Consensus among region’s utilities: Imports of liquefied natural gas will be needed to offset shortfalls

Two consultant studies done independently agree with what major utilities in the “railbelt” corridor, the major population centers from Southcentral to Interior Alaska, have been saying, that imports of liquefied natural gas will be needed to offset a looming decline in natural gas production.

Natural gas fuels most space heating and power generation in the region, so projected shortfalls in production from Cook Inlet are a matter of concern.

An analysis released by Chugach Electric Association and done by Black & Veatch, a consulting firm, largely agrees with another study done by Berkeley Research Group for a group of four major railbelt utilities led by Enstar Natural Gas Co.

A gas production decline from 2027 on is inescapable, both studies agree. Gas storage can cover utilities’ needs for two to three years but some form of imported liquefied natural gas, or LNG, will be needed by 2030.

New renewable energy projects will ease this but they can’t be built fast enough to forestall LNG imports and there is unlikely to be enough of them any time soon. The large Alaska LNG Project, which would have an 800-mile pipeline built from the North Slope, could nicely fill needs and at reasonable costs, but it also can’t be built in time.

Both of the consultant studies also agree that LNG imports will be costly and will raise fuel costs for utilities and consumers’ costs for heating and electricity. Fuel costs for utilities could rise sharply with LNG imports, both studies say, from about $8/thousand cubic feet (mcf) now to about $12 per mcg to $15 per mcf. However, only part of this will pass through to consumers because fuel is only part of electric utilities’ costs. But there will be an impact.

Expansion of renewable energy like solar, wind and hydro can soften this electrical consumers. But not for heating. Enstar is dependent on natural gas.

This could have an impact on heating bills in the short-to-medium term but in

the long run it will spur more aggressive home energy conservation and insulation programs, which have been successful in the past.

There could be resurrection of the popular home energy rebate program, where government subsidies helped pay for insulation and other improvements, under the federal Inflation Reduction Act, or IRA, an act passed by Congress in 2022.

Major building owners will pursue other strategies including electrification combined with by power storage. Micro-reactors, the new generation of small-scale nuclear reactors now being licensed by the federal government, might be installed in some places for large users.

Renewable energy projects like wind and solar cannot be built fast enough to replace natural gas but they can help. Chugach Electric Association says it is looking at two large 100-megawatt projects, one wind and one solar, in the Matanuska-Susitna Borough, but the cost of these is still unknown as is the cost of the power they can generate.

Some projects are already show they can be competitive with natural gas.Two privately-owned solar projects in the Mat-Su, one near Willow and a new one near Houston, sell power to Matanuska Electric Association at rates competitive with gas. The same company is planning a larger solar project on the Kenai Peninsula.

However, to fill the near-term gap imports of LNG, most likely from British Columbia are likely. The most practical near-term import options, agreed under both the Black and Veatch and Berkeley Research studies, are for a floating LNG storage facility in Cook Inlet, a moored vessel linked to an onshore gas pipeline.

This would be supplied by a small or medium-sized LNG tanker transporting the liquefied gas. LNG tank barges could also be used.

A mothballed LNG export plant at Nikiski, on the Kenai Peninsula, could also be used. Tanks and other machinery are in place but the cost of converting the plant from an export to import facility would have to be paid for. The studies put these as high as $150 million. Also, Marathon Petroleum Co. owns the plant and would have to negotiate an agreement for it to be used.

The Berkeley group, which includes all regional electric utilities as well as Chugach Electric with Black and Veatch are now in a phase two of their studies that will define costs around best options. This work is to be completed later this year.

The expectation is that both efforts will be merged and that an organizational structure will be developed among the utilities to allow decisions to be made and costs allocated. This has to happen quickly, though, because of the lead times needed for the utilities to negotiate LNG supply contracts to procure and construct equipment.

There are other views, however. One is a greatly expanded renewable energy, to be revealed in September when the U.S. Department of Energy’s National Renewable Energy Laboratory, or NREL, is to release a plan to supply as much as 80 percent of railbelt electricity needs with renewable power.

The NREL is building on a conceptual, technical plan for an 80 percent scenario done last December, but the new one will focus more closely on the economics, sources familiar with the study said.

NREL will present its initial results Sept. 9 at a wind energy conference in Anchorage planned by the Renewable Energy Alaska Project.