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194 Disclaimer This collection of reports was developed in Economics 425 during the Spring 2001 semester. These are student term papers as they were turned in, and they have not been edited for accuracy or validity. Northern Arizona University, and the College of Business Administration is providing this information only as a convenience. Northern Arizona University makes no representations about the suitability of the information contained in this document. Northern Arizona University disclaims any and all warranties, express or implied including without limitation warranties of loss of use, data, or profits whether in an action of contract or negligence, arising out of or in connection with the use or performance of the documents and/or related graphics, and provision of or failure to provide services or information available from this publication in no event shall Northern Arizona University be liable for direct, indirect, incidental, punitive or consequential damages of any kind whatsoever with respect to the information contained in this publication Chapter 17: Financing of Alternative Energy on Indian Reservations Ann-Kristina Trottnow Introduction Alternative energies increase in importance in our modern society. They help to prevent and cure environmental problems. Some of alternative energies can be used flexible. They do not rely on an expensive cable and maintenance system and can be applied in small numbers. They also can be adjusted individually. In addition, poorer people or people who live in remote areas will have the chance to receive energy (Ricketts, 1999). Many countries have already started huge alternative energy projects. China, e.g. has recognized, that it can no longer depend on its traditional oil supplies. For almost every country exists a large cost-effective savings potential in the implementation of renewable energy. There are several ways to finance the purchase of the new energy solutions: Government subsidies, including tax exemptions, loans, grants, incentives, and rebates, subsidies for Tribal Government, and industry subsidies. 195 Government Subsidies Under President Bush’s proposed fiscal 2002 budget, there will be a slashing of more than $200 million from federal renewable energy and efficiency research programs. The Energy Department’s core solar, wind and other renewable energy programs will be cut by more than half to $186 million from current spending levels of $376 million. But he also proposed a new tax credit of up to $2,000 for individuals purchasing solar energy equipment to generate electricity or heat water in homes (http://news.lycos.com). Subsidies for Companies Personal Tax The Arizona Solar Center offers an exemption of sales tax for retailers, that means that the customers are not charged for state sales tax. County and city sales tax still apply for these retailers who collect their own sales tax. Eligible Technologies are Passive Solar Space Heat, Active Solar Water Heat, Active Solar Space Heat, Solar Thermal Electricity, Photovoltaic, and Wind. There is also another provision of the sales tax for the basic power generating part of the system. This exemption is without a value limit. The sales tax exemption does not apply to batteries, controls etc. There is a guide available to acceptable devices under the law. The exemption is allowed on equipment up to $5,000. Before a dealer can utilize the tax, he must be registered as a solar device dealer with the Arizona Department of Revenue. This is a precaution. It is also possible to receive a sales tax exemption for the basic power generating part of the system (www.azsolarcenter.com/benefits/solarsalestax.html). 196 Investment Tax There is a 10 percent investment tax credit possible for commercial entities, which invests or purchases qualified solar energy property. It is not possible for property used outside the U.S., used by the government, foreign persons, or by tax-exempt organizations. Qualified solar energy property is equipment that uses solar energy to generate electricity, including storage devices, related parts, and transfer equipment. Dual use equipment (equipment that uses both solar and non-solar energy) does also qualify. The equipment must be completely installed in the year in which the credit is first taken (www.seia.org/SolarEnergy/taxcredit.html). Loans The Department of Commerce offers a Revolving Energy Loans for the Arizona Program. Companies that either manufacture renewable energy, alternative energy, or energy conserving equipment or acquire such equipment for use in their own process can qualify for the loan. They must have at least two years of operating experience in Arizona. Loans may range from $10,000 to $500,000, up to a maximum of 75% of the total project. There is an interest rate of 5% to this program. The projects must be set for seven years for payback or less. Eligible Technologies are comparably to the above: Passive Solar Space Heat, Active Solar Water Heat, Active Solar Space Heat, Solar Thermal Electricity, Photovoltaic, Wind, Biomass, Hydro, Alternative Fuels, Geothermal, and