New Department Of Energy Loan Guarantee Program Provides $2 Billion For Projects On Tribal Lands
One of the factors that separates the haves from the have nots is access to capital. For generations, native American tribes have found their access to capital markets severely limited, hampering their ability to participate in new technologies, including the renewable energy revolution. Tribal lands account for about 5.8% of the land area of the contiguous United States, but have about 6.5% of the total national renewable energy potential, according newly released National Renewable Energy Laboratory data in the Tribal Energy Atlas.
Taite McDonald, a partner with the law firm Holland & Knight, tells Utility Dive, “Tribes have asked about developing renewable energy projects throughout the years,” but finding affordable financing options has always been “the big question and the obstacle. This program will unlock that obstacle.”
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The Energy Policy Act of 2005 made loan guarantees available on tribal lands, but the program was not funded until Congress passed the Fiscal Year 2017 Omnibus Spending Bill. “This program will unlock that obstacle,” McDonald says. She expects interest to be high for solar-plus-storage projects, especially in the form of microgrids that serve remote locations.
The program will guarantee up to 90% of a loan for a renewable energy project, which could include fossil fuel energy production and mining, renewable energy, transmission infrastructure, and energy storage projects. In the past, one of the loan program’s pitfalls was the cost of the application fee, which has been lowered under the newly announced program from as much as $400,000 in the past to $35,000 for qualifying projects on tribal lands.
The tribal loan program also differs from other DOE loan programs in that it is structured as a partnership between eligible lenders and the DOE. Eligible lenders include commercial banks or other non-federal lenders with suitable experience and capabilities. That means a tribe seeking financing would apply to an eligible lender, which in turn would apply to DOE for the partial guarantee. The tribal loan program also allows for projects to be partially owned by non-tribal participants.
They could include transmission projects facilitating the sale of electricity generated on Indian land to outside markets or even transmission projects across Indian lands that connect outside generation to outside markets, even when power isn’t being routed to tribal customers, McDonald wrote in a blog post. The guidelines even stretch to include projects where a tribal borrower signs on as an investor, but has not other relationship to the tribe or Indian lands.
McDonald makes it clear that there is a political component to the Tribal Lands Loan Guarantee Program. It was opposed last year by the Trump administration and the Office of Management and Budget until it was revealed that the loan guarantees could “have value to existing advanced nuclear technologies and innovative fossil energy applications.” Still, for tribal authorities who have previously had virtually no access to federal assistance for renewable energy projects, half a loaf is better than none. Hopefully, they will be able to slip some real renewable initiatives in the back door while federal authorities aren’t looking.
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