This section presents strategies to promote renewable energy development and encourage energy conservation so that every dollar spent on renewable goes farther. Most emphasize the use of governmental authority, but some also consider what could be done by nongovernmental actors such as educational institutions and private businesses.

Demonstration Projects in Government Facilities

A number of tribes have made solar energy a part of everyday life by using solar design features in public buildings and other community facilities. While standard practice in the solar building industry, these features are often new to tribal communities.

Some tribes have used passive solar design in their tribal administrative office buildings, including the Wampanoag Tribe in Massachusetts.²³ In addition, quite a few tribal housing authorities have sponsored the construction of solar homes, using financial assistance from the Department of Housing and Urban Development (HUD), including Northern Pueblos in New Mexico, Cheyenne River Sioux in South Dakota, and the Sault Ste. Marie in Michigan. The Oneida Tribe in Wisconsin has used funding from the Department of Energy for its energy efficiency and solar homes program. The casino operated by the Mohegan Tribe in Connecticut features a number of exemplary energy conservation features.

Some tribes have been rather creative in using federal financial assistance for demonstration projects. For example, the Hualapai Tribe in Arizona constructed an office building for its Natural Resources Department as a recycling demonstration project. They built this passive solar "earthship" almost entirely out of recycled materials, including used tires in the thermal mass walls.

These demonstration projects represent steps in the direction of the widespread use of renewable energy in buildings -- but only first steps. Through their lawmaking powers, tribes have a range of tools available to make the shift to widespread use of renewable energy in buildings happen sooner rather than later.

Building Codes and Land Use Planning

The practicality of renewable energy use in buildings depends heavily on construction decisions; the orientation of a building with respect to the sun, for instance, can either facilitate or foreclose options for adding solar features later. In addition, it costs less to collect and store solar heat for an energy-efficient structure, so energy conservation considerations go hand-in-hand with the optimal use of renewable energy. Likewise, it is easier and cheaper to build solar and energy efficiency features into homes rather than to retrofit.

Yet many builders and homeowners make decisions affecting energy use without considering the implications.²⁴ In the years ahead, we can expect to see efforts at all levels of government to make new buildings more energy-efficient, in part because residential and commercial buildings account for more than a third of all the energy consumption in the United States and offer a wide range of opportunities for reducing the U.S. share of global greenhouse gas emissions.²⁵

Building codes represent the most basic policy tool for making new construction more energy-efficient. In 1983 the Council of American Building Officials published the first version of the Model Energy Code (MEC), developed for incorporation into state and local building codes.²⁶ The MEC has been updated periodically since then and has served as the basis for the energy conservation provisions of building codes adopted by about half the states.

In 1992 the MEC received the endorsement of the federal government in the Energy Policy Act (EPAct).²⁷ This requires states to review their residential building codes and determine whether to revise them to incorporate the MEC. EPAct also requires any new home financed with a federally insured or guaranteed mortgage to comply with the MEC. Although EPAct includes several sections authorizing grants to tribes for energy projects, the sections dealing with the MEC do not mention tribal governments. Federal funding has been provided to a private organization, the Building Codes Assistance Project, to help states and local governments review their building codes, but this group has not yet reached out to tribal governments.²⁸

The Department of Housing and Urban Development and the Department of Energy (DOE) are the federal agencies that have provided assistance to non-federal governments to work the MEC into their building codes. Unfortunately, these agencies appear to have overlooked tribal governments. Most of the homes that have been built in Indian communities over the last three decades have been made possible by federal funding, mainly through HUD and somewhat through the BIA. HUD and BIA regulations have recognized tribal authority to enact and enforce building codes, but these agencies have not provided much assistance to tribes to incorporate energy efficiency into them.

The Native American Housing Assistance and Self-Determination Act (NAHASDA) of 1996 overhauled HUD's Indian housing program by creating a block grant program for Indian housing and eliminating tribal eligibility for a variety of HUD programs.²⁹ The new program includes no express incentives for energy efficiency in buildings. In addition to the block grants, NAHASDA includes some provisions intended to help tribes and their members gain better access to private mortgage markets. (Standard home mortgages are anything but the standard in Indian Country, largely due to the trust restrictions on the alienation of Indian land, which make it complicated for lenders to enforce agreements; as discussed later, a transaction known as a leasehold mortgage can overcome this problem.)

