Alaska’s new “green bank” hopes to improve the financial situation for renewable energy

Alaskans who want to invest in solar panels or other renewable energy infrastructure for their homes will likely have new options in the next few years. The state is creating a new “green bank” aimed at helping Alaskans keep energy costs low and accelerate the transition to renewable energy.

The bill creating Alaska’s green bank hasn’t been signed into law yet – it awaits some final checks before Gov. Mike Dunleavy signs it – but Chris Rose, who has led the nonprofit Renewable Energy Alaska Project for two decades, is excited.

“I think a green bank can actually play a pretty big role in helping people get seed money to pursue projects that they want to do but just don’t have that kind of money,” Rose said in a phone interview.

This is not a new concept. States like Connecticut and Hawaii have been using green banks for years to encourage the development of renewable energy. Massachusetts just started one last year.

And for now, it’s hard to say what Alaska’s program will look like. But Rose said one goal is to reduce the risk of borrowing money for renewable energy projects, thereby making lending cheaper and easier for people. Rose said once a home or business owner has the money to invest upfront, it unlocks a number of federal incentives, such as large tax credits for items like solar panels, heat pumps and weatherization.

“But you can’t get a tax incentive, tax credit or relief from the federal government unless you spend the money in the first place,” he said.

This takes different forms in different places. For example, Hawaii’s green bank, the Hawaii Green Infrastructure Authority, began by directly financing rooftop solar panels for low- and moderate-income households, renters, nonprofits and small businesses, especially those that did not qualify for regular loans.

Executive Director Gwen Yamamoto Lau said a green bank in Hawaii no longer even has to run a credit check thanks to its green energy money-saving program. Basically, it takes the amount you currently pay for electricity, reduces it by at least 5%, and divides the rest between your remaining energy bill and a loan for new rooftop solar panels.

“They just continue to pay their utility bills and then the utility will forward the loan repayment to us,” she said by phone.

This eliminates much of the risk for lenders, she said – your ability to repay the loan does not depend on your income, but rather on how much energy you save.

There’s plenty of federal aid, too. Green banks across the country received a major boost from the Inflation Reduction Act of 2022. Vice President Kamala Harris said at an event last month announcing $20 billion in green bank financing that this approach allows communities to determine what they need.

It’s a great time for Alaska to join in, says Bryan Butcher, head of the Alaska Housing Finance Corporation, which will house the green bank.

“In some of the other state green banks, we see opportunities to match $1 from the Green Bank with $6 or $7 from various other areas, either from the private sector (or) from other government entities,” he said by phone.

Butcher said Alaska’s green bank likely won’t be limited to smaller projects, such as rooftop or small-scale solar installations.

“I think we see this as an opportunity to pursue large commercial-scale projects as well as potentially smaller projects,” he said.

But he said Alaskans should temper their expectations – the green bank won’t be a silver bullet for the state’s energy needs. Just raising the bank’s green rating will likely take the rest of the year, and it’s unclear when the first loan will be issued. But it’s a step in the right direction, he said.

“This will be a good step forward, allowing us to achieve many positive things. That’s good,” he said. “But if he’s expected to do it all for everybody, like everything else, I don’t think we’ll make it.”

Meanwhile, Butcher said the housing finance agency is preparing to distribute its share of a $125 million federal grant aimed at developing rooftop and community solar projects for low-income and disadvantaged communities across the state. He added that he expected the funds to be available this summer.