ALASKA’S NEW ENERGY VISION

No easy path: Report outlines costs, methods of renewable energy conversion
April 30, 2010 (Fairbanks Daily News-Miner)

THE POINT
If Alaska - with its long long nights so demanding of electricity for lights and its cold cold winters so crucially in need of heating - can transition to a New Energy economy, surely any state can. And Alaska Energy Pathway; Toward energy independence, from the Alaska Energy Authority, says yes, Alaska can. Can what? Can meet the state’s goal of getting half its electricity and heating from New Energy sources like hydropower, geothermal and wind by 2025.

Alaska is a uniquely diverse state with a contemporary metropolitan lifestyle in its Railbelt region from Homer to Fairbanks yet practically a developing world lifestyle in its rural outlying communities. Plans for either sector nevertheless settle on the same basic approach: (1) conservation and Energy Efficiency, (2) New Energy to reduce fossil fuel reliance, decrease greenhouse gas emissions (GhGs) and increase energy security, and (3) stable affordable utility rates.

The Alaska Energy Authority plan recommends that state leaders attend immediately to critical statewide supply/demand priority areas including (a) economic development, (b) climate change, (c) energy security, and (d) education and workforce development. It also recommends they add a 20% improvement in Energy Efficiency by 2020 to their target of getting half their power from New Energy sources by 2025.

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Electric generation with fossil fuels in the Railbelt region can, according to the Authority, be cut to 50% from the present 95%. The capital cost to make this transition would be $7.29 billion over 20 years. The problem is finding the funding to finance the transition. The debt capacity of Railbelt utilities is $1.0-to-$2.5 billion, some $4.5-to-$6.5 billion less than is needed. The 50% goal is, therefore not feasible without significant changes in the economy, changes in Alaskans’ Energy Efficiency habits and subsidy funding from state and/or federal programs.

Rural Alaska communities already get more than half their power from New Energy sources, especially hydropower. Electric generation from New Energy in the rural, non-Railbelt regions could, according to the Authority, be increased from 63% to 91% and the present 10% of space heating done with New Energy could be increased to 45%. This would cut greenhouse gas emissions (GhGs) from electricity generation 77% and from space heating 39%. The capital cost: $2.85 billion over 20 years. Once again, however, there is no clear way to fund the transition without outside assistance.

Alaska has begun a 3-part strategy to get the funding it needs. It is (1) cutting capital costs by reducing installed capacity goals, (2) upping the utilities’ debt capacity with a stronger economic base and better finance terms (loan guarantees, lower interest rates), and (3) pursuing state, federal and other grants and outside subsidies and investments.

The report concludes with a statement so brutally true and vitally important there is no point in trying to paraphrase it:

“Alternative energy is not an easy solution. It is not a cheap solution. But where practicable, it is a sustainable solution. The purpose of this report is to empower Alaskans at the community and regional levels to participate in finding the solutions that are right for themselves and their neighbors, and provide them with the tools to make smart choices about the direction their community heads. Energy is a larger issue than the cost of electricity or heating oil; it is intricately tied to Alaska’s various economies, and those economies are tied to the social health of a community and the state.”

Alaska may be the state that spawned the "drill, baby, drill" idiocy but whoever wrote that paragraph sees the future coming hard at every respiring creature on this good earth from the Alaska National Wildlife Refuge to the sand dunes of Saudia Arabia's Empty Quarter. Whoever wrote that paragraph understands that what's coming requires action and that action is not drilling.

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THE DETAILS
The report follows on Alaska Energy – A first step toward energy independence, a January 2009 preliminary report on how Alaskans can move to the use of local resources with information on all critical energy technologies and a database of community energy resources.

The report divides Alaska into two regions: (1) The Railbelt region from Homer to Fairbanks includes the major metropolitan areas like Anchorage and the Mat-Su Valley). (2) The other region is composed of the rural parts of the state, the southeast region and the communities on the road system linked by an isolated electric grid.

The report uses differing approaches to assess each region’s New Energy potential but the differing methods both pointed toward (1) conservation and Energy Efficiency, (2) New Energy targets to reduce the fossil fuel reliance, decrease greenhouse gas emissions (GhGs) and increase energy security, and (3) a goal of stable affordable utility rates.

The Railbelt region method was an Integrated Resource Plan (IRP), a traditional utility planning approach. It compared the resources throughout the interconnected system and selected the overall lowest-cost option.

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The conclusion for the Railbelt: Electric generation with fossil fuels can be cut to 50% from the present 95% by developing large hydroelectric, geothermal and wind projects. The capital cost to expand generation capacity and transmission infrastructure: $7,290,000,000 over the next 20 years.

The other region (the rest of Alaska) has limited-to-no grid access and can only transition to local resources for heat and electricity. A cost-effective transitional path for every Alaskan community is included in the report. It recommends New Energy where it makes dollar sense and staying on diesel for electricity and heating where New Energy is too expensive.

The conclusion for the non-Railbelt rural regions: Electric generation from New Energy could be increased from 63% to 91% and the present 10% of space heating done with New Energy could be increased to 45%. This would cut greenhouse gas emissions (GhGs) from electricity generation 77% and from space heating 39%. The capital cost: $2,846,000,000 over the next 20 years.

The Alaska Energy Authority estimated the cost of diesel fuel for the 176 largest rural communities (combined population 74,500) at $5+ billion over the next 20 years, almost twice the cost of making the transition.

