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- By Chez Oxendine
- Energy | Environment
Native-owned Indian Energy LLC has closed financing on a $150 million microgrid energy project for the Viejas Band of Kumeyaay Indians in Southern California.
The project, located on tribal lands in Alpine, Calif., is backed by a $43.3 million grant from the California Energy Commission, the largest ever awarded to a tribal project.
Additionally, the U.S. Department of Energy (DOE) is providing a $72.8 million loan guarantee through its Tribal Energy Financing Program, marking the first loan to close under the decades-old program. The guarantee will back a loan of up to $100 million from U.S. Bancorp Impact Finance to complete construction of the microgrid.
The financing package will support the completion of the Viejas Enterprise Microgrid, a 15-megawatt carport solar array paired with 70 megawatt-hours of vanadium flow battery storage and Aqueous Zinc batteries. According to Indian Energy, this will be the largest battery installation of its kind in California.
The project, which began in 2020, has seen its initial $31 million CEC grant grow to $43.3 million as the scope expanded. Total costs are expected to reach $150 million. The microgrid, which is slated for completion in September 2025, is expected to create 250 construction jobs and eight permanent operations jobs, including prioritizing tribally-owned, minority-owned, and veteran-owned contractors.
The financing has been a long time coming, according to Indian Energy VP of Engineering Allen J. Cadreau, noting that the project first kicked off in 2020.
“We have a vision for developing holistic and sustainable opportunities for our clients that can also maintain cultural values in a traditional way of life,” Cadreau told Tribal Business News. “That’s been our vision from the beginning, and the culmination of that vision has come to this particular project.”
Indian Energy will manage the project, selling power from the array to the Viejas Band through a long-term power purchasing agreement at a lower cost than traditional utilities. For the Viejas Band, the project represents lower energy costs and more reliable power, Viejas Chairman John Christman said in a statement.
“This solar microgrid project will enable us to create a reliable and sustainable source of clean energy for our gaming, hospitality, and retail operations going forward,” Christman said. “In turn, the associated non-lithium battery system supports the environmental protection and cultural stewardship of our ancestral land, thereby ensuring the vibrant future of our children.”
A multi-partner collaboration for financing, operation
The financial package supporting the Viejas Enterprise Microgrid is not only the first use of the aforementioned Tribal Energy Financing Program, but one of the first projects to utilize tax credits supported by the Inflation Reduction Act. Those credits, which can in some cases recoup up to 70% of a renewable energy project’s costs, have been the subject of extensive Tribal Business News reporting.
Impact Finance’s loan package included tax equity bridge funding supported by the tax equity investments from U.S. Bancorp and Starbucks, the global coffee company; and construction to term-debt from US Bancorp with the DOE Loan Guarantee. Per Cadreau, these investments provide construction funds to complete the project.
Project financing also included bridge financing to maintain construction momentum while navigating the DOE’s loan guarantee process. That unspecified funding amount was provided by Pittsburgh-based investor BlackRock Impact Opportunities, as well as New York-based Enhanced Capital, and the Viejas Tribe.
In addition to the array of financing partners, Indian Energy enlisted the Sault Ste Marie Tribe of Chippewa Indians, and Turtle Mountain Band of Chippewa Indians as equity partners in the development company. The tribes will eventually share income from the project.
Indian Energy hopes to see more of these kinds of multi-partner collaborations in the future, the company’s VP of development, Nicole Reiter, told Tribal Business News. For tribes that are hoping to stand up similarly large operations going forward, finding the right financing and development partners will be crucial. Tribes should seek out partners who share their goals and are willing to put the tribe first, she said.
Reiter also emphasized that tribes could partner with one another to utilize each tribe’s strengths. A poorer tribe with a lot of land suitable for a solar project could be supported by a tribe with more money, but less real estate, for example.
“There's a really big opportunity for tribes to invest in each other to diversify revenue streams,” Reiter said. “In tribes partnering with each other, there's the opportunity for tribes to utilize the specific strengths within those unique tribes, whether that's land or capital opportunities.”
These could be attractive, low-risk projects for private investment as well, Cadreau said. Thanks to the DOE’s loan guarantee program, and tax credits created under the Inflation Reduction Act, much of the debt has been “backstopped” against default.
“Debt-financed solar generation is not a new concept,” Cadreau said. “These solar arrays are proven generation assets. Their performance is understood and well-documented.”
The DOE’s loan energy guarantee program can be an effective “enabler” because it provides an opportunity to lower the cost of debt and the project’s risk, he said.
That’s the idea, according to Chris Creed, chief investment officer for the Department of Energy Loan Program Office. As a result, the Tribal Energy Financing Program has attracted tribal interest when traditionally tribes have been debt-averse, per prior Tribal Business News reporting. While a specific number was not provided, Creed said the DOE had other tribal applications for the Tribal Energy Financing Program at “various stages” of the process.
The Tribal Energy Financing Program has a cap of $20 billion - meaning there’s $19.9 billion left, Creed noted. A Department of Energy statement notes that across all of its programs, the Loan Program Office has attracted 211 active applications for projects across the country, totaling over $295 billion in requested loans and guarantees.
Ultimately, the program would widen opportunities for tribes and Native-owned operators like Indian Energy to invest in Indian Country renewable power, Creed said.
“We’re pretty excited about this program,” Creed said. “For those communities open to debt, this could be a very competitive source of financing.”
Editor's note: This story has been updated to include the use of Aqueous Zinc batteries on the project and additional information about tax credits used on the project.
