Energy Independence

Energy independence it is not an economic or technical concept with a clear definition. It can be broadly described as shifting electricity generation from imported fossil fuels to locally available resources to increase self-sufficiency and reduce risk. Energy independence is often discussed at two levels:

National Level: A nation that produces all the energy it needs domestically without relying on foreign imports. The interdependence of the global oil market makes energy independence at a national level unrealistic in most cases. In 2023, 17% of the U.S. energy supply was imported, 66% of which was crude oil (EIA).

Personal Level: A individual's ability to to generate and sustain their own power without relying on the electric grid. This is often referred to being "off-grid" and most often associated with solar panels. This insulates owners from market-driven fluctuations in grid-supplied electricity.  

Up to the early 1950s, the United States produced most of the energy it consumed. U.S. energy consumption was higher than U.S. energy production in every year from 1958–2018. The difference between consumption and production was met by imports, particularly crude oil and petroleum products such as motor gasoline and distillate fuel oil. Total energy imports (based on heat content) peaked in 2007 and subsequently declined in nearly every year since then. Increases in U.S. crude oil and natural gas production reduced the need for crude oil and natural gas imports and contributed to increases in crude oil and natural gas exports. The United States has been a net total energy exporter—total energy exports have been higher than total energy imports—since 2019 (EIA). However, despite being a net energy exporter, the U.S. still imports crude oil for high density grades that are not produced domestically. 

Since the oil industry spans the globe, it is heavily influence by geopolitical events that affect the production of oils in certain parts of the world. Learn more about energy economics.

But Renewable Energy Can Increase Energy Independence
Renewable	Non-Renewable
Renewable energy utilizes energy from local, natural sources, such as sun, rain, and wind. Since the energy is supplied by a functionally "free" fuel source, the largest expense is the initial capital investment and maintenance of the technology. This allows users of renewable energy to function independently of global energy supply chains. Currently, in Sitka, two hydroelectric dams provide the community with 99.9% of their electricity which is replenished by the abundant rain. As technology improves, Sitka's potential for new sources of renewable energy has increased. Learn more	Petroleum-derived energy is imported from foreign countries and fluctuate from global market trends. Alaska experiences higher oil prices due to its remote location which requires smaller volumes of fuel to be transported long distances. This transportation is often called the supply chain. Communities located further from centralized hubs (at the ends of the chain) experience higher costs and are at greater risk of supply chain failures. Since the fuel is burned, it is useable once and constantly needs to be resupplied. This makes the fuel for generation a large portion of ongoing operational expenses, in addition to initial capital and maintenance expenses.

A supply chain is a series of activities that make raw materials into useable products. Supply chains are often complex and optimized to minimize costs. Generally, supply chains that are larger benefit from an economy of scale. However, the complexity of supply chains leave them vulnerable to disruptions due to a variety of causes such as market changes, political shifts, disease, or natural disasters. Disruption in supply chains lead to increase costs due to limited availability which increases demand, or because the costs of running the supply chain increase and passed onto consumers.

The oil supply chain starts with crude oil being pumped up and transported. Depending on the location of the oil well, crude oil is  transported to bulk storage by barge or pipeline. It is then transported again, either by pipeline, or train, to refineries which turn the crude oil into petrochemical products like gasoline and diesel. Oil marketing companies then sell the oil to retail consumers like gas stations, or large industrial and commercial consumers. Since oil is the worlds primary source of energy, oil production is a geopolitical concern and changes worldwide impacts the costs to produce, refine, and buy fuel. 

Learn more about energy economics

Sitka's remoteness adds complexity to the supply chain by requiring small amounts of goods to be shipped long distances. Additionally, with only about 8,500 people, there isn't a significant demand for most goods to benefit from economies of scale. This impacts the costs of living. Fortunately, since Sitka's electricity is renewable, it only relies on the oil supply chain for back up generation in case of emergencies. Sitka's investments in renewable energy have kept its electricity prices lower than much of Alaska which is dependent on primarily imported natural gas and diesel.

Learn more about Sitka's energy today

To understand how renewable energy is an investment in energy independence, its important to understand the difference between capital expenditures (CapEx), operating expenses (OpEx) and Levelized Cost of Energy (LCoE).

