With declining oil prices, Alaska is looking at a new reality for budgeting this year. I congratulate Gov. Walker on signaling an end to big ticket items that may be beyond our means to build and maintain. But, I urge him to look more closely at options for conservative and cost-effective spending that creates long-term jobs and reduces the burden of costs for living and doing business in Alaska.
At the request of the Alaska Legislature, a team of economists from the Institute of Social and Economic Research, including myself, evaluated a wide range of approaches to solving Alaska's energy challenges. Energy efficiency and weatherization programs emerged strongly as the most conservative and cost-effective option. These programs deliver impressive results: They save energy, save money, create both short-term and permanent jobs, and yield a timely and low-risk return on invested state dollars.
Energy efficiency projects create short-term construction jobs as buildings are retrofitted. Jobs are created for a wide mix of Alaskan workers throughout the construction and related trades. Energy retrofit construction was also found to be an important job source during the most recent recession. What's more, money saved on energy stays in Alaska, in turn creating thousands of permanent jobs. Money saved in the public sector by retrofitting public buildings can be allocated to other public needs or used to offset other budget demands. Money saved in the commercial sector will be available for future investment or other spending.
To date, the state has funded highly popular and effective energy-efficiency programs to retrofit Alaskans' homes. Progress is ongoing to retrofit public buildings, and a newer program provides loans to retrofit commercial buildings.
As of early 2013, the time of our report to the Legislature, we had retrofitted just 10 percent of Alaska's homes. This effort created 4,000 construction jobs and more than 300 permanent jobs. Spending on energy was reduced on average by 28 per cent to 33 percent with as much as 43 percent savings in areas with higher fuel costs such as Northern and Interior Alaska. Annual statewide savings by households comes close to $30 million per year. These savings continue year to year.
Few other programs have demonstrated the capacity to reduce costs for Alaskans and create jobs to this degree. These programs have statewide impacts and have saved Alaskans millions of dollars. We therefore recommended that the Legislature increase the scale of funding so that more homes would be weatherized sooner. We also recommended that the state provide multi-year funding to provide a more stable business climate for the related construction industry. More jobs would be created sooner and more predictably.
Efficiency appears to the most effective, dependable path to lowering energy costs for all segments of energy consumers. We found that significant potential savings to Alaska businesses and government remain to be realized. These savings were estimated at over $125 million in energy spending for public buildings and over $200 million per year for commercial buildings.
Alaska has upwards of 5,000 public buildings with annual energy costs of more than $641 million. Retrofit of these buildings was estimated to potentially save the public $125 million annually. Retrofits would create more than 7,500 jobs in addition to about 1,300 permanent jobs gained through recirculation of the savings. As a case in point, Alaska maintains 479 schools. Based on a conservative estimate of 20 percent energy savings, roughly $18 million per year would be freed up to fund other education needs.
Unfortunately, Gov. Walker's first brush at the capital budget eliminates all funding for energy efficiency and weatherization.
With the abrupt end of these programs, Alaskans would lose the momentum of the savings and job creation described above just when these programs are ramped up and running effectively. Also, we would likely lose valuable skills and know-how within the construction trades, just as the retrofit industry is hitting its stride.
As we look toward leaner budgets, Alaskans cannot control world oil prices, but we can control how much we spend on energy in our own homes, businesses, and public facilities. Energy efficiency programs deserve a hard look as a cost-effective means of saving money and providing jobs for Alaskans statewide.
Sue Libenson has more than 25 years experience with natural resource policy in Alaska. She co-authored a 2013 ISER report to the Legislature comparing state policies for reducing energy costs.
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