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National American Indian Housing Council
Annual Convention
FINANCING SOLAR ENERGY FOR INDIAN
HOUSING Denver, Colorado
May 7, 2019
John Clancy & Brian Pierson
Godfrey & Kahn, S.C.
• Wisconsin-based law firm – 175 lawyers
• Renewable Energy Strategies Team Leader John
Clancy 18 years experience working with tribes in
environmental protection, renewable energy
development, beginning with successful
opposition to sulfide mine
• Indian Nations Law Team Leader Brian Pierson
28 years experience working with tribes,
beginning with Wisconsin treaty rights litigation
Why You Should Care
• The IHBG is inadequate to meet the affordable
housing needs of tribal communities.
• The IHBG won’t grow but your operating costs
will.
• Energy costs are a major expense for TDHEs
and for tribal families.
• Effective TDHE leadership means leveraging, i.e.
aggressively pursuing non-IHBG sources of
money to meet the community’s needs.
Why You Should Care
This presentation is about aggressive and effective
leveraging. Our goal is to help you:
• Finance conversion to renewable energy
• Reduce your tenants’ monthly housing costs
• Promote tribal environmental values
4
PART ONE
THE FOSSIL FUEL PROBLEM
5
Three Problems With Current Energy
Supply in Indian Country
1. Tribe depends on energy provided by state-regulated utilities based off-reservation.
2. Overwhelmingly, the utilities produce energy by burning fossil fuels that create greenhouse gases and other emissions (e.g., sulfur and mercury).
3. Energy from fossil fuels is expensive and the price may likely to continue to climb.
The Dependence Problem
• Tribe must depend on outsiders for energy for
governmental operations and economic
development.
• Tribe has no authority over state-regulated
utilities and are subject to rate increases and
supply interruptions.
• Tribe’s ability to plan long-term is impaired
because of unknown future energy costs.
7
The Fossil Fuels Problem: It Causes Climate
Change and Threatens Public Health
8
Fourth National Climate Assessment
(“NCA4”) published Nov. 2018• https://www.globalchange.gov/browse/indicators/indicator
-annual-greenhouse-gas-index
• Prepared pursuant to the Global Change Research Act of 1990
• Lead Agency is the National Oceanic and Atmospheric Administration (NOAA), with oversight by Department of Agriculture (USDA), Department of Commerce (DOC), Department of Defense (DOD), Department of Energy (DOE), Department of Health and Human Services (HHS), Department of the Interior (DOI), Department of State (DOS), Department of Transportation (DOT), Environmental Protection Agency (EPA), National Aeronautics and Space Administration (NASA), National Science Foundation (NSF), Smithsonian Institution (SI) and U.S. Agency for International Development (USAID)
9
NCA4 - Overview
“Earth’s climate is now changing faster than at any
point in the history of modern civilization, primarily
as a result of human activities. The impacts of
global climate change are already being felt in the
United States and are projected to intensify in the
future—but the severity of future impacts will
depend largely on actions taken to reduce
greenhouse gas emissions and to adapt to the
changes that will occur.”
10
Greenhouse Gas Index (NCA4)
11
CO2 Emissions (NCA4)
12
Climate Science Special Report
Fourth National Climate Assessment (NCA4 v. I)
13
Temp. changes 1901-1960 avg. vs. 1986-
2016 avg. (NCA4)
14
NCA4
“The health and well-being of Americans are
already affected by climate change, with the
adverse health consequences projected to worsen
with additional climate change. Climate change
affects human health by altering exposures to heat
waves, floods, droughts, and other extreme
events; vector-, food- and waterborne infectious
diseases; changes in the quality and safety of air,
food, and water; and stresses to mental health and
well-being.”
15
The Cost Problem
• Retail prices that utilities charge tribes/TDHEs
are high and generally increasing.
• Even though natural gas has been cheaper,
electric rates continue to rise.
• Costs may rise as users leave utility system.
16
Shrinking Icecap
17
PART TWO:
ENERGY TERMINOLOGY AND
SOLAR ENERGY BASICS
18
Renewable Energy Basics: Kilowatts &
Megawatts
• Energy output is measured in watts, kilowatts,
megawatts, etc.
• Energy consumption is measured in kilowatt
hours (kWh) and megawatt hours (MWh).
19
Renewable Energy Basics: kWs and MWs
A kilowatt hour (kWh) is:
The amount of electricity used, in kilowatts (1000
Watts = 1 kW) multiplied by number of hours the
energy is used.
(e.g., you have a 100 W light bulb and you have it
on for 10 hours a day then: 1000W (1/10 kilowatt)
x 10 (hours) = 1 kWh per day.)
20
Renewable Energy Basics: It Can Work Anywhere
21
Renewable Energy Basics: kWs and MWs
An 8 kW solar array could provide enough energy
to power an average home in states like Colo,
WI,NM, NV(on average 23 kWh per day).
It would likely cost $20,000 - $25,000 and look
something like …
22
This:
23
Renewable Energy Basics: kWs and MWs
1000 Kilowatts (kW) = 1 Megawatt (MW)
• A 2 MW wind turbine can generate 2 MW
of energy, enough to provide heat and
electricity to approximately 400 to 600
households.
