Success Stories 

SMUD’s

Solano 4 Wind Project

TCC’s

Solar Array

TCC Solar Array

1 MWac solar installation in North Pole, Alaska.

The Tanana Chiefs Conference (TCC) in Alaska provides a unified voice for 37 sovereign tribal governments throughout 235,000 square miles in interior Alaska.

  • The Tanana Chiefs Conference (TCC) in Alaska provides a unified voice for 37 sovereign tribal governments throughout 235,000 square miles in interior Alaska. TCC covers an area the size of Texas but has as fewer miles navigable roads than the state of Rhode Island. With an annual budget of $250 million, primarily focused on healthcare, TCC’s energy initiatives are constrained by the small size of the communities served, which have an average population of fewer than 200 individuals. This lack of interconnectivity makes supporting healthcare and community services with reliable energy extremely important. For instance, many in this region face the highest energy costs in the country, with $10-13 per gallon for heating fuel and more than 14,000 heating degree days annually.

    Before the IRA, TCC was unable to leverage tax credits due to the complexities involved in structuring tax equity partnerships. Historically, TCC relied on grants to fund projects, and given the high per-capita costs for infrastructure, it was hard to make progress. The IRA, however, opened up new financial opportunities for TCC to utilize direct pay.

  • TCC owns and operates a health center. To improve energy independence and demonstrate renewable energy potential in the region, the organization is building a solar project in North Pole, Alaska, just outside Fairbanks. This ~1 MWac solar installation aims to provide sustainable energy within the constraints of local utility requirements. TCC owned the land for more than 35 years, which was previously abandoned as a condemned warehouse.  The project began with the demolition and site preparation of this structure to create space for the solar array. The decision to cap the project at 1 MW was dictated by the tax credit requirements, physical limits of the location, and utility restrictions that apply to projects over 2 MW in the Golden Valley Utility service area. The project is scheduled to be commissioned at the end of December 2024 and is fully constructed and interconnected.

  • The initial vision for the TCC solar project emerged in early 2023, with conceptual plans shaped by the potential for a substantial federal grant from the Indian Health Service. The grant was secured in mid-2023 from the Indian Health Service, design efforts continued through the end of 2023 and building began in early 2024. By fall 2024, the panels arrived and construction preparations were well underway, with panels arriving and site grading ongoing. This timeline reflects TCC’s methodical approach, as the project aligns closely with both funding and logistical requirements specific to Alaska’s energy and construction landscape.

By combining innovative financing through a $5M revolving loan fund with strategic use of IRA tax credits and grants, TCC’s solar project sets a model for sustainable energy funding and efficient monetization in tribal communities.

  • To finance its solar project, TCC has strategically leveraged a revolving loan fund (RLF) upfront followed by and a mix of grant funding (alongside direct pay), ensuring both financial flexibility and alignment with TCC’s long-term energy goals. A revolving loan fund is a pool of capital set aside to provide loans for specific projects, and once these loans are repaid, the funds are reused to finance additional projects. This creates a "revolving" cycle of funding, where resources continuously support new initiatives.

    For TCC, the RLF was created around 18 months ago, whereby the organization set aside $5 million in operating budget to create the fund. As a nonprofit serving multiple tribes, TCC uses this fund to to avoid high-interest loans from banks. By funding internally, TCC can support tribal energy projects without relying on costly external financing, thus creating a more sustainable, long-term solution for capital needs in their community. This is especially important when it comes to direct pay, as the RLF provides essential bridge funding while awaiting federal grants or tax credits. The RLF is what allowed TCC to overcome the timing in cash flow problems of direct pay.

    With a total cost of over $3 million, the TCC solar project is funded through a combination of a $2 million grant (60% of funds) from the Indian Health Service and $1.3 million drawdown from TCC’s RLF (40% of funds to be recovered through direct pay). At an approximate capital cost of $2.76 per watt, the project’s costs are aligned with industry standards for similar installations and should result in a long-term power purchase agreement of between $.10-.15/kwh which will float based on the avoided cost of power.

  • TCC has secured a power purchase agreement (PPA) with Golden Valley Electric Association (GVEA). The energy produced from the project will fully offset the energy consumed by the main TCC healthcare administration building. The facility’s goal is to achieve virtual, electrically net-zero emissions for this healthcare facility. All power will be sold to GVEA, contributing to TCC’s broader goal of reducing its carbon footprint.

