Green Bank bill in legislative limbo

by Elizabeth Earl

Alaska uses more energy than most other states, and pays more than most for each kilowatt-hour. It also has vast options for renewable energy, but technology and project funding have been roadblocks. As technology catches up, the state is now considering a revolving loan program to help the funding issue.

The Legislature is debating a bill to establish the Alaska Energy Independence Fund, a dedicated loan fund for renewable energy. The program would be housed within the Alaska Industrial Development and Export Authority (AIDEA) and support public-private partnerships oriented toward renewable energy. Like AIDEA’s other revolving funds, it would require starting capital -- in this case, $10 million from the unrestricted general fund, potentially augmented by $130 million in expected federal funds -- but after that would use the payments from its borrowers to pay for future loans.

The bill—SB 123 in the Senate and HB 170 in the House of Representatives—was heard in April but did not pass out of committees.

Some renewable energy advocates have pushed for the legislation, saying AIDEA has the expertise and authority to direct the program effectively; other groups have expressed some hesitancy about the program being housed within AIDEA because of a lack of transparency.

Green Banks

Capital management programs for clean energy, sometimes called “green banks,” have been appearing all over the country. They are sometimes entirely independent financial institutions and sometimes programs or funds within a larger institution.

The Alaska Energy Authority, a state-owned corporation that shares its board of directors and some staff with AIDEA, already operates a grant focused on renewable energy. Since its establishment in 2008, AEA’s Alaska Renewable Energy Fund has issued $268 million in 12 rounds of funding for 287 renewable projects. The Renewable Energy Fund’s committee makes recommendations to the Legislature, which makes the final funding decisions.

Morgan Neff, AIDEA’s chief investment officer, told the Legislature in May that the EIF would be a loan authority, not grants.

“These are often referred to as green banks, but that name is really where the similarities end,” Neff said. “They’re not banks, and they do not compete with banks within the financial sector. They’re actually designed to work collaboratively with the banking sector and the private financial community within Alaska.”

In addition to direct lending, the green bank could collaborate with other financiers by aggregating smaller projects to a scale attractive to private finance and by supplying technical knowledge that can ease the concerns of risk-averse lenders, according to Weitzman’s presentation to the legislature. 

Funding

AIDEA expects the $10 million that the current bills would appropriate as start-up capital from Alaska’s unrestricted general fund to be joined by federal dollars from a similar bill making its way through Congress. The Clean Energy and Sustainability Accelerator Act— HB 806 in the federal House of Representatives and SB 283 in the Senate —would disburse funds among the states to support green banking efforts.

 If the federal legislation passes, Alaska would get approximately $130 million, Neff told the Legislature. He said that the fund is designed to grow as well as sustain itself.

The bill doesn’t limit the size of organizations eligible for loans -- they may be private individuals or multinational oil and gas companies. AIDEA president Alan Weitzner told the Senate Finance committee that the program would have an advisory board, but said other programs across the country have been successful without setting those specific limitations. The advisory board guiding the program would be made up of the state governor or their designee and four public members, including representatives of marketing, construction, and renewable energy.

Multiple legislators voiced concerns that the fund would go to benefit large corporations more than smaller organizations or individuals. Weitzner said the program has the flexibility to address those concerns and the advisory board would have input. 

He and Neff said the language in the bill for the AK EIF is in line with much of the federal legislation.

“From my viewpoint or vantage point, I do not believe that it focuses solely on corporations or larger businesses within the state,” Weitzner said. “It is focused on economic development, renewable energy, and building the capacity for clean, renewable energy throughout the state.”

Representative Lyman Hoffman (D-Bethel) commented that a loan program would not benefit most rural Alaskans, who took advantage of the state weatherization program to improve their energy efficiency, which was a grant program. The areas of the state with the highest energy costs also tend to be the areas with the lowest income, so a loan program may not benefit the average person from rural Alaska, he said.

Chris Rose, the executive director of the Alaska Renewable Energy Project, offered support. He said his group has been working on a green bank project since 2017, as grants for energy efficiency became harder to get. A green bank loan is different from a conventional loan, he told the Legislature, because recipients can pay it back based on energy savings.

“Most of these loans are designed so that the energy savings people get… are equal to the amount of money they have to pay the green bank back,” he said.

Multiple economic development organizations, including Fairbanks and the Kenai Peninsula, also offered support based on the opportunity for increased business activity and jobs.

AIDEA controversy

AIDEA is the go-to lender for economic development projects in the state, but not all legislators completely trust the transparency of the organization’s board to manage state funds. 

Rep. Matt Claman (D-Anchorage) proposed an amendment on the House version of the green bank bill, tying a reform of AIDEA’s board appointment regulations to the passage of the bill. Essentially, the amendment would change the composition of the board, giving the Legislature the right to appoint four of its five public members. The governor would still appoint one, but the Senate President and the Speaker of the House would each appoint two. It would also specify that members would have to be removed for cause rather than serving at the pleasure of the governor.

Claman said he wanted to see more oversight over AIDEA, citing bad investments in the past.

“The reason this is offered now in connection with this green energy bill is that this would actually strengthen the public confidence that this is going to be managed appropriately,” he said. “I've had a number of people contact my office who basically said, ‘This is a great idea but why are you letting AIDEA manage it? Because AIDEA's had so many fumbles along the way.’”

Rep. James Kaufman (R-Anchorage) said he thought coupling the reform to the green bank bill wouldn’t give the reform portion enough time to be reviewed.

“It's worth looking at the structure of AIDEA, but as an amendment to this bill for this purpose, it's putting something in this discussion that I don't believe will be well considered,” he said. “We don't have enough time... to adequately vet what changes are needed in AIDEA itself to have benefits.”

The House bill has gone through several versions, some with the amendments, in its committee process. It passed through the House Special Committee on Energy and the Labor and Commerce Committee, but has not had a hearing in the House Finance Committee.