Alaska and Hawaii electricity rates

Every other state can import power from a neighbour when its own generation is short. These two cannot, and that single fact explains most of what makes them expensive.

Hawaii is the only state generating a large share of its electricity from petroleum. Each island runs an isolated grid: no neighbouring system to import from, no shared reserve margin, and every island holding its own backup capacity, which means more capacity per unit of demand than any mainland system carries.

Alaska is not one system but many. The Railbelt, covering Anchorage, the Kenai Peninsula and Fairbanks, is a single interconnected system running mainly on Cook Inlet natural gas and some hydro. Everywhere else is a village grid, typically diesel-fired, with fuel barged or flown in.

Hawaii's rate tracks world oil markets more directly than any other state's, which is why it moved so much more than the mainland over the past year. Oil sets the marginal price, and as long as an oil-fired unit is the last one dispatched on a given evening it sets the price for everyone.

Alaska's Railbelt faces a different problem: Cook Inlet gas production has been declining and the region is planning for imported liquefied natural gas to replace it. Importing gas into a place that has produced its own for decades is a large cost increase.

Rooftop solar with storage is more economically compelling in Hawaii than anywhere else in the United States, simply because the rate it displaces is so high. The binding constraint is grid capacity and programme availability rather than payback period. Solar water heating is required on most new single-family homes and remains one of the cheapest ways to cut a Hawaiian bill.

In rural Alaska, the Power Cost Equalization programme is the single most important thing a household can be enrolled in. It subsidises residential rates in communities served by high-cost diesel generation, and it applies only to a capped monthly amount of usage.