  • TCC is applying for a 40% direct pay tax credit, which includes the 30% ITC alongside the 10% energy community adder. The entire state of Alaska qualifies as an energy community under the IRA.  The organization opted for lower-cost international panels due to a favorable cost-benefit analysis, even though domestic content benefits could offer additional reductions in installed costs, the timeline was uncertain. They were able to secure steel domestically. A cautious approach to navigating tax form requirements led TCC to engage CPA and legal advisors to ensure compliance with Form 990-T and other necessary filings. As we discussed above, the RLF allowed TCC to fund the project as they await the end of their tax year to file for direct pay. There has been some confusion around ensuring an alignment in fiscal year and tax year accounting. As described in the main findings above, even with a proactive team and responsive advisors, there has been uncertainty along the way that is still being resolved.

Successes and Challenges

  • 1.     Financial Innovation in the Revolving Loan Fund (RLF): Created a $5M RLF to provide low-cost internal financing, enabling TCC to meet cost-share requirements and avoid high-interest loans as bridge financing for direct pay.

    2.     Grant Acquisition: Secured significant grants, including a $2M award from the Indian Health Service, covering 60% of project costs.

    3.     Environmental Impact: Achieved an organizational objective of reducing the organizations carbon footprint.

    4.     First Large Solar Installation: Established the largest solar project in the GVEA grid and the largest tribally owned renewable project in the state, positioning TCC as a renewable energy leader for local tribes.

  • 1.     Tax Compliance Complexity: Needed CPA and legal support to navigate Forms 990-T, 3468, and 3800, as well as IRS guidance on tax year alignment.

    2.     Federal Matching and Grant Limitations: Faced restrictions where revolving loan funds might be misinterpreted as federal funds, complicating cost-sharing requirements. Federal grants or tax credits often have a requirement known as the "matching" or "cost-sharing" requirement. This contribution must come from non-federal sources to ensure that federal funds are supplemented rather than supplanted. Therefore, TCC had to clearly document the RLF was from an internal pool of capital, and not created by a previous federal grant.

    3.     Labor and Procurement Challenges: Experienced delays and difficulty finding contractors meeting TCC's requirements.

  • For tax-exempt organizations looking to pursue similar projects, TCC’s experience underscores the importance of early-stage education and buy-in from leadership, especially regarding the benefits of tax credits. Engaging consultants and advisors can validate the expertise necessary to convince stakeholders of a project’s viability. Securing bridge financing is necessary as well. As TCC continues to refine its processes, their story offers a blueprint for others in navigating the complexities of financing renewable energy projects under the IRA framework.

SMUD Wind Farm

19 wind turbines, each generating 4.5MW of power in Solano County, California

SMUD (the Sacramento Municipal Utility District) is a community-owned electric utility that serves 600,000 customers in the Sacramento area

  • SMUD, or the Sacramento Municipal Utility District, is a community-owned electric utility that serves the Sacramento area in California. It is one of the largest community-owned utilities in the U.S. and provides electricity to over 600,000 residential and business customers, covering a population of approximately 1.5 million people in the greater Sacramento region.

  • Located in Solano County, near Rio Vista, the Solano 4 wind project is an expansion of SMUD's renewable energy portfolio. The project includes 19 turbines with a blade diameter of 150 meters, each generating 4.5 MW of power. The initiative aims to increase capacity by 70.5 MW and boost annual energy production by 335 GWh, bringing the combined capacity of Solano wind turbines to 300 MW. Although the land is not owned by SMUD, the project contributes significantly to the utility’s goal of achieving zero carbon emissions. The Solano wind projects are estimated to offset ~9% of SMUD customer’s energy needs. The $230 million development broke ground in April 2023, with commercial operation in May 2024.

  • SMUD’s investment in wind energy dates back to the 1990s, with the acquisition of land in Montezuma Hills, an area known for its wind potential. Initial installations consisted of small 100 kW turbines, evolving through several phases of upgrades:

    1. Phase 1 (2000/2001): Installation of 660 kW turbines, achieving a capacity of 15-20 MW.

    2. Phase 2 (2006-2008): Expansion with 29 3 MW turbines, adding 100 MW.

    3. Phase 3 (2012): Addition of 128 MW from 24 turbines, with SMUD temporarily selling part of the project to Citigroup before repurchasing it in 2018 through a sale-leaseback arrangement.

    4. Phase 4 (2017-2024): Permitting and planning began around 2017, with construction commencing in early 2023. The expansion involves repowering older turbines with larger, more efficient models. 19 V150 4.5MW turbines for 85MW interconnection. Construction began in early 2023 and the project came online in May of 2024

    The timing of Solano 4 allowed SMUD to take advantage of the direct pay investment tax credit (ITC), which was not initially anticipated when planning began.

