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HomeMy WebLinkAboutElectric Power Consumption For The Rainbelt A Projection Of Requirements 1980t ELECTRIC POWER CONSUMPTION FOR THE RAILBELT: A PROJECTION OF REQUIREMENTS by Scott Goldsmith Lee Huskey Institute of Social and Economic Researe Anchorage * Fairbanks * Juneau prepared jointly for State of Alaska House Power Alternatives Study Committee and Alaska Power Authority June 1980 “e ELECTRIC POWER CONSUMPTION FOR THE RAILBELT: A PROJECTION OF REQUIREMENTS TABLE OF CONTENTS Es €UNTRODUCTION . 0s. ws we ewe ee ee ewe we ewe wee II. 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INTRODUCTION This report presents the results and documentation of the first systematic attempt to project future electric power requirements for the Alaskan railbelt using a technique which explicitly takes into account uses of electricity. The study, undertaken jointly for the House Power Alternatives Study Committee of the Alaska Legislature and the Alaska Power Authority, had two purposes. The first was to develop a model of electricity use which would enable the legislature, administration, and others to analyze the impact of policy measures to alter electricity consumption patterns. The second was to forecast future electric power requirements for the railbelt as input to a study of the feasibility of developing the hydroelectric resources of the Susitna River. The model which was developed as part of the study, an end-use model, is patterned after similar models developed and utilized by the federal government, various state government agencies, and electric utilities. It is a departure from traditional methods of electricity requirements forecasting (based largely upon trend analysis), which is widely recognized as being a necessary and worthwhile improvement. This is because the end-use model bases forecasts on estimates of the elec- tricity requirements for specific uses. This approach has the additional advantage over traditional elec- tricity forecasting methods of explicitly presenting the assumptions made by the forecaster about the relationships between important vari- ables. For example, the average household size is an important deter- minant of electricity consumption in the residential sector. Most analysts project that average household size will decline over the next twenty years. The end-use modeling technique requires that this factor be explicitly considered. A major difficulty with a forecasting model of this type is the lack of data with which to construct and validate the model. Information is necessary on the appliances in the residential and commercial sector, the building stock and its characteristics, the machinery used in indus- trial processes, and the uses to which fuels which are alternatives (and competing) to electricity are put. Such data is difficult, if not impossible, to obtain, so estimates and indirect methods of obtaining information must often be utilized. Consequently, this model is a "first draft" and, as such, subject to improvement and refinement as more information becomes available. The level of effort expended on this model has been much less than more highly developed and sophisti- cated end=use models such as those used by the New England Power Pool, California Energy Commission, and Federal Energy Administration. We expect more information to become available on a regular basis in the future as the general level of interest in and concern for energy consumption increases. This information will come both from work done in Alaska and in other states because the experience of other regions is often applicable to the Alaskan situation. Information from other areas will probably be in the form of better data on appliance electricity use, appliance lifetime, components of commercial electricity consump- tion, and consumer behavioral responses to changing energy prices and government regulations, incentives, standards, and controls designed to alter electricity consumption patterns. Within Alaska, better and more current information will become available as a result of a variety of efforts. These would include, 1. Under provisions of the Public Utilities Regulatory Policies Act (PURPA), the large railbelt utilities are required to undertake various end-use studies. 2. Railbelt utilities have, in the past, and will, in the future, conduct end-use studies for their own planning purposes. © ~ 3. The 1980 censuses of population and housing will provide information on the geographic distribution of population, trends in household size, the characteristics of the hous- ing stock, and the ownership rates for various appliances. 4. Efforts by local governments through surveys and analyses of existing records (tax records, building permits, etc.) to develop better information bases on the demographic and economic characteristics of their communities. De Energy audit programs presently in the initial stages at all levels of government which can provide information about not only where electricity is used but also the impact on consumption of conservation measures. Information from these secondary sources can improve the modeling and projections. There was no primary data collection effort undertaken as part of this study. The reasons that no primary data were collected in the process of original model development were two. First, the cost of data collection through surveys is expensive. Second, and more important, without a definite understanding of what information was necessary for modeling and what information was available from secondary sources, any primary data collection would be premature and inefficient. Now that the initial model development has been completed, it is possible to identify those areas where the model could be improved by primary data collection either through surveys or analysis of individual utility account records in conjunction with other primary data sources. The commercial-industrial component of electrical requirements is not well-specified in the model and would benefit most from additional primary data in the form of information on the proportions of electricity in different uses in the various categories of the commercial sector (retail, office, eduction, etc.) and the amount of electricity consumed in these different uses on an appliance or square foot basis. Unfor- tunately, because of the heterogeneity of the commercial sector, it is difficult to obtain a complete detailed picture of electricity use in this sector even through survey methods. Another reason why the model may be expected to change over time, in addition to the fact that better data will be integrated into the parameters, is that conditions in electricity markets are currently in flux and the dynamics of change are presently not fully understood: Consumer behavior is difficult to forecast whenever behavior patterns differ from those of the past, as is presently the case. An example would be in consumer preferences for space heating in the presence of high prices for all fuels as well as relative fuel price uncertainty. To what extent will consumers utilize dual heating systems (wood and electricity, for example) or district (room-by-room) heating systems rather than single, centralized heating which has become the standard in recent years? Only time will provide us with the answers after we have had the opportunity te actually observe consumer behavior in these new situations. In spite of these model shortcomings (which really are shortcomings of any forecasting technique because we have utilized all the available data), the methodology is a valid one. Every effort has been made to minimize the potential error which may arise because of misallocation of electricity consumption to a particular use. Differences of opinion regarding the parameters used in forecasting future use will obviously always be present. This model makes all those parameters explicit so that discussions about the projections can be structured around the numerical values chosen for these parameters. The end-use model, in conjunction with an econometric model of the Alaskan economy, has been used to do thirty-year projections of electricity requirements. In a sense, it is presumptuous to think it is possible to forecast for thirty years into the future with any degree of confidence. The last thirty years have produced trends nationally that were unantici- pated but had a profound effect on patterns of energy consumption such as suburbanization. Within the state, events such as the discovery of oil at Prudhoe Bay, which shaped the economy through the decade of the 1970s, were unpredictable. Similar, unanticipated factors (although the probability of another petroleum discovery on the magnitude of Prudhoe Bay is slight) will surely be important in the future. On the other hand, there are many things which we can anticipate with some assurance and, because we must try to plan the efficient future utilization of resources, we must attempt to define the future limits of electricity consumption. In addition to the normal degree of uncertainty in projecting future events, two factors make projecting Alaskan electricity require- ments particularly fraught with uncertainty. First, the small, absolute size of the economy and its dependence upon natural resources and govern- ment make the economy volatile and projections of future levels of activity subject to larger variability. Second, the ever changing con- ditions in national and Alaskan energy markets make it difficult to identify long-term trends in prices, fuel availabilities, federal and state policies, and consumer behavior. The projections should be inter- preted with this variability and uncertainty in mind. Specifically, any forecasting method which depends upon the past will necessarily be wrong to the extent it cannot anticipate change. We do try to take some changes into account but do not presume the ability to anticipate technological change which may be significant as a factor either increasing or decreasing electricity consumption from central station utilities. . The electricity end-use model has been constructed to maximize its potential applicability. It is not presently computerized, but the docu- mentation in the technical appendixes is complete and structured in such a way that conversion to the computer would be a simple task. We recom- mend this be undertaken to facilitate future use of the model for fore- casting and policy analysis as well as updating and validation. As used in this study, the model provides results for three electric power markets for five-year intervals. It can be modified to handle both other regions and shorter or longer time intervals. In conclusion, we are forecasting electricity requirements at a time when changes are constantly occurring which can have substantial effects on the outcome. We feel the approach of this study is the most appropriate under the circumstances, recognizing at the same time that it can and, hopefully, will be improved in the future. II. ECONOMIC GROWTH IN ALASKA AND ITS RAILBELT REGION Introduction The demand for electric energy is importantly affected by the level of population and economic activity in the region. This chapter describes the population and economic activity in Alaska and its Railbelt region. The railbelt currently contains the majority of the state's population and employment; it includes the Anchorage, Kenai, Seward, Matanuska- Susitna, Fairbanks, Southeast Fairbanks, and Valdez Census Divisions. This chapter discusses both the historical level and the probable future growth of population and economic activity. The projections of the future are the basis of the electricity demand projections. The analyses of historical economic activity and demographic change provide a point of reference for discussing potential future growth. Examining past activity provides information not only on what happened but also on how things happened, which allows us to develop an under- standing of the process of growth in Alaska. An understanding of how this process worked in the past allows us to assess the potential for future changes. We would not expect the future process of growth to differ qualitatively