Tim Bradner: Oddly, many public buildings have not undergone energy retrofits

Tim BradnerSeptember 21, 2013 

We're a bit spoiled in Southcentral Alaska when it comes to energy. Home heating and electricity, fueled mainly with gas, are still cheap compared with other parts of the state. In Fairbanks, where fuel oil is used, winter heating bills rival mortgage payments.

In rural Alaska, fuel oil is even more pricey. Low-income families can spent up to 40 percent of their disposable income on energy.

We're making some headway, however. The quickest and easiest way to reduce heating bills is to better insulate homes, and an energy efficiency and weatherization program run by Alaska Housing Finance Corp., the state housing corporation, as well as other agencies, is a success.

Here are examples. In Northwest Alaska, NANA Regional Corp., the Denali Commission and RuralCap are well along in "EnergyWise," a community energy conservation program. Small village residents can see fuel use drop by as much as 30 percent after home retrofits, I'm told.

In Juneau, residents at Villa Gastineau, a condominium, worked together to retrofit their building and achieved a 46 percent reduction of use of oil for heating.

Statewide, 32,000 residents have been retrofit so far, and the estimated fuel savings is estimated at almost half a million barrels per year. So far the state has invested $560 million in home weatherization and the residential efficiency rebate program.

It comes as some surprise, therefore, that many public building owners, like school districts, municipalities, even state agencies, haven't caught onto this. We're all alarmed at the continuing rise of government operating costs, and we know fuel costs drive a lot of this, particularly in rural Alaska. Schools, for example, spent about $90 million per year for fuel.

Unfortunately, a special AHFC low-interest loan fund set up for Alaska public agencies to finance energy conservation has had zero loans since it was formed in 2010, and only two inquiries. This is despite the fact that, under AHFC's programs, contractors who do the retrofits guarantee fuel savings enough to pay for them. There's no risk -- the contractors are on the hook for performance and they accept that.

So why no takers? It's a puzzle. The excuse being given is that public agencies "aren't used" to taking on debt and working out unusual financing arrangements, and there are complications with annual budget cycles.

This is baloney, I think. The cynical side of me says the real reason may be that too many schools and agencies would rather just go to the state budget hog trough in Juneau for a state capital grant. That may appear easier, for now, than working out a loan and contractor repayment scheme.

In all fairness, there are agencies pushing ahead with their own retrofits outside the AHFC program. The University of Alaska Fairbanks, for example, has an aggressive program under way on its campus financed by the university itself, which is able to borrow just as cheaply as can AHFC. UAF is working with Siemens on the project.

I'm sure other university campuses have similar programs, and I know the state Department of Transportation and Public Facilities, which operates many state-owned buildings, is mapping out a program.

However, there are still many municipalities and their school districts who need this, and the excuse that they "aren't used to debt," is odd because municipalities work with various debt instruments all the time for themselves and their schools.

Rural schools in the state-funded Rural Education and Attendance Areas (REAAs) do have a problem, however. They are essentially state creations and have no financing capability. Of all public entities, rural schools need energy conservation most of all.

The state should step in and help the REAAs. A special state loan program, perhaps under the Alaska Industrial Development and Export Authority, which now has authority to do energy loans, could accomplish this. There's no risk if contractors do guarantee the savings.

If a rural school fuel bill can be cut 25 percent, as seems possible, that's more money into the classroom.

In fairness to those who complain that AHFC's public energy loans are too complicated to get, I do know the agency is working on ways to make it simpler.

I don't think that's the underlying reason why the loans aren't being used, however.

It's time we weaned ourselves off the state budget hog trough for things like this when there are alternatives. State capital budgets are going down fast because Alaska's oil production, and revenues, are declining. This year our state budget will exceed revenues for the first time in years, and we'll have to tap cash reserves.

We'll see leaner capital budgets in the future, and Gov. Sean Parnell and state legislators will look carefully at every dollar spent, as they should.

Our home weatherization and energy efficiency programs are a big success, but we need public building owners to get on this bandwagon because big savings are possible.

The next goal should be to help commercial building owners. Large building owners can generally take care of themselves, but a low-interest loan program for small businesses to retrofit their buildings is worth considering.

Remember -- essentially no risk. This should be a no-brainer.

Tim Bradner writes on business and economics topics for Alaska publications. From 1970 to 1984, he worked for BP, a major North Slope oil company. Some of that time was spent as a lobbyist for the company in Juneau.

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