How do you keep developing rural energy projects in a fiscal drought? More loans.

Governor Bill Walker delivering the Keynote Address at the Alaska Rural Energy Conference in Fairbanks, April, 2018. One of topics of discussion was paying for energy projects with loans. (Ravenna Koenig/ Alaska’s Energy Desk).

It’s a fact of life in rural Alaska that energy is expensive.

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In the past, one way the state helped with high costs was through grants — for things like renewable energy projects, efficiency projects or diesel system upgrades.

But as the fiscal picture has changed, there are fewer grants available and more loans are cropping up in their place.

At the Alaska Rural Energy Conference in Fairbanks this week, one of the big questions on everyone’s mind is: how do you pay for energy projects now that there’s just less grant money than there used to be?

Cady Lister is the chief economist for the Alaska Energy Authority. She says that communities and rural utilities need to rely less on grants and look more to loans.

Lister oversees a loan program for the Alaska Energy Authority that has gotten a significant increase in applications since 2014. It’s called the Project Power Loan Fund.

“That’s a very flexible loan program,” Lister said. “It certainly is useful for communities who don’t have the ability to access capital through other means.”

That flexibility is important because small rural utilities often have trouble getting loans from banks. Sometimes the amount they’re asking for is too small for the bank to make a profit from. Or they don’t have the kind of assets that a bank wants to see to make sure the loan gets paid back.

State and federal loan programs can help get around those problems.

Jessie Huff works to connect communities with loan programs at the U.S. Department of Agriculture.

Huff says that even though government loans can help rural communities access funding, there’s still risk involved that there isn’t with grants, and that makes some communities wary. But she thinks it’s important for them to consider how expensive it can sometimes be to do nothing.

“It really does come down to: if there are no grants available, and you can reduce your energy cost by 30%… if you don’t do the project, you’re wasting money,” Huff said.

For example, the City of Aleknagik close to Dillingham wants to retrofit six buildings to make them more energy efficient. City Administrator Joseph Coolidge says they currently spend $24,000 a year on electricity for those buildings. And while the city council has been hesitant to apply for a loan because they’ve been used to grants in the past, Coolidge is going to push them to reconsider:

“We need to spend money to save money, and it will save money years down the road when everything’s all paid for,” Coolidge said.

Cady Lister at the Alaska Energy Authority says the hope is that in the coming years a lack of grants won’t keep communities from getting the resources they need to move forward on energy projects.

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