Alaska’s Largest Solar Project Just Broke Ground. Here Are 5 Reasons It’s Remarkable.
On a sunny day in September, Matanuska Electric Association (MEA) hosted a groundbreaking ceremony at a new solar farm site on a 45-acre plot of land in Southcentral Alaska. Surrounded by changing fall colors, cranberry bushes, and steel pilings, a crowd gathered to celebrate an achievement years in the making – breaking ground on what will be Alaska’s largest solar asset built to date.
The property is located in the city of Houston, a community of around 2,000 people an hour’s drive north of Anchorage. Renewable IPP (Independent Power Producers), an Anchorage-based company founded in 2017 by former oil and gas engineers, is building the Houston solar farm. Renewable IPP is leading the way on large-scale, cost-competitive solar development in Alaska, and Launch Alaska is proud to have played a role in bringing the Houston project together.
The 8.5 megawatt (MW) solar array, when completed in summer 2023, will provide power to MEA co-op members. It’s enough to power 1,400 homes per year in the Matanuska-Susitna Borough. While you might have seen this project in the news recently, you may have missed the deeper significance. This solar farm represents a watershed moment for the future of solar and clean energy in our state. It is significant in Alaska for five key reasons.
1) The project represents a new class of investment in Alaska, expanding economic diversification.
The Houston solar farm was financed utilizing an external equity investment partner who is helping arrange project financing, including debt and tax equity. The use of tax equity to finance renewable energy is common in the Lower 48, but still in its infancy in Alaska. The Houston project proves this model can be smoothly executed here, and with the recent passage of the Inflation Reduction Act and associated clean energy tax credits, this means that Alaska can increasingly capture federal tax incentives just as other states are across the country.
“Launch Alaska was instrumental in connecting our Alaska-grown business with investors, enabling us to go from a startup to a real contributor to the Alaska economy.”
Launch Alaska has been a partner in the Houston project since 2020, working closely with Renewable IPP through a Joint Development Agreement to support the project’s financing. Launch Alaska CEO Isaac Vanderburg sourced and interviewed investors across Alaska and the country, eventually forging a connection with New York-based CleanCapital and providing an introduction to Renewable IPP. CleanCapital has supported solar farms across the country and is now helping to arrange project financing for the Houston project, its first in Alaska.
This out-of-state project financing will generate a hyperlocal economic impact. The project is creating 30-40 local construction jobs and 15-20 part-time maintenance jobs when complete. All the training for Renewable IPP team members is done on the job, contributing to the country’s fast-growing clean energy workforce. And the solar energy the project will provide helps meet MEA’s goal of fuel supply diversity (85% of MEA’s electricity is currently generated from Cook Inlet natural gas), as well as the utility’s voluntary 28% carbon emissions reduction goal.
2) The project marks a shift in Alaska’s power production landscape.
As the name suggests, independent power producers (IPP) are privately owned power plants, operating outside of the more traditional utility model. Less than 5% of Alaska’s electricity is generated by IPPs versus over 40% in the Lower 48. If this Houston project is an indication, we’ll see that number quickly rise in the coming years.
The IPP model allows private industry to fund and take the up-front capital risk associated with building new generation projects instead of the public. When recent inflation caused cost increases for the Houston project, Renewable IPP and CleanCapital developed creative solutions to maintain the project economics. MEA members were insulated from this inflation spike; the fixed price contract was already signed. This model incentivizes private industry to deliver a project on budget.
3) The project shows solar is cost-competitive with natural gas generation.
The Houston Renewable IPP project integrates renewable energy without raising electricity prices for consumers. That is key to increasing deployment of clean energy in other areas of the state. To be approved by regulators, clean energy has to compete on its economics, and the Houston project proved it could provide power that was more affordable than natural gas generation - a game changer for the sector.
MEA had that top of mind for this project.
“Member surveys indicate [our members] want MEA to produce more power with renewable energy, but not at an additional cost. We believe this project achieves that goal,” MEA CEO Tony Izzo noted in a press release for the Houston solar farm.
The recent news that future natural gas contracts for many of Alaska’s urban utilities can’t be guaranteed means that utilities like MEA are looking at different ways to secure power for their customers. Solar energy, wind generation, and maybe even tidal power can play increasing roles as costs for renewables continue to decline, out-competing prices for natural gas.
As Alaska Gov. Mike Dunleavy said in his remarks at the Houston groundbreaking, “Oil and gas and renewables are not incompatible, in fact they fit nicely. I think you’re going to see more and more [of this type of solar farm] across the state of Alaska. This is not a one-off, this is just the beginning of tremendous amounts of power we can produce here in Alaska.”
And earlier this year – in a press release introducing legislation to establish a 80% by 2040 Renewable Portfolio Standard for Alaska’s five urban ‘Railbelt’ utilities – Dunleavy noted the trends are clear: “For over 30 years, natural gas prices have only risen in the Cook Inlet while the cost of renewable generation has plummeted…While we must continue to aggressively develop our oil and gas exports, remaining captive to a costly and unpredictable energy source at home is not an option.”
4) The project provides stable pricing consumers can count on.
While many consumers may be interested in more renewable sources of electricity to power their homes and lives, the price of that electricity is often the most important factor. The fixed-price and long-term contract signed between MEA and Renewable IPP for power helps stabilize rates for a more affordable source of energy. The pricing of the solar power generated by the Houston farm will be independent from natural gas contracts or inflation. This fixed contract - known as a Power Purchase Agreement - is set for 25 years, providing MEA ratepayers stability in their pricing.
5) Alaskans came together to make this complex project possible.
Like many large infrastructure projects, this solar farm and its financing, approval, siting, and public process required significant partnerships and collaboration. The team at Renewable IPP guided the project and its stakeholders through the multiple layers of approval and decision points required. Everyone had to be in alignment. The City of Houston had to rezone the land on which the project would be located, the Matanuska-Susitna Borough had to approve a lease, Launch Alaska had to find the right investors willing to dig into the nuances of an Alaska project, CleanCapital had to work through the complexities of the project and get its investors comfortable with a solar farm in Alaska, suppliers and shippers had to get familiar with Alaska logistics, staff had to be hired and trained, and MEA staff and leadership had to get comfortable with intermittent solar power and how they would handle the technical aspects. But as Renewable IPP CEO Jenn Miller recalls of the process, “Everyone was asking ‘How can we make this work?’ Instead of ‘This can’t work.’”