The lack of attention to MEC compliance in NAHASDA creates another obstacle to Indian access to private mortgage markets, since federally insured mortgages now require MEC compliance. An unintended consequence of the new Indian housing program, coupled with the lack of attention to energy conservation in the new law and on the part of federal and tribal officials administering it, may be that new housing in Indian Country will be less energy-efficient than anywhere else the federal government helps families buy homes.

Tribal governments can avoid this. They do not need the federal government's permission or encouragement to work the MEC into tribal building codes or to go beyond MEC's minimal requirements. For example, a tribal building code in a northern climate might require superinsulation. Where winter sunshine is abundant, a code might require each new home to provide a certain percentage of its heat through solar design features and to incorporate a minimal amount of thermal mass for heat storage. A tribal land use planning code might require consideration of solar orientation for new buildings.

At least two major obstacles impede tribal governments from enacting such innovative building codes and pursuing related policies. First, the limited amount of federal funding for Indian housing coupled with the need for adequate housing creates a strong incentive to minimize the initial cost per housing unit -- a split incentive in which tribal housing authorities make the decisions, with home buyers and tenants bearing the costs of heating and cooling.

Second, tribal governments lack access to technical assistance for energy conservation and renewable energy, in part because much of this funding by the federal government has been provided through state government agencies and educational institutions that lack a mandate to reach out to Indian Country. The most significant example of this omission may be the State Energy Program administered by DOE. Its regulations do not even mention Indian tribes or reservations, let alone include any requirements that states receiving federal assistance direct any of it to Indian Country.³⁰ And, of course, no counterpart federal assistance program exists for Indian Country.

This is a familiar pattern for federal assistance programs administered through the states. Some states do a reasonably good job in making sure that some assistance under federal programs reaches Indian communities, but a more equitable share tends to reach Indian Country if the federal regulations impose some requirements for this, as in the Low-Income Weatherization Program administered by DOE and the Low-Income Home Energy Assistance Program, administered by the Department of Health and Human Services (HHS).³¹

Obstacles can be opportunities, of course. NAHASDA includes a rather open-ended authorization for tribal housing authorities to include "model housing activities" in their Indian housing plans, which presumably could cover a range of energy conservation and renewable energy activities. Creative tribal officials and staff might find ways to make nonfederal money available for investments in energy conservation and renewable energy. On the other hand, if state and local governments get federal help to upgrade the energy conservation provisions of their building codes, why shouldn't tribal governments also receive such help?

Electric Power A Multitude of Possibilities

Electricity offers a wide range of options for tribal governments that want to promote the use of renewable energy. Tribal initiatives in the electricity arena should be seen in the context of the sweeping changes that are taking place in the U.S. electric power industry.³² As the third kind of sovereign in our federal system, tribes can help shape these changes. And since they are frequently overlooked by federal and state policymakers, they may find that federal legislation or economic forces beyond their control have foreclosed some options unless they become more actively involved.

Within the existing legal framework and market structure, some options that tribes might pursue include choosing to buy electricity only from power companies and independent power producers that have demonstrated a commitment to renewable energy systems; developing tribally owned renewable energy systems, both to meet the needs of tribal facilities and to sell power over the grid; and establishing tribal electric utilities and energy service companies. Other options could be fashioned, but these three suggest the possibilities.³³

Tribal Government Choices in Buying Electric Power

In some parts of Indian Country, tribal government programs constitute a major portion of the local economy. Many reservations have little or no private sector, and most employed people work for tribal government agencies. In other areas, especially those with successful gaming facilities, tribes have become powerful forces in their local and regional economies. In either case, a tribe may have enough bargaining power that electric power companies and independent power producers would compete to win long-term contracts to serve it.

