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AEA researches affordable rural energy State agency follows up on commitment in Alaska natural gas pipeline legislation to find ways to alleviate rural energy costs Alan Bailey Petroleum News
Although most discussion around Senate Bill 138, the bill authorizing the state of Alaska’s involvement in the Alaska liquefied natural gas export project, has focused on the LNG project itself, the bill also contained provisions aimed at helping state residents who will not enjoy direct access to North Slope gas, assuming that a gas export line is built.
That part of the bill has triggered what is referred to as the Alaska Affordable Energy Strategy, an initiative aimed at finding ways of alleviating the current high cost of energy for many Alaska rural communities. The Alaska Energy Authority has taken on a project to develop a plan and recommendations to the Legislature for implementing the strategy. And on Dec. 9 during Law Seminars International’s annual Energy Markets and Regulation in Alaska conference Neil McMahon, AEA program manager for the project, talked about what his agency is doing to achieve the project’s aims.
McMahon said that AEA has until Jan. 1, 2017, to complete the project. Under Senate Bill 138 perhaps 20 percent of state revenues from the gas export line would be channeled into assistance for areas of the state that do not have access to the North Slope gas, he said.
Several challenges McMahon said that the challenges in bringing affordable energy to rural Alaska include the low energy demand in small rural communities at remote locations, where economies of scale in energy delivery are difficult to achieve. Distances around the state are very large, while the typically cold climate can present operational challenges, including increased risks of equipment breakdowns.
The cold climate, perhaps with temperatures of 50 below, also makes energy supply reliability an imperative, McMahon commented.
“To some extent, reliability is as important as any other function when we’re looking at a rural power system,” McMahon said. “If there’s not a backup we do not want things to go wrong because that then puts people’s lives at stake.”
Climate can also have a major impact on the feasibility of implementing different forms of renewable energy in different parts of the state. In especially cold regions, for example, the freezing of water over much of the year may preclude the implementation of hydropower, McMahon said.
Evaluate by region As an initial step into its affordable rural energy project, AEA has been assessing the energy status and future energy potential in 12 regions that roughly correspond to the Native regional corporation regions defined under the Alaska Native Claims Settlement Act. Some 77 percent of electricity production takes place in the Alaska Railbelt, between the southern Kenai Peninsula and the city of Fairbanks, McMahon said. Much of the rest of the state’s production occurs in Southeast Alaska, with other parts of the state only accounting for 1 to 2 percent, he said.
For their energy needs, many rural communities depend on fuel that is shipped by barge. The fact that fuel can only be delivered during the annual season of ice-free water increases the fuel price risk for the communities and locks in prices between deliveries, McMahon commented. Storage for the fuel is also expensive, he said.
An examination of the cost of electricity in different rural communities across the state, taking into account the impact of power cost equalization, the state funding program for reducing rural residential electricity costs, shows anomalies in the resulting cost of residential power for some communities relative to others. These anomalies probably reflect variations in the efficiency with which power is delivered, McMahon said. Some rural communities have upwards of 30 to 40 percent power loss along power transmission and distribution lines, while in some places the efficiency of power generation is only 60 percent of what is specified under power cost equalization standards, he said.
Energy access On the assumption that access to natural gas and renewable energy sources can alleviate the cost of energy, the AEA team has taken available data for individual communities and categorized the communities according to their ability to access either, both or none of these energy resources. From a regional perspective, it is apparent that the Railbelt has access to natural gas, and to renewable energies in the form of hydropower and wind power. Southeast Alaska has access to hydropower for electricity.
Only two communities, Barrow and Nuiqsut on the North Slope, currently have access to natural gas but not to renewable energy, McMahon said.
Many communities have access to biomass in the form of firewood or wood pellets, as a form of renewable energy for heating buildings. However, southwest Alaska has relatively little biomass and no natural gas, McMahon said.
Different strategies McMahon said that AEA is going to use its assessment of the current energy situation to evaluate different ways in which the state can help rural communities, with strategies depending on where the various communities are situated relative to the availability of gas or renewables. In all cases improved energy efficiency, including the improved operational efficiency of energy systems, will be helpful. Other possibilities are improved facilities for fuel transportation, including perhaps assistance with the transportation and storage of natural gas. The development of new renewable systems such as wind power is another possibility.
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