• It would cost approximately $1.3 - 2.2
million per MW and look something like …
24
This:
25
Renewable Energy Basics: Wind and Solar Limitation
• Electricity is consumed not only during the day
but also in the evening and at night.
• A solar array produces energy only during
daylight.
• Wind produces energy only when the wind blows.
• Which means a key to renewable energy finance
is …
26
Renewable Energy Basics: Net Metering
• Net Metering: An arrangement by which the Tribe
sells the renewable energy it produces, but does
not consume itself, into the grid and receives a
credit against the amounts it pays for energy
purchased from the grid.
• Interconnection: Process of connecting energy
generation system with utility grid.
• Net Zero: The goal of producing enough
renewable energy to meet the Tribe’s entire
energy needs.
27
Energy Consumption / Costs
• Actual energy costs depend on the local utility.
• High current energy costs can be beneficial for
financing solar because the cost savings from the
conversion are greater, increasing the potential
return for investors, which translates into more
investor money to finance the solar facilities.
28
Battery Storage
• Key to resiliency with solar or wind
• Battery storage is an evolving technology
• Pricing has been declining and will likely continue to decline but battery costs are still high
• At current prices, adding battery storage to the 10 kW rooftop residential system pictured in a previous slide would increase the total cost by $700-$900 per kW ($7,000 - $9,000)
• Strategy Issue: Whether to invest now or wait for improvements in technology and further price reductions
29
Battery Storage
Strategic Options
• Install solar facilities solar with equipment that facilitates future
incorporation of batteries;
• Solicit bids from solar installers both with and without battery
storage to assess the value added;
• Limit costs by sizing battery storage based on critical loads to
assure essential needs
• Pursue grants to reduce the cost of batteries.
30
31
PART THREE
OVERVIEW OF THE STRATEGY
32
Strategy
1. Use tribal/housing energy consumption and
energy efficiency opportunities as assets,
rather than just liabilities;
2. Take advantage of Federal, State and utility
grants and programs; and
3. Partner with taxpaying entities to take
advantage of tax incentives.
33
Residential Average Electricity Consumption & Cost
2017 average residential monthly electricity consumption, cost*:
• U.S.: 867 KWh @ 12.89 cents per KWh = $111.67
• AL: 1,136 KWh @ 12.55 cents per KWh = $142.55
• AZ: 1,033 KWh @ 12.44 cents per KWh = $128.40
• CAL: 554 KWh @ 18.31 cents per KWh = $101,49
• CT: 690 KWh @ 20.29 cents per KWh = $139.97
• FL: 1,089 KWh @ 11.61 cents per KWh = $126.44
• HA: 506 KWh @ 29.50 cents per KWh = $149.33
• LA: 1,187 KWh @ 9.74 cents per KWh = $115.54
• ME: 546 KWh @ 15.97 cents per KWh = $87.21
• MA: 583 KWh @ 20.06 cents per KWh = $116.86
34
Residential Average Electricity Consumption & Cost –
2017 (cont.)
MS: 1,132 KWh @ 11.08 cents per KWh = $125.38
NM: 615 KWh @ 12.88 cents per KWh = $79.16
NY: 572 KWh @ 18.03 cents per KWh = $103.22
NC: 1042 KWh @ 10.94 cents per KWh = $113.98
RI: 577 KWh @ 18.32 cents per KWh = $105.76
SC: 1082 KWh @ 13.02 cents per KWh = $140.80
SD: 976 KWh @ 11.77 cents per KWh = $115.06
TN: 1150 KWh @ 10.72 cents per KWh = $123.30
TX: 1112 KWh @ 11.01 cents per KWh = $122.47
WI: 660 KWh @ 14.35 cents per KWh = $94.67
*Latest data available from U.S. Energy Information Agency released 10/12/18
https://www.eia.gov/electricity/sales_revenue_price/pdf/table5_a.pdf
35
Commercial Average Electricity Consumption & Cost
2017 average residential monthly electricity consumption, cost*:
• U.S.: 6,143 KWh @ 10.66 cents per KWh = $654.79
• AL: 5,123 KWh @ 11.60 cents per KWh = $594.06
• AZ: 7,771 KWh @ 10.50 cents per KWh = $809.85
• CAL: 5,782 KWh @ 15.76 cents per KWh = $911.53
• CT: 6,723 KWh @ 16.06 cents per KWh = $1079.88
• FL: 6,506 KWh @ 9.35 cents per KWh = $608.19
• HA: 4,194 KWh @ 26.77 cents per KWh = $1,122.79
• LA: 7,006 KWh @ 8.95 cents per KWh = $626.99
• ME: 3,286 KWh @ 12.12 cents per KWh = $398.11
• MA: 5,282 KWh @ 15.93 cents per KWh = $841.64
*https://www.eia.gov/electricity/sales_revenue_price/
36
Goals
• Reduce short-term and especially long-term energy costs for the tribe and for tribal members;
• Achieve long-term energy independence by transitioning to renewable, reservation-based sources of energy; and
• Do the Right Thing by reducing carbon/environmental footprint.
