NREL is a national laboratory of the U.S. Department of Energy, Office of Energy
Efficiency & Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.
Contract No. DE-AC36-08GO28308
Renewable Energy in Alaska
WH Pacific, Inc.
Anchorage, Alaska
NREL Technical Monitor:
Brian Hirsch
Subcontract Report
NREL/SR
-7A40-47176
March 2013
NREL is a national laboratory of the U.S. Department of Energy, Office of Energy
Efficiency & Renewable Energy, operated by the Alliance for Sustainable
Energy, LLC.
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Contract No. DE-AC36-08GO28308
Renewable Energy in Alaska
WH Pacific, Inc.
Anchorage, Alaska
NREL Technical Monitor: Brian Hirsch
Prepared under Subcontract No. AEU-9-99278-01
Subcontract Report
NREL/SR
-7A40-47176
March 2013
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1
1. Executive Summary − Opportunities for Renewable Energy Resources
in Alaska
Alaska’s abundant renewable energy (RE) resources can be
leveraged into an export opportunity by building upon the
foundation of experienced human institutions and vast natural
resources, creating a unique opportunity for RE technology
deployment and development and new enterprise creation.
Alaska has a complex layer of human institutions, including
indigenous cultures and tribal communities, non-profit non-
governmental organizations, sophisticated regional native
corporations, and other private sector enterprises operating within the
context of local, regional, state, and federal government agencies.
Not unlike much of the developing world, many of Alaska’s rural
communities lack running water and sewer systems, and have
only replaced kerosene lamps with electric lights made practical
by diesel-fired generators over the last forty years.
As a resource-rich state, Alaska continues to enjoy a vigorous
democratic debate over the balance between pursuing
development opportunities and protecting local cultures and
unique environments.
Alaska has been a leader in successfully balancing resource
preservation and development, and preserving a portion of the state’s resource base while
developing targeted high-yield opportunities. This approach has enabled the distribution of
resource income to Alaska residents, while investing in future sustainability through pursuit of
RE projects. Alaska’s resource wealth has also attracted a vibrant oil and gas industry; the
resulting technology deployments are implemented locally and the resources exported
throughout the world.
Alaska’s RE resources exist in a complex natural and socio-economic environment. Alaska’s RE
resources must be accessed within vast challenging environments with severe seasonal
transportation obstacles associated with limited road access. Alaska has a long tradition of
supporting its remote rural areas with lifeline support for essential services, including
telecommunications, fuel, and electricity. Alaska is managing the transition toward reduced
support as circumstances allow. Many of Alaska’s RE resources can be developed by the
indigenous villages and communities to reduce their dependence on fossil fuels and fossil fuel
subsidies, and help sustain Alaska Native communities.
Alaska is uniquely endowed with a full range of RE opportunities, including extensive and
diverse biomass; hydropower that ranges from run-of–river and low-impact high-head to
traditional massive dams; wind energy that ranges from micro, wind-hybrid turbines in small
So, we have a choice to make.
We can remain one of the
world’s leading importers of
foreign oil, or we can make
investments that would allow us
to become the world’s leading
exporter of renewable energy.
We can let the jobs of tomorrow
be created abroad, or we can
create those jobs right here in
America and lay the foundation
for lasting prosperity.
–President Obama,
March 19, 2009
2
coastal villages to large wind farms; world class tides; and huge geothermal potential on the
northern edge of the Pacific rim of fire.
Finally, Alaska’s strategic location, well positioned between Europe, Asia and North America,
has enabled the Anchorage airport to become the busiest airfreight hub in the United States, and
provides RE and commodity export industries with a strategic advantage.
For all of these reasons, Alaska presents a unique opportunity to develop practical, exportable RE
solutions for a wide range of circumstances that have been tested by a challenging physical
environment under a complex institutional backdrop. Alaska presents a unique, competitive
advantage and opportunity to build and staff a RE development and commercialization cluster to
support developing regions of the 21
st
century.
3
2. Introduction
2.1 Scope
Under the leadership of Brian Hirsch with the Alaska office of the National Renewable Energy
Laboratory, (NREL), WHPacific, and Mark Foster and Associates (MAFA) was retained to
conduct an analysis of the potential for energy efficiency and renewable energy (EE/RE)
development opportunities in Alaska. The information found herein is derived under sub-
contract agreement #AEU-9-99278-01 from the Alliance for Sustainable Energy, LLC
Management and Operations contractor for NREL. The team was lead by Brian Hirsch, PhD.,
Alaskan office of NREL.
This report examines the opportunities, challenges, and costs associated with EE/RE
implementation in Alaska and provides strategies that position Alaska’s accumulating
knowledge in EE/RE development for export to the rapidly growing energy/electric markets of
the developing world.
Modeling estimates EE/RE opportunities across Alaska’s many regions including: the Railbelt
(Fairbanks-MatSu-Anchorage-Kenai-Homer-Seward), Southeast, Southwest, Western,
Northwest, North Slope, and the remote rural Interior.
Increasing the market adoption of EE will require improved customer education, EE program
promotion to improve EE technology diffusion, and changes in pricing policies so prices more
closely reflect the full cost. Many fossil fuel energy sources remain significantly under-priced
relative to their future cost, especially at peak. This “false security” pricing of energy presents
particular concerns for natural gas supply in the Cook Inlet where peak winter demand has begun
to challenge the local peak supply.
Increasing the market adoption of RE will require: 1) expansion of the transmission infrastructure; 2)
expansion of technical and market opportunities for converting remote stranded RE resources into
fuels that can be used locally and exported to larger markets; and 3) clarification of schedule and
scope to reduce the uncertainty associated with renewable resource permitting.
This report presents the results of an analysis of three energy price scenarios to test the
sensitivity of the market to both short term and long term trends in fossil fuel energy prices. The
report is not intended to offer a risk adjusted forecast of future energy prices, but rather to
provide an illustration of the economic attractiveness of EE/RE in relation to future energy price
expectations.
2.2 Contributors
Report contributors include: Mark A. Foster, Brian Yanity, Barry Holt, and Jay Hermanson.
Brian Hirsch provided guidance and programmatic perspective on the scope of work.
Key references include: EIA AEO 2009 and EIA AEO Technical Documentation, IEA World
Energy Outlook 2008; EIA, EPA, and CRA estimates of future C02 emissions costs (May-
August, 2009); AEA EE/RE reports and databases, UAA ISER Energy Reports, Energy Alaska
by Neil Davis, ANGDA Natural Gas Development Reports, Lake and Peninsula Borough Energy
Plan (2008).
4
2.3 Assumptions and Method
To establish a technical and economic foundation for the report, Mark A. Foster and Associates
(MAFA) analyzed the economic potential for energy efficiency and RE opportunities across
Alaska and developed cost supply curves for the energy efficiency and RE opportunities. Similar
projections for conventional generation technologies were developed based on MAFA data and
experience with fossil fuel energy sources and power plant design, construction, and operational
performance.
The boundaries between market adoption of energy efficiency, RE and fossil fuel energy sources
were identified and analyzed in order to estimate the future market potential for energy
efficiency and renewables. The data analysis and market model runs for this report were
concluded in August 2009. The data and information in this report are based on publicly market
reconnaissance data available through August 2009.
The Energy Information Administration Annual Energy Outlook 2009, reference high and low
and the International Energy Agency World Energy Outlook 2008 reference case were used as
baselines for future energy prices. These baselines were then adjusted to take into account
differences between national/international markets and Alaska markets consistent with the
methodology that has been used by the Alaska Energy Authority.
1
Carbon emissions cost projections from Charles River Associates, EPA and EIA analysis of HR
2454 were added to the fossil fuel cost estimates to establish a range of fossil fuel energy costs.
At the time this report was written (August 2009), the Renewable Energy Fund projects were in
their beginning stages and the AHFC weatherization/energy grants program was entering its
second year with thousands of households poised to receive their first energy audit for baseline
energy consumption. In addition, the AEA had initiated a study of natural gas supply issues,
electrical generation and transmission system resource options for the Railbelt region. This study
identified electrical generation scenarios designed to reach 50% renewable penetration by 2020
and natural gas supply options to meet a large assumed increase in gas market demand.
1
See for example, Colt, Crimp. Foster “Renewable Energy Opportunities in Alaska” (2008).
5
3. Alaska Energy Market Overview
3.1. The Alaska Market Overview
Alaska sits at the apex of the Pacific Rim and remains actively involved in developing
international trade opportunities. The International Airport in Anchorage has been the busiest
airport in the United States by total landed weight for at least a decade. Alaskan foreign trade
ranks 4th among states on a per capita basis. Alaska ranks 8th among states when measuring
foreign exports as a percentage of gross state product.
2
Alaska hosts a large number of private,
and public-private partnerships, and public organizations dedicated to supporting international
trade.
3
Building upon these foundations, an effort to develop renewable technologies and
implementation expertise in challenging developing world conditions presents a unique
opportunity for those interested in promoting the development and export of clean technology
expertise around the Pacific Rim.
Because of the relatively small size of energy markets in Alaska, Alaskan enterprises have
frequently developed energy technology in and for Alaska, and then exported the technology and
business models to other markets. Examples include the development and export of 4-D seismic,
directional drilling and long-reach heavy-capacity drilling rigs in the oil and gas sector, as well as
Alaska Power Company’s exportation of its hydropower project development expertise to small-
scale (<50 MW) high-head (>300 m) low-impact Clean Development Mechanism projects in
Central America (Guatemala, El Salvador). In short, Alaskan enterprises, ranging from large
multi-national oil and gas industries to locally grown power companies, have found Alaska to be
an excellent proving ground for technology and project development teams, and have successfully
exported their expertise. When considering Alaska’s EE and RE opportunities, is useful to note
that the addressable market has proven to be international, not just domestic in scope.
As a leading petroleum producing state, Alaska’s total energy use is dominated by oil and gas
production and export related activities. This sector also presents a large EE opportunity with
spillover effects down market in adjacent industrial and commercial sectors.
4
Alaska’s wealth of renewable resources, including large undeveloped hydropower, biomass,
geothermal, tidal, and wind opportunities presents development opportunities to serve export
industries (oil and gas, mining, Internet Pacific network hub, fertilizer), local industrial, commercial,
and residential markets.
2
It is important to note that the vast majority of Alaska’s crude oil is dedicated to domestic, not international markets, and domestic trade is not counted in the
rankings cited.
3
Organizations supporting the development of international trade include World Trade Center Alaska, Alaska Industrial Development and Export Authority,
and the Alaska Office of Economic Development.
4
A prominent example of the down-market spillover effect from the oil and gas industry in Alaska is the development of local Internet enterprises in the 1990s.
