Alaska's Arctic Energy System

How we produce and consume energy affects our environment. Likewise, Arctic climate change affects the social and environmental systems that produce energy people depend on.

Electric vehicle charging stations in Fairbanks. Photo: Alaska Center for Energy and Power.

The railbelt electrical grid

The Railbelt electrical grid serves the populated region spanning from Fairbanks through Anchorage to the Kenai Peninsula. It provides 79% of the state’s electricity. Approximately 73% of electricity on the Railbelt grid comes from natural gas. The rest comes from renewables such as wind and hydroelectric and other fossil fuels such as coal and oil.

New Microgrid technology

Alaska’s small population dispersed over a large area requires an energy system different from the rest of the U.S. More than 150 standalone electrical grids make up the state’s energy system. These “microgrids” serve individual communities, allowing rural Alaska to maintain independent and robust energy systems.

Between 2009 and 2015, the State of Alaska invested more than $250 million to develop and integrate renewable energy projects to power microgrid systems. Microgrid developments are helping smaller communities move from diesel to renewable energy.

Microgrids also serve universities and military installations in Alaska due to district heating needs. Because the Fairbanks area remains without a reliable natural gas supply, the University of Alaska Fairbanks opened the only new coal-fired heat and power plant in the U.S. in 2018, replacing its more than 60-year-old coal plant. Eielson Air Force Base is supported by its own coal-fired power plant for the same reasons.

As Alaska evolves as a leader in implementing renewables and other microgrid technologies, local knowledge and expertise may become a key export for the state. Other cold regions may look to Alaska’s systems as a model. Places with insecure access to energy or that seek energy independence may also learn from Alaska’s technology.

Moving from diesel to distributed energy resources

Alaska’s rural communities that are disconnected from the regional grids commonly run diesel generators for electricity and heating homes.

Diesel is barged in during the ice free season or flown in if no water route is available. Since transporting fuel is costly and there is potential for fuel spills, many communities are implementing renewable distributed energy resources.

Distributed energy resources are small-scale electricity generation and storage devices connected to regional grids or islanded microgrids. Distributed energy resources vary widely in Alaska and may include biomass, geothermal, hydroelectric, hydrokinetic, solar and wind energy. Because of the remote nature of rural Alaska communities, there can be additional costs and time needed to develop and complete renewable projects in places where air transportation is limited and barging is often only available during the summer.

Kotzebue is making great strides transitioning to renewable energy. The community’s cooperative utility, Kotzebue Electric Association, installed its first wind turbines in 1997. Since then, it has continued to expand its renewable energy system to include solar and battery storage.

Many energy utilities

Over 100 utilities deliver energy to Alaska consumers. Most electric utilities are small, often serving just one community, with electric loads varying from tens of kilowatts for the smallest communities to several megawatts for larger “hubs.” Five utilities operate along the Railbelt grid. Utilities in Alaska are owned by cooperatives, municipalities and tribal governments.

The grassroots nature of Alaska’s utilities creates both challenges and opportunities. While the small size of locally owned utilities may create capacity challenges such as implementing large capital projects, it may also enable communities to be more directly involved in decision-making as compared to regions with larger utilities.

The cost of fossil fuels directly affects rural communities in Alaska where households face electricity costs three to five times higher than households in urban areas of the state like Anchorage, Fairbanks and Juneau.

The Power Cost Equalization program provides economic assistance to communities outside the Railbelt that largely rely on diesel fuel for power generation. PCE serves more than 80,000 Alaskans in 193 communities. Utilities in rural Alaska provide credits to their customers based on a usage formula. The state reimburses these credits to the utility. Funding for the PCE program comes from a specialized endowment.

Rural energy

(7) A significant proportion of the Alaska Native population in the state is not connected to the Railbelt. As a result Alaska Native Peoples are disproportionately impacted by the high energy costs in rural areas. [Source: Department of Labor and Workforce Development, Research and Analysis Section, 2020.]

Though Alaska ranked sixth among top oil-producing states in the U.S. in 2020, the state still imports petroleum due to limited refining capacity and high per-capita petroleum consumption. Outside of the Railbelt, communities pay high energy costs for diesel to produce electricity, even with the Power Cost Equalization offsets. The Railbelt produces 79% of the state’s electrical load from four electrical cooperatives and a municipal non-profit utility. As of 2020, this served 293,000 customers. While nearly two-thirds of Alaskans live in communities found along the 484 miles of highway and railway of the Railbelt, 82% of Alaska communities depend on aviation for year-round access. The majority of these communities are primarily Alaska Native, and many are seeking to diversify their energy sources not only to cut costs but also for concerns related to health and environmental safety.

