Policies in Alaska & beyond
State and federal policies that encourage renewable energy projects play a crucial role in their development.
For more than 25 years, the federal Production Tax Credit (PTC) was the primary incentive tool for renewable electricity in the United States. Congress passed the PTC in 1992 to even the playing field between the renewable energy industry and the fossil fuel and nuclear industries. The subsidy provides a credit for each kilowatt-hour (kWh) a project produces over the first 10 years of its operation, incentivizing efficient operations and maintenance. In late 2015, Congress introduced a five-year extension of the PTC that included a gradual phasing down of the 2.4 cent/kWh credit for wind energy, beginning in 2017. Projects that started construction in 2019, the final year of the credit, will receive just 40 percent of the 2.4 cents/kWh credit for 10 years. The PTC for geothermal, closed-loop biomass and solar energy all ended at the beginning of 2018.
The 2015 bipartisan deal also called for an extension and phasing out of the other major federal incentive for wind developers, the Investment Tax Credit (ITC). The ITC is a separate incentive that has allowed project developers to elect to take a one-time tax credit of 30 percent of the total cost of the project’s construction, instead of the PTC. Wind projects that began construction in 2019 will receive a 12 percent tax credit, before the ITC goes away completely. The 30 percent ITC for solar was extended through 2019, when it begins to ratchet down. After 2023, the residential credit will drop to zero while the commercial and utility credit will drop to a permanent 10 percent.
Because of the uncertainty surrounding federal policy, individual state policies have historically been the primary drivers of renewable energy development in the United States. The three primary policies used across the country have been net metering, renewable portfolio standards and various forms of innovative public financing. As the threat of climate change intensifies, an increasing number of jurisdictions are also considering pricing carbon emissions to encourage renewable energy development, both directly and indirectly.