A number of entrepreneurial efforts, originating with information and communications technology employees and subcontractors serving the oil and gas sector
in Alaska, blossomed into successful enterprises, including Internet Alaska, a pioneering Internet access company that led efforts to deploy Internet services
around the state.
6
Figure 1: Alaska’s Energy Future: Incremental Efficiency and Renewable Energy
3.2. Findings – Energy Efficiency and RE Opportunities in Alaska
Figure 1 represents the estimated incremental contribution of end-use efficiency and RE development
associated with investment by public and private enterprises beyond historic market adoption trends.
Contributions have been relatively modest, with the notable exception of the reconfiguration of the
Trans-Alaska Pipeline System (TAPS) to more efficiently accommodate lower throughput.
Industrial export sectors in Alaska (including oil and gas and mining) have an estimated 40,000 billion
Btu of additional potential efficiency gains through 2030, or roughly a 10% energy efficiency gain
over the next 20 years. These gains are anticipated based on a renewed emphasis on addressing aging
infrastructure systems, as well as capacity reconfigurations and expansions associated with new
developments. The sheer size of the industrial export sector is illustrated by noting that a 10%
efficiency improvement in this sector amounts to roughly half of the incremental total energy
efficiency/RE opportunity in Alaska (see Figure 1 above).
End-use efficiency improvements in building heat and electrical use include the recently expanded
Alaska Housing Finance Corporation (AHFC) weatherization and energy grant programs, along with
emerging electric sector initiatives (e.g., Alaska Energy Authority/AEO, Golden Valley Electric,
Chugach Electric, and Anchorage Municipal Light & Power). Benefits start to accrue in 2010, with a
20% efficiency improvement anticipated over the next 20 years.
Combined heat and power (CHP) and distributed generation (DG) include utility gas-fired
cogeneration in commercial/institutional sectors (e.g., University of Alaska Anchorage/Providence
Hospital district in Anchorage, large office buildings and schools across the state). With rising fossil
fuel prices (including natural gas and diesel), CHP/DG opportunities appear increasingly competitive
over the next ten years.
In the event of the development of Alaska North Slope natural gas, this gas appears likely to displace
coal-fired electricity in the Interior (Aurora, UAF, Ft. Wainwright, Eielson AFB).
7
Run-of-river, low impact, and lake-tap hydropower and wind power are expected to continue to grow
throughout the state; as diesel and natural gas energy prices increase, carbon emissions costs become
internalized, and environmental permitting processes for renewables become more streamlined.
Geothermal energy from Mt. Spurr and along the Aleutians could provide a competitive energy
alternative as fossil fuel prices increase, assuming that it can be found in and around existing demand
centers. This energy source is expected to make a noticeable contribution by 2020.
Biomass appears to be a competitive heating option in locations with a sustainable fuel supply.
Biomass for CHP appears competitive in communities that currently rely on diesel fuel.
Tidal energy resources remain an intriguing possibility given Alaska’s world-class tides. Our analysis
assumed the development of small-scale demonstration projects showing the technology development
and export potential.
The analysis does not include any longer term potential market opportunities associated with
developing Alaska’s large renewable resources for export markets (e.g., large hydropower for
energy intensive export industries, or for the development of “stranded” renewables like wind
and geothermal along the Aleutians that could be used to produce renewable fuels such as
hydrogen or ammonia for export).
5
5
An overview of those opportunities is presented in Section 6 of this report.
8
3.3. EE/RE Opportunities in Alaska – Regional Overview
Within Alaska, there are several distinct regions where energy challenges reflect the underlying
geography, climate, geotechnical, transportation and logistical characteristics of each area. The
following map attempts to capture the regional diversity of RE projects. The map reflects the
estimated cost of energy from a panel of RE projects, including wind, hydro, geothermal, and
biomass; projects are scaled by size and color coded by the relative cost of energy.
Figure 2: Economics of RE Projects in Alaska (MAFA Analysis, 2009)
3.3.1. North Slope
Alaska’s North Slope faces severe arctic climate conditions and remote logistical challenges. The area
includes major oil and gas industrial development complexes at Prudhoe Bay, Kuparak, and out into
the National Petroleum Reserve in the West. Barrow, the area’s regional hub, sits on top of a very
slowly declining natural gas field which some speculate may reflect the presence of methane hydrates.
The most prominent renewable opportunity in this area appears to be wind energy; this resource could
be used to supplement local diesel and gas fired electrical generation, while providing high-value heat
using dump- load energy.
3.3.2. Northwest
Facing extreme climate conditions and remote logistical challenges, Alaska’s Northwestern Region,
anchored by Nome and Kotzebue, currently relies heavily on diesel fuel oil imported by ocean barge.
The coastal and upland communities near hills have started to develop wind resources. Additional
9
wind development would likely reduce local dependence on increasingly expensive fossil fuels. A
few hydropower opportunities have been identified that would easily surpass local needs; however,
local support of these opportunities remains questionable due to the risk of disturbing rivers that
provide vital fish and game habitat to support local subsistence needs. Hydropower opportunities face
the additional challenge of highly seasonal hydrology.
6
3.3.3. Western
Western Alaska’s climate and remote logistics are slightly less challenging than those of the
Arctic/Northwest. The region’s historic abundance of fish and game has contributed to a high number
of small indigenous villages on the coast and along the rivers with a regional hub in Bethel on the
Kuskokwim River. The coastal winds and upland hills provide significant opportunities for wind to
supplement local diesel generation and to provide high-value dump-load energy. As in the Northwest,
a few hydropower opportunities have been identified that would easily surpass local needs; however,
local support of these opportunities remains questionable due to the risk of disturbing rivers that
provide vital fish and game habitat to support local subsistence needs. Hydropower opportunities face
the additional challenge of highly seasonal hydrology.
7
3.3.4. Southwest
Southwestern Alaska’s remote logistics and climate are slightly less challenging than those of
Western Alaska. Again, wind development to supplement local diesel generation presents a
number of opportunities along the coast and out along the Aleutian chain. While the cost of wind
development in many remote rural coastal communities may appear high in absolute terms,
exceeding 40c/kWh, the wind energy is frequently less expensive than the diesel it displaces,
which may approach 80c/kWh. A few hydropower opportunities have been identified that would
surpass local needs. These opportunities would face scale considerations and challenges
associated with local support due to potential disruption of rivers that provide vital fish and game
habitat that support local subsistence needs. Additionally, hydropower opportunities face the
challenge of seasonal hydrology.
8
With slightly less
challenging seasonal hydrology, a few small hydropower
resources have been developed in Southwest Alaska to meet
local needs and supplement the summer fishing export industry.
The Southwest region potentially includes considerable
geothermal resources, suggested by the presence of locally
active volcanoes and confirmed in part by temperature logs
from oil and gas exploration drilling. A production-capable
drill rig has been mobilized in the region to explore and develop
geothermal resources.
3.3.5. Kodiak
Kodiak Electric Association (KEA) installed three 1.5-MW GE SLE wind turbines in August 2009 for
roughly $3000/kW at its Pillar Mountain site.
9
The new wind power complements the nearby 22.5-
6
Just as many developing countries face high seasonal rain, the rivers in the Northwest have highly seasonal stream flow associated with the rain and freeze/thaw
cycles.
7
Ibid.
8
Ibid.
9
For the Pillar Mountain Wind Project (3X1.5-MW), KEA was the recipient of a $1 million grant from the State of Alaska and was also successful in receiving a
second Clean Renewable Energy Bond (CREB) loan for $5 million from the IRS. The CREB funds give KEA a near zero interest loan for the project. A total of
$12 million in CREB funds are allocated for this project.
While the cost of wind development
in many remote rural coastal
communities may appear high in
absolute terms, exceeding 40c/kWh,
the wind energy is frequently less
expensive than the diesel it
displaces, which may approach
80c/kWh.
10
MW Terror Lake Hydroelectric Project. KEA’s recently acquired ownership of Terror Lake for
$1700/kW from the Four Dam Pool Joint Action Agency.
10
3.3.6. Yukon River into the Interior
Dozens of remote rural villages reside along the Yukon River, a 2,300 mile river with a drainage area
25% larger than the state of Texas. Approximately one-third of the Yukon’s drainage area falls within
Canada and two-thirds falls within Alaska. Far upriver in Canada, the Whitehorse Rapids
Hydropower facility is the only permanent hydroelectric dam on the Yukon with a capacity of 40 MW
summer/25 MW winter. Downstream along the Alaska portion of the Yukon and its tributaries,
renewable opportunities include: 1) local biomass, predominantly located on South facing slopes; 2)
upland wind; and 3) in-stream hydro. While many of the renewable sites on the recon map are costly,
these sites appear to offer RE that is less expensive than imported diesel fuel oil.
3.3.7. Railbelt
Roughly 500,000 people reside among the Railbelt region, which includes Fairbanks, Mat-Su,
Anchorage, and the Kenai Peninsula. Many Railbelt communities utilize locally distributed
generation resources that are linked by government-subsidized electric transmission facilities,
providing shared access to a wide variety of electric generation resources, including naphtha, heavy
atmospheric gas oil (HAGO), and coal-fired generation around Fairbanks in the North to hydropower
and natural gas generation around Anchorage down to the Bradley Lake hydropower project (126
MW) across from Homer. The region also includes four (4) military bases, mining, refineries, and
other oil and gas related industrial developments.
Current prospects for RE include: 1) wind resources, most notably in the mountain-funnel geographic
area around the Cook Inlet and in the Alaska Range; 2) local biomass for heat; 3) Mt. Spurr
geothermal; and 4) tidal, and run of river, lake tap and various hydropower dam projects ranging from
high head/small footprint in the mountains to large downstream dam sites.
3.3.8. Interior Roads
Several communities adjacent to the Railbelt rely primarily on imported diesel fuel as their primary
energy source. These communities are connected by roads (improving logistical access), but not
interconnected by electrical transmission facilities. Rising diesel fuel costs have caused a shift toward
biomass for heating. Biomass for CHP systems appears competitive along with small hydropower.
3.3.9. Southeast
The early gold rush of 1898 was followed by larger gold mining operations after the turn of the 19
th
century. These ventures were eventually supplied with power by hydroelectric facilities that took
advantage of local high-head hydropower with natural seasonal storage features. Many fishing and
timber communities expanded during the decades of low-cost diesel fuel oil. As diesel fuel oil prices
spiked over the past 30 years, both the State of Alaska and private sector interests have re-invested in
hydropower ranging in size from 500 kW up to 20 MW. Investigations continue into the possibility of
exporting SE hydropower via to-be-constructed transmission facilities into British Columbia.
11
Local
biomass and upland wind resources appear as competitive renewable opportunities in areas that are
10
Terror Lake was originally constructed by the State of Alaska for over $230 million in 1985, or $20,895 per kW (2009$).
