Proposed solar project on Kenai Peninsula would be Alaska’s largest

The Kenai Peninsula may soon get the state’s largest solar power farm to date, but it may depend on the local government’s willingness to provide a tax break.

Renewable Independent Power Producers, an Anchorage-based company with several solar farms in Anchorage and the Mat-Su area, is working on a new project on the Kenai Peninsula. If it moves forward with the development, the farm — planned to be 160 acres, with about 60,000 panels and 20 megawatts of power production — would be the largest in Alaska.

Jenn Miller, the CEO of Renewable IPP, told the Kenai Peninsula Borough Assembly in October that the company isn’t sharing details of the exact location for the project yet because the land lease details are still in the works.

“It’s definitely significant,” she said. “This would be about 60,000 solar panels. Our record to date is a panel per minute to install, so we’ll see if we can beat that.”

Across Alaska, cooperative utilities like Chugach Electric Association, Matanuska Electric Association and Homer Electric Association generate and provide electricity to members. Their boards are elected, and the members underwrite the infrastructure projects in their power bills. In the past, the cooperatives have built and owned all their generation sources. IPPs are essentially private companies that build and own the generation projects, but not the transmission lines. They then sell the electricity they generate to the cooperatives.

Renewable IPP already owns three projects—one in Willow, one in Houston and one in Anchorage. Miller said the Willow project is the largest so far, but the Kenai Peninsula project will be significantly larger than that, providing enough energy to support about 4,500 homes, or about 6.5% of HEA’s energy demand.

But one factor that may make or break the project is whether the Kenai Peninsula Borough Assembly is willing to give the project a property tax break. Without a significant subsidy, the project won’t be competitive as a power producer, she said.

“Property taxes would be about 10-15% of our annual revenue,” she said. “Ultimately what that does is it inhibits our ability to offer the lowest possible electricity cost to HEA members.”

There’s a tax difference between public utilities and for-profit private energy generation companies. Utility cooperatives like HEA are incorporated as nonprofits, and therefore are not taxed on their properties. Private for-profit corporations — even if they are providing utility services — are. Electric utilities also operate as regulated monopolies under the Regulatory Commission of Alaska, which prevents them from altering prices to consumers too much without oversight. They can only adjust power costs so much under RCA regulations.

Renewable IPP is providing electricity like a utility, but because it doesn’t have any paying members, it can’t pass the cost along directly to amortize its infrastructure project. HEA can’t necessarily pass along its cost directly, either, because its prices are regulated by the RCA. Therefore, the solar project has to be competitive with natural gas prices in order to be economical. Miller said that’s why the property tax amounts on a project like the Kenai solar farm — with an estimated $30 million-$35 million in infrastructure costs — can make or break it.

“If we get this exemption for this project, how does it benefit the borough residents?” she said. “If we come in four-tenths of a penny below the current cost of generation, we will equal what we would have paid in property taxes, and those dollars are going directly to the residents.”

Renewable IPP does pay property taxes on the Willow project in the Mat-Su Borough. However, the difference there is the size of the project, Miller said — the Kenai project would be larger, and with intermittent energy like solar, the company has to cover the cost of guaranteeing power to HEA when the sun isn’t shining.

Assembly members expressed some skepticism about having to provide a tax subsidy for a private industry. Borough Mayor Charlie Pierce said several times he didn’t support providing a tax cut to the solar project when another utility provider like Enstar Natural Gas pays taxes on its lines. Enstar, where Pierce was previously an employee before retiring, is a for-profit company and thus pays taxes. However, Enstar is also different in that it has a direct subscriber base of consumers.

Miller said Renewable IPP usually does have a set escalator over the life of a lease that has to “meet or beat inflation.” The company has to look out a few decades at a price forecast for the utility’s cost of generation and show its price comes in under the estimate to receive approval from the utility and the RCA. She said the estimated cost per kilowatt-hour of electricity for the project would be competitive with HEA’s current costs of generation — between 7 and 9 cents per kilowatt hour — which is still more expensive than the Lower 48 average for solar power generation, but it is renewable and doesn’t depend on the cost of fossil fuels like natural gas or coal, which can fluctuate.

She said the project may appeal to new businesses coming into the area as well.

“We have heard for some new industries (what) they are looking at when they are considering siting a manufacturing plant here in Alaska … energy prices are one of the major deciding factors,” she said. “Some new businesses are very keen on renewable energy, and they want to be able to say, ‘We’re getting this much of our generation from renewable,’ but people have different feelings about that.’”

The assembly took no action on a potential tax exemption for the project in October, but several members said they appreciated the information and were looking for more.

Reach Elizabeth Earl at elizabethearl@gmail.com.