GUEST COMMENTARY: A path forward to unify Railbelt electric utilities
The article entitled “Concept scrapped for unified Railbelt utility,” written by Elwood Brehmer in the Alaska Journal of Commerce on July 17, does not mean the future of our utilities is doomed; it just means there is opportunity to work out better solutions.
The electric utility companies that cover the Railbelt have been working to form the Railbelt Reliablity Council and have been working on the formation of a transmission company, or transco, intended to simplify electrical transmission transactions among entities along the Railbelt.
The real driver for all this is the desire by some to allow open access of renewables to any point along the system, and this vision was driven by House Bill 306.
In 2010, HB 306 “An act declaring a state energy policy” was passed. Item 2 of the legislative intent reads: “…the state receive 50 percent of its electric generation from renewable and alternative energy sources by 2025.”
There are efforts to establish a binding Renewable Portfolio Standard that would require 50 percent renewable electric generation by 2030 as some think Alaska’s (or Alaskans’) feet need to be put to the fire. Before we get to a binding standard, Alaska needs a plan to work out all the issues that hinder even starting the process of achieving 50 percent and greater renewable energy sources, as there are many issues that need to be solved.
First, the Regulatory Commission of Alaska and the state have not provided any real incentives to achieve a unified utility. Instead, they have threatened to do it for them if they fail to get it done. The Railbelt utilities comprise the largest supplier of electric power to the residents and businesses in Alaska, and yes, there have been efforts to encourage the addition of renewable energy sources to the Railbelt.
There are those who would have the Legislature create an independent entity in the Railbelt with the desired intent to mandate the increase of the amount of renewable sources that are connected to the Railbelt utilities. The concern that drives this is that the Railbelt does not deliver the maximum benefit possible to ratepayers.
Forcing the Railbelt utilities to change their practices by mandate and regulation will not result in the desired effect, as there are many technical and business problems to address before all the separate utilities can operate effectively as a combined entity. There are also political hurdles that need attention, since there have been numerous complaints from the public against the Railbelt utility companies over the $1.5 billion spent for generator upgrades, which many think should have been invested, instead, directly in renewable resource connection.
Understandably, utility companies are reluctant to invest any more money in infrastructure when their previous investments only drew the ire of their ratepayers, resulting in rate case intervention against them in some circumstances.
Second, combining five separate entities into one is not as easy as many think, as each utility must consider the adverse impact to their own ratepayers; thus, some positive motivation should be provided to the utilities to ensure obvious and measurable benefit is achieved in their combining to become one utility. As noted before, for the entire Railbelt to be combined into one entity and be open to connection of Independent Power Producers, or IPPs, there are technological problems to be worked out.
Third, the list of issues that work against adding generation to the system are many. Decreasing population, decreasing loads (with increased efficiency through conservation efforts), insufficient communication over the extent of the Railbelt, lack of energy storage, and insufficient transmission line capacity all provide negative incentives to develop a unified utility.
As rates continue to rise, more customers will be incentivized to install peak-shaving, load-leveling, and distributed generation assets to decrease their costs, and this will require adjustments to rate structures to meet utility revenue requirements. Likewise, introduction of distributed battery energy storage and distributed generation will also require new rate structures for charging, discharging and production.
To complicate matters, every change in rate structure requires the approval of the RCA, a lengthy and political process subject to public intervention and scrutiny. Under the current circumstances, why would the utilities be motivated to increase the amount of generation they have available when everything is working against them?
Fourth, the technical deficiencies of the current Railbelt paradigm should not be underestimated. Communications and control capabilities along the Railbelt need to be upgraded to allow proper monitoring and control of all the new inverter-based equipment that will be connected.
Even if we do not implement a true “smart grid,” it will need to be a lot smarter than it currently is to accommodate a lot of renewables interconnected throughout the system. Transmission lines need to be upgraded not only for the current loads and generators but also for the future loads as well as a reconfigured Railbelt utility.
Sufficient energy storage must also be added to the system in strategic locations to smooth out the variability of renewable sources as well as variable loads to ensure system stability and minimize renewable resource curtailment. Right now, Railbelt utilities are compensating for the existing variability from Fire Island and other sources with conventional generation. This wastes fuel as well as renewable generation potential.
To illustrate the scale of the problem posed by the desire to incorporate 50 percent renewable energy resources, a recent annual value for energy consumed along the Railbelt is just more than 5 million megawatt hours, or MWh, which is an average generation of 580 megawatts.
The 50 percent share of renewable and alternative generation called for by HB 306 would be 2.5 million MWh. This could be provided by 725 MW of interconnected renewable and alternative generation sources operating at a capacity factor of 40 percent (typical for wind power), provided there is sufficient energy storage to account for the variability.
At some point in the future, nearly 100 percent of the Railbelt’s energy demand could be supplied by alternative sources, but large-scale, long-term energy storage is needed to make this possible. The best current technology for storing and absorbing energy on the needed scale of weeks to months is pumped hydro.
In any case, the solution needs to be big enough to continuously store surplus energy during seasons of high energy production and to discharge continuously during seasons of low production. Additionally, implementing anything on this scale will require extensive transmission line upgrades to handle the flow of power.
By the way, spending $1.5 billion for upgraded generation seems to have been a good idea, as the new generation will help ensure a more efficient and reliable system while the distributed renewable resources are added than the old generation ever could have.
Finally, The Railbelt utilities need to be in the business of providing the lowest cost electricity possible. One way to do that is grow their load base to increase the economy of scale and decrease the cost of service to meet revenue requirements. Therefore, utilities should look for ways and cooperate with other entities to encourage the diversification of Alaska’s economy through value-added endeavors on all extracted resources in Alaska (i.e., processing rare-earth minerals and heavy metals), developing new industries (such as the ocean industries or “Blue Economy”), and improving the economy in more communities.
If Alaska is “open for business” then let’s produce the power to support the new businesses while serving the long-time customers with low-cost power. For example, the utilities should be marketing power to the mining projects currently in process.
How can six individual utilities market to encourage an expanding marketplace? The consumer marketplace has its own considerations. Electric vehicles are supposed to “take over the world” in the next few years. How can six separate entities incentivize fast-charging stations in their respective service territories?
What about incentivizing customers to use electricity for heating and cooling instead of using natural gas? Business development efforts such as these should have the overall goal of increasing the demand for their product, electric power. Once utilities become serious about providing low cost power and growing their customer base, we can look at the necessary capital improvements that are necessary to accommodate the vision we wish to achieve.
In summary, moving the integration of the Railbelt utilities forward requires a PLAN, not a mandate. They (the utilities) will have to find a way to become one utility while keeping all the customers happy with rates lower than they are paying now. Let’s be innovative! For Alaska to develop a long-term energy plan takes leadership to expand our energy base beyond oil and gas, while we still have a good oil and gas economy.
Robert Seitz, PE, electrical engineer, is Alaska resident for more than 75 years, and an advocate for renewable energy sources.