Econ 919 — Building Alaska's largest solar farm
An Alaska energy company wants to build its biggest solar panel farm yet on the Kenai Peninsula. First, it’s asking the Kenai Peninsula Borough for a tax exemption, which it says will help it produce energy for less.
Sixty-thousand. That’s how many solar panels Renewable Independent Power Producers wants to put on the Kenai Peninsula, for what could be its largest solar array to date.
The Anchorage-based for-profit company already has a solar farm in Willow. It’s building out another in Houston.
But this project would be nearly 20 times larger than the Willow project and would cost around $30 million, said company CEO Jen Miller.
“What we know right now is it has to be cost competitive with the current cost of generation," she said. "So between 7 and 9 cents a kilowatt hour.”
Solar power has been slower to catch on in Alaska than in much of the country. But as it becomes more affordable, it’s also becoming more attractive to Alaska energy co-ops, especially as energy costs in the state are spiking.
Homer Electric Association gets around 86 percent of its energy in the form of natural gas from Hilcorp. It pays about 8.5 cents for gas.
KeriAnn Baker, director of member relations for HEA, said it’s important to HEA that the utility diversifies.
“Because you never just want to be so dependent on one provider," she said. "And right now, we’re dependent on one supplier.”
Miller estimates the solar project would meet 6.5 percent of Homer Electric’s energy needs.
But before the company signs an agreement with the utility, it’s asking the Kenai Peninsula Borough for a property tax exemption on its capital improvements.
Public utilities like Homer Electric are tax exempt. But Renewable IPP, which is a private company with backing from private investors, is not, though the borough does sometimes offer tax exemptions for companies that qualify as contributing to economic development.
Company CFO Chris Colbert said what the borough would lose in taxes, it would make up for in lower electricity costs for residents.
“It’s a way to spreading out the benefits and possibly creating a bigger, larger benefit for more people," Colbert said.
Miller and Colbert asked the Kenai Peninsula Borough Assembly to consider an exemption of about 80 percent on capital improvements at a meeting earlier this month.
Miller said they will pursue the project regardless of whether it can get subsidies. But she said those breaks would help them charge HEA less for energy.
"Not paying the property taxes opens up anywhere from two-tenths to four-tenths a penny of negotiating room," she said. "And honestly, that really makes or breaks whether a contract is agreed or not agreed.”
Borough mayor Charlie Pierce was skeptical.
"When you consider doing a project for the benefit of the taxpayers and the tax base of this borough, if we have to subsidize it in order to do it, why should we do it?" he said at the assembly meeting.
Pierce, who comes from an oil and gas background, said he doesn’t object to the project. But he said he has a problem with there being an exemption for a privately owned, for-profit company.
Miller and Colbert also both have experience working in oil and gas. And they said government has historically subsidized the energy industry to incentivize development.
"When there’s incentives for energy, it reduces the cost and that benefits businesses and individuals to have more disposable income to grow the economy further," Miller said.
Colbert said Renewable IPP would hire between 40 to 60 workers to build the farm. That could take two years.
Once the farm is up and running, there would less to be done on the day-to-day. Colbert said they’d work with a smaller, part-time workforce to do farm upkeep, like removing snow from panels.
Miller said that workforce is partly why they’re eyeing the Kenai Peninsula as the site for the project.
"The nice thing about the Kenai Peninsula is there’s already a workforce that’s been trained in the energy sector," she said. "And we also come from oil and gas and have seen a lot of oil and gas folks transitioning to renewable energy.”
She said they’re exploring the possibility of offering technical training in solar locally, as well.
The company isn’t yet saying where it’s thinking of building the farm. Miller said it’s still waiting to finalize an agreement there.
Of course, this is Alaska, so the sun isn’t out all the time.
Homer Electric is working on a battery energy storage system project in the hopes that it can capture energy while it’s being generated, like on sunny days, and then use that energy later. It’s part of the utility’s goal to get to 50 percent renewable energy by 2025.
Baker said that system would make a project like Renewable IPP’s a lot more feasible. She said if the company can provide the cheapest power, Homer Electric will buy it.
“The numbers are looking pretty good," Baker said. "And we’re optimistic.”
A local advisory group, the Resilience and Security Advisory Commission, is conducting an independent study on whether the project is in the best interest of the borough.
In the meantime, it's still in its development phase. Miller said that phase could take about three years, with an additional two years of construction.