State grants are Bush boon

With that in mind, let's give credit to our Alaska Energy Authority, state legislators and Gov. Sean Parnell, who have given steady support to a renewable energy grant program aimed mainly at helping small rural villages.

The program is already reducing these communities' reliance on costly diesel for power generation and space heating. It's a worthy public investment because reducing the amount rural Alaskans spend on diesel keeps cash at home, strengthening the local village economy.

It's also good for the state's larger cities, including Anchorage, because rural residents will have more money to spend on purchases here. Money stays in Alaska rather than going to purchase oil from countries that are sometimes unfriendly.

Legislators designed the program to last three years, with $250 million in grants to be allocated. We're now two years into the three years.

So far the energy authority has approved $150 million in state funds for 124 projects around the state. By the end of this year the number should be up to 180 projects.

Local partners, and local matching funds, are required, so the actual amounts being spent are higher because of the local contributions, which vary.

The Legislature will consider another $50 million in projects next year, the third and final year.

Considering just the projects completed now, there will be annual savings of 2.5 million gallons of fuel that won't have to be purchased. As more projects are completed, by the end of 2012 the savings will be 8 million gallons per year, increasing to 9 million gallons yearly the following year.

Assuming an average delivered fuel cost of $5 per gallon (the actual prices are higher, no doubt), 9 million gallons a year saved adds $45 million dollars a year to the purchasing power of rural villagers.

If the Legislature completes the third year of funding and the governor approves it, the fuel savings will grow.

This is something to be proud of. Alaska now has the largest renewable energy development program of any state, and it appears to be the only state program aimed at small projects in rural areas.

The bulk of these are small wind and hydro projects but there are innovative wood-heat and even solar projects. Yes, the sun does shine, even at northern latitudes.

Finding substitutions for diesel is only part of this story. Energy conservation is the cheapest and easiest way to reduce diesel use and the energy authority also has programs under way to upgrade the efficiency of local power plants, many of which are aged, and help communities retrofit public buildings.

So far, efficiency programs, funded with a mix of loans and grants, have reduced electrical use in villages by an average of 4.5 percent. This is power that would otherwise have to be generated, mostly with diesel.

The renewable energy grant program is set to end in another year but it's interesting to consider the possibilities of an extended and truly aggressive renewable energy program for rural Alaska.

The energy authority has charted a path that through a mix of conservation, power plant efficiency improvements and local renewable energy projects could reduce -- to a startling degree -- the use of diesel to generate power in rural communities. And there would be additional reductions in diesel used for space heating.

Here are the numbers: The authority believes 35 million gallons per year now used for power generation could be reduced to 7.5 million gallons. Diesel used for space heating could be cut from the 60 million gallons per year used currently to 35 million gallons.

Between the two, that's a combined reduction of 62.5 million gallons of diesel yearly. That's an annual savings of $312 million per year, and an equal increase in rural residents' income for other purchases.

These numbers and how they were calculated are in the authority's new booklet, "Alaska Energy Pathways," in which the energy authority lays out the state's energy strategies and goals.

All this doesn't mean the authority is focused only on rural Alaska, or that the state won't pursue bigger renewable energy projects like a hydro facility at Watana, north of Anchorage, or Chackachamna, west of the city.

Last year the energy authority worked with regional electric utilities to develop an Integrated Resource Plan for new power projects needed for Southcentral and Interior Alaska, which include provisions for a large hydro project.

The state already has a substantial hydro development track record. In the 1980s, a number of large projects were built in Southeast Alaska and near Homer. These facilities, which include the Bradley Lake project near Homer, provide Alaskans with the lowest-cost power available.

Back to my point: These projects show government can do things right. And it can be done again.

Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears every month in the Anchorage Daily News.