Energy Effciencies Combat Costs: The surprising ways businesses can reduce energy consumption.

• Author: Simonelli, Isaac Stone
• Position: ENERGY

It is a basic tenet of business that the cost of goods and services passed along to consumers, commercial or otherwise, is driven by operating costs and profit margin. As it does in so many other ways, Alaska deviates from this simplistic economic principle. Especially when it comes to energy.

"Alaska has some of the highest costs of living in the country, particularly in rural Alaska. In the SBDC's [Small Business Development Center's] annual survey of small businesses, operating costs were one of the top three barriers to business." Alaska SBDC Executive Director Jon Bittner says. "In smaller communities, that is driven largely by energy and the cost of transporting goods."

Bittner points out that, when energy costs more than $0.20 per kWh, it has a huge impact on what a business must charge its clients to break even, much less make a profit.

Costs Across Alaska

For most of the more than 100 Alaska communities that are not directly connected to the rest of the state via road or rail, the cost of energy is significantly higher than in the state's "urban" communities, as fuel must be brought in by airplane or barge.

One major exception in Alaska is Anchorage, which primarily relies on natural gas for heat and power.

"They use the Cook inlet natural gas deposit. Their energy costs--per million BTUs--are actually below the median national cost," says Nathan Wiltse, policy program manager and building energy economist for the Cold Climate Housing Research Center. "There was an effective subsidy on natural gas for Anchorage with a production tax rate of 1 percent and additional credits. Between 2005 and 2015, their cost per million BTUs was half of the median national cost of energy per million BTUs. During that period the cost of energy in Fairbanks was between three and four times [depending on specific fuel mix] the cost of energy in Anchorage. Rural Alaska was two to three times the cost of Fairbanks."

Another exemption to a community reliance on fuel for power is in Kodiak, which is powered by renewable energy resources via the nonprofit Kodiak Electric Association (KEA). However, even Anchorage and Kodiak businesses still need to deal with the cost of keeping light and warm during the Last Frontier's long winters.

"Alaska is located in Climate Zones 6, 7, and 8. We have actually got a state-designated Climate Zone 9 for things north of the Brooks Range--it is just that cold," Wiltse says. "With the heating season lasting eight months, Fairbanks has about 14,000 heating degree days. Communities north of the Brooks Range have about 20,000. Anchorage averages more than 10,000 heating degree days. Meanwhile, the coldest counties in the coldest states in the Lower 48 rarely get beyond 8,000 heating degree days and have a shorter winter."

The generally higher costs of energy, mixed with longer heating seasons, add...