Waste (www.dcs.ncsu.edu/solar/dsire). Interest subsidies on loans 197 Alabama’s Science, Technology, and Energy Division, which is located in the Department of Economic and Community Affairs offers interest subsidies on loans. Eligible technologies are biomass, fuel cells, and alternative Fuels. The projects must include the installation of equipment for the production of hot water, steam or hot air from biomass. Also eligible is equipment for biomass fuel storage, preparation, and transport, as well as equipment for the production of biomass fuels. The loan is only for commercial, industrial, agricultural, or institutional facilities. The maximum interest subsidy is $75,000. Assistance is only given for loans with interest rates no greater than 2%. A loan must be obtained from a commercial institution. Afterwards the interest subsidy can be applied (www.dcs.ncsu.edu/solar/dsire). The Department of Energy initiated a million Solar Roofs project, which enables businesses and communities to install solar systems on one million rooftops by 2010. The grants will be limited to $50,000 each and will be distributed among the six DOE regions (www.eren.doe.gov/millionroofs). The Office of Energy Efficiency and Renewable Energy (Department of Energy) is making grants available to States for Special Projects in 2001. These grants are awarded on a competitive basis (www.energy.gov/HQPress/releases00). Subsidies for Homeowners There are subsidies available, which are not only for companies, but also for individuals. Incentives 198 Citizens Utility Company offers financial incentives for the installation of qualified solar hot water and photovoltaic systems. The terms are $1,38 per AC watt, but $2,250 maximum; this program is for residents only (www.REVermont.org). Leasing Southwestern Public Service Company introduced a solar leasing program in 1998. The only eligible technology is Photovoltaic. The lease is for an undetermined period. The photovoltaic must be used in livestock water pumping and stand-alone power supplies. All customers are eligible; there is no requirement for a minimum distance from the grid. The utility handles all equipment maintenance; each program is fitted to the customers’ needs (www.dcs.ncsu.edu/solar/dsire). Arizona Public Service created the Remote Solar Electric Service in 1997. Off- grid Customers are able to lease self-contained solar units. Eligible Technologies are only Photovoltaic (www.energy.ca.gov/greengrid). Industry rebates The California Energy Commission offers a program called the Emerging Renewables Buy-Down Program, which includes cash rebates on eligible renewable energy systems. It is possible to get a rebate of up to $3,000 per kilowatt, or 50% off the system purchase price. The generating systems, which are eligible, are Photovoltaic (solar cells that convert sunlight directly to electricity), Small Wind Turbines (with an output of 10 kilowatts or less), Fuel Cells (devices which use a chemical process to convert renewable fuels into electricity), and Solar Thermal Systems (systems that use solar heat to generate electricity). The electricity production of the system should not exceed 125 % 199 of the site’s current electricity needs. There also must be a minimum five-year warranty on the system. All types of electricity customers are eligible, but the proposed site must be within the electric utility service area of: Pacific Gas and Electric, San Diego Gas and Electric, or Bear Valley Electric Company. The system must be installed within 9 months of the rebate-confirmation date of the systems that are 10 kilowatts or less, and within 18 months for larger systems (www.dcsu.ncsu.edu/solar/dsire). Green Pricing Program Arizona Public Service developed 400 kW of centralized, connected photovoltaic systems. The program is for commercial and residential customers. Current facilities are in Flagstaff, Tempe, Glendale, Scottsdale, Gilbert, Prescott, and Yuma. The solar power is sold in 15-KWh increments, the premium will be $2.46 per month per 15 KWh block (www.dcs.ncsu.edu/solar/dsire). Subsidies for Tribal Governments It is not possible for tribes to receive incentives. The energy bills for some buildings on Tribal lands, e.g. schools are paid by federal agencies and so the tribes can’t operate the buildings efficiently by themselves. There are subsidies available, which are exclusively designed for Tribal Government. They are created to give the residents of the reservations the opportunity to enjoy what most of the consumers take for granted- electricity (Council of Energy Resource Tribes and E source, 2001). The Department of Housing and Urban Development sponsors the Alaska/Native Hawaiian institutions Assisting Communities Program. Universities and Minority institutions can apply for it, if they meet the statutory definition of either an Alaska 200 Native institution of higher education or a Native Hawaiian institution of higher education. The maximum amount of funding is $400,000 for Alaska Native institutions and $2 million for a Hawaiian institution (http://frwebgate.access.gpo.gov). The Navajo Tribal Utility Authority has a program, called