Our view: Tap wind, cut taxes

Depending on the size of the alternative projects, those tax savings could be worth from a few thousand dollars to millions of dollars.

The 2.1 cents figure matches a federal program's tax break for wind, geothermal and biomass electricity production.

Alternative energy producers could sell their state tax credits to any outfit required to pay an Alaska corporate income tax. That's because most of Alaska's power is produced by government utilities or nonprofit cooperatives that are exempt from income taxes.

The idea here is simple: Encourage Alaska energy producers to give us more power from alternative and renewable sources for the sake of energy efficiency, a cleaner environment and reduced costs.

With production tax credits, the state lets the private sector make the upfront investment and assume the risk of failure. If investors build a project that actually produces energy, they get the tax reward. That way the state isn't bankrolling projects that may or may not pan out.

The tax credits should serve Gov. Sarah Palin's stated goal -- that 50 percent of Alaska's power come from renewable sources by 2025 (It's 24 percent now). That's the most ambitious target in the United States.

None of this is to argue that Alaska's state-funded renewable energy program should be scrapped. Lawmakers already have voted to fund dozens of projects with the $100 million Renewable Energy Fund. This state money, born of the high oil prices of 2006-08, is generally a good investment to jump-start projects throughout Alaska.

Sen. McGuire's bill is a different approach -- and one that doesn't depend on future appropriations that may not be available if oil stays closer to $40 than $140 a barrel. Producers take the initiative, and when they can turn that alternative power on, they can tap the tax savings. McGuire aide Trevor Fulton said the bill is due for more revision as lawmakers review it -- for example, the latest version would cap the tax credits at 20 percent of the project's capital investment. But the general idea is sound.

Alaska is rich in a wide range of energy resources. This bill should accelerate the production of those that neither pollute nor run out.

BOTTOM LINE: Tax credit for alternative energy production is smart state policy.