Thursday, June 30, 2016

Tribes & Renewables Part IV: Barriers to Tribal Renewable Development and Ownership

By Andrea Lang, Policy Analyst

In Part III of this blog series on tribes and renewable energy resources, I explored the convoluted process for obtaining the Bureau of Indian Affairs’ approval before American Indian tribes can develop renewable energy on tribal land. Even if that process were remedied, tribes still face numerous other barriers to enjoying the full benefits that renewable development on tribal land would afford. According to a Sandia National Laboratory survey of tribal and federal Indian energy experts, lack of financing or funding and lack of customers are two of the most significant barriers to renewable energy development on tribal land. This fourth post in the Tribes and Renewables series briefly explains each of these barriers and suggestions for overcoming them.

Lack of Financing or Funding

One of the major barriers to tribal renewable energy development is lack of access to funding or financing. Even without the financing difficulties raised by the need for Bureau of Indian Affairs approval, tribes face considerable and inequitable barriers to financing their projects. Many renewable energy project owners are able to offset some of their tax liability by qualifying for the federal production tax credit or the investment tax credit, making the energy more valuable to them. However, since tribal governments have no tax liability, the credits do not provide any benefit to tribes directly. Tribes can attempt to find a third-party tax investor willing to finance their project in exchange for the tax credits, but it requires giving that investor ownership of the project for a time. This adds an extra step to the process and robs the tribe of the ability to fully own renewable energy projects, which is inequitable and raises concerns among some tribes with regard to sovereignty. Regardless, the federal government is currently phasing out the renewable tax credits over the next five years.

However, even if tribes could use the benefit of tax credits to save money and make renewable projects more financially beneficial, it would not solve the problem of being able to finance tribal renewable projects. Fortunately, the federal government is trying to overcome this particular barrier. Last March, the U.S. Department of Energy (DOE) announced a $9 million dollar investment in Native American “clean energy and energy efficiency programs,” including 12 solar photovoltaic projects, one wind energy project, and one tidal energy project. While this program will likely lead to additional renewable energy development on some tribal lands, such direct funding from the federal government should only be part of the solution.

Lack of Customers

The Sandia National Laboratories survey also found that a perceived lack of customers hinders tribal development of renewable energy resources. Prospective Native American renewable project developers could build projects to provide power to tribal residents, helping the tribe become more self-sufficient and reducing its need to purchase power from elsewhere. But the fact that the survey identified lack of customers as a significant barrier to development suggests that tribes are looking to also sell their electricity elsewhere.

The best way to ensure adequate demand for the output of renewable projects is to ensure that state renewable portfolio standards (RPSs) are sufficiently strong to create a market for renewable energy. RPSs are state mandates to obtain a certain amount of electricity from renewable resources. In states with high RPSs, utilities will be looking to buy more renewable electricity to meet their requirement, creating more customers for tribes. This is one of many reasons states should consider enacting ambitious RPSs. 

As I’ve explained in the last few posts in this series, there are certainly some barriers to tribal development of renewable resources, but there are also lots of reasons for hope. Plenty of policy options are available to overcome these barriers, and the fact that the Government Accountability Office and the Sandia National Laboratories are looking into the reasons for underdevelopment of tribal renewable resources is promising. The next post in this series will begin looking at a completely different aspect of tribes and renewables: how to develop renewable energy projects on non-indian land without destroying tribal cultural resources.