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U.S. GOVERNMENT PUBLISHING OFFICE WASHINGTON : For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 95–298 2016 S. HRG. 114–308 ISLANDED ENERGY SYSTEMS: ENERGY AND INFRA- STRUCTURE CHALLENGES AND OPPORTUNITIES IN ALASKA, HAWAII, AND THE U.S. TERRI- TORIES HEARING BEFORE THE COMMITTEE ON ENERGY AND NATURAL RESOURCES UNITED STATES SENATE ONE HUNDRED FOURTEENTH CONGRESS FIRST SESSION ON ISLANDED ENERGY SYSTEMS: ENERGY AND IN- FRASTRUCTURE CHALLENGES AND OPPOR- TUNITIES IN ALASKA, HAWAII, AND THE U.S. TERRITORIES TUESDAY, JULY 14, 2015 ( Printed for the use of the Committee on Energy and Natural Resources VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 (II) COMMITTEE ON ENERGY AND NATURAL RESOURCES LISA MURKOWSKI, Alaska, Chairman JOHN BARRASSO, Wyoming JAMES E. RISCH, Idaho MIKE LEE, Utah JEFF FLAKE, Arizona STEVE DAINES, Montana BILL CASSIDY, Louisiana CORY GARDNER, Colorado ROB PORTMAN, Ohio JOHN HOEVEN, North Dakota LAMAR ALEXANDER, Tennessee SHELLEY MOORE CAPITO, West Virginia MARIA CANTWELL, Washington RON WYDEN, Oregon BERNARD SANDERS, Vermont DEBBIE STABENOW, Michigan AL FRANKEN, Minnesota JOE MANCHIN III, West Virginia MARTIN HEINRICH, New Mexico MAZIE K. HIRONO, Hawaii ANGUS S. KING, JR., Maine ELIZABETH WARREN, Massachusetts KAREN K. BILLUPS, Staff Director PATRICK J. MCCORMICK III, Chief Counsel ISAAC EDWARDS, Senior Counsel ANGELA BECKER-DIPPMANN, Democratic Staff Director SAM E. FOWLER, Democratic Chief Counsel ALLEN STAYMAN, Democratic Senior Professional Staff Member VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 (III) C O N T E N T S OPENING STATEMENTS Page Murkowski, Hon. Lisa, Chairman, and a U.S. Senator from Alaska .................. 1 Cantwell, Hon. Maria, Ranking Member, and a U.S. Senator from Wash- ington .................................................................................................................... 3 Hirono, Hon. Mazie K., a U.S. Senator from Hawaii ............................................ 4 WITNESSES Kia’aina, Hon. Esther, Assistant Secretary for Insular Areas, U.S. Depart- ment of the Interior ............................................................................................. 6 Underwood, Hon. Robert, President, University of Guam, and former Guam Delegate, U.S. House of Representatives ........................................................... 20 Glick, Mark, State Energy Administrator, Department of Business, Economnic Development, and Tourism, State of Hawaii .................................. 25 Hodge, Jr., Hugo, Executive Director/CEO, Virgin Islands Water and Power Authority ............................................................................................................... 33 Kohler, Meera, President and CEO, Alaska Village Electric Cooperative, Inc. . 41 ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED American Public Power Association: Statement for the Record ................................................................................. 83 Cantwell, Hon. Maria: Opening Statement ........................................................................................... 3 Glick, Mark: Opening Statement ........................................................................................... 25 Written Testimony ............................................................................................ 27 Responses to Questions for the Record ........................................................... 67 Hirono, Hon. Mazie K.: Opening Statement ........................................................................................... 4 Hodge, Jr., Hugo: Opening Statement ........................................................................................... 33 Written Testimony ............................................................................................ 35 Responses to Questions for the Record ........................................................... 75 Kia’aina, Hon. Esther: Opening Statement ........................................................................................... 6 Written Testimony ............................................................................................ 8 Responses to Questions for the Record ........................................................... 64 Kohler, Meera: Opening Statement ........................................................................................... 41 Written Testimony ............................................................................................ 43 Responses to Questions for the Record ........................................................... 80 Murkowski, Hon. Lisa: Opening Statement ........................................................................................... 1 Underwood, Hon. Robert: Opening Statement ........................................................................................... 20 Written Testimony ............................................................................................ 22 Responses to Questions for the Record ........................................................... 66 Wittrig, PhD, T. Stephen: Statement for the Record ................................................................................. 85 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 (1) ISLANDED ENERGY SYSTEMS: ENERGY AND INFRASTRUCTURE CHALLENGES AND OP- PORTUNITIES IN ALASKA, HAWAII, AND THE U.S. TERRITORIES TUESDAY, JULY 14, 2015 U.S. SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES Washington, DC. The Committee met, pursuant to notice, at 10:06 a.m. in Room SD–366, Dirksen Senate Office Building, Hon. Lisa Murkowski, Chairman of the Committee, presiding. OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA The CHAIRMAN. Welcome, and good morning. We are at order today in the committee. We are looking at the unique energy chal- lenges that face those who live in the remote and isolated areas that are not connected to our national grid. Alaska, Hawaii, and our territories—these areas are largely dependent on imported die- sel fuel for their energy needs. The cost of importing that fuel adds significantly to the overall cost of electricity, and in the case of Alaska, it also adds to the cost of space heat. Most remote locations pay at least twice the national average for electricity. In parts of my state we see rates that can reach 10 times the national average as a result of the need to import fuel, so when we talk about energy challenges, for us this is every bit as important as anything else that we face. Alaska, of course, is not alone in this. In our isolated areas, in our islands that are reliant on imported energy, this is probably the most debilitating aspect of their ability to have an economy at all. While the nation’s regional grids have a diverse set of energy sources to draw from, most isolated areas simply do not have that luxury. Instead their energy costs are directly tied to the price of oil. Lower prices are providing some relief right now, but energy source diversity is the best and most stable option over the long term. In many parts of our state, the fuel barge comes in once a year, twice a year maybe. Sometimes it does not come when you expect it because you cannot get the barges up the river, but effec- tively what happens is the communities are locked into the price of fuel at the time that it was contracted. So if you contract for the fuel in July and the prices are reasonable, you enjoy those reason- able prices until the next shipment comes, which may be a year later. VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 2 I asked this morning to see what the people in Bethel paid for their energy costs. In the summer of ’13, heating fuel was going for $6.09, diesel was going for $6.51 and gas was at $6.85. In October of ’14 we were looking at heating oil at $6.20, diesel at $6.82 and gas at $6.79. We see the low prices around the country. Everyone was benefiting from the low prices, but not so much for those of us in Alaska. We are still seeing price comparisons that simply do not add up. It is important that we look at remote and isolated energy sys- tems in a holistic manner, not just from a cents per kilowatt hour perspective. In all but a few of the communities served by remote energy systems, economies of scale are simply not a reality. Fur- ther, the isolated nature of these energy systems means that they must bear the entire burden of ensuring reliability within the com- munity. The ability to support these energy systems directly de- pends on the underlying economy, and at the same time, the cost of energy drives that economy. I was in Pelican over the 4th of July break. Pelican, Alaska is down in the southeastern part of the state, a very small commu- nity, with 100 or so people. It is only accessible by boat or by float plane. It was founded as a commercial fish processing site back in the mid-1930’s. It processed one million pounds of fish back in 1942, but over the years they have languished as the fish went elsewhere, and they went elsewhere for some pretty simple rea- sons: ice. If you do not have ice to keep your fish chilled after you have harvested them, you do not have a product. Making ice takes energy, and without competitive energy, the community could not provide the ice necessary to support quality- based fisheries. The good news for Pelican is that they have a small hydro project that has put Pelican back on the map proc- essing small bits of fish that are coming in, and the fish are no longer going by this community. It is in part due to the fact that they have energy to the school, to the water plant, and now to the fish processors there. Pelican, in my mind, is an example of how we need to think about energy in these systems. We need to focus on solutions to the problems at hand where energy sources match what the community needs and what the community can sustain, and not simply what is desired for them. From a Federal perspective, we must ensure that our programs do not leave these areas on the sidelines. I note that the DOE’s definition of a microgrid requires the microgrid to be able to disconnect and connect to a larger grid. Well, that is just not possible for those of us in the non-contiguous parts of the United States. We have legislation before the com- mittee, S. 1227, to ensure that the development of microgrid tech- nology includes isolated communities, and hopefully that will be- come part of our larger energy package. Finally, I would note that this hearing occurs at the time the Pa- cific Power Association, which is the umbrella organization for the power companies in the Pacific Islands, including those in the U.S. territories and freely associated states, is holding its 24th annual conference in the Marshall Islands. That is a coincidence, not a matter of coordination, but it is good to know that the issue of re- VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 3 mote and isolated energy systems will be highlighted across the globe this week. The issues associated with islanded energy systems deserve our attention. Energy can be a staggering cost and a staggering burden for the people who live in these areas, so I am pleased that we have set aside time this morning to explore what can be done at the Federal level to help find lower cost solutions to them. Senator Cantwell, I am going to now turn to you for your com- ments, but I also want to recognize our colleague, Senator Hirono, a fellow offshore senator. We have had an opportunity in the past to discuss the challenges that are unique to your smaller state and my larger state. While we are at least connected to the mainland, we are clearly islanded in the sense that we are disconnected from the rest of America. I do appreciate working together with you, so if you would also like to make a comment after Senator Cantwell, we would be certainly happy to hear from you as well. With that, let us go to Senator Cantwell. STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON Senator CANTWELL. Thank you, Chairwoman Murkowski, for holding this important oversight hearing, and I welcome the wit- nesses, including our former