Where does your electricity come from and how does the electricity grid operate to provide you with electricity? It is important to be able to answer these types of questions before you make energy policy, project, or investment decisions. This webinar provides a general understanding of how the electric grid operates and an overview of common policies that impact tribes and their energy decisions.
>> James Jensen: Welcome to everyone. I'm James Jensen today's webinar host, I am a contractor supporting the Office of Indian Energy Policy and Programs tribal energy Webinar Series. Today's webinar titled Understanding Your Electric Grid and Why You Need To, is the second webinar of the 2020 to do a tribal energy webinar series. Let's go over some event details. Today's webinar is being recorded and will be made available on DOE's Office of Indian Energy Policy and Programs website in about one week. Copies of today's presentation slides have been posted to our website. You also receive an email with the link to where the slides and where the recording will eventually be located. Because we are recording this webinar, all phones have been muted.
They will answer your written questions at the end of all of the presentations. You can submit a question at any time by clicking on the question button located in the webinar control box on your screen and typing in your question. We'll get started with some opening remarks from Lizana Pierce. Ms. Pierce is a senior engineer and deployment supervisor for the Office of Indian Energy Policy and Programs and its duty station in Golden, Colorado. She is responsible for the execution of the deployment program which is national in scope. Specifically, the deployment program includes financial assistance, technical assistance, and education and outreach. She also implements national funding opportunities and administers some of the result in Shoreline energy project grant agreements.
She has over 25 years of experience in project development and management. And has been assisting sites in developing their energy resources for over 20 years. Ms. Pierce holds a Bachelor’s of Science degree in mechanical engineering from Colorado State University. Lizana the virtual floor is now yours.
>> Lizana Pierce: Thank you, James and hello everyone. I join James welcoming you to today's webinar. This webinar series is sponsored by the Office of Indian Energy Policy and Programs, otherwise referred to as the Office of Indian energy. The Office of Indian Energies congressional charter is to promote Indian energy development, efficiency and use to reduce or stabilize energy costs, enhance and strengthen Indian tribal energy and economic infrastructure, and to bring electric powered services to Indian lands and homes. To provide this assistance, our deployment program partners with Indian tribes and Alaska Native villages, to overcome the barriers to energy development. Our deployment program, as James indicated, is comprised of a three-pronged approach consisting of financial assistance for competitive grants.
Technical assistance offered at no cost to tribes and tribal entities in education and capacity building. This tribal energy webinar series is just one example of education and capacity building efforts. Specifically, the webinar series is intended to provide attendees with information on tools and resources to develop and implement tribal energy plans, programs and projects, to highlight tribal energy case studies, and identify business strategies that tribes can use to expand their energy auctions and develops sustainable local economies. This year's webinar series entitled empowering native communities, and sustaining future generations, just focused on the changing energy landscape, and how tribes can position themselves to participate in the energy transition to benefit their communities and future generations.
In the second webinar of the series, we'd look to provide attendees with foundational knowledge around how electric grids operate, and provide electricity when and where it is needed. In this webinar, you will hear from two presenters who will provide a general understanding of the electric grid, and provide an overview of common policies that impact tribes and their energy decisions. On these two presentations, we will have a timely presentation sharing information on a forthcoming funding opportunity for formula grants to states and Indian tribes, while preventing outages and enhancing the resilience of the electric grid. We do hope that this webinar and the series as whole is useful to you. We also welcome your feedback.
Please let us know if there's ways we can make the series better. Or you could send any of that feedback to our main Office of Indian Energy mailbox at firstname.lastname@example.org. And before I turn it back to James, I did want to personally thank the presenters, Al, Doug and Pat for giving of your time in preparing for, and for presenting on today's webinar thank you all. And with that the virtual floor is yours, James. Thank you.
>> James Jensen: Thanks, Lizana. Before we get started with the presentation, I first want to introduce all of today's speakers. Our first presenter is Mr. Al Austin. Mr. Austin is technical lead for Western Area Power Administration, also known as WAPA. He is based out of the Power Systems Operations Office located in Phoenix, Arizona. He has worked in the energy business for the past 39 years and has spent time in both public and private sectors if, then the early part of his career working in the distribution wire side of the utility business but then shifted his focus to the transmission generation and marketing sides of the business, where he has spent the last 25 years in his current role, and provides technical guidance on a variety of initiatives relating to WAPA's operational and reliability activity.
Following Mr. Austin, we will hear from Doug Gagne. Mr. Gagne is a project analyst at the National Renewable Energy Laboratory also known as NREL. He performs technical economic analyses to identify what makes the generation technologies will most cost effectively meet power needs. He also evaluates early stage project development considerations for renewable energy and resilience projects. Our last presenter will be Patricia Hoffman, Ms. Hoffman serves as the acting director and Principal Deputy Director of the US Department of Energy's grid deployment office. Prior to her current position, Miss Hoffman was named Assistant Secretary of the office of electricity delivery and energy reliability at the United States Department of Energy.
The focus of her responsibility is to provide leadership on a national level to modernize the electric grid, enhance the security and reliability of the energy infrastructure, and facilitate recovery from disruptions to the energy supply, both domestically and internationally. This is critical to meet the nation's growing demand for reliable electricity by overcoming challenges of our nation's aging electricity transmission and distribution system and addressing the vulnerabilities in our energy supply chain. Thanks to each of our presenters for making the time to join us today. With that, let's get started with our first presentation. Al, you may proceed once your slides are up.
>> Al Austin: Well, thank you, James and Lizana, I appreciate the opportunity to present to this the tribal webinar series again, it's a real pleasure and an honor to be here. My name is Al Austin, as James mentioned, what I'm going to talk to you about today is just give you an overview of understanding the electric grid. Next slide, please. What I'd like to do initially is, the objectives today is I just want to provide you quickly an overview of Western Area Power Administration or WAPA who we are, many of you may know us, others may not. And then provide you just a quick overview of the electric grid, and then really explain some of the fundamentals of the electricity supply chain, and where you fit in individually. Next slide.
WAPA is one of four power marketing administrations, we fall under the US Department of Energy, and our role is what we market and transmit wholesale electricity from a lot of federal multi use hydro projects. WAPA doesn't own the dams. Those are own primarily by the United States Bureau of Reclamation, or the Karvy Corps of Engineers, and they own the dams, they operate the dams. What WAPA does, is we take the energy that's produced at the dams, and then we transmit it across our transmission system, and deliver it to customers across our service territory. Next slide. Our service territory is pretty expensive. We've got customers across 15 different states. WAPA is organized into four regional offices that help us to manage the federal hydro customers and the transmission system in those regional areas.
We've got 56 hydro power plants, ranging in size from just a couple of megawatts all the way up to the Hoover Dam and Glen Canyon Dam. There's a wide range of capacity and size. We've got about over 10,000 megawatts of installed capacity of federal hydro. We've also managed over 17,000 miles of high voltage transmission lines across this service territory. We operate a really large transmission system that spread out geographically, which makes us very unique from a lot of the other utilities that we interact with on a daily basis, given our size geographically. Next slide, please. Our functional responsibilities, what we really do at a high level is, we design and construct and maintain these transmission lines that I mentioned, all the substations that are needed to transmit that energy from the dams to deliver to our customers.
And then we also design and construct, maintain a lot of other related facilities. We provide power marketing of wholesale federal hydropower, we have to operate the system. And there's all of the functions and the activities around operating the transmission system and the delivery of that energy. And in concert with the Bureau of Reclamation, the Karvy Corps of Engineers, and the folks that are running the dams. We also take capacity on our transmission system. And we market that and sell that to third parties, we have excess capacity on a lot of our transmission lines. And we post and make that capacity available, on our oasis, on a common website and for others to then turn around and procure for the wheeling of energy.
There's a lot of energy that flows across our transmission system. And that energy or the capacity of that transmission has been marketed to third parties. We have a transmission infrastructure program that whereby or under which, we have about $3 billion of federal dollars that have been allocated to us, and that are available for folks that have been set aside by Congress for the improvement of the transmission system and for the delivery of renewables. And that's a large program that we manage. And under that folks are, there's dollars there that we've been entrusted to manage for the improvement and upgrade of the transmission system. And then we also have folks that look at our impact and natural resources to ensure that we're adhering to environmental rules and regulations.