11
For an excellent discussion of the SE Hydroelectric export opportunity, see Brian Yanity, “Transmitting Development Strategies”, International Water Power
and Dam Construction, August 2009. Available at www.waterpowermagazine.com
.
11
beyond the reach of affordable transmission facilities, tying local demand centers to regional
hydropower developments.
3.4. EE/RE Opportunities in Alaska – The Challenges of “Stranded Resources”
In addition to numerous undeveloped RE resource opportunities that are adjacent to existing
communities, Alaska may have large RE resources that, by virtue of not being adjacent to a large rich
market opportunity or appearing to be unproven or expensive relative to fossil fuel alternatives, are not
on the high profile list of commercial development opportunities of the renewable industry in the
near term.
Nonetheless, these RE resources hold significant promise for future energy developments to serve
growing local markets along with local development of export industries. These large, currently
“stranded” renewable resources present significant opportunity:
The next five years −
As local innovations and learning-by-doing reduce costs and increase the competitive frontier
of renewables;
As roads and electrical transmission facilities are extended into areas with RE resources.
The next 15 years, as local research and commercial development continues to push the
cost/performance frontier for renewables and renewable electricity/storage and renewable fuel
technologies.
Technologies to help develop Alaska’s vast stranded renewables potential include wind, tidal,
geothermal and hydropower combined with renewable fuels production, switching from fossil fuel to
electric transportation systems supported by renewables, and energy storage systems that enable
higher utilization rates of renewable resources.
Alaska is well positioned to develop applied research in support of pushing the commercial frontiers
to enable development of stranded renewables based on key research collaborations between National
Energy Labs and State of Alaska and University of Alaska institutions. Two prominent collaborations
include:
Alaska Center for Energy and Power/Sandia National Laboratories/National Renewable Energy
Laboratory;
Alaska Energy Authority/National Renewable Energy Laboratory.
3.5. Alaska Energy Historic Backdrop
It is not unusual for the unit cost of developed energy resources in Alaska to be on the order of two to
ten times the cost of similar resources in the Continental U.S.
The relatively high cost of energy resource development in Alaska has led to a variety of local and
regional adaptations of fossil fuels and renewables, depending upon local resources and the extent to
which the market demand being addressed is local or export. There is a long history of hydroelectric
development in Southeast Alaska - from the small projects that supported gold mining in Juneau and
Skagway shortly after the turn of the century, continuing up to the present day completion of the
12
Kasidaya hydroelectric project outside Skagway to support local tourism. In addition to wood and
coal burning for general space heating, biomass in the form of wood boilers for heating and electricity
was used in the early mining developments in Fairbanks and in McCarthy/Kennicott
12
. Natural gas
was used for heating and electricity in South-central Alaska after the discovery of oil and gas in the
Cook Inlet in the 1950s that led to a refinery and LNG export facility. Coal and oil became prominent
in the Interior after World War II to meet the needs of the Department of Defense, the university, local
markets, and export opportunities. Where local hydropower and biomass were not readily available
and natural gas was not adjacent to the local market, liquid fossil fuels (gasoline, diesel, AV gas, jet
fuel) were commonly used in large resource development projects during and following World War
II. These resources became more locally affordable after the development of relatively small-scale
local refineries – the Nikiski refinery, which followed Cook Inlet oil discoveries in the 1950s, and the
North Pole and Valdez refineries associated with the TAPS in 1977.
During the early 1980s, the State of Alaska’s oil revenue surplus enabled a rapid expansion of state
funded energy programs including the Alaska Housing Finance Corporation’s energy
efficiency/weatherization programs, the Four Dam Pool, Railbelt electric transmission interties,
Bradley Lake Hydroelectric Project and the Power Cost Equalization (PCE) program for rural,
predominately diesel-fired electrical generation.
Even with the PCE subsidy program, which is primarily designed as a lifeline program, the average
residential customer in rural Alaska only uses around 400 kWh/month – reflecting the confluence of
low incomes and high energy prices resulting in a high “natural rate” of energy conservation.
Most recently, during the fossil fuel energy-price spike in the summer of 2008, the State of Alaska
Administration and Legislature moved quickly to address high energy prices and the desire to
accelerate the transition toward clean RE with:
Approximately $750 million “resource rebate” to residents in the form of a supplement to the
Permanent Fund Dividend in the fall of 2008,
$360 million to residential weatherization and energy efficiency programs,
$100 million for the RE grant fund (+another $25 million in 2009)
13
,
$60 million in supplemental loan support for fuel purchases, and
$1.8 million in supplemental payments to the PCE endowment and program.
As fossil fuel energy prices and capital construction costs have moderated into 2009, many Alaskans
have been asking, what is the future potential for EE/RE to help avoid fossil fuel price shocks and
higher prices? How can we advance EE/RE opportunities in Alaska? Where should we focus our
attention to help develop EE/RE opportunities? How should we monitor and evaluate EE/RE
programs in Alaska in order to package local adaptation expertise for export to the developing word?
12
See Neil Davis, Energy Alaska (1984)
13
Please note that Alaska’s Renewable Energy Fund is the largest state-funded renewable energy effort in the United States, $125 million in two years, which, on
a per capita basis, is equivalent to a $55 billion Renewable Energy Stimulus Fund in the United States Even in these challenging economic times, the State of
Alaska continues to be supportive of additional spending on critical transmission infrastructure and smart grid demonstration projects to reduce the barriers for
renewable energy development. The State of Alaska recently appropriated $25 million for transmission infrastructure for wind power development and is
reviewing how to leverage another $49 million in energy fund grants in the upcoming legislative session. If the State follows through and invests $49 million in
smart grid and efficient electrical transmission infrastructure, it would be the equivalent to a $21.7 billion investment in the United States on a per capita basis.
13
3
Fortunately, not unlike Norway, Alaska is blessed with abundant resources and has saved a significant
portion of its fossil fuel-generated wealth in the form of financial reserves, and appears poised to
continue to use its financial reserves to invest in the next generation of clean energy opportunities. A
number of energy related bills have been introduced in the Alaska Legislature to support further
investment in energy efficiency and renewable energy.
3.6. Alaska Historic Energy Consumption
Over the past 50 years, the total energy consumption in Alaska has grown by a factor of 15 with two
dominant expansions: 1) the development of oil resources on Alaska’s North Slope; and 2) the sales
of jet fuel associated with the development of the Anchorage Airport as the leading international cargo
hub in the United States.
Prior to the development of the oil and gas industry, export industries and the federal government
were the primary developers of renewables, including biomass and hydropower for mining, and
federal hydropower projects.
During the 1980s, the state invested surplus revenue from oil and gas resources in a number of
hydropower projects.
In the 2004-2007 period, as fossil fuel prices rose around the world, a portion of those increases were
felt in Alaska.
Figure 3: Alaska Total Energy Consumption by Source.
A prominent industrial use of natural gas, the Agrium Nikiski fertilizer plant, phased down and
eventually shut down in 2007. The phase down of the Agrium fertilizer plant, with a natural gas
demand of approximately 40-50 billion cubic feet (Bcf)/year (40,000 to 50,000 billion Btu per year),
or roughly 15% of the total consumption of natural gas across Alaska, including field operations, is a
prominent contributor to the decline in natural gas and total energy consumption in the historic record.
Figure __: Alaska Total Energy Consumption by Source
Source: EIA Historic Energy Consumption, Alaska, Table 7
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Billion BTUs per year
Biomass
Hydro
Other Petro
Resid
Motor Gasoline
Lubricants
LPG
Kerosene
Jet Fuel
DFO
Av Gas
Asphalt Road Oil
Natural Gas
Coal
14
Figure 4
Subsequent events which have also contributed to a reduction in total energy use include:
• The Phillips LNG export facility has been reducing exports to allow limited Cook Inlet supply of
gas to be diverted to gas for local heating and electrical generation;
• Flint Hills refinery periodically shuts down one out of three process trains over the past 12 months;
• BP has announced the closure of its Gas-to-Liquids industrial facility on the Kenai Peninsula,
reducing natural gas and electrical demand on the Kenai Peninsula.
On the RE front, the Alaska Energy Authority, Alaska Village Electrical Cooperative, TDX, and
AP&T, among others, have been developing wind and hydropower opportunities. AP&T completed
Kasidaya hydroelectric project (approx. 3 MW near Skagway) in late fall of 2008.
3.7. Alaska Energy Consumption by Market Segment
3.7.1 Residential
Diesel fuel oil remains a significant source of heating fuel for Alaska. The discovery of natural gas in
the Cook Inlet allowed Anchorage and surrounding communities to convert to gas-fired generation as
the transmission and distribution system expanded to meet the growing demand.
As households increased in number and size, electric consumption has increased, magnifying energy
losses associated with electrical generation. Most electricity is generated from an energy conversion
Alaska Residential Energy Consumption by Source
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Billion BTUs
Electric System Losses
Retail Electricity
Wood
LPG
Kerosene
DFO
Natural Gas
Coal
15
process that converts roughly a third of the primary energy to electricity − the remaining two-thirds is
“wasted” as heat. Combined heat and power plants may capture another 20%+ of the heat to offset
heating requirements. Modern fossil fueled turbines in combined cycle may increase system
efficiencies to the high 50% - low 60% range. After that, the local power plant typically uses a few
percent for “station use.” An additional 8-10% of the energy is lost in the transmission and distribution
lines due to inefficient transfer of electrons.
Over the past 20 years, residential energy consumption on an MMBtu per square foot basis has
declined.
14
Alaska’s residential heating and transportation fuel consumption is relatively high due to the state’s
long and extreme winters, dispersed populations, and remote distances. In addition, the high energy
costs and relatively low income of rural areas results in lower end-use energy consumption per
household than in urban Alaska. See Figure 5 below.
14
MAFA Presentation to the Railbelt Integrated Resource Plan Technical Conference, July 2009.
Figure xx: Median Household End-Use Energy Consumption
Source: MAFA Analysis 2009
0
50
100
150
200
250
300
350
Rural AK Urban AK
MMBtu/year
Transport
Electric
Heat
Figure 5:
16
The electrical use per capita in rural Alaska is under 2000 kWh/year, placing it closer to the profile of
a recently developing country. As a result of its relatively new exposure to electricity and its remote
rural character, rural Alaska is well positioned to share lessons learned with other developing regions
that appear poised to climb the development ladder through rapid expansion of electrical energy,
especially with the rapid diffusion of information and communications technology (see Figure 6).
