Kotzebue Clean Energy Coalition Newsletter

The latest from just above the Arctic Circle.

Here is what is on my mind...

The Pitfalls of PCE

Let me preface this by saying that the PCE and its knock-on effects are complicated, it is an algorithm that I still do not understand completely...but this is my understanding right now.

Power Cost Equalization (PCE) was a major step towards equity for rural Alaska when it was passed in 1984. It was established by the Alaska State Legislature to help offset the economic burden of electricity expenses for residents in remote communities. 1984 was a very different time. Prince was on top of the billboard charts with When Doves Cry and the president was about to remove solar power from the Whitehouse roof.

The State of Alaska was not thinking about renewables when it enacted PCE. Al Adams, from Kotzebue and a legislator that I admired, was thinking about fairness and seized an opportunity to help Rural Alaskans. The PCE program has undergone various amendments and changes since its inception to adapt to the needs of Alaska.

The problem Renewable Energy and PCE for utilities is that if they own the RE asset, the energy from that asset is not treated like the energy from burning diesel; they do not get PCE credit for renewable energy. Villages, like Shungnak, found a brilliant solution; the tribe owns the renewable energy asset and sells the energy to the utility and magically that energy is eligible for PCE funding. An added benefit is economic development for the tribe and the community. Imagine for a moment that someone else, an outside investor or even a native corporation owned that asset. We would be right back to the extraction of value from native communities that we see with the fossil fuel industry. Tribes, more than any other entity, provides services and spends money in small Rural Alaskan communities. Having resources accrue to tribes, to be circulated in the community, is how you build a healthy local economy. Any proposed “legislative fix” to the utility ownership problem would likely eliminate economic development and will not help the average consumer or economic situation in Alaskan villages.

What happens if PCE is adjusted to count utility owned assets in the PCE formula like diesel?

In short, not much. For the average consumers the price does not change, it is already capped by PCE at least for 750kW per month. For the utility they are eligible to receive more PCE funding from the State, this is a good thing. Where it gets really interesting is with commercial consumers for example the federal government, school districts, city governments and private businesses. Their rates would go down. So you could say, since School Districts are the largest user of electricity in villages, that the legislative fix is a way backdoor method for the governor to fund schools (who’s funding he has cut to the bone) on the back of the PCE fund. This amounts taking from a rural Alaska endowment to fund what should be a State responsibility. I’m not against funding schools, but this is questionable methodology in my mind.

I am biased towards tribal development of RE assets, but the evidence of that model benefitting the community is compelling.

Consumers on the other hand, even if they don’t know it, are being economically disincentivized to add solar and wind to their homes. Here is the deal, if you add solar or wind and tie it to the local microgrid you are adding it “behind the meter”. That means that you use that energy first, instead of the subsidized energy provided by PCE. From an economic perspective, your payback time is much greater because you are replacing energy that costs 0.24 cents, the PCE rate, and not the 0.44 cent energy, the non-PCE rate*. So although they are not really losing anything, they are losing a potential benefit. If you pencil out the economic benefit of installing a solar array the value of the array is distorted by PCE. There are still benefits for adding renewables, like energy security and redundancy which are important. I think there are ways to address the "behind the meter" problem…but I will get into that another time.

*Those are the estimated rates in Kotzebue and may be different elsewhere.

What's Up in Alaska

https://alaskaventure.org/newsletters/alaskas-potential-global-leadership-in-climate-and-green-energy/​

I started following Alaska Venture Fund on LinkedIn because I am always on the lookout for other people's money to invest in our renewable energy projects. As I continue to follow them, their approach and people resonate with what we are trying to achieve here in Kotzebue as well. I will have to reach out and visit them one day just to visit. This article from their Newsletter​ Archive talks about the potential for Alaska to provide leadership in the energy transition.

Article Worth Reading

​“Record-breaking sugar battery could supercharge transition to renewable energy” by Anthony Cuthbertson. I usually avoid battery articles because you hear so much, but so little comes to market. This seems like a big breakthrough. We have finally found a beneficial use of sugar! Besides of course it's awesome taste.

Quote

"People are trapped in history and history is trapped in them."
​― James Baldwin
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Let me know what you think at chad.nordlum@qira.org.
Have a great weekend.
​
Chad

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