37
Key Finance Tools
• Grants
• Investment Tax Credits
• State and Local Incentives
• Power Purchase Agreement: Allows tribe to pay the cost of the solar facilities over time in the form of payments (lower than current payments to electric utility) for energy produced by the solar facilities
• Net metering Agreement: Allows tribe to be paid for the energy produced by the solar facilities when the Tribe isn’t consuming it.
38
WORKPLAN
• Project Schedule and Milestones: The Applicant
should provide a detailed schedule (by month) for
the entire project, including task and subtask
durations, and milestones. See Appendix D for
sample
39
PART FOUR
GRANTS
40
Federal Grants
• DOE Tribal Energy Program
• HUD Indian Housing Block Grant and Indian Community Development Block grant
• DOI grants, including Indian Energy and Economic Development Program.
• USDA Rural Energy for America Program, Rural Utilities and Community Facilities
• Federal Home Loan Band Affordable Housing Program
• And more
41
Financing: Key Sources
All of the above-listed funding sources should be considered. Our focus is:
• Federal Grants, especially: − Indian Community Development Block Grants
(ICDBGs)
−Competitive Indian Housing Block Grant
−Department of Energy Renewable Energy Grant
−USDA Rural Energy for America Program (“REAP”)
• NAHASDA Title VI guaranteed loans
• Renewable Energy Investment Tax Credits
42
Grants: IHBG
• NAHASDA Title II: “Eligible” activities include:
−Development of utilities
−Necessary infrastructure
−Utility services
− Improvement to achieve greater energy efficiency
• Activities must be to develop, operate, maintain,
or support affordable housing.
43
Grants: IHBG Can be Used for Projects not
Exclusively Devoted to Housing
The IHBG can be used to finance a renewable
energy facility to the extent the power is used for
“affordable housing activities.” If 50% of the energy
is used for affordable housing then the IHBG can
be used to cover 50% of the costs of a facility that
powers, e.g.
• Tribal government facilities.
• Tribal enterprises (casinos can be very attractive
because of heavy energy consumption).
44
The FY 2018/19 Competitive IHBG
• The FY 2018 and 2019 budget bills provides for a
total of $200,000,000 of IHBG funds for
“competitive grants to eligible recipients. … The
Secretary shall consider need and administrative
capacity and shall give priority to projects that will
spur construction and rehabilitation.”
• No regulations or other guidance yet. May be
similar to ICDBG.
• Ongoing debate over the “need” component
45
Competitive IHBG
• Annual IHBG normally needed to meet existing
needs
• Competitive IHBG offers opportunity to use IHBG
for larger development project
• Should be strategically considered in tandem
with ICDBG opportunity
46
Grants: ICDBG
Indian Community Development Block Grant:
Objective is “development of viable Indian and
Alaska native communities, including decent
housing, a suitable living environment, and
economic opportunities, principally for persons of
low and moderate income” (i.e., < 80% of area
median income). 24 CFR 1003.2
47
Grants: ICDBG
− Tribes can apply or pass resolution permitting
TDHE to apply
− FY 2018 Notice of Funds Available was published
10/22/18
− www.hud.gov/program_offices/public_indian_housi
ng/ih/grants/icdbg
− Applications were due 1/7/19
48
Grants: ICDBG
Eligible Uses include:
• Acquisition of real property
• Housing rehabilitation, including improvements to
increase energy efficiency through installation of
storm windows and doors …[etc.] and
modification or replacement of heating and
cooling equipment, including the use of solar
energy equipment.”
1003.202(b)(4)
49
Grants: ICDBG
Eligible Uses (cont.)
• Public facilities and improvements
• Private utilities
• Technical assistance to increase capacity to
“carry out eligible neighborhood revitalization or
economic development activities”
50
Grants: ICDBG
• Maximum Grants
Eastern Woodlands $700,000
Southern Plains $800,000
Northern Plains $800,000
Northwest $500,000
Alaska $600,000
51
Grants: ICDBG
SWONAP
50,001+ $4,000,000
10,501-50,000 $2,000,000
7,501-10,500 $1,600,000
Below 7,500 $800,000
52
Competitive IHBG - ICDBG
• Consider ICDBG and Competitive IHBG as
complementary programs
• Annual IHBG generally needed to meet existing
needs, not available for a large solar project
• The Competitive IHBG, like ICDBG, offers
opportunity for large solar project to achieve
long-term cost savings for members
• Competitive IHBG easier to use for new
construction
53
DOE 2018 Grant
1) Energy Efficiency Measures and/or Energy Generating System(s) for Tribal Building(s) (Area of Interest 1)
a. Deep Energy Retrofits (Area of Interest 1.a.)
b. Energy Generating System(s) (Area of Interest 1.b.)
c. Energy Efficiency Measure(s) and Energy Generating System(s) (Area of Interest 1.c.)
or,
2) Community-Scale Energy Generating System(s) Deployment (Area of Interest 2); or,
3) Energy System(s) for Autonomous Operation (Area of Interest 3)
a. Powering Essential Tribal Loads (Area of Interest 3.a.)
b. Tribal Community Resilience (Area of Interest 3.b.)
