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HomeMy WebLinkAboutISER_Research_Summary_No_73_Energizing_Alaska_2012Research Summary No. 73 Institute of Social and Economic Research n University of Alaska Anchorage A, ;A Energizing Alaska: Electricity Around the State July 2012 ByAlejandra Villalobos Melendez and Ginny Fay This publication is mostly about electricity in Alaska: how it's generated, how much fuel is used to produce it, how fuel sources have shifted over time, and how prices vary. An inside foldout map shows how individual communities throughout the state generate electricity. But besides looking in detail at electricity, it also reports more broadly on energy in Alaska. It includes our estimates of all the types of energy produced and consumed in Alaska, and summarizes changes over time in the prices and amounts of energy Alaskans use. The information is from analyses we prepared for the Alaska Energy Authority (see back page). We've used the best and most recent data, but there's a two-year time lag before some types of data are available, and in other cases we made estimates, based on limited information. About 57% of the electricity Alaskans use is generated by natural gas, another 22% by hydropower,15% by diesel, and 6% by coal. Wind still produces a very small part of electricity statewide, but use of wind power is growing rapidly. Figure 1 previews the more detailed foldout map, wing how some communities around Alaska generate electricity. Many places use more than one power source. Here we first highlight some findings and then provide more detail inside. Utilities around Alaska used about 1.7 million barrels of diesel, 40 bil- lion cubic feet of natural gas, and 410 thousand tons of coal to produce electricity, in 2010 (Figure 1). But converting energy sources to electricity is a very inefficient process. In 2008, Alaska's electrical sector consumed about three times as much energy as it produced in electricity (Figure 4). ® Six times as much electricity was produced in Alaska in 2070 as in 7970, with an increasing share from natural gas and hydropower and a declin- ing share from coal. Wind power was also introduced (Figure 2). • Use of electricity from hydropower increased more than 10% per capita in Alaska since 197S, even as the population more than tripled. A number of large and small hydroelectric projects were constructed over the past sev- eral decades, largely subsidized by federal and state money. More than two dozen utilities will be using wind to generate part of their electricity by the end of 201Z up from 7 in 2008. A number of other com- munities plan to add wind systems. Most of the existing wind power is on Kodiak Island and in small communities in western Alaska (inside map). . Alaska produces about five times more energy than it consumes, because of North Slope oil. The biggest use of energy in Alaska is for transportation and the smallest is for residential purposes (Figure 4). Figure 1. How is Electricity Generated Around Alaska? (Net Generation 2010: 6.5 Million MWh) Percentages of Statewide Generation, 2010 Wind: Less than 0.5% Fuel Used Statewide, 2010 Diesel:1.664 Million Barrels Natural Gas:40 Billion Cubic Feet Coal: 410 Thousand Short Tons Snapshot of Selected Communities n Kaktovik Point Hope Anaktuvuk Pass AShishmaref Kotzebue Kobuk Fort Yukon Nome Ruby ° Fairbank� Sleetmute Glennallen LimeVillage- Iliamna • , Juneau & Kwigillingok •Homer =: Hoonaha Dillingham' Anchorage •Angoor: !`^+ ♦Sitka Kodiak ♦ Metlakatla Akutan -•- Unalaska '&+ Sources: Alaska Energy Authority; U.S. Energy Information Administration; authors'calculations Key to Symbols Natural Gas Diesel Hydropower u Coal Wind We now look at how the amounts of energy Alaskans use, and the prices they pay for that energy,.have changed overtime. I . Electricity is the only form ofenergy less expensive in 2008 than in 1970, when adjusted for inflation (Figure 6). The drop of nearly 15% is most likely due to the fact that the state and federal governments subsidized construction costs for a number of hydroelectric projects, so prices do not reflect the full costs of producing the hydropower. . All other forms of energy were all considerably more expensive in 2008, but the biggest increases were for jet fuel and diesel fuel. Real —again, adjusted for inflation —prices for those fuels more than tripled. Figure 6. Change in Alaska Energy Prices, 1970-2008 1970 2008 Real Percentage Change -14% Nominal $ 2008$ Electricity (per kWh) $0.03 $0.17 $0.15 Natural gas (per Mcf) $0.69 $3.82 $6.88 Distillate fuel (per gallon) . $0.16 $089 $3.91 Jet fuel (per gallon) $0.10 $0.55 $3.03 Motor gasoline (per gallon) $0.40 $2.21 $165. - Real prices of gasoline and natural gas rose in the range of 60% to 80% between 1970 and 2008. Alaska's population tripled between 1960 and 2008. That fast popula- tion growth meant that Alaskans on the whole used a lot more energy in 2008. But to get a picture of how energy use changed independent of population growth, Figure 7 shows changing use per capita. Alaska population 1960: 226,000 2008: 681,977 Sources: U.S. Energy Information Administration; authors'calculations 80% 341% 455% 65% The largest