colleague, Congressman Underwood. Thank you so much for being here. And the Assistant Secretary, thank you for being here. I look forward to hearing everyone’s testi- mony about the challenges of reliable and affordable energy in re- mote communities in rural Alaska, islands such as Hawaii, and a number of our U.S. territories. To me this is very important because energy is the lifeblood of any economy. Alaska and Hawaii have challenges as it relates to reliable energy sources, and coming from a state where we have seen cheap hydro build an economy over and over again, I just think this is such an incredibly important issue to how your econo- mies grow in the future. This committee has jurisdiction over relations between U.S. and the communities of our fellow citizens and nationals who live in the territories. Part of our responsibility is ensuring that these commu- nities have viable economies and that means a need for reliable and affordable energy. We need to look no further than Puerto Rico where electricity costs are over twice the national average, and the public utility is carrying a debt of about $9 billion, to see the con- sequences of high dependence on costly energy and old equipment. In other territories or in isolated communities in Alaska, elec- tricity costs are typically three to five times the average of the lower 48 states, and this constitutes a significant challenge to eco- nomic development. Two summers ago, Chairman Murkowski and I traveled to remote areas of Alaska, and I saw firsthand the chal- lenges that they face in getting an energy supply and building an economy with these energy challenges, particularly in the winter months. It is a very, very challenging situation. These communities export cash to operate and maintain their oil- based electric and transportation equipment. Newer, lower-cost electricity generation and transportation technologies are increas- ingly available, but there are typically two barriers to deployment: VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 4 a lack of technical expertise to operate and maintain these new technologies, and these are typically lower income communities which often lack the capital resources needed to finance the transi- tion to less expensive fuel and equipment. So, partnering with the Federal Government offers ways to over- come these challenges. First, making sure that we tap into tech- nical expertise at the Department of Energy and its laboratories. And second, assuring that these communities can leverage the grant programs administered by the Interior Department’s Office of Insular Areas, such as the Empowering Insular Communities Pro- gram and Maintenance Assistance Programs. Similarly, the Office helped establish the Pacific Power Association to help island utility officials to learn more and to share their best practices in meeting the challenges of reliable and affordable electricity in these remote communities. I am glad to have this important hearing today, and thank you again for having this and affording our colleague, Senator Hirono, a few minutes for her comments. STATEMENT OF HON. MAZIE HIRONO, U.S. SENATOR FROM HAWAII Senator HIRONO. Thank you, Senator Cantwell. Thank you, Chair Murkowski. I am glad that, Senator Cantwell, you men- tioned the high energy costs in Puerto Rico are twice what the na- tional average is. In Hawaii it is three times higher as Alaska is well aware. Senator Murkowski, our two states could become test beds for how we can provide affordable and, in our case, renewable energy to remote areas, something that you and I are very familiar with. Aloha to my friend, Bob Underwood, President of the University of Guam and former delegate to the U.S. House of Representatives. And, of course, I am really pleased to welcome Mark Glick, the Ad- ministrator of the Hawaii State Energy Office, as one of our wit- nesses today. I am also pleased to see our Assistant Secretary, Es- ther Kia’aina, another friend who served as first deputy for Ha- waii’s Department of Land and Natural Resources among positions of public service to the State of Hawaii. It is incredibly important that we are holding this hearing on islanded energy systems. The people of Hawaii understand the unique challenges that come with living on our islands, but our en- ergy challenges loom especially large. Families and businesses in Hawaii are well aware that they face the most expensive energy costs in the country. With oil accounting for 80 percent of the energy needs of our state, the people of Hawaii are acutely aware that there be must new alternatives to the volatile prices and vulnerable supply of the global oil trade. We can address our energy needs in ways that are much cleaner using Hawaii’s own renewable resources. In 2008, with the advice and support of the Department of En- ergy, our state established the Hawaii Clean Energy Initiative, a groundbreaking State/Federal partnership. We set a goal for 40 percent of our energy to come from renewables by 2030, and in June of this year the Governor of Hawaii signed into law an expan- sion of that goal to—listen to this—100 percent renewable elec- VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 5 tricity by 2045. This is the most ambitious plan and goal in the country. Can we get there? Mr. Glick is here to tell us how we are going to do that. [Laughter.] Hawaii has already more than doubled its use of renewable elec- tricity in 6 years to 21 percent. Hawaii also set a goal requiring a 30 percent improvement in energy efficiency by 2030. According to the Hawaii State Energy Office, the standard has resulted in the equivalent of $405 million in energy savings for Hawaii’s homes, farms, and businesses. Hawaii has also established an on-bill fi- nancing program to help consumers cut their energy costs by in- vesting in clean energy. Hawaii has benefited from the partnership of the state, the utili- ties, and the military in finding solutions for an affordable lower carbon energy future. It will help keep at home more than the $5 billion per year that we currently spend on importing energy. So not paying for importing oil and becoming more energy self-suffi- cient will, of course, mean more money; that $5 billion is circu- lating in our own economy, creating jobs, raising wages, and help- ing families make ends meet. It is great that we are focusing today on how Hawaii and other islanded areas deal with a high dependence on oil, high energy prices, and the reduced reliability of energy supply that comes from not being able to connect our electrical grids and pipelines with neighboring states. At the same time, Hawaii is on the forefront of addressing questions that will need answers all across the state and territories of the U.S.: how to use energy more efficiently in our homes, vehicles, and businesses; how to get affordable energy from increasingly renewable sources; and how to integrate new re- sources of energy in the energy infrastructure that supports our daily lives. Thank you, and I look forward to the testimony of our witnesses. Thank you, Madam Chair. The CHAIRMAN. Thank you, Senator Hirono. We will now turn to our panel this morning, and welcome to each of you. I will do quick introductions and then we will hear testi- mony. I would ask that you try to keep your comments limited to 5 minutes. Your full statement will be included as part of the record, and then we will have an opportunity for questions after that. We will begin the panel this morning with the Honorable Esther Kia’aina, who is the Assistant Secretary for Insular Affairs. As head of the Office of Insular Affairs, Ms. Kia’aina oversees the United States Government’s relationship with American Samoa, the Northern Mariana Islands, Guam, and the U.S. Virgin Islands, as well as financial assistance to Palau, the Marshall Islands, and the Federated States of Micronesia through our Compacts of Free Association. Welcome. We next have the Honorable Robert Underwood. Mr. Underwood currently serves as the President of the University of Guam, but, as has been noted, is a former colleague here. He was the Delegate from Guam to the U.S. House of Representatives. We are also joined by Mr. Mark Glick, who is the Administrator for Hawaii’s State Energy Office, tasked with growing Hawaii’s clean energy sector. Mr. Glick has been there since 2011. VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 6 We also have Mr. Hugo Hodge. Mr. Hodge is the Executive Direc- tor for the Virgin Islands Water and Power Authority, the public power utility for the U.S. Virgin Islands. He is also on the Board of Directors of the American Public Power Association; the Co-Di- rector of the Energy Development in Island Nations, a U.S. Virgin Islands (USVI) Initiative; and, the Chairman of the Caribbean Electric Utility Service Corporation. Welcome to you. Finally, we have Ms. Meera Kohler. Meera and I were on the plane yesterday coming from Alaska, so I know that she also is clearheaded and not foggy this morning from jet lag. Ms. Kohler has come before this committee several times. She has been the President and CEO of the Alaska Village Electric Cooperative (AVEC) since 2000 and has 36 years in the electric utility business. AVEC serves a population of about 30,000 people across 56 commu- nities with 49 power plants. She is a great friend and one who clearly understands the challenges that we face in Alaska. So thank you for making the long haul. To each of you this morning, welcome, and let us begin with the Honorable Esther Kia’aina. Welcome. STATEMENT OF HON. ESTHER KIA’AINA, ASSISTANT SEC- RETARY FOR INSULAR AREAS, U.S. DEPARTMENT OF THE IN- TERIOR Ms. KIA’AINA. Thank you so much. Chairwoman Murkowski and members of the Committee, I thank you for the opportunity to tes- tify on the energy efforts of the Department of the Interior’s Office of Insular Affairs (OIA) in the U.S. territories. The U.S. territories face higher energy costs than the rest of the nation, about three times higher than the U.S. national average. The territories are also nearly 100 percent dependent on imported fossil fuels for electricity generation. To combat these high cost of electricity, the Office of Insular Affairs entered into an interagency agreement with the U.S. Department of Energy’s National Renew- able Energy Laboratory, or NREL, in 2010 to help the territories of American Samoa, Guam, and the Northern Mariana Islands: (1) establish baseline energy system data; (2) form energy task forces; (3) develop long-term strategic energy plans; and (4) formulate en- ergy action plans. I am pleased to say that all of these objectives have been completed, and we are in the implementation stages of the energy action plans which are living documents that are up- dated regularly as circumstances change. On a slightly different track, the U.S. Virgin Islands was selected as the pilot project for the Energy Development in Island Nations, or EDIN, an initiative of the Department of Energy. Interior and the Department of Energy provided technical assistance to the USVI throughout the initiative, and in September 2011, NREL published the U.S. Virgin Islands Energy Road Map which outlines a path for achieving the territory’s goal of reducing its dependence on fossil fuel by 60 percent by 2025. As of December 2013, the ter- ritory has already achieved a 20 percent reduction in fossil fuel en- ergy consumption, a third of its goal. OIA’s current priority is assisting the territorial governments with the implementation of their energy plans through our Empow- ering Insular Communities Grant Program at about $3 million an- VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 7 nually. Some project highlights include funding support for geo- thermal exploration drilling programs in American Samoa and the Northern Marianas, a wind pilot project in Guam, solar panel sys- tems for the hospitals on Guam and Northern Marianas, and the integration of a hybrid renewable energy system in American Samoa to bring the Manu’a Islands close to 100 percent renewable by 2016. The greatest challenge we face is the lack of funding for high pri- ority projects identified in the energy plans. Some of the projects must be supplemented with funding from