Legislature Passes Bills on Community Solar and Green Bank
By Brian Kassof
June 6, 2024
Ed. note–this article discusses the Alaska Public Interest Research Group (AKPIRG) as well as the Renewable Energy Alaska Project (REAP), of which AKPIRG is an institutional member. While editorially independent, AETP receives its funding from AKPIRG.
The final days of the legislative session saw the passage of two bills that will make it easier for Alaskans to gain access to the benefits of renewable power generation and energy upgrades. In particular, both bills could help spur a significant increase in small-scale solar power generation. The first bill, SB 152, provides a regulatory framework for the development of community solar projects—these are solar arrays that allow community members who cannot install solar panels at their own homes to buy shares of their output. The second bill, HB 273, includes the creation of a statewide Green Bank under the auspices of the Alaska Housing Finance Corporation (AHFC). The Green Bank will help finance ‘sustainable energy projects’ for individuals, small business, and communities—these could include anything from insulation upgrades to home or community solar arrays. It could also potentially help finance larger projects, such as utility-scale wind farms.
At the time of publication, neither bill had been transmitted to the Governor for his signature. The Governor has 20 days after transmission to sign or veto a bill. This article will be updated to reflect the Governor’s actions after they are taken.
SB 152: The Saving Alaskans Money With Voluntary Community Energy (SAVE) Act.
SB 152 provides a framework for utility customers to buy subscriptions in small, renewable generation facilities known as “community energy facilities” (CEFs)—these are generally solar arrays, but could include other technologies, such as wind generation. According to Philip Wight, a policy analyst with the Alaska Public Interest Research Group (AKPIRG) who helped to develop SB 152, the bill will have many positive impacts, including addressing fundamental inequalities in access to the benefits of home renewable power generation and helping to attract new investment in solar generation in Alaska. The development of CEFs could also help ease the pressure on limited supplies of Cook Inlet natural gas, increase the resiliency of the Railbelt power grid, and create new jobs.
Alaskans with home solar arrays are able to take advantage of a program known as ‘net-metering,’ which allows them to sell the power they do not use back to their utility. The credit for this power offsets the energy charge on their monthly power bill. SB 152 will allow for ‘virtual net-metering.’ Power generated at a CEF will be fed into a utility’s system and its value will be credited proportionately to the CEF’s subscribers, offsetting part of their monthly energy bill. The exact value of each kilowatt hour per subscriber will be determined by the Regulatory Commission of Alaska (RCA, a state agency that regulates most Alaskan utilities). The law would apply to all Alaskan electric utilities currently required to offer net-metering programs under 3 AAC 50.900. Community solar CEF programs currently exist in over 40 states, and 22 states have passed legislation to encourage their development. SB 152 is unique in that it does not specify what type of renewable technology can be used for virtual net-metering, opening the door for CEFs employing other technologies such as wind or geothermal generation.
Wight sees the availability of virtual net-metering as a way to address the present system’s fundamental inequality. Currently only those who own their own home (or business), have the right solar exposure, and sufficient money to pay for the installation of solar panels are able to take advantage of net-metering programs. This excludes renters (who make up roughly one-third of the state’s population), condominium owners, and those with lower-incomes. Wight says that virtual net-metering will mean that “more Alaskans can share in the benefits of the clean energy transition.” Foremost among these are monthly savings–subscribers to community solar projects in other states save an average of 5 to 15 percent on their monthly utility bill. Virtual net-metering would also be attractive to those who wish to lower their carbon footprint.
Wight contends CEFs will also increase investment in renewable power generation in Alaska. There are a number of independent power producers that already operate CEFs in other parts of the United States, some of which have expressed interest in developing projects in Alaska. CEFs also bring in investment from subscribers, allowing utilities to add to their generation capacity without tying up their own funds.
In a presentation to the Senate Labor and Commerce Committee, David Dunsmore, a staff member for the bill’s main sponsor Senator Bill Wielochowski (D-Anchorage), laid out a number of other potential benefits. The introduction of CEFs should accelerate the addition of more renewable generation capacity along the Railbelt. This would reduce electric utility demand on the diminishing supply of Cook Inlet natural gas, leaving more gas for home heating and buying more time for utilities to find new sources of natural gas. Outside companies investing in CEFs would bring their experience and expertise to Alaska. New CEFs will create a demand for technicians to build and service them, generating new jobs and increasing the Alaskan workforce with experience in renewable generation technology.
Under the bill, CEFs can be set up by utilities, community groups, non-profits, other organizations (such as condo boards), or private investors. It is also possible that a portion of a larger facility set up by an independent power producer or utility could be designated as a CEF–Golden Valley Electric Association (GVEA) is considering such an arrangement for a proposed solar farm in Nenana. Only residential and small-business customers who receive power from the relevant utility are allowed to subscribe to a CEF (to allow for virtual net-metering). There is no size limit for CEFs in the bill, although the RCA could impose one as part of its regulations. Wight said that best practices in other states usually limit the size of CEFs to a maximum of 5 megawatts generation capacity.
The hope is that the passage of SB 152 will increase the amount of renewable power generated on the Railbelt relatively quickly, once the RCA enacts the necessary regulations, a process expected to take at least a year. The bill requires utilities to evaluate every two years how much CEF power they can safely integrate into their systems. There is currently room for considerable expansion of net-metering. According to figures from the Alaska Center for Energy and Power (ACEP), as of the end of 2022 net-metering capacity was equivalent to between 2 and 6 percent of the Railbelt utilities’ average retail demand (CEA is about 2 percent, GVEA 2.5 percent, MEA 3 percent, and HEA about 6 percent).