change in energy use happened when discoveries of natural gas in Cook Inlet made relatively inexpensive gas available in Anchorage and adjacent areas. And despite sharp increases in prices, per capita use of gasoline and diesel also increased considerably. By contrast, per capita use of electricity actually dropped somewhat. That's probably because appliances and light bulbs and other things that run on electricity became more efficient, and the price of diesel —which is used to produce electricity in some communities —increased considerably. Figure 7. Changing Per Capita Use of Energy Among Alaskans Use of natural gas to generate electricity and heat homes in south central Alaska soared after the discovery of gas in Cook Inlet. Most Alaskans outside the railbelt still generate most of their electricity and heat their homes with diesel, and per capita use increased 62% between 1960 and 2008. Per capita use of gasoline was up 33% between 1960 and 2008. Per capita use of coal dropped by half, with use of other energy sources growing faster. Also, almost 40% of the coal produced is exported. Electricity from hydro produced per person increased about 11 %—meaning that hydroelectricity kept pace with population growth. Per capita use of electricity from all sources dropped about 5%, most likely due to improved efficiency in applicances and lighting. Natural gas (in thousand cubic feet) 1960 9 2008 491 Diesel (in gallons) 1960 490 2008 793 Gasoline (in gallons) 1960 308 2008 410 Coal (in short tons) 1960 2 2008 1 Electricity from hydro (in kilowatt-hours) 1975 1,553 2008 1,719 Electricity from all sources (in kilowatt-hours) 1975 10,009 2008 9,555 Sources: U.S. Energy Information Administration; Alaska Department of Labor and Workforce Development; authors'calculations Ginny fay is an assistant professor of economics at ISER, and Alejandra Villalobos Melendez is an ISER research associate. This summary is based on energy statistics reports the authors prepared for the Alaska Energy Authority: Alaska Energy Statistics 1960-2008; Alaska Energy Statistics 1960- 2009, and Alaska Energy Statistics 1960-2010, The authors thank the staff of the Alaska Energy Authority and many others at utilities and businesses who provided information and valuable comments. We especially thank Amber Converse, an intern at AEA, who provided critical help collecting 2010 data. Editor: Linda Leask, Graphics: Clemencia Merrill ENEMY PRODIUM AND Corisf w.D 1N At AsKA, 2008 Until now we've discussed generation and use of electricity. But Figure 4 looks at Alaska's total energy picture: it shows our estimates of II the energy produced and consumed in Alaska, as of 2008. We don't have complete data for more recent years. The figures are in trillion Brit- ish Thermal Units (Btus), a standard measure of energy content that allows comparison across energy types. Figure 5 shows the equivalent of a trillion Btus, in barrels of oil and other common units. North Slope oil accounts for more than three-quarters of Alaska's energy production. Most of that oil is exported, but some is refined into gasoline and other petroleum products used in Alaska. • Natural gas from Cook Inlet is used locally, mainly for residential and commercial uses, while most gas extracted on the North Slope is reinjected to boost oil production. The oil producers use some for their North Slope operations, and two North Slope communities have access to natural gas. About 40% of the small amount ofcoal produced in Alaska is exported, and the rest is used mainly for producing electricity in the Fairbanks area. • Fuel for transportation makes up nearly half the energy consumed in Alaska, and jet fuel alone accounts for a third of total consumption. But almost all that fuel is for flights into and out of the state's international airports —so it isn't "consumed" in Alaska the way other fuel is. • Producing electricity is very inefficient, with 67 TBtus from natural gas, water, oil, coal, and wind producing just 22 TBtus of electricity in 2008. . The largest source of renewable energy in Alaska today is hydropower, which generates nearly a quarter of all electricity statewide. Figure 5. How Much is a Trillion Btus? Crude oil:172, 414 barrels Electricity: 293,083,236 kWh Natural gas: 972,763 Mcf Diesel: 7,210,300 gallons Coal: 50,030 short tons Gasoline: 7,995,431 gallons Wood: 50,000 cords ` Figure 4. Energy Produced and Consumed in Alaska, 2008 (in Trillion Btus) Imports 47 TBtu Crude oil Petroleum 4W 51% products What About Electricity? Electricity is a form of energy, but it is not an energy source. We convert energy sources (oil, natural gas, and coal) into electricity, which in turn supplies energy for many uses. But the conversion process is very inefficient. In 2008, Alaska's electric sector consumed three times more energy than it produced in electricity. N )0 M-* Energy into Energy consumed in electric sector producing electricity Electricity produced Energy Produced:1,985 TBtua Coal: 31 Petroleum productse 12 Renewables: 6d Exports 1,342 TBtu Crude oil 91% Crude oil Petroleum products M Natural gas M Coal M Hydro/Wood/Wind M Electricity t% Coal:1% (1 Petroleum products Liquified natural gas: 