from the past. Economic Growth Alaska has a frontier economy. Alaska, like all frontier economies, can be characterized by its small size, relatively recent development, and isolation from major markets and production centers. Examining these characteristics helps both to explain past growth and to define the potential for future economic growth. The small size of Alaska means there are only limited local markets, which limit the local pro- duction of goods and services. The recent development of the economy means there are areas with only limited infrastructure and services. Recent development and small size result in the need to import labor to staff major development projects; this migration requirement necessitates high wages to attract labor. Finally, the isolation from markets and producers means that transportation cost is an important component of the cost of living and producing in Alaska. These characteristics have two general results for the Alaska economy. First, Alaska, like all frontier regions, is a high-cost region. The cost of living and producing goods and services is relatively higher in Alaska than in competitive regions. Secondly, resource development for export to other regions is the major source of growth for the economy. Because of the cost structure described above, only bonanza resource finds will be developed; the high cost of development means resource finds which would be developed in other areas will be overlooked in Alaska. Economic growth in frontier regions is then driven by two forces. First, the development of resources is driven by changes in world market price and technology which may reduce production costs in the region. Secondly, growth generated by resource development leads to expansion of local markets. This will increase the production in the region of locally consumed goods and services and reduce the relative cost differ- entials, possibly encouraging future growth. Each of these causes of growth has been important in the past and will continue to be important in the future. HISTORICAL FCONOMIC GROWTH IN ALASKA The importance of natural resource development to the growth of the Alaska economy can be seen by examining the historical growth of the economy. European settlement of the region as a Russian colony was a means of exploiting Alaska's resources, primarily furs. During the American colonial period, major growth occurred with the development of the gold fields in Northwest Alaska in the late nineteenth century. The final major pre-statehood cause of growth was the expansion of the federal government presence in the state. This was primarily a result of the military expansion during World War Il, the Korean War, and the Cold War. This expansion was a result of Alaska's strategic location, a type of natural resource (Kresge, et al, 1977). Since statehood, economic growth has been dominated by the develop- ment of the state’s petroleum resources and growth of state government. Two major petroleum developments have been responsible for growth during this period, the Kenai Peninsula-Cook Inlet and Prudhoe Bay. The Kenai fields were developed in the late 1960s, reaching peak production in 1970; employment increased both in Kenai and as headquarters employment in Anchorage. Employment associated with this development declined after peak output was reached in 1970. Development of the Prudhoe Bay fields had two major phases, field ———— and construction of the trans-Alaska pipeline to carry the oil to a port in Valdez. The construc- tion project had major employment effects, adding 15,000 workers to the work force in 1976; however, field development and production will have more long-run effects. A second major source of growth has been the expansion of state government. State government expenditures affect the economy by increas- ing employment in state government and through expenditures, such as for the Capital Improvements Program, in other sectors of the economy. State government expenditures have been a particularly important source of growth since 1970. The lease bonus received by the state in 1969 from the sale of the Prudhoe Bay lease held to a rapid expansion of state expenditures (Scott, 1978). The lease sale bonus and future revenues from petroleum production are a unique source of revenues since they are exogenous to the state economy. Because of this, the level of revenues and state expenditures does not depend on the level of economic activity in the state, but determines it. Table II.1. describes the growth in employment in Alaska since 1960. Employment increased at an average annual rate of 4.1 percent per year during this period; this is about twice as fast as the growth of the U.S. economy during the period. We can distinguish three separate periods of growth between 1960 and 1979 by their relation to the development of Prudhoe Bay. The most rapid period of growth occurred between 1970 and 1976; employment grew at an annual average rate of growth of 8.1 percent per year. Prudhoe Bay influenced most of the growth in this period. TABLE II.1. ALASKA EMPLOYMENT GROWTH BY SECTOR (Average Annual Percent Change) 1960-1970 1970-1976 1976-1979 1960-1979 Basic Sector® -7 4.6 - 7.0 ot Support Sector? 6.1 12.3 2.9 7.5 State and Local Government 10.1 9.4 4.9 9.0 Total Nonagricultural Wage and Salary (plus military) 353) 8.1 a Aol ®Tncludes mining, construction, manufacturing, and federal civilian and military employment. (Nonagricultural wage and salary does not include agricultural or fisheries employment.) Pincludes transportation, communications, utilities, trade, finance, and services employment. SOURCES: Alaska Department of Commerce and Economic Development, The Alaska Economy Year-End Performance Report, 1978; and Alaska Department of Labor, Alaska Economic Trends, March/April 1980. 10 State government expansion as a result of the Prudhoe Bay lease sales, the development of the fields, and the employment expansion associated with construction of the Trans-Alaska Pipeline Service (TAPS) occurred during this period. The rate of growth of employment between 1970 and “1976 was more than twice the rate prior to 1970. The period after 1976 reflected the downturn in the economy after the completion of TAPS; average employment growth fell to less than one percent per year during this period. The adjustment after 1976 reflected most importantly the reduction in construction workers connected with the pipeline construction. Economic growth affects more than total employment; the structure of the economy also changed, as reflected in Table II.1. In all periods, growth in both the support sector and state and local government is more rapid than total employment. This reflects a change in the structure of the economy, which is a result of three factors. The first factor is the increased importance of state government in the economy. Prior to 1970, the state's increased role resulted from a transfer of functions from the federal government to the new state. Since 1970, state government growth was primarily a response to available revenues. The second factor is the maturing of the economy. As an economy grows, it produces locally more of the goods and services it consumes. This structural change re- sults in a nonproportional growth in the support sector. Finally, the composition of the basic sector has changed through time, so that employ- ment numbers do not reflect its impact on the economy. The primary change is the reduction in military employment throughout the period. Because of this, the increase in the civilian basic sector was greater than reflected by Table II.1. Two economic effects of the structural change which occurred in the past have been the reduced seasonality of employment and a narrowing of the cost of living differential between Alaska and the remainder of the United States. Alaska's dependence on natural resource production and severe winters historically resulted in seasonal increases in unemployment’. As the economy matured, this seasonality has been reduced. As measured 11 by the ratio of fourth-to-third quarter employment, seasonality decreased by about 14 percent between 1950 and 1976; this index was .75 in 1950 and -87 in 1976 (Huskey and Nebesky, 1979). The other major effect of struc- tural change was a narrowing of price differentials. Prior to 1975, the Anchorage consumer price index increased at a yearly rate that was less than the national rate, which meant that the price differential between Alaska and the rest of the United States decreased. The expansion of the local support sector and the economy's size were primarily respon- sible for this. With the TAPS boom, this price trend. was reversed because of bottlenecks which resulted from rapid increases in demand and resulting increases in prices. RAILBELT ECONOMIC GROWTH In this study, we are primarily interested in growth in the Rail-~ belt region, the region which would be served by the Susitna Hydroelectric project. The Railbelt region contains the majority of the population and economic activity in the state; most of the recent economic growth has occurred in this region. The Railbelt region contains three sepa- rate subregions which are unique, separate economies, The regions are: e Anchorage. This region contains the Anchorage, Matanuska- Susitna, Kenai, and Seward Census Divisions. Anchorage serves as the administrative, distributive, and transportation center for the state and so reflects growth in other regions of the state. Matanuska~Susitna is a major agricultural region of the state; recent growth has resulted from a suburban connec- tion with Anchorage. Kenai and Seward have experienced growth as a result of both fisheries--the historically important natural resource industry, and petroleum--the currently impor- tant natural resource industry. e Fairbanks. The region contains the Fairbanks and Southeast Fairbanks Census Divisions. Fairbanks is the regional center for most of interior Alaska. It is also an important government 12 center, operating not only as a regional center but as the site of the University of Alaska's first campus and important military bases. Fairbanks’ most recent major expansion occurred in connection with the development of Prudhoe Bay and construc- tion of TAPS for which it served as a construction center. e Valdez. The Valdez region contains the Valdez Census Division. This region recently experienced rapid growth as the terminus of the trans-Alaska pipeline and site of the oil terminal for Prudhoe Bay oil. Future growth should result from the location of the pipeline terminus in the area. The remainder of the state consists of three major regions. Southern Alaska from Southeastern to the Aleutians contains the major fishing areas of the state. This region also contains the state capital at Juneau. In contrast to southern Alaska and the railbelt is village Alaska which includes most of western and northern Alaska. These in- clude small Native villages whose pattern was established by subsistence patterns and larger regional centers which serve as governmental and distribution centers. The final regions are resource zones such as Prudhoe Bay. These zones are not necessarily developed or associated with any existing population center. These include Brooks Range min- erals zones, Outer Continental Shelf zones, and major agriculture zones. Development of these areas will determine the future economic growth of the state. Historical growth, as measured by employment, has been evenly dis- tributed between the Railbelt region and the remainder of the state. Table II.2. shows that over the period 1965 to 1978, the railbelt has grown slightly faster, growing at an annual average rate of 4.8 percent per year, compared to 4.1 percent for the rest of the state. The rail- belt grew most rapidly during the Prudhoe Bay period (1970-1976); employ- ment in the railbelt grew at an annual average rate of 8.9 percent per year, compared to 6.3 percent for the rest of the state. During this 13 TABLE 11.2. REGIONAL EMPLOYMENT GROWTH" (Average Annual Percent Change) 1965-1970 1970-1976 1976-1978 1965-1978 State 3.7 8.1 - 9 4.6 Railbelt 3.3 8.9 =—- 3.3 4.8 Anchorage 3.8 8.2 2.4 5.6 Fairbanks 2.2 7.7 -11.3 2.4 Valdez 2.6 45.2 -49.0 8.1 Rest of State 4.3 6.3 - 2.6 4.1 “Includes nonagricultural wage and salary employment plus military. Data limit end dates. SOURCES: 1965-1974, Alaska Department of Labor. 