In 2023, Valley Children’s Healthcare joined the U.S. Department of Energy’s Better Climate Challenge with a goal to reduce Scope 1 and 2 greenhouse gas emissions 50% by 2030. The renewable energy microgrid is pivotal to meeting this ambitious goal and Valley Children’s Healthcare’s overall sustainability strategy that is built on three pillars:
- Operational Resilience: Mitigating planned and unplanned power interruptions with scalable solutions.
- Financial Efficiency: Optimizing nonprofit capital and operating expenditures through cost-effective renewable energy solutions.
- Environmental Sustainability: Reducing energy consumption and greenhouse gas emissions through enhanced efficiency and renewable sources.
Valley Children’s Healthcare is making a $30 million capital investment to install the renewable energy microgrid. Prior to the Inflation Reduction Act (IRA), nonprofits like Valley Children’s could not directly benefit from such tax credits. The IRA has fundamentally altered the feasibility of this project, providing up to $13 million in tax credits, covering approximately 40% of the initial capital outlay. Additional operational income savings over 25 years are projected to recoup a minimum of $15 million of upfront costs. The IRA funding includes:
- Investment Tax Credit (ITC): Base ITC (~30%) for meeting prevailing wage and apprenticeship requirements
- Low-Income Communities Bonus Credit: ~10% for Solar PV and Battery Storage
- Domestic Content Bonus Credit: ~10%
The journey to establish the renewable energy microgrid at Valley Children’s Healthcare began with identifying the need for energy resilience. This was achieved by linking existing challenges, such as power outages, with opportunities presented by the Inflation Reduction Act (IRA). The development of the microgrid concept was meticulously aligned with the hospital's long-term organizational goals, ensuring that the project would not only address immediate energy needs but also contribute to the overall mission to provide high-quality, comprehensive healthcare services to children regardless of ability to pay.
Currently reliant on a single aging substation transformer for power, the hospital uses diesel generators for backup power. Once operational, the microgrid will power both normal and emergency operations, ensuring triple resiliency for Valley Children’s through access to the substation, microgrid, and diesel generators.
Securing full approval for the project took approximately 1.5 years. This process required patience and a clear vision as the team navigated the complexities of integrating a large-scale renewable energy solution into the hospital's infrastructure.
The feasibility and financial analysis phase involved conducting a comprehensive financial analysis, which included evaluating the savings from IRA tax credits. Collaboration with the Facilities team was essential to assess the technical feasibility and long-term benefits of the microgrid. Through detailed planning, the team was able to demonstrate the long-term savings and return on investment (ROI) that the project would bring to the hospital.
Stakeholder engagement was a critical component of the project's success. Early engagement was crucial for gaining support and aligning the project with the hospital's strategic priorities. The following represent key stakeholders and their roles:
- Board of Trustees: Provided strategic oversight, ensuring that the project remained aligned with the organization's mission and goals.
- Chief Executive Officer: Championed the project from its inception, providing the leadership and support to drive it forward.
- Chief Financial Officer: Played a crucial role in the financial modeling, securing funding, and ensuring the project's cost-effectiveness. This involved a comprehensive analysis of the financial implications, including the benefits of the Inflation Reduction Act (IRA) tax credits.
- Facilities Team: Indispensable in assessing the technical feasibility of the microgrid and planning its implementation. Their expertise ensured that the project was not only viable but also aligned with the hospital's operational needs.
- Strategy Lead: Responsible for leading the strategic vision, coordinating internal/external and cross-departmental efforts, and ensuring that the project is aligned with the broader organizational goals.
Upon completion in 2025, the renewable energy microgrid will significantly reduce Valley Children’s reliance on the traditional power grid, ensuring continued hospital operations during regional power outages. In addition to the energy and cost savings benefits, the project will improve air quality, enhance operational resilience, provide continuous care to patients during power outages, and establish a sense of safety and well-being amongst staff and the greater community.
Post-implementation, Valley Children’s Healthcare will safeguard against market fluctuations and mitigate long-term financial risks, redirecting energy savings toward enhanced patient care and community support. The microgrid is poised to meet 80% of the hospital’s energy needs for current services, save approximately $15 million in operating costs over 25 years, and reduce the hospital’s greenhouse gas emissions by 50.5% (around 7,970 metric tons of CO₂). It will also ensure the hospital remains operational during regional power outages.
In line with the hospital’s strategy to increase both environmental and community resilience, Valley Children’s Healthcare has also committed to extensive community health initiatives, including developing a 10-year plan through the Valley Children’s Guilds Center for Community Health to address regional health disparities, promote sustainable food practices and local sourcing, and engage in community partnerships to enhance environmental and health outcomes.
Beyond the initial microgrid, Valley Children’s Healthcare has undertaken several sustainability initiatives. These measures include:
- Conducting an energy audit of the facility to identify opportunities for improvement
- Replacing the aging vehicle fleet with more efficient models to reduce environmental impact
- Implementing measures to reduce food waste
- Developing a water management plan
- Addressing the environmental impact of anesthetic gases
- Establishing an employee-led "Green Team" stewardship program to promote sustainability initiatives
Additionally, Valley Children’s has been selected to receive a significant grant from the U.S. Department of Energy (DOE) totaling $30 million for long-duration energy storage demonstrations, with an additional $25 million from the California Energy Commission (CEC), further supporting the microgrid expansion. This grant is designated for a future phase of the project, enhancing clean energy storage capabilities.