Figure 1: Residential Electric Consumptions per capita, by region
Source: EIA IEO 2009, MAFA 2009
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Canada
United States
Australia/New Zealand
Japan
OECD Europe
Russia
South Korea
Rural Alaska
Middle East
Other Euro/Eurasia
Mexico
Brazil
China
Other Central and
South America
Other Non-OECD Asia
India
Africa
EIA IEO Region
kWh/year per capita (2030 Projection)
Rural Alaska is well situated to act as a bridge between the developed and
developing world on the transition to renewables - based on its strategic
location on the energy development ladder and accumulated experience
building bridges among indigineous populations and complext institutions
under challenging circumstances
Figure 6:
17
3.7.2 Commercial
Aggregate commercial energy use tends to follow economic growth. Economic growth has been
predominantly driven by oil and gas development and held aloft by federal government spending
across the 1990s when oil prices were relatively low.
Again, as the commercial sector grew, electrical use increased along with the associated energy loses
from electrical generation. Over the past 20 years, commercial energy consumption on an MMBtu-
per-square-foot basis has increased, driven in part by the proliferation of computer and associated
telecommunications technology.
15
Electric system losses, as noted earlier in the residential market overview, reflect the total energy
efficiency of historic electric energy production, where roughly one-third of the fossil fuel energy is
converted to electricity and roughly two-thirds is converted to heat (much of which is not
recoverable).
15
MAFA Analysis of Railbelt End-Use Energy Consumption, prepared for Railbelt Integrated Resource Plan Technical Conference, July 2009.
Figure 7
Alaska Commercial Energy Consumption by Source
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Billion BTUs
Electricity System Losses
Retail Electricity Sales
Geothermal
Resid
Motor Gasoline
LPG
DFO
Natural Gas
Coal
18
3.7.3 Industrial
Industrial energy consumption is primarily driven by gas reinjection to support enhanced oil recovery
and, up until 2007, the Unocal/Agrium Nikiski fertilizer plant, discussed previously.
All things being equal, with the closure of the Unocal/Agrium Nikiski fertilizer plant, natural gas used
for fertilizer production is expected to decrease on the order of 50,000 billion Btu per year.
Depending upon how quickly the use of natural gas is converted from use to enhance oil recovery to
commercial export opportunities, either as a heating fuel, fuel for electrical generation, or as liquefied
natural gas feedstock, its use seems likely to continue whether in domestic or export markets.
The big opportunity in the industrial sector, including both oil and gas and mining, is the replacement
of aging energy infrastructure with efficient modern equipment as old fields are reworked and new
throughput capacity is developed to meet new market opportunities (e.g., transportation of natural gas
to non-local markets).
Figure 8
Alaska Industrial Energy Consumption by Source
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Billion Btus
Electricity System Loses
Retail Electricity Sales
Biomass
Hydro
Other
Resid
Motor Gasoline
Lubricants
LPG
Kerosene
DFO
Asphalt Road Oil
Natural Gas
Coal
19
3.7.4 Transportation
Historically, transportation fuel consumption is dominated by jet fuel to serve two U.S. Air Force
bases and the expansion of the Anchorage International Airport into the busiest cargo airport in the
United States.
With the recent national and international economic downturn, jet fuel consumption has declined.
Going forward, the transportation sectors in Alaska are likely candidates for increased efficiency, as
transportation equipment (e.g., trains, planes, boats, automobiles, and off-road recreational vehicles)
continues to evolve. Due to its relative distance from markets, goods and services in Alaska tend to
have a higher proportion of their cost associated with transportation. As energy costs escalate, the
relative burden of transportation requires efficiency adjustments to stay competitive.
Given the relative magnitude of the fishing industry in Alaska, the conversion of the existing fleet of
boats and ships to more efficient designs will likely be necessary for the industry to stay competitive
in larger domestic and international markets.
Finally, despite some concerns with the performance of hybrid vehicles at low ambient temperatures,
we expect efficient land transportation vehicles to become more prevalent in Alaska. High fossil fuel
prices may lead to the exploration of new alternatives for fleet vehicles, including hybrids and other
renewable fuels.
Figure 9
Alaska Transportation Energy Consumption by Source
0
50,000
100,000
150,000
200,000
250,000
300,000
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Billion BTUs
Fuel Ethanol
Resid
Motor Gasoline
Lubricants
LPG
Jet Fuel
DFO
Av Gas
Natural Gas
Coal
20
3.7.5 Energy for Electrical Production
Cook Inlet natural gas dominates the historic picture due to its proximity to the population centers in South-
central Alaska and the associated military bases and industrial developments on the Kenai Peninsula,
including the Tesoro refinery and Unocal/Agrium fertilizer plant. The construction of the Alaska Intertie
connecting Anchorage and Fairbanks has allowed the export of Cook Inlet gas-fired electrical generation to
Fairbanks. This exportation enabled additional growth in natural gas for electrical consumption as industrial
mining loads expanded in Fairbanks, drawing upon the less costly gas-fired electricity.
In addition, Fort Richardson converted from generating its own power to purchasing power from
Municipal Light and Power in 2007, resulting in a jump in natural gas consumption for electrical
production.
The Bradley Lake Hydroelectric Project (126 MW) and Four Dam Pool Projects (Tyee Lake,
Solomon Gulch, Swan Lake, Terror Lake, total of 74 MW) were commissioned in 1980s and 1990s,
and are the major contributors to the growth in the dark blue top line.
In addition, a number of smaller hydroelectric projects constructed in the 1980s and 1990s (including
Black Bear, Goat Lake, Power Creek, and Tazimina for a total of 15.3 MW) have also contributed to
the growth in hydroelectric output.
The increase in hydroelectric production has reduced the need for natural gas and diesel fuel oil used
in electric production.
Alaska Electric Energy Consumption by Source
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Billion BTUs
Imports
Wind
Solar PV
Geothermal
Biomass
Hydro
Naphtha
DFO
Resid
Natural Gas
Coal
Figure 10
21
More recently, peak winter gas consumption in the Cook Inlet associated with heating and gas for
electrical generation has exceeded available peak supplies; the LNG export facility has curtailed
natural gas consumption in deference to the high-priority local heat and electric winter demand. Peak
pricing of gas supply and associated efforts to make more efficient use of gas and electricity are under
way in the winter of 2009.
3.8. Lessons Learned
3.8.1 Alaska is a Tough Incubator
Alaska’s energy needs and resources are spread across a vast and diverse landscape with limited road
access, severe seasonal transportation and logistical challenges, and a high cost to deploy imported
energy solutions.
Vigorous competition and cooperation between and among local, state, and federal government
agencies, village, and regional native corporations and enterprises, non-profit and for-profit enterprises
has produced a rich mix of practical skills on how to navigate complex institutional settings.
In addition, the dramatic seasonality of the climate and of many resource development activities is
matched by a highly migratory population with the attendant challenges of attracting and retaining a
skilled workforce each season – not unlike the sharp seasonality associated with activities and logistics
around the rainy season in developing countries in addition to the more obvious analogues with the
extreme arctic/sub-arctic and mountainous regions of the world.
The accumulation of practical experience in a frontier environment makes Alaska an ideal location to
continue to develop new RE enterprises.
3.8.2 Alaska as Innovation Hub to Develop Renewable Export Opportunities
3.8.2.1 Alaska’s Challenges are Challenges of the Developing World
Going forward, one of the biggest challenges facing the worldwide development of RE is how to
effectively develop technologies that will work under the severe stress of the developing world.
As many commentators have repeatedly noted, success in the developing world is not just a
matter of dropping United States, European or Australian technology into a developing
community. Locally appropriate adaptations and local institutional support are absolutely critical
for success.
16
While Alaska has its own litany of stories of ineffective adaptations, it also has a growing list of
success stories of energy projects, institutions, and narrowly targeted subsidies that have
transformed energy markets leading toward higher efficiency and higher penetration of
renewables under rather challenging remote conditions. Alaska’s history and accumulated
experience with EE and RE provide a rich foundation upon which to build practical, robust
energy solutions for many emerging economies in the developing world.
Alaskan enterprises have already begun to share their RE expertise around the world, including
hydroelectric development in Central America and RE and information and telecommunications
16
See for example Building Institutions for Markets, World Development Report 2002, World Bank and Stephen A. Marglin, “Development as Poison:
Rethinking the Western Model of Modernity”, Harvard International Review, Spring 2003.
22
technology integrations in India and Ghana.
17
Technical, institutional, and economic knowledge
in RE/EE present both import and export opportunities. In the summer of 2009, an Alaska
electric utility owned and operated by a former Peace Corps volunteer imported slow-speed
electric generators from China to integrate into an Alaska fish wheel system designed to provide
supplemental summer/fall refrigeration for fish and game harvest seasons. If the fish wheel
system integration is successful, it may be suitable for export to regions where subsistence
activities are prevalent around rivers and streams. The integration of simple, robust, electrical
production systems with on-going subsistence activities provide reliable electrical production to
support valuable health interventions for remote rural communities, such as water, sanitation,
and refrigeration of medical supplies.
3.8.2.2 Alaska has Broad Experience in Enterprise Development
Alaska is a developing state with a high density of business development enterprises devoted to
creating new business and export opportunities.
18
Over the past 40 years, Alaska’s leading public/private partnership development bank, Alaska
Industrial Development and Export Authority (AIDEA), has issued roughly $2 billion
(>$2900/capita) in loans and conduit revenue bonds.
19
In addition, AIDEA, in recognition of the
strategic value of energy and industrial and export development, has been closely associated with
AEA, a public/private partnership organization.
3.8.2.3 Alaska as International Transportation Hub
Anchorage’s airport is the busiest airport in the United States as measured by freight tonnage.
Anchorage presents a unique international hub opportunity for RE enterprises that are looking to
build a bridge from North America across the Pacific Rim and over the pole to Europe.
3.8.3 Alaska as Showcase for the Transition from Fossil Fuels to Renewables
3.8.3.1 World Class Oil and Gas Development
Alaska’s oil industry has a long track record of development that demonstrates sensitivity and
respect for Native culture, tradition, and a subsistence lifestyle, along with local employment
needs.
Alaska hosts some of the leading oil and gas companies in the world, including Exxon, BP,
Conoco-Phillips − these corporations have built considerable expertise in new technology
development and project management in challenging frontier environments. These advances
present opportunities for cross-fertilization with RE projects, especially as both fossil fuel and
RE industries head offshore in search of new resources.
17
Alaska Power and Telephone’s subsidiary, Hydrowest International, continues to develop low impact hydroelectric projects in Central America. The ATandT
Industrial Ecology foundation nominated Alaskan subject matter experts to serve on the United Nations Committee on Renewable Energy and
Telecommunications Technology to help identify policies to enhance the deployment of both in developing countries.