our OIA’s Capital Im- provement Project, Technical Assistance Program, as well as our Maintenance Assistance Program, all which are already stretched thin. Another challenge is funding for Puerto Rico. Public Law 113–235 included a provision for energy planning in Puerto Rico that would be funded by the Office of Insular Affairs. NREL’s cost estimate for including Puerto Rico is $331,000 for planning pur- poses. With no appropriation for this effort, OIA’s Energy Grant Program would likely suffer for the other territories. Although the challenges are many, we feel there are still signifi- cant opportunities for the territories to reduce the cost of elec- tricity, diversify their supply of energy, and become less dependent on imported diesel fuel. The President’s 2016 budget includes $4.4 million for pursuing sustainable energy strategies already identi- fied in the territories’ strategic energy plans. Solutions to energy issues are always pressing with significance for the environment, financing of territorial governments, and the well-being of island societies as a whole. Thank you so much for the opportunity to testify on our energy initiatives in the U.S. territories. With me to help in the answering of any technical aspects of my testimony is Scott Haase, who is the NREL liaison to the Department of the Interior. Thank you very much. [The prepared statement of Ms. Kia’aina follows:] VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 8 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 1 here 95298.001 9 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 2 here 95298.002 10 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 3 here 95298.003 11 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 4 here 95298.004 12 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 5 here 95298.005 13 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 6 here 95298.006 14 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 7 here 95298.007 15 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 8 here 95298.008 16 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 9 here 95298.009 17 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 10 here 95298.010 18 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 11 here 95298.011 19 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 12 here 95298.012 20 The CHAIRMAN. Mr. Underwood, welcome. STATEMENT OF HON. ROBERT UNDERWOOD, PRESIDENT, UNI- VERSITY OF GUAM, AND FORMER GUAM DELEGATE, U.S. HOUSE OF REPRESENTATIVES Congressman UNDERWOOD. Thank you. Hafa adai. Good morn- ing, Senator Murkowski, Madam Chair, and members of the com- mittee. It is an honor to be asked to share some ideas and perspec- tives on energy issues in remote areas, especially island commu- nities. I am President of the University of Guam since 2008 and former Congressional Delegate, as has been mentioned. Part of the initiative as President is to establish the Center for Island Sustain- ability to kind of function as an honest broker on issues related to the sustainability of the islands in what we consider our greatest challenge, which is to try to figure out how to sustain our economy, our way of life, and our environmental resources at the same time. Our greatest export from Guam is money. As soon as we get it, we export it, and $300 million a year, which is roughly seven and a half to 8 percent of our total, what we call our gross island prod- uct, goes to fossil fuel. As you have pointed out, Madam Chair as well as Senator Hirono, if we were able to capture portions of that export through efficiencies and through the establishment of re- newables, we could keep the money circulating in the Guam econ- omy, generate jobs, improve the quality of our lives, and make sig- nificant strides toward energy independence. And that is the holis- tic approach that we think is necessary for people to understand. Power generation on Guam is provided by local companies which face significant challenges to keep power constant and consistent due to infrastructure issues, and the fact that we are disconnected from a greater grid, a national grid, a continental grid. They also must try to maintain policies which are able to pay back their long- term indebtedness. In most instances, the power companies are the drivers of energy policy rather than the entire society, and this is because they exist in a power vacuum. I hate to use that term, but that is exactly what happens in many of the islands. Consequently, strategic plan- ning which engages energy issues as a long-term social and eco- nomic issue as well as dealing with technological innovations is in- coherent and is really driven by occasional Federal initiatives. Some of the initiatives outlined by the Assistant Secretary have been very helpful, and there are others by the U.S. Department of Energy, and sometimes by the U.S. EPA. But looking at it from an island perspective, what happens is that you see various initiatives coming back and forth, and you are not sure which ones are really indicative of the entire Federal policy toward energy in the insular areas. Financing innovative technologies is complicated by, of course, capital shortages and the notion, very common, that innovative technologies is a Federal or external responsibility. Island power systems effectively must, of course, function as micro or minigrids. While our solutions to this are simple—well, they are simple to say, not simple to carry out—we need strategic planning which is holis- tically based and focuses on greater energy independence and the VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 21 positive consequences which include economic growth and sustain- ability. We need to understand the concept of ‘‘indigenous energy,’’ bring- ing back using technology to help build independence. In the expe- riences of the islands, the introduction of technology usually means greater dependence on the outside world. Energy technology, re- newables, actually reverses that trajectory. We need to adopt strong, but achievable, goals which reward in- novation and spur participation rather than skepticism and opposi- tion. This means we need renewable energy portfolio standards which are realistically arrived at but which have rewards and con- sequences. We need capacity building which is based on people, not just on infrastructure, and education for the work force and com- munity outreach which enhances energy literacy, which goes fur- ther than just computing the dollars and cents computation of kWs, as you mentioned in your opening statement, Senator Murkowski. Federal policy initiative and activities must be coherent and con- sistent. A multiplicity of funding sources and regulators and tech- nical assistance possibilities do not facilitate coherence in small communities, but rather the creation of silos within those small communities. There is very little followup on the ground by any Federal agency relating to energy in spite of its importance, which means the deploying of individuals from agencies to help us and to help those islands. The Federal Government should provide not only seed funding and technical assistance for some innovative projects but also the establishment of green funds themselves which are sustainable. Last, we want to call for development of not just an all-island, but an all-islands, solution and network. Individual communities must develop their own coherent policies and initiatives for indi- vidual sustainability; however, we must join all-islands networks to share best practices and to avoid redoing what has been done be- fore. We have done this through the establishment of the Center for Island Sustainability and our annual conferences. We have also reached out to remote communities in Alaska through our relation- ship with the center at the University of Alaska-Fairbanks, which I visited last year. The committee’s efforts and the efforts of our partners, particu- larly under the leadership of the Office of Insular Affairs and other Federal agencies, will be greatly enhanced by adopting policies which reward demonstrated collaboration, successful projects, and which build that human capacity. A key factor in this is to not just look at territories as political jurisdictions, but to adopt an all-is- lands approach through the participation of islands, whether they are in the Pacific, the Caribbean, off the coast of Alaska, or the New England coastline. I will be happy to answer any questions. Thank you very much. [The prepared statement of Congressman Underwood follows:] VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 22 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 13 here 95298.013 23 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 14 here 95298.014 24 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 15 here 95298.015 25 The CHAIRMAN. Thank you, Congressman Underwood. Mr. Glick, welcome. STATEMENT OF MARK GLICK, STATE ENERGY ADMINIS- TRATOR, DEPARTMENT OF BUSINESS, ECONOMIC DEVELOP- MENT, AND TOURISM, STATE OF HAWAII Mr. GLICK. Thank you. Good morning, Chair Murkowski and members of the committee. Thank you for inviting me to testify be- fore you today about Hawaii’s energy ecosystem and the challenges and opportunities faced in operating islanded energy systems in the Hawaiian archipelago. First, the state views our annual expenditure of about $5 billion a year on imported oil as a tax on growth in Hawaii that imposes a significant burden on our residents and businesses. Economics and energy security have driven our push for clean energy with substantial progress for energy transformation finally taking root, once a bipartisan collage of policymakers in Hawaii’s congressional delegation and our Statehouse decided to take bold action. This was embodied in the 2008 Memorandum of Agreement between the U.S. Department of Energy and Hawaii and the subsequent pas- sage in 2009 of the nation’s strong renewable portfolio and energy efficiency portfolio standards, something we call the Hawaii Clean Energy Initiative, as Senator Hirono mentioned in her remarks. In 2013, the Governor established energy policy directives to offer guidance and clarity for actions necessary to fulfill Hawaii’s energy transformation. I would like to emphasize directives calling for a diversified energy portfolio and relying on clean energy solu- tions in which the market decides winners and losers, and the re- sults have been strong. The renewable portfolio topped 21 percent at the end of last year, well ahead of the 2015 interim target of 15 percent, and the state has reduced electricity demand by more than 15,000 gigawatt hours. To do this, we used the winning strategy of paying off infrastructure costs through energy savings, and Hawaii has led the nation for three consecutive years in the per capita value of energy savings performance contracts. Hawaii also leads the nation in solar capacity per capita, even though our isolated grid cannot absorb the percentage of intermit- tent renewables through the interconnection with the regional grid as is done on the mainland. So to address these technical chal- lenges and costs associated with incorporating this increasingly large percentage of renewables, our electric utilities are working with the host partners to test and work on specifications of fast trip, inverter functionality to avoid transient over voltage events, Midwich distribution circuit to determine proactively the amount of distributed energy resources that can be hosted on each circuit, and work with inverter manufacturers to bring to market advanced in- verter functionality to manage voltage levels to customers. Now, to support these solutions, our office, the Hawaii State En- ergy Office, focuses more these days on utility resource planning, rate design, and price signals to inform energy stakeholders on the optimal configuration to achieve a growing portfolio of renewable resources. One example I would like to cite is our modeling of load balancing and storage resources from higher penetrations of elec- tric vehicles. VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 26 If we assume 120,000 electric vehicles are operating when we achieve a 70 percent renewable portfolio, peak energy