believe we can move wholesale to 
renewable energy sources away for coal, oil and natural gas. Even the 
President is suggesting that 75% of our energy is going to come for 
conventional sources in 2025. For the federal government to spend time 
and money on renewables and not spend equal or even more on learning 
how to more effectively deal with CO2 is a recipe for 
failure. Yes, the government should invest more on research into carbon 
capture and sequestration--finding ways to capture more of it and 
proving ways to indefinitely store it. Note that even the most 
``conventional'' proposals for long-term storage--pumping into depleted 
oil or gas wells--has not been ``proven'' in a scientific sense and 
remains as weapon available for use by those who wish to see all fossil 
fuel based energy discontinued. Other potential means of storage are 
but that much more theoretical. Making the research investment to 
prove--or disprove--the effectiveness would be highly beneficial to all 
sectors of the economy. Also, standing ready to help defray some of the 
cost of carbon transmission--i.e. pipelines--might also be beneficial: 
reducing industry resistance in proportion to their reduction of 
prospective cost.
                     biomass, air quality concerns
    Question 4. Alaska, of course, has a lot of biomass. As I said in 
my opening statement there is 114 million acres of Interior forests 
that could produce biomass. But most biomass projects involve 
combustion and that opens the door to air pollutants. Fairbanks already 
is under the threat of potential air quality sanctions for PM 2.5 
violations in future years. How would your projects actually help 
Fairbanks to meet air quality concerns in the future?
    Answer. Any biomass burning in the Fairbanks area should be limited 
to complete combustion, such as biomass gasifiers or other highly 
efficient biomass burners. The problem in Fairbanks is that many of the 
biomass burners don't even meet the current EPA standards. ``Complete 
combustion'' leads to fewer particulates and industrial/commercial 
scale gasification of the kind envisioned emits no air born 
particulates at all. Also, because the CTL as designed could serve as a 
large fluid heating source, much in the same way the Wainwright and 
Eielson power plants do now, it could, through the installation of 
radically expanded distributed heating system, allow for the 
discontinued use of potentially thousands of PM2.5 production sources: 
home heating furnaces.
                                 ______
                                 
      Responses of Chris Rose to Questions From Senator Murkowski
                        comparison of technology
    Question 1. You for years have been studying all types of renewable 
energy technology looking to see what would be best and most cost 
effective for use in rural Alaska communities. What do you believe is 
the best technology for the future? Obviously that depends on location, 
whether you are in a windy area, whether you are along a river or 
coast, whether you have good biomass potential, whether you are on top 
of a geothermal hotspot. But is there any general direction that you 
believe the technology is headed and what is the best technology in 
general as far as being economic?
    Answer. Rural Alaskan communities are simply too small to ever 
expect the same kind of economies of scale that larger communities 
enjoy. That being said I think it is possible for most small 
communities to survive the escalating price of fossil fuels by 
considering the following:

          1) Energy efficiency and conservation.--Most villagers will 
        tell you that they are already modifying their behavior to 
        conserve energy. People in rural Alaska use far less 
        electricity per capita that people in Anchorage. However, this 
        use could be reduced further by replacing inefficient 
        appliances with more efficient ones. This does not take 
        behavioral change, only some basic education and up-front 
        capital. But as you know, the bigger issue for rural Alaskans 
        is the cost of heating their homes, and to a lesser extent, the 
        price of transportation fuels. Many homes in the Bush still 
        need to weatherized. In my opinion, Alaska should be setting a 
        world standard for energy efficiency with new home 
        construction. Efficiency and conservation should always be 
        considered before, or at least simultaneously with, new 
        generation. It is almost always cheaper to save a unit of 
        energy that to produce it. I think we have all been guilty of 
        focusing too much on generation technologies.
          2) Development of advanced hybrid systems.--Alaska is already 
        seen as world leader in wind-diesel hybrid technology. We 
        should be building on this leadership role. There are over two 
        billion people living in the developing world without any 
        electricity, almost one third of the world. That's a huge 
        market that Alaska could lead. We can demonstrate many 
        technologies and save people money at the same time, something 
        that can't really be done many places. As you noted, the answer 
        to what kind of renewable resource is used is site specific. 
        Alaska should keep focusing on wind because we have about 100 
        communities that could use it to displace diesel. The Wind 
        Diesel Test Center that is getting off the ground at UAF is 
        going to focus on how we can get more ``high penetration'' 
        wind-diesel hybrid systems operating in Alaska. Those are 
        systems where over 50% of the community's electricity could 
        come from wind at certain times. These systems require more 
        advanced control systems to marry the wind turbines with the 
        diesel engines. Those control systems need to be optimized and 
        improved for better high penetrating systems. We need R & D & D 
        for this. The ceramic stoves that could use excess electricity 
        in a high penetration system are an example of one way to use 
        the excess electricity for heating. Charging electric vehicles 
        would be another way to optimize a high penetration hybrid 
        system. Of course, any renewable resource could be plugged into 
        a hybrid system. Kodiak now has a wind-diesel-hydro hybrid 
        system.