By leveraging lower capital costs, direct pay tax credits, and streamlined permitting, SMUD’s $230M Solano 4 wind project sets a benchmark for utility-driven renewable energy innovation and cost savings for customers.

  • Costs: The Solano 4 wind project’s total cost is approximately $230 million, including pre-construction planning expenses. SMUD chose to retain ownership of the project rather than pursue a Power Purchase Agreement (PPA) as it believed direct ownership would yield lower electricity rates. As a public utility, SMUD benefits from lower capital costs compared to private developers. Equity capital costs 15%, tax equity costs around 7%, but SMUD debt is around 4%. This offers a great opportunity for public utilities to cheaply finance renewable development. Funding comes directly from SMUD’s capital, avoiding the use of bonds, which would have reduced the ITC benefits.

    On the other hand, as a public organization, there is also a push for risk mitigation which often leads public utilities to go the PPA route to push the risk to a private developer (which in turn likely leads to higher costs for customers). Due to SMUD’s size, they had the balance sheet and access to capital markets in order to fund the project before receiving direct payment. Also, SMUD serves as the lead agency. This is crucial because it allows them to streamline project approvals and expedite timelines for renewable energy projects and infrastructure improvements. As the lead agency, SMUD can manage the CEQA process directly, which means they have more control over the project’s pace, environmental assessments, and stakeholder engagement.

    Construction: The use of a fully wrapped EPC contractor (Vestas) also streamlined construction. Vestas handles the manufacturing and supply of components. Since the project was started before the IRA released detailed guidance on domestic content, they sourced materials from the most reliable and cheapest suppliers.

  • The Solano 4 wind project’s energy generation is outside SMUD’s direct service area. Depending on load demand and market pricing, SMUD either sells the energy into the CAISO market or transmits the energy to SMUD customers.

  • The project qualifies for a 40% ITC due to its location within an energy community, amounting to an $87 million tax credit. While many wind projects often choose to go the PTC route (due to a higher capacity factor from wind), SMUD opted to apply for ITC due to concerns the government could change the law before the expiration of a ten year PTC. Political risk was the key reason they applied for an ITC. Due to the construction of the project starting in October 2022, SMUD was also grandfathered into not needing to hit PWA requirements to achieve the 30% base.

    SMUD has felt that the process of monetizing tax credits has been straightforward so far. They mentioned the IRS has been responsive and resources are clear. The biggest challenge has been limited guidance on the documentation required. As one SMUD representative explained, “The IRS website was broad in its guidance. We didn’t know what to provide, so we uploaded a CEQA exemption document as a backup—it worked, but we would love more clarity moving forward.” To manage these complexities, SMUD hired a tax consultant for accuracy in cost aggregation and compliance. For them, the investment on consultants and advisors is well worth the return on the potential to receive an $87 million direct payment.

Successes and Challenges

    1. Effective and Sizable Team Ready to Apply for Direct Pay: SMUD's ability to take advantage of direct pay provisions stems from a well-positioned finance and treasury team alongside a team of advisors. SMUD has an impressive team of analysts within the treasury department. For SMUD, there's at least 5 experts available to lend ITC support if needed, in addition to accounting and others.

    2. Navigating Barriers: By acting as the lead agency in permitting, SMUD managed to push the project forward through environmental reviews and community engagement.

    3. Internal Ownership Benefits: The decision to own and operate the wind project allowed SMUD to avoid PPA costs and retain greater control over project economics and operations. As the project team noted, “SMUD should theoretically always be cheaper due to lower capital costs and property tax exemptions compared to private equity.”

    1. Complexity in Direct Pay Application: The lack of specific guidance from the IRS regarding documentation requirements made the direct pay application process difficult. If an organization as smart as SMUD faces challenges, it highlights the need for clearer federal guidelines to help tax-exempt entities. Even SMUD mentioned to us that if they “only had one finance person, filing an ITC would be a tough increase in workload for one person to manage.”

    2. Domestic Content Risks: While SMUD could qualify for the energy community bonus, the project's reliance on non-U.S. wind turbine components meant it could not meet domestic content requirements. The team noted, “Domestic content is a huge stick for munis because they won't be allowed to use direct pay after 2026 if they aren’t doing domestic content.” Wind turbine supply chain in the US is likely to be limited until 2027 which could slow down development.

    3. Community Pushback: Opposition from the community and concerns around the Air Force base radar faced significant hurdles, necessitating compromises such as delayed re-powering efforts and extensive permitting work to protect wildlife.

  • Engaging consultants early in the project can significantly reduce risks associated with tax credits and permitting. SMUD's experience shows the value of using external experts to guide the site selection process, incorporate domestic content considerations into contracts, and manage regulatory documentation.