Energy consumption in Alaska

Summary: Alaska is a major producer and exporter of crude oil. At the same time, its small population, large land area, and unique geography have led to a diverse energy supply infrastructure.

Energy production and consumption in Alaska grew significantly in the twentieth century, with corresponding increases in population and the rise of political and social institutions. Indigenous peoples have lived in the far northwest corner of the North American continent for more than 10,000 years, but only in the last century has Alaska sustained interconnected communities with large energy needs. Still, with little transportation infrastructure and only about 700,000 residents in a land area of 586,412 square miles, Alaska relies on numerous energy resources and distribution systems to serve its urban and rural communities. As of 2021, Alaska ranked first among US states for energy consumption per capita.

Early Energy Use

In premodern times, Alaska’s Indigenous peoples used primarily wood, coal, and chunks of oil-soaked tundra, created by surface petroleum seeps, for space heating and cooking. Energy conservation in the form of subterranean housing was common, especially among the Inupiaq of Alaska’s North Slope. With 119 million acres of forests in Alaska, wood remained the primary source of fuel and construction materials for Russian fur traders, who occupied the coastal regions from 1741 to 1867, and American gold miners, who rushed into the territory following the subsequent US purchase of Alaska for $7.2 million. Gold strikes in Juneau in 1880, the Klondike (Yukon) in 1897, and Fairbanks in 1902 brought tens of thousands of individuals who quickly denuded the forests around those communities. Wood–powered steamboat travel on the Yukon and Tanana Rivers, the region’s primary water transportation corridors, resulted in clear-cuts extending several miles from the banks of the rivers. Harvest data are not available for the late 19th century, but by 1909 the annual cut was 8 million board feet, a number that rose to 55 million board feet two decades later.

Alaska experienced significant population growth immediately following World War II, with an increased military presence, completion of the Alaska Highway, and air travel. The changes brought about a transition to coal production, which increased accordingly in the period. Today one coal mine operates in Alaska, the Usibelli mine in the state’s interior. Its annual average production of 1.5 million tons per year supplies six power-generation facilities along the state’s so-called Railbelt, the rail- and highway-connected communities (including Anchorage and Fairbanks) that constitute 70 percent of the state’s population and account for 80 percent of total electrical usage. Coal is also exported to Asia. Although estimates of Alaskan coal reserves run as high as 5 trillion tons, most of the resource is unrecoverable because of the lack of transportation infrastructure and the general inaccessibility of large areas of the state. The roadless northwest region of Alaska in particular contains large coal reserves, but long-standing proposals to build roads or rail lines to the area have not come to fruition.

Modern Oil Era

By the 1950s, widespread oil exploration had begun to play a major role in transforming Alaska’s economy and political institutions. The Swanson River discovery on the Kenai Peninsula in 1957 totaled 250 million barrels of crude and resulted in state revenues of $84 million by 1963. In that decade, both onshore and offshore natural gas wells in nearby Cook Inlet began supplying Anchorage, the state’s largest city, with an affordable source of energy. Today natural gas accounts for 70 percent of power production on the Railbelt, which has an installed power capacity of 1,340 megawatts and an average load of 500 megawatts. In 1968, oil companies discovered the Prudhoe Bay field on the North Slope, the largest petroleum reservoir in North America, with an estimated 20 billion barrels of crude oil and 30 trillion cubic feet of natural gas. The US Department of Energy estimates that satellite fields across the Alaskan Arctic region hold an additional 36 billion barrels of crude oil and 137 trillion cubic feet of natural gas.

The Trans-Alaska Pipeline went into operation in 1977. The 800-mile oil line delivers North Slope crude oil to Valdez, an ice-free, deepwater harbor on the southern coast, where tankers ferry the oil to refineries in the lower 48 states. A 129-megawatt power plant near Fairbanks is fueled by oil from the pipeline, while a refinery produces jet fuel for the Fairbanks and Anchorage airports. In its first three decades of operation, the pipeline has transported more than 16 billion barrels of crude oil. Today, Alaska accounts for 8 percent of domestic oil production. An export ban that reserved Alaskan crude oil for domestic use was lifted in 1995, but to date exports to Asia have been minimal.

More than any other industry, oil development has had a major impact on Alaska’s modern history. From the 1930s to the 1960s, Alaska’s politics were largely progressive. Upon statehood in 1959, Democratic candidates won the offices of governor, lieutenant governor, US congressional representatives and senators, and a majority of state legislative seats. Running on a pro-oil, pro-development platform, Republican candidates began having success in the 1960s, and today Alaska is solidly conservative politically—with both parties supporting resource development. Alaska derives 80 percent of its annual revenue from oil, a small percentage of which is deposited into the Alaska Permanent Fund, a $30 billion reserve account established in 1976 from which annual dividends are paid to every Alaska resident. The economic windfall from oil development resulted in the elimination of the state income tax in 1982.

The discovery of oil on the North Slope helped to catalyze Alaska’s indigenous peoples’ political engagement. Congressional approval of the Alaska Native Claims Settlement Act of 1971, which conveyed 44 million acres of land and $1 billion to Alaska’s indigenous population, came about from the need to resolve land issues before construction of the Trans-Alaska Pipeline could commence. In 1972, the Inupiaq people of Barrow established the North Slope Borough, a local government unit larger than all but 11 states, which has taxation authority over the Prudhoe Bay oil fields.