demand, electric demand, would increase by as much as 20 percent, result- ing in a 10 percent increase and our need for energy storage. How- ever, if those 120,000 electric vehicles are supported by smart charging and advanced systems to be connected to the grid, energy storage requirements might actually be decreased by 10 percent. Now, the fact that we are the most isolated population concentra- tion in the world makes energy resiliency and disaster recovery an even greater concern. Renewable energy and distributed energy of- fers great energy resilience, and we have also taken concrete steps to ensure that Hawaii’s clean energy transformation is realized by all demographics and communities throughout the state. That is why our new securitized rate reduction bond and On Bill Repay- ment Green Financing Program targeting the undeserved residen- tial customers, renters and non-profits, is so important. So in conclusion, Hawaii has been able to leverage our isolation and the challenges faced in the arena of clean energy to great ad- vantage. Hawaii has been able to attract international investment from governments and corporations who see Hawaii as a bellwether for renewable energy solutions before rolling out to international markets, and this success has prompted the state to rethink the po- tential of Hawaii’s clean energy transformation. The offshoot was the passage of the bill that Senator Hirono had mentioned signed by Governor Ige in June of this year calling for Hawaii’s electric utilities to accelerate the 2020 interim RPS target or renewables from 25 percent to 30 percent, and, of course, go to 100 percent renewable energy by 2045. Our continued refinements of these targets assist in resource optimization and prevents costly overbuilds, and sets a clear, unambiguous goal of generating 100 percent electricity from its renewable sources. Our approach in set- ting targets for utilities is a practical approach to furthering the state’s energy policies. So thank you for this opportunity to highlight Hawaii’s clean en- ergy leadership and to share some of the lessons we have learned in pursuing our clean energy transformation. [The prepared statement of Mr. Glick follows:] VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 27 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 16 here 95298.016 28 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 17 here 95298.017 29 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 18 here 95298.018 30 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 19 here 95298.019 31 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 20 here 95298.020 32 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 21 here 95298.021 33 The CHAIRMAN. Mr. Hodge, welcome. STATEMENT OF HUGO HODGE, JR., EXECUTIVE DIRECTOR/ CEO, VIRGIN ISLANDS WATER AND POWER AUTHORITY Mr. HODGE. Good morning, Honorable Chairwoman Lisa Mur- kowski and other honorable members of the Committee on Energy and Natural Resources. My name is Hugo V. Hodge Jr., and I am the Executive Director/Chief Executive Officer of the Virgin Islands Water and Power Authority (VIWAPA). On behalf of the Governor of the Virgin Islands, the Honorable Kenneth E. Mapp, the Virgin Islands Delegate to Congress, the Honorable Stacey Plaskett, and the members of the 31st Legislature of the Virgin Islands, and the Governing Board of the VIWAPA, we thank you for this invitation. To say that volatile oil prices have placed an undue burden on the businesses and residents of the U.S. Virgin Islands and the overall economy of the territory is an understatement. Since ap- proximately 2003 when fuel oil prices began an unprecedented climb, electric customers have struggled to pay for electric services, spending approximately 9 percent of their income on these services versus the 2-percent paid by their mainland counterparts. At one point in time, the average price of energy paid by the U.S. Virgin Islands consumer climbed to a high of $0.51 per kilowatt hour, five times the U.S. average. While the territory has received some relief in recent months due to the recent decline in oil prices which has reduced the current electric rate to $0.32 per kilowatt hour for residential customers and $0.35 per kilowatt hour for com- mercial customers, analysts are divided on how long this respite from high fuel prices will last. One thing is certain, however. Prices will elevate again, so the urgency remains the same. Like most other Caribbean islands, the USVI has no conven- tional energy resources to meet its energy needs. While U.S. main- land utilities can connect to grids to purchase power from other utilities in the continental United States, island utilities are small, isolated, and are not interconnected to a grid comprised of other utilities. This is primarily due to their separation by water and the depth of the ocean floor, which makes interconnection via under- water electric cables technologically and economically unfeasible. As a result, island utilities have historically purchased small sim- ple cycle generating units that are oil-fueled. From the mid-1980’s to approximately September 2003, the infla- tion-adjusted price of a barrel of crude oil on the NYMEX was gen- erally under $25 a barrel. The attraction of low cost fuel, combined with the economies of scale, provided the framework for island util- ities to purchase these small generating system. In many islands that are comprised of several small islands separated by water, du- plicate generating systems and increased reserves are required to meet the need for electrical services. VIWAPA, for example, has two separate generating systems—one to serve the islands of St. Thomas, St. John, Water Island, and Hassel Island, and another separate system serves the island of St. Croix. During 2003, oil prices globally began to steadily rise. The price per barrel paid for by the Authority was approximately $22 a bar- rel. At its highest, we have paid $141 per barrel. The result of these massive spikes caused operating cash shortfalls, flat to de- VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 34 clining sales in electricity, and larger outstanding receivables, re- sulting in deferred maintenance on our generating equipment. I provide a table showing the rise of fuel prices. So what we have done since that point is we have pursued every available option to reduce the cost of electric services to our cus- tomers and jump start the economy. We have pursued alternative and renewable sources tirelessly for almost 10 years now, and tan- gible relief is finally on the horizon. VIWAPA could not, however, have made the advances it has without a number of public and pri- vate partnerships. Chief among our supporters have been the Department of Inte- rior, the Department of Energy through its National Renewable Energy Laboratory, the Federal Emergency Management Agency, and the U.S. Department of Agriculture, and RUS, which have pro- vided the following assistance. DOE through NREL helped to iden- tify the territory’s baseline energy use and how the USVI could best meet its goal to cut fossil fuels by 60 percent by 2025. VIWAPA, as an EDIN partner, has been able to tap into a broad spectrum of technical assistance and project development support from DOE and NREL. DOI provided a $500,000 grant for VIWAPA to prepare an Integrated Resource Plan that will provide the road- map for responding to future generation needs. FEMA has provided funding for hazard mitigation projects that have assisted VIWAPA with burying power lines that serve areas critical to the territory’s infrastructure. RUS has approved a loan that will allow VIWAPA to implement Distributed Automation Technology, a smart grid capital improvement project, and AMI, Advanced Metering Infra- structure. The closing on this loan has, however, been delayed. Any assistance the committee can provide to close the loan would be ap- preciated. Throughout the rest of the testimony I highlight some of the things we have implemented. We were 100 percent dependent on fuel oil. Now we have about 8.2 megawatts of grid type solar and about 15 megawatts of net metering, bringing our renewable port- folio to just about 22, 23 percent currently. We also have another six megawatts of solar power we have contracted for to be built on the island of St. Croix. We have a seven-megawatt biofuel project on St. Croix contracted to be built by the end of 2016, and we are currently doing a massive undertaking of converting all of our power generation to use of LPG, or propane. The conversions of the units allow for both LNG and LPG, and we expect to see a signifi- cant reduction in costs as a result. The Island of St. Croix will be benefiting from that project as early as next month. We plan to introduce propane to the storage facilities the end of July and produce energy in August. I am pleased to report that. The St. Thomas project is behind waiting for the issuance of an Army Corps of Engineer’s permit, and we know they are doing their utmost to produce the permit. However, the permitting staff for the region, which reviews the permits, is inun- dated with other requests. I would like to thank you for the opportunity to appear before the committee, and I am here to answer any questions you may have. [The prepared statement of Mr. Hodge follows:] VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 35 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 22 here 95298.022 36 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 23 here 95298.023 37 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 24 here 95298.024 38 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 25 here 95298.025 39 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 26 here 95298.026 40 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 27 here 95298.027 41 The CHAIRMAN. Thank you, Mr. Hodge. Welcome, Ms. Kohler. STATEMENT OF MEERA KOHLER, PRESIDENT AND CEO, ALASKA VILLAGE ELECTRIC COOPERATIVE, INC. Ms. KOHLER. Thank you. Good morning. My appreciation to Chairwoman Murkowski for inviting me here today and to all the members of the Committee for tolerating hearing a little bit about Alaska. You have already had a brief introduction to AVEC, the Alaska Village Electric Coop. We are a non-profit electric utility that serves 56 communities, and we do so by operating 49 independent power plants. The reason we have to do that is because none of our communities are connected to each other, or very few of them are, although we have been on a mission for the last several years to try and interconnect our communities because that is how we can achieve economies of scale as well as allow us to integrate some wind power. We actually are leaders in the development of wind power in Alaska. We own 34 wind turbines that serve 15 communities. We are able to achieve capacity reduction or diesel reduction of up to 30 percent in some of those communities, which is technologically a very challenging feat. Nonetheless, it is a mission that we do have to reduce our diesel consumption substantially. I think, as was pointed out, the export of Alaskan dollars for fos- sil fuels is considerable. A very brief study that we did a few years ago shows that we are exporting $3 billion a year in fossil fuels used to power electricity and heat in our communities. We are, of course, an Arctic state, and as a result, heat is a very critical factor that has to be provided. What we will find in Village Alaska and some of our smallest rural communities, over 20 percent of the population spends lit- erally 50 percent or more of their disposal income on energy, and that is just electricity and heat. That is not supportable. You can- not have any type of economic development when you have energy that is crippling the economy. Across the State of Alaska we have electric rates ranging from $0.10 a kilowatt hour in southeast Alaska where they have renew- able hydro electricity up to over $1 a kilowatt hour in many of our communities where fuel has to be flown in. As Senator Murkowski mentioned, our river systems are changing. They are becoming shallower, and more and more communities are unable to be reached by barge traffic during the very brief summer season when we