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Providing coverage of Alaska and northern Canada's oil and gas industry
January 2009

Vol. 14, No. 4 Week of January 25, 2009

Palin: 50% renewable by 2025

Calls for half of electricity to come from renewable sources by 2025, sets up process for rural Alaska to mid-term seek cost relief

Eric Lidji

Petroleum News

Gov. Sarah Palin wants half of the electricity in Alaska, and at least 30 percent of the electricity in the Railbelt, to “ideally” be generated from renewable sources by 2025.

Palin made the announcement at a Jan. 16 news conference, where her administration also presented a process intended to lower the high cost of energy in rural Alaska.

“Whether we’re talking about rural Alaska, or the Railbelt, or Southeast, one thing remains true: Renewable energy will be the key,” Palin said on Jan. 16.

Attaining “affordable energy” will require major infrastructure projects over the coming years, Palin said, adding, “Most of this is going to have to be financed by rate payers.”

In setting out her energy plan, Palin also reiterated her long-standing goal of increasing Alaska’s importance as a national energy supplier, “while taking care of Alaskans first.”

She said “a large-diameter natural gas pipeline” is still the “foundation” of her long-term energy policy, but that natural gas for Alaska will be “a focus” of the legislative session.

“The message today is that we’re willing and able to responsibly build and produce and provide opportunity for our resources to be available for our citizens,” Palin said.

To address short-term concerns, Palin said the state would invest in energy efficiency and conservation measures, which she called “low hanging fruit that’s available to us now.”

“Ultimately, it’s going to take many years of work to reach all our goals,” Palin said.

On the first full day of the new session, the energy plan received a lukewarm reception from House leaders, who mostly applauded the ambitious goal for renewable energy, but wondered how it would be achieved, especially given slimming state revenues.

On the goal for 50 percent renewable energy, Speaker of the House Mike Chenault, R-Nikiski, said, “It’s a worthy goal. Now can we get there by 2025? I don’t know.”

On the renewable energy goal and others like consolidating urban electric utilities and issuing state loans for energy projects, House Minority Leader Beth Kerttula, D-Juneau, said, “Those things, I believe, are very laudable, if somewhat broadly stated goals.”

A goal for the Railbelt

In some ways, Palin’s 50 percent renewable goal is the most ambitious in the country.

Of the roughly 30 states that have set goals for increasing the role of renewable energy in electricity generation, most are only trying to produce between 10 and 25 percent of their electricity from renewable sources by various deadlines running from next year to 2025.

The high bar is California, the most populous state in the country, which last year set a new goal to generate 33 percent of its electricity from renewable sources by 2020.

Alaska is always a unique case in energy discussions, though.

On the one hand, Alaska uses more energy per person than any state in the country. But that ranking comes largely from Alaska’s small population, large industrial base and cold climate. In 2007, only Vermont and South Dakota generated less electricity than Alaska.

Statewide, Alaska already produces some 20 percent of its electricity from renewable sources, mostly from several large dams that power the Southeast region around Juneau, according to the U.S. Energy Information Administration.

But in the Railbelt region from Homer to Fairbanks, home to about 65 percent of the population, hydropower accounts for a much smaller percentage, less than 5 percent.

Reaching the 30 percent goal for the Railbelt “probably means at least one really big renewable project,” said Joe Balash, Palin’s special assistant for oil and gas issues.

Because a project of that nature would be “large, complex, time consuming to build and expensive,” and therefore beyond the “financial strength and technical muscle” of any single utility, the state is proposing the formation of a “Railbelt Energy Corp.”

The new corporation would help coordinate the generation needs of the major utilities and institute “a uniform price structure and postage stamp rates.” Under postage stamp rates, the customers within a given system would all pay the same price for electricity.

Balash said “working together” could save ratepayers $40 million each year.

Some aspects of pursuing this consolidation effort are already under way.

An idea for rural Alaska

Any energy plan in Alaska must split the road system from the rural parts of the state.