54
DOE EERE Tribal Energy Grant
Energy Infrastructure Deployment on Tribal Lands
issued under the Indian Tribal Energy
Development and Self Determination Act of 2005
25 USC § 3501 et seq.
The 2019 FOA was issued on March 14, 2019.
Source for all DOE 2019 Grant information is https://eere-exchange.energy.gov/FileContent.aspx?FileID=98266714-
eac7-407d-9947-9751cbc8cf3f
55
DOE 2019 Grant: FOA Summary
Tribes, Intertribal Organizations, and Tribal Energy Development Organizations can apply for funds to:
1) Energy Generating System(s) and/or Energy Efficiency Measure(s) for Tribal Building(s) (Topic Area 1)
a. Energy Generating System(s) (Topic Area 1.a.)
b. Multiple Energy Efficiency Measures (Topic Area 1.b.)
c. Energy Generating System(s) and/or Energy Efficiency Measure(s) (Topic Area 1.c.)
Or,
2) Community-Scale Energy Generating System(s) Deployment (Topic Area 2);
Or,
3) Energy System(s) for Autonomous (Independent) Operation (Topic Area 3)
a. Powering Essential Tribal Facilities (Topic Area 3.a.)
b. Tribal Community Resilience (Topic Area 3.b.)
56
DOE Grant: Average Award Amount
DOE anticipates making awards that range from:
• $50,000 to $1,000,000 for Topic Area 1 (Energy Efficiency Measures and/or Energy Generating System(s) for Tribal Building(s));
• $250,000 to $2,000,000 for Topic Area 2 (Community-Scale Energy Generating System(s) Deployment)
• $50,000 to $1,000,000 for Topic Area 3.a. (Powering Essential Tribal Facilities); and
• $250,000 to $2,000,000 for Topic Area 3.b. (Tribal Community Resilience).
AVAILABLE WITHOUT REGARD TO INCOME LEVELS OF PERSONS BENEFITTED.
57
DOE Grant: Cost Share Requirement
A 50% cost share of the total allowable costs of the
project (i.e., the sum of the DOE share, and the
Recipient share of allowable costs equals the total
allowable cost of the project) is required.
58
59
Grants: USDA Rural Energy For America Program
(REAP)
• Renewable Energy Systems & Energy Efficiency
Improvement Loans And Grants
• Competitive Small Grants of $20,000 or less
available at specific times
• Competitive Unrestricted Grants (up to
$500,000) available at specific times
• Competitive Loan Guarantees are available
continuously throughout the year
60
Grants: USDA REAP
Funds may also be used for the purchase, installation and construction of energy efficiency improvements, such as:
• High efficiency heating, ventilation and air conditioning systems (HVAC)
• Insulation
• Lighting
• Cooling or refrigeration units
• Doors and windows
• Electric, solar or gravity pumps for sprinkler pivots
• Replacement of energy-inefficient equipment
61
Grants: REAP
• Who may apply for this program?− Agricultural producers with at least 50% of gross
income coming from agricultural operations, and
− Small businesses (including tribal businesses) in eligible rural areas.
• What is an eligible area?− Businesses must be in an area other than a city or
town with a population of greater than 50,000 inhabitants and the urbanized area of that city or town.
− •Agricultural producers may be in rural or non-rural areas.
62
Grants: REAP
• Projects greater than $200,000 require a
technical report.
• Energy efficiency projects require an energy audit
or assessment.
• Loan guarantees on loans up to 75% of total
eligible project costs.
• •Grants for up to 25% of total eligible project costs
• Combined grant and loan guarantee funding up
to 75% of total eligible project costs
63
REAP Loan Guarantee
Loan Guarantee Terms
• $5,000 minimum, $25 million maximum loan amount;
• Up to 85% loan guarantee
• Rates and terms negotiated with the lender and subject to USDA approval. Maximum term of
−30 years for real estate
−15 years for machinery and equipment
− •7 years for capital loans
−30 years for combined real estate and equipment
64
Grants: REAP
• Renewable Energy System Grants:
−$2,500 minimum
− •$500,000 maximum
• Energy Efficiency Grants:
−$1,500 minimum
−$250,000 maximum
65
Financing: Federal Home Loan Bank AHP
• Federal Home Loan Bank System encompasses
11 Regional Banks.
• Created by the Federal Home Loan Bank Act as
a government sponsored enterprise to support
mortgage lending and community investment.
• Each FHLBank is a separate, government-
chartered, member-owned corporation.
66
Financing: FHLB AHP
• Affordable Housing Program (“AHP”) programs
pursuant to 12 U.S.C. 1430(j) and 12 C.F.R. Part
1291
• Rental AHP Eligibility requires that at least 20%
of the project's occupants earn 50% or less of
area median income
• Grant maximums vary by Regional Bank
• Competitive application process
67
Financing: FHLB AHP
Maximum grants vary by regional FHLB, e.g.