are ice free. So as a result, our challenges in Alaska truly are formidable. These small local facilities do not have economies of scale be- cause you are serving populations of just a few hundred. Our aver- age village community in AVEC is 450, but if you look across the state where we have more than 200 microgrids as it were that are completely islanded, the average population in those villages really is more like 200. So when you are trying to develop a reliable en- ergy system to serve such a small population, you actually wind up with a huge amount of redundancy. VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 42 We have typically three to four diesel generators in a village. They are sized such that they can pick up the loads during any one part of the season of the year. You have to be able to count upon having one generator down for planned maintenance and having another one break down unexpectedly, so you have to have at least triple redundancy in each of these communities. As a result, our actual installed cost per service in our villages is five times or more that of the lower 48. So typically over here, the lower 48, you see a capital cost of about $2,500 per service. In our villages, it is more than $17,000 per village—per service. Those disparities result in very high non-fuel costs of power as well, so typically in one of our villages we are looking at over $0.60 per kil- owatt hour for the first thousand kilowatt hours, as it were. We must have affordable energy if we are going to have economic development. We must have jobs. We must be able to provide es- sential services. The State of Alaska has been a significant player. They have funded several programs to improve the cost of elec- tricity. They have a renewable fund that has been in operation since 2008 and has plugged almost $300 million into developing re- newable energy systems. They have innovative financing options for large-scale construction, they have a revolving Power Project Fund, and they have the power cost equalization to reduce the cost of residential electricity for the first 500 kilowatt hours, but Fed- eral help is desperately needed in Alaska. We do not have a trans- mission grid. We would love to have a grid to be able to connect and disconnect to, so that is something that certainly should be on the plate in the future. The Energy Independence and Security Act has got the potential to be a huge player in Alaska, so we urge you to consider funding elements of that act so that we can have the Federal support that we need across Alaska. With that, I stand ready to answer questions, and yield the floor back to Chairman Murkowski. [The prepared statement of Ms. Kohler follows:] VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 43 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 28 here 95298.028 44 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00048 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 29 here 95298.029 45 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 30 here 95298.030 46 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 31 here 95298.031 47 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 32 here 95298.032 48 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 33 here 95298.033 49 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 34 here 95298.034 50 The CHAIRMAN. Thank you, Meera. I appreciate you being here and for your testimony this morning. I have several questions this morning. Let me start with you first, Assistant Secretary. Under the Omnibus Appropriations bill from 2015, the Secretary of the Interior was directed to establish energy action plans for the territories which you mentioned in your comments. It also included Puerto Rico, but Puerto Rico is not yet included in the process. Where are we with Puerto Rico’s inclusion? Obviously Puerto Rico is clearly and keenly in the news right now. We are all very engaged in these issues that are very, very difficult for Puerto Rico. I have noted that as difficult as the econ- omy is right now, unless we can deliver and work with the people of Puerto Rico on some energy solutions, it is going to continue to be a tough set of facts there. So where are we on the energy action plan for Puerto Rico? Ms. KIA’AINA. Thank you, Chairwoman, for that question. When the law was passed, our Fiscal Year 2015 budget did not take into account Puerto Rico, so the $3 million that we received went to other areas in the other territories. As I stated in my testimony, the plan estimated by NREL will cost $330,000. We believe that if we received our full funding for Fiscal Year 2016, which is $4.4 million, we would be able to accommodate Puerto Rico in the up- coming Fiscal Year. The CHAIRMAN. So to this point in time, there has been nothing done to pursue an energy action plan for Puerto Rico. Is that cor- rect? Ms. KIA’AINA. That is correct; however, there is NREL and there is the U.S. Department of Energy. I have been in contact with the U.S. Department of Energy, and they actually have told me that a plan may not be necessary because they have already done a lot of work in Puerto Rico. So I commit to you after this hearing—well, first, let me just say for Fiscal Year 2016, we can fund it if we get an increase in appropriation. With regard to what can DOI and U.S. DOE do now, I need to followup with my colleague at the Department of Energy, who is already active in Hawaii and the Virgin Islands and has said that a lot of ground work has been made in Puerto Rico. And so, they may have the discretionary authority to do that plan. That is some- thing I will followup with your staff as well as with the Depart- ment of Energy. The CHAIRMAN. I would appreciate you doing that. We had in- vited representatives from NREL or DOE to attend this morning to speak to some of these issues, so hopefully they are on alert that these are questions that we would like to have addressed. I am sure that the people of Puerto Rico would like to know that there is a plan that is out there. Nobody has really talked this morning about storage capacity, and I know that for the areas that you all represent and are en- gaged in, the ability to store energy from these intermittent sources is really going to be the future here. What level of engagement have you had with the Department of Energy on these microgrid technologies that you are working on to improve storage capacity? Has there been much work either in Alaska, Hawaii, or the terri- tories? Mr. Glick? VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 51 Mr. GLICK. Chairman Murkowski, the Department of Energy has provided a great deal of technical assistance through some of the analyses that we talked about. The Oahu wind integration study, as well as the solar integration study did talk about amounts of storage that would be necessary to smooth out frequency disrup- tions and other technical problems created through intermittent power. So there have been RFPs that have been put together by the utility to solicit that amount of storage for our systems, but we also believe that it is important to do grid modernization, which will relieve a lot of demand for storage through these trip inverters and other technologies I discussed, which are a lot less expensive. So we have to do both. The CHAIRMAN. Mr. Hodge? Mr. HODGE. Yes, good morning again. We have been talking to the Department of Energy about a microgrid system for the island of St. John. It is an isolated part of our grid, it is served by under- water submarine cables, it is about eight megawatts in total, and we believe that the island is ideal for a microgrid system with dis- tributed generation and storage. We have asked for their assist- ance, and I believe we are just about close to getting some technical assistance in studying how we can do our microgrid system for that island. We also look at other mechanisms for our utilities scale. Solar, we use some of the European standards, the low voltage ride through, the frequency support, and some of the other technologies that are in the inverters that are not predominant in the U.S. mar- kets, but that are more prevalent in the other countries that utilize the renewables. The CHAIRMAN. Let us go to Senator Cantwell. Senator CANTWELL. Thank you, Madam Chair. The Napaskiak. Is that where we—— The CHAIRMAN. That is where we were. Senator CANTWELL. So Senator Murkowski and I were at Napaskiak two summers ago. Ms. Kohler, one of the things that you said that struck me is this nexus between economic develop- ment—energy costs and economic development. You are not going to grow an economy if you do not have basic energy costs that are competitive for people to establish businesses there. So this is, to me, a very critical issue. One of the things I mentioned in my statement was about the two challenges that we have, both the technical barriers on the ground and in the workforce and then the financial investments or the structure to deploy that. Of the programs that we currently operate at the Federal level, what are the holes? Why does this not work to try to test or deploy other technologies, or maybe you think they are working fine? Ms. KOHLER. Well, I would like to say they are working fine, but the reality of the matter is that when you are looking at—you men- tioned Napaskiak, and that is a standalone community that oper- ates their own electric system. When you are that small you do not have access to technical resources that you can afford, and so you rely upon other entities, such as the State of Alaska through the Alaska Energy Authority, for assistance. Now, on the other hand, in our communities, the AVEC commu- nities, because we are headquartered in a single location, we have VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 52 the technical staff and the engineering resources and so forth to provide the support services we need for our own communities. You still have a real issue with local capacity. When we install wind turbines, for example, in our communities, we actually send indi- viduals that are residents in those communities, typically one or two people, to extensive wind training so that they actually become wind smiths, as it were. They are supported by journeymen level staff out of our own office, but it makes for very expensive alter- natives. U.S. DOE has not really played a major part, but the Denali Commission has been a very strong supporter and has provided funding for renewables and for training as part of the operation of those renewables. I know that very recently the Alaska Center for Energy and Power is working with U.S. DOE to put together a modest innovative program to develop storage alternatives. The storage that we use to operate our wind turbines really is a diversion off that excess electricity into heat sources. We actually use the electricity as heat to supplant diesel in public projects, water treatment plants and so forth. So we do effectively use it, al- though the best value for that electricity would be as electricity. But until storage becomes more of a mainstream event, as it were, we cannot afford to invest in it. Senator CANTWELL. So financing really is an issue. Ms. KOHLER. Financing is the hugest issue of all, yes. Senator CANTWELL. And that seems to me to be the crux of this—I am not saying the complexity of Alaska and its temperature is not a very challenging issue, but it does not seem to me that these problems are about getting a national lab to tell us what we need to do here. It is more about whether the tools are there for the communities to build capacity that they do not have to begin with because of remoteness or the lack of a business interest. It seems to me that the financial tools that we are making available seems to be a very critical issue. You are nodding your head. You agree? Ms. KOHLER. I am agreeing with you 100 percent. Senator CANTWELL. Okay. Mr. Underwood, Mr. Glick, or Mr. Hodge? Congressman UNDERWOOD. Yes, that is exactly it. I think the main issue we are—and certainly in small island societies, you are waiting for some technological innovation to come along to solve your problem instead of—and what happens is that the shifting of the responsibility of, well, how do