Many Alaska Native Peoples still practice subsistence. As of 2017, about 17% of the Alaska population, approximately 123,122 people in 264 communities, lived in rural areas. As energy costs rise, in particular fuel for snowmachines, boats and ATVs, rural residents face difficult choices about where to spend their money — home heating is often the trade-off for gasoline for hunting or fishing. Bringing down energy costs in rural areas also reduces the need for families to migrate to urban centers of the state where practicing traditional livelihood and cultural pathways can be difficult.

Programs and policy that support energy and just transition

Alaska communities and industry need a way to address the negative effects of climate change while minimizing the inequalities of economic change and diversification. Energy decarbonization and just transition are processes that pursue net-zero emissions while reducing costs and improving lives.

  • Carbon capture and storage programs remove and sequester carbon. These can help locations reduce carbon emissions along with energy decarbonization, where power grids and supply chains work to limit initial emissions.
  • Energy diversification is a principle for reducing energy costs and stabilizing energy portfolios over time by adding different types of distributed energy resources. Diversity in electricity generation can help minimize the effects of boom and bust cycles by reducing uncertainty in supply and distribution. Looking into the future, energy transitions in Alaska that address concerns of equity can avoid disproportionately disadvantaging any citizens.

Several programs and policies support energy decarbonization and just transition in rural Alaska

  • Both the Renewable Energy Fund and Emerging Energy Technology Fund build capacity in rural Alaska. They help communities maintain and expand existing renewable energy systems. They can also ensure that communities are able to share their knowledge and experience with others in Alaska and across the Arctic.
  • The Regional Clean Hydrogen Hubs program is one opportunity to ensure the benefits of energy investments are felt locally. Funded through the Bipartisan Infrastructure Law, the program establishes six to 10 regional hubs across the country focused on accelerating the production and use of hydrogen. Due to its natural gas resources and proximity to the West Coast and Asian markets, Alaska is a strong contender to be selected for one of the hubs. This would create further opportunities for communities in the state, such as through workforce development.
  • Alaska Regional Collaboration for Innovation and Commercialization Program’s Energy Innovation Network supports community engagement and just transition. The network helps Alaska communities reach self-determined energy and economic goals. With a local to global focus, it builds capacity for new homegrown energy industries designed and deployed in the state.
  • Until 1972, a nuclear reactor operated for about a decade on Fort Greely. In February 2022, Gov. Mike Dunleavy signed into law SB177: an Act relating to Microreactors. The law allows communities to explore the option of nuclear power for electricity and to reduce greenhouse gas emissions. Two test projects for nuclear microreactors are planned in Alaska, at Eielson Air Force Base and through the Copper Valley Electric Association.

(8) These charts show how Alaska generated electricity in 2010 compared to 2019. [Source: U.S. Energy Information Administration, Electric Power Annual.]

Alaska leadership in Arctic energy

Alaska is well positioned for an energy transition locally, while also leading the way nationally and internationally. The state has a wealth of resources available, knowledge and expertise in cold climate renewables and remote microgrids.

Alaska has 50% of the installed microgrids in the U.S. and 10% of the global microgrids. Many Alaska microgrids already incorporate renewable energy.

Local Alaska knowledge is already being exported globally through the Arctic Remote Energy Networks Academy program. ARENA connects emerging energy professionals from around the circumpolar north with hands-on learning experiences and mentorship they can take back home to support their own communities in the energy transition.

(9) This map shows where there is current electric grid infrastructure and where there has been renewable energy development in the Arctic. Map data from 2021. [Source: Erin Trochim, Alaska Center for Energy and Power; Greg Poelzer, University of Saskatchewan, based on an earlier version by Gwen Holdmann.]


Policy implications of Alaska's Arctic energy system

Creating energy from multiple geographically appropriate sources can foster business growth alongside locally driven priorities such as less-expensive electricity. Development of wind, solar, hydropower, biomass, geothermal and nuclear possibilities are receiving a significant influx of federal funding and have received attention within the state. These opportunities will need regulatory and logistical support to reach economies of scale, especially in rural locations where grid networks can be more cost effective than individual communities working alone.