Methods for financing solar projects include grants and philanthropic support; low-cost loans; Power Purchase Agreements; third-party, contractor, and installer financing and leasing; utility mechanisms; and both state and federal tax credits, incentives, and programs, as outlined below, and detailed in the sections that follow.
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Several federal agencies and some state departments offer grants to support energy projects in Indian Country. These are outright gifts which do not need to be repaid, but federal grants typically require a local cost-share, that is, a contribution from non-federal sources, ranging from 20% to 50% of the total project budget.
Loans must be repaid, but are often available at attractive rates and terms, and are available from federal sources, such as the U.S. Department of Agriculture, as well as commercial lenders (banks, credit unions, Community Development Finance Institutions). Savings on utility energy bills from the solar power generated can offset part (or in some cases all) of the loan repayment.
PPAs are legally binding agreements to purchase power from a solar generator at a fixed price over a long term. The buyer (or “off-taker”) is typically a utility or large-scale commercial or municipal energy user. PPAs can be used as collateral for loans, to finance the project development costs or provide cost-share for federal grant funding.
Typically used for a combination of energy efficiency and generation projects, EPC financing is provided by a third-party (sometimes also the project engineering contractor) to cover the up-front capital costs of the assets. They are repaid from guaranteed savings on energy costs from the more efficient and economical operations. BIA approval may be required.
Many solar PV companies are able to provide the customer with loan financing for projects which they install. As noted, utility bill savings can offset part or all of the loan repayment. Commercial and industrial deployments can also offer lease finance structures. BIA approval may be required.
Several types of incentives at both the federal and state levels can reduce the effective cost of solar projects, and are therefore part of the financing equation if they can be used as tax credits or otherwise monetized. In particular, substantial federal tax credits for residential photovoltaics are available through 2022, and many states such as New Mexico offer solar, geothermal, and energy efficiency tax credits for individuals and businesses.
Utilities can offer their customers/members a way to pay for needed energy efficiency improvements and solar additions to a household, then the members repay over a set amount of time on their monthly utility bill. Currently Jemez Mountains Electric Coop (on-bill repayment of third-party solar loans), Roosevelt Electric Coop (ground source heat pumps) and Northern Rio Arriba Electric Coop (energy efficient appliances) offer on-bill financing to their members.
Tribes can negotiate with a utility or a private solar provider to lease lands for generating solar electricity (utility solar). For example, PNM’s Solar Direct Program will, with the guaranteed purchase of solar output by the City of Albuquerque, Santa Fe County and others, transmit solar power from a Jicarilla Apache reservation-sited PV array to the grid, and then to the purchasers.
IRBs can be a useful source of government-backed debt for third-party commercial energy project developers, frequently employed by economic development agencies to stimulate this type of private sector activity (for example, Rio Arriba County and the Jicarilla Apache/PNM solar array).
Across these several types of financing, many potential sources are available to NM tribal entities and members, including state resources, federal resources, private philanthropies, and NGOs and non-profit organizations. (Note: funding support for strategic energy planning and capacity building can be found on the Technical Resources page.) Key sources of project financing are as follows.
Special Update: The bi-partisan federal Infrastructure and Jobs Act of 2021 is providing unprecedented levels of funding. This Bipartisan Infrastructure Law Tribal Playbook is a roadmap for delivering opportunity and investments in Indian Country that will deploy record investments to provide affordable high-speed internet, safer roads and bridges, modern wastewater ansanitation systems, clean drinking water, reliable and affordable electricity, and good paying jobs in every Tribal community. See additional detail in the section below:
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Federal & State Tax Credits & Incentives
The federal tax credit for solar PV systems installed before December 31, 2022 is 26%. This will decline to 22% for systems installed in 2023. The tax credit expires for residential systems (commercial systems retain a 10% credit) starting in 2024 unless Congress renews it. See the U.S. Department of Energy’s Guide to Federal Tax Credit for Residential Solar PV for more information.
These historic acts provide (or will provide) unprecedented funding resources. the Infrastructure Investment and Jobs Act (IIJA, aka the Bipartisan Infrastructure Law) and the Inflation Reduction Act (IRA) can or will provide funding, incentives, and rebates for several aspects of the clean energy transition in Indian Country, with the potential to also reduce energy expenses, increase resiliency, and create a more healthful environment. Download this easy-to-read summary from America is All In. In addition the IRA offers improved rebates and incentives for the purchase of new and used electric and fuel cell vehicles, both individual and commercial, as outlined in this summary from the Congressional Research Service.
Administered through the Department of Energy’s new Grid Deployment Office, the upcoming Grid Resilience and Innovation Partnership Program is funded by the IIJA (Bipartisan Infrastructure Law), and will enhance grid flexibility, and improve the resilience of the power system against growing threats of extreme weather and climate change. DOE expects to release the final Funding Opportunity Announcement for FY22 and FY23 funding that will solicit concept papers and applications in the 4th quarter of 2022 and 1st quarter of 2023. Read more in the DOE press release.
For NM state tax credits and incentives, see North Carolina State University’s Energy Technology Center and its DSIRE Database of State Incentives for Renewables and Efficiency and the NM Incentives there. Of special importance is the renewal of the “New Solar Market Development Tax Credit,” providing a credit of 10% of the installation cost up to $6,000.