NY: $20K per unit
SF: $2M per project
CHI: $850K
Des Moines: lesser of $500K or $30K/unit
68
Financing: FHLB AHP
• Eligible Rehab is prescribed in each regional
bank’s Implementation Plan
• Often allows for upgrade of electrical and energy
systems
69
NAHASDA Title VI
• Permits TDHE to borrow up to five times the
needs portion of IHBG - Permits AHA to pursue
larger projects, achieve economies of scale and
meet needs of community sooner
• 95% Guaranteed by the United States
• Secured by future IHBG: Unless there is revenue
to service debt, will reduce funds available for
future development – Must be used wisely
• Good source of “gap” financing
70
Tribal Solar Accelerator Fund
• “GRID Alternatives has a long-standing partnership with the Wells Fargo Foundation, which has supported the national expansion of GRID’s renewable energy access work since 2012.
• In 2018, GRID Alternatives received a 3-year, $5 million grant from the Wells Fargo Foundation to support GRID’s National Tribal Program as well as provide new, independent funding to tribes for renewable energy projects.
• This concept and program scope was developed into what is now the Tribal Solar Accelerator Fund (TSAF).”
Source: https://tribalsolaraccelerator.org/apply/
71
TSAF Priorities
• “The TSAF will provide necessary capital to support the development of new solar demonstration projects in tribal communities around the country
• The TSAF supports solar education, training, and workforce development in tribal communities
• The TSAF prioritizes the development of long-term energy plans to increase tribal energy security and resiliency.”
• Source: https://tribalsolaraccelerator.org/apply/
72
TSAF Funding Areas
Each TSAF funding area has its own application for funding; please go to tribalsolar.org to download the application(s).
“DOE Matching Funding - Application deadline: May 3rd
• Matched Funds: Tribes that have a cost-share funding need, or an outstanding U.S. Department of Energy grant matching funds requirement
• Proposals will be funded up to $250,000 per project
Tribal Solar Project Funding - Application deadline: May 3rd
• Tribal Facility Solar Projects: These projects can include rooftop, carport or ground-mount solar installations that meet the energy needs of the tribal community
• Tribal Residential Solar Projects: These projects will be for low-income single-family homes in tribal communities
• Proposals will be funded up to $200,000 per tribe”
Source: https://tribalsolaraccelerator.org/apply/
73
TSAF Grant Timeline and Reporting
• Source: https://tribalsolaraccelerator.org/apply/
RFP ANNOUNCEMENT March 4, 2019
TSAF INFORMATIONAL WEBINAR March 15, 2019
GRANT APPLICATION DUE May 3, 2019 by 5:00 p.m. MST
GRANT AWARD/DENIAL NOTIFICATIONS June 3, 2019
GRANT TIMELINE (PROJECT FISCAL YEAR START/END) July 1, 2019 – June 30, 2020
GRANTEE CHECK-INS WITH TSAF STAFF July 1, 2019, October 1, 2019, January 1, 2020
GRANTEE FINAL REPORT DUE March 1, 2020
74
TSAF Initial Review and Selection
CriteriaUpon receipt of a TSAF application, the following funding criteria should be met regardless of the funding area applied for:
• Solid and concrete matches between project purpose and funding priority area
• Clear focus on building renewable energy infrastructure in the tribal community
• Demonstrated ability and/or experience necessary for a successful project
• Clear plan of action, including specific goals and measurable objectives
• Feasible, cost-effective, and sustainable budget
• Partnerships that engage broad tribal community participation and support
• Potential for application and replication in other tribal communities
Source: https://tribalsolaraccelerator.org/apply/
75
TSAF EligibilityThe TSAF eligibility criteria is as follows:
• Federal and state-recognized tribal governments in the lower 48 states and Alaska (tribal government programs, such as tribal housing authority, cultural departments, economic development entities, etc.)
• Tribally-led 501(c)(3) nonprofit organizations (fiscally-sponsored tribal community organizations, tribal community organizations without a 501(c)(3) nonprofit status may submit an application through a sponsoring organization if the sponsor has IRS 501(c)(3) status and can provide written authorization confirming its willingness to act as the fiscal sponsor.
• Schools that are tribally-controlled 501(c)(3) nonprofit organizations and schools that are tribally-operated such as tribal colleges and universities (TCUs), any public or Bureau of Indian Education (BIE) schools.
• The definition of “tribal-led” is: an organization in which a majority (>51%) of the board of directors and leadership team are American Indian or Alaska Native. Organizations that are not tribal-led are not eligible to apply (with or without a fiscal sponsor).
• For tribal facility projects, the community served must be designated low-to-moderate income (LMI) as demonstrated by eligibility for federal, state, or tribal low-income programs, or with Census data.
• For tribal household or multi-family projects, the resident households must be 80% or below the area median income as defined by the Department of Housing and Urban Development (HUD) or another LMI-serving program.
76
TSAF Application Site and
Submission Guidelines• No more than 10 pages of application organization information and
proposal narrative (including charts/graphs, maps, or photos). The budget, project timeline, tribal council resolution or letter of support, and tribal council roster or board of directors list are required attachments excluded from the 10-page maximum.
