DOE Launches $ 2 Billion Renewable Energy Loan Guarantee Program on Tribal Lands

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Dive brief:

  • The US Department of Energy (DOE) on Tuesday announced a $ 2 billion loan guarantee program for energy projects on Native American and Native lands in Alaska.

  • Under the Tribal Energy Loan Guarantee Program, the DOE can guarantee up to 90% of the principal and unpaid interest of a loan made to an Indian tribe recognized by the federal government for energy development.

  • The program requires the tribal borrower to invest equity in the project and all project debt to be provided by non-federal lenders.

Dive overview:

Tribal lands make up 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 to the Tribal Energy Atlas just released by the National Renewable Energy Laboratory.

However, it has been difficult to harness these resources due to limited access to finance.

The tribes have asked about developing renewable energy projects over the years, according to Taite McDonald, partner at Holland & Knight law firm. Finding affordable financing has always been “the big question and the hurdle,” she told Utility Dive. “This program will unblock that obstacle.”

The program is already on the radar screen of at least one energy storage developer. “We have our feet on the ground and are currently working on pre-engineering studies,” Stefan Schauss, executive director of CellCube Energy Storage, told Utility Dive. “A lot of things have to fall into place before we can even do our financial due diligence,” he said. However, he also said the potential to combine the long-lasting vanadium flux batteries his company manufactures with solar installations on tribal lands, especially in remote locations with little access to the grid, is exciting.

The $ 2 billion program is expected to secure up to 90% of a loan for a renewable energy project. Loans can be directed to a wide range of energy projects focused on commercially proven technologies, including projects for the production and exploitation of fossil energy, renewable energy, transmission infrastructure and energy storage. This is the first time that the loan program has been extended to projects on tribal lands. The program is authorized under the Energy Policy Act 2005, but was only recently funded under the General Expenditure Bill 2017.

In the past, one of the pitfalls of the loan program was the cost of the application fee, known as the credit grant fee.

For the tribal loan program, however, the fee has been lowered to $ 35,000, which will make the program much more attractive to potential borrowers, McDonald said. The fees for other solicitations currently open are $ 150,000 for loans under $ 150 million and $ 400,000 for loans over $ 150 million.

The Tribal Loan Program also differs from other DOE loan programs in that the Tribal Program is structured to be a partnership between eligible lenders and the DOE. Eligible lenders include commercial banks or other non-federal lenders with appropriate experience and capabilities. This means that a tribe seeking funding will go to an eligible lender, who in turn will go to the DOE for the partial guarantee. The tribal loan program also allows projects to be partially owned by non-tribal participants.

Eligible projects could hypothetically include production projects serving both non-tribal customers and residents of Indian lands, McDonald’s written in a blog. They could also include transmission projects facilitating the sale of electricity produced on Indian lands to outside markets or even transmission projects through Indian lands that link outside production to outside markets, where no tribal customer is present. ‘is served. Eligible projects could also be structured to include plans in which a tribal borrower participates as an investor, but has no other direct relationship with the tribe or Indian lands.

McDonald’s expects interest to be high in solar and storage projects, particularly in the form of micro-grids that serve remote sites. Solar and storage projects are likely to contribute to the success of the program, she said.


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