Alaska Officials Weigh Reviving Susitna-Watana Hydroelectric Project Amid Railbelt Energy Concerns
Why It Matters
Alaska’s Railbelt electric grid, which serves roughly three-quarters of the state’s population from Homer to Fairbanks, faces mounting pressure as its primary natural gas supply from Cook Inlet continues to decline. The Susitna-Watana Hydroelectric Project — long discussed but never built — is drawing renewed attention as policymakers and energy analysts weigh whether changed economic and policy conditions justify a serious new review of the decades-old proposal.
What Happened
At the start of the current legislative session, the Alaska Energy Authority (AEA) delivered its annual update on the Susitna-Watana project to state lawmakers. The report was just two pages long. In it, AEA Executive Director Curtis Thayer described how the agency has halted active work on the project and shifted focus to archiving the existing body of research — effectively placing Susitna alongside the more than 3,000 reports generated during its original licensing effort in the 1980s.
Yet even as AEA moves toward archiving, voices in Alaska’s energy and policy community are calling for one final, rigorous evaluation of the project before the state closes the door on it permanently. The argument centers on three significant changes in the energy landscape that have emerged over the past decade — changes that, proponents say, may have fundamentally altered the project’s financial and strategic case.
Background: A Project Twice Shelved
Susitna-Watana has been examined and set aside twice before. In the 1970s and early 1980s, the project advanced through years of planning before stalling when Cook Inlet natural gas became abundant and affordable. At that time, gas cost roughly 2 cents per kilowatt-hour, while power from the smaller Bradley Lake Hydroelectric Project — which narrowly secured legislative approval by a single vote — ran approximately double that figure. Susitna, far larger than Bradley Lake, could not survive that arithmetic.
The path chosen instead — gas-fired generation centered on Cook Inlet — served the Railbelt for decades. But those economic conditions have not held. Hydropower prices have remained comparatively stable over time, while natural gas costs have risen substantially and are projected to climb further as domestic supplies diminish.
Three Shifts Driving Reconsideration
Analysts point to three developments that distinguish today’s energy environment from the one that led to Susitna’s previous shelving.
Declining Cook Inlet gas supply: Cook Inlet natural gas currently accounts for roughly 70 percent of Railbelt electricity generation and the vast majority of heating in Southcentral Alaska. Production from existing fields is declining year over year, and Hilcorp Energy — the basin’s dominant producer — has signaled it is not interested in new long-term supply commitments. That leaves Railbelt utilities under increasing pressure to identify alternative power sources.
Federal tax credit access: Changes in federal clean energy policy now provide technology-neutral tax incentives for large hydropower projects. Critically, public and cooperative utilities — which own much of the Railbelt system — can now access these credits directly through a cash-equivalent payment mechanism. Analysts estimate such incentives could offset on the order of 50 percent of total capital costs, which for a project of Susitna’s scale could represent several billion dollars. That shift alone could substantially alter the project’s long-term rate outlook. Alaska has already been positioning itself as a pillar of American energy independence through major infrastructure investment.
Rising electricity demand: After a prolonged period of flat or declining load growth across much of the country, demand projections are turning upward. Electrification of heating systems and transportation, combined with rapid expansion of power-intensive data centers, is creating conditions under which a large baseload resource like Susitna could find a willing and growing customer base.
By the Numbers
- Susitna-Watana could generate approximately 2.5 to 3 million megawatt-hours annually at full buildout
- That output could displace an estimated 60 to 80 percent of current gas-fired electricity generation on the Railbelt
- Cook Inlet gas supplies roughly 70 percent of Railbelt electricity generation today
- Federal tax incentives could offset approximately 50 percent of total capital costs
- The Railbelt grid serves roughly 75 percent of Alaska’s total population
Zoom Out
Alaska’s energy challenge is in some ways a concentrated version of a broader national debate over grid reliability and the transition away from fossil fuel-based generation. Several states facing similar supply constraints have revisited large-scale hydropower or pumped storage projects as part of longer-term grid planning. Fisheries concerns — a persistent issue in any discussion of large dam construction in Alaska — remain an active consideration in state resource policy.
Advocates for reconsideration also argue that Susitna and the proposed Alaska LNG pipeline project are not competing priorities, as is often assumed. The two projects address fundamentally different problems: Susitna is oriented toward stabilizing in-state Railbelt electricity costs, while Alaska LNG is primarily structured around accessing export markets, with domestic benefits secondary.
What’s Next
No formal legislation or funding proposal to restart Susitna-Watana study has been introduced at this stage. The Alaska Energy Authority’s current directive is to archive existing project materials rather than advance new analysis. Any serious reconsideration would require a legislative mandate and new appropriations. Whether the current session produces either remains to be seen, though advocates argue the window for meaningful evaluation — before energy conditions force more immediate and costlier decisions — is narrowing.