you finance some of these things, and how do you finance innovations and adopt them into your is- land society that has shifted. It shifted to other places, and you are just kind of waiting for something to happen. I would argue that and I would urge that Federal agencies spend as much time giving some island communities as much technical assistance on how to finance things as much as technological advice or advice on new techniques. Also, just to speak briefly to the point about storage. That is also a very critical issue, and I am eager to hear what the others have done with this issue because the inability to store from solar panels is one of the biggest reasons why some people argue you should not adopt solar panels now until you get that level of technology. I VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 53 just—I do not accept that. I think there must be ways of managing that grid and power consumption throughout the day in order to manage that, so that storage issue. But just to speak briefly again to the issue of technical assist- ance, and financing, and developing models for that is really as much a key as is advice on new technologies. Senator CANTWELL. Well, I am a big—oh, Mr. Hodge, did you want to say something? Mr. HODGE. Yes. I would like to say that having the utility be a part of the plan is critical because how we have tackled the issues of financing is by using the PPA model. So where the utility or the government could not outright finance the project or do the borrowing for the project, our utility can use a mechanism called a power purchase agreement to pledge the repayment over a period of time via the rates for that reduction in cost. For our LPG conversion, we had a worldwide company, VITOL, put up all of the upfront costs, the $150 million, the conversion, of all of our units, all the facility, build all the infrastructure. And then over a period of just 10 years, we can repay this debt via a small add-on to our cost of buying the propane from the Gulf, so it is U.S. fuel. And the PPA model we have used for our solar projects with 25-year PPAs. We have got $0.13, $0.14 for solar en- ergy on a utility scale. We have utilized it for our bio fuel project. We do not have the capital to go out and do large purchases or utility-owned systems, but by using the PPA model, which does re- quire that you maintain investment-grade, which is a challenge for some utilities but that is the way we handle that issue. Senator CANTWELL. Well, I was going to say I am a big fan of public power in general, and we had one utility in our area, Park- land, which is in Pierce County, that basically put all its utilities underground. So here is a little utility that decided what was in the best interest of those rate payers was an investment in secur- ing their delivery system because of our winds and storms. They decided to finance that and move ahead. So I like having the public models in the marketplace, because I think that they keep a keen eye on the interest of cost-based power in delivering the resource to the community that allows the community to grow. While I am a very big supporter of Power Afri- ca in the context of the United States doing all it can to take U.S. technology and promote it in other areas, it is an embarrassment that we are not spending more time and energy in the United States of America and our territories providing real solutions to the people that live within our boundaries. We have got to do this. Madam Chair, I am all ears about the solutions that we can seek to do this. This is something that we should do, and it should be a commitment by this government to get it done. Thank you. The CHAIRMAN. Well, you are singing to the choir here. [Laugh- ter.] Let us have Senator Hirono join. Senator HIRONO. Thank you very much, Madam Chair, and I echo those sentiments about singing to the choir. I am a proponent of the setting of national renewable energy and efficiency standards to encourage the private sector to step forward with R&D. Mr. Glick, I note in your testimony that you say that Hawaii has been able to attract international investment from gov- VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 54 ernments and corporations. They see Hawaii as a bellwether for re- newable energy. So I wanted to have you talk a little bit more about how Hawaii has spurred this kind of activity on the part of the private sector. Mr. GLICK. For us, clean energy, as you know, Senator Hirono, has been all about rebuilding our economy and creating this new clean energy sector. Part of it is attracting innovation. With us in Hawaii as being an emerging test bed, companies like Hitachi with support from the Ministry of Economy and Trade and Industry in Japan have been funneling dollars. About $40 million came to Maui for the smart grid project called Great Maui that is building a microgrid and a smart grid network—also developing bigger net- works of electric vehicles and fast charging networks. A very im- portant project which we expect will expand. Through the Hawaii-Okinawa Agreement which was just signed last week, we are hoping to identify additional projects that could be brought to Hawaii and also shared resources, some that would be developed in Japan as well. I think that is the kind of model that we see in the future continuing to find collaborative projects to test the boundaries of how we integrate more renewables, how do we build smarter clean transportation systems using clean en- ergy, and trying to track those dollars on very large-scale real world demonstrations. Senator HIRONO. We have heard from some of the other wit- nesses how expensive energy is in their localities. So, again, Mr. Glick, Hawaii created the Green Energy Market Securitization Pro- gram, or GEMS, to help more people invest in renewable energy. This is particularly important to people who do not have the money up front to buy solar panels, for example, but who are interested in saving money in the long term by generating their own power. Can you elaborate on how the GEMS Program works in engaging with the public and providing financing options to people, including renters and non-profit organizations, and do you think this ap- proach could be used in other territories and other states? Mr. GLICK. Thank you, Senator Hirono. Certainly the GEMS ap- proach, we use rate reduction bonds that are securitized. They are backed in our case by security from the Public Benefits Fund, which comes from everybody’s electricity bill, a small surcharge. We are able to utilize some of that back, repay the loans. We are able to get triple A financing, so very, very low cost of money. We then build loan programs around it. It is hard getting small commercial non-profit organizations and also the residential mar- ket. Those loan products have just been rolled out this summer, and we expect a lot of people to take advantage of that. Very low interest rates on the low side, five to six percent, on the high side, nine percent. But compared to other programs, particularly for those who have had difficulty getting financing for solar projects, it is really the only way that they have been able to get financing. And then, of course, tying it to your electricity bill repayment really reduces the risk of default, so I think that is another thing that can be incorporated. I know many states have had difficulty getting on bill programs instituted, and that is done pretty much on state-by-state level so far. But on bill does reduce risk of repay- ment, so we see that as an important model. VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 55 As far as the overall capitalization and how bond programs like GEMS could be expanded, we know that the State Energy Program through states and the state energy offices have managed $2.1 bil- lion in loans. Perhaps the State Energy Program through some kind of mechanism like GEMS could funnel additional dollars. In Hawaii, we think our clean energy installations will exceed $20 bil- lion in capitalization, so we need to find more means of financing to make it more affordable. Senator HIRONO. Madam Chair, it seems as though my time is up, although it did not feel like five minutes. Is this right? Do you mind if I just ask Ms. Kia’aina whether a GEMS kind of a model could work in the other areas, territories? Ms. KIA’AINA. I think some of my other colleagues in the terri- tories might be better able to answer that question, but just let me say in general our energy program is so small, $3 million. So I would promote greater dialog with the private sector, and I took notice of Hitachi, Mr. Glick, because in the Pacific territories, Japan is a close neighbor. They have committed $450 million just recently for climate change and other types of funding specifically for independent Pacific Island nations, including Micronesia. And so, my head was thinking here with regard to some Kokua we could use for our energy initiatives. That is something we will contemplate, but, again, I defer to my other colleagues directly from the territories because they are on the front lines, and they are probably already working with the pri- vate sector. Senator HIRONO. If it is all right with the chair, if anybody else wants to chime in. Congressman UNDERWOOD. Yes, I think that is a—that is a pos- sibility, and it goes back to the whole point about how to finance these things in the small island territories. I think there is kind of a common perception that OIA is going to fund some of this, or that they are going to create some kind of financing mechanism. But it is not there, and we recognize that. At least I recognize that. I am not sure that everyone does. But this is the kind of promising thing that I think could come from an all-islands approach where we are constantly having these dialogs. I should not have to go to Washington, DC. to hear about it when I can just go to Honolulu. [Laughter.] Senator HIRANO. Mr. Hodge. Mr. HODGE. Yes, we have used on bill financing for our solar water heater program, so I am sure somewhat the model can work. I am not familiar with the GEMS Program and what the surcharge is on a per kilowatt hour basis that is used to backstop the financ- ing or the debt, and I guess it would be also dependent on the scale and size of the billing. So if you have two million customers, a small surcharge would be much different with 50,000 customers to backstop that kind of an endeavor. But I will do some more re- search to see if it is applicable for our small territory. Senator HIRONO. Thank you. Did you want to add something? Ms. KOHLER. If I could just add, there really is not a lot of pri- vate party interest in providing or looking for solutions for our small villages because the economies of scale again are so poor. The average village sells, you know, 1.3 million kilowatt hours. There VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 56 is just not enough to be able to amortize an investment of any size, so I do not really see that it would have a lot of potential applica- tion for our villages. Senator HIRONO. I think you definitely have a very unique situa- tion, and that is why you have a wonderful senator who is going to address some of those needs. Thank you very much, Madam Chair. The CHAIRMAN. Thank you. I think it is valuable when we have hearings such as this for us not only to hear the different projects and proposals that are underway and the challenges, but how you are facing those, and to share a little bit of best practices. I would agree with you, Mr. Underwood. You should not have to come all the way to Washington, DC. to find these, but hopefully we gain from one another as we try to find these solutions that are often- times very unique. But then you think not necessarily so. Just because it is perhaps colder and darker in Alaska when you are trying to make applica- tion to an area that is so isolated, and remote, and small, there are applications not only with our territories, but I think about the value of what we are doing in Alaska and sharing it with other Arctic nations who are also dealing with cold, and remote, and small populations. Again, sharing some of these best practices that are innovative to where we