Assessing a Solar Project and a Virtual Power Purchase Agreement Between the Red Lake Nation and the Minnesota Department of Transportation

Abstract

In this report, we analyze the feasibility of a northern Minnesota solar project and accompanying Virtual Power Purchase Agreement (VPPA) between the Minnesota Department of Transportation (MnDOT) and the Red Lake Nation. We analyze three sets of benefits for MnDOT: government-to-government relations, environmental, and economic. In government-to-government relations, we find great potential for the VPPA to further a first-of-its-kind Tribal energy project and Tribal sovereignty. We also summarize lessons from other governmental entities in pursuing VPPAs. For environmental benefits, we find the array will avoid between 48,000 and 89,000 metric tons of carbon dioxide-equivalent gases, resulting in a monetized environmental value of between $1 million and $9.4 million in avoided emissions-related damages. Finally, for economic benefits while we find the array has a net present value (NPV) between a negative $5.5 million and negative $16.5 million to MnDOT, we identify several project adjustments that could increase the value to more than a positive $3 million in NPV. In conclusion, we recommend MnDOT form a "strike team" to develop the project further, communicate the project clearly, and consult with outside experts on further project opportunities.