During a hearing for SB 152, RCA Commissioner Robert Doyle estimated that net-metering capacity on the Railbelt could likely be increased to at least 20 percent of average demand without having a negative impact on system reliability or safety. In addition to ensuring that CEFs do not compromise system reliability, the bill requires the RCA to make sure that they will not have a negative impact on the rates of other utility members (this is sometimes known as cross-subsidization).
While there have been several efforts to start CEFs in the Railbelt over the past decade, they have been slowed by a lack of regulatory clarity and certainty. Utilities are able to submit CEF proposals to the RCA, but they currently have to be approved on an individual basis–once the RCA develops the regulations required by SB 152, there will be an established set of rules for utilities to develop a set of rates (tariff) that would apply to a proposed CEF (and the same tariff would apply to all CEFs in that utility’s territory).
In 2017 Chugach Electric Association (CEA) proposed starting a community solar project that would be owned and operated by the utility. This proposal was rejected by the RCA, which found it overly complicated and incomplete. A more recent CEA proposal, for a 500 kilowatt solar farm in which CEA members could buy subscriptions, was approved by the RCA in January 2024. This recent CEA proposal has been criticized by some renewable energy advocates who say that its financing and structure make it much more expensive than it needs to be—rather than save money, subscribers would actually pay between two and three times regular power rates for the energy produced. They also point out that, since CEA plans to build the project regardless of subscriber interest, it will not actually promote any additional solar power generation, as SB 152 is intended to do. In addition to its possible Nenana project, GVEA is also currently considering converting its existing solar array in Fairbanks into a CEF, though this has not yet been submitted to the RCA for approval.
HB 273: Sustainable Energy Development Fund (Green Bank)
This bill allows the AHFC to create a state ‘Green Bank’-- a subsidiary that will help finance sustainable energy projects. The funds for the Green Bank will come from federal grants earmarked for such entities (the state will pay for some administrative costs). The purpose of a green bank is to leverage public funds to encourage private investment in renewable or sustainable energy projects, ranging from energy efficiency upgrades such as insulation, heat pumps, or solar panels for homes or small businesses to larger projects, such as community- or utility-scale generation facilities like wind farms.
Green banks are not traditional banks with depositors, but rather more akin to specialized investment funds. They sometimes provide direct loans or financing themselves. But their main function is to help leverage private investment, through loan guarantees, public-private partnerships, the administration of small loans, and other financing mechanisms. There are currently over 20 green banks in the United States, mostly at the state level, which accounted for over $4.6 billion in investments in 2022. (For more on green banks, see this AETP Explainer).
The Green Bank included in HB 273 is a slimmed-down version of the one proposed last year in HB 154 and SB 125. Those bills originally included $20 million of state funding and called for the creation of the Alaska Energy Independence Fund (AEIF--see this AETP article for details). This funding was removed by the Senate Finance Committee in February, along with the language describing the AEIF and how it would operate. The remaining bill simply allows AHFC to create a subsidiary to aid in the financing of ‘sustainable energy development.’ AHFC will receive technical support and advice from the Alaska Energy Authority (AEA).
The expectation is that the creation of the Green Bank will allow Alaska access to some of the $27 billion included in the federal Greenhouse Gas Reduction Fund, which was created as part of the 2022 Inflation Reduction Act (IRA). This money is being disbursed through a number of intermediaries and should become available over the next several years. AEA and AHFC have already received a tentative $62.5 million grant from the Greenhouse Gas Reduction Fund’s Solar for All program, targeted at installing solar arrays in disadvantaged communities and for low-income households. This funding, however, is separate from the future Green Bank.
In addition to helping the state gain access to some of these federal funds, supporters have also pointed out that the financing made available by the Green Bank will help Alaskans take advantage of numerous federal tax credits, rebates, and loan supports for energy efficiency upgrades, like the installation of solar panels, that will be available through 2032. As Chris Rose, Executive Director of the Renewable Energy Alaska Project told a webinar audience in November 2022, conventional banks are hesitant to provide loans for things like solar panels, putting them out of reach for many homeowners. Financing options made possible by a green bank would allow many more people to take advantage of these tax incentives.
While HB 154 and SB 125 included specific language about what types of financial instruments a future Green Bank could use, these portions of the bill were removed along with those creating the AEIF in February. According to testimony given to the Senate Finance Committee in February by Akis Gialopsos, Deputy Executive Director of AHFC, the language in the new version of the bill is intentionally vague, so that the Green Bank could adapt its rules and practices to coincide with the requirements of the federal programs from which it might receive funding.
The guidelines remaining in the bill are fairly straightforward. The Green Bank should work to help finance sustainable energy development while taking state energy policy into account. Energy upgrades for various types of buildings (residential, commercial, or community) are given priority. The definition of sustainable energy remains the same from the previous bill--renewable energy generation systems, improvements to buildings’ energy efficiency, energy storage systems that support renewable generation, “clean transportation,” and any other greenhouse gas reducing or energy efficient technology approved by AFHC. A clause making foreign renewable generation facilities that provide power to Alaskan communities eligible for support was added to the bill at the request of Senator Jesse Kiehl (D-Juneau).
The green bank legislation almost did not make it into law this year, getting caught up in the crunch of bills awaiting legislative action at the end of the session. The House version, HB 154, was sent to the Rules Committee on April 29, but never made it to the floor for a full vote. The Senate version, SB 125, was only advanced by the Senate Finance Committee on May 12.
To save the bill, the Senate Finance Committee inserted the green bank section into another AHFC-related bill, HB 273. That bill had passed the House in March, but was still being considered in the Senate. The revised version, which included the Green Bank, passed the Senate by a vote of 18-2. The Senate version was then approved with bipartisan support in the House on the final day of the legislative session, by a vote of 28-11. The bill now awaits transmission to Governor Dunleavy for his signature.