• References must be included as footnotes or endnotes in a font size of 10 or larger. Footnotes and endnotes are counted toward the maximum page requirement.
All applicants will need to secure a tribal resolution or a letter of support from your tribal council acknowledging the application for the proposed project and that Wells Fargo Foundation is the source of funding regranted through the Tribal Solar Accelerator Fund.
Source: https://tribalsolaraccelerator.org/apply/
77
Public Communications Expectations
The following are GRID’s commitments to and expectations of tribal partners participating in TSAF projects.
Our Commitments to You (TSAF grantee):
1. GRID Alternatives will provide you with a single point of contact for all TSAF-related communications activities.
2. GRID Alternatives will collaborate with your designated communications representative to develop a set of
communications activities that is appropriate for the project and your tribe. Activities may include one or more of the
following:
− Press release announcing receipt of TSAF grant for local, regional or national audience
− News item on GRID Alternatives’ website(s) and/or newsletter about the project
− News item on Wells Fargo Stories about the project
− Groundbreaking or other public event with speaking opportunities and/or branding for TSAF funders
− Project video produced by GRID Alternatives, Wells Fargo or other approved partner
− Listing/write-up in Wells Fargo stakeholder reports
− Listing in Wells Fargo philanthropy press releases
3. GRID Alternatives will provide you the opportunity to review and approve all external-facing communications assets
and their intended use prior to their release.
Source: https://tribalsolaraccelerator.org/apply/
78
Tribal Solar Accelerator Fund
• 2018 grantees include the Spokane Tribe of
Wellpinit, Washington, the Chemehuevi Tribe,
and the Los Coyotes Band of Cahuilla and
Cupeño Indians.
79
State Incentives
• State incentives for Renewables and Efficiency
can be very significant and should be thoroughly
explored. NC Clean Energy maintains a
database:
• http://www.dsireusa.org/
80
For Tribes with Larger Undeveloped
Land Areas• May be good opportunities for siting of utility-scale
solar or wind facilities
• May allow for potentially substantial lease payments
• May allow for potentially significant payments in lieu of taxes
• May provide significant tribal member job-training and jobs
• May provide opportunities for provision of low-cost clean energy to Tribal buildings
• May be able to incorporate grant/tax credit financing strategies for energy used by the Tribe
81
82
PART FIVE:
RENEWABLE ENERGY
INVESTMENT TAX CREDITS
83
Tax Credits (Get Used to them)
• Congress authorizes tax credits to achieve policy goals without having to appropriate federal funds
• Tax credits are a major source of financing for new housing, housing rehab and solar development.
• Investors, rather than Congress, provides the funds; In return, investors get a dollar for dollar credit against their federal income tax;
• In effect, the US Treasury is contributing to the Project the money it would otherwise have collected.
84
How Tax Credits Work in Indian Country
• Tribes and TDHEs don’t pay income tax so they
have to partner with the investors who do.
• The Tribe/TDHE forms a partnership with the
investors for a limited period of time.
• The investor owns 99% of the partnership so that
it can claim 99% of the tax credits that the
Tribe/TDHE can’t use. The investor also gets
99% of the depreciation tax deductions on the
equipment.
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The Basic Approach
1. Monetize investment tax credits to pay for
approximately 30% of construction/installation of
facility;
2. Further reduce the Tribe/TDHE’s out-of-pocket
development cost with energy grants, IHBG, Title
VI loan or other sources;
3. Potentially pay less for electricity while paying off
remaining costs over five or more years, depending
on grants, through a power purchase agreement;
4. Assume full ownership after the development costs
are paid.
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Key Tax Credit for Renewable Energy: the ITC
The Renewable Energy Investment Tax Credit (“ITC”):
• Available for solar and small wind
• Potentially available for battery storage installed with
new solar facilities subject, however, to restrictions
that may be less attractive to investors.
• Source of funds that don’t need to be repaid - like a
grant from the tribal perspective
• Delivers up to 30% of cost of development
• Survived the “Tax Cuts and Jobs” Act of 2017, Public
Law 115-97
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Tax Credits: Key Business Terms
• Depreciation: The right to deduct capital costs,
over time, from taxable income
• Tax Credit: A dollar for dollar credit against
income taxes otherwise due
• LLC: Limited Liability Company: A partnership-
like structure that allows for allocation ownership
interests for tax purposes of profits and losses
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ITC: the Tribe’s Deal with the Investor
Put simply:
1. The Tribe and the tax investor, who could also be the developer, form an LLC.
2. The Tribe agrees to give the investor a 99% ownership interest in the LLC so that the investor can claim 99% of the investment tax credits, which the Tribe/TDHE can’t use.
3. In return, the investor agrees to make economic contributions that significantly reduce the cost of the project to the Tribe/TDHE.
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ITC: The Tribe’s Deal with the Investor
• The investor gets the tax benefits.
• The Tribe gets the investor’s cash to build the
project.
• The amount that the investor contributes to the
Project is negotiated. The investor is looking for a
certain return on investment.