And so that our footprint with this large transmission system is, we're not impeding or violating any of the regulations around managing these natural resources and lands. Next slide, please. What I want to do now is jump in and provide you a high-level overview of the electric grid. Okay, next slide. First of all, unless you're asleep, you're probably have noticed just anecdotally in day to day interactions with news and information that there's a lot of things going on in the energy landscape. And it's really changing rapidly. We've got a lot of solar and wind generation capacity that's continuing to grow. The demand for storage technologies is really rising. The expansion of wind and solar supplies, especially out west has really posed some operational challenges for grid operators.
Utilities looking for regional solutions to contain cost and transmission capacity has become a constraint. And as has been reported recently, drought conditions are persisting. And it's really put a lot of pressure on those of us who operate the grid. There’re so many different issues, that folks that interact with the grid are really having to navigate through. And this is just some high levels. Next slide, please. But as you contemplate these things, you're saying, "Yeah, that's interesting," but what is it mean to me? Next slide. Well, it really depends on where you fit in the energy supply chain. Because we're all consumers of electricity at some level, but for each of us, you have to really ask yourself some questions like, you may be part of a tribal utility, and you may actually have generation assets that you manage, you may be a producer.
On the flip side, you may operate a utility, or you actually may take services from a third party. When evaluating your demand and your needs, is your load or is your demand primarily residential? Is it commercial? Do you have retail and commercial operations in your footprint? Or do you have some industrial loads? These are the questions that you need to be asking yourselves. When you think about, alright, well, how do I fit in this? How do I fit into the energy supply chain? Let's go to the next slide, let's take a look at really what that energy supply chain looks like. Now, in addition, excuse me for getting ahead of myself, when thinking about the energy supply chain, and if you've been thinking about all of these various the dynamic nature of the grid and the dynamic nature of issues, it's also important to understand what your energy goals are.
You might be just wanting to be a more responsible and informed consumer. It may be that your only concern, or your biggest concern right now is containing costs and maintaining long term price stability, you may be an end user that's paying a utility for retail service, and you're concerned about costs. Now, it may be as well that you may have some obligation to self-supply, you may have a generator or some sort of a resource, many of you likely have a federal hydro allocation. And you're wanting to make sure that you're getting the most out of that. But it may be that federal hydro allocation that you get, isn't sufficient to cover all of your load needs. And you're out, you have a need to supplement that with other energy supplies.
And then you may as well be, a desire may be to be more environmentally conscious, as well as you have a concern about generating revenue and jobs for your tribe. Your energy goals might be one of or a mix of all of these. But in terms of dealing with these issues, it's important to not only know where you fit in the energy chain or the supply chain, but as well to have some sort of idea as to what your goals are and have some sort of a plan. Next slide. Now with regard to and this is a quote from a very astute and sage energy professional, regardless of where you are in the supply chain, and what your goals are, a better understanding of the grid will at least to make you a more informed consumer, and at best, more effective and implementing your energy goals.
Okay. All right, next slide, please. Here's some facts about electricity. Number one, electricity requires a physical path to move from one place to another. And if there's no wireless electrical network, you can't turn on your phone or a device and turn on Bluetooth, or go wireless and get electricity. It requires a physical connection to an energy supply chain. Number two, storing electricity, at least on any large scale, up until recently has really been impossible. And it's only up until the last few years that we've begun to see real inroads into that area of being able to store electricity. And what that means though is, electricity is a commodity that up until recently hasn't been able to be stored and the instant that it's generated or produced its concurrently being consumed somewhere off of the grid.
Now the physics require a constant balance between supply and demand, or bad things can happen. And what that means is, if I'm pushing electricity out onto this wire grid, and I do that with a bunch of generators, the demand or how much energy I'm consuming with everything that's connected to that grid, needs to be kept in constant balance. If there's an oversupply of electricity, meaning we're generating way too much electricity. Or conversely, if the supply of electricity lags behind the demand, then things get out of balance. And we can have real problems, physically on the grid system. There’re people out there that manage that balance constantly. And there's mechanisms in place to make sure that supply, that balance between supply and demand is constantly kept in check.
And then anytime we talk about producing electricity, and transmitting electricity, it's important to understand that the infrastructure that's required, to produce electricity and deliver it is really a capital intense effort. And these decisions about producing, let's say building a new power plant, or constructing some more capacity on a transmission line, installing new wires, those kinds of things, these are real capital-intensive efforts and require a lot of planning. And they're not something that you can just pick up at the hardware store and bolt on something onto the grid and have a real lasting effect. Because the scale is so large that they require a lot of planning, engineering and effort to implement. Next slide. This is just a graphic of the power grid.
And beginning up at the upper right-hand corner, you can see that we've got a dam and a power plant. You could put in here, this could be a thermal plant, coal plant, nuclear plant, a wind facility, solar whatever, that generator is producing energy, and the energy is tied to a large substation. And what happens is that energy gets pushed out onto the grid and the energy has to be stepped up in voltage, which is the pressure that it takes to push that energy down the transmission lines. And it flows along this high voltage transmission lines and gets down to a distribution is utility substation, and then the voltage steps down, to a low enough voltage where it can be distributed to end users. Next slide please. The power grid, if you think about it is very similar to a roadway.
Whereas the high voltage transmission system is like our interstate highway, and the distribution system is often can be equated to our city streets. And to get the energy across long distances, we increase the voltage and it's like getting on the interstate highway system, the energy flows at a high rate of speed. And then once you get off the highway, which is what occurs at a distribution substation, the speeds go lower, the voltage drops down and then you can make its way out into the neighborhood. Next slide please. This is really what we talk about when we talk about the supply chain. The generation side of it is really on the supply side. Then you've got transmission, which is the moving of the energy from typically these remote sites where these generators are located.
Transmitting it across a high voltage transmission system, and you can see that the typically these transmission lines, the high voltage transmission lines are usually 500,000 volts, 230,000 volts, and that those are the high voltage transmission lines that you'll see along roads and going out in the countryside especially out in the west across with high lattice towers. Those are high voltage transmission lines that are moving energy from a remote generator and bringing it into a load center. And when they get into the load center, then they drop the voltage down at a substation, and then it gets distributed out to the end use customers. And those end use customers are typically going to be commercial customers, some industrial customers, residential and what have you.
And these guys on the consumption side are really the load or the demand side of the supply chain. Next slide, please. When we think about this grid, and you've got this grid of all of these high voltage and low voltage transmission lines, who's operating that and who's responsible for it? Well, in talking about the grid, it's important to understand that there are people that are actually out there looking at the grid and operating it. And it's important that they operate it in a reliable fashion. In 1965, there was a large blackout in the Northeast that took up millions of customers. And in response to this outage in 1965, all of the utilities that were affected got together. And they formed, what came to be known as the North American Electric Reliability Corporation.
And their primary focus is reliability of the power grid. And we call them NERC, and what NERC is charged with doing, is formulating reliability standards, that anyone who operates the grid or is involved in operating the grid has to adhere to. And in doing that, what NERC did was they developed a functional model that defines the roles and the tasks that need to be performed to ensure that reliable operations, they then develop the standards. And what those standards now do is they provide anyone who interacts with the bulk of the grid, standards that they have to adhere to. And what NERC can do in order to ensure compliance, what they can do is actually levy sanctions for non-compliance. Next slide, please.
Under NERC, they've got various functional areas, you've got generator owners and operators, you have transmission owners, transmission operators, and transmission service providers, distribution providers, and load serving entities. You can see functionally, each of the elements of the grid and the supply chain are represented here in these functional areas. And then under each of these functional areas, NERC has developed reliability standards, which provide each of these functional operators a guidance as to how they're supposed to operate their portion of the grid. Next slide, please. One of the one of the functional areas that WAPA performs, is we're the balancing authority. And what a balancing authority is, it's an entity that is responsible for running a specific portion of the power grid.