1975-1978, Alaska Department of Commerce and Economic Develop- ment, Numbers: Basic Economic Statistic of Alaska Census Divisions, 1979. period, the majority. of the TAPS construction project occurred in this region. The two regional centers, Anchorage and Fairbanks, also reflected growth in the rest of the state. The location of TAPS employment also accounted for the more rapid decline in employment in the railbelt after 1976. Because of its slightly more rapid growth, the Railbelt region increases its share of state employment from 68.5 percent in 1965 to 70.3 percent in 1978. The most rapidly growing subregion of the railbelt was Anchorage, which grew at an annual average rate of 5.6 percent during the period. Anchorage did not suffer a decline in employment between 1976 and 1978. The growth in Anchorage employment was not direct construction employment but support and government employment, so it did not suffer the immediate employment decline with completion of construction. Employment between 14 1976 and 1978 was buoyed by anticipations of future major projects and spending of wealth accumulated during the pipeline period. Both Fair- banks and Valdez were more directly affected by pipeline construction, growing very rapidly during construction and falling equally rapidly after pipeline construction was completed. In each region, a familiar Alaska employment pattern occurred, and employment did not fall back to pre-peak levels after the peak was reached. FUTURE ECONOMIC GROWTH The future growth of the state economy will follow a pattern similar to past growth. The characteristics of the economy we have described will continue to affect growth. The importance of the federal government pres- ence in Alaska, both civilian and military, will continue. Although this provides a stable base for economic growth, it is not likely to be an important source of growth. Growth will most importantly result from development of Alaska's natural resources, expansion of state government, and expansion of the scale of the economy. State government expansion will result in increases in government employment, construction employ- ment through the capital improvements program, and expansion of industry through the state loan program. Expansion of natural resource produc- tion beyond the bonanza finds depends on the location of reserves relative to transportation and developed areas; areas without easy access to infrastructure will be costly to develop. Expansion of natural resource industry beyond production will continue to be limited by small local markets and high production costs. Finally, as the size of the economy expands, we would expect a continued nonproportional expansion of the support sector as thresholds are reached in various industries. Although historical analysis can provide some indication of the future growth of the economy, one thing should be evident: there is a large potential variability for the future course of economic activity in the state. The future development of natural resources depends im- portantly on world market prices. There is also uncertainty about the size and marketability of resource reserves in the state. The future 15 level of state government activity is also uncertain. Because of the petroleum revenues from Prudhoe Bay, the state is in a position of having revenues which exceed expenditures. Expenditures are constrained only in the long run by revenues. In addition to the amount the state spends, the way the state spends its money will affect state growth. These areas of variability make any projection of future state economic activity probabilistic. We chose to combine two approaches for forecasting future Alaska economic growth. For the period prior to 2000, we used the MAP econo- metric model of the Alaska economy (see Appendix B) to project futute economic activity. This approach allowed us to create scenarios describ- ing the possible future growth of exogenous events such as natural resource developments and levels of state government expenditures. Use of the model also provides consistency across alternate projections. Beyond 2000, when much less is known of possible exogenous events, we chose to forecast the growth of major economic variables by making assumptions about their rates of growth. Nine separate state economic projections were made for this study (see Appendix C). These projections were the result of the combination of three separate economic scenarios and three state government expendi- ture scenarios. These projections were designed to capture the possible future range of economic activity. The three economic scenarios reflect probable low, moderate, and high levels of resource development and exogenous industry growth. Three alternate state government. expenditure growth paths were assumed representing state expenditures as a declining, constant, and rising proportion of personal income. Each state expendi- ture assumption is possible since none exhausts the state's fund balance by 2000. Of these nine, three were chosen to be used in the electricity demand projections. It was assumed that the three economic scenarios, in combination with a state expenditure assumption which assumed state 16 expenditures would remain a constant proportion of personal income, would describe the most probable range of alternative futures. These scenarios are described below. High Economic Growth The high economic scenario assumes major resource development in the state. In addition to continued petroleum production at Prudhoe and in the Upper Cook Inlet, reserves in the National Petroleum Reserve and eleven OCS lease sales areas are assumed to be developed. Other mining is also assumed to grow with Beluga coal development and U.S. Borax developed. In-state processing of petroleum resources is assumed to increase with a major petrochemical development in Valdez, a petro- chemical development using state's royalty gas in Fairbanks, and the Pacific LNG project. The Northwest gasline is also assumed to be built. Agriculture, fisheries, and forestry are all assumed to expand with maximum government support; major agricultural development occurs, and the foreign bottomfish effort is assumed to be replaced by the Alaska industry over the period. In addition to the state government spending assumed, the state capital is assumed to be moved to Willow during the projection period. (See Appendix C for specific scenario description.) Table I1.3. describes the projected growth in employment in the high scenario. In this scenario, the Railbelt region grows at the same rate as the state; both grow at a rate of 3.7 percent per year between 1980 and 2010. The region grows slightly slower between 1980 and 1990 and more rapidly between 1990 and 2000. ‘This is mainly a result of massive OCS development which occurs during the 1980s outside the region. Examining the growth rates over decades ignores the rapid growth in the early 1980s associated with major construction projects which occur in the region. By 2010, the region contains approximately 67 percent of the state 1 employment; total employment in the railbelt equals 393,738 by 2010. Growth is slightly faster in Fairbanks and Valdez than in Anchorage. 17 TABLE II.3. HIGH SCENARIO EMPLOYMENT GROWTH (Average Annual Percent Change) 1980-1990 1990-2000 2000-2010° 1980-2010 State* 4.6 3.2 3.3 3.7 Railbelt Region? 4.2 3.4 3.3 3.7 *rotal employment includes self-employed. Regional projections are for nonagricultural wage and salary employment plus military. This excludes self-employed and was the basis for electricity demand projections. “Post-2000 growth assumed to be 33 percent per year, which is the approximate growth rate of the 1990-2000 period. Anchorage's share of railbelt employment falls from 76.3 percent to 74.2 percent between 1980 and 2000. Fairbanks and Valdez increase their share from 22.1 to 23.1 and 1.6 to 2.7, respectively. These changes in shares result from growth in resource development and government employ- ment outside the region. Moderate Economic Growth The moderate economic scenario also assumes important future resource development although the extent and timing differ from the assumed growth in the high scenario. As in the high scenario, petroleum development continues at Prudhoe and Upper Cook Inlet; however, the extent of further development is limited. Only six OCS lease sales areas are developed and development in the National Petroleum Reserve does not occur until the end of the projection period. Development of Beluga coal is the only nonpetroleum mining which occurs. The state's in-state processing of petroleum resources is more limited, a fuels refinery is built in Valdez 18 and the Pacific LNG project is built. The Northwest gasline is also assumed to be built. Agriculture is given a low priority and development is limited. Only half the foreign bottomfish effort within the 200-mile limit is assumed to be replaced by Alaska fishermen over the period. Table I1.4. describes employment growth in the state and Railbelt region over the projection period. The Railbelt region grows slightly slower than the state over the period, growing at an average of 2.5 per- cent per year, compared to 2.6 percent for the state. As in the high case, the state grows slightly faster until 1990, and the region grows slightly faster after 1990. This is also a result of OCS development in the 1980s and the decade growth rates masking the large economic growth associated with large construction projects during the 1980s. TABLE II1.4. MODERATE SCENARIO EMPLOYMENT GROWTH (Average Annual Percent Change) 1980-1990 1990-2000 2000-2010° 1980-2010 State® 2.9 2.8 2.0 2.6 Railbelt Region? 2.6 3.0 2.0 2.5 *yotal employment includes self-employed. bRepional projections are for nonagricultural wage and salary employment plus military. This excludes self-employed and was the basis for electricity demand projections. “Ppost-2000 growth assumed to be 2 percent per year. 19 By 2010, the Railbelt region contains 66 percent of the total state employment; total employment in the railbelt is 281,986 in 2010. The subregional growth is similar to the high case with Anchorage growing at a rate slightly slower than the remainder of the region. The Anchorage share of railbelt employment falls slightly from 76.3 to 74.8 percent over the period. Fairbanks and Valdez increase their shares of railbelt employment from 22.1 to 22.9 percent and 1.6 to 2.3 percent, respectively. Low Economic Growth The major source of growth in the low scenario is government spending. Only limited resource development takes place in this scenario. Petroleum production at Prudhoe Bay and in Upper Cook Inlet are assumed to continue and the Northwest gasline is built, but no other resource project is assumed to be developed. Agriculture is assumed to disappear from the state by the end of the period, while no bottomfish industry is assumed to be created. Growth in both the state and Railbelt region are projected to be much lower in this scenario, averaging 1.9 percent per year and 1.8 per- cent per year, respectively. The Railbelt region is assumed to grow slightly slower than the state. By 2010, the Railbelt region has 68 percent of total state employment; by 2010, total employment in the railbelt is 231,559. As in the other scenarios, the Anchorage region grows slightly less rapidly than the other two railbelt subregions. By 2010, Anchorage accounts for about one percent less of the Railbelt region employment than in 1980. (See Table II.5.) _20 TABLE II.5. LOW SCENARIO EMPLOYMENT GROWTH (Average Annual Percent Change) 1980-1990 1990-2000 2000-2010 1980-2010 State® 1.9 oy 1.0 1.9 Railbelt Region” 6 229) 120 1.8 Total employment includes self-employed. bRegional projections are for nonagricultural wage and salary employment plus military. This excludes self-employed and was the basis for electricity demand projections. “Post-2000 growth assumed to be one percent per year. Population Growth Change in the population of Alaska will follow the growth of employ- ment. The change in the