18
Among others, Alaska InvestNET, Alaska Federation of Natives Alaska Marketplace, Anchorage Economic Development Council, TriBorough Commission,
Alaska Department of Commerce, Alaska Department of Commerce and Economic Development, USDA, Rural Development), and the Alaska Small Business
Development Center
19
See http://www.aidea.org/
23
3.8.3.2 Saving and Reinvesting Fossil Fuel Wealth in Future Generations
Alaska is a world leader in investing financial gains from fossil fuel resource development for
future generations - the Alaska Permanent Fund, with a market capitalization of $30 billion
($43,700/per capita)
20
in June 30, 2009, which is expected to pay a dividend to all Alaska
residents on the order of $1305. From 1982 through 2009, the accumulated total per resident
dividend will be over $30,000.
3.8.3.3. Building the Bridge to Clean Energy
Alaska continues to lead the United States in state-level investments in energy efficiency and
renewable energy, having recently invested a portion of its surplus from the recent oil price spike
in 2008 as follows:
21
$360 million for weatherization and residential building envelope improvements;
$125 million for a RE project fund. Matching funding has been encumbered for projects that
include wind power, geothermal, biomass, combined heat and power, and hydro. The total RE
project value associated with the RE matching funds is estimated at $1.25 billion for an aggregate
average project value to match ratio of 10:1.
Committees of the Alaska Legislature are working on a state energy policy that emphasizes
energy efficiency and RE along with an Emerging Energy Technology Grant Program.
3.8.3.4 Federal Agency Presence and Department of Defense
The Denali Commission is releasing up to $4 million towards alternative and emerging RE
technology and demonstration projects. The Emerging Energy Technology Grant (EETG) seeks
to develop emerging alternative and RE technology that has the potential of widespread
deployment in Alaska, and that has the potential to reduce energy costs for Alaskans. Alaska’s
large federal agency presence enables the rapid development of several energy efficiency and
renewable enterprises as federal agencies such as the Department of Defense mobilize efforts to
reduce their greenhouse gas footprint as a result of high-level directives to lead by example.
20
The Alaska Permanent Fund is roughly half the size of Norway’s Sovereign-Wealth Fund on a per capita basis.
21
On a per capita basis, the total of $485 million is roughly five times as large as the total 2009 Recovery Act investments directed through the U.S. Department
of Energy, and 12 times as large as the 2009 Recovery Act DOE EE/RE allocation.
PAGE 24
4. Fossil Fuel Energy Price Projections
4.1. Introduction
This section describes the basis of the future energy price projections used to illustrate the market
potential of energy efficiency and RE in Alaska.
4.2. Fossil Fuels Price Projections
4.2.1 Natural Gas Price Projection – The natural gas price projections range from $8 per
MMBtu (2009$, EIA Low) to $17 per MMBtu (2009$, IEA Reference) in 2030.
4.2.2 Crude Oil – The crude oil price projections range from $50 per barrel (EIA Low,
2009$) to $200 per barrel (EIA High, 2009$) in 2030.
Figure __: Natural Gas Price Projection - CONUS (2009$ / mmbtu)
Sources: EIA AEO 09 Reference, Low, High; IEA WEO 08
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
2056
2058
2060
2009 $ / mmbtu
Base
High
Low
IEA Reference
11
25
4.2.3 Carbon dioxide emissions cost estimates range from $30 per
carbon dioxide
eq
tonne (EPA,
Waxman-Markey Reference Case, 2009$) to $65 per carbon dioxide
eq
tonne (EIA, Waxman-Markey
Reference Case, 2009$) in 2030.
22
22
The presentation of the EIA projection ends at 2030 in part as a reminder of the advice offered by the Congressional Research Service review of
carbon dioxide emissions cost projections – anything projected out beyond the 20-year time horizon is so highly speculative that it may not be
anything more than illustrative.
Figure __: CONUS Crude Oil Import Price (2009$ / bbl)
Sources: EIA AEO 09 Reference, Low, High; IEA WEO 08
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
2056
2058
2060
2009$ / bbl
Base
High
Low
IEA Reference
Figure ___: US CO2 Emissions Cost Projections (2009 $ / tonne)
Sources: EPA (July 2009), CRA (May 2009), EIA (August 2009)
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
2042
2044
2046
2048
2050
2052
2054
2056
2058
2060
2009$ / tonne
EPA WM Est
CRA WM Est
EIA Basic
12
13
26
4.3 Fossil Fuel Price Projections In Alaska
4.3.1 Natural Gas Wellhead
Historically, Alaska has been blessed with a low wellhead price for natural gas compared to
other gas producing states.
Going forward, the wellhead price for natural gas in Alaska will substantially depend upon the
extent to which Alaska can export its large natural gas and additional resources. The
successful development of natural gas exports on the order of 4 billion cubic feet (bcf)/day
should enable Alaska’s wellhead price of natural gas to remain below most North American
wellhead price ratios (in the Alaska to Colorado range of 0.7 to 0.9 of U.S. average – see
figure above) which appear likely to be dominated by shale gas at the margin.
For the purpose of this long-run analysis, we have assumed that Alaska is able to develop and
export significant natural gas resources. To the extent that Alaska is unable to develop a large
natural gas export opportunity, the wellhead price is likely to increase toward the marginal
forward looking cost to develop gas for smaller scale markets. Under this scenario, it seems
likely that the wellhead price will exceed the price ratios of other gas producing states due to
small relative scale (upper blue arrow in the figure above).
Please note that difference in the future gas market price projections by EIA and IEA, roughly
$10/MMBtu and $17/MMBtu respectively in 2030, suggest considerable uncertainty over the
future price of natural gas. This turn presents considerable uncertainty with respect to the
Figure __: Natural Gas Wellhead Price => State:U.S. Ratios
Source: EIA Natural Gas Wellhead Price Annual Data (2009)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Alaska
Colorado
Texas
Wyoming
5 per. Mov. Avg. (Alaska)
5 per. Mov. Avg. (Colorado)
Alaska
Colorado
?
?
14
27
economic attractiveness of many EE and RE alternatives. At the lower price projection,
several energy efficiency and renewable opportunities from the hydropower, wind, and
geothermal sectors appear commercially viable. Additional energy EE/RE market penetration
is highly dependent on learning curve improvements in the technology development and
integration and the project team experience. Conversely, at the high price projection, a wide
range of energy efficiency and RE projects are very competitive with fossil fuels; existing
commercial technologies could be expected to displace fossil fuels with only modest reliance
on experienced project teams. In short, high prices allow otherwise less competitive projects
to attract capital and teams to build them. Please see the supply curves developed below for
quantitative information on the long-run cost of renewables.
4.3.2 Natural Gas Residential Heating
Historically, the residential price for natural gas in those areas adjacent to natural gas resources
has tracked the wellhead price plus transmission, distribution, and taxes.
Over the study horizon, we assumed that residential prices will continue to track the wellhead
price and the overall average Alaska wellhead price will be set largely as a netback from large-
scale export markets. This is expected to result in an a favorable residential gas price relative
to other gas producing states whose future prices appear likely to be set by shale gas and LNG
imports at the margin.
Figure __: Natural Gas Residential Price = State:U.S. Ratio
Source: EIA Natural Gas Price Residential Annual Data (2009)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Alaska
Colorado
Texas
Wyoming
15
28
4.3.3 Diesel Fuel Oil
Historically, Alaska’s residential price for home heating oil (No. 2 distillate or an “arctic
blend” of No. 1/No. 2 for arctic winter conditions) has tended to track the U.S. price since the
opening of the refinery complex in North Pole, currently owned by Flint Hills.
Assuming the successful development of Alaska North Slope natural gas resources, there will
likely be additional adjacent development in oil exploration yielding additional oil for
transport down the TAPS and feedstock for the in-state refineries.
It is important to note that older small-scale in-state refineries may struggle to compete with
imported diesel fuel, especially in light of the Waxman-Markey Climate Change legislation
which appears to levy a high emissions cost on U.S. refineries, putting the in-state refinery at a
competitive disadvantage relative to diesel imports from the Pacific Rim.
23
Given the
relatively small incremental diesel fuel supply requirements in Alaska compared to other
markets on the Pacific Rim, this uncertainty may result in higher diesel fuel prices in the
Alaska market compared to historic trends. If these risks materialize, energy efficiency and
RE should experience additional growth.
23
See Oil and Gas Journal, “Study lists House clean air bill's possible refining impacts,” September 7, 2009.
Figure __: Alaska to U.S. Price Ratios - No. 2 Distillate (a.k.a. diesel fuel oil)
Source: EIA Annual No. 2 Distillate Fuel Oil Prices (2009)
0
0.5
1
1.5
2
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Alaska:U.S. Price Ratio
Retail Sales
Residential Price
Commercial Price
Industrial Price
5 per. Mov. Avg. (Residential Price)
5 per. Mov. Avg. (Industrial Price)
5 per. Mov. Avg. (Commercial Price)
Recent Moving Average:
Residential = 1.00
Industrial = 1.16
Commercial = 1.23
16
PAGE 29
5. Energy Efficiency Opportunities
5.1 Historic Trends
In rural Alaska, high energy prices have created considerable incentive for energy efficiency
and conservation in the heating and electrical demand for buildings, industrial processes, and
transportation end-use markets. Nonetheless, due to limited technical and marketing
expertise, substantial opportunities for energy efficiency remain.
24
In urban Alaska, moderate energy prices have provided the backdrop for residential energy
efficiency programs (e.g., Alaska Housing Finance Corporation), resulting in energy
efficiency savings for new construction and a weatherization program for existing housing.
The net effect has been an increase in residential heating efficiency over the past 25 years.
Commercial markets, without financial, technical, and marketing support, may be lagging
behind the United States in the development of energy service companies. Large institutions
have recently begun to procure energy efficiency resources.
25
5.2 Current Developments
The Legislature appropriated a total of $360 million ($525/capita) for residential
weatherization and energy grant programs in 2008, and the program is well underway,
reporting on the order of $130 million plus in encumbered funds in September 2009.
26
Nascent Railbelt electric utility end-use initiatives, led by Golden Valley Electric Association
GVEA, have recently expanded. Chugach Electric and Anchorage Municipal Light and
Power (ML&P) recently re-invigorated a lighting program and ML&P has designated
$250,000 for end-use efficiency/conservation to match other funds in 2010.
27
Railbelt electric
utilities have begun to include smart meter demonstration projects in their capital
improvement program.
28
The Alaska Energy Authority’s rural village electric efficiency program expects to continue its
school lighting and other upgrades as it works its way around over 200 rural communities.
29
The Alaska Legislature has promoted efforts to capture Alaska’s share of energy efficiency
related stimulus funds in the summer of 2009.
24
The weatherization, energy grant, and village efficiency programs continue to find large untapped potential.
25
State of Alaska Department of Transportation is contracting for energy efficiency services in its facilities.
