How health systems are using federal funds to fuel clean energy

As the Creek Fire scorched central California in September 2020, first responders warned administrators at Valley Children’s Healthcare they might be forced to shut off power lines and electrical equipment to stop the fire from spreading.

Valley Children's managed to avoid a power shutdown, which would have caused the facility to rely on backup generators that don't have the capacity to fuel all operations at the 358-bed hospital. But the close call — and financial incentives from federal tax credits — helped Ratan Milevoj, assistant chief strategy officer at Valley Children’s in Madera, convince the board of trustees to invest in renewable energy.

Related: How energy tax incentives, grants could save health systems billions

Valley Children's had considered solar energy investments for about 10 years, but the finances never penciled out. The math changed with the Inflation Reduction Act of 2022 and its tax credits for clean energy projects, Milevoj said.

When a $30 million solar-powered microgrid comes online near Valley Children's campus, which is set for next fall, the hospital will no longer be solely reliant on a utility company, she said.

“That is a vulnerability we cannot have,” said Milevoj, the hospital’s incident commander during the Creek Fire. “In California, we cannot avoid the threat of wildfires. This is a real situation and very much part of the conversation with our board. Our microgrid will be our main source of power and backup power. We’ll be triple-insulated if power goes out.”

Health systems across the country are using the federal tax credits provided through the Inflation Reduction Act to support solar energy panel projects, electric charging station construction and other renewable energy investments.

Many providers have been reluctant to pursue clean energy, given the upfront capital required. But as the frequency of natural disasters rises, utility providers boost rates and access to federal funding increases, more providers have invested in renewable energy.

Base Inflation Reduction Act tax credits cover up to 30% of an organization’s clean energy investment through direct payments. There are additional credits for organizations in low-income communities and for U.S.-manufactured infrastructure. Providers typically bundle those credits with federal and state grants from sources such as the Agriculture Department's Rural Energy for America Program and Illinois' Equitable Energy Future Grant Program.

The Inflation Reduction Act significantly changed the feasibility of Valley Children’s 40-acre solar array and battery storage facility, as the provider stands to reap an estimated $13 million in tax credits, Milevoj said. Over 25 years, energy cost savings will cover the remaining upfront investment in the project, which will power 80% of the hospital's peak energy demand and slash its carbon emissions in half, she said.

The federal government has seen a lot of interest from healthcare providers about leveraging the Inflation Reduction Act to support clean energy projects, a spokesperson for the Health and Human Services Department said. HHS did not specify how many healthcare providers have used these tax credits for energy projects.

OhioHealth, Hackensack Meridian Health and AdventHealth are also among the growing number of health systems tapping Inflation Reduction Act tax credits for renewable energy projects.

OhioHealth is using them to expand its hospital-based charging stations for electric vehicles, a strategy hospital leaders say will boost services and access.

In April, the 15-hospital nonprofit health system installed two charging stations at its 360-bed rural hospital in Mansfield. It is considering adding stations at five other hospitals, including Southeastern Medical Center in Cambridge, where the charging stations will help recruit clinicians with electric vehicles, said Allegra Wiesler, sustainability advisor at Columbus-based OhioHealth. The charging stations are another perk OhioHealth can offer potential employees, who have few to choose from in the Cambridge area, she said.

OhioHealth's more than 100 charging stations are also available to the public, Wiesler added.

AdventHealth is building a solar canopy with more than 7,500 panels and 31 electric vehicle charging stations on its corporate campus in Altamonte Springs, Florida. The solar panels will decrease the headquarters' reliance on third-party utility companies by about one-third, saving an estimated $20 million over the next 20 years, said John Culver, director of environmental sustainability.

AdventHealth expects to get up to $3 million in tax credits from the Inflation Reduction Act, also known as the IRA. That incentive, along with the upward trend in utility rates in recent years, helped justify the investment, Culver said.

“The available IRA funding enabled AdventHealth to stretch our capital further,” he said.

Hackensack Meridian is working on a $134 million renewable energy project featuring 50,000 solar panels.

The 18-hospital, Edison, New Jersey-based system expects to receive $50 million in tax credits after the project comes online, which is set for 2027. That includes an additional 10% credit for using U.S.-made supplies. Hackensack Meridian will fund the rest of the project through a sale-leaseback agreement with Bernhard, an energy infrastructure management company.

The installation is expected to save Hackensack Meridian roughly 30% a year on its energy costs, said Jose Lozano, chief growth officer.

“The due diligence on this took a solid two years,” he said. “I understand why some healthcare systems might not want to explore renewable energy right now because it is cumbersome, but at the end of the day, it is worth it.”

Even though the administration is poised to change after the November presidential election, healthcare executives don’t expect the federal tax subsidies to end. Thousands of manufacturing jobs are tied to clean energy infrastructure, they noted.

“The incentives from the federal government through the IRA have really helped get solar projects off the ground,” said Glen Garrick, the system sustainability director for Salt Lake City-based Intermountain Health.

While Inflation Reduction Act tax credits have helped justify the business case for many systems' clean energy investments, not all providers are using those incentives.

Intermountain powered up a solar energy farm in Huntington, Utah, in April. The health system didn’t use the tax credits because utility companies and developers were responsible for the financial cost of the project’s construction.

The cost-neutral project will supply Intermountain with renewable energy for the next 20 years and produce enough electricity to offset the total annual use of 17 Intermountain facilities, including nine hospitals, Garrick said.

"This makes us more diversified, which makes us safer," he said. "We need to continue this push away from coal-powered energy, which is a major pollutant. It's better for us and our patients."