region's population is a result of natural increase (the excess of births over deaths) and migration. In a rapidly growing region with a small population base, like Alaska, migration is the most important component of population change. Migration occurs primarily as a response to economic opportunities which include both relative employment opportunities and higher incomes. The relatively large increases in employment associated with major projects such as TAPS mean that the national increase in the region's labor force will not meet the employment requirements of the economy and migration will be needed to meet the labor requirements. The growth in population may diverge from the growth in employment; recent experience shows that population did not increase as fast as employment. This is primarily a result of two factors, increasing labor force participation and change in the number of unemployed. Labor force _ participation rates measure the proportion of the population in the economy which wishes to be employed. Increases in this rate result from many factors. The increased participation of women in the labor force is a national trend. A change in the age distribution of ‘the population which puts a greater proportion in the working ages will.also increase participation rates. The region's labor force participation rates will also change if the migrants have different rates than the existing popu- lation. Finally, increased employment opportunities may bring a larger proportion of the population into the labor force. High incomes and employment opportunities in Alaska have this effect, especially when projects are located in rural areas with a high proportion of population which does not participate because of the lack of jobs. High levels of unemployment prior to a growth period may result in many of the jobs being taken by the unemployed with no need for migrants or population growth. As the economy expands, the yearly expansion of the Alaska labor force will provide labor for a large proportion of jobs created and migration will become less important as a force of population change. HISTORICAL POPULATION GROWTH? os Table II.6. describes the historical ‘growth of the state and the Railbelt region since 1960. Over the entire period, the railbelt grew slightly more rapidly than the state as a whole. Between 1960 and 1978, Alaska grew at an annual average rate of 3.3 percent, while the railbelt grew at 3.8 percent. Over the period, the railbelt increased its population share from 63 percent in 1960 to 70 percent in 1978. The Railbelt region led the state in growth in each growth period, 1960-70 and 1970-76, as well as in the period of contraction, 1976-78. During 1960-70 and 1970-76, the railbelt grew at 3.6 and 5.8 percent per year, while the state as a whole grew at 3.0 percent and 5.0 percent, respectively. During each of these periods, the major causes of growth were located within the region--the Kenai oil fields and TAPS construc- tion. Because of the location of major portions of the TAPS project in the region, it also suffered a more rapid population decline than the 22 TABLE II.6. HISTORICAL POPULATION GROWTH (Average Annual Percent Change) 1960-1970 1970-1976 1976-1978 1960-1978 State 3.0 5.0 - 7 3.3 Railbelt Region 3.6 5.8 - 8 3.8 Anchorage 4.5 6.1 oak, 4,5, Valdez 1.3 16.5 -14.1 4.2 Fairbanks 1.5 3.7 -2.4 1.8 Rest of State 1.9 3.4 - 4 2.2 SOURCE: Alaska Department of Commerce and Economic Development, Division of Economic Enterprise, Basic Economic Statistics of Alaska Census Divisions, November 1979. state as a whole, with population declining at an annual average rate of .8 percent per year, compared to .7 percent for the state as a whole. Within the railbelt, Anchorage grew most rapidly, expanding at an annual average rate of 4.5 percent per year. The Anchorage expansion was a result of its service-support function and the location of families of project employees. Valdez also experienced rapid growth over the period, expanding only slightly slower than Anchorage at a rate of 4.2 percent per year. One population characteristic which is especially important for projecting future energy demand is the number of households in the popu- lation. Changes in the average size of households can result in the numbers of households changing more rapidly than population. Changes in the social patterns, age structure and employment opportunities have resulted in rapid changes in the average household size in both 23 a the United States and Alaska. Table II.7. compares the average house- hold size in 1970 and 1976 in both Alaska and the United States. The changes in the United States were reflected in Alaska; within this period, average household size dropped by about the same amount. The average household size in Alaska was 11.5 percent greater than in the United States in 1970; in 1976, it was 12.8 percent greater. TABLE II.7. AVERAGE HOUSEHOLD SIZE 1970 . 1976 United States 3.14 2.89 Alaska 3.50 3.26 SOURCES: U.S. Department of Commerce, Statistical Abstract of the United States, 1978, and Demographic, Social, and Economic Profile of States: Spring 1976, 1979. PROJECTED FUTURE POPULATION GROWTH Table I1.8. describes the projected growth of population under all three scenarios previously described. The expansion of both the railbelt and state population is similar to the projected growth of employment. There are two major differences between employment and population pro- jections. First, growth of population is assumed to be less rapid than employment over the entire period. Between 1980 and 2010, state popdla- tion grows .3 percent slower than state employment in the high scenario, .2 percent slower in the moderate scenario, and .2 percent slower in the low scenario. This pattern is repeated in the Railbelt region. This reflects the historical pattern of increasing labor force participation which results from increases in working-age population and participation 24 TABLE II.8. PROJECTED GROWTH OF POPULATION (Average Annual Percent Change) 1980-1990 1990-2000 2000-2010° 1980-2000 High Scenario State 3.8 3.1 3.3 3.4 Railbelt 3.8 at aun 3.4 Moderate Scenario State 2.7 265) 2.0 2.4 Railbelt 2.7 Ze5) 2.0 2.4 Low Scenario State 2.0 2.2 1.0 Set Railbelt 2.0 Zee 1.0 a7 "Growth in this period at same rate as employment growth. by women in urban areas and greater employment opportunities in rural areas. The second difference from the pattern of employment growth concerns the variability of growth between periods. In all scenarios, population in the Railbelt region grows at approximately the same rate as in the state; while the employment growth in the railbelt varies around the state growth rate. This reflects another historical pattern, the separation of place of employment and place of residence. With development in remote, unsettled areas of the state, many families of workers in these areas settled in the metropolitan regions of the state--Anchorage, Fairbanks, and Kenai. This pattern of settlement will most likely change as more activity occurs in other regions of the state. 25 Overall growth of population of the Railbelt region ranges from an annual average of 3.4 percent in the high scenario to 1.7 percent in the low. Railbelt population by 2010 reaches 773,804 in the high scenario, 576,037 in the moderate, and 476,007 in the low. Within the region, the distribution of population remains relatively stable throughout. The Valdez region expands its share of regional population to reflect its projected rapid growth in the moderate and high scenarios. We assume in these projections that the average household size will decline following the projected national pattern. Table II.9. illus- trates the effect of this assumption; the number of households is pro- jected to increase more rapidly than population, resulting in the ; reduction in the average number of people per household. At both the ‘state and regional levels, average population per dwelling unit is ‘assumed to fall over the period, decreasing from 3.2 to approximately 3.7 at the state level in all scenarios and 3.04 to approximately 2.6 in the Railbelt region for all scenarios.” By 2010, the number of households in the Railbelt region is 294,115 in the high scenario, 216,020 in the moderate, and 180,235 in the low scenario. : TABLE II.9. PROJECTED POPULATION PER HOUSEHOLD 1980 2010 High Scenario State 3.17 2.66 Railbelt 3.04 2.58 Moderate Scenario State 3.17 2.69 Railbelt 3.04 26 39) Low Scenario State 3.17 eid, Railbelt 3.04 2.56 26 Conclusions The economic and population growth projected in the three scenarios presented in this section is similar to past growth. The determinants of growth are primarily resource development and state spending. These scenarios differ slightly from past growth because it is not as centered in the Railbelt region as past growth. There are two important reasons for this. First, state expenditures play a much greater role in future projected growth. This increased employment is spread more evenly out of the region, concentrating in the capital but also serving other regions. Secondly, more resource development projects occur out of - the region. The major future sources of petroleum and such important resources as bottomfish development will occur out of the Railbelt region. 27 CHAPTER II ENDNOTES Nonagricultural wage and salary plus military employment. The populations described in this section are, except for 1960 and 1970 census figures, only estimates. This may explain some of the difference between growth of population and employment. Regional differences reflect distribution of the population across subregions; each subregion had a different assumed starting value of population per household. 28 III. ELECTRICITY USE IN THE RAILBELT Historical Patterns of Electricity Consumption Between 1920 and 1970, net production of electrical energy in the United States by utilities grew at an average. annual rate of 7.6 percent. The growth rate in the 1960s was only slightly below that long-term trend at 7.3 percent. In the 1970s, growth rates have been considerably lower. Table III.1. shows that between 1970 and 1978 the rate has been 4.6 percent, with growth in the years before 1973 twice that of later years (1973 was the watershed year of recession and oil embargo). Electricity consumption has grown historically at a faster rate than total energy consumption and, thus, has accounted for an increasing share of final energy demand. TABLE II1.1. HISTORICAL U.S. GROWTH RATES OF UTILITY NET PRODUCTION OF ELECTRICITY Average Annual Period Growth Rate (%) 1920-1930 Six) 1930-1940 4.5 1940-1950 8.8 1950-1960 ew) 1960-1970 aaa 1920-1970 7.6 1970-1978 4.6 1970-1973 6.7 1973-1978 35) SOURCE: U.S. Department of Commerce, Statistical Abstract, various years. 29 Nationally, industry is the largest user of electricity, most of it supplied by utilities, followed by the residential sector, and finally by the commercial sector. Table III.2. shows that industry has histori- cally been the largest user of electricity but that in recent years combined residential and commercial consumption has surpassed that of the industrial sector. TABLE III.2. PERCENT DISTRIBUTION OF U.S. ELECTRIC ENERGY USE Year Residential Commercial Industrial Other 1920 = 11 54 30 1930 9 12 2S 26 1940 13 12 51 24 1950 18 13 49 20 1960 23 14 49 14 1970 28 18 42 12 SOURCE: U.S. Department of Commerce, Historical Statistics of the United States, Colonial Times to 1970, 1975. In the Alaska railbelt, historical growth in electricity sales has been more rapid than the national average. Table III.3. shows the level of utility sales in Anchorage and Fairbanks for selected years since 1940. Although above the national growth rates throughout, there is a pattern of deceleration of growth as the economy has developed and matured. In the greater Anchorage area (encompassing the Census Divisions of Anchorage, Kenai-Cook Inlet, Matanuska-Susitna, and Seward [see map on Figure III.A.]), this growth has been relatively evenly divided between the residential sector and the commercial-industrial-government sector 30 TABLE III.3. ELECTRIC UTILITY SALES IN THE ANCHORAGE AND FAIRBANKS AREAS Year Sales (10? MWh) Year Sales (10? MWh) 1940 10 1965 467 1966 523 1951 78 1967 * 1952 101 1968 660 1953 134 1969 157 1954 148 1970 897 1955 166 1971 1,048 1956 190 1972 1,168 1957 204 1973 1,300 1958 220 1974 1,408 1959 243 1975 1,683 1960 320 1976 1,886 1961 353 1977 2,050 1962 387 1978 2,179 1963 431 1979 * 1964 472 1980 (est) 2,594 Average Annual Growth Rate (%) 1940-1950 20.5 1950-1960 15.3 1960-1970 12.9 1970-1980 10.1 Note: Data from different sources not totally compatible. SOURCES: 1940 - U.S. Department of Interior, Susitna River Basin: A Report on the Potential Development of Water Resources in the Susitna River Basin of Alaska, 1952. 