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Potential Partners

Potential Partners

In order to fund the microgrid, we recommend piecing together funding from a few different sources and project partners – 1) PCE subsidy; 2) donations; 3) grants; and 4) investments.

As discussed above, the PCE subsidy is at risk of being lost as a result of moving towards a more fuel efficient system. The Regulatory Commission of Alaska determines the PCE level for each utility based on a formula that looks at: fuel expenses such as the cost of fuel, transportation; and, non-fuel expenses such as salaries, insurance, taxes, parts and supplies, interest and other reasonable costs. It’s interesting to note that Alaska is now the global leader in microgrid development, and that a lot of these wind projects started in Alaska in the early 1990s in anticipation of the subsidy going away. The subsidy has survived for 40 years now, but regulatory overhaul is necessary in order to keep it up to times with the current state of electricity generation in Alaska. More specifically, the AEA and the RCA should modify the formula with which they grant subsidies to allow cost-effective investments in non-diesel alternatives to be reflected in lower rates for rural customers. One way to do so is to change to way non-fuel expenses more than fuel expenses for renewable energy projects. We propose that the Emmett Environmental Law & Policy Clinic work as a project partner in order to petition the AEA and RCA to reconsider their allotment of subsidies. Given that this is a regulatory role that the Commission plays – no legislative intervention is necessary.

Donations: Shishmaref is in a difficult situation because it has the need for massive amounts of funding with very small prospects of offset production to exchange for it. Nonetheless, Alaskan native regimes are unique in that some villages are actually incorporated as 501(c)(3) corporations – including Shishmaref. Therefore, the Shishmaref Native Corporation is eligible for tax exempt donations. For example, Wells Fargo announced in November that it was committing $50m over five years for Alaskan Native Communities – specifically for renewable energy and clean water projects. Similarly, more project partners could be identified zoning in on specific corporate responsibility missions that companies have. Patagonia is a great example because they put money aside to fund organizations and projects that have a focus on preserving and protecting the environment. If Patagonia were to make a donation to our wind microgrid project, as owned by a 501(c)(3) corporation – they would be able to deduct their donation from their taxable income. In this manner, they’re hitting their internal mandates for corporate responsibility and at the same time taking a tax break. Using this incentive, it’s possible to attract more donations.

Grants: there are several foundations that provide grants to initiatives that are looking at clean and renewable energy. For example, the Rockefeller Foundation has provided funding for projects that have to do with efficient energy systems in rural areas in the US in the past. The Bill & Melinda Gates Foundation has an Emergency Relief Fund that identifies “slow-onset emergencies” as eligible for funding – and although their requirements have to do with issues of public health, as you’ve heard from Darya, there are certainly several public health issues implicated that need to be addressed via our project.

Investments: Corporations can also invest in the microgrid in exchange for wind related tax credit via the Business Energy Investment Tax Credit from the US Tax Code. Large Wind projects can provide up to 18% credit in the first year of investment. Business Energy Investment Tax Credit provides the following chart of tax credits available for investors (as per 26 U.S.C. § 48):

Technology

2018

2019

2020

2021

2022

Future Years

PV, Solar Water Heating, Solar Space Heating/Cooling, Solar Process Heat

30%

30%

26%

22%

10%

10%

Hybrid Solar Lighting, Fuel Cells, Small Wind

N/A

N/A

N/A

N/A

N/A

N/A

Geothermal Heat Pumps, Microtubines, Combine Heat and Power Systems

N/A

N/A

N/A

N/A

N/A

N/A

Geothermal Electric

10%

10%

10%

10%

10%

10%

Large Wind

18%

12%

N/A

N/A

N/A

N/A

As seen above, companies would be able to get an 18% tax credit for their investment in our wind project.

As such, a large number of project partners would need to come together in order to provide the funding to make this a reality.

PROJECT PARTNERS PEEL OUT: This project requires support from a variety of corporations, philanthropic institutions, non-profits, financial institutions, educational institutions and more in order to be successful. Partners could come together to provide three resources:

Materials, design, and labor

Funding

Legal Assistance

LEGAL ANALYSIS

Currently, the Alaska Village Electricity Cooperative (AVEC) is the electrical supplier for the community, and it is anticipated that they would continue to provide energy at the new site. AVEC has had great success in Western-remote Alaska using wind generation to offset the fossil fuel power generation that these rural communities rely on.

AVEC could operate the wind farm and micro grid that is proposed in this section. This system works well as over 50% of utilities in Alaska are co-ops, including the largest utility, Chugach Electric. Another 30% of utilities are municipally owned, making Alaska mostly a Public Power State.

AVEC could provide energy to Shishmaref through a power purchase agreement. A power purchase agreement (PPA) is a contract between two parties, one which generates energy and the other which purchases it. In this case, AVEC would be generating the energy which Shishmaref would purchase.

It might be worth noting that if Shishmaref required 501(c)(3) donations in order to set up the wind farm, then the microgrid would have to be owned by the Native Village of Shishmaref Corporation and operated by AVEC. This arrangement would require an additional contract along with the PPA – one where in AVEC is contracted to operate the utility facility by Shishmaref, and then sells the electricity back to the organization. This would need to be carefully constructed into various parts: establishing the ownership of the microgrid by Shishmaref, establishing AVEC as the operator of the microgrid and the outlining the expectations of what AVEC can and can’t do with the facility (i.e. parameters of where the supplied energy is going; what authority does the appointed co-op have in an operating capacity, grounds for termination, compensation of the board, etc) along with the power purchasing agreement to have the energy created by the wind farm be sold to the village of Shishmaref.

Finally, the Village of Shishmaref would also need to enter into agreements with contractors for the installation of the wind farm which would require attention to timeline, caps on cost of materials, compensation, and material breach clauses.