Navajo Solar Power Initiative. With the help of the Department of Energy’s Sandia National Laboratories, they bring electricity to the homes of people living in remote areas. They buy 200 photovoltaic systems at once and install them on individual units at private residences (www.sandia.gov). The Navajo Electrification Demonstration Program provides electric power to the 18,000 occupied structures on the Navajo Nation that lack electric power. The goal is, that every household on the Navajo Nation has access to electricity by the year 2006. Every year there are $15 million authorized, beginning in 2002 (www.appanet.org/general/issues). The National Tribal Energy Network has proposed a program with different components. One part of it is grants, which tribes can use to support their energy policy, for planning and management activities, and for investments in energy infrastructure improvements. There are also tax credits available. The annual funding of these programs is $40 million (Council of Energy Resource Tribes and E source, 2001). Industry Subsidies Nearly all of the industry suppliers offer leasing contracts to finance renewable energy. Besides this, there are other offers like grants, rebates, and cash incentives. The Shell Foundation offers grants in a Sustainable Energy Program for wind and solar projects. Registered organizations are eligible for the grant. Research and analysis, 201 technical assistance, and training are also eligible. Besides grants, there are other kinds of assistance available (www.shellfoundation.org). Austin Energy offers a Green Building Program with cash incentives for commercial new constructions and major renovations. The program has been planned for commercial buildings and single-family houses. There is also a programming assistance available and a technical analysis for energy efficiency (www.ci.austin.tx.us/greenbuilder). Austin Energy offers a utility rebate program for active solar water heaters. The rebates can also be used for energy-efficient equipment, which include heat pump water heaters, heat recover water heaters, and air conditioners. The rebate for a 16 square feet collector area or less is up to $150, for a 16 to 35 square feet collector area up to $250, and for a 36 square feed collector area and more up to $350. It is possible to choose from a rebate as well as from a loan. This program has been designed only, for Austin Energy customers, mainly single-family residents (www.dcs.ncsu.edu/solar/dsire). Conclusion There are many financing options available for energy-efficiency projects. It is important to evaluate each of them to come to the best combination of the funding projects. There are several steps to find the best solution. The first step is to define the objectives, to identify the goals. The second step is to define the criteria that may influence the selection e.g. mission requirements, safety, protected life of the buildings in question etc. The third step is to define potential funding scenarios. For the various options it is important to identify the required side resources. Finally the risks and benefits from the different projects have to be evaluated, before a financing method is selected. 202 Each financing alternative brings with it strengths and weaknesses, there is not a prescriptive procedure, and all projects must be evaluated on a site-by-site basis. There is still an uncertainty of the fiscal 2002 budget. Congress will finalize a spending plan for the federal government within the next few months. If the funding reductions pass through, it will be a huge obstacle in the implementation of the renewable energy projects (Ricketts, 1999). Addresses Alabama Department of Economic and Community Affairs Science, Technology & Energy Division P.O. Box 5690 401 Adams Avenue Montgomery, AL 36103-5290 Phone: 334-242-5290 Fax: 334-242-0552 E-mail: email@example.com Arizona Public Services Janet Crow Technology Development Mail Station 8378 P.O. Box 53999 Phoenix, AZ 85072-3999 Phone: 602-250-4990 E-mail: firstname.lastname@example.org Arizona Solar Center/ Arizona Energy Office Phone: 602-280-1402 Austin Energy Jerrel Gustafson 206 E. Ninth Street, Suite 17.102 Austin, 78701 Phone: 512-499-3587 Fax: 512-499-3518 California Energy Commission Phone: 916-654-4058 E-mail: CallCntr@energy.state.ca.us Citizens Utility Company, Vermont 203 Phone: 877-888-7372 Department of Commerce Patty Duff Phone: 602-280-1340 Department of Energy John B. Townsend Phone: 202-5806 Department of Housing and Urban Development Jane Karadbil Office of University Partnerships 451 Seventh Street, SW, Room 8106 Washington, DC 20410 Phone: 202-708-1537 E-mail: Jane R. Karadbil@hud.gov Navajo Tribal Utility Authority Chris Burroughs Phone: 505-844-0948 E-mail: email@example.com Shell Foundation Phone: 888-468-5822 Fax: 888-689-3041 Solar Energy Industries Association Peter Lowenthal 1616 H Street, NW 8th Floor Phone: 202-628-7979 301-951-3231 Fax: 202-7779 Southwestern Public Service Company Kent Johnson P.O. Box 1261 Amarillo, 79170 Phone: 806-378-2166 204 Appendix Eligible Kind of Eligible Maximum Additional Program People Financing