2% JlLietfNuell [D!Iesel Gasdoe 3% 16% 10% 23 1 1118% 99% 1 % 11 % 4% Transportation: 215 TBtu Commercial: 47TBtuf Industrial: 56TBtuf Residential: 40 TBtu Energy Consumed: 444 TBtug aAuthors'esti mates. A Btu (British therma I unit) is a standard measure of energy content (or heat va I ue), roughly the amount of energy needed to heat one pound of water one deg ree Fahrenheit. bincludes 77TBtuofnaturaIgas Iiquids cThis figure excludes North Slope gas extracted but reinjected. It includes 259TBtus North Slope oil producers used forth eir 2008 operations, 6TBtus used in Barrow and Nuiqsut, and 157TBtusfrom Cook Inlet. We were unable to specifically trace consumption of about 40 TBtus of that Cook Inlet gas that entered the Alaska market. dRenewables include mostly hydropower (4TBtu), wind power (0.008TBtu) and wood (2TBtu). .'tus of crude oil remaining in the Alaska market do not equal Btus of petroleum products consumed, partly because of imprecise data on imports and exports, but also because we couldn't get data on energy used in the refining process. re commercial sector includes businesses, government offices and facilities, and religious and other organizations. The industrial sector consists of industries that produce or process goods, including petroleum, commercial fishing and processing, agriculture, and mining. Not shown are wood, which generates less than 0.5% of energy for commercial and industrial uses, and coal, which generates less than 0.5% of the energy for industrial uses. glncludes 45 TBtus of energy used to produce electricity and 40 TBtus of natural gas that entered the market but couldn't specifically be traced. Sources: Alaska Energy Authority; U.S. Energy Information Administration; U.S. Army Corps of Engineers, Waterborne Commerce; Alaska Department of Natural Resources; authors' calculations Natural gas discovered in Cook Inlet in the 1950s has been used to gen- erate increasingly more electricity in Southcentral Alaska over the past several decades, as the region's population grew. The electrical intertie linking utilities from the Kenai Peninsula to Fair- banks —the Railbelt—now gives most Railbelt communities some access to electricity from natural gas. But constraints on natural gas supplies, gen- eration, and intertie capacity limit the amount of lower -priced electricity moved from Southcentral to Interior Alaska. The Railbelt region also has some hydropower, and the largest commu- nities in Southeast Alaska rely largely on hydropower. Some smaller com- munities in that region also benefit from hydropower, but others still have to rely entirely on diesel. Diesel is used to generate electricity in most remote communities, although a growing number are supplementing diesel with wind and other renewable energy sources. Barrow and Nuiqsut on the North Slope have ac- cess to natural gas from local fields. Some of the electricity for Fairbanks and surrounding areas is generated with diesel and naphtha, as well as coal. Figure 3 shows how sources of electricity affect prices and use. • Communities that get electricity mostly from hydropower have the low- est prices —because government subsidized costs of building hydropower facilities —and the highest use. Petersburg and Metlakatla are examples. Figure 2. Electricity Generated in Alaska Over Time, by Fuel Type A 1971 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 092010 • Places that have access to natural gas, as well as some hydropower, have mid -range use and prices. That includes Anchorage and Fairbanks. • Places that rely mostly on diesel have the highestprices and the lowest use. That includes communities throughout Western, Interior, and Northern Alaska, as well as those in Southeast without hydropower. These places are generally eligible for payments under the Power Cost Equalization program, a state program that reduces prices of electricity for residential customers (see note on Figure 3). Figure 3. Average Annual Residential Use of Electricity and Price per 500 kWh, Selected Alaska Communities, 2010* Average Annual Use, Total kWh Price per 500 kwh Petersburg — L= IIf $50 M Without Power Cost Equalization 1• With Power Cost Equalization (see note below) Metlakatla � � • �$45 Fairbanks E$100 Alaska 0 $75 Barrow Barrow M$60 • Kivalina Anchorage � a �$65 Diomede AIlakaket White Mountain a Fairbanks Cordova M Railbelt $120 Petersburg Healy Lake Kivalina MEMO 1*, Toksook Bay . Anchorage Hoonah ©$180 Lime Village Cordova Petersburg Toksook Bay MI - lllllm $105 M Metfakatia Hoonah AN= M$173 Diomede mom $70 *In the 1980s, Alaska's state government funded some large hydroelectric Allakaket ram] projects, and many residents of Southeast and Southcentral Alaska have $100 lower electric rates as a result. At the same time, the state established the Power Cost Equalization program, which helps reduce the price of Healy Lake FM ® electricity by paying eligible utilities part of the price of electricity for M$110 residential customers and community facilities. Communities eligible White Mountain �r for PCE assistance are determined by state statute, based on local prices -1,846 I♦ $220 of electricity. 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