Such a transaction will be easier in states that allow direct contracting between suppliers and retail customers, and the number of such states will likely increase in coming years. But sovereign tribes can fashion ways to make such purchases lawful even in the absence of state-sanctioned retail access. For example, North Dakota's Spirit Lake Sioux Tribe (formerly known as the Devils Lake Sioux Tribe) requested an investor-owned electric utility, Otter Tail Power Company, to provide power to a tribal business located on trust land within the reservation, even though under state law the land at issue fell within the exclusive service area of Baker Electric Cooperative. After the North Dakota Supreme Court ruled that the N.D. Public Service Commission had exclusive regulatory jurisdiction over the entire reservation, the tribe promulgated its own regulations, asserting that it had exclusive authority to regulate electrical services on the reservation.³⁴ The federal courts ruled that the tribe has authority to regulate electric service only to tribally owned businesses located on trust land, but that otherwise the N.D. Public Service Commission has regulatory jurisdiction.³⁵ The federal courts are currently reviewing the issue of whether this tribe has similar authority over electric services to homes located on trust land and to a school it operates that is owned by the BIA on trust land.³⁶

Advocates of direct retail access generally argue that increasing competition between electricity suppliers will lower prices for consumers. Some skeptical environmentalists and renewable energy advocates counter that marketplace competition tends to ignore the "external" costs of individual purchasing decisions, such as the environmental and social costs of fossil fuels. They suggest that policymakers should therefore structure a retail market so as to reflect the benefits of renewables and the costs of nonrenewables. One strategy under consideration in various utility industry restructuring proposals is a concept called the "renewable portfolio standard." This would require companies selling power in a competitive market to ensure that a percentage of the power sold be produced from renewable sources.³⁷ Tribes purchasing large blocks of power could establish their own policies favoring the use of renewables, including but not limited to a renewable portfolio standard.

Generating Power with Renewable Energy

Perhaps the most obvious option for tribes wishing to pursue renewable sources of electric power is to develop their own facilities. A substantial number of such projects now operate in Indian Country. Most feature relatively new technologies, but some involve quite an old one -- hydroelectric dams. In a few cases tribes have operated hydropower projects for many years, and at least one tribe has recently taken over the operation of an existing hydropower dam.³⁸ Some tribes have become involved in relicensing matters before the Federal Energy Regulatory Commission; others whose reservations have existing dams may want to consider filing competing applications as these come up for relicensing.³⁹

Several renewable projects have received financial assistance from DOE pursuant to the Indian Energy Resource Development Program authorized by Title XXVI of the Energy Policy Act of 1992.⁴⁰ Projects assisted in fiscal years 1994 and 1995 include the use of photovoltaics for pumping water on the Ute Mountain Ute Reservation in Colorado and the Hualapai Reservation in Arizona, utility-scale wind turbines on the Blackfeet Reservation in Montana and Spirit Lake and Turtle Mountain Reservations in North Dakota, and hydroelectric projects sponsored by the Agdaagux Tribe and Native Village of Chignik Lagoon in Alaska.⁴¹ In addition, this DOE program aided some feasibility studies and resource assessments for projects planned by a number of other tribes, including biomass cogeneration sponsored by the White Mountain Apache Tribe in Arizona and the Keweenaw Bay Indian Community in Michigan.

DOE administered funds through the Indian Energy Resource Development Program as a competitive grant program for tribes in fiscal years 1994 and 1995. In fiscal years 1996, 1997, and 1998, practically all the appropriated funding was congressionally earmarked for specific tribes.⁴²

In the absence of funding sufficient to administer this grant program in a competitive fashion (or without enough political influence to secure earmarked funding for specific projects), tribes wishing to sponsor renewable energy projects can use some of the same financing options available to the general public, or they can fashion their own creative strategies using their tribal lawmaking powers. (A few financing options are discussed later in this paper.)

However the tribe finances a project's capital investment, the project must be designed and the financial transactions arranged so that the project pays for itself over its useful life through the power it generates. One way to lock in a financial return on such an investment would be to contract with an electric utility to sell the output. But in an era of industry restructuring, this may be undesirable or impossible. Another option would be to build and finance such facilities through joint ventures with companies experienced in bringing independent power projects into operation.