1951-59 - Bureau of Reclamation, Devil's Canyon Project: Alaska Feasibility Report, 1960. 1965-78 - Sales to Final Consumer from Federal Energy Regulatory Commission, Power System Statement. 1960-64 - Utility System Requirements from U.S. Department of Interior, Devil's Canyon Status Report, 1974. 31 ze Barrow-North Slope Division KUSKOXWIM Figure III. A. Railbelt Regions Bee Legend SS "Greater Fairbanks Greater Anchorage + ALEUTIAN ISLANDS (PART) A “° with the latter being slightly larger. In the greater Fairbanks area (Fairbanks and Southeast Fairbanks Census Divisions), the commercial- industrial-government load has been substantially larger than the residential load except in the mid-1970s. The high rate of growth of electricity sales in the railbelt is the result of both more rapid growth in the number of customers and in consumption per customer. Table II1.4. compares the number of customers and annual growth in the number of customers over a recent period in the railbelt with the United States. Growth in the railbelt has exceeded TABLE III.4. NUMBER OF ELECTRIC UTILITY CUSTOMERS Greater Greater United States Anchorage Fairbanks Average (103) (103) (106) Residential 1965 27:50 8.2 57.6 1978 77.0 ad od 77.8 Average Annual Growth Rate (%) 8.4 6.0 243 Commercial 1965 4.0 1.3 7.4 1978 10,2 2.9 9.1 Average Annual Growth Rate (%) 7.5 6.4 1.6 SOURCES: Federal Energy Regulatory Commission, Power System Statements of Alaska Utilities, U.S. Department of Commerce, Historical Statistics of the United States, Colonial Times to 1970, and U.S. Department of Interior, Susitna River Basin: A Report on the Potential Development of Water Resources in the Susitna River Basin of Alaska, 1952. 33 the national average for two reasons, First, the railbelt population growth rate between 1950 and 1980 has been much larger than the national rate over the same period. Second, the proportion of households served by electric utilities was lower for Alaska than for the United States over much of the historical period so that some growth in the number of customers served occurred independent of population growth. Table III.5. compares average annual consumption in the residential sector in greater Anchorage, greater Fairbanks, and the United States. Overall, the greater Anchorage area growth rate per customer has been about equal to the U.S. average, but the growth has been concentrated in the 1970s. In Fairbanks, the overall growth rate has exceeded the national average with all the growth occurring between 1965 and 1975. The same general pattern can be observed in the commercial-industrial-government sector. Nationally, in the household or residential sector, the growth in electricity consumption has greatly exceeded that of energy in general. Although the overall annual growth rate for energy consumption in the residential sector (net of transportation) was 3.4 percent between 1950 and 1975 (household formation was 2 percent), the growth rate for elec- tricity consumption was 7.2 percent annually so that between 1950 and 1975 electricity's share of residential consumption grew from 18 per- cent to 43 percent. A considerable portion of this increased electricity share can be attributed to a substantial increase in electric space heat- ing which accounted for less than 1 percent of households in 1950 but had risen to 12 percent by 1974.7 Substantial increases in the proportion of households using electricity for hot water and cooking as well as growth in the percentage of homes having air conditioning also helped contribute to rapid growth in electricity's share of the residential sector. 34 TABLE III.5. AVERAGE ANNUAL RESIDENTIAL ELECTRIC USE PER CUSTOMER (MWh) Greater Anchorage Greater Fairbanks U.S. Average 1950 2.4 = 1.8 1965 6.4 4.8 4.9 1966 6.9 Ded 5.3 1967 6.9 = 5.6 1968 6.8 6.6 6.1 1969 7.0 7.7 6.6 1970 7.5 8.4 Pal 1971 8.5 UBS) 7.4 1972 8.8 10.5 7.7 1973 9.2 11.2 8.1 1974 9.0 11.6 7.9 1975 10.1 13.7 8.2 1976 10.8 12.6 8.4 1977 10.4 11.5 8.7 1978 10.9 10.2 8.8 SOURCES: Federal Energy Regulatory Commission, Power System Statements of Alaska Utilities, U.S. Department of Commerce, Historical Statistics of the United States, Colonial Times to 1970, and U.S. Department of Interior, Susitna River Basin: A Report on the Potential Development of Water Resources in the Susitna River Basin of Alaska, 1952. 3D The most important uses of electricity in the residential sector nationally are for space heating, water heating, refrigeration, cooking, air conditioning, and lighting. In the Alaskan railbelt, electric space heating in 1978 was used by about 17 percent of the housing units, which contributed to both a larger proportion of total residential energy requirements supplied by electricity than nationally and also a larger portion of electricity use allocated to space heating. Table III.6. shows that the large proportion of housing units heating with electricity and the large unit requirements because of the number of heating degree days (as well as a lack of any substantial air conditioning load) result in a much larger proportion of railbelt residential electricity use for space heating than found nationally. Refrigerators, water heaters, lights, and cooking are next in order of importance. In the commercial sector nationally, the same general growth patterns of electricity use emerge as in the residential sector. Between 1950 and 1975, annual growth of total energy use (net of transportation) was 4.4 percent; while that of electricity was 6.9 percent, so that its share of the total increased from 34 to 61 percent during the period. The majority of commercial consumption of energy (and electricity) is in retail-wholesale trade, education, finance and other o'fice, and health- related activities. In contrast to the residential sector, space heating and water heating are relatively unimportant. Table III.7. shows the pro- portions of electricity in various uses in the commercial sector in 1975. Historically, lighting, cooling, and electromechanical uses of electricity have increased relative to space heating and water heating. Substantial variation in end-use patterns for electricity exists among different types of consumers. Among the four primary commercial con- sumers, educational facilities use considerably less, and hospitals considerably more, than average amounts of energy for cooling, space 36 Le Households Served Appliance Water Heater Range Elec. Dryer Refrigerator Freezer Dishwasher (Water) Clothes Washer (Water) Television Air Condition. Total Major Appliances Lights Small Appl. Total Appliances Consumption/Household Served (kWh) Unit Consump. (kWh/yr.) 3,475 1,200 1,000 1,250 1,350 230 700 70 1,050 400 400 1,000 1,010 43,135°~ TABLE III.6. 1978 RAILBELT RESIDENTIAL ELECTRICITY CONSUMPTION Part I: Appliances GREATER ANCHORAGE AREA Saturation Mode Rate (4) 99 100 ae 100 46 47 77 148 0 100 100 GREATER FAIRBANKS AREA GLENNALLEN-VALDEZ AREA Elec. Consump. (MWh) 1,695 643 483 1,675 778 34 38 61 338 429 0 6,174 1,340. 1,786" 9,300 65,250 15,250 1,340 Appliance Electric Total Appliance Electric Total Appliance Electric Total Elec. Saturation Mode Elec. Saturation Mode Split Consump. Rate Split Consump. Rate Split (4) (MWh) (4) (4) (MWh) (4) (%) 34 76,319 97 43 22,103 91 40 64 50,311 100 81 14,823 100 40 90 41,693 66 98 9,863 48 73 100 81,561 100 100 19,063 100 100 100 40,519 42 100 8,647 43 100 100 7,053 36 100 1,263 11 100 16 7,308 -- 15 1,601 -- 4 100 3,512 74 100 790 65 100 26 17,813 -- 37 4,964 -- 24 100 38,627 149 100 9,089 80 100 100 0 a. 100 61 0 100 364,521 92,267 100 65,250 100 100 15,250, 100 100 100 65,902 100 100. 22,358 100 100 495,673 129,875 7,597 8,516 6,940 91 466 kWh per household b 1,333 kWh per household se TABLE III.6. (continued) 1978 RAILBELT RESIDENTIAL ELECTRICITY CONSUMPTION Part II: Space Heating and Totals GREATER ANCHORAGE AREA GREATER FAIRBANKS AREA GLENNALLEN-VALDEZ AREA Housing Units Served 41,873 17,500 1,500 Elec. Elec. Elec. Housing Heating Total Housing Heating Total Housing Heating Total Unit Mode Mode Elec. Unit Mode Mode Elec. Unit Mode Mode Elec. Housing Type Consump. Split Split Consump. Consump. Split Split Consump. Consump. Split Split Consump (kWh) (%) (2) (MWh) (kWh) (2) (%) (MWh) (kWh) (%) (%) (MWh) Single Family 32,000 52 18.8 224,714 45,900 52 feo 30,491 31,700 31 2 295 Duplex 21,200 8.3 18.4 23,203 30,400 723 ve? 2,796 20,900 13 0 0 Multifamily 15,000 26.7 19.9 57,396 20,200 27.7 10 9,792 13,900 13) 0 0 Mobile Home 23,900 13 18.4 40,478 35,100 13 7.3 5,829 24,200 43 0 0 Total Space Heat 345,791 48,908 295 Consumption/Housing Units Served (kWh) 4,811 2,795 197 SUMMARY Total Residential . Consumption (MWh) 841,464 178,783 9,595 Appliance Consumption (MWh) 495,673 129,875 9,300 Space Heat Consumption (MWh) 345,791 48,908 295 Consumption/ ; Household (kWh) 12,896 11,724 6,397 TABLE III.7. NATIONAL PROPORTIONS OF ELECTRICITY IN VARIOUS USES IN THE COMMERCIAL SECTOR, 1975 Lighting 41 Cooling 36 Other (primarily electromechanical uses) 15 Space heating Water heating BN SOURCE: Jerry Jackson and William Johnson, "Commercial Energy Use: A Disaggregation by Fuel, Building Type, and End Use," Oak Ridge National Laboratory, 1978, Table 5. heating, and electromechanical uses; while hospitals use considerable amounts for water heating, and educational facilities use considerably smaller amounts for Lighting.” It is difficult to compare Alaskan railbelt commercial electricity use with these national patterns because of the lack of data on Alaskan consumption. Air conditioning is present but to a much smaller degree, and a portion of this demand is met by natural gas. Electric space heat is probably not more important in Alaska than nationally in spite of the higher incidence of electric space heat in the residential sector. This is because a larger proportion of the commercial load is in areas acces— sible to natural gas. In this study, both the government and industrial sectors are combined with the commercial sector because of inconsistency of report- ing of the government sector (included in commercial by some utilities) and the small size of the industrial sectors, as well as the fact that 39 some utilities combine the commercial and industrial sectors for repor- ting purposes. Because of the presence of industrial users in the Alaskan data, one might expect a larger proportion of electricity attrib- utable to electromechanical and other industrial uses. However, it is clear that industrial use of electricity is a much smaller proportion of Alaskan railbelt needs than national needs. This is evident first from the fact that 46 percent of Alaskan railbelt utility sales are residential compared to 28 percent nationally (1970 national data from Table III.2.). Second, Table III.8. shows that manufacturing activity in the railbelt, as reflected by employment, is relatively limited. Considerations in Projecting Future Electricity Requirements Several factors are generally recognized as important in the deter- mination of the amount of energy consumed in various uses and the portion of that energy requirement satisfied with electricity. PRICE The price of energy relative to other commodities is important in the determination of how much energy is consumed. The price of elec- tricity relative to other energy prices is an important determinant of how much of that energy consumption is in the form of electricity. Historically, both nationally and in Alaska, the real price of elec- tricity (adjusted for changes in the cost of living) has declined. This has been true even during the 1970s when prices in general and energy prices in particular have moved rapidly upward. As it becomes cheaper, people tend to use more. The movement of electricity prices in the future and the impact of these price movements on electricity consumption are difficult to fore- cast. Considerable sophisticated statistical analysis has been done nationally in an attempt to determine the exact relationship between 40 TY TABLE III.8. RAILBELT POPULATION AND WAGE AND SALARY EMPLOYMENT IN 1978 GREATER ANCHORAGE AREA Matanuska- Kenai- Anchorage Susitna Cook Inlet Seward Total Resident Population 179,000 14,200 19,600 2,900 215,700 Employment Total 88,040 3,090 6,565 1,327 99,022 Mining 1,874 * 805 * 2,740 Construction 6,431 235 485 12 7,163 Manufacturing 1,683 x 989 # 3,103° Transportation-Communication- a Utilities 7,924 307 574 * 8,865 Wholesale Trade 4,197 51 240 * 44989 Retail Trade 12,668 588 950 201 14,407 Finance-Insurance-Real Estate 5,018 128 197 16 D5oo9 Services 15,526 363 853 164 16,906, Miscellaneous and Farm Workers 459 129 58 * 666 State and Local Government 11,265 Lk25 1,324 241 133955 Federal Civilian 5,140 94 7 72 5,293 Military and Related Federal 15,854 8 3 101 15,966 * Information withheld to protect confidentiality. a ; Author's estimate. SOURCE: Alaska Department of Commerce and Economic Development, Division of Economic Enterprise, "Numbers: Basic Economic Statistics of Alaska Census Divisions," November 1979. cy TABLE III.8. (continued) RAILBELT POPULATION AND WAGE AND SALARY EMPLOYMENT IN 1978 (Continued) Fairbanks Resident Population 54,100 Employment Total 27,061 Mining 54 Construction 1,960 Manufacturing 564 Transportation-Communication- Utilities 2,765 Wholesale Trade 798 Retail Trade 3,274 Finance-Insurance-Real Estate 1,004 Services 3,939 Miscellaneous and Farm Workers 86 State and Local Government . 