If you look at the power grid in the West or in the country, there's literally hundreds and hundreds of thousands of miles of transmission lines interspersed all over the country. It's just a web of transmit high and low voltage transmission lines. There’re thousands of generators that are all connected to this grid. In order to establish some order to this web of facilities, what they've done is they've divided the grid up into specific areas, and they've created a functional mechanism called a balancing authority and made folks responsible for running a specific portion of that grid. Now, typically out west, the balancing authorities are typically utilities. They're your host utility and one of the things that they do is run a balancing authority in addition to everything else that they do.
A balancing authority's responsibility is to maintain balance between resources and loads. And each of you, somewhere wherever you are, whether it's your personal home or your business, or your constituents, they fall under a balancing authority somewhere. And the balancing authority that you fall under is the entity that's responsible for operating the grid. The balancing authority manages energy flows between their balancing authority and any other balancing authority. And to maintain balance on all of the transmission lines as well, they have to adhere to stringent reliability standards, they also need to maintain a 24 by seven operations center, so that they can maintain situational awareness. Next slide.
Now, in addition to these, these balancing authorities also provide the following ancillary services, and a lot of these are going to be fairly Greek to you. But really these are the services that they're providing, reactive supply and voltage control. As I said, voltage is like the pressure needed to move the electricity along the transmission lines. And it's important that voltage and reactive energy is maintained so that you can maintain, for lack of a better way, at the right amount of pressure on the system to control the flows. And to maintain balance. They also provide scheduling and dispatch services. They provide energy imbalance service so that folks can maintain the balance between supply and demand. In order to operate reliably, oftentimes, from time to time a generator will trip off line, or there'll be some sort of event that interrupts that balance of supply and demand.
And in order to respond to those interruptions, the balancing authority needs to have in reserve a certain amount of generating capacity, that if one of their generators trips offline or becomes unavailable, that generation or that supply can be replaced in a timely fashion, so that we can maintain that balance. And they also provide generator imbalance service. If a generator is producing but it's not producing where it needs to, the imbalance between where they're supposed to be and where they are currently generating at can be made up. And then there's also some other services around regulation and frequency response. Not only is voltage important, we also operate a 60 hertz system. Frequency is a big deal to folks who are operating on the grid. And we're constantly managing voltage.
And we're also constantly managing where frequency is because we operate on a 60 hertz system. And if frequency begins to droop, or get high, then again, there's mechanisms in place to keep all of that in check so that we can operate reliably. But those are some of the ancillary services that your balancing authority provides, and is required to adhere to under NERC standards. Next slide, please. These are the balancing authorities that currently exist in the West. We're way down in the lower area that gray in the northeast corner of Arizona is WALC. That is the Western Area Lower Colorado balancing authority. But we're surrounded by other balancing authorities. And there's 38 of them in the western interconnection. And each of these balancing authorities is having to perform those functions that I've articulated in previous slides.
And then they have to interact with each other in real time to ensure that the grid in the West is balanced, and that energy is flowing reliably, so that we can maintain uninterrupted service. Next slide. Some of the common utility functions or responsibilities, there's as I said, we need to maintain adequate supply resources to serve the demand, utilities are responsible to construct and maintain transmission distribution networks. We have to adhere to NERC reliability standards, we also have to plan for future load growth, provide transmission services under our transmission tariff. And then we also have to establish rates through a regulated process, meaning if we have to recoup the revenue required in order for us to provide the services that I've described under our standards and whatnot. Okay, next slide, please.
How do we secure a reliable and low-cost supply of energy? Well, what we do is, every day we do a forecast of our demand obligations, our loads and exports, we develop a day ahead plan to meet those energy and ancillary service requirements, we identify resources available, what resources we have to meet that demand, which is we either have generation, we import or we make purchases. And then what we do is we have to economically dispatch those resources to meet that demand. And then as we go into real time, or then we have to go ahead and make adjustments to account for changes to demand and resources. This at a high level is what each of the utilities, these 38 balancing authorities are doing every single day for the next day or the next couple of days.
And then they're also, we're doing this in real time, hour to hour, they're constantly looking ahead to the next hour, looking at their demand and their supply. And then they're making adjustments to their plans to ensure that they've covered their load, and met that demand. Next slide. One of the ways that utilities actually procure extra energy, and now most utilities will have a lot of the tools will have enough connected capacity, got enough generators to serve their own demand. But they may have generators that are on outages because of maintenance and that sort of thing. And in order for them to meet their load demands, they have to go out and make purchases from other entities and procure energy from someone else. And then that energy needs to be scheduled. And we'll do that through the bilateral markets.
And what the bilateral markets are, just the utilities are constantly comparing wholesale market prices relative to their own production costs, and then they'll buy and sell accordingly. These bilateral markets exist every morning in the West, there's a bilateral energy market that trades and utilities come into these markets. And you've got buyers and sellers who make of either are looking to procure energy and sellers who are looking to sell any excess capacity that they have. And based on the current market prices, bilateral transactions are entered into for, either the end they trade in the forward market for like next summer, or they may trade for next day. And then there's also bilateral trades that are done in real time, which are done for hour head. All of these transactions are priced at $1 per megawatt hour. They're limited to sub hourly volumes.
And then these contracts that are entered into are settled between different counterparties, which are typically BAs or sub BA entities. The problem is that liquidity can be limited depending on location. And what we have found is, as a lot of the BA's and the entities have gone into these larger organized markets, that the real time bilateral markets have become significantly less liquid meaning there's less buyers and sellers out there. There's still and the supply has really dried up. And that's posed challenges for balancing authorities who are trying to supplement their needs in real time for future, for next hour, next couple of hours. That's one of the challenges that I know we've been facing in our balancing authority. All right, next slide, please. In developing a supply plan, this is just a graphic of a typical, let's say plan for the next day, you've got a load shape.
And this is really not a typical load shape. It's just a curve. But these loads, the purple line at the top is a load curve. And you can see that what we've done is laid in these resources in red, you've got some seven by 24, baseload energy resources that have been committed. And then you may lay in some on peak products, which are typically from six in the morning to 10 at night, and then you've got some off-peak products. And they've layered in these energy transactions, to try to fit to set aside enough energy to meet that load curve. And this is just a visual of what each of the balancing authorities are having to do, to develop their supply plan for the next day. All right, next slide. Now, as I said, there's a little bit difference between bilateral and centralized markets.
Bilateral markets are basically one party selling to another where the centralized markets or an RTO, what happens is, these balancing authorities can come together. And it's the centralized market that's actually providing the energy for these to meet their needs. Now, what's happening in the West is these bilateral markets are definitely drying up, they're becoming less and less liquid, and people are actually moving over to centralized markets. Next slide, please. The RTO is what we call a regional transmission organization. And what that means is, if you think back about that slide, where there's like 38 different balancing authorities in the West, what an RTO has done is it actually takes multiple balancing authorities, and they pull all their transmission wires together, and they place it under one overreaching organization.
And that regional transmission organization then takes over the responsibility of operating the transmission system, rather than having to be balkanized and broken up into all these various BAs. And this graphic shows you that in the US, these are the RTOS where individual BAs have banded together and formed these RTOS. And you can see out west, the only RTO that's out west is in California. And that was based on the formation of the three major utilities out there in California. And we're still fairly fragmented in the West. All right, next slide. The one thing to know about centralized markets and how it affects the grid is that as you can see here, without a market or without this regional transmission organization, overlaying the balancing authority, each BA balances its loads and resources within its borders.
Whereas under a market, the market actually takes the loads, and of all of the individual balancing authorities, and then it efficiently re-dispatches, and the generators and each of the balancing authority actually balance the load of the market as a whole. It really becomes an issue. It's a more efficient way of operating the grid, rather than everyone running their own piece of the grid individually. What these markets provide the intent is that it really is as you can see on these bullet points, if you're running as your own BA you have a limited view of the world. You have a limited pool of balancing resources because you only have those resources that are in your balancing authority area. There's some inflexibility built into that. The scheduling and the dispatch is typically just on an hourly basis, it requires more reserves. And there's some economic inefficiencies by operating on your own.