Tribes may be able to realize a greater rate of return if they design projects so that a major part of the output is used on the reservation in tribally owned facilities or in enterprises in which the tribe has an interest. In general, if you sell power at wholesale rates and buy at retail rates, you can realize more value from a project if you use the output to meet your own needs (although as the industry goes through restructuring, generalizations such as this may not apply to specific projects). The Spirit Lake and Turtle Mountain wind power projects fit this model, providing power for a casino and a water treatment plant, respectively.

Although the return on investment for a particular project may be higher if the output is used for a power load on the reservation, off-reservation markets are potentially much larger. Electric power generated by renewables on reservations might have some real advantages in such markets, not least of which are the marketing synergies possible owing to the vague but positive image many Americans have of renewable energy and Indian culture.

Electric Utilities and Energy Service Companies

As noted earlier, a small number of tribes have operated their own electric utilities for many years. Recently quite a few others have reportedly investigated this option.⁴³ The EPAct of 1992 encourages tribes to establish electric companies by authorizing DOE to provide grants and loans as well as technical assistance to tribes for "vertical integration projects" to develop the energy resources of Indian Country, expressly including solar and wind energy and the generation and transmission of electricity.⁴⁴ EPAct also authorizes grants to tribes for help in the development and enforcement of tribal laws and regulations governing energy resources. The EPAct directs the Secretary of the Interior to administer this program, but Congress has never appropriated any funds.⁴⁵

What can tribes do in the absence of federal funding for these provisions of EPAct? Among other things, they must look closely at the cost-effectiveness of specific proposals and find ways to secure private investment capital. (Some options are discussed later.) They also need to pay attention to the changes occurring during restructuring of the electric utility industry. Where tribes plan to capitalize tribal power companies with revenues from renewable energy power plants, they need to have reasonable assurances that changes in the industry will not undercut the financial viability of projects.⁴⁶

In conjunction with establishing a tribal power company, a tribe can establish a separate regulatory institution with authority over the rates it charges.⁴⁷ An alternative model is that of municipal electric utilities, which operate to serve the public interest rather than to produce profits, and which typically set their own rates. Either way, rate structures can be used to encourage both energy conservation and passive solar design and to discourage some kinds of electric space heating. Time-of-day rates can have these effects.⁴⁸ In this case, consumers are charged premium rates during peak demand periods and discounted rates during off-peak periods. The premium peak-load rate discourages the use of standard electric space heating but encourages the use of off-peak power to charge up thermal mass -- such as hot water pipes embedded in a mass floor. Passive solar design also uses thermal mass. With time-of-day rates, homeowners can charge a mass floor with solar heat on sunny days or with off-peak power on cloudy days.

Tribal leaders should know, however, that EPAct's endorsement of vertical integration for Indian Country is somewhat at odds with trends in the electric utility industry (or at least with much of the rhetoric about restructuring). In some ways the industry is moving toward three different kinds of utilities: power producers, transmission companies, and distribution companies. The industry has also seen the rise of private companies that fit certain niches that either are not open to power companies or that leave room for competition. Independent power producers fit one such niche. Energy service companies, which help clients plan and carry out energy efficiency measures, fill another one. In addition to technical expertise, some energy service companies also provide financing; they may take payment as a percentage of energy savings realized.

Tribal governments can help shape the restructuring debate by focusing on how the various entities that make up the electricity industry serve reservation communities and by using their sovereign powers to fill any remaining unmet needs. The range of options is wide open. One possibility at the modest end of the spectrum would be to expand the capacities of a tribal weatherization program and create ways to make its services available to families not eligible for the federally funded program as well as to businesses, community organizations, and others. Another prospect might be the creation of a tribal power company and the legal infrastructure to regulate it or otherwise ensure that its operations serve the interests of reservation communities. A third option would be to create a tribal power company that would produce power with renewables, sell the power to off-reservation markets, and use some of the revenue to finance the installation of dispersed renewables for reservation families and communities.

