|
The what and how of affordable energy AEA Alaska Affordable Energy project defining its target and gathering information for future strategy for rural energy relief ALAN BAILEY Petroleum News
During a presentation to the Alaska Energy Authority board on Sept. 24, Neil McMahon, AEA program manager for what is referred to as the Alaska Affordable Energy Strategy, an initiative aimed at alleviating the high cost of energy in many Alaska communities, talked about AEA’s plan for developing the strategy. An appropriate definition of the term “affordable” forms one of the starting points for assessing how affordability is to be achieved, McMahon commented.
The AEA project is driven by a provision within Senate Bill 138, the bill authorizing the state of Alaska’s involvement in the Alaska liquefied natural gas export project. The provision requires 20 percent of the revenues derived from state royalty gas, after payments to the Permanent Fund, to be channeled into initiatives for energy cost reduction in areas of the state that do not end up having access to North Slope natural gas.
The bill provided funding for the Alaska Energy Authority to develop a strategy for making energy affordable in Alaska and to report on the results of its efforts by Jan. 1, 2017.
McMahon said that the AEA project was considering both long-term and short-term energy plans, in expectation that the findings of the project will prove helpful, regardless of whether or when North Slope gas ends up being exported as LNG.
Two perspectives McMahon said that the project is considering affordability from two different perspectives: a need-based perspective, in terms of whether people have enough money to pay for the energy that they require, and a need-blind perspective involving some acceptable target energy pricing level.
In its need-based approach, the AEA analysts have defined energy as affordable if its total annual cost is less than 8 percent of mean household income, a definition of affordability derived from a fuel poverty concept developed in the United Kingdom. The need-blind approach, on the other hand, assumes an electricity price of 21 cents per kilowatt hour and heating at an equivalent cost to a natural gas price of $15 per thousand cubic feet.
Under either approach, the energy cost reductions needed to make energy affordable vary widely around the state, depending on the sizes of the population in different regions; the local price of energy, in particular heating fuel; the local climate; and the local building stock, McMahon said. Currently the project has assembled regional cost data for residential energy but has yet to address energy costs in the commercial sector, he said.
Under the need-based approach, the Lower Yukon-Kuskokwim area of the state requires the greatest total energy cost reduction of any Alaska region, with an overall total annual residential cost reduction in excess of $70 million across the region required to achieve affordability. The total residential cost reduction needed for Alaska as a whole is $241 million per year, McMahon said. Factoring in energy cost reductions needed for commercial activities would likely result in an annual total cost in excess of $500 million, he said.
Looked at from the need-blind perspective, the cost reduction required in Southeast Alaska, in particular, increases significantly, with the cost reduction needed in the Yukon-Kuskokwim area also increasing somewhat. The overall annual cost reduction needed under this approach is a bit over $300 million for residential energy, with commercial energy needs perhaps raising this figure to about $600 million, McMahon said.
Prioritized recommendations McMahon said that the Alaska Affordable Energy Strategy project will ultimately result in a prioritized list of recommendations and a set of useful tools that communities and regions will be able to us when prioritizing projects. The AEA project will involve identifying energy cost drivers, identifying strategies to reduce the costs and formulating policies for enacting the strategies and allocating resources. Several studies are being contracted out to organizations including the University of Alaska Fairbanks Geographic Information Network of Alaska and Alaska Center for Energy and Power. The University of Alaska Anchorage Institute of Social and Economic Research is conducting some community energy economics studies. And consultancy Northern Economics is leading an investigation into the feasibility of delivering LNG to various parts of the state, McMahon said.
| 