Technology Amount Information Registration as a Arizona Solar Exemption of Companies Solar, Wind $5,000 Solar Dealer is Center Sales Tax Precaution Not possible for Investment Tax Seia Companies Solar 10% of Tax Property used by the Credit Government Interest Alabama's Science Biomass, Also eligible is Companies Subsidy on $75,000 Division alternative Fuels Equipment for Storage Loans Solar, Wind, Department of 75% of the Interest Rate of this Companies Loan Biomass, Hydro, Commerce Project Program is 5% alternative Fuels Department of Companies and Grant Solar $50,000 Valid till 2010 Energy Communities Office of Energy Grants are awarded on States Grant all are eligible - Efficiency a competitive Basis Citizens Utility Financial Terms are $1,38 per Residents Solar $2,250 Company Incentive AC Watt Southwestern Utility handles all Public Service All Customers Leasing Photovoltaic - Equipment Maintenance Company Minimum five-year California Energy Solar, Wind, Fuel $3000 per All Customers Cash Rebates Warranty on the Commission Cells Kilowatt System 205 Appendix (continued) Eligible Kind of Eligible Maximum Additional Program People Financing Technology Amount Information Arizona Public Off-grid Leasing Photovoltaic - - Service Customers Premium is Arizona Public Commercial/ Green Pricing Current Facilities Photovoltaic $2,46 per Service Residential Program are in Flagstaff Month Department of Universities and Only for Alaska all are Housing and Urban Minority Funding $2 million and Hawaiian eligible Development Institutions Institution Navajo Tribal People living in Installation at Funding Photovoltaic - Utility Authority Remote areas Private Residences Navajo Households of Goal is to Supply all are $15 million Electrification the Navajo Funding Electricity for eligible every Year Program Nation Every Household Tribes can also Nationa Tribal Grant, Tax all are $40 million Tribes use the Money for Energy Network Credit eligible every Year Management Research and Registered Shell Foundation Grant Wind, Solar - Analysis is also Organizations eligible It is also Commercial/ all are Austin Energy Cash Incentive - Assistance Residential eligible available Rebate can also be Austin Energy All Customers Rebate Solar $350 used for Energy Equipment 206 References Alabama Department of Economic and Community Affairs. (02/19/2001). Alabama Renewable Fuels Program-Biomass [online]. Available: www.dcs.ncsu.edu. (03/07/2001). APPA. In Support of Full Funding for the Navajo Electrification Demonstration Program [online]. Available: www.appanet.org. (04/13/2001). Arizona Public Services. (02/07/2001). Arizona-APS-Solar Partners [online]. Available: www.dcs.ncsu.edu. (03/07/2001). Arizona Public Services. (01/24/2001). Arizona-Remote Solar Electric Service [online]. Available: www.dcs.ncsu.edu. (03/07/2001). Arizona Solar Center. (01/26/2001). Arizona-Solar and Wind Equipment Sales Tax Exemption [online]. Available: www.dcs.ncsu.edu. (03/07/2001). Austin Energy. (02/29/2000). Texas-Home Energy Air Conditioning and Appliance Rebates [online]. Available: www.electric.austin.tx.us. (03/07/2001). Austin Energy. (02/05/2001). Green Building Program [online]. Available: www.electric.austin.tx/greenbuilder. (04/08/2001). California Energy Commission. Emerging Renewables Buy-Down Program [online]. Available: www.energy.ca.gov. (03/07/2001). Citizens Utility Company. (10/03/2000). Vermont-Solar VT [online]. Available: www.REVermont.org. (03/07/2001). Council of Energy Resource Tribes and E source. 2001.”Electricity Sufficiency on Tribal Lands: Opportunities, Barriers, and Policy Recommendations.” Department of Commerce. (01/26/2001). Arizona-Revolving Energy Loans for Arizona (RELA) Program [online]. Available: www.dcs.ncsu.edu. (03/07/2001). Department of Energy. (05/01/2001). Department of Energy Announces Major Effort to Help Accelerate Nation’s Use of Wind Energy [online]. Available: www.energy.gov. (04/08/2001). Dodgett, Tom. (04/09/2001). Bush Budget Cuts Solar Renewable Energy Programs [online]. Available: http://news.lycos.com. (04/13/2001). Energy Efficiency and Renewable Energy Network. (03/29/2001). Special Projects for Fiscal Year 2001 [online]. Available: www.eren.doe.gov. (04/06/2001). 207 InfoEd International.inc. (03/12/2001). HUD-Alaska Native/Native Hawaiian Institutions Assisting Communities Program [online]. Available: http://frwebgate.access.gpo.gov. (04/05/2001). Ricketts, Jana. 1999. “Exploring Energy & Facilities Management Opportunities in a Changing Marketplace.” Lilburn, GA: The Fairmont Press, Inc. Sandia National Laboratories. (07/10/2000). Navajo Tribal Utility Authority brings solar electricity to homes in remote areas [online]. Available: www.sandia.gov. (04/05/2001). Shellfoundation. Leasing [online]. Available: www.shellfoundation.org. (04/08/2001). Solar Energy Industries Association. (12/13/1999). Investment Tax Credit for Solar Energy Property [online]. Available: www.seia.org. (03/11/2001). Southwestern Public Service Company. (02/29/2000). Texas-Solar Leasing Program [online]. Available: www.dcs.ncsu.edu. (03/07/2001).
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