4,814 Federal Civilian 984 Military and Related Federal 6,819 % Information withheld to protect confidentiality. a ; Author's estimate. GREATER FAIRBANKS AREA Southeast Fairbanks 5,300 Deel 0 * * 24 86 157 * 281 45 1,089 Total 59,400 28,780 54 1,968" 571° 2,789 805* 3,360 1,012 4,096, 93 5,095 1,029 7,908 GLENNALLEN-VALDEZ AREA 362 23 236 56 409, 10 790 48 SOURCE: Alaska Department of Commerce and Economic Development, Division of Economic Enterprise, "Numbers: Basic Economic Statistics of Alaska Census Divisions," November 1979. price and consumption. The studies generally conclude, as common sense would suggest, that higher electricity prices in the future will result in lower rates of growth of electricity consumption than in the past. Because of a lack of Alaskan data, the inappropriateness of using national estimates of the price-consumption relationship, and the dif- ficulties involved in trying to predict energy prices over the next thirty years, we do not specify a price-consumption relationship. We assume that electricity prices will continue to rise as they have since the mid~1970s and that growth in consumption per customer will generally follow the pattern since that time. That is, the nominal price of elec- tricity will continue to rise, but the real price of electricity may not increase significantly. This is in contrast to the past when the real price of electricity consistently fell. We assume that the electricity price relative to other fuels will not change in such a way as to significantly shift the proportion of appliances fueled by electricity. This is particularly important for space heating which is the largest single user of electricity per customer. INCOME Historically, as household and aggregate incomes have increased, electricity consumption has also grown. This consumption growth is manifest in the residential sector in both a larger stock of electrical appliances and a larger unit consumption of electricity within appliances. In the commercial-industrial sector, the same factors can be observed and, in addition, an increase in the number of commercial consumers. Higher aggregate income means more business activity in trades and services and, consequently, more utility customers. We assume that real incomes per capita will continue the general pattern of growth of the past. During the years of oil pipeline construc- tion in-Alaska, real incomes grew much more rapidly than the national 43 average; but in the post-pipeline era, the level of Alaskan personal income per capita is moving back toward its previous relationship to national trends. This implies more and larger appliances and larger living units in the future. FUEL AVAILABILITY In most of the Greater Anchorage area, consumers have a choice among electricity, natural gas, fuel oil, and other fuels for their needs. In Greater Fairbanks and Glennallen-Valdez, natural gas is not available. Changes in fuel availabilities in the future could signifi- cantly affect electricity consumption patterns. We assume that there will be no significant change in the availability of different fuels in the future or in the geographic distribution of economic activity and housing units within regions which would significantly alter the fuel- use opportunities available to consumers. CONSERVATION Some conservation measures will affect the use of electricity independent of price effects. Federal, state, and local government regulations and incentives can be directed at conservation. Estimating the impact of such conservation measures on consumption is difficult because each policy generally involves technical, institutional, and consumer behavior considerations which, because conservation programs are relatively new, are not well understood. We assume that substantial federal conservation programs are mandated and implemented during the next five years. (Some may be administered by state and local governments.) The effects of these programs will be less than the idealized engineering analyses would indicate, and the impacts will be observed to occur over a period of years because of institutional constraints and the time re- quired for old, less efficient appliances to wear out and to be replaced by more energy-efficient counterparts. The implementation and impact of the automobile fuel efficiency standards is an example of the type of program assumed for electricity conservation. 44 TECHNOLOGICAL CHANGE Over a thirty-year period of time, substantial technological change can be expected to occur in the use of electricity as a result of price and other incentives. Some change may result in increased electricity consumption as electricity substitutes for other types of’ energy. The electric car is an example of a new and possibly very substantial use of electricity which could be energy conserving. Other changes could significantly reduce utility supplied electricity consumption. Co- generation and solar voltaics are examples of this phenomenon. We do not speculate on the possible impact of these developments on utility electricity sales. Although it is important to consider such developments, they should be analyzed in separate studies which directly involve engineers and other technicians familiar with the prospects and problems of such emerging technologies. Projection Methodology Utility-supplied electric power requirements are projected on the basis of an end-use model driven by projections of households, the com- position of the housing stock, and employment. A simplified diagram of the end-use model is shown as Figure III.B. The model is divided into five submodels, each of which uses a dif- ferent formulation to forecast a portion of total consumption. The submodels are as follows: i. Residential appliances 2. Residential space heating 3% Commercial-industrial-government 4. Street lighting 5. Second homes This division was chosen because different variables determine consumption for each of these uses and because further subdivisions, where appropriate 45 > a | HOUSEHOLDS | HOUSING UNITS Appliance Saturation Fuel Mode Split e@ price @ availability e appliance replacement rate Electric Appliances Electrically Heated Housing Units Average Appliance | Consumption | @ unit size we @ conservation : j e replacement rate e household size e utilization rate i | | EMPLOYMENT Average Electricity Consumption per Employee e growth of economy @ conservation “a°LIL aanold Space Heat Second Home Appliance Commercial— Street Light Electricity Electricity Electricity Industrial— Electricity Consumption Consumption Consumption Government— Consumption Consumption Total Electricity Consumption Figure 111. B. Diagram of Utility-Supplied Electricity Requirements Model (the commercial-industrial-government sector), were not possible because of the way the utilities report sales. The residential appliance model forecasts requirements for nine separate appliances plus lighting and unspecified small appliances. The appliances are as follows: l. Water heater . Range Clothes dryer Refrigerator Freezer Dishwasher Clothes washer . Television 9. Air conditioner 10. Lighting 11. Small appliances OnNDULPWN These appliances are separately identified because over time we would not expect growth of electricity consumption in the different appliances to respond identically to changes in economic projection variables. The model first calculates the number of households who own and operate each appliance. This is the product of households, the satura- tion rate, and, for those appliances that may be fueled by gas or oil, the electric mode split. Average annual consumption per appliance is separately calculated as the weighted average annual consumption of appliances of each vintage, or age group. Newer appliances tend to be larger, but in the future they will also be more energy efficient. Thus, it is important to keep track of the vintage, or age, of appliances as well as how long they last before wearing out. The residential space heating model forecasts requirements for four different housing types based upon the assumption that the space heating requirements and characteristics of each is different. These divisions are as follows: 47 Single family Duplex Multifamily Mobile home PFwWwne The number of housing units determines the potential electric space heating load. (Each household corresponds to or resides within a housing unit, but because of vacancies, there will normally be more housing units than households.) We assume all housing units must be heated even if unoccupied as long as they are available for a household. As in the case of appliances, only a portion of all heating systems will use electricity--the electric mode split. The model also estimates the average consumption per unit. The product of the number of units and average consumption is total residential space heating consumption. In addition to different housing types using different amounts of energy for space heating, newer units use more fuel because they are larger; but in the future, they will be more efficient. Also, older units may be retrofit to be more efficient. Thus, the average unit consumption will vary with the age of the unit. The commercial-industrial-government model is much simpler because of a lack of data. Nonagricultural wage and salary employment serves as a proxy for establishments. New establishments are equivalent to increases in employment. New establishments, since most of the electricity con- sumption is determined at the time of construction, consume electricity at different rates than existing establishments whose consumption remains constant. These three model components account for about 99 percent of utility sales. The remainder is miscellaneous, composed of street lighting and second or vacation homes. For simplicity, street lighting is a small, fixed percentage of sales in other categories. Consumption by second homes is based on a very rough estimate of the number of households with second homes. 