    In terms of its possible reach, hydrokinetic power seems to be the 
technology that could most benefit rural Alaska. There many Alaska 
communities that are located either on a river, or on the ocean where 
tidal and wave power will be possible in the future. I believe because 
of its predictability, proximity to load, and sheer immensity tidal and 
wave power should and will get a lot of public and private money to 
commercialize it and make it cost competitive through technology 
advancements and improving economies of scale. As a sister of straight 
tidal technology, river hydrokinetics can benefit from advances in 
tidal power. However, there are special issues on rivers like floating 
debris that must be solved. Wave and tidal power are both advancing in 
Europe, and in Maine and Oregon. Alaska may have already lost its 
``first mover'' advantage in tidal and wave, despite the huge amount of 
resource we have. However, the huge amount of resource in Alaska, along 
with the need for more affordable power in rural areas, should move 
hydrokinetics to the top of the list of technologies with future 
promise for the State. Alaska is likely not going to be a leader in 
solar PV technology because so many other Nations are already so far 
ahead and will continue to lead technology advancements. However, I 
believe that as more electric and plug-in electric hybrid vehicles 
become available rural areas could benefit eight months a year from 
solar PV power charging stations. As diesel prices go up and PV prices 
go down, the addition of solar PV to other hybrid systems will make 
economic sense. Solar thermal already pencils out to heat water and 
potentially whole buildings in places where fuel oil prices are high. 
Small hydro and geothermal are very site specific and will be viable if 
located near enough to a load. Biomass for central heating is another 
promising technology. Several Alaskan communities are currently putting 
in systems and many more are located near sustainable sources of woody 
biomass and/or wood residues.
                      technologies for the future
    Question 2. Everyone right now is focused on wind, solar, 
geothermal, biomass, and do a degree ocean renewable. We in Alaska know 
that hydroelectric is a wonderful source of power from an environmental 
standpoint, but problems in the past in the Lower 48 have certainly 
caused barriers to be erected against federal aid for hydroelectric. 
Are there new technologies out there that should be pushed, whether 
generating fuel from algae--pond scum--or using renewable energy to 
produce hydrogen from water--hydrogen being a fuel that can be shipped 
when high voltage transmission is expensive and difficult to site. 
Where should we be focusing our attention to maximize energy production 
for Federal aid dollars? Should hydro be more in that mix?
    Answer. Large hydro should and probably will be in the mix for the 
Railbelt's future. My bet would be that Chackachamna's economics come 
out looking better than Susitna's. Large hydro will help the Railbelt 
diversify its energy portfolio and retire old and inefficient gas 
turbines. If we do build so much large hydro that we have excess 
electricity on the Railbelt, I think it would be prudent to apply that 
energy to electric transportation and heat for the citizens of the 
State who will no doubt be subsidizing the initial capital outlay that 
will be required to build large hydro. It certainly would be nice to 
allow new, ``properly permitted'' hydro projects in Alaska to trade 
RECs under any new cap and trade scheme that might become law. As far 
as new technologies go, without a massive effort to change our 
infrastructure to accommodate the storage and transportation of 
hydrogen, I do not see that as a near term way to store excess or 
stranded renewable energy resources. I am, however, intrigued with the 
notion of making anhydrous ammonia from large stranded renewable energy 
resources, especially those located near ports in the Aleutians. Agrium 
was using the hydrogen in natural gas to make ammonia-based fertilizer 
for years. Anhydrous ammonia, or fertilizer, are two products that can 
be readily shipped and monetized using existing infrastructure. I think 
it is worth looking into tapping into our large stranded renewable 
energy resources with electrolysis and ammonia production in mind. Bill 
Leighty from Juneau is a leading authority on using Alaska's stranded 
renewables for hydrogen and/or ammonia production.
    Advancements in battery technology will help firm all variable 
renewable energy resources. Compared to other technology advancements 
over the last 50 years, advances in batteries are relatively meager. 
Again, because of our unique isolated grid communities, Alaska has a 
special incentive to lead in batteries and other energy storage 
technologies. Finally, I would put in another plug for developing 
highly energy efficient homes. It will save Alaskans billions of 
dollars over the long term and it may also help spur an industry and 
knowledge base that can help us diversify our economy, something we 
desperately need to do.
                                 ______
                                 