Federal and state land management issues related to oil development have also contributed to Alaska’s modern oil era. Areas with restrictions on oil development but of particular interest to the oil industry include the National Petroleum Reserve–Alaska, a 23-million-acre federal reserve to the west of Prudhoe Bay; and the Arctic National Wildlife Refuge, a 19-million-acre area of predominantly federally designated wilderness, to the east. Both areas feature varying degrees of wildlife protection status. Over the last few decades, Congress and Republican presidential administrations have directed the relevant federal management agencies to study the regions’ petroleum potential and possible avenues for exploration and development.

By the early 1980s, burgeoning oil revenues enabled Alaska to diversify its energy sources and fund alternative and renewable energy projects. The Four Dam Pool hydroelectric project began delivering power to several coastal and island communities in 1985. The Bradley Lake facility, near the community of Homer, went into operation in 1991; it supplies power to the six utilities along the Railbelt. Apart from these relatively recent projects, hydropower has a long history in Alaska dating back to the Gold Rush era, when primitive waterwheels were used in mining operations. The Eklutna facility went into operation in 1955 with an installed capacity of 30 megawatts for the Anchorage area, and the Snettisham facility opened in 1973 and now supplies power for Juneau, the state capital.

Like oil drilling, hydropower projects have had an effect on the state’s political development and environmental policies. Two proposed but never built hydroelectric projects, Rampart Dam on the Yukon River and Susitna Dam north of Anchorage, proved controversial for their significant environmental and social impacts. Rampart Dam in particular was criticized for its potential displacement of Alaska Native peoples whose villages would be flooded by the reservoir.

In 2024, nearly 50 hydropower facilities operated in Alaska with a total installed capacity of 423 megawatts. State investment in solar, wind, and geothermal energy projects in the 1980s did not have an appreciable impact on Alaska’s energy picture, although these and other renewable sources are receiving attention today.

Away from the Railbelt, Alaska has more than 200 small rural communities that are not connected by either roads or power transmission lines. Sometimes called the “bush” or “village Alaska,” these communities are often majority Alaska Native in population and are typically characterized by high unemployment and a subsistence hunting and fishing lifestyle. Although the US Bureau of Indian Affairs supplied some rural schools with small generators as early as the 1950s, most rural communities did not become electrified until the 1970s. Many rural villages use diesel generators as their primary power source—Alaska is second only to Hawaii in the percentage of power generated in this way. Diesel fuel is typically shipped to the communities via river barges in summer, where it is stored in bulk tank facilities throughout the winter. The purchase and transportation costs of fuel, along with facility operation costs for these low-capacity, stand-alone electrical grids, translate to power costs up to five times higher than on the Railbelt.

With its high oil revenues in the 1980s, the state of Alaska created Power Cost Equalization (PCE), a program that subsidizes the high cost of power in rural communities. In 2009, the PCE program offset $37 million in electric costs for 184 communities, at an average per-customer rate of $1,301. In 1998, Congress established the Denali Commission, an independent federal agency designed to provide critical utilities and infrastructure throughout Alaska. The Denali Commission has funded construction and upgrades to rural power plants, transmission lines, diesel fuel tank farms, and alternative energy projects such as wind turbines. The Alaska Energy Authority is a public corporation established by the Alaska legislature in 1976 to construct, acquire, finance, and operate power projects and facilities.

Rural towns' lack of connection to the power grid has been seen by some as an opportunity to more easily implement renewable energy solutions. The town of Kodiak, which once derived much of its power from diesel generators, set a goal in 2007 of getting 95 percent of its energy from renewable sources; environmental concerns were one motivation, but the high cost of diesel also played a role in the decision. By 2014, over 99 percent of its energy came from wind and hydropower. A number of other towns reliant on diesel generators have followed suit.

Renewable Energy

Hydropower accounted for more than 20 percent of Alaska’s total electric production as of 2023, making it by far the largest source of renewable energy, which accounted for roughly one-fourth of the state's energy production. In the twenty-first century, Alaska has attempted to encourage development of alternative and renewable energy sources with tax credits, net metering policies, and grant and loan programs. Biomass energy development is focused on combined heat and power (CHP) systems that use cordwood, pellets, and waste wood materials to generate heat and electricity for schools, office buildings, and other public facilities. Alaska is also one of only a few US states to generate geothermal energy; its first geothermal energy plant opened in 2006.

Some rural communities are currently using wood-fired boilers in an effort to displace costly diesel heating fuel. Communities with fish-processing plants are also investigating turning fish waste into biofuels. As Alaska is an active volcanic region, research is being conducted on geothermal resources in Akutan, Pilgrim Hot Springs, and other locations around the state. Extensive research is also being conducted on hydrokinetic, wind, solar, small-scale nuclear, and tidal resources. The Alaska legislature has set a goal for 100 percent of the state's energy to be produced using nonrenewable resources in the 2030-2050 timeframe.

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