48 The parameters used in the model are derived from analyses of a large number of sources, both within and outside the state. None are based upon econometrics or other sophisticated techniques because of data limitations. Because of the severe data limitations and the novelty of this approach within Alaska, a large degree of judgment is involved in choosing parameter values. They are all explicit and explained in the appendixes. An important part of model development is model validation, that is testing the model before it is used to gauge how well it forecasts. Two partial tests of the model were done. The first was a "backcast" to see how well the model, calibrated on 1978, could predict consumption in 1970 and 1960. The model predicted too high. The problem was traced to a probable underestimation of the growth rate of average appliance con- sumption for which adjustments were subsequently made. A second test would be to predict 1979 consumption since preliminary 1979 figures began to become available after the model was constructed. The model projects an 8 percent growth between 1978 and 1980, including a shift to a normal winter in 1980 from an abnormally warm one in 1978 (which would account for about one-quarter of the projected growth). Actual growth between 1978 and 1979 was 3 percent; so that if growth between 1979 and 1980 were also 3 percent, independent of weather-related factors, the model will have predicted well for an initial two-year period. It appears as though there was a slight underestimate of growth in residential space heating demand in the outlying areas of the Greater Anchorage region for 1979, but this may correct itself in 1980. Although it is some consolation that the model appears reasonable in the short run, its validity in the long run is more important. Further analysis of the model structure and methods used to determine the parameters is the only way to assure that the model is appropriate for long-run analysis. 49 Electric Power Requirements Projections One set of assumptions about electricity consumption behavior was applied to three sets of economic projections. The economic projections are minimum, maximum, and most Likely economic growth cases. All eco- nomic cases are assumed to be identical with respect to relative energy price, per capita income, energy availability, and conservation measures. The major assumptions about electricity consumption in the projections are as follows: e The electricity market is presently in relative equilibrium except for space heating use of electricity in Fairbanks where a significant shift away from electric space heat is underway. e This relative equilibrium (in terms of the price of electricity relative to other fuels) is projected to remain in effect through- out the period of the projections such that no major shift toward or away from electricity use in favor of alternative fuels occurs. e This assumption is consistent with a long-run projection of decon- trol of energy prices and movement of relative fuel prices towards equivalency as market forces play a larger role in price determination. e The price of energy relative to other goods and services will con- tinue to rise. The reduction in electricity consumption resulting from this price rise will be more than offset by the effect of rising real incomes acting to increase electricity consumption. e Federal policies designed to conserve energy will be effective in the area of electric appliance efficiency standards but will have a smaller impact on electricity consumption through the building stock through incentives for retrofitting and the application of new building standards. These programs will go into effect during the 1980s. e No state conservation policies specifically directed at the use of electricity are implemented. 50 e No significant state policies designed to alter the price or availability of alternative fuels to consumers or utilities are implemented. e No new technologies are assumed such as solar voltaics for elec- tricity generation or electric cars. e Additional growth in population will be centered in utility ser- vice areas. e Assumptions specific to residential appliance electricity consump- tion include the following: 1. Growth in major appliance saturation rates generally follows a continuation of national trends. 2s As appliances wear out, their replacements are generally larger and contain more features requiring more energy. (This assumption is independent of the appliance effi- ciency standards assumption.) 3. For some large appliances, the reduction in average household size reduces average electricity requirements. 4. Changes in consumption rates resulting from changes in the size and other characteristics of the appliance stock occur over a period of time according to the rate at which appliances wear out and are replaced. 5. Residential electricity consumption not attributable to the appliances specified in the end-use model or to lighting is projected to increase 5 percent annually per household. This assumption reflects both the relation- ship of appliance purchase and utilization with real income and the development of new electrical appli- ances not currently available. e Assumptions specific to residential electric space heating require- ments are as follows: 1. A slight trend toward single-family homes comprising a larger portion of the housing stock. Ze The average size of new housing units continues to grow in a reflection of a national trend. 3. No significant shift in the geographic distribution of the housing stock occurs to areas where electricity is the least expensive fuel. At the same time, the 51 service areas of existing natural gas utilities or the introduction of new gas utilities into regions not now served does not occur. 4. The introduction of alternatives to central space heating which would involve the use of electricity in conjunction with other fuels such as fuel oil, wood, or coal does not result in a significant increase in the space heating load. Die No significant utilization of electric heat pumps occurs. e Assumptions specific to commercial-industrial-government utility- supplied electricity consumption include: l. Growth in electricity requirements in excess of residen- tial requirements will occur both because employment is projected to increase more rapidly than population and because, without specific conservation measures enacted by standards and regulations, less conservation of elec- tricity will occur in this sector than in the residential sector. 2. The distribution of end uses of electricity within this sector will not shift markedly over the projection period. e Miscellaneous utility sales, composed of street lighting and second home use, will grow at rates consistent with overall utility sales and remain an insignificant portion of the total. e Military net energy requirements are assumed constant in spite © of mandated conservation efforts. e Self-supplied industrial net energy requirements are composed of those projects identified and included in the economic scenarios. They do not include possible projects attracted to Alaska by the prospect of inexpensive electricity. The projections of utility sales as well as military and self- supplied industrial net generation are presented in Table III.9. and detailed projections by consumer category in Table III.10. for the most likely case and in Table III.11. for the high and low cases. 52 TABLE III.9. PROJECTED ELECTRIC UTILITY SALES AND MILITARY PLUS SELF-SUPPLIED INDUSTRIAL NET GENERATION (10> Muh) Utility Sales - Total Military Self-Supplied Anchoraget+ Glennallen- Utility Net Industry Net Year Anchorage Fairbanks Fairbanks Valdez _ Sales Generation Generation 1978 1,747 427 2,174 38 2,212 334 414 1980 1,907 446 2,353 37 2,390 334 414 1985 L 2,249 619 2,868 53 2,921 414 M 2,438 669 3,107 64 3,171. 334 571 H 2,676 769 3,445 116 3,561 847 M-E 2,438 669 3,107 64 Sy L7i 571 ° 1990 L 2,510 666 3,176 60 3,236 414 M 2,782 742 3,524 75 3,599 334 571 H 3,249 914 4,163 119 4,282 981 M-E 2,782 742 3,524 75 3,599 571 1995 L 3,097 813 3,910 66 3,976 414 M 3,564 949 4,513 88 4,601 334 571 H 4,438 1,227 5,665 124 5,789 981 M-E 3,564 949 4,513 104 4,617 571 2000 L 3,981 1,040 5,021 80 5,101 414 M 4,451 1,177 5,628 102 5,730 334 571 H 5,939 1,537 7,056 136 7,192 981 M-E 4,973 1,416 6,389 136 6,525 571 2005 L 4,375 1,154 5,529 88 5,617 414 M 5,226 1,397 6,623 119 6,742 334 572 H 7,013 1,988 9,001 176 9,177 981 M-E 6,220 1,834 8,054 165 8,219 571 2010 L 4,807 1,277 6,084 95 6,179 414 M 6,141 1,671 7,812 140 75952 334 571, H 8,927 2,586 11,513 223 11,736 981 M~-E 7,624 2,318 9,942 200 10,142 571 L = Minimum economic growth M-E = Likely economic growth with shift to M = Likely economic growth electric space heat and appliances H = Maximum economic growth in residential sector 53 9S Year 1978 (actual) 1980 1985 1990 1995 2000 2005 2010 Annual Growth Rate 1980-1990 1990-2000 2000-2010 1980-2010 Components may not sum to totals due to rounding error. Large Appliance Appliance 365 382 464 523 627 753 858 975 3.2 3.7 2.6 3.2 Residential Small 131 144 203 255 334 427 509 604 5.9 5.3 3.5 4.9 TABLE III.10. PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (103Mwh) GREATER ANCHORAGE Space Heat 346 395 508 578 717 906 1,045 1,198 3.9 4.6 2.8 3.8 MEDIUM Total Residential Government Misc. Commercial Industrial 841 921 1,175 1,356 1,678 2,086 2,412 2,777 3.9 4.4 2.9 3.8 884 966 1,238 1,397 1,849 2,319 2,760 3,301 3.8 5.2 3.6 4.2 22 20 25 29 37 46 54 63 3.8 4.7 3.2 3.9 Total 3.9 4.8 3.3 4.0 SS Year 1978 (actual) 1980 1985 1990 1995 2000 2005 2010 Annual Growth Rate 1980-1990 1990-2000 2000-2010 1980-2010 Components may not sum to totals due to rounding error. TABLE III.10. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS Large Residential Small (103Mwh) GREATER FAIRBANKS Space Appliance Appliance Heat 92 95 123 142 £75 211 242 278 4.1 4.0 2.8 3.6 38 41 60 78 105 137, 166 200 6.6 5.8 3.9 5.4 49 a 48 44 37 25) Ly a5 (1.5) (5.5) (5.0) (4.0) MEDIUM Total 179 187 231 264 317 373 425 493 305) 3.5 2.8 3.3 Commercial Industrial 243 255 431 470 622 792 958 1,161 6.3 5.4 3.9 5.2 Residential Government Misc. 12 14 17 7.2 4.1 3-5 4.9 Total 5.2 4.7 3.6 4.5 9S TABLE III.10. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (103Mwh) GLENNALLEN - VALDEZ MEDIUM Commercial Total Industrial Year Residential Residential Government Misc. Total Large Small Space Appliance Appliance Heat 1978 (actual) 6 3 0 10 29 0 38 1980 6 2 0 9 27 1 37 1985 9 D 0 14 49 1 64 1990 10 7 1 18 56 1 75 1995 i3 9 i. 23 64 1 88 2000 5 12 1 28 73 i. 102 2005 18 14 1 33 85 1 119 2010 21 17 2 40 99 1 140 Annual Growth Rate 1980-1990 5.2 8.8 - 7.2 7.6 - re) 1990-2000 4.1 5.5 - 4.5 Z.7 - 3.1 2000-2010 3.4 3,5 TZ 3.6 3.1 - 3.2 1980-2010 4.3 6.0 - 5.1 4.4 - 4.5 Components may not sum to totals due to rounding error. Ls TABLE III.11. PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (105Mwh) GREATER ANCHORAGE Low Commercial Total Industrial Year Residential Residential Government Misc. Total Large Small Space Appliance Appliance Heat 1978 (actual) 365 131 346 841 884 22 1,747 1980 382 144 395 921 966 20 1,907 1985 444 193 476 Zsias 1,135 23 2,249 1990 489 238 539 1,266 1218 26 2,510 1995 564 301 643 1,508 1,557 32 3,097 2000 679 385 816 1,880 2,060 41 3,981 2005 736 437 900 2,073 2,257 45 4,375 2010 795 494 982 ym val 2,487 49 4,807 Annual Growth Rate 1980-1990 2.5 See 3.2 5.2 24 aut 2.8 1990-2000 3.3 4.9 4.2 4.0 5.4 4.7 4.7 2000-2010 1.6 . 2.5 1.9 1.9 1.9 1.8 1.9 1980-2010 2.5 4.2 3.1 31 362 3.0 2.1 Components may not sum to totals due to rounding error. 8S Year 1978 (actual) 1980 1985 1990 1995 2000 2005 2010 Annual Growth Rate 1980-1990 1990-2000 2000-2010 1980-2010 Larg Residential Small e TABLE III.11. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (103MWwh) GREATER FAIRBANKS Space Appliance Appliance Heat 92 95 118 235 159 194 211 230 3.6 3.7 1.7 3.0 38 41 58 73 95 125) 144 165 5.9 peo 2.8 4.8 49 Eyl 48 44 36 2 16 2 (1.5) (5.9) (6.7) (4.7) LOW Total Commercial Industrial Residential Government Misc. 179 187 224 251, 290 343 ak 407 3.0 362 Lad 2.6 Components may not sum to totals due to rounding error. 243 255 389 408 o15 686 771 857 4.8 a3 2.3 4.1 aL “N ak 12 18 5.8 4.6 Se 4.0 Total 427 446 619 666 813 1,040 1,154 Lee 4.1 4.6 2.1 3.6 6S TABLE III.11. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (107Mwh) GLENNALLEN - VALDEZ LOW Commercial Total Industrial Year Residential Residential Government Misc. Total Large Small Space Appliance Appliance Heat 1978 (actual) 6 3 0 10 29 0 38 1980 6 3 0 9 27 1 37 1985 8 5 0 13 39 1 33 1990 9 6 0 15 44 1 60 1995 10 7 A 18 47 iL 66 2000 12 9 1 22 57 bis 80 2005 14 er i 26 61 1 88 2010 15 12 1 28 66 AL: 95 Annual Growth Rate 1980-1990 4.1 7.2 - 5.2 5.0 - 5.0 1990-2000 2.9 4.1 - 3.9 2.6 - 2.9 2000-2010 2.3 2.9 - 2.4 . 