Support for Private Renewable Energy Enterprises

Although many Indian communities lack robust private sectors, exceptions exist. One private renewable energy enterprise receiving moderate media coverage is Native SUN/Hopi Solar Electric Enterprise, based in Hotevilla on the Hopi Reservation in Arizona.⁴⁹ Started in 1988 by the Hopi Foundation, this three-person nonprofit company installs photovoltaic systems on the Hopi and Navajo Reservations. It also helps arrange financing and has established a revolving loan fund. By mid-1997, Native SUN/Hopi Solar had installed 320 PV systems.⁵⁰

Native SUN does not depend on government support, either federal or tribal. This may well be a major reason for its success. On the other hand, if a tribal government were to provide some support by, for example, adding money to the loan fund or creating a tribal loan fund to complement Native SUN's, this might help many more families afford PV systems. The number of families in Indian Country interested in owning a photovoltaic system may be far larger than can be served by the three-person staff of Native SUN.⁵¹ This is a model that should be replicated, but it could be improved.

Roles for Educational Institutions

Tribal colleges and other educational institutions based in or serving Indian communities can play a variety of roles in promoting renewables in Indian Country. In particular, they can increase knowledge about locally available renewable resources, improve local technical capacities, and explore financing mechanisms -- three of the four critical needs identified earlier. To fill these needs, tribal colleges and other educational institutions need only carry out their educational missions. Perhaps not so obviously, tribal colleges also can contribute to meeting the fourth critical need: political will. They can do this by sponsoring community education programs to help people in Indian communities understand the interactions among energy, environment, and economic development, and to explain the role that renewables can play in sustainable economic development.⁵²

Tribal educational institutions also can showcase energy efficiency and solar design in school facilities -- a wonderful way for communities to see how renewable energy works in everyday life. Unfortunately, many school buildings throughout Indian Country are far from energy-efficient. Although DOE's "schools and hospitals" program undertook energy audits for many schools operated by tribes and by the BIA in Indian Country, anecdotal evidence suggests that not much has been done in many cases to conserve energy because, for one reason or another, funding was not available.⁵³ Here is another example of the gap between what is and what could be in Indian Country.

Indian Expertise in Developing Countries

Many developing countries have little hope of making electric power available to rural communities except through the use of dispersed renewable energy systems. These communities provide an enormous potential market for such systems. Where people want renewable power, they will have to overcome a range of problems centering on the four critical needs mentioned earlier. Over the next several decades, many interests will converge to address these needs, in part driven by the need to limit carbon emissions from human activities, the main culprit in climate change. Industrial countries will insist that developing nations share in limiting emissions, and developing nations will demand help in gaining access to energy technologies to do so.

Indigenous peoples inhabit the rural areas of many developing countries. Indian tribes and tribal colleges in the United States may be particularly well suited to transfer renewable energy technologies to indigenous communities, in large part because of a sense of common experience and, especially with respect to Indian communities in Central and South America, a measure of shared cultural values. These factors can build trust, an important factor in introducing new technologies. The experience of Native SUN/Hopi Solar Electric Enterprise suggests that tribal ventures could be well received in overseas indigenous communities. Native SUN receives Indian visitors from Central and South America, and they have put on workshops as far away as Ecuador.⁵⁴ In the coming decades, tribal ventures that provide technology transfer services could find themselves in high demand.

Tribes also could pursue more conventional ways of entering international markets for renewable energy products and services. For example, tribally owned business enterprises and enterprises owned by Alaska Native corporations generally qualify for the minority small business program administered by the Small Business Administration, commonly known as the "Section 8(a) program."⁵⁵ Business entities with 8(a) status can obtain contracts with federal agencies without competition or in a competition limited to 8(a) entities. Tribally owned 8(a) firms working in renewable energy could use this status to obtain contracts with such federal agencies as the U.S. Agency for International Development. They could enter into joint ventures with companies that manufacture products such as PV panels and wind power equipment. Such joint ventures could create employment opportunities for tribal members, generate income for tribal business entities and their joint venture partners, and help joint venture partners expand their shares of overseas markets.

Partners in joint ventures with tribal companies will realize financial and competitive benefits common to partnerships with 8(a) firms generally. Yet tribally owned business entities differ from typical 8(a) firms. By locating manufacturing facilities on tribal trust land and structuring joint ventures carefully, tribes could bring some significant advantages to such undertakings. Some of these potential advantages are discussed in the next section.

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