On the precipice of a gas shortfall in Cook Inlet, Alaska utilities plan to use more.
Alan’s last post mentioned the precipitous drop in wind and solar prices since 2010 (around the time of the Railbelt’s last wind projects), which is being successfully integrated more quickly in most other places. And NREL’s preliminary results show the cheapest future electricity mix as 78% renewable. Our Cook Inlet natural gas supply crisis should be driving us that direction even faster, but instead, filed plans show no drop in gas use.
Most of Alaska's population depends on Cook Inlet natural gas, which supplies two thirds of the Railbelt's electricity, and most of the heat from the Kenai Peninsula to the Mat Su valley. It's a closed system, with one main seller (Hilcorp), a few main buyers (Enstar and the electric utilities), and no gas imports or exports.
This gas is running out. Geologically, there's still gas. Economically, what's left isn't worth the cost of exploring for and extracting it. This problem has been known for well over a decade, prompting state reports in 2009, 2015, and 2018, warning of the eventual crisis.
Now we're at the brink. In May 2022, Hilcorp announced that it couldn't guarantee gas supply beyond its existing contracts -- the longest of which ends in early 2028 -- and urged utilities to use less of its gas. The state's 2022 report warns of shortfalls within five years. Utility leaders testified to the legislature about the near term need for gas imports, and have been exploring import options -- all of which will be substantially more expensive than our current prices.
Despite this, the utilities have been releasing plans to use more gas.
For the past two years, the Regulatory Commission of Alaska has required electric utilities to submit estimates of future natural gas needs. In 2022, they planned to keep future gas use mostly flat -- with a slight near term increase followed by a decline back to 2022 levels. A year later, after substantially more dire news about Cook Inlet gas, planned use actually grew.
This summer the electric utilities and Enstar released a joint report on their Cook Inlet Gas Supply project. The "normal" demand assumptions for the electric utilities are similar to what they filed with the RCA -- a short term increase, falling back to flat, and then an eventual slight decline. This report did at least contemplate a possible scenario with substantially lower gas use in the electric sector.
graph from joint utility Cook Inlet Gas Supply report
Even in that optimistic scenario, overall gas use in Cook Inlet declines by less than 20%. This is because the majority of Cook Inlet gas is used to generate heat, not electricity. And while electric utilities have some incentive to reduce the cost of fuel to run their power plants, the single gas utility -- Enstar -- is a private company that can only grow by selling more gas.
The State Energy Task Force just released a draft of their Energy Master Plan. The task force was convened with the idea of a “moonshot” goal of consumer electricity prices of 10 cents/KWh, statewide. Even in the Railbelt, imported gas would bring electricity fuel costs alone above that — and fuel is only about third the current cost of power. The report contemplates bonuses to utilities for electricity diversification, reviving the Susitna Watana project ($5.6 billion in 2014 dollars), hoping the $43 billion gas pipeline goes through, and working on the $8.7 billion pipeline in case it doesn’t, as well as subsidizing large industrial customers to come in and increase the load. While increased load does help spread out the “fixed costs” of delivering electricity, it will only accelerate gas shortfalls and gas price increases on our current gas-dependent grid. Also, if the state pays for a pipeline, that does not save state consumers money — we may see lower bill numbers, but will pay all those costs through PFD cuts, taxes, gutted state services, or all of the above.
The report predicts no reduction in gas for heating for the next couple decades, and a zero to 20% reduction in gas use for electricity. Renewable electricity could provide a much larger portion of our power. And heat pumps could replace gas heat in the Railbelt, if the electric grid running them wasn’t dependent on gas. Yet there appears to be no serious contemplation of a future, even a distant one, without heavy reliance on natural gas, so the $600 million to $900 million import infrastructure projects might be the smallest beginning of the costs.
For more, see my analysis of the goals and plans of Alaska’s Railbelt electric utilities, including renewable energy, emissions, and utility-by-utility results
.