“For decades, federal support for renewable energy largely excluded Alaska while building new energy opportunities and capacity in the Lower 48,” Dan Menth, president and CEO of the Kodiak Electric Association, and Dave Messier, owner of electrical contracting and consulting company Daylight Energy Services and board member of the Renewable Energy Alaska Project, remembered. In an op-ed published in the Alaska Beacon, they noted a key change: “Legislation passed in 2022 finally reformed these credits to work for Alaska.”
Among the vital changes introduced in 2022 was the elective pay feature. It enables tax-exempt entities, like local governments and electric cooperatives, to receive the tax credits as direct cash payments. This put these entities on equal footing with private companies in a way they had not been before, thereby ensuring support for all power generation project owners. Because the tax credit is technology-neutral, it provides equal support to hydropower and geothermal resources in the state for the first time. In their op-ed, the authors note that hydropower, in particular, is essential in many Alaskan communities. Finally, because the state of Alaska is an “energy community,” the size of its credit is 40%, instead of the 30% baseline.
However, in its version of the budget reconciliation bill, the U.S. House took an ax to these tax credits. Menth and Messier stressed the gravity of this moment, as the U.S. Senate works on its version of the bill: “The House budget bill stripped the most important parts for Alaska before we can even benefit, and would drive up electric rates. Early Senate edits may soften some of these changes, but most Alaska projects won’t be able to access the incentives before they phase out.”
The authors described, “Draft Senate language means many projects would have to start construction almost immediately to access the full credits, and phases them out fully over several years.” As a result, they predicted, “Slower-to-build projects like hydro plants don’t have a hope of meeting the schedule.”
Photo Courtesy Kodiak Electric Outage Alerts
Without taking advantage of the tax credits’ support for all types of organizations in deploying clean energy projects, the state stands to miss out on a significant amount of federal funding. “Depending on the final text, the Railbelt stands to lose hundreds of millions of dollars, from the state’s proposed Dixon Diversion hydroexpansion, planned wind farms, and solar on the Kenai Peninsula,” Menth and Messier explained. Alaskans will have to bear more of the cost for the projects to move forward: “That money will come from ratepayers instead — for example, as much as 3 cents more per kilowatt hour for a project using the production tax credit.” The authors pointed out that this would come when rates have risen at least 10% over 18 months, and even higher in more rural areas.
Menth and Messier added that without the credits, it is possible that many projects do not move forward at all: “It takes years to get projects to the start line, and the state and federal grants that kickstarted them are disappearing.” As of May, according to the E2 and the Clean Economy Tracker, factory and project cancellations nationally have totalled $15.5 billion since January, equating to nearly 12,000 lost jobs. More than $9 billion and 10,000 jobs had been set for Republican districts.
The authors added that Renewable IPP, the biggest solar developer in the state, pulled out of three projects in the Railbelt region, including what would have been Alaska’s biggest solar project, in Nikiski. CEO Jenn Miller told the Anchorage Daily News, “We don’t have a stable climate for investment to move forward,” part of which she attributed to “uncertainty around the solar investment tax credits” in a conversation with KDLL.
The authors said that projects’ cancellation or inability to upgrade their infrastructure in the future “locks our communities into volatile diesel and imported gas,” which compromises Alaska’s energy independence, a significant issue as the price of fuel could rise due to international conflict.
Photo Courtesy Renewable IPP
Menth and Messier advocated for changes to the Senate language that will make the bill work better for Alaska: “We need reasonable ‘start of construction’ eligibility, a more realistic phase out schedule for the production tax credit, investment tax credit and residential clean energy credit, and to replace the impossible paperwork mess of the ‘prohibited foreign entity’ requirements with a workable sourcing rule.” For example, it would prove very difficult for a small rural cooperative to ensure that any component it used, no matter how small, came from a blocked country.
“Alaska needs our congressional delegation to help keep the elective pay option, technology neutrality, the 30% baseline, and Alaska’s 10% energy community bonus,” Menth and Messier concluded. “We urge Sen. Dan Sullivan and Sen. Lisa Murkowski, as well as Rep. Nick Begich, to safeguard the federal investment tax credit and the production tax credit provisions.”