are. You mentioned, Ms. Kohler, the triple redundancy that we face in Alaska and the need to have the backup generating capacity be- cause if you are not part of anybody’s else’s grid when power goes out, power goes out. If you are in a cold place, if it goes out for a period of time, not only do you face the loss of your infrastructure through broken pipes and damage, but you could face loss of life. So for us, it is pretty critical. I am just curious with the other systems that we are talking about whether it is in Guam or in our Caribbean islands, are you also in a situation where it is effectively triple redundancy for your backup generation capacity? Mr. HODGE. Yes, ma’am, it is, and—— The CHAIRMAN. Tell me how that adds then to the cost to your rate payers. Mr. HODGE. We have to have that redundancy in our generation. We use the N-minus-one criteria, so we have to be able to serve all of our load if our two largest units are offline, and you have to have that kind of criteria given that you have no interconnection with the grid. We are doing a conversion right now to LPG, and we are con- verting units one at a time. Because there is no grid, we are doing that while we are still trying to meet the N-minus-one criteria, which is even that much more challenging to make change and to affect change. We have not even discussed the water side of it, be- cause there are some synergies between water and electricity that I know that everyone kind of gets into on a regular basis. But definitely there are reliability requirements on an island grid, and we do collaborate. I think there is an island and a grid in Alaska called Kodiak, Alaska that I have spent some time speaking with their wind—that they have put out a grid through DOE and NREL. They put us together since we have some similar VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00060 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 57 characteristics, so there are some synergies between the territories and the State of Alaska as well. The CHAIRMAN. Mr. Underwood? Congressman UNDERWOOD. Yes. I cannot say that I do not know whether we have double or triple redundancy, but we do have re- dundancy because the—and we also have issues with resiliency in connection with our natural disasters. That really leaves a great deal of challenges to the power companies. But part of that is, again, an issue of energy literacy, people un- derstanding that and then people changing their habits on how the use power throughout the day so that you do not need that level of redundancy. So, you know, we have a smart grid, you also need smart people in order to use those grids, and that speaks to the issue of capacity building and energy literacy, which, of course, speaking as an educator, I am really trying to present to all the authorities and policymakers on that. The CHAIRMAN. Senator Cantwell? Senator CANTWELL. Thank you, Madam Chair. Ms. Kia’aina, this issue of financing or just where we are with current programs and gaps, you obviously see this issue from the perspective of the as- sistance provider, and you see what these individuals are request- ing. You know what we can and cannot do. Do you have specific ideas about what you think we should do to improve that? Ms. KIA’AINA. Well, the easiest answer, of course, is for our en- ergy program of $3 million, it would be nice to see an increase not only just to help in the implementation of all of the energy plans, but to take into account Puerto Rico. Apart from our direct funding for energy initiatives, we actually tap from our other programs right now maintenance assistance, which is only a $1 million program. We provide technical expertise, apprenticeship programs and staff training. We also take money from our general technical assistance program, as well as our cap- ital improvement projects. So what we are doing is pulling from other areas that are already stretched thin. I would also say that with regard to the Department of Energy’s involvement, whether it be the energy as a whole or NREL, if there is increased funding to that Department, I ask that it specifically by designated for the U.S. territories and Puerto Rico because very often other agencies put it in the national pot, and the territories are unable to compete. The Office of Insular Affairs is one of the only unique programs in the Federal Executive Branch that actu- ally has the territories competing for a set pot of funding. So absolutely increased funding would help. I believe that our en- ergy program is the best return on investment for our entire pro- gram, and helping the islands will not just help in energy, but the totality of their economy. Senator CANTWELL. On this point about empowering them to help secure financing, do you see solutions in these individual terri- tories or states that you think are just a matter of whether they can be deployed? Ms. KIA’AINA. You know, that is a very difficult question to an- swer because our mission is the overall Federal relationship with the territories. So while we are talking about energy, I believe that our government’s failure to help in the overall economic conditions VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 58 of each of the insular areas would be hurtful to energy initiatives because they are all intertwined. For example, if a government does not have enough revenues to fund its portion of energy initia- tives, then the burden will transfer to the Federal Government. So for my role, I have a dual purpose. I not only help on energy initia- tives, but I help on the overall front on a multitude: health, edu- cation. Senator CANTWELL. Which I think to your point then, says you are uniquely qualified. I do not know if you have quantified that in a study, the analysis of the lack of investment in energy, then the consequences, cost, and expense to the U.S. Government be- cause we do not. Ms. KIA’AINA. That is correct. Senator CANTWELL. So if you have any data on that, we would love to see it. Ms. KIA’AINA. Thank you so much. We will followup with that, Senator. Senator CANTWELL. I did not mean to cut you off, but I had for- gotten that your position was so broad. You were covering the con- sequences of lack of investment as well, so, if there was anything you wanted to add about how we should look at financing? Ms. KIA’AINA. Financing for me is making the territorial govern- ments efficient so that they could derive enough revenues to help with funding their local government. It is promoting economic op- portunity so that their private sector could also help. Part of our mission is also quality of life issues to ensure that the health, edu- cation, and natural resources are protected. Our mission at OIA is formidable. We work across the Executive Branch with other agencies, but part of the challenge, quite frank- ly, is that we always get the answer from every agency that if we do not provide funding, whether it be for travel, or for detailees, or for money to do studies, for example, GDP. We have to give the Department of Commerce money to do GDP. So in short, the OIA is being used as a funding source for what the Federal Government in its totality should be doing. I myself be- lieve it is unfair. Some of it is statutory in nature. It is only inclu- sive of the 50 states, and sometimes it is not. It is the agencies that are telling us they will not do this until we give them money. The GDP numbers, for example, in the totality of the economy is nearly $1 million, and that pot is taken out of our $50 million Technical Assistance Program, and that is money that could be used for en- ergy initiatives. Senator CANTWELL. Thank you for that illumination. I am not sure I wanted to hear that, but nevertheless, I am glad to under- stand it. Just mark me down as somebody who believes in flat or- ganizational structures. I think that an information age is about empowering people at the lowest level, not a hierarchy bureaucracy all the way from Washington, DC. trying to tell somebody how to implement solutions. That is not going to work. I think we see that in Puerto Rico at the moment, and it is not going to be successful. So I think we need to rethink some of these issues. Thank you. Ms. KIA’AINA. Thank you. The CHAIRMAN. Senator Hirono? VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 59 Senator HIRONO. Thank you, Madam Chair. Ms. Kia’aina, I am glad that you mentioned our country’s responsibility to do more to invest in the territories and to help create more economic opportu- nities there, because it is all interconnected. I know that your mis- sion also incorporates the concerns under the compact of free asso- ciation. Since that has been brought up, I did want to make the point that I do not think that our country is meeting its obligations under our compacts, and that this is something that the State of Hawaii as well as Guam and other impacted states because of these compacts, that we need to do a lot more to provide resources to states such as Hawaii, and places such as Guam, Arkansas prob- ably. The impact of compact migrants in our states is large, and we do not provide enough resources to help a state like Hawaii, as I mentioned, to meet our country’s obligations toward our compact migrants. So I did want to take the time to mention that. While I have you, Ms. Kia’aina, has the Department of Interior applied any of the lessons that were learned from DOE’s planning and technical assistance in developing the Hawaii Clean Energy Initiative in Interior’s efforts to assist the U.S. territories in their energy planning efforts? Perhaps you could talk a little bit about those lessons learned that enabled you to work with the territories? Ms. KIA’AINA. Sure. If you do not mind, I would like to defer that question to our NREL liaison. NREL falls under the Department of Energy, and so our whole direction for our energy planning proc- ess is provided by NREL. Recently we have reached out directly to the U.S. Department of Energy because they also have their own resources. They have an Office of Energy Efficiency, and that was the division that I spoke to with regard to the chairwoman. There seems to be a disconnect right now with regard to what the Depart- ment has done for Puerto Rico, and we will followup on that. Scott, could you please answer that question? Mr. HAASE: Thank you. Scott Haase. I am a senior program man- ager with the National Renewable Energy Laboratory, and I man- age our relationship with the Department of the Interior. So the team that worked on the HCI, EDIN, and the territorial work, we all work together. It is many of the same people that have been working across these island communities. So there have been significant lessons learned that have carried forward through- out from technical assistance, the planning side, looking at financ- ing options and mechanisms. So, yes, there has been a great deal of cross-fertilization. Senator HIRONO. Well, Mr. Hodge, I note that the Virgin Islands have been able to meet its energy reduction goals much more quickly than anticipated. In 2011 you had a goal of 60 percent re- duction of fossil fuel, and by 2013 you had already reached a 20 percent reduction. How did you do that? Mr. HODGE. We aggressively sought for diversification of our re- sources. We issued some RFPs for renewable energy, and the first one was a broad RFP for any kind of technology. That one was failed, so we found that more concentrated requests would be bet- ter served for our needs. So we did one for solar, and we received some really good bids. We had assistance from NREL and DOE in the evaluation of such, and we received eight megawatts of grid- VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 60 tied solar on the grid right now from that process, and six more soon to come. We also had an aggressive net metering program. I cannot say that I think all aspects of the program are in the best interest of all rate payers, but it has served the purpose of jump starting the program. And we do have about 50 megawatts of net metering on the grid right now, so between both of them we are 23 percent of our peak demand. So those two have done that, but we also have, like I said, six megawatts of solar in the wings