Special Subcommittee on Energy


Minutes of the<MeetNo1> 6th Meeting

of the 2014 Interim


<MeetMDY1> November 21, 2014


Call to Order and Roll Call

The<MeetNo2> 6th meeting of the Special Subcommittee on Energy was held on<Day> Friday,<MeetMDY2> November 21, 2014, at<MeetTime> 10:00 AM, in<Room> Room 171 of the Capitol Annex. Representative Richard Henderson, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Jared Carpenter, Co-Chair; Representative Richard Henderson, Co-Chair; Senators Joe Bowen, Ernie Harris, Ray S. Jones II, Dorsey Ridley via video-conference, Katie Stine, and Johnny Ray Turner; Representatives Dwight D. Butler, Hubert Collins, Leslie Combs, Tim Couch, Will Coursey, Jim Gooch Jr., Thomas Kerr, Sannie Overly, Tom Riner, John Short, Kevin Sinnette, Fitz Steele, and Brent Yonts.


Guests: Rodney Andrews, Director, Center for Applied Energy Research; Bill DePriest, President, Kentucky Propane Gas Association; Gregory T. Guess, Director, Division of Efficiency and Conservation, Kentucky Department for Energy Development and Independence; and Jeremy Faust, Strategic Business Development Director, Greater Cincinnati Energy Alliance.


LRC Staff: D. Todd Littlefield, Janine Coy-Geeslin, and Susan Spoonamore, Committee Assistant.


The minutes for August 15, 2014, September 19, 2014 and October 17, 2014 were approved, by voice vote, upon motion of Representative Collins and seconded by Senator Harris.


Research Effort to Diversify Kentucky’s Energy Economy

Rodney Andrews, PhD PE, Director for Kentucky Experimental Program to Stimulate Competitive Research (EPSCoR) explained that EPSCoR supports states and territories that receive less than 0.75 percent of the National Science Foundation (NSF) research budget. EPSCoR funds are used for programs designed to increase the competitiveness for NSF research and development funding. Kentucky receives approximately 0.23 percent of the NSF research budget. The University of Kentucky received a Research Infrastructure Improvement Track I award of $20 million from NSF along with $4 million provided by the state’s EPSCoR program.


Dr. Andrews defined infrastructure as people (faculty and students), equipment (major investments) and education (STEM education, public outreach and workforce). Research goals are utilizing Kentucky’s biological resources to develop new materials, industries and jobs; develop a lignin-based biomass technologies and products; develop biological active membranes; develop improved energy storage materials based around biomaterials and bio-inspired approaches; and leverage research to increase STEM graduation rates. The statewide investment would support the additional institutions of the University of Kentucky, University of Louisville, Kentucky State University, Western Kentucky University, Eastern Kentucky University, Northern Kentucky University, Morehead State, Big Sandy, and Bluegrass Community Technical College with the expectation of expanding to Murray and Pikeville. This would also involve hiring 12 new faculty hires. The program would better prepare students for STEM careers. Dr. Andrews stated that when students are more involved in research it enhances and encourages retention in the programs. Faculty and students would be better able to solve the problems facing Kentucky in creating a sustainable bio-economy.


In response to Representative Steele, Dr. Andrews said switchgrass or any biomass has the issue of transportation. If the existing plant is a pulverized coal plant, and no major modifications are made, it restricts the amount of biomass that can be used. It is more expensive to burn switchgrass.


In response to Representative Gooch, Dr. Andrews said that several companies are looking at how to use batteries with intermittent sources of energy like wind and solar to store energy and generate enough power to make a difference in the grid. The efficiency comes from allowing the units to run flat by storing the energy when there is excess energy to be used when there is peak energy consumption. The higher the efficiency of the plant would result in lower carbon emissions.


In response to Representative Yonts, Dr. Andrews said that the program is reaching out to high school students.


Propane Supply Update

Mr. Bill DePriest, President, Kentucky Propane Gas Association (the Association) explained that the propane shortage in 2013 was mostly caused by the mid-west exporting fuel to the Gulf of Mexico without anticipating the high volume needed for drying grain and the early onset of winter. He said that the industry traveled all over the nation to get propane back to Kentucky.


