Energy and Rural Alaska Economic Development

Steve Colt, University of Alaska Anchorage

email afsgc@uaa.alaska.edu

presented to

Utility Wind Interest GroupMay 23, 2000

Institute of Social and Economic Research, University of Alaska Anchorage 2

Statewide Economic Outlook:

On the Surface,• Positive Signs• People Feel Good• Future Looks Positive

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Economic Indicators

• Jobs• Wage Rate• Personal Income• Per Capita Income• Value Added (GSP)• Population

Institute of Social and Economic Research, University of Alaska Anchorage 4

JOBS: Growth Rate Down

0%

1%

2%

3%

4%

5%

6%

7%

60-70 70-80 80-90 90-98

Alaska US Avg

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BASIC JOBS:

1,810

5,080

1,390

2,340

380

4,600

890

420

-6,000 -4,000 -2,000 0 2,000 4,000 6,000

TOURISM

AIR CARGO

SEAFOOD

MINING

OIL AND GAS

TIMBER

FED CIVILIAN

MILITARY

4,000 Lost since 19904,000 Lost since 1990

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AVERAGE REAL WAGE: Down

$30,000

$32,000

$34,000

$36,000

$38,000

$40,000

$42,000

$44,000

80 82 84 86 88 90 92 94 96 98

1998

$

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REAL PERSONAL INCOME: Growth Rate Down

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

60-70 70-80 80-90 90-98

Alaska US Avg

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Total REAL INCOME:Growth Since 1990

$659

$154

$251

$78

-$500 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

Millions of 1998 $

LABORINCOME

INVESTMENTINCOME

PF DIVIDEND

OTHER GOVTTRANSFERS

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PER CAPITA PERSONAL INCOME:

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

80 82 84 86 88 90 92 94 96 98

% A

lask

a A

bove

US

Avg

Now Below U.S. AverageNow Below U.S. Average

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NON-OIL Value-Added:Growth Rate Down

0%

1%

2%

3%

4%

5%

6%

7%

8%

aver

age

annu

al g

row

th

60-70 70-80 80-90 90-98

Alaska US Avg

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POPULATION:Cumulative Change in the 1990s

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

over 40 under 40

Anchorage US Avg

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The Post-Prudhoe BluesMarket Value of Oil and Other Production

$0

$5,000

$10,000

$15,000

$20,000

$25,000

70 75 80 85 90 95

Mill

ion

1998

$

Oil and Gas

Seaf ood

Mining

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What About Rural Alaska?• Shift from State to Federal Funding• Shift from Govt to “Services”

employment (nonprofits, tribes)• Shift from Municipal to Tribal govt• Continuing Rapid Population Growth

– (2-3%)

• Struggle to retain fisheries wealth• Cautious embrace of tourism

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High Wind Communities

• Class 6 and 7• Coastal• Treeless• Small -- average population 387

– (excluding Unalaska)

• Some have Fish Resources

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Per Capita Personal Income:Alaska vs. High-Wind

Communities

25,000

30,000

9,500

0

5,000

10,000

15,000

20,000

25,000

30,000

Alaska

Anchorage

Class67

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Fuel Cost per kWh: Anchorage vs. High-Wind Communities

2

9

0

2

4

6

8

10

cent

s pe

r kW

h

Anchorage Class67

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Components of Diesel Cost

• Crude oil = $.35 • Refining = $.25 • Bulk Barge = $.10-.30 • Inland Transport = $.00 - $1.00• Bulk Storage = $.10-.20 cents

• Total = $.80 - $2.10

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NonFuel Cost per kWh

8

17

27.5

0

5

10

15

20

25

30

cent

s pe

r kW

h

Anchorage Class67 AVEC

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Rural vs.(?) Urban Energy Projects

• Through 1993, urban projects cost about twice as much as rural projects plus PCE.

In any Event,• About 75% of rural energy project

dollars flow to urban areas. (weatherization)

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Energy Projects and Jobs

• The conventional energy system supports significant employment.– Little of the total cost goes out-of-

state

Hence,• Real job creation comes from a

lower cost (not price!) of living and doing business, not from one-time construction impacts.

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Four Types of Feasibility

• Technical -- Performs according to design, designed for Alaska

• Economic -- beats avoided cost of diesel

• Locational -- resilience against normal disruption

• Human Resource / Administrative

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Which Comes First?

• Projects drive Community Development and develop capacity

Or,• Community Capacity Enables

Projects