• The value of the tax credits and depreciation is
large enough for both the investor and the
Tribe/TDHE to benefit.
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ITC: The Tribe’s Deal with the Investor
The ITC is like Low Income Housing Tax Credits in some ways:
1. There’s an LLC or partnership with an investor.
2. The investor is given 99% ownership interest in order to claim 99% of the tax credits.
3. The investor compensates the Tribe for the tax credits by contributing equity to the project.
4. After a period of years, the investor goes away and the Tribe keeps the project BUT…
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ITC: The Tribe’s Deal with the Investor
It’s much easier than LIHTCs because
1. The ITCs aren’t allocated by a state housing agency and the State has no compliance role.
2. The ITCs aren’t competitive and there’s no complicated application process.
3. The investor can claim the credit in year one instead of over 10 years.
4. The investor may be ready to exit after six years instead of 15 years.
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ITC: The Tribe’s Deal with the Investor
Compared with LIHTCs, the ITC deal is a:
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ITC: Documenting LLC’s ownership
and access• Monetizing tax credits requires a lease or permit
to establish the LLC’s control of the wind or solar
facility for tax purposes.
• Lease: BIA Part 162 Leasing Regulations
− Include Special Provisions for Wind and Solar
Resource Leases.
−Still Require BIA approval of all leases.
−Leave in doubt whether agreements for
installation and access are “permits,” “rights of
way” or leases.
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ITC: Documenting LLC’s ownership
and access• The HEARTH Act:
• Permits tribes to avoid future BIA lease approval by
adopting a BIA-approved leasing ordinance.
• Includes Tribal Environmental Review Procedures.
• Over twenty tribes have BIA-approved ordinances.
All tribes should consider doing the same.
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ITC: Documenting LLC’s ownership
and access• Permits avoid BIA approval process. According to
25 C.F.R. 162.007, they generally:
• Do not grant a legal interest in Indian land;
• Are of shorter terms than leases;
• Give permittee has a non-possessory right of
access, not a right of possession or right to “limit
or prohibit access by others;”
• Are revocable “at any time.”
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Key Timing Issues
Beginning in 2020, the 30% ITC will phase down
per IRC Section 48(a)(2) and (6):
• 26% for projects whose construction begins
January 1 - December 31, 2020, if placed in
service by January 1, 2024, otherwise 10%;
• 22% for projects whose construction begins
January 1 – December 31, 2021, if placed in
service by January 1, 2024, otherwise 10%.
• 10% for projects whose construction has not
begun by January 1, 2022.
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ITC: the Tribe’s Typical Deal with the
InvestorPut simply:
• The Tribe and the tax investor, who could also be the developer, form an LLC.
• The Tribe agrees to give the investor a 99% ownership interest in the LLC so that the investor can claim 99% of the investment tax credits, which the Tribe can’t use.
• In return, the investor agrees to make economic contributions that significantly reduce the cost of the project to the Tribe.
• The investor exits the LLC and goes away once the IRS rules have been satisfied (minimum five years control) and the project has been paid off (normally after 5-10 years assuming substantial grant funds)
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PART SIX
THE OTHER AGREEMENTS THAT MAKE IT WORK
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ITC: Tribe’s Deal with the Design-Builder
• The LLC, owned by the Tribe (1%) and the
Investor (99%), enters into a contract with the
Design-Builder to install the system
• May be an AIA A141 Standard For of Agreement
Between Owner and Design-Builder.
• Issues include:
−Federal Procurement Requirements
−Subcontracting, employment and training
opportunities for tribal members
−Warranties
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ITC: Procurement Strategy to Maximize Benefit to Tribe
• Procurement may seek design-builder who can
not only install facilities but also bring ITC
investor who could potentially help finance up-
front installation and transaction costs, reducing
Tribe’s out-of-pocket costs
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ITC: Power Purchase Agreement
The Power Purchase Agreement (“PPA”)
• Determines what the Tribe/TDHE will pay to the
LLC for energy during the payback period.
• Should be less than what the Tribe/TDHE
currently pays to state-regulated utility.
• Will constitute part of the investor’s “return on
investment.”
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Interconnection and Net Metering
AgreementsAgreements with the utility that allow the LLC to
• connect to the grid and
• receive retail credit for the energy produced by
the solar facility when the Tribe isn’t using the
energy
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Tribal Utility Ordinances
A tribal ordinance may play an important role
• Exercise of sovereignty
• Authorizes sales of energy from wholly-owned Tribal entities to wholly-owned Tribal entities on Reservation lands
• Strengthens the Tribe’s case if the state should seek to impose restrictions on the LLC, Tribe or utility under state law. (Cf. White Mountain Apache v. Bracker cases)
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PART SEVEN
PUTTING IT ALL TOGETHER:
SOME REAL WORLD ILLUSTRATIONS
Illustration #1: DOE Grant + ITC
• Project: Solar facilities to generate 600 kW electricity to power 150 homes (or potentially 1000 kW for a solar farm serving 250 homes).
• Can be rental, rent-to-own or home ownership units.
• Approximate Cost: $2 million.
