- By Chez Oxendine
- Energy | Environment
Two upcoming funding opportunities could help tribes pay for renewable energy projects if the USDA’s Rural Utility Service can coax them to take advantage of the historically underutilized federal loans.
The Powering Affordable Clean Energy (PACE) Program and the Empowering Rural America (ERA) Program will begin accepting letters of interest at the end of this month, putting a total of $10.7 billion in assistance up for grabs. Both programs are part of the Inflation Reduction Act of 2022.
Money for these programs was first appropriated in 2017, but they haven’t caught fire with tribes for a number of reasons, according to Alliance for Tribal Clean Energy CEO Cheri Smith. Some of those reasons include a lack of grant application resources — including grant writers and fund management staff — as well as long-standing distrust of federal loan programs, she said.
“Tribes are uncomfortable with being in debt to the U.S. government, as it has historically come with big strings attached, and, quite frankly, lies, deceit, and manipulation,” Smith said. “It's hard for tribes to move past the history of having their energy resources exploited for the benefit of everyone but Native people.”
The PACE program, which has $1 billion in available funding, can be used for wind, solar, hydropower, geothermal and biomass projects, as well as renewable energy storage projects. The program offers loan forgiveness of 60% to tribal entities; by comparison, non-tribal applicants can secure forgiveness rates of up to 50% based on criteria such as location and population served.
The ERA program has $9.7 billion in available funding, the largest such federal investment in rural electrification in nearly a century. Applicants can apply for low-interest loans or grants, though grants are limited to 25% of the total project cost. The program can offer loans or grants for up to $970 million per project or applicant.
Loan programs largely haven’t appealed to tribes in the past, according to data provided by the USDA’s Rural Development department. Rural Development has either loaned or awarded $553.68 million to tribal beneficiaries across the country since FY 2018, according to data provided by the USDA. The bulk of that money, per a USDA representative, is grants.
Grant programs across many federal agencies can provide supplemental funding, but rarely cover the cost of an entire project — such as the ERA program’s 25% limit on project funding, for example. Moreover, federal grant programs are typically badly oversubscribed, such as the National Telecommunications and Information Administration’s Tribal Broadband Connectivity Program, which received $5 billion in applications for an original $980 million later in funding. That funding amount has since risen to $2 billion, which is still far short of the need according to tribal broadband experts.
A report from trade publication Angi places the development cost of a solar farm at roughly $1 million per megawatt. The same report notes that one megawatt will typically power around 164 homes, making widespread usage a particularly galling prospect for tribes operating on limited revenues.
Not every tribal project aims to place an entire community on utility-scale solar energy right off the bat, choosing instead to outfit specific buildings or homes with solar panels meant to offset soaring traditional energy costs, per prior Tribal Business News reporting. But as tribes continue pushing to combat climate change by employing wider and wider uses of renewable energy, cost quickly becomes a barrier to entry, Smith said.
There are, though, new federal funding programs that could help tribes fund energy projects without significant upfront costs.
Matt Ferguson, a loan programs officer at the DOE, told Tribal Business News that tax rebates, which tribes were made eligible under the Inflation Reduction Act of 2022, represented a paradigm shift that was still in its early stages, Ferguson said. Ferguson stressed that if tribes could pursue direct payments through tax credits, however, they should strongly consider doing so.
“If you're looking at a commercial project, you've first got to look at what direct pay has to offer. You're looking at a minimum 30% rebate,” Ferguson said. “And in any of the federal loan programs, you can get construction financing, we'll lend you bridge financing for the direct pay. You don't really need to have that much cash.”
Tribes could inch those rebates up into the 70% range based on what DOE requirements their projects fulfill, meaning a $1 billion project could garner, at minimum, a $300 million check from the U.S. Treasury, Ferguson said. That move toward reliance on tax rebates is just beginning, with tribes still puzzling out tax credits’ impact on potential projects, he added.
In the meantime, loans and grants will continue to represent the bulk of available federal support. And grants often won’t cover the entire cost of a project, can come with stifling matching requirements, and remain ultra-competitive. For tribes left with loans as their most prominent option, PACE and ERA could excel in helping get these projects off the ground, Smith said.
There remains a perceived gap in coverage even before tribes ever submit letters of intent or applications. Some tribes don’t have the staff to navigate the labyrinthine of program requirements or the arcane grant-writing process in the first place, Alliance for Tribal Clean Energy Technical Assistant Jennifer Rouda told Tribal Business News.
PACE and ERA are a step in the right direction with supporting tribes who have shovel-ready projects, but getting those projects through waves of feasibility studies, environmental screenings, and readiness tests often stifles projects before they ever leave the conceptual stage, Rouda said.
“I think these (loan programs) are attractive, but there are some steps to take before a tribe is really going to be prepared and apply to take advantage of them. There really needs to be some help in that space between,” Rouda said. “Pre-development capital is expensive, it’s always expensive, and there needs to be more help available for tribes performing feasibility studies, establishing energy boards or departments, and helping these projects survive long-term development cycles.”
Alliance for Tribal Clean Energy provides some of those services through people like Rouda, who provide consultations on everything from potential development partners to the array of studies and screenings necessary ahead of a project. Rouda helps tribal partners both figure out the steps of each study and who will complete them as well as finding funding, such as through state economic development boards.
“What we do is provide those resources - that guidance, what are the strategic steps you have to take. We're a matching service, and then we help them find out how to cover the costs. In some cases the tribe may want a development partner, we can make those kinds of recommendations or referrals, and in that case a development partner might be the best option,” Rouda said. “We want to be able to pull up tribes and support them in getting these projects ready for development.”