Whereas under a market construct, a lot of those challenges are mitigated, because have access to a more diverse pool of balancing resources, there's increased flexibility, the resources are being dispatched on a five-minute basis rather than an hourly basis and those kinds of things. And this is where folks are really, there's a lot of activity in the West, around markets and wanting to operate the grid more efficiently by banding together and forming these broader markets. Next slide. With all the activity in the energy industry, I think having an improved understanding of where your position is in the supply chain, really hopefully help you navigate through it all. I know this presentation has been very high level. But my hope is that, I do have some resources here in the presentation on the next slide that will be helpful to you.
I think these are really good resources, they step through each of the segments in the supply chain. But a lot of this can be unfortunately, when you think about the grid, it's almost like it becomes like drinking out of a firehose, it can be overwhelming. But I think by going through some of these resources, they really are helpful in terms of stepping through each of the components in the grid, understanding how it works, and then where you fit into that supply chain. The idea is that hopefully, by broadening your understanding of the supply chain, and where you fit in, you're going to find yourself in a better position to really achieve your goals. And we'll help you as you consider new initiatives, you'll be engaging in those conversations from a position of understanding. Anyway, with that, I want to thank you for the opportunity to present. And we'll turn it back over to James.
>> James Jensen: Thanks so much Al, wonderful presentation, a lot of good information in there and great job taking relatively complex topic and bring it down to understandable level. And we do have some questions that have come in and we'll address those, at the end of the final presentation, so just stand by. With that our next presenter is going to be Doug Gagne, Doug we'll bring up your slides and you can get started.
>> Doug Gagne: Hey, can you hear me okay?
>> James Jensen: Yeah, great.
>> Doug Gagne: Awesome. Thanks, James. I'll be covering many of the important policies incentives that shape your electric grid. Next slide. I'll be covering some of these policies and incentives at the federal level, as well as the state level. And we'll also talk about utility rates, which is maybe one of the main financial ways you'll interact with your utility for a lot of you. This was also a key driver of on-site behind the meter projects, which I'll talk a little bit more about on the next slide. Next slide. Throughout this webinar, I'm going to use some industry jargon for both front of the meter and behind the meter projects. But before I do, I want to explain what I mean when I use these terms. These terms are shorthand for what type of projects you might be developing. Front of meter renewable energy projects are typically large scale, involve the sale of produced electricity directly to a utility.
They don't typically offset a customer's load at their sites. Whereas behind the meter projects are typically installed in an existing utility customer location, and produce electricity that directly offsets that customer's utility bill. I would just note that behind the meter projects are much more common as they require much less upfront investment in risk. They can also typically benefit from receiving or offsetting the utility rates, for the electricity produced, rather than having to receive much lower wholesale market prices. Throughout this webinar, I'll be talking about these policies and incentives, but also how they could potentially drive a tribal project, either front of the meter or behind the meter. If I talk about front of meter and behind the meter, that's what I'm referring to next slide.
With that basic terminology covered, I'll now discuss some of the key federal policies and incentives that may govern your electric grid. Next slide. First, I'd like to note that historically, front of the meter projects where you can sell electricity public utility haven't always been allowed. The Public Utility Regulatory Policies Act, which was passed in 1978 established rules for generating facilities, legally called qualifying facilities to be able to do this, assuming they met certain requirements. This set the precedent for non-utility entities to sell their power back to the utility grid, and unlocked a new type of renewable energy market. Although this is still a viable development pathway in a few select markets, there's a lot of barriers to doing a PURPA project today.
For one, PURPA only requires utilities to purchase your power, but generally only require that the utility pay the avoided wholesale cost of that power. And that's generally less than maybe five cents per kilowatt hour, which is a pretty low amount, making it hard for a project to make sense under PURPA alone. Utilities also govern the PURPA projects in the connection process. And the large queue of projects trying to connect can be another barrier to this approach. Next slide. Another major driver of changes to the electric grid has been the implementation of State Renewable Portfolio Standards, also known as RPS. These standards can be binding or voluntary, but generally established a target percentage of renewable energy that utilities must purchase by a specified date. They may also require that the utility meet interim milestones to ensure that they stay on track for these goals.
For example, in my home state of Colorado, they've set 100% renewable target by 2050. Utilities that are under this requirement will need to obtain all of their electricity from renewable sources by that date. Because utilities have to comply with these requirements, this creates a ton of demand for renewable energy projects. Although much of this demand is for front of the meter projects, which tend to be utility scale very large, and solicited through competitive bidding processes, which can make it a little bit harder for smaller entities to compete. Some states do have unique carve outs in their RPS. For other project types though, such as community solar and smaller distributed are behind the meter projects as well. Next slide. Federal tax incentives are another key driver of renewable energy project. The solar investment tax credit or ITC, as I'll call it, is one of the major examples.
This ITC does apply to other technologies, such as small wind, fuel cells, and waste energy recovery properties. But they're eligible in different amounts. And some of them have already expired. Just be aware that you can look at the IRS notice at the bottom here about that as well. The important thing I want to note about the investment tax credit is that it's only available for taxable business entities, nonprofits, tribal organizations that are not taxable, and individuals are not eligible to receive this incentive. I'll talk about this limitation a little bit more in a few slides. A little bit about the ITC, it's currently a 26% tax credit, meaning that 26% of the total investment costs of your solar project will basically be provided as a tax credit on your tax return for the next year. There's much more complicated tax guidance that I can won't get into.
But at the big picture, if you invested $100 in a solar project, and that was all eligible, then you would see $26 as a one for one reduction of your taxes. It's not reduction of your tax liability. It's a tax basis, it's a reduction of your one for one reduction of your taxes. A couple other things to know is if you do start a project this year, you'll have a few years until the end of 2025 to complete it. But be aware that there's a lot of specific rules and requirements that you'll need to follow, to ensure that you remain eligible for the project. I would strongly recommend seeking qualified tax attorney guidance, if you're attempting to obtain this incentive, and meet the construction requirements, as it can be complicated and there can be some ITC in there. The slide has some good links with the basics.
On the right, you can see a link to a fact sheet on the commercial ITC. And if you want to go deeper into the weeds, the IRS notice that lays out a lot of these rules and guidelines. Next slide. Also wanted to just brief mention to the production tax credit or PTC. This historically has been a huge factor in the evolution of the grid as well, especially to promote large scale wind energy projects. But the PTC is not currently available for new projects unless legislation changes in the future. I wanted to note it, but we'll keep moving for now. Next slide. Last thing on tax incentives. As noted, before only eligible taxable business entities can receive tax incentives. And further they have to pay enough in taxes that they can actually use this potentially massive tax benefit.
The ITC and also there's some accelerated depreciation benefits that put together with that 26% ITC and the depreciation benefits, this can almost be like 50% of the upfront investment is recovered in tax benefits. That's massive I mean, I used $100 as an example but these projects can often be millions of dollars. If you aren't paying millions of dollars in taxes, it can be hard to use these benefits. Also, as tribes are not federally taxable, you may need to find a taxable business entity, typically a C corporation that owns the project. If you want to take advantage of those incentives, you'd have to have that and also make sure that you have the tax appetite to actually use these incentives, or a partner who could use the incentives. That's the more complicated way. Another more common structure is to enter into a power purchase agreement, or PPA with a taxable third-party owner who is able to use those incentives.
And they can pass the benefit of these incentives along in the form of a lower electricity price in that PPA. And last, I just want to emphasize again, the legal structuring of these projects can be a bit tricky, so be sure that you enlist qualified legal counsel prior to embarking on a project. Next slide. Now we'll cover some different state policies and incentives. Note that it's hard to generalize across all states, they all have their differences. But there's several broadly applicable trends. Next slide. First, be aware of that there's multiple types of electricity markets in the United States from a customer perspective, by far the most common market is the regulated market, where utilities are treated as regulated monopolies, and are the primary entities allowed to sell electricity to their customers. Certain and those are shown in orange.