26
Personal conversation with Scott Waterman, AHFC
27
This represents roughly $4.20 per capita in the ML&P service territory, which, when combined with existing end-use efficiency/conservation
program expenditures, places it near the national average, roughly $5.40 per capita, reported in The State Energy Efficiency Scorecard for 2006,
Eldridge, Prindle, York and Nadel, June 2007, Report No. E075, ACEEE, Figure A.1, p. 63.
28
Chugach and ML&P, 2010 Budgets.
29
See http://www.aidea.org/AEA/programsalternativeenduse.html for more detail.
30
5.3 Future Opportunities
5.3.1 Electric Peak Demand
A recent analysis from the Federal Energy Regulatory Commission (FERC) suggests that
Alaska could bend the curve of electrical peak demand if it fully participated in the
opportunities presented with demand side and distributed resources which include improved
peak pricing, interruptible rates, smart metering and associated enabling technology.
Figure 17: Alaska System Peak Demand Forecasts by Scenario
• Source: FERC National Demand Side/Distributed Resource Assessment, 2009
Given the heightened level of concern over the availability of adequate natural gas in the Cook
Inlet at winter peak demand, efforts are underway to help manage winter peak demand,
including improving peak pricing so that it more closely resembles the future cost to acquire
peak resources, energy efficiency/conservation initiatives, and a public information campaign
to encourage conservation at peak.
5.3.2 Electric Energy
Similar to the demand reduction estimate in the FERC National Demand Side/Distributed
Resource Assessment (2009), Alaska consultants have estimated that an invigorated pursuit of
end-use efficiency and conservation efforts can bend the curve of electric energy demand in
Alaska at a level comparable to the Electric Power Research Institute’s estimate of “realistic
savings” of 22% by 2030 (EPRI, January 2009) if market structure, pricing, enabling
technology, and subject matter experts are organized around demand side services. As
illustrated in the figure below, an estimated 21% reduction in Railbelt region’s energy
requirements through 2030 may result from an aggressive restructuring of the market to
emphasize forward-looking peak pricing and technical support for initiatives to transform the
market and increase the demand for energy efficiency.
Alaska System Peak Demand Forecasts by Scenario
1,300
1,350
1,400
1,450
1,500
1,550
1,600
1,650
1,700
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Peak Demand (MW)
System Peak
(without DR)
BAU
Expanded BAU
Achievable
Participation
Full Participation
31
While Alaska does not have the summer peak shaving potential of continental U.S. air
conditioning demand, the region does experience high winter peaks with coincident winter
peaks associated with lighting and refrigeration inside well-heated buildings. A combination
of more efficient lighting, refrigeration, and water heating (including fuel switching) presents
a number of promising areas to reduce electrical demand both at peak and year round.
Figure 18: Projected Railbelt Electrical Energy Requirements (GWh)
Source: MAFA Analysis of Railbelt EE Opportunities (2009)
Projected Railbelt Electrical Energy Requirements (GWh)
0
1000
2000
3000
4000
5000
6000
7000
8000
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
GWh/year
BAU Conservation Achievable Potential
PAGE 32
6. Renewable Energy Opportunities
6.1 Introduction
As energy prices peaked in the summer of 2008, the Alaska State Legislature appropriated
$100 million for Renewable Energy Projects in 2008 and another $25 million in 2009. As a
result, project development work is underway on over $1.2 billion in RE projects across
Alaska.
30
Further commercial development of projects receiving funding under the Renewable Energy
Fund and other renewable opportunities around the state will depend upon the ability of
project developers to raise sufficient funds and organize project development teams to
successfully execute the projects.
RE resource supply curves were developed to estimate potential renewables, based on
levelized cost estimates of electricity (LCOE) for various renewable technologies in different
regions of the state.
Wind, hydropower, biomass and geothermal supply curves illustrate the local Alaska potential
for each basic technology, while highlighting the sensitivity of the supply curves to price.
Many of the supply curves represent a few lower cost, easily exploited resources, followed by
higher cost large-scale opportunities or smaller costly resources. Please note the basic shape
of the supply curves resemble a supply curve developed recently for a hydropower evaluation
study in British Columbia.
6.2 Future Opportunities
6.2.1 Wind – Rural
In rural Alaska, diesel fuel based electrical generation ranges in price from $0.20/kWh on up
toward $1.00/kWh in remote rural villages where fuel has to be flown in. As a result, the
“cost umbrella” presented by diesel in rural Alaska creates opportunities for many small- scale
renewable project deployments that might not be competitive in larger markets where the
fossil fuel alternatives may appear to cluster down around $0.10 per kWh.
In those communities where wind appears likely to yield a net economic benefit relative to
diesel (benefit/cost >1.0), we’ve estimated the wind supply curve for rural Alaska (PCE
communities) in Figure 19 below.
30
See http://www.aidea.org/AEA/RE_Fund.html for detail.
33
19
19
6.2.2 Wind – Railbelt
Within the Cook Inlet and Alaska Range, mountain funnels create high wind zones with Class
3 and above winds with capacity factors of 0.30 and above. The ports, rail, and road system
that serve the Railbelt region enable total project cost on 24 to 50-MW scale wind projects to
be estimated at around $3000 to 3400/kW (2009$), including an allowance for transmission
and interconnection facilities to connect to the transmission grid. Preliminary wind integration
studies have pointed toward the use of hydropower facilities as the most appropriate balancing
resource for wind. Unfortunately, the largest modern hydropower facility with robust control
is Bradley Lake, located at the southern end of the transmission system which may require
additional balancing resources to make optimal use of the wind while maintaining robust
voltage support across the network. Fire Island and Eva Creek wind projects are included on
Figure 2, the Alaska map of competitive RE projects.
In addition, renewable resource potential maps for the Railbelt region have identified a
renewable cluster that includes wind on the west side of Cook Inlet, Mt. Spurr geothermal, and
Chakachamna hydropower. High level analyses suggests this cluster may present a
competitive package of renewables that takes advantage of the relatively close proximity of
the cluster to the existing Beluga Power Plant, thereby reducing the total cost of transmission
infrastructure required for any one project. In addition, the close proximity of the wind,
hydropower, and geothermal resources to each other may reduce the total cost of integration of
the intermittent wind resource into the grid.
6.2.3 Hydropower – Analysis of AEA Alaska Hydropower Project Database
The Alaska Energy Authority hydroelectric reference database was combed to develop a
list of roughly 1000 mutually exclusive projects where cost estimates or actual
Figure __: Supply Curve for Rural Alaska Wind Energy - estimated bus-bar energy costs
Source: MAFA Wind Model of PCE Communities, Updated to 2009
$0.000
$0.100
$0.200
$0.300
$0.400
$0.500
$0.600
$0.700
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Cumulative Quantity Available for Local Use (kW)
Levelized Cost of Electricity ($/kWh)
34
information was either in the database or readily available. The cost information was
then adjusted to a common 2009 basis using U.S. Corps of Engineers cost escalation
factors for hydroelectric projects. Using a small sample of roughly a dozen projects
completed since 1980, estimated costs were compared to actual costs of completed
projects (where available and discovered). The analysis revealed a systematic bias of
underestimates on larger public projects and overestimates on smaller private projects.
To avoid the apparent bias in the project cost estimates − many dating back to the 1970s
and 1980s − the cost estimates were adjusted to reflect the historic pattern of
underestimating large projects and over-estimating small projects.
31
The results of the hydropower screening study are presented below by region. In communities
where hydroelectric development appears within the range to yield a net benefit relative to
fossil fuels within the 50-year study period, a hydropower supply curve is provided.
Notably, the general pattern reveals a few very large hydropower projects with modest
capital cost, measured on a $/kW basis, followed by a variety of medium to small
projects with increasing capital cost typically associated with projects that are 1) farther
away from demand centers which require additional transmission facilities to
interconnect; and 2) farther “upstream” in both the river/hydrology sense and in logistical
challenges to develop the project.
It is also useful to note that there are a number of smaller projects, typically high head, low-
impact sites of under 5 MW, that are relatively close to an existing substation (e.g.,
hydropower around Girdwood and in Southeast, whose unit costs are relatively modest
compared to larger dam projects) that show up as low cost in the Southeast and South-central
regional supply curve presentations.
Few small projects with long-term levelized cost of electricity appear to be down around
$30/MWh. We appreciate the skepticism expressed by a reviewer of the draft report about
this low-cost hydropower. Verification revealed that estimates appear reasonable based on the
particulars of the sites, which typically include previous civil engineering work from an earlier
era to provide access to the site and enhance the storage volumes available, effectively
reducing the overall need for civil engineering work and increasing annual flow volumes and
capacity factors available on relatively high head projects. In short, there appear to be a few
cost effective opportunities for redevelopment of previously developed sites across the
Southern mountainous regions of the state typically associated with the mining and fishing
industries from earlier in the 20th century.
On the opposite end of the cost curve, the screened project list includes small projects that
appear to be around $300-400/MWh. These projects are included in the presentation because
many of the small remote projects are competitive with other basic local options − such as
remote off-grid diesel-fired generation.
31
Analysis of hydropower cost estimates vs. actuals available upon request.
35
Figure 20: Yukon River Region Hydroelectric Supply Curve
Figure 21: Southwest Alaska Hydropower Supply Curve
Yukon River Region Hydro Supply Curve - $/MWh vs. Cumulative Capacity (MW)
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
0.0 1,000.0 2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 7,000.0 8,000.0
Capacity (MW)
Levelized Cost (2009$/MWh)
Rampart ($55/MWh)
Woodchopper ($125/MWh)
Crooked Creek - Circle Hot Springs ($84/MWh)
Gerstle - Tanana River ($257/MWh)
Southwest Alaska Hydro Supply Curve - $/MWh vs. Cumulative Capacity (MW)
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
$1,400.00
$1,600.00
0.00 100.00 200.00 300.00 400.00 500.00 600.00 700.00 800.00
Cum. Capacity (MW)
Levelized Cost $/MWh (2009$)
36
Figure 22: Southeast Alaska Hydropower Supply Curve
Figure 23: South-central Alaska Hydropower Supply Curve
SE Alaska Hydro Supply Curve - $/MWh vs. Cumulative Capacity (MW)
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
0.00 200.00 400.00 600.00 800.00 1000.00 1200.00
Cumulative Capacity
$/MWh (2009$)
Southcentral Hydro Supply Curve - $/MWh vs. Cumulative Capacity (MW)
$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$450.00
0.00 500.00 1000.00 1500.00 2000.00 2500.00 3000.00 3500.00
Cumulative Capacity (MW)
Levelized $/MWh (2009$)
37
6.2.4 Biomass
The cost/performance data in the Crimp Biomass database was updated and calibrated against
steam engine 2009 vendor quotes. It was assumed that biomass electrical generation plants would
be used in combined heat and power applications where, in aggregate, 50% of the “waste” heat
would be used to offset fossil-fuel heating, typically diesel fuel oil. The analysis did not include an
independent assessment of biomass gasification technology.