CapEx

The cost of investment. It represents things like generation infrastructure including hydroelectric dams, solar panels, wind turbines, diesel generators, and transmission and distribution infrastructure, the powerlines, substations, and other things used to deliver power. How affordable a renewable energy project is is strongly influenced by the cost of the capital investment in that technology. While hydroelectric projects have the highest initial capital, they are also the longest lasting (50-100 years) and most reliable. As with all technologies, renewable energy sources have reached a point where the initial high capital investments made that them prohibitively expensive in many cases, are now gone and are comparable if not cheaper that fossil-fuel powered generation.

The price of EVs and renewable energy predicably falls as their cumulative capacity or production doubles                                                                                                                     Graphic by Visual Capitalist, BloombergNEF, IRENA

OpEx

The cost of doing business. Day-to-day costs of running a business. Examples include employee salaries, equipment maintenance, insurance, research and development, office supplies, rent and utilities. Operating expenses can be broken down into two categories: Fixed Costs: These are costs regardless of activities, do not change and are somewhat predictable. Things like salaries, rent, and insurance are considered fixed costs. Variable Costs: This costs can fluctuate depending on external factors or changes in operations. Things like shipping and raw materials are examples. Fuel is often considered a variable cost, since its price fluctuates and the business has no direct control over it besides monitoring its usage.
CBS Utility Budget With Hydropower	CBS Utility Budget With Diesel Only
CBS's Electric Utility has an annual budget of approximately $25 million. 48% is operational expenses and 52% capital expenditures. This is not an usual split for electric utilities which. Capital expenditures include debt payments for both the Blue Lake and Green Lake Hydroelectric Projects as well as transmission and distribution upgrades for the substations. Operational expenses include maintenance, insurance, and administrative support. You can learn more about rates here: Energy Economics	With current electric loads and generators, a diesel-only utility in Sitka would require about 11 million gallons of fuel each year, adding least $50 million to operating expenses. While some expenses would no longer be applicable, shifting so much of the balance would not allow for investments to be made into infrastructure that would reduce diesel dependence. While Sitka's electric loads would be much less and it would likely operate more efficient generators, grid improvements would be limited to emergency repairs, rates would be significantly higher, and budgeting much less flexible due to fuel price fluctuation. The majority of money would be lost to fuel costs, limiting the Utility's ability to plan, upgrade, and provide power.

Levelized Cost

Levelized Costs of Energy (LCoE) includes CapEx and OpEx, as well as considerations like efficiency, to calculate a per-unit cost of electricity over the lifetime of a project. How affordable a renewable energy project is is strongly influenced by the cost of the capital expenditure required to invest that technology. Since the input to generate renewable energy (rain, sun, and wind) is free, the majority of the cost is upfront in the form of capital expenditure. Additionally, the technology is often less complex, with some technologies having no moving parts, such as solar panels. While hydroelectric projects have the highest initial capital, they are also the longest lasting (50-100 years) and most reliable. Today, renewable energy sources have a cheaper LCoE than fossil fuel energy sources.

2025 Global Levelized Cost of Energy (LCoE) of Different Technologies Data by Lazard. Per-unit costs are calculated globally and includes only the costs of generation, not transmission and distribution and/or other factors that influence the actual rates of a energy technology in any given area.

A major additional benefit of energy independence is keeping money local. Money spent on electricity that is locally generated goes back into the community rather than out to large, external companies in the form of fuel payments. In Sitka, this has an even greater impact since the electric utility is municipally-owned and it does not have investors its required to benefit. Instead, the community owns, operates, and benefits the most from its renewable investments.

A major drawback of improving energy independence it that has large, upfront expenses. This is a significant barrier for many communities that would like to have renewable energy but are unable to overcome the initial investment costs. Additionally, smaller installations minimize the potential benefits that come with economies of scale.

The benefits that come with economies of scale require the sacrifice of some level of self sufficiency and independence and vice versa.

While Sitka experiences the influence of cost factors differently than most grids, it is more independent and self-sufficient than many larger grids

Energy, in all forms, is expensive. While efforts can be made to keep the costs of electricity as low as possible, the cheapest form of energy is the energy you don't use. That's why energy efficiency and conservation is one of the most important things individuals can do to lower their energy bills, no matter the source.