Five Almost-Practical Policies Five Almost-Practical Policies to address High Energy Costs to address High Energy Costs

in Remote Alaskain Remote Alaska

SWAMC ConferenceFebruary 2006

Steve ColtUAA Institute of Social and Economic Research

steve_colt@uaa.alaska.edu

5

18.5

0

5

10

15

20

25

30

dollars p

er m

illion B

tu

Anchorage gas @

$5/ Mcf

Remote place diesel @

$2.50 gal

The Problem:The Problem:High energy High energy COSTCOST = High energy = High energy

PRICEPRICE

However,However,

Price is Not CostPrice is Not Cost• Very easy to reduce the price of

things in remote Alaska– rolled-in pricing (First-class mail)rolled-in pricing (First-class mail)– subsidized services (bypass mail)subsidized services (bypass mail)– cost-shifting (Bill the School District!)cost-shifting (Bill the School District!)

• Much harder to reduce the cost – the overall resources used to provide energy when, where, how people need it

Physics Reminder:Physics Reminder: Energy is converted from one Energy is converted from one

form to anotherform to another

• Electricity is an energy “currency,” not a primary energy source

• Hydrogen is an energy currency too!• Example: Your Toaster

Solar energySolar energy plants plantsNatural Natural GasGasElectricityElectricityHeatHeat

(toast + low-grade heat)(toast + low-grade heat)

Primary Energy Input per Alaskan

-

10

20

30

40

50

60

Alaska GasNetwork

PCEplaces

Other

Bar

rels

of O

il p

er Y

ear

Wood and all other

Other petroleum

Gasoline

Diesel

Hydro

Coal

Natural Gas

Primary energy consumption per Primary energy consumption per AlaskanAlaskan

barrels oil per person per yearbarrels oil per person per year

How we use it: about 900 How we use it: about 900 gallons/person/yeargallons/person/year

electricity 278

gal/person

community heat 105

small engine 163

large engine 78

home space/wtr heat 270

almost practical Policy #1:almost practical Policy #1:Reduce the Energy BillReduce the Energy Bill

Practical because:• Alaska is overwhelmingly a Seller

of Energy.• Overall, We are in GREAT FISCAL

SHAPE when oil prices rise.

Arrows not to Exact Scale!Arrows not to Exact Scale!

-1,000

0

1,000

2,000

3,000

4,000

5,000

trillio

n btu

net consump

elec losses

product import

product export

crude export

re-injected

used f or xtraction

gross extraction

Overall Disposition of EnergyOverall Disposition of Energy

Oil and gas processing462 trillion btu

gasoline10%

distillate7%

jet fuel35%

ammonia & urea11%

LNG16%other

product13%

used up8%

Oil & gas processing (462 Oil & gas processing (462 trillion trillion

btubtu))

-1,000

0

1,000

2,000

3,000

4,000

5,000

trillio

n btu

net consump

elec losses

product import

product export

crude export

re-injected

used f or xtraction

gross extraction

-1,000

0

1,000

2,000

3,000

4,000

5,000

trillio

n btu

net consump

elec losses

product import

product export

crude export

re-injected

used f or xtraction

gross extraction

Exports (2,140 Exports (2,140 trillion btutrillion btu))

Exports: total 2,140

Liquid Natural Gas,

Ammonia, and Urea

4%

Crude Oil89%

Coal1%Motor

Gasoline1%

Jet Fuel5%

Jet fuel exports are to foreign flights

Reduce the Energy Bill:Reduce the Energy Bill: Details Details

• Fully fund PCE, with sliding funding when diesel prices are high

• Community energy assistance tied to rising and falling oil prices

almost practical policy #2:almost practical policy #2:Make PCE a Lump-Sum PaymentMake PCE a Lump-Sum Payment

Practical because:• Relatively easy to create a fair

formula using existing data and program delivery channels

• Might also REDUCE program admin costs

Make PCE Lump-sum:Make PCE Lump-sum:DetailsDetails

• Reward utilities for efficiency improvements

• Reward entrepreneurs for new technologies

• Reward consumers for being frugal– Preserve the Price Signal!Preserve the Price Signal!

almost practical policy #3:almost practical policy #3:Pre-Fund Energy Costs as part of a Pre-Fund Energy Costs as part of a

Capital ProjectCapital Project

Practical because:• We spend a lot of money on the

“capital” budget• It’s a proven, prudent way to build

sustainable infrastructure– Most private universities require thisMost private universities require this

Pre-Fund Energy Costs as Part of a Pre-Fund Energy Costs as Part of a Capital Project:Capital Project:

DetailsDetails

• Include an energy (and maintenance?) endowment in all appropriations

• Maintain endowments in escrow;• Make payments partly as lump-sum

amounts to encourage efficient facility design

almost practical Policy #3A:almost practical Policy #3A:Include Life-Cycle Energy Costs in Include Life-Cycle Energy Costs in

Evaluation of the “Low Bid”Evaluation of the “Low Bid”

Practical because:• Communities could do on their own• Rewards designers for efficient

design rather than penalizing them for higher capital costs

almost practical Policy #4:almost practical Policy #4:Focus Focus StateState capital $$ on capital $$ on Energy-Energy-SavingSaving infrastructure, Away from infrastructure, Away from

Energy-Using InfrastructureEnergy-Using Infrastructure

Practical because:• You save the most $$ with up-front

efficient design• It’s a proven, prudent way to build

sustainable infrastructure– Most private universities require thisMost private universities require this

almost practical policy #5:almost practical policy #5:Focus Focus StateState R&D dollars on R&D dollars on

AdaptationAdaptation of Emerging of Emerging TechnologiesTechnologies

Practical because:• Feds and private sector are

conducting major efforts• Alaska is a unique market niche

with harsh conditions

Focus on Adaptation:Focus on Adaptation: Details Details

• Continue support for wind technology, focus on shared O&M

• Pilot projects:– Direct Hydrogen combustion in vehiclesDirect Hydrogen combustion in vehicles– Small-scale coal gasificationSmall-scale coal gasification– Coal-bed methaneCoal-bed methane– Biodiesel utilizationBiodiesel utilization

Changing Mix of U.S.Changing Mix of U.S. Primary Energy Sources Primary Energy Sources

Steve_Colt@uaa.alaska.eduSteve_Colt@uaa.alaska.eduwww.iser.uaa.alaska.eduwww.iser.uaa.alaska.edu

• Other references:• Alaska Electric Power Statistics (with Alaska Energy Balance)

1960-2001 by Scott Goldsmith, November 2003. http://www.iser.uaa.alaska.edu/Publications/akelectricpowerfinal.pdf