New Mexico State Funding Resources
ICIP is a plan that establishes planning priorities for anticipated capital projects. The state-coordinated ICIP process encourages entities to plan for the development of capital improvements so that they do not find themselves in emergency situations, but can plan for, fund, and develop infrastructure at a pace that sustains their activities.
This NM Finance Authority-administered fund has expanded beyond water projects to also cover costs of energy audits as well as master plans, conservation plans, and infrastructure plans. It could address what would it take to achieve “net zero energy” in community buildings and facilities. Engineers in the Energy Conservation and Management Division of the Energy, Minerals, and Natural Resources Dept. review energy audits for governmental entities considering energy efficiency projects that are financed by pledging future energy savings.
The Tribal Infrastructure Fund was created by the Tribal Infrastructure Act in 2005. This act recognizes that many of New Mexico’s tribal communities lack basic infrastructure, including but not limited to water and wastewater systems, roads, and electrical power lines. At each funding cycle, the project proposal is evaluated and based on scoring, is awarded funds through the 13-person Tribal Infrastructure Board, which is administratively attached to the New Mexico Indian Affairs Department.
According to the enabling legislation, “The State Board of Finance division shall allocate five percent (5%) of the estimated senior severance tax bonding capacity each year for tribal infrastructure projects, and the state board of finance will issue severance tax bonds in the annually allocated amount for use by the Tribal Infrastructure Board to fund qualified tribal infrastructure projects.
The PPRF, New Mexico Finance Authority’s flagship program, is used to finance public projects such as water system upgrades and other infrastructure improvements, fire and law enforcement equipment, and public buildings. Both market rate based loans and loans to disadvantaged communities at subsidized rates are made from PPRF funds. This Fund is an attractive and effective funding source for non-gaming related tribal projects. Provided that NMFA has PPRF legislative authorization for whichever tribe is seeking financing, the PPRF is a strong option for tribal energy infrastructure projects.
While 2020 saw a record number of projects funded by capital outlays legislatively appropriated, the subsequent tax revenue collapse soon after the legislative session ended effectively means that for the foreseeable future there will be little to no capital outlay projects emanating from Santa Fe. However, this Capital Outlay availability will change with time and economic recovery.
In addition to these existing resources, the NM Grid Modernization Roadmap bill of 2020 (HB 233) enables the establishment of a Grid Modernization Fund in the future, and includes tribal projects in its scope.
(Note: This state resources overview was contributed by Ken Hughes, who retired in 2019 after 26 years with the State of New Mexico.)
Federal Loan & Grant Programs
Department of Agriculture: USDA, through its Rural Development programs, offers several Energy Programs providing loans and grants that can support energy project development on tribal lands, including Renewable Energy Development Grants and Renewable Energy Systems Loans & Grants.
Note: In addition to these existing funding sources, planners are encouraged to monitor new federal initiatives — particularly as part of the ongoing COVID-19 economic stimulus measures — designed to support infrastructure development and renewable energy.
Also in response to the COVID-19 national emergency, DOE has instituted a formal process to request reductions in cost-share requirements; for more information on the process, see the Office of Indian Energy website and watch the informational webinar.
For additional funding resources, see the Federal Funding presentation from the ESI 2019 workshop on the Downloads page.
Other Funding Opportunities
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Remy’s Good Day Fund promotes collaboration for sustainability and the well-being of future generations. Remy grants have varied widely in scope. They range from the solarization of buildings, to classes for Navajos living off-the-grid around Gallup, New Mexico, to learn about solar systems, their installation and maintenance for their own and their families’ homes. We recognize that needs vary, and welcome diverse ideas about how solar energy can meet the unique needs of the communities we serve.
New Energy Economy supports select PV solarization projects for NM tribal centers, through its Sol for ALL program. Sol For ALL is a campaign to bring brighter possibilities for health, prosperity, and sustainability to the people of New Mexico, in line with longstanding community values. Cochiti Pueblo, Tesuque Pueblo, Crownpoint Chapter on the Navajo Nation, and Tewa Women United have benefited from this combination of crowdfunding, fundraising events, strategic partnerships, and grant support.
GridAlternatives’ Tribal Solar Accelerator Fund aims to catalyze the growth of solar energy and expand solar job opportunities in tribal communities across the United States. Note that these grants can be used for cost share on DOE Infrastructure grants.
Positive Energy Solar in Santa Fe offers a Solar Loan program with $0-down financing (available from several NM lenders) for PV projects it installs. Various loan payment terms and conditions are available, and allow you to keep any solar tax credits and/or state and local incentives for which you may be eligible.
Homewise makes solar energy affordable and accessible to low and moderate income New Mexico families with the SOL Fund. The program is aimed at making solar obtainable for regular income households. By offering access to fixed-rate loans with terms up to 30 years, many households find that their solar loan payment is lower than what they previously paid in their electric bill.
JMEC offers a Solar Loan Program, administered by Century Bank for qualifying coop members and backed by a $500,000 federal loan, whereby members can choose among four solar installers and pay back the loan to the bank via on-bill repayment, in return for reduced electric bills.
The Navajo Tribal Utility Authority (NTUA) offers off-grid electricity access to members of the Navajo Nation via its Solar Photovoltaic (PV) Service, for a fixed monthly fee, subject to the availability of equipment. The service is “Available to customers who do not reside along existing electric lines of the Authority, in areas reasonably accessible by standard utility vehicles, and who entered into a Solar Photovoltaic Service Agreement with the Authority.”