Federal incentives green light historic advancements for MN cities

When Minnesota school officials and local government leaders call for advice on clean energy, Peter Lindstrom is always there to answer the call. Whether it’s a solar-powered middle school or an energy-efficient Zamboni, he’s seen it all.

As the Clean Energy Resource Teams (CERTs) Manager of Public Sector and Community Engagement, Lindstrom has spent years educating and working alongside Minnesota’s cities, counties, townships, and school districts to help them achieve their clean energy goals. He’s witnessed countless successes and plenty of roadblocks. Including an outdated federal tax credit system that has long created serious barriers for cities and schools trying to invest in greener options.

“For decades there has been a federal tax credit for individuals and businesses that want to utilize renewable energy,” says Lindstrom. “But cities, counties, schools, nonprofits, they don't pay taxes, so they don't get a tax credit. Whenever they’ve wanted to do a renewable energy project, they’ve had to pay full freight.”

Now the landscape of Lindstrom’s work has finally changed. Thanks to advancements under the federal Inflation Reduction Act, local governments and other non-taxpaying entities can apply for what is known as “elective pay,” (formerly referred to as “direct pay.”) This new mechanism allows certain entities to receive a payment from the federal government investments in clean energy projects, including solar, geothermal, electric vehicles, and electric vehicle charging infrastructure.

Not only are the incentives more accessible, they’re also larger. For tax paying and non-tax paying entities alike, the federal government has agreed to chip in for 30% of the cost (previously 26%.) Plus, they’re taking other elements of the projects into consideration.

“For example, if a project uses made-in-America components, there's an additional 10% adder for that. So that 30% can go to a 40% tax credit or elective payment,” explains Lindstrom. “If you’re a school, maybe you also get a ‘Solar for Schools’ grant.” He continues, “These things can add on top of one another and pretty soon, these projects that were really difficult for cities to pencil out in years past, are now very much a possibility.”

This stack of advancements is set to transform the landscape for Minnesota's cities and schools, making ambitious renewable energy projects more financially viable than ever before. Based on his long career supporting the public sector, Lindstrom says it’s worth getting fired up about. 

“Simply put, elective pay is a game changer for clean energy here in Minnesota.” 

Through the network, Rathsack discovered that others were in the same boat (or in this case, EV!) The City of Eagan was looking to apply for elective pay funds toward their new electric vehicle as well. This realization set the cities up for a chance to merge efforts.

“The noncompetitive nature of elective pay is fantastic,” explains Rathsack. “If we complete the application correctly, we should all receive the funding. So Eagan’s sustainability coordinator, Gillian, and I were like, ‘Let's do it. Let's just work together!’”

Pooling knowledge and guidance from their respective experiences and supporting teams, Eagan and Burnsville worked through the applications in tandem. The partnership led to supercharged momentum for both cities.

“We got the documents done by the first deadline in May!” shares Rathsack. “It made the process of filling out tax forms fun, you know? Both cities working together helped us complete it more quickly and build confidence in our applications.” 

With their applications submitted and currently under review, Burnsville and Eagan are setting an example for other local governments in Minnesota. They’re not alone: Saint Paul, Minneapolis, Duluth, Bloomington, and others have also filed for elective pay, and are relaying the experiences to their city and county counterparts in CEN. Kemp feels that this may prove especially helpful to Minnesota communities that don’t have as many resources, but still want to pursue elective pay.

“Many communities involved in the network are smaller or rural, and may not have dedicated sustainability coordinators on hand to navigate the application process,” says Kemp. “When cities like Burnsville and Eagan share their experiences with elective pay, they help break down barriers for others, paving the way for communities across the state to benefit from elective pay.”

Not only is this type of teamwork paving the way, it’s also being encouraged at the highest levels of government.

Beyond outlining these possibilities and taking questions, Eichenthal was keen to learn from Minnesota’s own successes and challenges. 

“David was impressed with the strategies our cities have adopted to navigate the evolving landscape of clean energy,” recalls Lindstrom. “He praised the Community Energy Network’s collaborative spirit and the creative ways Minnesota’s municipalities are leveraging the new opportunities.”

The visit showcased Minnesota’s leadership in sustainability and its role as a model for other states. Cities like Burnsville and Eagan demonstrate that the path to a greener future is both achievable and collaborative, fueled by a shared vision. With fresh opportunities on the horizon, and groups like CEN growing quickly, Minnesota is well-positioned to help lead a transformative movement.

“We still have a long way to go, but the journey has just become a bit less challenging,” says Lindstrom.

But nowadays, when he answers the call from a city or school looking to explore clean energy, Lindstrom says he is helping them along a new path. One with fewer obstacles and a faster route to the bright future ahead.

Note from Rathsack on their elective pay status: “We received a check today (Nov. 5, 2024) for our EV elective payment!”