To build or not to build

Fairbanks Daily News Miner, 1/27/91
By Fred Pratt
Page B-1

The crowd at the Northern Alaska Environmental Center is always telling us that it's better to conserve energy than build new power plants (or anything else for that matter).

Now that a state study says a three-part conservation program is not only feasible on a cost-benefit basis, but just as feasible as the proposed gas pipeline from Cook Inlet to Fairbanks.

The study was part of the effort being made by the Alaska Energy Authority for its proposed Healy "Clean Coal" power project, which flunked all the cost-benefit tests itself.

While the studies already cover a good-sized shelf, they are reviewed succinctly in a new legislative research report released this week.

There's a lot of good stuff in this report, but today I'll cover just the conservation program analysis.

In the "Railbelt Intertie Reconnaissance Study" written in 1989 by Decision Focus Inc., all the various suggested AEA projects are subjected to a cost-benefit analysis. The study was the first in a series required by the legislature to justify the Healy project.

First the consultants broke down oil price projections for the next 20 years into low, middle and high scenarios. The low forecast assumed oil prices of $13 a barrel this year rising slowly to only $19 a barrel by 2010. The high forecast saw $19 a barrel by 2000 and $30 a barrel in 2010.

Then the consultant made low, middle and high forecasts for electric power demand growth in the Railbelt. The low and middle forecasts expect declining or relatively flat demand through 2000, while the high forecast saw steady growth after 1990.

Combining these two sets of assumptions gave nine different scenarios for the next 20 years.

The "low-low" forecast was judged the most probable, with a 30 percent chance of coming true. The low oil price and medium power demand growth was considered next most probable, with a 23 percent chance.

The consultant then analyzed the costs and benefits from the Healy project, as well as other proposals, including upgrading transmission lines, the Railbelt gas pipeline, and other coal-fired plants.

The result was that the most cost-effective program would be a $10 million upgrade of the Anchorage-Fairbanks power intertie, which would bring savings of four times its cost.

Next best is the Railbelt gas pipeline, which would cost $284 million in a version slightly smaller than the one proposed by Enstar several years ago. It would have a cost-benefit ration of 1.86, slightly less than half as good as the power line upgrade's 4.0.

Third came the three best of the eight proposed conservation programs. They would cost $16 million and yield savings of $28 million, the consultants figured, for a cost-benefit ration of 1.75.

Last came a package of all eight conservation programs. They would cost $44 million and yield $61 million in savings.

What are these conservation programs? Most are rebates the state would pay to businesses that sell or install eligible equipment, rebates supposedly passed on to consumers.

The programs were dreamed up and evaluated by the University of Alaska's Institute of Social and Economic Research. They are:

1. $500 for converting residential hot water heaters from electric power to natural gas;

2. $40 for buying an electric hot water heater with an efficiency of more than 95%;

3. $170 for installing gas piping to a residential clothes dryer and $50 for buying a gas clothes dryer;

4. $50 for buying a refrigerator that's at least 28 percent more efficient than required by new federal appliance efficiency standards;

5. $50 for buying a freezer that's at least 35 percent more efficient than new federal standards;

6. 30 cents to $1.80 for buying energy efficient fluorescent lamps;

7. $13 for each electronic fluorescent ballast, the "starter" for fluorescent lamps;

8. $7 to $12 for compact fluorescent lamps; and

9. A rebate for exceeding conservation standards in new commercial construction.

The consultants figured that 6, 7, and 8, the lighting group, would generate nearly 60 percent of the expected savings. They threw out No. 5, the freezer rebate, in later analysis.

However, ISER figured the program would have to be maintained for 20 years to yield the full seven percent savings it projected in electric power demand, and the savings would disappear over the next 20 years as the incentives end and we go back to "normal" buying patterns. A 10 year period, considered more politically realistic, was used in the later cost-benefit analysis.

That's the problem, of course. Sooner or later we'll still need new generating capacity.

The Legislative Research Report 91.025 is available at the local Legislative Information Office.