The Railbelt will spend $60+ billion on fossil fuels for electricity generation, transportation and heat through 2030, about 8 times the cost of the transition.

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The problem is finding the funding to finance the transition. The debt capacity of Railbelt utilities is $1.0-to-$2.5 billion, some $4.5-to-$6.5 billion less than is needed.

Any of three options might bridge the financial gap and are being pursued:
(1) Cut capital costs by cutting installed capacity goals.
(2) Up the utilities’ debt capacity with a stronger economic base and better finance terms (loan guarantees, lower interest rates).
(3) State, federal or other grants and outside subsidies.

Specific actions to meet the goal of improving Energy Efficiency 20% by 2020:
(1) Ongoing public education and outreach,
(2) Ongoing residential electrical efficiency program,
(3) Develop an energy audit program for commercial and public buildings,
(4) Develop an energy audit program for small industrial facilities,
(5) Ongoing Village Energy Efficiency Program providing assistance and retrofits to rural villages, towns and small cities,
(6) Create a loan guarantee fund to drive private sector investment in Energy Efficiency retrofits,
(7) Create a database and baseline data for residential and commercial electricity and heating energy and track progress toward stated goals,
(8) Support retrofitting of public buildings with performance contracting, etc., and
(9) Develop and test cold climate Energy Efficiency innovation.

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Specific actions to meet the goal of getting 50% of power from New Energy by 2025:
(1) Ongoing Alaska Renewable Energy Fund,
(2) Expand the Alaska Energy Authority Power Project Loan Fund providing low-interest loans for New Energy projects,
(3) Consider a New Energy production tax credit (PTC),
(4) Create an Emerging Energy Technology Grant Fund for nearly ready technologies,
(5) Create a Railbelt electric corporation that could plan, finance and deploy New Energy and Energy Efficiency infrastructure, and
(6) An Integrated Resource Plan (IRP) for Southeast Alaska to identify the most cost-effective generation and transmission options.

The report calls on Alaska's leadership to address global climate change with New Energy and Energy Efficiency while simultaneously cutting fossil fuel dependence, moving to more stable energy prices and seizing the economic opportunities of the New Energy economy.

Specific actions to make Alaskan energy more secure:
(1) Expand New Energy capacity,
(2) Expand Energy Efficiency,
(3) Make Old Energy sources more environmentally responsible,
(4) Create incentives for oil and gas exploration and to maintain the Trans-Alaska Pipeline,
(5) Expand transmission where it is financially feasible, and
(6) Support in-state food production.

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Specific strategies for energy-related economic development:
(1) Support Alaskan energy, food, technology, and labor with more domestic New Energy and Energy Efficiency,
(2) Build Alaskan energy production and delivery infrastructure in a slow, methodical, cost-effective manner,
(4) Use Alaskan resources in the most cost-effective manner, and
(5) Leverage Alaska’s wealth to stimulate economic development.

Specific actions to drive innovation:
(1) Support an Alaskan Emerging Technologies Grant Fund to bring technologies
with near-term potential to market,
(2) Support University of Alaska energy RD&D,
(3) Create an information-sharing mechanism for energy RD&D, and
(4) Collect and maintain energy resource data and make it available to researchers and developers.

Specific actions for education and workforce development:
(1) Expand statewide Energy Efficiency education,
(2) Take New Energy and Energy Efficiency to all levels of education (K-12, tech training programs, university and college, and continuing adult education),
(3) Catalogue existing job training and education programs and close gaps in technical training, engineering, managerial, education, and community leadership.

Regarding Alaska’s fossil fuel resources (90% of present revenues):
(1) Increase the natural gas supply to South-Central Alaska,
(2) Fulfill the state law requiring a large-diameter natural gas pipeline,
(3) Design and permit a small-diameter natural gas pipeline, and
(4) Develop heavy oil and other technologies for the Trans-Alaska Pipeline System (TAPS) and maintain the line.

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QUOTES
- From the Fairbanks Daily News-Miner editorial: “The report deserves consideration from Alaska’s policymakers in the coming months. The ideas in it might not all prove acceptable or adequate to meet the ambitious goals laid out in the report, but the benefits of reducing our dependence upon an expensive and ultimately finite supply of crude oil makes them worth a close look.”

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- From the Alaska Energy Authority report: “Alaska is a large state. The disparity between energy costs in various regions is enormous, far higher than that seen in any other U.S. state and approaching levels more commonly seen in the Third World. When this fact is put in context with our patchwork of isolated grids and general lack of infrastructure, Alaska is clearly in a unique position, in that energy policy successfully enacted in other places may not apply to our state. In our dispersed population and limited infrastructure, we represent Second and Third World countries, but in our energy use we are rivaled by no one in the developed world. Our situation is unique, and as such the solutions
we seek must be unique, as well.”

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- From the Alaska Energy Authority report: “This Pathway does not present a single solution, but rather presents a roadmap which, if followed, can result in a partial solution. Alternative energy is not an easy solution. It is not a cheap solution. But where practicable, it is a sustainable solution. The purpose of this report is to empower Alaskans at the community and regional levels to participate in finding the solutions that are right for themselves and their neighbors, and provide them with the tools to make smart choices about the direction their community heads. Energy is a larger issue than the cost of electricity or heating oil; it is intricately tied to Alaska’s various economies, and
those economies are tied to the social health of a community and the state. This document sets the framework for local action and develops an overall state strategy. It will be up to all Alaskans to work toward implementing these actions…”