Empowering sovereignty: The path to energy independence for Tribal Nations

Introduction

This article delves into the evolving energy economy for tribal nations, exploring the innovative strategies they are implementing to achieve energy autonomy. From localized microgrids that provide reliable power to macrogrids that connect tribal lands to broader energy networks, tribal nations are at the forefront of a transformative movement.

Central to this effort are tribal utility authorities (TUA), which oversee energy projects, ensuring that they align with the community’s goals and values. By harnessing renewable energy sources and leveraging advanced technologies, tribal nations are addressing their energy needs while promoting economic growth, environmental stewardship, and cultural preservation. Below, we explore the dynamic landscape of tribal energy independence and sovereignty and highlight the successes, challenges, funding options, and future prospects of this critical endeavor.

Tribal Utility Authority

By establishing a TUA, a Tribe can define the type of power generation, the amount of power produced, and the pricing of power for end customers. These customers may include the tribal government, individual consumers within the community, the Tribe’s businesses, and third-party enterprises operating on or near the Tribe’s sovereign land. By taking this control, a Tribe can greatly reduce or eliminate the dependence on the local public utility authority. The TUA will need to develop facilities for power generation, transmission, and delivery to its customers.

Successes

Many Native American tribal nations have established successful Tribal Utility Authorities to own and operate their reservations’ power grid.

• The Navajo Tribal Utility Authority was created in 1959 to address the absence of utilities on the 27,000-square-mile Navajo Nation.¹
• Fort Mojave Indian Tribe founded Aha Macav Power Services (AMPS) in 1991 to provide electricity and natural gas to homes and businesses on the Fort Mojave Indian Reservation.²
• Colusa Indian Community built a microgrid in the early 2000s to provide energy independence to its community.
• Pechanga Western Electric provides electric utility services to its customers on the Pechanga Indian Reservation.³

Challenges

As with any new venture, creating a tribal utility comes with its own set of challenges. Energy project development requires expertise with a focus on safety, security, and technology. Finding the right partners and hiring qualified individuals to develop and operate the energy project are crucial.

An energy service company (ESCO) offers a variety of services aimed at improving energy efficiency and reducing energy costs. Some common services provided by ESCOs include:

• Energy audits: Comprehensive assessments of energy use to identify inefficiencies and recommend improvements.
• Energy management: Strategies and systems to optimize energy consumption and reduce costs.
• Project financing: Financial solutions to fund energy efficiency projects, often with guaranteed savings.
• Renewable energy solutions: Installation and management of renewable energy systems like solar panels and wind turbines.
• Maintenance and monitoring: Ongoing support to ensure energy systems operate efficiently and effectively.
• Consulting services: Expert advice on energy policies, regulations, and best practices.

These services help tribal nations achieve significant energy savings, reduce their carbon footprint, and enhance overall sustainability.

Funding Options

Commercial banks with expertise in tribal lending and the utilities and power industry are well equipped to offer advice and funding solutions for tribal energy projects. These options include traditional financing and loan products, equipment leasing, and public debt backed by a power purchase agreement (PPA).

A PPA is a long-term contract between a power buyer — such as a public utility, corporation, or government entity — and an energy developer to supply electricity over a specified period of time. Lenders evaluate the PPA by the strength of the end user — typically investment grade — rather than the energy producer. The debt typically amortizes over the term of the PPA.

Tax equity financing enables an entity that cannot monetize a tax credit to allocate the tax credit to an investor in return for an equity investment in the project. Typically, the investor provides an upfront cash injection into the project in exchange for an ownership stake and future use of the tax credits. Before the Inflation Reduction Act (IRA), tribal nations were unable to use elective pay tax credits and had to transfer those credits to an investor. Under the IRA, tribal nations can now claim an amount equal to the tax credit as a direct payment from the IRS.

While PPAs are a common financing tool for tribal energy projects, some may opt for more traditional financing models, such as direct ownership funded through general obligation (GO) pledges or leasing structures. GO pledges offer secure repayment using the tribe's general revenues, while leasing provides flexibility by allowing tribes to acquire equipment and infrastructure without immediate ownership. Both methods support energy independence and financial stability.

Grant funding is available through the Department of Energy’s Office of Indian Energy or state agencies. Additionally, the DOE’s Tribal Energy Loan Guarantee Program supports tribal investment in energy-related projects by providing loan guarantees to federally recognized tribal nations, including Alaska Native villages or regional or village corporations, or a Tribal Energy Development Organization that is wholly or substantially owned by a federally recognized Indian Tribe or Alaska Native Corporation.⁴

Future Prospects

Developing on-reservation power generation and transmission is crucial for self-determination and can also economically benefit tribal nations. The demand for power generation has surged due to the growth of data centers and AI development. According to the U.S. Energy Information Administration, after almost two decades of little change, electricity consumption grew by 2% in 2024, and is expected to continue this trend through 2026, driven by new semiconductor and battery manufacturing and data centers.⁵ The Department of Energy estimated in 2024 that data center load growth tripled over the past decade and may double or triple again by 2028.⁶

Conclusion

For generations, tribal nations have been stewards of the land, practicing sustainability and resilience long before the term “clean energy” became mainstream. Today, tribal nations can work towards achieving energy sovereignty in line with tribal values, economic self-determination, and long-term sustainability while, at the same time, creating a long-term revenue source to benefit the entire tribal community.

Looking for financing solutions for your energy project? Connect with Key’s Native American Financial Services team today.