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Vol. 14, No. 44 Week of November 01, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

Renewables, conservation in draft plan

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Alaska legislators looking at energy efficiency, state goals, more money for various plans in review of state’s energy situation

Kristen Nelson

Petroleum News

Members of the Alaska Senate energy policy group have taken a wide-ranging look at the state’s energy situation and in a draft released Oct. 19 have proposed a variety of approaches to deal with everything from energy-efficient buildings to incentives for more oil and gas exploration, some of which the Legislature could promote with funding and some of which it could encourage with legislation.

Sens. Bill Wielechowski, D-Anchorage, and Lesil McGuire, R-Anchorage, said the recommendations are designed to promote more reliable and affordable energy for Alaskans. The two are co-chairs of the Senate Resources Committee; McGuire also chairs the Senate Special Committee on Energy.

“This is a plan to help Alaskan families save money and make Alaskan businesses more profitable and competitive,” Wielechowski said in a statement. “It will help ensure that Alaska has a robust economy, fueled by affordable and abundant energy.”

There are seven energy goals and detailed recommendations to achieve those goals.

“The recommendations focus on improving energy efficiency, among many other strategies,” said McGuire. “Increasing efficiency is a way to cut costs without compromising comfort or productivity.”

McGuire said the recommendations also call for investing more in renewable energy with tax credits and low-interest loans.

“While we recognize that Alaska relies on fossil fuels for the vast majority of its power production and heating, we have seen the benefits of transitioning to more local, sustainable and flat-priced sources of energy,” McGuire said. “Southeast Alaska with its interconnected hydro systems is a model for other parts of the state.”

Wielechowski emphasized that the recommendations will help the state and its families move toward greater energy independence.

“This report is a call to action. Alaska’s energy future depends on what we do now,” Wielechowski said. “With oil prices on the rise again, Alaska is at a crossroads. We need to invest now for Alaska’s long-term benefit.”

McGuire said the recommendations “are a way to ensure a strong Alaska for decades to come, with families that can afford to heat and power their homes, drive to school and work, and build profitable businesses.”

Input requested

In a letter to Alaskans, issued with the draft report, Wielechowski and McGuire said with all of the state’s resources, “we’re facing natural gas shortages in Southcentral, businesses are closing their doors because of the price of energy, and some rural Alaskans are leaving their communities because they can’t afford to heat their homes and keep their lights on.”

A Web site for the report, www.energy.aksenate.org, says members of the Senate Resources and Energy committees have been working over the summer to find long-term solutions to energy issues, many of which have plagued Alaska for years.

The senators requested input from the public on the report, and requested comments at the Web site, where the report and recommendations are also available.

In addition to McGuire and Wielechowski, members of the Senate’s energy policy group, all members of the Resources and Energy committees, include: Hollis French, D-Anchorage; Lyman Hoffman, D-Bethel; Charlie Huggins, R-Wasilla; Albert Kookesh, D-Angoon; Bert Stedman, R-Sitka; Gary Stevens, R-Kodiak; and Tom Wagoner, R-Kenai.

State challenges

On the plus side, the draft report says, “Alaska is blessed with abundant energy resources,” both fossil fuels and “considerable, largely untapped renewable energy resources.”

But there are challenges: Alaska ranks first among the states “in terms of our energy consumption per capita,” with prices for energy in the state “among the highest in the nation.”

Getting reliable supplies of energy is also a challenge. “If freeze-up comes early and barge travel is blocked, fuel may not be delivered to a village on the brink of running out.”

And generators failing in a remote community can leave it without power for days.

“Even Alaska’s largest city faces the prospect of natural gas shortages this winter, which could result in rolling blackouts and the need to cut back on home heating.”

Costs to meet these challenges are high, the report said: in excess of $4 billion for a small-diameter in-state line to bring natural gas from the North Slope to the Interior and Southcentral; $16 billion or more for a Susitna hydroelectric plant; and hundreds of millions to ensure communities have adequate bulk fuel storage and efficient generators.

Electricity

Alaska ranks sixth in the U.S. for electric rates with rates 50 percent higher than the national average and much higher in some areas of the state, the report said. The U.S. national average cost in 2008 was 11 cents per kilowatt hour, but in Lime Village the cost — before Power Cost Equalization payments — was $1.17 per kilowatt hour.

Electrical consumption is growing much faster in Alaska than in the U.S. as a whole and Alaska’s higher costs are due in part to the fact that outside of Alaska’s major cities most electricity users are not linked to large electric grids.

