Wind turbines turn in Kodiak on May 14, 2018. (Photo by Dennis Schroeder/NREL)
For decades, federal support for renewable energy largely excluded Alaska while building new energy opportunities and capacity in the Lower 48. Nonprofit cooperatives, which generate nearly all of Alaska’s power, didn’t qualify. Hydropower, which is an important energy source in many communities, also didn’t qualify, or received a lesser credit.
Legislation passed in 2022 finally reformed these credits to work for Alaska. Today, the ‘elective pay’ provision allows not-for-profit entities like our electric cooperatives and governments to take the credit in cash, putting them on equal footing with the rest of the country. The new credit is technology-neutral, so hydro and geothermal can qualify. And the entire state of Alaska receives a 10% bonus on top of the 30% baseline.
As the U.S. Senate works on President Trump’s comprehensive budget reconciliation package – his ‘One Big Beautiful Bill’ – we urge Sen. Dan Sullivan and Sen. Lisa Murkowksi, as well as Rep. Nick Begich, to safeguard the federal investment tax credit and the production tax credit provisions. 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.
Depending on the final text, the Railbelt stands to lose hundreds of millions of dollars, from the state’s proposed Dixon Diversion hydro expansion, planned wind farms, and solar on the Kenai Peninsula. 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. This comes as fuel costs are driving up our already high rates, which have risen 10% in the past 18 months. Rural Alaska faces even steeper increases.
That’s if the projects happen at all. Alaska’s largest solar developer pulled out of all their planned projects based on uncertainty over tax credits. It takes years to get projects to the start line, and the state and federal grants that kickstarted them are disappearing. Ratepayers in other communities, like Kodiak, that have already made the move to renewables but must maintain and eventually replace their equipment, will also lose if these incentives are taken away. If energy projects are canceled now, or infrastructure can’t be replaced, it locks our communities into volatile diesel and imported gas. With the Senate expected to vote on final language for these provisions within the next few weeks, Alaska’s window to defend these benefits is rapidly closing.
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. Alaska’s remote logistics, long supply chains and short building seasons mean that a single delayed barge could make ratepayer costs jump. Slower-to-build projects like hydro plants don’t have a hope of meeting the schedule.
“Prohibited foreign entity” rules demand that utilities prove that no wire or microchip ever touched a blacklisted country. A small rural co-op has no chance of tracking this and could see money clawed back years later for an honest mistake.
Alaska needs our congressional delegation to help keep the elective pay option, technology neutrality, the 30% baseline, and Alaska’s 10% energy community bonus.
It is also important to fix the parts of this bill that don’t work 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.
Our state has waited decades to benefit from federal clean energy incentives. These credits are our chance to finally diversify our energy system and build a more stable, affordable future. Let’s not eliminate Alaska’s opportunity before we can use it.
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