The majority of Alaskans get their electricity from six interconnected utilities powered mostly by natural gas. But scattered across the vast rural swaths of the state are dozens of very small, isolated, mostly diesel-fired utilities providing power for single communities.

Among the most anticipated elements of the new plan was how it would address the high cost of energy for those communities, many of which remain locked into high oil prices from summer and early fall, and all of which face some added cost to import their fuel.

But the result is not so much “the plan” as it is “a plan for creating many plans.”

Steve Haagenson, state energy coordinator and head of the Alaska Energy Authority, unveiled an inventory of the alternatives to diesel that are currently available in each community, along with “energy meters” that compare each option with the price of oil.

For instance, the western Alaska village of Emmonak, which has been in the news recently because of an economic disaster caused in part by high fuel costs, could save money by upgrading its power plant, by burning wood or through regional collaborations.

The actual decisions about which projects to pursue will be made by the communities, along with the Legislature, local governments, the university and the private sector.

The next step, Palin said, is creating the “legal and government structures” needed to facilitate projects, and finding the funding sources to help pay for prioritized projects.

While the oft-stated goal is to lower costs, the plan tempers that expectation slightly.

A 245-page document released with the new plan suggests it might only be appropriate for the state to bring energy costs down to a certain level, say the equivalent of $50 per barrel oil, and that capital funding will likely come from “a balance of loans and grants.”

“The challenge facing all of us is to collectively decide how many and which projects to build, and how to finance the needed investment,” Palin said.

Administrative pressures

If successful, the energy plan could generate hundreds of proposals flooding the state.

The model for deciding which proposals to fund and to what extent is the Renewable Energy Fund, a $100 million appropriation created by state lawmakers last year.

In the first round of funding, the Alaska Energy Authority received 234 applications for projects totaling $755 million. Along with the new energy plan, Haagenson presented a list of 79 projects totaling $100 million being recommended for funding. (See sidebar.)

Haagenson said every proposed project underwent a three-stage review to check first for completeness, then for technical and economic feasibility and was finally scored according to factors like current energy costs, available funding, readiness, sustainability and support.

“We got a little dose of that kind of review already,” Haagenson said, but added that he is concerned about how his small crew will handle the increased load. Haagenson said staff at the Alaska Energy Authority has been working seven days a week since July to create the energy plan and manage the first round of applications for the renewable energy fund.

Palin appointed Haagenson in March to head up the Alaska Energy Authority and serve as the first “energy coordinator” of the state. The centerpiece of the new position would be addressing the rising cost of energy in Alaska, particularly in rural parts of the state.

The appointment came as oil prices topped $100 a barrel for the first time.

From the start, Haagenson talked about creating an energy plan that would help people across the state understand and leverage the resources available in their communities.

“What I’d like to do is engage all Alaskans to help identify local resources and technologies that we can employ to help get the cost of energy down,” he said in March.





State recommends initial project funding

While the state is looking to significantly increase the role of renewable energy in the future, it is getting started now with help from a fund created by lawmakers last year.

On Jan. 16, Steve Haagenson, state energy coordinator and head of the Alaska Energy Authority, released a list of 79 projects recommended for the Renewable Energy Fund.

The projects total $100 million, the full amount lawmakers put toward the fund last year.

Lawmakers initially pledged to spend another $50 million each year for the next four years, but that was before state revenues declined sharply last fall with the price of oil.

The 79 projects still need approval from the Legislative Budget and Audit committee before they can move forward, but Gov. Sarah Palin said “with swift action” projects can be “headed to construction” as early as this summer. Timing is important because the construction timetable in many smaller communities relies on barges to import goods.

The projects come from every major region of the state. The proposals are mostly small wind and hydroelectric projects, but the list includes solar, geothermal and biomass projects, as well as support for electric generation from the Anchorage Regional Landfill.

For a complete list, visit www.akenergyauthority.org.

—Eric Lidji


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