How to get more rural Southeast homes on heat pumps? A special rate could help, study says.

An air-to-air heat pump can provide a more efficient alternative for heating a home, particularly in regions of Alaska with less dramatic temperature swings like Southeast. Because they run off of electricity, they can also reduce greenhouse gas emissions in communities that use renewable alternatives like hydropower or solar. (Erin McKinstry/KCAW)

Many Southeast Alaska homeowners are converting to electric heat pumps as a way to reduce reliance on fossil fuels and improve air quality. But in some of the region’s smallest communities, the high cost of electricity makes operating them unaffordable.

A recent study found that offering a special rate for heat pumps in the Kupreanof Island village of Kake and other remote communities could help the consumer, the electric utility and the environment.

Kake resident Adam Davis decided to convert to a heat pump about four years ago. Before that, he was using a pellet stove. Barging in fuel was getting expensive, he said.

When the Tlingit-Haida Regional Housing Authority offered to install a heat pump for free as part of a pilot program, it piqued his curiosity.

“I was willing to be a guinea pig to see whether or not they were viable here,” he said.

Davis doesn’t have any complaints about his new air source heat pump. The devices work like an air conditioner, using electricity to move hot air outside during the summer. But unlike an air conditioner, they can also move warm air into the home to provide heat in the winter. They provide added benefits too, like air filtration, compared to wood and oil heating, which reduce indoor and outdoor air quality.

Davis said maintaining and operating the heat pump is also a lot easier than the pellet stove, and he’s only seen a slight increase in his electricity bill. Even with that increase, he thinks he’s saved money by not having to buy the pellets for his stove.

But that wouldn’t be the case if the heat pump was his only source of heat, especially when temperatures drop below freezing. He also has propane and oil heaters for his nearly 2,000-square-foot home.

“I see them as a great, you know, complementary type of heat source. Not as a primary heat source just because of the wide swings in our temperature here,” he said. “I don’t think you can rely on them in the coldest of months.”

Davis is one of six Kake residents to benefit from the program so far, including a few of his neighbors. He said they installed heat pumps as their only source of heat and their electric bills skyrocketed, minimizing or eliminating savings from not having to buy heating fuel.

Like many rural Alaska communities, the cost of electricity in Kake is high: 1.5 times the state average and 2.5 times the national average. And that’s when you factor in Power Cost Equalization, a state program subsidizing high rural energy costs. In Kake, any usage over 500 kilowatt hours a month is about double the cost because it isn’t covered by the sate program. And the added electrical demand of heat pumps can easily push a household over that threshold.

That’s one of the reasons the Inside Passage Electrical Cooperative worked with the Alaska Center for Energy and Power to study whether a lower rate for heat pump users might be a good fit for Kake and the four other communities they serve.

“I do understand that people are having a hard time, you know, those who have heat pumps are having a hard time paying the extra amount on their electric bill every month,” said IPEC CEO Jodi Mitchell. “And so some of them are really struggling with that.”

She said it’s expensive to provide electricity to the remote communities the electrical cooperative serves because they each have their own infrastructure, like diesel generators or hydroelectric dams. And the company has way fewer customers to carry the burden of those fixed costs than in a city. As customers cut back on electrical use and introduce energy efficiency measures to try and save money, it can actually make rates per kilowatt hour go up because the utility still needs a minimum amount of money coming in to keep things running.

“People always say IPEC has to be more efficient, and IPEC’s customers need to be more efficient. It doesn’t work that way because of the economies of scale factor,” Mitchell said. “The more we sell the cheaper it is for everybody. That’s it in a nutshell.”

Introducing a special rate for heat pumps could encourage more customers to use them, and the money they’d normally spend on imported fuels would go toward electricity instead. And even though IPEC would absorb the cost of the special rate, the study shows that it’s still worth it financially because it would help them sell more power.

The study also shows that, with the special rate, consumers would save money on heating in the long run, even if they have to cover the cost of the heat pump and installation. But with the program Davis benefited from, that could come for free.

And finally, in places like Kake where renewable hydropower is in play, heat pumps are a win for the environment because they replace non-renewable fossil fuels with clean energy, according to the study.

Mitchell is excited about the findings, but also recognizes their limitations. IPEC doesn’t want to overload their microgrids either. They’ll likely have to limit the number of residents who can benefit from the special rate, which would apply to any usage over 500 kilowatt-hours a month.

“So we’re trying to find this sweet spot: How many can we allow, assuming that our system was using a peak demand from like January? If we added this much more burden on our electric system, would we have to start up another generator? And that’s what we want to avoid,” Mitchell said.

The study put that sweet spot at about a quarter of Kake households installing heat pumps.

Gary Williams is a former executive director of Kake’s tribal government, the Organized Village of Kake. He’s been working on a grant-funded project to study heat pumps and electric vehicles to help Kake address energy issues, and hopes IPEC will implement the special rate.

“Because without that rate for heat pumps and EVs, it quite frankly, probably wouldn’t be practical,” he said.

He said looking to alternative solutions to address the high cost of energy in Kake is imperative. It doesn’t just impact households, it has a broader effect on the entire economic development of the town.

“Time after time, we’re faced with the high cost of electricity just making it impractical and unfeasible for anyone to develop new businesses,” Williams said.

IPEC plans to hold a meeting with its members in early June to discuss the special rate for heat pump users. If implemented, customers would apply on a first-come, first-served basis.

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