Certain states have eliminated these monopolized utilities, or relegated to only providing the wire services. The transmission and distribution and opened up competitive electricity generation markets, where any qualified entity can sell power to another customer. These are called by a few names. They're called competitive markets, deregulated markets or retail electric choice markets. They tend to refer to the same thing. They're shown in green here. And there's also a few hybrid markets that have features of both regulated and competitive markets, such as California, Georgia and Virginia. Next slide. However, I don't want to draw too broad of a brush there, even within regulated markets, there can be a lot of different utility types.
There may be one regulated monopoly utility that serves maybe large population centers, these tend to be called investor owned utilities. These are large shareholder owned utilities that are usually regulated by a state elected public utilities commission. These are PUC, these PUCs determine what costs are reasonable to pass on to ratepayers and ensure that the utilities meeting its reliability requirements. To the end, even in a regulated state, though, there may be other types of utilities, such as publicly owned utilities or coops. Publicly owned utilities are often municipal utilities or we sometimes call them munies. These munies have more latitude in implementing innovative renewable energy projects, or types of programs as to the third category of cooperative utilities, as they aren't necessarily governed directly by their PUCs, although this does vary state to state.
There's also within cooperatives. These are typically nonprofit member owned utilities, that usually have a board of directors, and often serve rural customers, although not always. Next slide. Another major state level policy that's been developing is the treatment of third-party sales of electricity. Rather than referring to different types of utility, like co-ops or munies. This typically refers to private individuals or businesses selling power to other individuals or businesses within a market. As I mentioned in regulated monopoly territories, you typically can't sell power to other customers. But that isn't always the case. Certain states now do allow a third party, say a solar development business, to develop solar on maybe a household roof or a business's roof, and own that generation and sell that generation to that customer under a power purchase agreement or lease.
This is an important driver of development of distributed or behind the meter projects in a lot of states, and can be a good option for tribes that maybe don't have the taxable structure, or tax appetite to fully benefit from the solar ITC, for example. However, this still isn't allowed in many states. This is a fairly recent map showing some of the different restrictions by state of where this is allowed or not. Although it can vary, even within a state of whether a PPA isn't allowed, but maybe other types of arrangements are allowed like leases, you can see that in the note, just above the note about the number of states that allow this. This database for state incentives and renewables and efficiency, is a good place to look. But it's really a best practice to discuss your plan project with your utility, and confirm their specific restrictions rather than relying on these maps as they can get out of date.
Next slide. In addition, another grid development is the advent of renewable energy certificates, or RECs. These are tradable market-based instruments that represent the renew ableness, or another term is the non-power attributes of the renewable electricity generation. These are really the documentation that you can use to make claims about using the renewable energy or going green, if you want to use the colloquial term associated with RECs. RECs are generated and for every megawatt hour of electricity generated by a qualifying renewable project, but even if it's generated, there's also tracking systems that I won't go into that level of detail. But there's various certifications like Greenie and REC markets and tracking systems that go through the process of verifying and codify these RECs for sale to other entities to claim their renew ableness.
But the big picture with RECs is that these are a way to potentially improve the economics of your project. If you aren't worried about claiming that you're going green or that you have a certain percentage of your generation from renewables. Next slide. RECs and particularly solar RECs or SRECs can be very valuable in a handful of states. In downtown DC for example, SRECs can sell for as much as $400 per megawatt hour, which just for context is two to three times the cost of utility power in those states. States where SRECs are particularly valuable are shown in this map, with DC, Maryland, New Jersey, and Massachusetts all serving as notable examples. However, as you can see, much of the US is not colored in here. And where states have not legislatively carved out high value SRECs markets, as RECs don't tend to have all that much value.
Historically, the average REC prices has been less than $1 per megawatt hour, or point one cents per megawatt hour or per kilowatt hour. But in 2021, the average REC price rose to about $6 per megawatt hour, or point six cents per megawatt hour, which is still very low, but it does seem to be on the rise. I focused on SRECs as an incentive that's driving development in these markets. But utilities do have other incentives that promote different types of distributed development as well. These can include property and sales tax exemptions for these projects, incentives from utilities to develop projects like rebates, and also ancillary service market revenues, that I'll talk a little bit about earlier if the project's big enough. Next slide. Some states have also begun to price the impact of carbon emissions into the regulatory frameworks.
States do this through cap and trade, which is a market-based mechanism that allows businesses to choose whether they buy allowances for their emissions, or reduce their emissions to meet ever tightening state-imposed emissions caps. Again, so far, there's not a huge market for these allowances, but prices have continued to rise in California, and in the Northeast, where they have the Regional Greenhouse Gas Initiative, or RGGI market that's shown in blue. The State of Washington has also passed legislation enabling their own cap and trade carbon market program, and is working on implementing this as well. Next slide. One of the major economic drivers for distributed behind the meter projects is net metering as originally conceived, this is a billing arrangement where the electricity generated by your renewable energy project, provides a one for one reduction in your site bill.
For example, one kilowatt hour generated by your solar PV system on your building's roof, would provide a one-kilowatt hour reduction in your site electric bill at the end of the month at the exact same rate. And this would even apply to electricity sold back to or exported back to the utility at times when your system was producing more than you need, which would effectively make your meter roll backwards from your consumption like earlier when the system wasn't fully producing what you needed. This is however becoming an evolving policy discussion in many states, as utilities and other groups push back on this policy. In California, for example, the California PUC is evaluating how net metering 3.0 will work, which is reflective of how much work and iteration they've already gone through to get to this point.
And it's currently appearing to envision much less compensation for exported electricity than has been previously allowed under the previous net metering regimes. Next slide. This can be seen in the chart below, which shows some of the net metering compensation options that you might encounter. The chart on the left is the structure that I described on the last slide, where even the kilowatt hours that you sell back to the utility are worth the same amount as what you pay them for consumption on site. However, this is where things seem to be going is now utilities may only pay your project for a fraction of your utility rate, for the power you sell back to them. They may only pay you the avoided wholesale rate of electricity, like the price they would pay in the wholesale power markets, again, maybe that less than five cents per kilowatt hour, or they may not pay you at all as shown in the right for that export.
Definitely read the fine print of any net metering tariffs or agreements if you are pursuing a project, and make sure you discuss this with your utility. And make sure you understand both eligibility requirements, as well as the compensation that a net metering program might provide. Next slide. One more state level grid trend I wanted to cover is community solar. This is a project where third party developers build a large, typically large ground mounted PV array and subscribes portion of that array’s generation to lots of different individual businesses and households. This can have a lot of advantages, as allows for economies of scale and the facilities construction. And many customers may not have a site conducive for solar projects. There’re many flavors of this, where subscribers can pay up front, or they can make monthly payments, and everything in between.
This is also proving to be a really beneficial vehicle for low income customers, as they can subscribe for a portion of the array, maybe at a discount to the normal upfront payment, or maybe they receive shares for free, and it serves as a benefit to them. There's a lot of ways to do it. The trick is in balancing the benefit to both the low-income subscribers, as well as the regular subscribers, and also in retaining that percentage of low-income customers over time. There’re a few other terms for them, yeah, thanks. Here's a simplified diagram of how community solar works in practice. On the left with shown with the solar panels, a developer finds enough subscribers shown as houses on the right, to fill up their project. And also make sure that the utility shown with a meter there at the top is on board with managing the subscription credits for those subscribers’ bills.
The developer owns and maintains the project, and gets paid up front or over time by the subscribers for the electricity generated by the solar array. The community solar project also generates RECs, which the developer then typically sells or conveys to the utility to improve the economics of the project. The subscribers or the houses typically don't receive the RECs, so they're not technically allowed to state that they're purchasing green power, or going green. Next slide. And here's just the last map showing a few locations where there are state policies, and community solar projects and operation or development. As you can see, the largest amount of development is concentrated in the Northeast. But projects do exist in other states around the country is as well. Excellent.