Figure 24: Alaska Biomass Supply Curve
*MAFA Cost/Performance Update of Crimp Biomass Database
38
6.2.5 Geothermal
The cost/performance data outlined in the April 2009 HDL memo to David Lockard, AEA was
updated, illustrating the cost of geothermal developments in Alaska and added current estimates for
fixed and variable operations and maintenance (O&M) costs. Within this analysis, the Chena Hot
Springs project was estimated at $200/MWh (2009$) – roughly at the inflection point in the supply
curve. As with prior supply curves, a few high-cost projects are included; these projects appear
competitive with the basic remote diesel-fired alternative due to their remote location.
Figure 25: Supply Curve for Geothermal Energy in Alaska – Energy Costs including
Connection to Local Alaska Markets
Supply Curve for Geothermal Energy in Alaska - Energy Costs
Including Connection to Local Alaska Markets
$0.00
$100.00
$200.00
$300.00
$400.00
$500.00
$600.00
$700.00
0 50 100 150 200 250
Quantity Available, MW
Levelized Cost of Electricity, $/MWh
(2009$)
Mt. Spurr
Makushin
Naknek
PAGE 39
7. Stranded Renewable Energy Resource Opportunities
7.1 Introduction
In addition to numerous undeveloped RE resource opportunities that are adjacent to existing
communities, Alaska may have large RE resources that, by virtue of not being adjacent to a
large, rich market opportunity or appearing to be unproven or expensive relative to fossil fuel
alternatives, are not on the high profile list of commercial development opportunities of the
renewable industry in the near term.
Nonetheless, these renewable resources hold significant promise for future energy
developments to serve growing local markets along with local development of export
industries. These large, currently “stranded” renewable resources present significant
opportunities:
The next five years −
o As local innovations and learning-by-doing reduce costs and increase the competitive
frontier of renewables (e.g., wind-diesel-dump load integrations, wind-Railbelt grid
integrations, geothermal exploration and development).
o As roads and electrical transmission facilities are extended into areas with RE
resources (e.g., wind-hydro-geothermal cluster around Mt. Spurr/Chakachamna).
The next 15 years as local research and commercial development continues to push the
cost/performance frontier for renewables and renewable electricity/storage and renewable
fuel technologies.
Alaska is well positioned to develop applied research in support of pushing the commercial
frontiers to enable development of stranded renewables based on key research collaborations
between national energy labs and State of Alaska and University of Alaska institutions. Two
prominent collaborations include:
Alaska Center for Energy and Power/Sandia National Laboratories/National Renewable
Energy Laboratory
Alaska Energy Authority/National Renewable Energy Laboratory
7.2 The Big Renewable Stranded Resources – Wind, Geothermal, Tidal, Hydro
7.2.1 Shoreline and Offshore Wind
Not unlike the offshore wind potential of the continental U.S., Alaska has tremendous offshore
wind potential.
32
In the short term, shoreline and near-shore winds present opportunities for
32
See for example NREL high resolutions wind maps of Alaska available at: http://www.akenergyauthority.org/programwindmap.html which
indicate an abundance of class seven wind resources along the vast Alaska coastline.
40
wind power to displace expensive diesel fuel for commercial export (e.g., seafood) and local
village power system. As innovation in diesel-wind-energy storage systems advances,
additional wind power opportunities will become competitive. Some progress has been made
on improving the cost/performance of energy storage systems. Additionally, wind-storage
systems appear likely beneficiaries of research into batteries for electric cars.
33
Potential wind resource opportunities may be unduly constrained by current practices which
require individual project independent assessments of bird migration conflicts and local
environmental and view-shed concerns. Systematic, regional bird migration and mitigation
assessments may be a more efficient and effective way to help wind project development.
7.2.2 Geothermal
Alaska sits on the top of the Pacific Ring of Fire where the North Pacific Plate runs under
Alaska, resulting in an extraordinary geothermal resource potential along the South-
central/South-western volcano range and down along the Aleutian Chain.
34
Due to relatively small local markets, 95% of geothermal projects under public review in
Alaska are under 30 MW in size, while 86% are 10 MW and smaller.
35
A few larger projects have recently received private sector attention. Ormat paid the State of
Alaska $3.5 million for a subsurface lease to develop geothermal resources around Mt. Spurr
near Anchorage. Ormat has estimated the Mt. Spurr project size at 100 MWe.
36
In the short term, the geothermal potential in Alaska appears constrained by a very small
number of experienced geothermal developers, lack of a proven utility-scale development and
associated support services, and a subsurface resource lease regime on State of Alaska land
that includes a 10% State of Alaska royalty on gross revenues derived from the geothermal
resources.
37
The potential geothermal resource opportunity may also be constrained by local
environmental concerns.
38
7.2.3 Tidal
Several of Alaska’s southern coastal regions (e.g., Cook Inlet, Southwest/Aleutians, and
Southeast) contain world-scale tides with daily variation averaging 30 feet and approaching as
much as 40 feet in the Cook Inlet.
The estimated costs to develop these large tidal resources remain highly uncertain; projected
costs range from a yet-to-be-constructed 1-MW pilot project estimate of $6346/kW (EPRI,
33
See for example WHP Report on Energy Storage [Brian Yanity to provide cite]
34
See for example, http://geotherm.inel.gov/maps/ak.pdf
35
See Dilley, HDL, Memo to Lockard, AEA, April 2009. The 100MW Mt. Spurr geothermal project sponsored by Ormat is the exception to the
tendency for Alaska geothermal projects to be small scale, even when they are slated to serve a fish processing energy demand.
36
Ormat applied for, but did not receive, any funding from the State of Alaska Renewable Energy Fund, for assistance with geothermal exploration
around Mt. Spurr.
37
See the summary of the results of the State of Alaska Mt. Spurr Geothermal Lease Sale,
http://www.dog.dnr.state.ak.us/oil/products/publications/geothermal/spurr/sale_docs/final_SaleResultsSummary.pdf
38
We note the presence in the historic public record of concerns by local indigenous populations on the Hawaiian Islands over geothermal
development.
41
2006), an estimated commercial 50 MW development of $2200/kW (EPRI, 2006), to
$1136/kW (Petroleum News, Little Susitna Construction Company, Turnagain Arm Project,
2009).
Ocean Renewable Power Co. has subsequently proposed installing a single tidal-power
turbine-module pilot project in the Cook Inlet in 2010 to test the technology and commercial
potential. The National Marine Fisheries Service (NMFS) sent a letter to the Federal Energy
Regulatory Commission (FERC) questioning the adequacy of proposed environmental studies
for the pilot project based on concerns with the Cook Inlet beluga whale, an endangered
species, and salmon runs.
39
Little Susitna Construction Company filed a preliminary permit application, dated July 28,
2009, with the FERC for the $2.5 billion Turnagain Arm Project – estimated at 2200 MW
($1136/kW) and a 54% capacity factor, which suggests a total cost on the order of
$0.04/kWh.
40
If these tidal power configurations achieve the commercial break-through purported in their
preliminary permit applications with FERC and successfully navigate the permitting process,
they may have the potential to be “game changing” renewable opportunities that substantially
displace fossil fuels, position Alaska as a world leader in tidal power technology, provide
extremely competitive electric rates for the northern Pacific Rim which could significantly
enhance export industry opportunities, and encourage renewable market transformation in
electrification of end-use energy demand and conversion from fossil fuel to renewable fuels
for transportation. In the meantime, the development of these tidal projects appears to remain
in the pre-commercial demonstration project phase.
The local office of NREL has been approached to facilitate a discussion among federal
permitting agencies to explore the potential for streamlining the permit process for tidal energy
projects in the Cook Inlet.
7.2.4 Large Hydroelectric Resources
7.2.4.1 Overview
At first blush, Alaska appears to have a tremendous amount of undeveloped hydroelectric
potential. Some reports suggest Alaska may have as much as 45,000 MW of undeveloped
hydropower potential.
41
However, an analysis of the Idaho National Labs IHRED database (2003) suggests that a
significant portion of the undeveloped hydroelectric potential is not likely to be accessible for
a variety of reasons. See Figure 26.
39
See Petroleum News, 7 June 2009, http://www.petroleumnews.com/pnads/545706866.shtml
40
Assuming 20 years, 5% real discount rate on a reported capital cost of $2.5 billion, and all of estimated output is sold. Assume fixed O&M at
$100/kW/yr. See http://www.petroleumnews.com/pnads/641916781.shtml
for additional information. We note that Blue Energy Canada does
not yet appear to have built a 1-MW pilot project to prove the concept at a moderate scale, let alone scale up to 2200 MW, so the cost/performance
projections remain highly uncertain.
41
US DOE Wind and Hydropower U.S. Hydropower Potential Study (2003).
42
In short, the Idaho National Laboratory’s Alaska Hydropower Assessment suggests that
roughly 1/8th of the hydropower resource identified in their assessment is available for
development; the remaining 7/8ths of the hydropower resource raise concerns related to
National Parks, Preserves, and Refuges, and fish which limit their development potential to
less than a 90% probability of success.
In light of the recent substantial interest in national and international renewable potential, the
tremendous hydropower potential of Alaska may benefit from additional research work to
delineate a “national renewable reserve” from the pool of technically available hydropower
resources.
Figure xx: Alaska Hydropower Resources - Availability of Resource for Development
Source: IHRED - Alaska Hydro Resource Assessment (2003)
13%
62%
25%
Available for Development
Dev't Concerns - Nat'l Parks
Dev't Concerns - Fish
Figure 26
43
Figure 27: Probability of Development of Alaska Hydropower Resources
7.2.4.2 Potential Measures to Improve the Prospects for Hydropower Development
Research into local fisheries, wildlife habitats, and local indigenous uses could help reduce the
uncertainties associated with hydroelectric development by identifying low impact
hydroelectric opportunities; this in turn could reduce development timelines and permit
uncertainty.
42
Research on effective techniques for engaging local indigenous populations and addressing
local, regional, national, and international environmental and habitat concerns could be shared
in international forum for renewable resource advocates. This would allow advocates to share
“lessons learned” on working with local populations to solve the practical challenges
associated with renewable development in developing countries. Prominent Alaskan
examples of local engagement with indigenous populations in the development of RE include
the Yukon River Inter-tribal Watershed Council (YRITWC) – the first ever U.S. application of
hydrokinetic turbines in addition to installations of wind turbines, solar, and energy efficiency
measures in Ruby, Alaska.