    Responses of Steve Haagenson to Questions From Senator Murkowski
    Question 1. As a State official responsible for power plannmu, what 
would be the recommendations you would give the federal government for 
what it should be doing to assist in energy development? Obviously 
everyone wants more money; but with a federal deficit of more than $1 
trillion this year and a forecast deficit of $1.3 trillion for FY 10, 
finding that money is difficult. What should we be doing to better 
utilize our existing funding for energy development? How can we be 
smarter in promoting energy production and usage?
    Answer. Recognizing that funding has become difficult at both the 
State and Federal levels, we need to focus our efforts on smart 
thinking to better utilize existing funding or remove roadblocks for 
energy development. When money is tight, the development of a triage 
method will focus funds to reduce risk and fill knowledge gaps with 
applied research. The triage tools should focus on risk reduction to 
reduce the failures before large scale deployment of a technology.
    There are many technologies and resources available for energy 
development. As a general rule, pure research provides valuable 
information on emerging technologies but may be years away from a 
mature application. Applied technology provides expanded knowledge that 
will move the application toward commercial operation. The National 
Renewable Energy Lab and Denali Commission are two great examples of 
federal groups that are focused or moving emerging technologies toward 
commercialapplication. University of Alaska Fairbanks, Alaska Center 
for Energy and Power is also heavily involved in applied research to 
fill knowledge gas on resource sustainabity and emerging technology. 
The Cold Climate Housing Research Center (CHRC) has recently 
constructed a low-cost,low-energy efficient home in AnaktuvuhPass. A 
slide show of the construction of the Sustainable Northern Shelter 
project in Anatktuvuk can be seen at www.cchrc.org. It is smart 
business to build low-enegy homes to reduce the energy consumption as 
we develop technologies that use local resources to construct and power 
our communities.
    The following is a list of technologies, resources and 
demonstration projects which could be developed to enhance the 
sustainability of Alaskan communities:

   Sustainable Northern Shelter programs;
   Gasification Technologies for biomass: direct-fired or 
        plasma;
   Assessment of wind resources with on-site anemometers;
   Assessment of willow resources to determine growth rates;
   Assess the resource potential for wave and tidal power;
   Develop technologies for capturing wave and tidal resources;
   Control technology to provide integrated system operations;
   Optimize delivery systems to reduce the costs and increase 
        reliability;
   Evaluation of energy conversion technology and storage 
        efficiencies;
   Capital cost estimates based on required sizing for 
        technoiogies;
   Opportunities to reduce construction and operating costs;
   Identify opportunities for in-State component construction 
        and assembly;
   Identify opportunities for in-State operations and 
        maintenance personnel training;
   Development of model communities to demonstrate 
        technolcoies;
   Domestic use, transportation and storage of hydrogen;
   Domestic use, transportation and storage of ammonia; 
        Cellulosic Ethanol production from biomass;
   Access to low interest loans and loan guarantees.