Last, I'm just going to spend a few slides talking about utility rates, some of the common types and how to interpret them and consider them for a project. Next slide. When you're looking at your bill, you may typically be billed in two types, based on two types of consumption. Sites load is characterized by both the amount of electricity consumed, and when that electricity is consumed. In more advanced grids, there's meters that track sites electricity consumption on an hourly or a 15-minute basis. This illustrative chart that I have on the right here shows a simplified view of that where you can view these sites hourly consumption, as it drops during the nighttime and then on the weekends, and then rises dramatically up to a peak during the day as the load increases. A way to visualize this is that the blue shaded area is the kilowatt hours or electricity consumption over time.
And the green line shows the instantaneous demand for that power and kilowatts in green. Two types of utility charges will generally be assessed to a site especially a large site like the one I'm showing here. Utilities will generally have you pay for all of that kilowatt hour consumption in blue, at a cent per kilowatt hour rate. And then they'll also charge you for the highest point of consumption shown by that dotted green line there, of maybe like 1.25 megawatts of consumption, and they'll charge you a different charge for that, and I'll get into that on the next slide. This is what I was talking about before. The two components that you'll most commonly see on your bill are your energy charges, which are charged in cents per kilowatt hour, and demand charges, which again was that dotted green line, in dollars per kilowatt.
And those are based on the maximum demand, a month typically. Both of these are important as you're considering projects, and understanding how large these charges are. And what you're actually allowed to avoid is really important. If you're thinking about developing a project or just trying to understand how to cut your consumption, some of your utilities will be very heavily demand charged loaded, they might charge you a lot of your total bill based on how much power you consume at a given moment. And then reducing that amount of demand could be a better way to save on your utility bill. Conversely, maybe it's all just a separate kilowatt hour rate at every kilowatt hour that you reduce, is going to result in savings. These are a few different ways that you can think about saving on consumption. Next slide.
I'll just cover a couple high level drivers of solar projects, help bring everything together and particularly in regards to rates. If you have high energy charges, or cent per kilowatt hour charges, then solar may be more likely to be cost effective at your site. Also, you may be charged different amounts on what we call time of use rates for power, during peak times of the day, that are more expensive for the utility. If solar PV which operates during the day, aligns with those higher cost charges, than that can save you more money. If it doesn't align with them, then you may not save as much as you think. Similarly, if you have utility bill, where you mostly get charged in dollars per kilowatt for the demand, this may not be that great for a PV project, because the PV may reduce those demand charges if you're lucky. But it's not guaranteed as the PV output can be pretty variable.
A way to deal with all this is pairing it with storage. But you do need pretty specific and very high electricity rates to make that work right now, until storage costs come down. Next slide. And last, I just wanted to cover some different drivers of storage projects. Storage is still very expensive, so I would say this is very niche, it's not going to work in a lot of sites. Just because batteries are still too expensive for this to work in a lot of places, places where those demand charges are very high, typically over $15 per kilowatt, make it worthwhile for battery project to be installed to reduce that peak demand. Certain states also have very lucrative incentives that can be used to promote storage, and sites that have huge differences between those on peak times, and those off-peak times in terms of the rates that they charge.
Using a simple example, if you had an off-peak rate that was only one cent, and on peak rates that were 20 cents, then it might really be worth it to have a battery there. Because you could charge it up on that cheap one cent power, and then sell it back to the utility or reduce your load from the utility during that 20-cent time. And the arbitraging almost 90 and cents between those. And I didn't get too much into demand response, but can talk about it more if people have questions. But this is another grid service that batteries can provide to utilities. And last, batteries could be a resilience driver as well for a project even if it's not strictly cost effective. And with that, that's the end of my section so I'll pass it back to James thanks.
>> James Jensen: Thank you Doug, great job. Once again taking a lot of complex information and distilling it down for people who want to better understand how their projects can be economic or non-economic or basically better evaluate project in the context of utility policy and pricing. Thank you for that. Now we're moving on to a new subject by the timely subject, we're going to have Pat Hoffman talk about an upcoming funding opportunity related to resilience. Pat, we got your slides up, looks like you're ready to go.
>> Pat Hoffman: Thank you very much. Thank you, James for the opportunity to be here like the thankless honor. Also, as well from the Office of Indian Energy for her support and the ability to do a briefing for you all today. It does follow on nicely with all the information that was provided earlier in the presentation. But the important part of this presentation is it's hot off the press, opportunity for Indian tribes to get some grant funding. And it's a formula grant funding as part of the bipartisan infrastructure law. And we call this affectionately 40101 D. And its formula grants to states, territories and Indian tribes. We are also nicknaming this grid resilience grants. Next slide. What I wanted to cover for you today is the information that we did post this past week out on the website, we'll give you the web link as well. Our ask of folks is to comment on the materials we've provided.
Basically, these materials are the full information that you would need to know to apply for a formula grant from the Department of Energy under this provision and statute, which is the bipartisan infrastructure law. We are asking for comments June 2nd, unfortunately there was a couple of dates posted earlier and some press releases and materials. But we had a delay in getting the Federal Register notice out so the comments are now due June 2nd so everybody got a couple extra days for providing comments to the department. The other thing that I'd like to provide today, some early insights on the application process, what are we looking for? How is this going to work? Some of the things that you should need to know. Next slide, please. This is part of a set of resilience funding opportunities as part of the bipartisan infrastructure law. There’re three provisions related to resilience.
The first one, of course, is the one that I'm going to talk to which is 40101, preventing outages, enhancing the resilience of the electric grid, which tends to be more of the hardening type of resilience grants. The second provision that is in the infrastructure bill is 40103 B, which is upgrading our electric infrastructure for reliability and resiliency. And then the third one is really enhancing technologies for grid flexibility. The funding amount is listed in the slide here, the full text there is a web link to the full text. But what I really want to cover is the Notice of Intent for the formula grant process, the actual application process will be available. Once we review the comments, we will put the actual formula or the actual application process timeline out for everybody. Next slide please.
Under the grid resilience formula grants, it is really to support the overall goals by the administration in Congress, and really mitigating the climate related risks. Its energy resilience, its resilience to all hazards in the United States. What it does, it really provides a unique opportunity to advance the capabilities of states and Indian tribes to address current and future hazards. Really invest in resilience, but also take a hard look at some of the resilience needs as an economic development way to improve our grid infrastructure, as well as support grid modernization investments in underserved communities. Next slide, please. To give a high-level summary of the grid resilience and formula grants, it is a formula grant process that is an annual process, we're looking at about 2.3 billion that's spread over five years, so approximately $459 million per year. It is based on a formula that will be divided to the states, territories and tribes.
Any entity or applicant from the states, territories or tribes that applies for funding must provide a 15% cost share, and up to 5% of the funding can be used for technical assistance. The legislation required us to develop the formula based on five sub criteria, then included population area, probability of events, severity of disruptive events and expenditures on mitigation efforts. On the website, we do have the former allocation that goes to all the states, territories and tribes based on these five criteria. And also, we will put up the data sources that we use to calculate the formula for each of the entities. The main part of the application, is that the states territories and tribes need to submit to DOE criteria methods for award for receiving the grants, advance notice of public hearing that they have done, each of the applicants must do an advance notice and a public hearing on the criteria and methods.
And this will be required as part of the program narrative. Formula grant also must be required to submit applications each year. But we are allowing any funding that is provided through the formula grant process to cover multiple year deployments or activities or projects. In addition, the states and territories and tribes may sub grant to entities to do specific projects. What do I mean by that? Next slide. Before I cover the sub grants, let me talk about the annual tribal funding summary, current formula analysis. Basically, with respect to the tribal entities, here's the distribution of funds, basically 359 tribal entities will receive on an annual basis if they apply for 4 million grant 30 to $100,000, on an annual basis 191, 100,000 to 500,000, and so on and so forth. There is a significant amount of funding that is available to tribal entities for investing in resilience type investments at a tribal location.