Mr. Gregory T. Guess, Director, Division of Efficiency and Conservation, Kentucky Department for Energy Development and Independence said that propane inventories are now currently above the five-year average which is better than last year. He confirmed that exporting and a reversal of one of the pipelines to Canada was part of the problem for lack of propane supplies. The reversal of the pipeline resulted in a loss of 320 million gallons of propane. Mr. Guess said that if Kentucky has another tough winter there may not be enough propane. He stated that by next winter there should be sufficient infrastructure to help replace the 320 million gallons of propane. Another issue was the shutdown of a terminal in Todhunter, Ohio which contained 40 million gallons of propane in underground storage. The terminal developed a leak. The Todhunter terminal was a cushion for the Midwest region. The terminal still has 210,000 gallons of storage capacity but not the full 40 million gallons capacity level.


Mr. Guess said that Kentucky households heating with propane are mainly in Northern Kentucky, Western Kentucky and the Purchase area. The residential price for propane spiked in early 2014 because of shortages. The National Oceanic and Atmospheric Administration (NOAA) is forecasting that there is an equal chance that the temperature for this winter will be above normal, normal, or colder than normal. Based on that forecast, Kentucky’s propane supplies will be adequate. Mr. DePriest said that the Association is working to make sure that there is an adequate supply of propane. The Association is also encouraging customers to fill their tanks now instead of waiting until bad weather hits. Mr. Guess said that the KDEDI has been working closely with the Association and state agencies providing information related to the supply of propane and other heating sources. He said South Dakota and Wisconsin have already declared states of emergency because there are shortages of diesel fuel and kerosene. KDEDI was recently notified by the Energy Information Administration that heating oil inventories in Kentucky’s region are below the five year average.


In response to Representative Collins, Mr. Guess said the Department was trying to find out why there is already a shortage of heating oil/diesel fuel. It appears that there is a big draw out of the upper mid-west to meet the demand in Canada and the Dakotas. It could also be that the inventory has been drawn down because prices have dropped. Mr. Guess said that prices were likely to go up in the winter months due to the lack of availability.


In response to Representative Collins, Mr. Guess said that supply is not the issue for propane but it is the lack of infrastructure to get it to where it is needed. The demand for propane is only for a few months. From the industry’s standpoint it is not economically feasible to increase the infrastructure. Mr. DePriest said it was true that last year Kentucky was only able to get enough propane to fill most tanks only half-full. He also said there should not be a shortage for propane for this winter because the mid-west region has more propane available than last year.


In response to Representative Henderson, Mr. Guess said the loss of propane at the at the Todhunter storage facility could have an adverse impact on the price of propane for this region. He said he was not sure how Enterprise, the owner of the Todhunter facility, planned to go about obtaining more propane for their storage facility. Mr. DePriest said the loss of storage capacity at the Todhunter facility should not affect the price or supply to this region this year and the price of propane is lower than this time last year.


In response to Representative Riner, Mr. Guess said that any unvented heater has to have an oxygen depletion sensor and an American Gas Association (AGA) stamp showing that the heater is safe. Older heaters will probably not have the AGA stamp, and it would be important to install a carbon monoxide detector.


Energy Project Assessment Districts

Mr. Jeremy Faust, Strategic Business Development Director, Greater Cincinnati Energy Alliance discussed Energy Project Assessment District (ePADs), also known as PACE, is a new and innovative way for commercial property owners to pay for energy efficiency upgrades, on-site renewable energy projects, and water conservation measures with no cost to Kentucky taxpayers. More than 30 states have adopted similar ePAD legislation. ePAD funding is arranged for 100 percent of a project’s costs, and is repaid by participating property owners with an assessment on the property tax bill over a term of up to 20 years. Financing energy projects helps to create jobs and save small businesses money. Mr. Faust explained that the mission of the Kentucky ePAD Council is to facilitate investment in energy efficiency for industrial and commercial building owners through outreach and education, and financing solutions such as Energy Project Assessment Districts. The Council is a membership-based not-for-profit social welfare organization, established under Section 501(c)(4) of the Internal Revenue Code.


In response to Representative Collins, Mr. Faust said the goal is to drive the economic development projects in communities. He said each model works differently in particular areas. Energy efficiency projects can include improved lighting, heating and cooling equipment, and insulation and air sealant that a property owner may need improvement on.


In response to Representative Combs, Mr. Faust said that the projects are done with no cost to the taxpayer. He said that no analysis had been done yet to determine the growth of jobs. Other states using ePAD show a dramatic growth curve.


In response to Senator Carpenter, Mr. Faust said that property owners who receive project funding repay the amount through a property assessment for up to 20 years. Financial investors are willing to help small businesses and commercial property owners through the ePAD program.


There being no further business, the meeting was adjourned.