42
A similar effort is underway in wind. The Alaska Energy Authority and the U.S. Fish and Wildlife Service have been working to delineate those
regions with minimal potential conflict between bird migration and wind turbines. Email with Martina Dabo, Alaska Energy Authority, Wind
Program Director.
Probability of Development of Alaska Hydro Resources
Source: IHRED Alaska Hydro Resource Database (2003)
296
355
1,792
533
438
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1
MW
90% Dev't Probability
75% Dev't Probability
50% Dev't Probability
25% Dev't Probability
10% Dev't Probability
72% of MW = 50% or less
probability of development
44
One way to distill practical learning in the Alaska renewables development arena is to provide
experienced indigenous culture business-development resources for local entrepreneurs to
compile lessons learned into practical models for export to developing countries.
7.2.5 Potential Break-Through Technologies to Unlock Alaska’s Vast
Renewable Resources that Appear “Stranded” Today
7.2.5.1 Electric Vehicles
43
Hybrid electric vehicles (HEVs) combine the benefits of high fuel economy and low
emissions with the power, range, and convenience of conventional diesel and gasoline fueling.
HEV technologies also have potential to be combined with alternative fuels and fuel cells to
provide additional benefits. Future offerings might also include plug-in hybrid electric
vehicles (PHEVs).
The EIA Annual Energy Outlook 2009 forecast includes:
Concerns about oil supply, fuel prices, and emissions have driven the market penetration of unconventional
vehicles (vehicles that can use alternative fuels, electric motors and advanced electricity storage, advanced
engine controls, or other new technologies). Unconventional vehicle technologies are expected to play a
greater role in meeting the new NHTSA CAFE standards for LDVs (light-duty vehicles). Unconventional
vehicles account for 63 percent of total new LDV sales in 2030 in the AEO2009 reference case.
Hybrid vehicles (including both standard hybrids and PHEVs) represent the largest share of the
unconventional LDV market in 2030 (see figure below), at 63 percent of all new unconventional LDV
sales and 40 percent of all new LDV sales. Micro hybrids, which allow the vehicle’s gasoline engine to turn
off by switching to battery power when the vehicle is idling, have the second-largest share, at 25 percent of
unconventional LDV sales. Turbo diesel direct-injection engines, which can improve fuel economy
significantly, capture a 16-percent share of unconventional LDV sales. The availability of ultra-low-sulfur
diesel and biodiesel fuels, along with advances in emission control technologies that reduce criteria
pollutants, supports the increase in diesel LDV sales.
Currently, manufacturers receive incentives for selling FFVs (flex-fuel vehicles) through fuel economy credits
that count toward CAFE compliance. Although those credits are assumed to be phased out by 2020, FFVs
make up 13 percent of all new LDV sales in 2030 in the reference case, in part because of the increased
availability and lower cost of E85.
43
See for example, http://www.nrel.gov/vehiclesandfuels/hev/ and for the latest news, and also see electric vehicle world at
http://www.evworld.com/index.cfm.
45
Alaska Hybrid and Electric Vehicle Challenges
While the opportunity for hybrid and electric vehicles remains promising at the international
and national level, the remote nature and extreme climate of Alaska may present some
challenges for the development of cost effective hybrids. Battery performance typically
degrades during cold weather and can effectively preclude reliable performance of
conventional automobiles during the extreme winter conditions of the Interior and Northern
regions where winter temperatures are frequently below –20°F and often reach –40°F.
Additional applied research into battery technologies under the extreme climactic conditions
of Alaska’s winters may enable broader deployment of hybrid and electric vehicles to regions
with cold temperature extremes, including mountainous regions of the world, as well as the far
North and far South.
7.2.5.2 Wind Hydrogen.
44
The development of commercial technology that links renewable power (e.g., wind
turbines) to electrolyzers would serve as a technical breakthrough that could expand the
addressable market for renewable electricity. Hydrogen could then be stored for later use
to generate electricity from an internal combustion engine or a fuel cell – a configuration
that may be of particular interest to isolated off-grid systems like those in Alaska and the
developing world. The goal of this technology would be to improve hydrogen production
efficiency from renewable resources to compete with traditional energy sources such as
coal, oil, and natural gas.
45
In the future, as the price of fossil fuels rise and the price of hydrogen production from
renewable power falls, there is a potential for wind-hydrogen to provide local hydrogen fuel
that is competitive with gasoline and diesel used for transportation.
44
See a system study in Alaska, Colt and Gilbert, “Economic Analysis of an Integrated Wind-Hydrogen Energy System for a Small Alaska
Community,” Final Technical Report, DOE, December 2008.
45
For more details, see the NREL Wind-Hydrogen Demonstration project at http://www.nrel.gov/hydrogen/proj_wind_hydrogen.html.
Figure __: EIA AEO 09: Sales of Unconventional Light-Duty
Vehicles by Fuel Type, 2030
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Total Electric
hybrid
Micros Flex-fuel Diesel Other
Thousand Vehicles Sold Per Year
28
46
7.2.5.3 Ammonia Fuels.
46
Another potential renewable fuel on the horizon is ammonia. The Iowa Energy Center in
Iowa State University has been researching the viability of NH
3
as “the other hydrogen
TM
” in
light of its potential benefits:
47
Ammonia is widely produced and distributed today for fertilizer around the world; the
technology and incremental cost of storage and delivery systems is modest.
The cost of ammonia has been competitive with gasoline on a dollar-per-MMBtu basis for
several years. While the price of ammonia peaked more sharply during the natural gas
price run-in in the 2004-2008 period, the cost of NH
3
for fertilizer and NH
3
for fuel may
both decrease if they are produced as a joint product because of improvements in capital
infrastructure utilization.
The incremental cost to convert diesel and spark-ignition engines to run on ammonia is
purported to be modest.
Direct ammonia fuel cells are under development at Natural Resources Canada and at
Howard University.
The Hydrogen Engine Center (HEC) and the NH
3
car have both produced spark ignition
engines that have demonstrated the use of ammonia fuel for hundreds of hours.
46
See for example, http://www.ammoniafuelnetwork.org/projects.html and the associated research published by the Iowa State University, Iowa
Energy Center.
47
See Olson and Holbrook, “NH3−The Other Hydrogren
TM
”, March 30, 2009, for a summary of key considerations.
PAGE 47
8. Market Evolution and Transformation
8.1 Alaska Market Evolution Opportunity
Alaska is in the process of investing $125 million in RE projects and $360 million in end-use
efficiency/conservation programs, or roughly $524 per capita, from 2008/2009 legislative
appropriations – placing it in the forefront of U.S. efforts to finance RE projects and help
develop RE enterprises, including wind, geothermal, biomass, and hydropower.
The Regulatory Commission of Alaska, the state utility regulator, is examining how to
enhance energy efficiency, conservation, peak demand shaving, and RE opportunities.
The Alaska Energy Authority (AEA) is developing an energy plan that features consideration
of demand side and RE opportunities.
The public and private sector and associated enterprises are working together across the state
to increase the availability of reliable, cost-effective energy efficiency and renewable energy.
If these collective efforts continue, a sharp focus on key market transformation issues may
include:
Pricing energy resources to reflect their full incremental cost, especially at peak;
Development of subject matter expertise in management, marketing, technology and
integration of energy efficiency/renewable energy, especially robust rural-scale wind,
geothermal, biomass, and hydropower that can be exported;
Wide dissemination of technical, managerial, and marketing lessons learned −
o Alaska is well positioned to take a leadership role in the rapid development of EE/RE
opportunities for developing markets around the world.
8.2 Package Alaska Market Transformation Expertise for Export
As a leading trade state with significant public and private sector support for export
enterprises, Alaska is well positioned to support national goals of developing a vigorous RE
export industry.
8.3 Alaska/NREL International Developing Country Energy Ambassador
Opportunities
Forty years ago, most of rural Alaska was without reliable electricity, frequently relying on
kerosene lamps or a few small household-scale gasoline generators that were used to generate
light for a few hours a day. Watering points were still being installed and most villages used
“honey buckets” for waste. Over the past forty years, rural Alaska has been in transition −
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building schools and clinics, village-scale power plants, piped water and sewer systems, and
modern mobile and Internet telecommunications systems. Much has been accomplished, yet
much remains to be done. A tremendous number of rural development lessons have become
part of the fabric of successful rural enterprises – including rural utilities and health care
facilities. International development agencies have sought the expertise of Alaskan subject
matter experts in rural development.
As energy prices have risen dramatically over the past few years, the private sector, State of
Alaska, and the federal government have increasingly invested in RE technology and
enterprise development. As the State of Alaska’s RE fund is being leveraged to develop over
$1 billion in new wind, biomass, geothermal, and hydropower resources, new innovative
enterprises are working to address the needs of many remote rural communities attempting to
move from fossil fuels toward a low carbon future.
If the United States is to move forward on the promise of becoming “the world’s leading
exporter of renewable energy” to the vast developing world that is poised for continued
growth, it may find Alaska presents a unique investment opportunity.
8.4 Recommendations to Enable Further Development and Export of Alaska EE/RE
Knowledge
Market Transformation −
Assist efforts to eliminate fossil fuel subsidies
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and ensure that any remaining life-line
subsidies for energy and electricity are “technology neutral” and apply to both energy
efficiency and renewable technologies;
Explore opportunities, e.g., build, own, transfer, build, own, operate, to leverage private-
sector federal tax credits for RE into Alaska market dominated by municipal,
cooperative, and village non-profit utilities;
Facilitate exploration of combined heat and power opportunities by encouraging
appropriate pricing of fossil fuels, especially at peak demand.
Permit Streamlining −
Facilitate state and federal agency exploration of ways to streamline the permitting of
renewable energy resources.
Monitoring and Evaluation −
Develop program monitoring and evaluation capacity, especially with respect to the
current slate of projects being funded by the State Renewable Energy Fund and federal
stimulus funds, to identify most promising EE/RE technologies and business models for
further development.
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See for example, Financial Times, “An idea whose time has come” (24 Sept 09), “As addictions go, the world’s addiction to fossil fuels is a killer. President
Obama has a big idea on how to help the world kick the habit: the elimination of fossil fuel subsidies globally.”
49
Marketing and Education −
Support local technology collaborations, including EE/RE conferences;
Support the development of national and international collaborations, especially among
indigenous peoples.
Technology Development and Deployment −
Facilitate exploration of combined heat and power opportunities, e.g., wind-dump loads
to heat bricks and other storage media;
Facilitate exploration of new emerging renewable and enabling technologies (e.g.,
batteries, ammonia fuels, in extreme climatic conditions);
Identify and support the most promising demonstration projects in emerging renewables,
including tidal and hydrokinetic technologies.
Workforce Development −
Provide support for efforts to attract and retain local expertise in the development of RE
and RE enterprises.
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