And this is a huge opportunity to take advantage of and I wanted to use this seminar as a way to really get early notice out to tribal entities for application and what you need to be prepared for. Approximately 17.9% of the funding goes to tribal entities. Next slide. Here's where I was talking about eligibility for the formula grants for the resilience funding. The eligible act entities for the formula grants, are states, Indian tribes and territories. But as stated in the statute and as I had mentioned earlier, that the entity may sub grant the funding to additional providers. Those providers are listed here, it can be an electric grid operator, an electric storage operator, an electricity generator transmission owner, operator, distribution provider or fuel supplier. Next slide. But, as anything, the statute also requires cost share for any sort of engagement in this.
In addition to the 15% that I mentioned earlier going to the states, the states or tribes would have to provide as part of the grant application. If they do a pass through to the sub grantee, there will be cost shared requirements that must be met for the sub grantee. An entity must match 100% of the funding via the sub grant. The projects are capped to the amount that are spent in the last three years prior on resilience. But there is a small generator or a small utility set aside with respect to that a sub grantee that sells less than 4 million megawatt hours of electricity per year, is only required to match 1/3 of the amount. In addition, there is a small utility set aside so proportional to the customers in the state, there is a small utility set aside to ensure that dollars are appropriately applied, that covers really represents the customers in the utilities in the state and or the region or served by the tribe. Next slide.
The type of investments that are permitted for the Formula Grant Program, is a wide variety of investments from utility pole management, to hardening, to protection, to monitoring, to fire resistant technologies, low sag, re-conducting. There is a huge opportunity here to do investments with respect to how can you advance resilience and mitigate potential vulnerabilities with respect to events and climate where related weather events. But one thing that I would like to note, that there are certain efforts that are not allowed under this section and this is highlighted in yellow, you are not allowed to use the funds for construction of a new electric generating facility, or a large scale battery facility that is not used for enhancing system flexibility or adaptive capacity during disruptive events, maybe mid-engine load as power goes off.
It really needs to provide some sort of response for a disruptive event. Cybersecurity activities are also not allowed as part of this provision. Next slide. DOE is seeking your feedback, we are asking for comments to be provided by June 2nd at 11:59pm, Eastern Time, and what we really want is comments on the implementation plan, the application, the ward requirements. In addition, we are trying to figure out what challenges you may have in providing the program narrative, and what type of technical assistance we can provide to help you in applying for these formula grants. In addition, we are looking to see if there's any additional data sources we should consider as we develop the formular grants in future years. Next slide. Specifically, for each of these documents, the Notice of Intent, the Notice of Intent is a high-level guidance document that really provides more of the strategic guidance for what we are looking for under Section 40101 D.
And really what we want entities to do is undertake a strategic planning process, really think about the risks that are facing the tribe and your community, and identifying the highest priority opportunities for investment to really mitigate those risks. We want you to develop and formulate strategic goals and objectives, and really measures of how you're going to evaluate success with respect to utilizing these funds and investment opportunity. Ideally, we're going after a long-term strategic planning process. We want it to be transparent, thus the notice and hearing to be able to be very transparent on how we're thinking about investments, how we are thinking about resilience. How is the community thinking about the greatest economic benefit? Next slide. The application highlights.
The application just to let everyone on the line know, is really the war has to be defined by the head of government which must define the single applicant that will represent and receive the grant award. Once again, the focus is methods and criteria. The criteria really is the set of criteria that would be used by the state or Indian tribe to award grants to eligible entities. And what we're looking for is really three to five objectives, depending on the funding, is really how are you going to use this investment to demonstrate and improve resilience. It also will require the notice of public hearing, and the transparency from the public hearing process the notice and hearing. With respect to methods, there's a lot of flexibility for tribes on how they want to pass through or subcontract the sub grant the formula grant that they receive.
It could be a competitive solicitation, it could be direct awards, it could be utilizing other financing instruments, but you will have to provide a description on how you propose to do this. In addition, once again, 5% of the federal grant funds can be used for project administration and technical assistance. You do need to provide a write up on that. I will highlight that any sort of formula grant process with the federal government does take some time and it does take some registration. Please look at the materials now and start thinking about some of the things that you would like to do if you apply for this funding, and as well as register for the requirements that are there. Next slide. What can you be doing now, or what would I advise you to do? First is really to work with the head of government to identify the single applicant that would be applying for the funds under this formula grant process, that needs to be codified into a letter.
The second thing is the applicant should start doing the research and do the registration requirements that's on page two of the administrative legal and requirements documents, and it's on the website. There’re three web links for registration, things that an applicant must do. The third thing is really to begin to develop a plan or process for distribution of funds, as well as whether it's going to be solicited or for some of the very small amount of projects is really to think about what type of projects is funding could be best utilized, and problem that the best of this funding could be utilized to solve. In a part of the hearing process is really identifying the criteria. And once you do that criteria and methods, then it is to conduct the hearing, as required in the bipartisan infrastructure law, section 40101. And really want folks because I know it takes time to schedule a public hearing. And that's something that entities need to think about now.
Next slide. Here are where the documents are available. It's on the NETL website. Once again, the Notice of Intent is out there. The actual Federal Register notice is there for the request for information, which is basically the questions that are presented to you earlier in the slide deck. The draft documents are online as well, for the LRD, the allocation of funds, etc. All those documents are also up on the website for everyone to be aware of. In addition, we are doing a public webinar tomorrow, which is going to be another version of this webinar, probably just a hair bit longer to go in more details of some of the documents that I did not have time to go through and in totality here. But we will have a public webinar, we will also have webinars moving forward on how to provide some technical assistance, really detailed, specific targeted webinars depending on the feedback we get from the notice of intent and request for more information.
We want to have some targeted webinars, really to provide some technical assistance and also support entities as they apply for the formula grant funding on an annual basis. We also will have a resource library that's there and available for folks to see some best practices and doing things from a resilience perspective, resilience of electric and energy infrastructure. Next slide. Here, once again, is the email address for questions. The questions can be submitted as well as the postal address once again, the comments are due by June 2nd, and thank you. And so next slide. The last thing that I guess I would like to cover with you and we would like to do some polling questions is really around technical assistance. We recognize that some of the funding 5%, can be used for providing technical assistance to a state or an Indian tribe.
And these are the types of assistance, whether it's administrative expenses, or facilitating the distribution of information to think about the consequences of disruptive events. But DOE also has the ability to provide technical assistance. And one of the things that we would like to figure out is how to best provide technical assistance and how to serve your needs. How can we help you in the technical assistance and support you in the development and application and execution of these formula grants? With that, I believe the next slide is a couple of polling questions. And I'm going to stop here and turn it back over to James, who's going to conduct the polling instructions. Thank you.
>> James Jensen: Thank you, Pat. This slide here has instructions on how to complete the poll. I'm trying to send the link out right now in the chat, but it looks like it's not a live link, unfortunately. If you copy that address in the chat that I just sent out to everyone and paste it into your browser, you will be navigated to the polling functionality. And once you're there, you'll be able to enter your name or skip that if you want to be anonymous, and hit submit or enter and then you'll be able to start answering the polling questions. There's also a secondary option that doesn't work quite as well. But if you're on a cell phone, you can text this number on the screen here. The text nrelwebinars303 to the number 22333. And then that'll also get you in the system but it doesn't work quite as well. At that you guys have a moment to get those entered into your browser or your phone and then we'll start the polling question. Again, polling questions need to be answered in real time. Yes,
>> Lizana Pierce: James, we also want to make sure that people if they use their cell phone do not click on that link because it will take them other places remember?
>> James Jensen: Exactly. Thanks, Lizana. Yeah, so when you use your cell phone, if you're using the cell phone the more difficult method, there's an automated reply that has a link commit, you just ignore that link that's to like sign up for the system. All you have to do is start texting your answer after you get the automated reply either A, B, C, or D or whatever. Here's the first question. What are the areas in which you would most appreciate receiving technical systems? Respond A, answers best practices for setting objectives and metrics and respond B, for methods or undertaking threat-based risk assessments, respond C, for approaches for hardening assets and doing asset management strategies. Or you can select D, if none of those are the best answer for you the other. We're getting some responses here, I'm going to spend a little bit of time just waiting on this one.
