Study: $22M annual savings for households in energy rebate program

The University of Alaska Institute of Social and Economic Research has completed a study of the state Home Energy Rebate Program and estimates the program is saving households about $22 million annually.

This program by the Alaska Housing Finance Corp. was launched in 2008 to incentivize homeowners on energy efficiency through rebates.

The state has spent an estimated $110 million between 2008 and 2011 in rebates for new insulation, furnaces and other retrofits for approximately 16,500 homeowners. The 2013 fiscal year capital budget allocates $20 million for the program.

ISER’s analysis by economists Scott Goldsmith and Nathan Wiltse and research associate Sohrab Pathan looks in-depth at the program’s effects so far.

Around $185 million was spent on the program in those years with state rebates covering 60 percent and homeowners the rest. The authors estimate many homeowners would not have invested as much without state aid but don’t know how much that would have been.

The rebate program accounted for 1,332 jobs from April 2008 to September 2011, according to the study. This is based on every $1 million in new state spending generating seven direct retrofitting jobs and five indirect ones. Homeowner spending didn’t generate additional jobs like state spending.

Alaskan homeowners under the program save an estimated $22 million annually on heating, an estimated 26 percent reduction on those heating bills.

The report states that if that annual $22 million is spent locally, it could generate around 240 jobs a year based on a multiplier that $1 million of new household spending generates 11 permanent jobs.

As for fuel use, it dropped an estimated 33 percent in houses retrofitted under the rebate program. This is an annual savings of 1.6 trillion Btus, which is equivalent to around 275,000 barrels of oil.

However, the report states part of this decline may be due to higher energy prices instead of the rebates.

The Home Energy Rebate Program strives to increase Alaska’s energy efficiency by 15 percent per person by the year 2020.

The authors estimate the rebates have other long-term benefits, such as reducing needs to store natural gas in Southcentral. They state the retrofitting may also have helped offset the residential construction slowdown around the time the program started.

The legislation funded the program as fuel prices shot upwards over the last several years. The issue is a big deal in Fairbanks, where 80 percent of households use fuel oil. ISER reports that Fairbanks homes make up 14 percent of the rebate program.

Jim Dodson, president of the Fairbanks Economic Development Corp., said energy costs, such as space heating costs, can four times as much as in Anchorage. However, other communities around the state can even pay twice as much (twice as much as Fairbanks?).

Dodson said the rebate program is significant but not enough. He said such energy conservation is a good way to save money but will never replace developing affordable energy.

“My belief is that Alaska will never be economically successful until affordable energy is distributed across all resources, not just resources in one location,” he said.

He said Alaska is an extraction state that exports resources without adding labor value, which will inhibit development that leads to such energy. This can contribute to transportation epicenter communities like Anchorage to faring better than others, including rural areas.

“What we’re doing does not make any sense,” Dodson said.

Rebates are not the state’s only measure of working on the Interior’s high energy costs. Gov. Sean Parnell recently told business leaders his administration is working on a liquid natural gas trucking project that could start in 2014.

The other state retrofit program is the Weatherization Program. The new capital budget allocates $31.5 million for this.

The full analysis is available on the ISER website.