Alaska establishes new loan program targeting renewable energy projects

Energy development in Alaska, including renewable energy projects, could be eligible for low-interest financing through a newly created, state-administered loan program.

Gov. Sean Parnell signed S.B. 25, the Alaska Sustainable Strategy for Energy Transmission and Supply bill, on June 12, thereby creating a fund that will finance energy development by letting the Alaska Industrial Development and Export Authority make direct loans or participate in loans through banks or credit unions. "It will bring the state closer to achieving its goal of 50% electricity generated by renewable energy by 2025," Parnell said in a news release.

The new fund will be capitalized at $125 million and administered by AIDEA. The program is effective Sept. 10, authority spokesman Karsten Rodvik said.

The bill was sponsored by Sen. Lesil McGuire and Rep. Lance Pruitt. While the bill does not exclude traditional forms of energy, there is a special provision for renewable energy development to keep interest rates low, said Mike Pawlowski, McGuire's chief of staff.

AIDEA is in the process of developing the regulations for the program, including how companies will apply, Rodvik said. But the bill came with a requirement for the participation of other financial backers on projects and legislative approval on loan guarantees of more than $20 million.

"The hope is you'll see a lot of projects just accelerate their development timelines and start to be built," Pawlowski said. "Senator McGuire is really hoping that this bill attracts outside capital, new money to Alaska."

The program is another mechanism developers can use to finance renewables projects in a state where industry proponents see vast renewable resource potential. In April, Alaska reauthorized its Renewable Energy Fund grant program for 10 years at a spending level of $50 million annually, Pawlowski said. While the spending level has been authorized but not yet appropriated, the two programs can work well together, he said.

"The reason S.B. 25 works so well with the [renewable energy] fund is it allows projects to move past that sort of first grant phase into construction," he said. "Let's say you get your grant for your wind farm, you don't have to keep applying for grants every year. You have the ability to borrow and go build it."

With both tools, developers can have greater certainty working in the state, Renewable Energy Alaska Project Executive Director Chris Rose said. Additionally, more than 200 projects have gone through the renewable energy fund pipeline, he said. But many of the projects funded were preliminary assessments. Many will need further funding as they move forward, and developers can soon look forward to the loan program, he said.

"The new fund will definitely provide another source of financing for renewable energy and energy efficiency projects in the state," Rose said.

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