The report recommends consolidating the six existing Railbelt utilities into a single entity for purposes of planning, financing and building future electrical generation and transmission projects with maximum efficiency, and calls for amending Senate Bill 143, “An Act establishing the Greater Railbelt Energy and Transmission Corporation,” and passing a revised bill.

A regional integrated resource plan is being developed for the Railbelt with a draft report due in November; legislative hearings are proposed in January to review the findings and make recommendations.

Investment in Railbelt projects that will provide the lowest cost and most reliable energy is recommended, with capital added to the Railbelt Energy Fund as needed.

The report also recommends adding a minimum of $10 million to the state’s Power Project Loan Fund which provides loans to utilities, local governments and independent power producers.

Improving the efficiency of diesel power generation is recommended through increased funding for the Alaska Energy Authority’s Rural Power System Upgrade Program, which has upgraded some 35 rural power systems producing an average increase in efficiency of 26 percent; some 25-30 community power systems still need to be upgraded. Recent funding for the upgrades has been primarily from the Denali Commission, but the commission’s budget is in sharp decline and $10 million in state funding for the program is recommended.

Other funding recommendations include $200,000 for the Rural Power Systems Technical Assistance Program, the “circuit rider program,” and continued funding of the Power Cost Equalization Program, with $37 million for fiscal year 2011.

In Southeast, continued development of the region’s hydroelectric potential is recommended, specifically completion of an integrated resource plan for Southeast Alaska. Regional electrical grid interconnections are also recommended for adjacent Southeast communities, as well as broadening the scope of the Southeast Alaska Energy Fund and capitalizing it.

Increased state funding for the Bulk Fuel Upgrade Program is recommended — $5 million per year for the next three years; this is another program which has been funded by the Denali Commission. The report also recommends revising interest rates for the Bulk Fuel Revolving Loan Program and Bridge Fuel Loan Program to ensure there is an incentive for communities to maintain good credit histories. Five to 10 training classes per year are recommended for power plant and bulk fuel operators to teach operations, maintenance and management best practices.

Home heating

Alaska is one of the coldest states, the report says, and Alaska homes use more energy for space heat than counterparts in the Lower 48. The Institute of Social and Economic Research found the average annual cost to heat a home in Alaska in 2008 was $4,500, about 45 percent of the total energy used to run a home.

Additional funding is recommended for the state’s weatherization program. The report said the $200 million the state appropriated for the program in 2008 is expected to be fully encumbered by the end of FY’10 and an additional $150 million is recommended for the program in FY’11.

Additional funding is also recommended for the state’s Home Energy Rebate program, which assists homeowners in making energy efficiency improvements. The Legislature appropriated $160 million for the program in 2008 and that is expected to be fully encumbered by June 30, 2010; an additional $50 million is recommended for FY’11.

Energy efficiency

The report said conventional electrical generation, nationwide, costs 7-15 cents a kilowatt hour; by comparison, energy efficiency costs 0.25 cent a kilowatt hour. “It is also stably priced, in contrast with volatile fossil fuels, and beyond the reach of international disruptions.”

Alaska is ranked 37th in terms of energy efficiency policies.

“We can reduce our energy consumption and costs more easily than other states by harvesting the ‘low-hanging fruit’ of energy efficiency.”

The report recommends reducing the demand for electricity and heating fuels by 10 percent by 2015 and said the state made energy efficiency upgrades to eight public facilities and reduced energy in those buildings by 24 percent in the first year.

The report recommends a $2 million program to create an appliance rebate program to encourage consumers to replace older appliances with those which are more energy efficient.

It recommends $100,000 to AEA for ongoing technical assistance to businesses to improve energy efficiency and $250,000 toward a more extensive building energy monitor program.

The report says since energy efficiency and conservation is typically 50-75 percent cheaper than building new power plants, setting efficiency goals and implementing a strong education program would allow the state and utilities to forecast energy efficiency gains; AEA and the Alaska Housing Finance Corp. would be tasked with implementing this $175,000 program.

The Department of Education would be encouraged to include energy efficiency lessons in the K-12 curriculum.

Legislative hearings would be held to investigate the costs and benefits of requiring utilities to decouple revenues from sales to provide greater incentives for the utilities to promote and invest in energy efficiency.

Technical assistance would be provided to communities for implementation, code enforcement, energy audits and efficient building design.

A voluntary energy efficiency labeling program is recommended for buildings.

And low-interest loans are recommended for Alaska’s commercial fishers for energy efficiency upgrades, since volatility in fuel costs continues to have an impact on Alaska’s commercial fishing fleets, cutting into profits and threatening productivity.

Editor’s note: Part 2 of this story, recommendations for renewable and conventional energy development in the state, will appear in the Nov. 8 issue of Petroleum News.



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