As I'm sure some people are struggling through the process of getting their response, or getting the pulling up on their screen. It does appear like we're slowing down here. Certainly, right now the leader is A, best practices for setting objectives and metrics. This avail, this information that you're submitting now will be made available to Pat and the team and they can use this to better understand what people may expect. We've got a late run for approaches for hardening assets and instituting asset management strategies. Alright, we've slowed down here so I propose we move on to question two. All right, for questionnaires, what approaches for providing technical assistance would be most helpful to you? A, live webinars, B on demand recordings, C in person meetings, D virtual meetings, E small peer to peer cohorts, F hotline phone number, written resources G or other.
Looks like they've got a good distribution. People aren't very interested in the hotline phone number it looks like.
>> Pat Hoffman: That is very insightful. Thank you very much.
>> James Jensen: From that looks like since we've got even members of percentages in groups of 10, we probably have 10 responses right now. I don't know I'd like to get a few more if we could. Just because we got 70 attendees right now. We'll give it a little bit more time, see if anybody is still trying to respond. All right, well, we start out here so I will say that's good enough. Thanks to all who are able to participate in real time polling, we appreciate it. And to wrap it up and Pat, do you have any more slides?
>> Pat Hoffman: No, I don't have any more slides. Just thank you very much. Just a reminder that there will be a webinar for an hour tomorrow on the fifth. The web link is in the slide deck for registration to the webinar. It will be basically the same presentation with a little bit more detail. If folks are able, they can join the webinar tomorrow from two to 3pm on Eastern Time for additional information. Thank you very much and I do appreciate your time and allowing me to participate in the session today so thank you.
>> James Jensen: Thanks so much Pat. We're going to get started on the question answer now. We have quite a number of questions that have come in. And we'll try to get to them looks like actually, most of the questions have lapsed. We'll probably have time for additional questions if you have them. Please do submit any questions you have. First question here is probably for you Al. Does WAPA provide electricity directly to any tribes? Or is it through distribution company? Probably a question on WAPA allocation board.
>> Al Austin: Yeah, that's a good question, I believe, yeah, we do. We do provide some energy scheduled directly to some tribes, it's good to note though, that WAPA is really more of a wholesaler. And what I mean by that is, we'll deliver our energy at a higher voltage, 115, 69, kilovolts and such, so it's more of a, we're not a distribution provider. What we'll do is, and we do actually schedule energy and drop it off directly at some tribes, and then we also drop off energy at utilities on behalf of tribes. It really is a mixed bag. But we do as an example, into the Naval tribal utility authority is a customer so we drop energy off to them off of I believe some of our Colorado river storage project energy, it's a mixed bag.
>> James Jensen: Thanks Al. Another question for you or I guess potentially Pat might know the answer to this. Do you have any balancing authority information on Alaska?
>> Al Austin: I don't, and the reason being is Alaska is really much like Hawaii, in that they're not part of the western interconnection, per se. They run a standalone system whereas Hawaii is in that same boat, they're not interconnected with any of the other balancing authorities. And I believe that they have to still adhere to reliability standards, NERC still has an interest in making sure that they ensuring that they run their system reliably. I believe that they're still subject to the NERC reliability standards. But I'd have to find that appreciate. It's a great question.
>> James Jensen: Thanks Al. Yeah, I don't know how much detail they're looking for. But at the highest level, Alaska has one main grid that serves the main population centers of Anchorage and Fairbanks and some of the other medium sized towns on the road system. And that's called the real dark grid. And then outside of that are a lot of individual micro grids that are not isolated in and of themselves. And that's a general overview of the grid and Alaska. But the details on their requirements for the railroads I can't provide an answer for you. Let's move on here, another Alaska question. Maybe a question for you, Doug. But Alaska, is anybody aware of incentives in Alaska, for renewables? And I'm paraphrasing the question, but it seems like Alaska is a little bit of a unique entity and they're saying they don't share the incentives of renewable energy goals. I assume they're referring to RPS is on why Alaska is.
>> Doug Gagne: Let me come check it on desire right now actually, I'm not aware of any standalone incentives. I think it's a good question. Certain cooperatives may have some incentives, primarily net metering for a project. But I'm not seeing a ton of stuff that would be directly, significant in a way of driving significant investment projects. I mean, I've worked only a little bit in Alaska, I think the main driver of renewable projects up there is typically just the electric rates are so high, that you can often justify a project just based alone on beating your utilities rate if they'll allow you to interconnect. And if you can do so, in a way that's stable for the grid, it's generally just worth it. Because a lot of the generation up there so expensive. I don't have any great answers on the incentives. I don't think there's a lot out there other than possibly net metering at the co-op level.
>> James Jensen: Thanks, Doug. Yeah, their website and some Google searches will probably get you some up to date information and current incentives in Alaska.
>> Doug Gagne: Yeah, check with your utility. See if they have any suggestions. Beyond that, I'm not sure there's going to be a lot at the state level.
>> James Jensen: Yeah, thank you. Pat, looks like we got a few questions here at the end, tied to the RFI. I think you addressed this, but maybe cover it quickly again, what variables are involved in the formula allocation?
>> Pat Hoffman: Sure, there's five statutory criteria we had to incorporate in the formula allocation. And the first one was population. The second one was area. The third one was the number of disruptive events. And then the last two dealt with the economic impact of the events. I don't have it on the slides, I can pull it back up. But basically, there's five criteria and statute that we had to cover and incorporate in the formula. The data streams that we use range from the US Census to the disaster declaration database by FEMA, also the FEMA state risk index databases. And those were some of the things that we used as the anchoring data for calculating this formula. But it was quite complicated due to those five criteria by statute that we have to consider for the formula.
>> James Jensen: Great, thank you. And I think you've said that the website also lists the funding amount by driver by entity.
>> Pat Hoffman: Yes, the website has the funding amount for every single entity that's eligible to apply to the formula grant process.
>> James Jensen: Great, thank you. And here, just a clarifying question that says tribes do have a cost share requirement. They say some grants under the WAPA and infrastructure law, don't require to provide cost share.
>> Pat Hoffman: I will check into the other provisions. But in the statute, it does say that there is a 15% cost share off for this provision for this formula grant process.
>> James Jensen: Great, thank you. And one last question for you, are state energy offices eligible to apply as the single applicant?
>> Pat Hoffman: It is defined by the head of government so the governor would define if he defines the state energy office as the eligible applicant? Yes, they are the eligible entity to apply. And they would be the representative that would register in those websites that are listed in page two of the AERD.
>> James Jensen: Excellent. Thank you, Pat. And those are all the questions we have at this time. Let's, go ahead yeah.
>> Al Austin: This is Al Austin. Yeah, I did do a quick Google search on the question around Alaska and NERC standards. I was able to confirm quickly that both Alaska and Hawaii are not subject to NERC reliability standards, and that there was a second article from 2020, March of 2020 that stated that, at the time the Alaska legislature was considering forming a regional reliability group of all of the six utilities in Alaska. Apparently, A, they're not currently subject to NERC reliability standards, but B there appears to be in March of 2020, there was reported that there was some legislation that was being considered to actually form a regional reliability standard group up in Alaska. At least there appears to be some effort in that direction so it's worth following up on.
>> Doug Gagne: And to follow up on mine, I did find a renewable energy fund that's run by the Alaska Energy Authority, runs competitive solicitations for funding. Looks like near annually subject to state legislature writing it in, but something to keep an eye on. I'll post the link to their main landing page, and that'd be a program to take a look at.
>> James Jensen: Thanks, Doug. And thanks Al for those timely responses. There doesn't appear to be any additional questions at this time. I want to thank everyone for their participation in today's webinar. And thanks to our speakers for your expertise and time. We're very interested in our audience's suggestions on how to strengthen the value of these webinars so please do send us any feedback that you have. On the final slide here, we are showing the remaining webinars for the 2022 series. The next webinar is titled Energy, Infrastructure and Climate Resilience. It will be held on June 1st of this year, 11am Mountain Time. And with that, this concludes our webinar for today. Thank you for your interest in attendance. And we look forward to you joining us in future for the next, good day.
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