Alaska Governor Proposes Legislation Requiring 80 Percent Renewable Energy by 2040

Alaska Governor Mike Dunleavy on Feb. 4 introduced legislation to create a renewable portfolio standard that would require utilities to use qualifying resources for 80 percent of their sales by the end of 2040. If enacted, Alaska would join 30 states and two territories, which have standards or goals to procure a certain percentage of their electricity from renewable energy sources.

The Governor’s office said the transition to renewables is important because of the reliance on natural gas in the Railbelt, the grid stretching south from Fairbanks to Anchorage, and the Kenai Peninsula, which supplies power to two-thirds of the state’s residents. The office added that natural gas prices have increased in Cook Inlet while the cost of renewable generation has dropped, making the clean form of energy more favorable in the coming decades.

Dunleavy’s administration collaborated with the National Renewable Energy Laboratory to conduct a study titled “Renewable Portfolio Standard Assessment for Alaska’s Railbelt,” and found that the 80 percent target is achievable. This could result in $426 to $506 million in fuel savings annually by 2040, according to the study.

If legislators enact the program the compliance periods would cover five-year spans. Load-serving entities would submit annual reports to the Regulatory Commission of Alaska, which oversees the state’s utilities, to show compliance with the mandate. The proposal includes interim targets of 20 percent by 2025, 30 percent by 2030, and 55 percent by 2035.  Electric suppliers would have to retire renewable energy certificates bundled with generation located in their service territories or feeding into the grid that serves them.

Wind, solar, hydropower, biofuels, and waste-to-energy would be among the list of qualifying renewable sources. The legislation excludes generation from nuclear and petroleum, natural gas, and coal-fired power plants. The bill would set the alternative compliance payment, leveled against utilities for each megawatt-hour by which they fall short of the requirements, at $20 per megawatt-hour. Regulators would have the authority to waive the fee, which serves as a de facto price ceiling on RECs in compliance markets if a utility could not meet the mandate due to circumstances beyond a supplier’s reasonable control such as weather-related damage, labor strikes, and mechanical failure.

Load-serving entities would be exempt from complying with the renewable portfolio standard obligations if the overall targets are met by all utilities in aggregate, despite individual utility failures to meet the benchmarks.