1.5 - WS) 1980-2010 3.2 4.7 - 3.9 3.0 - 5.2 Components may not sum to totals due to rounding error. 09 Year 1978 (actual) 1980 1985 1990 1995 2000 2005 2010 Annual Growth Rate 1980-1990 1990-2000 2000-2010 1980-2010 Large Residential Small TABLE III.11. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (103Mwh) GREATER ANCHORAGE Space Appliance Appliance Heat 365 382 485 574 728 886 1,065 1,302 4.2 4.4 3.9 4.2 131 144 211 282 390 509 646 817 7.0 6.1 4.9 6.0 346 395 520 640 842 1,076 1,327 1,623 4.9 5.3 4.2 4.8 HIGH Total Commercial Industrial Residential Government Misc. 841 921 1,216 1,496 1,960 2,471 3,038 3,742 5.0 5.2 4.2 4.8 Components may not sum to totals due to rounding error. 5.9 5.7 5.5 5.7 wa 22 20 28 Total 19 Year 1978 (actual) 1980 1985 1990 1995 2000 2005 2010 Annual Growth Rate 1980-1990 1990-2000 2000-2010 1980-2010 Components may not sum to totals due to rounding error. Large Residential Small TABLE III.11. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (103Mwh) GREATER FAIRBANKS Space Appliance Appliance Heat 92 95 134 162 208 257 315 387 Jeo 4.7 4.2 4.8 38 41 66 89 25 167 abo 278 8.1 6.5 532 6.6 49 SL 48 45 38 27 21 21 (42) (5.0) (2-5) (2.9) HIGH Total 179 187 248 296 37k 451 551 686 4.7 4.3 4.3 4.4 Commercial Industrial 243 255 a13 609 843 1,070 1,417 1,874 ea 5.8 5.8 6.9 Residential Government Misc. 16 20 26 6.1 5.9 5.0 5.7 Total 427 446 769 914 L,Z27 1,537 1,988 2,586 7.4 Jae Dad) 6.0 29 TABLE III.11. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS Components may not sum to totals due to rounding error. (103Mwh) GLENNALLEN - VALDEZ Year Residential Large Small Space Appliance Appliance Heat 1978 (actual) 6 3 0 1980 6 3 0 1985 11 6 2 1990 13 9 1 1995 16 A 1 2000 18 14 a 2005 23 18 2 2010 28 23) 2 Annual Growth Rate 1980-1990 8.0 136 - 1990-2000 3a3) 4.5 - 2000-2010 4.5 Sek flies 1980-2010 5.3 7.0 - HIGH Total Residential Government Misc. Commercial Industrial 10 23 28 33 43 53 9.8 3.7 4.9 6.1 29 27 97 95 95 102 23 168 13.2 7.4 Tod, pt He Noe 7. 2 2 -3 Total 38 37 116 119 124 136 176 223 12.4 23) Del! 6.2 The projected rates of growth of consumption are considerably below historical growth rates and all previous projections. In the most likely case, the average annual rate of growth over the thirty~-year period is 4.1 percent with somewhat more rapid growth in the 1990s and somewhat less rapid growth after 2000. The reasons for projecting slower growth in the future are three: de The long-run rate of economic growth of the state will moderate. In the most likely case, the growth of popu- lation in the railbelt over the next thirty years is projected at 2.4 percent annually. The statewide popu- lation growth rate during the twenty years since state- hood has been about 3 percent annually. 2. Conservation measures and other factors will moderate the rate of increase in electricity consumption per customer, Bs Electric utilities will saturat« their market areas. Table III.12. shows the performance of previous electric power requirements studies in predicting the 1980 net energy sales of railbelt utilities. Of nine studies done, six significantly overestimated the growth rate between the time the study was conducted and 1980. Only those studies done before 1970 underestimated the actual growth rate, and all were closer to the actual growth rates than those done since 1970. This suggests that the projections done during the 1970s may have been upwardly biased because of the influence of the overall rapid growth of the economy during the mid-1970s. The lower projected growth rates of consumption in this report are consistent with recent projections done nationally and in other states. A recent article in the New York Times noted: Last year electricity consumption rose only 2.8 percent in this country, down sharply from the 7 percent annual rate of growth that the industry routinely experienced until the early 1970s. So far this year, consumption has actually dropped, by 1.4 percent. 63 as TABLE II1.12. Net Energy (10? MWh) PERFORMANCE OF PAST PROJECTIONS OF RAILBELT ELECTRIC POWER REQUIREMENTS HITTING 1980 ON TARGET® Annual Growth Rate of Net Energy Between Forecast Year & 1980 Percent Error in Forecast of Study Year of Year of Forecast Implicit in Growth Rate Number Publication Forecast for 1980 _ Forecast Actual to 1980 (%) tl 1952 101 1,600 10.4 12.4 - 16 E2 1960 320 2,391 10.6 Hist - 6 ia 1969 833 2,355 9.9 11.0 - 10 iad 1974 1,549 3,450 14.63. 9.2 + 55 i.3 1974 1,549 3,543 14.8 9.2 + 62 1.6 1975 1,851 3,240 11.9 7.3 + 63 I.7 1976 2,093 2,985 9.3 5.9 + 58 1.8 1978 23397 3,000 11.9 4.8 +148 1.9 1979 2,469 3,155 27.8 6.5 +328 “Assuming 1980 Net Energy consisting of 2,390 of sales plus 10 percent losses. bSee Appendix I. “Net Energy figures calculated from sales plus 10 percent for losses. 64 One reason is that the mild winter sharply reduced the needs of those who heat their homes with electricity. "I think what we've seen in the last year is probably the pre- cursor to the 1980s--much, much lower growth rates" said Roger W. Sant, Director of the Carnegie-Mellon Institute of Research. "I suppose 3 percent growth is now the conventional wisdom, but my guess is that it will still be quite a bit lower than that." The Edison Electric Institute, the trade association for the nation's investor-owned utilities, is now updating its long- term forecast, last published five years ago. William McCollam, Jr., President of the institute, said in an interview that the study analyzes growth rates, over the next 20 years, ranging from 2 percent to more than 5 percent a year. "But the most important conclusion in our study," he said, "is that factors of choice are far more important than factors of chance. He added, "If the nation docsn't go to what we call the preferred scenario--in the order of magnitude of 4-to-4.5 percent a year--then we are not going to have the healthy economic growth that we ought to,"6 This article indicates substantial disagreement among experts about what the new long-term trend in the electricity growth rate may be. It is clear, however, that everyone expects the rate to be lower than historically. California is a state which has done considerable analysis of its energy situation. The state government estimate of electricity sales growth between 1978 and 2000 is 2 percent annually. In contrast, the combined estimate by the large utilities is 3.4 percent. Between 1973 and 1978, the average annual growth rate was 1.2 percente” (This covers the years of the Great Recession and consequently may be downward biased.) Drawing parallels between Alaskan experience and that of other states or the nation as a whole can be misleading because of different circum- stances. Comparisons do suggest, however, that if Alaskan electric power 65 requirements are to grow faster than in ether states or the nation, such growth must be attributable to one of several factors: 1. More rapid economic growth 2. Increase in electric space heat ing 35 Less implementation of conservation measures Consumption per customer has always exceeded the national average, and its growth is unlikely to be a contributing factor to higher overall growth in electricity requirements. Detailed sensitivity analysis of the projection results has not been done at this time. It is clear from the projections using the three economic scenarios and the implied slow growth rate of electricity con- sumption per capita that the projections are more sensitive to the assump-— tions about economic growth than to those of consumption per capita. The only case where this is not truce would be if there were a sig- nificant shift in space heating and residential appliances toward the electric mode. The impact of this could be almost as substantial as that of a shift from the most likely to the maximum economic growth scenario. Such a case is presented for illustrative purposes in Table III.13. Here all of the economic assumptions are the same as the most likely case, and the only changes in the electricity use assump- tions involve a greater preference for electricity in the residential sector after 1990. The specific assumptions are as follows: e In the period after 1990 for Glennallen-Valdez and after 1995 for the remainder of the railbelt, the price of electricity falls relative to that of alternative fuels because of a shift in generation capacity towards coal plants, hydroelectric facilities, or other types of facilities which have costs independent of the prices of natural gas and fuel oil. It is 66 49 Year 1978 (actual) 1980 1985 1990 1995 2000 2005 2010 Annual Growth Rate 1980-1990 1990-2000 2000-2010 1980-2010 Components may not sum to totals due to rounding error. Large Appliance Appliance 92 95 123 142 175 238 292 345 4.1 Ded 3.8 4.4 MEDIUM - ELECTRIC SPACE HEAT Residential Smail 38 41 60 78 105 Sy) 166 200 6.6 5.8 3.9 5.4 TABLE III.13. PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (103Mwh) GREATER FAIRBANKS Space Heat 49 51 48 44 37 235) 399 589 Ges) 18.2 9.6 8.5 Total Residential Government Misc. 3 8. 6. 6. 179 187 231 5 7 4 2 Commercial Industrial 243 255 431 470 622 792 958 15 LoL 6.3 5.4 3.9 5.2 14 19 23, ur ao 6.0 Total 5.2 6.7 5.1 Died 89 TABLE III.13. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (103MWh) GREATER ANCHORAGE MEDIUM - ELECTRIC SPACE HEAT Commercial Total Industrial Year Residential Residential Government Misc. Total Large Small Space Appliance Appliance Heat 1978 (actual) 365 131 346 841 884 22 1,747 1980 382 144 395 921 966 20 1,907 1985 464 203 508 T5175 1,238 25 2,438 1990 pao 255 578 1,306 1,397 29 2,782 1995 627 334 717 1,678 1,849 37 3,564 2000 919 427 1,257 2,603 2,319 51 4,973 2005 1,166 509 Lye 3,397 2,760 63 6,220 2010 1,391 604 anol 4,245 3,201. 78 7,624 Annual Growth Rate 1980-1990 aaa 5.9 3.9 ae ® 3.8 3.8 339. 1990-2000 5.8 5.3 8.1 6.7 Jaa jue 6.0 2000-2010 4,2 aed 6.0 §.0 3.6 4.3 4.4 1980-2010 4.4 4.9 6.0 De Z 4.2 4.6 4.7 Components may not sum to totals due to rounding error. 69 TABLE III.13. (continued) PROJECTED ELECTRIC UTILITY SALES TO FINAL CONSUMERS (103Mwh) GLENNALLEN - VALDEZ MEDIUM - ELECTRIC SPACE HEAT Commercial / Total Industrial Year Residential Residential Government Misc. Total Large Small Space Appliance Appliance Heat 1978 (actual) 6 3 0 10 29 0 38 1980 6 3 0 9 27 1 37 1985 9 2 0 14 49 ZL 64 1990 10 7 x 18 56 E 75 1995 16 9 14 39 64 - 104 2000 22 12 28 62 73 aL 136 2005 26 14 38 78 85 a 165 2010 31 17 51 99 99 2 200 Annual Growth Rate 1980-1990 belny/4 8.8 - 7.2 7.6 - he 1990-2000 8.2 bs 39.6 13.2 mad - 6.4 2000-2010 3.5 a.5 6.2 4.8 3a Jon 3.8 1980-2010 5.6 6.0 - 8.3 4.4 avo 5.8 Components may not sum to totals due to rounding error. assumed that prices of natural gas and fuel oil rise sufficiently high to make electric power relatively more attractive in the residential sector. Replacement appliances in subsequent years are largely electric. New additions to the housing stock in subsequent years are primarily electrically space heated, but electric space heat retrofitting does not occur. 70 7. CHAPTER IIL ENDNOTES Eric Hirst and Jerry Jackson, "Historical Patterns of Residential and Commercial Energy Uses," Energy, Vol. 2, 1977, pp. 131-140. In this discussion, electricity use is in terms of primary energy; that is, it includes generation and transmission losses, Ibid. Ibid. Jerry Jackson and William $. Johnson, "Commercial lnergy Use: A Disaggregation by Fuel, Building ‘type and End Use," Oak Ridge National Laboratory, 1978, p. 1l. Ibid., p. 13. Anthony J. Parisi, "Electricity Use No Longer Soaring, Nation Expected to Benefit in 80's," New York Times, April 6, 1980, Ds. Ls California Energy Commission, California Energy Demand 1978-2000, A Preliminary Assessment, August 1979, pp. 1-4. Wi. RAI 010 vol. 1 PROPERTY GF: Alaska Powwsr Authority ° 334 W. 5th Ave. Anchoraga, Alaska 99501 LIBR COPY ELECTRIC POWER CONSUMPTION FOR THE RAILBELT: A PROJECTION OF REQUIREMENTS by Scott Goldsmith Lee Huskey Institute of Social and Economic Research Anchorage * Fairbanks * Juneau prepared jointly for State of Alaska House Power Alternatives Study Committee and Alaska Power Authority LEGISLATIVE INFORMATION OFFICE 1024 W. 6th Ave. Anchorage, Alaska ¥9501 June 1980