Lower costs for heating oil to slow natural gas conversion

Written on: July 18, 2016 by ICM

JUNEAU, Alaska (AP) – A newly released report shows that about a third of households in interior Alaska won’t make the switch to natural gas once it’s more widely available because of low heating oil prices.
The Interior Energy Project’s study says about 1,000 homes will convert to natural gas in 2018, the year it’s expected to start being distributed. By 2023, officials are anticipating nearly 11,000 natural gas customers, The Fairbanks Daily News-Miner reported .
The report is an updated version of a study released last year and comes as the project’s initial estimates for demand have changed now that the price of heating oil has dropped to about $2 per gallon.
“The significant change in the price of heating fuel required a fresh look at the ‘willingness to convert’ with specific attention paid to the closing of the cost gap between heating fuel and the IEP natural gas price targets,” the report states.
The project had initially aimed to offer natural gas equivalent to $2 per gallon of heating fuel when heating fuel was around $4 per gallon.
Jomo Stewart, manager for Interior Gas Utility, said the latest estimates reinforce the need to make sure everything going into the project – from the source gas to the burner tip in a home – will drive costs down.
He said the point of the project is to overcome the challenge that is being presented by potentially lower demand.
“So much of this is impacted by demand and when and how that demand shows up,” Stewart said. “That’s just the reality. The project is effectively the state trying to bend the laws of normal economics. If it was easy and it was cheap, it would have already been done.”

Courtesy: Washington Times/AP