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Illustration #1: DOE Grant + ITC
• $1 million US DOE Tribal Energy Grant.
• Tax investor/developer pays the rest of the costs of
development, and gets return on investment through:
− The investment tax credit ($2M x 30% x 99% = $594k).
− Depreciation deductions.
− Tribe’s/TDHE’s reduced-cost payments for the energy
produced by the renewable energy facility.
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Illustration #1: DOE Grant + ITC
• If full credit is given for ITC (and nothing for
depreciation), Tribe pays for remaining
approximately 20% via energy purchases at price
substantially below utility rates.
• Once 20% is paid, Tribe essentially receives full
ownership without incurring any capital costs.
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Illustration #2: ICDBG + ITC
• Tribe or Housing Authority applies for ICDBG.
• No cost-sharing required but receive full six
points because of leveraging with tax investor.
• Potentially build solar facility that is about 40%
larger than with ICDBG alone.
• Further leverage with potential state incentives.
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Illustration #2: Cost Savings to
Tribe/Tenants
1. Currently: TDHE pays state utility 12¢/kWh, annual costs of $100,000.
2. After installation: During about 6-year payback period: Tribe/TDHE pays LLC 4¢/kWh, annual energy costs of $33,333.
3. After payback period: Tribe/TDHE can continue charging tribal member 4¢/kWh and use revenue for affordable housing OR reduce charges to minimal cost of maintenance during remaining 20-25 year life of facility.
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Subsidized or Free Energy Provided to
Members is Tax–FreeUnder the Tribal General Welfare Exclusion Act, 26 U.S.C. § 139E “Indian general welfare benefits” provided to or on behalf of a tribal member (or spouse or dependent) under an “Indian tribal government program” are excluded from taxable income if –
(1) the program is administered under specified guidelines and does not discriminate in favor of members of the governing body of the tribe, and
(2) the benefits provided under such program—− (A) are available to any tribal member who meets such
guidelines,
− (B) are for the promotion of general welfare,
− (C) are not lavish or extravagant, and
− (D) are not compensation for services.
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Subsidized or Free Energy Provided to
Members is Tax–Free
IRS Rev. Proc. 2014-35, “Application of the
General Welfare Exclusion to Indian Tribal
Government Programs That Provide Benefits to
Tribal Members” lists various specific tribal
government benefits that will qualify, including
residential housing programs that
−“enhance habitability … such as by remedying …
heating or cooling issues” and
−“pay utility bills and charges (including …
electricity)”
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Illustration 3: Solarizing Gaming,
Governmental and Other Facilities
• Evaluate energy usage and suitability of tribal gaming and other facilities for solar installations
• Solicit proposals from investors and developers using tax credits
• Seek targeted grants to assist with financing
• Seek low-cost debt to assist with financing e.g. USDA REAP guaranteed loan
• Use tribally-owned C-corp leasing structure to partner with tax credit investors
• Provide energy to tribal buildings through C-Corp.
• Prepay lease with buyout right
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Illustration 4: Solar Farm
Large-scale solar, e.g. 500-1000 acres – 100 MW
• Potential opportunity to lease land to a large
solar developer or utility and receive high lease
payments and payments in lieu of taxes
(reportedly double or triple the amount paid to
lease farmlands)
• Potential for negotiation of better pricing for solar
facilities on tribal buildings
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Energy Efficiency Projects
• Energy efficiency project can have quicker
payback (two to five years), especially with
state/utility incentives.
• Can have renewable energy company finance
project with Tribe/TDHE reimbursing through
energy payments.
• Tribe/TDHE can receive and keep federal, state
and utility grants/incentives.
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Take Aways
• There are significant federal and state incentives
for renewable energy and energy efficiency
• These incentives can often be combined with
investment tax credits and depreciation benefits
to dramatically reduce the cost of renewable
energy and energy efficiency development
• Any remaining costs can normally be financed
through energy savings
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Next Steps / Strategies
• Identify priority project(s)
• Identify federal and state grants and other
incentives that best match the priority project(s)
• Confirm tax credits that apply to the priority
projects
• Pursue federal and state grants and incentives
• Identify partners, e.g., installer and investor
• Tax benefits become less valuable beginning in
2020
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Getting Help Getting Going
HUD ONAP Training/Technical Assistance Process:
• The TDHE sends regional coordinator a Request for Training/Technical Assistance. To get the form, go to http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/ih/codetalk/training
and click on the link “Technical Assistance Request Form”
• HUD contacts one of the authorized T/TA providers.
• G&K is a subcontractor in the area of renewable energy finance and development.
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Done!
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OFFICES IN MILWAUKEE, MADISON, WAUKESHA, GREEN BAY AND APPLETON, WISCONSIN
AND WASHINGTON, D.C.
The presentation and materials are intended to provide information on legal issues and should not be construed as legal advice. In addition, attendance at a Godfrey & Kahn, S.C.
presentation does not create an attorney-client relationship. Please consult the speaker if you have any questions concerning the information discussed during this seminar.
Thank You.
John Clancy
(414) 287-9256
Brian Pierson
(414) 287-9456
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