that have already been signed, PPAs, and seven megawatts of biofuel that have been signed, as well as we are negotiating about seven to ten megawatts of wind. So we are pretty much on the right path of getting to our goals. Part of the 60 percent is energy efficiency, and we have done some advances in that arena as well. We definitely—you know, I guess being that I sit on some positions in the region in the Carib- bean and whatnot, I see a lot of studies and a lot of examinations of what can be done. To finally have somewhere and it be ours that have the actual projects built, shoveling dirt, construction on the way, and almost complete is something that we need to see more of rather than just the studies of what we can do, and spend a lot of money for those studies. Senator HIRONO. Yes, hear, hear. Thank you, Madam Chair. The CHAIRMAN. Ms. Kohler, we talk a lot about the price of en- ergy, and we talk about per kilowatt hour, but we also have the issue of heating. Can you speak to what you see as perhaps some of the more innovative approaches to how we can deal with space heat and the ways that the cost of space heating can be brought down in some of the villages that are part of your oversight with AVEC? Ms. KOHLER. Thank you, Chairwoman Murkowski. Space heat is the primary consumer of BTUs at this particular point in time and typically represents about three-quarters of the energy consump- tion in a home or a business. So obviously it is a very critical need to reduce that reliance. In terms of alternatives to diesel fuel, we do not have a lot of bio- mass in the State of Alaska. In parts of Alaska, of course, is that you have got these beautiful forested sections that must yield a lot of biomass, but that is not true in Village Alaska. If there is any wood in the region at all, it is typically just driftwood that is float- ing down the rivers from more biomass intense communities. So that does not become a very major alternative. What we have seen happen is very high efficiency heating sys- tems going on where typically you may get something in the order of 92 to 95 percent efficiency from a Toyostove, laser electric stove. Extensive efforts at weatherization of homes and businesses. We have actually partnered, we were able to get a very modest $200,000 from USDA for Rural Business Enterprise grants, and we have actually put together a commercial energy audit program be- cause we believe that there are efficiencies of 30-plus percent to be gained in terms of the BTU content of space heating. That has moved ahead, and we have got some really good results from that that tell you what can be done to conserve heat. We believe that VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 61 heat consumption can be reduced by a third or better just through energy efficiency and conservation measures. We also utilize waste heat, so we recover heat from our diesel gensets. It is a very high priority for us to recover that heat and to distribute it to typically public buildings that are nearby the power plant. We are looking right now at what we can do to re- cover wasted heat from exhaust systems. That is 30 percent of the heat utilization of a genset. It comes out of the exhaust system or is just wasted up there. So we are looking to recover that as well, the objective being to drive down the overall consumption of diesel in a specific community. There are some biomass combined heat and power projects that are very much experimental, emerging technology. We do have some of those installed across rural Alaska, and we are hopeful that they are going to yield some good results. We are also looking at heat pumps. That typically, though, is really more viable in the more temperate parts of Alaska, so in south central. I am sure you are aware of the seawater heat pump system that they have in Seward. That is a technology that is po- tentially transferable. I believe that heat pump technology is pro- gressing rapidly. I think we are going to see more air-to-air heat conversion where you can utilize recycled heat within a building. But those are all the emerging technologies, and those emerging technologies have to be carefully fostered for them to develop into something that is commercially viable across a broad scale. Once they are commercially viable, the cost becomes much more afford- able, and then they can be deployed much more ubiquitously. The CHAIRMAN. Yes. I was out in Kwigillingok and was able to celebrate with the community there. I think it was either their first or their second day of being completely diesel free. They had three wind turbines, and the wind was kicking up. They had a little bat- tery storage unit that was not much to speak of in terms of size, and then they had—I believe there were 25 different clay heating stoves within the homes, and you go inside roasty toasty. But you think about just this little microcosm out there in an area where your costs up to this point are almost prohibitive for sustainability of a village, and you see what they are doing. I was in Egegik last week where they are putting in a run of river hydrokinetic turbine. It is going to be in the river. It should be in right now. It was in last year for a brief moment in time. Again, a private entity is making this investment and realized that they needed to reconfigure. They went out and adjusted it. It is going to be back in the water and plugged into Egegik by the 15th, so that is just in a few days. You combine that with the five wind turbines that they have, the solar panels that they have, and, again, a sustainable community where they have struggled for so many years. Mr. Hodge, you mentioned Kodiak. Kodiak is an amazing exam- ple of how you can utilize all of your renewable assets, whether it is the wind, the hydro. They are blessed with great hydro out there, but this is a major seaport, a major fishing community. To know that they, too, can be off diesel is a future for them that is really quite vibrant. VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 62 I think about all the technologies that we have being considered in laboratories, and how you work to get them to commercializa- tion. And I say, okay, that is nice. We are actually making things happen on the ground. I think that some of our laboratories should be looking to what we are pioneering because we have to, because the alternatives are just not working for us. You cannot be a sus- tainable community if folks cannot afford the heat or the elec- tricity, so you figure it out. Sometimes it takes a little bit of duct tape. Sometimes it takes begging for dollars from the state, and the tribes, and the feds. But you piece it together with some really, really bright innovative peo- ple and through your universities. We are blessed with the Univer- sity of Alaska, and I am sure we are where you are, Dr. Under- wood, in Guam. But we are really pioneering this whole concept of microgrid, and Senator Cantwell and I were just talking back here about we have got this very generous eye to the rest of the world in how we can help facilitate energy solutions in Africa and else- where. Again, I think to a certain extent charity begins at home, and I recognize that we definitely have energy needs that are not being met yet, but with a little bit of assistance, and I think looking to the experts, looking to the innovators, this is where it is really hap- pening. And so, I commend you all. Mr. Glick, you have got a high standard up there to reach Ha- waii’s renewable energy goals, how you are going to be dealing with the distributed generation aspect of it and the integration of all of your renewables. Many in the country are looking to you for the example and the leadership. You are kind of pioneering here, so we wish you well in that and are eager to know how we can be helpful and be off assistance. Meera, you mentioned resourcing and some of the programs that are out there, and we have had a little bit of conversation about that today. We have a Renewable Energy Deployment Fund, a fund that I established through legislation some years ago. It is a nice idea, but you have got to have the dollars that are in it so that we can help our states, we can help our territories, so we can help make a difference and making sure that there is a level of sustain- ability that our economies can thrive. I appreciate the leadership from each of you and the opportunity for you to share a little bit of the best practices and some of the challenges. Hopefully you inspire not only others, but you have learned from one another and you are going to take some good ideas back to Guam, the Caribbean, Alaska, Hawaii, and through- out all of our areas here. With that, I thank you all, and we stand adjourned. [Whereupon, at 11:44 a.m., the hearing was adjourned.] VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 (63) APPENDIX MATERIAL SUBMITTED VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00067 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 64 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00068 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 35 here 95298.035 65 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00069 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 36 here 95298.036 66 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00070 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 37 here 95298.037 67 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00071 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 38 here 95298.038 68 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00072 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 39 here 95298.039 69 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00073 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 40 here 95298.040 70 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00074 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 41 here 95298.041 71 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00075 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 42 here 95298.042 72 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00076 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 43 here 95298.043 73 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00077 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 44 here 95298.044 74 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00078 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 45 here 95298.045 75 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00079 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 46 here 95298.046 76 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00080 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 47 here 95298.047 77 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00081 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 48 here 95298.048 78 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00082 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 49 here 95298.049 79 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00083 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 50 here 95298.050 80 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00084 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 51 here 95298.051 81 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00085 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 52 here 95298.052 82 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00086 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 53 here 95298.053 83 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00087 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 54 here 95298.054 84 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00088 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 55 here 95298.055 85 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00089 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 56 here 95298.056 86 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00090 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 57 here 95298.057 87 VerDate Nov 24 2008 11:32 Jul 29, 2016 Jkt 095298 PO 00000 Frm 00091 Fmt 6604 Sfmt 6604 C:\TARSHA\HEARINGS\95298\95298.TXT 95298 Insert offset folio 58 here 95298.058