    There are federal programs for energy development under US 
Department of Agriculture, Housing and Urban Development and Bureau of 
Indian Affairs which range from loan guarantees to loans to grants. 
Economic development programs are key to a sustainable community. An 
economic base would provide jobs that would in turn provide income to 
allow for payment of bills and expenses. There are many economically 
depressed areas in Alaska that could benefit from a hand up as they 
develop long-term careers in their communities.
    With the significant federal in holdings in Alaska, harvesting and 
accessing local resources will likely involve federal review, 
permitting and approval. A comprehensive review to streamline the 
permit process could provide easier access to available resources and 
benefit communities across Alaska.
    Question 2. Producing renewable energy is useful, what would be 
even better technology to store the energy made when the wind is 
blowing, the sun shining and water flowing. In your testimony you spoke 
about trying to store renewable electricity by heating water and then 
using that hot water for either space heat or to generate electricity 
using potential low-temperature turbine technology. Can you amplify on 
what you are seeking from the State's consultant and how such a system 
might work in a typical village? What other technologies are you seeing 
that most interest you for reducing overall energy costs either through 
promoting energy efficiency, or storing energy or converting it into 
transportable fuels? There is talk about hydrogen fuels or about using 
wind to produce ammonia, which is somewhat easier to transport than 
hydrogen. I know you looked at biomass/waste generation while at GVEA. 
What looks like the most cost-effective, best alternatives from your 
viewpoint at this time?
    Answer. Alaska has resources which may not be available when they 
are needed. To solve this situation AEA is looking at storage mediums 
which can store energy for one day, one month and one year. Tidal 
power, although very predictable, is not continuous and may use a one 
day storage medium. Solar is very plentiful in the summer but will 
require up to 12 months storage for use in the winter months.
    Tidal power could use a short-term storage medum such as batteries, 
compressed air air, or pump storage which could hold excess power anti 
needed to provide power at slack tide, it is en electrical system 
requirement to provide continuous power. Alternatively, if a barge was 
constructed to house hydrokinetic devices, the energy could be used to 
power a compressor to make ice when the tide is flowing and stop when 
the tide is slack. The availability to obtain ice closer to the fishing 
grounds could save significant fuel for both production and 
transportation of ice rather than picking up ice at a distant port.
    Wind power would use a mid-term thermal storage medium such as hot 
water, thermal-oil or other material. Wind can provide electricity and 
heat when the wind is blowing. The key is to store energy when the wind 
blows so it can be used at a time when the wind stops. For years, water 
has been used for energy storage and transfer in geothermal 
applications. There may be in any storage mediums but for this 
discussion we will use water. A large wind farm could provide 
electrical energy directly to the distribution system with the excess 
electrical wind energy being input and stored in the water tank. When 
the wind stops, the hot water would provide heat to a community and 
could be used to make electricity through a binary phase turbine, 
similar to the Chena Chiller Organic Rankine Cycle (ORC) generator used 
at Chena Hot Springs. Alternatively, the diesel generators could be 
operated at an increased efficiency to make electricity with the water 
jacket heat being stored in the water tank. Stored energy could be 
augmented through other renewable resources such as solar, hydrokinetic 
or tidal, or other fuel resources such as diesel or wood.
    Solar power is very predictable but will require long-term storage 
such as a super insulated thermal mass. CCHRC is looking at use of a 
large insulated thermal mass that would be heated in the summer time 
with abundant solar energy, and used as a thermal source for a heat 
pump to heat buildings in the winter. There may also be opportunities 
to use a heat pump to store the heat in the thermal mass in the summer 
time and extract it when needed in the winter months.
    The attached PowerPoint* shows a map of Alaskan communities with 
local resources identified.
---------------------------------------------------------------------------
    * Document has been retained in committee files.

         NUMBERS                   indicates Wind Class (7 being
                                            best)
         W                         indicates Wood and Biomass
         H                         indicates Hydroelectric
         GAS                       indicates Natural Gas
         COAL                      indicates Coal
         T                         indicates Tidal
         GEO                       indicates Geothermal

    As you look at the map you will see areas where there is only one 
resource. The best alternative is the one that uses the locally 
available fuel, so in southwest Alaska we are looking at mainly wind 
with our artificial geothermal, hot water energy storage system (page 
23 of the PowerPoint). In the upper Yukon, we are looking at main wood 
and biomass Ccra wo has traditionally been used to provide heat in 
areas where it is available. Sustainability may become an issue as more 
people use cord wood. Biomass from fast growing plants may provide a 
better energy source as they require less acreage to provide a 
sustainable resource. The sustainable harvest level of both cord wood 
and fast growing biomass will need to be determined, as well as the 
access to rty where the resource resides. Appropriate conversion 
technologies will need to be identified for each resource to make both 
heat and electricity.
    Hydrogen is considered a clean, non-carbon based fuel, but only if 
it is made from a renewable energy source. Similar to electricity, 
hydrogen can be considered an energy medium rather than a source of 
energy. Being the smallest atom know to man, hydrogen presents its own 
storage and transportation chalIenges. With some applied research into 
the utilization, hydrcoen could become a vital fuel which could be 
generated from Alaska's vast tidal and wave power resources.
    Ammonia is another non-carbon based fuel which could be generated 
in Alaska using remote resources that would be uneconomic for domestic 
uses due to the high delivery costs to the point of use. This is 
another emerging technology in which Alaska could be the leader eid 
supplier of ammonia to a global market.
    Thank you again for the opportunity to testify. Let me know if 
there is any way can help advance local production of energy in Alaska.

                                    

      
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