Cost of Energy

Putting the Cost of Energy in Context

While energy and its cost to our communities are the main focuses of this wiki, the context of energy within the social framework of Alaskan communities must also be considered. Energy is ultimately a tool used to achieve a certain quality of life. Energy heats homes, runs appliances, provides light, fuels our vehicles, and powers communication equipment, among other applications. With this fact in mind it is clear that state energy planning must look at more than simply reducing the cost of energy in communities throughout the state. The planning effort must also look at the much more complex goal of improving and sustaining the quality of life across the state to retain a stable population base, and diversify the economy.

Migration from Rural to Urban Areas

The statement has often been made that many Alaskan rural communities are dying, and this is frequently attributed to the high cost of energy in those locations. It is easy to document the fact that residents in most rural communities spend a disproportionate percentage of their gross income on energy when compared to the more urban areas of the state. According to ISER, in 2006 rural residents spent approximately 9.9% of their total income for energy related expenses, an increase from 6.6% in 2000, and there has almost certainly been a further increase since 2006.

While this trend is most apparent in rural Alaska, the rising cost of energy is affecting Alaskans in all regions of the state. Southeast Alaska and Kodiak, which largely benefit from stable electric costs from hydropower, are still being effected by the high cost of space heating. The Fairbanks area has seen a dramatic increase in both space heating and electricity costs. Even in the Anchorage area average residential natural gas prices increased 27% in one year, from 2006 to 2007. While the rising cost of energy is clear, what is less definitive is whether these rising costs directly correlate to out-migration from rural to urban areas, and out of the state completely.

ISER recently completed a study [1] that indicates migration from rural to urban areas of the state is a long-term trend caused by a number of factors and that it has been occurring for generations in some parts of the state. There has also been a small net migration out of the state since 2002. Many factors contribute to this trend, including the overall high cost of living in Alaska. In general, people migrate to improve their lives by increasing their access to opportunities such as better paying jobs, education for themselves and their children, and a lower cost of living. It is possible that the current spike in energy costs may serve as a tipping point, or final straw stressing rural residents to the point where the decision to leave is finally made. This decision is also frequently influenced by other considerations: the lack of adequate housing, lack of well paying jobs, and deterioration of social networks due to prior out-migrations and other social issues.

In fact, an attitudinal survey of 600 Alaska Natives and 302 non-Natives who had moved from rural to urban areas of Alaska was conducted by the First Alaskans Institute in 2007 [2]. It indicated that for 65% of survey participants, nothing would motivate them to return to rural Alaska. This is presumably due to a lack of real or perceived opportunities for themselves and their families, which combined with the high cost of living, reduced the overall attractiveness of their community of origin.

In the technology screening database developed as part of the Alaska Energy Report, the cost-to-benefit analyses of energy projects in each community are based solely on the potential for displacing diesel fuel. There is no consideration included for the impact of any single project on the overall economic health of a community, such as the potential for new jobs, businesses, or industries. However, even though the database does not quantify those impacts, they exist. Examples include jobs created by harvesting and processing wood for a biomass energy project, the development of a greenhouse business based on low-cost heat from a geothermal development project and the stabilization of energy prices through the use of local renewable resources.

An energy project could also have a positive impact on the social health of a community. Examples include a more stable employment base, educational opportunities for local students and the perception that energy prices are becoming more stable. It is usually the communities that already have strong leadership and cohesive social structures that will be most successful in implementing new projects, and those communities tend to be larger.

1. Fuel Costs, Migration, and Community Viability
Colt, S. and Martin, S., University of Alaska Anchorage, Institute of Social and Economic Research, May 2008.
2. Engaging community knowledge to measure progress: Rural development performance measures progress report
Alaska Native Policy Center (September, 2007), prepared for the Denali Commission. download report
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