How to make solar+storage accessible for low-income communities

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How to make renewable energy technologies like solar PV and battery storage more accessible to low-income communities is detailed in a breakthrough report released today by The Kresge Foundation and prepared by the nonprofit Clean Energy Group. The report contains a comprehensive set of recommendations for foundation investment strategies that could bend the arc of the solar+storage market to benefit disadvantaged communities, in both urban and rural areas of the country.

A Resilient Power Capital Scan: How Foundations Could Use Grants and Investments to Advance Solar and Storage in Low-Income Communities” concludes that solar+storage is reaching a robust market acceleration phase as PV costs decline and batteries become cheaper, more efficient and are deployed to both slash electric bills and provide energy security. Though solar+storage technology is currently serving mostly high-end commercial markets, it has barely penetrated low-income neighborhoods where it could reduce utility costs, reduce harmful emissions, curb climate pollution, and strengthen resilience in the face of disruptions to the electricity grid.

The report, commissioned by The Kresge Foundation, the Surdna Foundation and The JPB Foundation, identifies market barriers to deploying solar+storage technologies in low-income markets, and proposes more than 50 grant and investment opportunities that socially minded investors can use to target those barriers. Based on in-depth interviews with over 30 leading industry, NGO, and foundation leaders, this first-of-its-kind report synthesizes information on the market barriers to clean energy. With solar capacity outpacing the installation of fossil fuel generation, and the costs of battery storage expected to fall by half during the next four years, this presents an opportunity for market expansion. But in order for these technologies to be adopted by all market segments, including the poor, interventions and incentives are needed.

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5 market barriers in low-income communities:

  1. The need for an integrated development finance model to overcome finance gaps in underserved markets.
  2. Lack of internal capacity of portfolio owners, advocates, and public officials to develop solar+ storage projects.
  3. Insufficient energy data collection, policy research, and economic analysis to understand the development of solar storage technology in low-income markets.
  4. Insufficient capacity of technical service providers, project developers, and nonprofit intermediaries to reach underserved communities.
  5. Inadequate market rules, incentives. and regulatory policies to advance new solar+storage technologies in low-income markets.

“These barriers are real, but surely surmountable with the right policies and investments,” said Clean Energy Group President and report co-author Lew Milford. “More than 50 recommendations in the report create a philanthropic roadmap to moving past these hurdles and integrating solar+storage projects throughout low- and middle-income (LMI) communities.”

The report recommends a broad palette of options for foundations interested in different market efforts.

Proposed interventions that foundations can undertake

• Support New Tax Credit Aggregation Entity. There is a need for the creation of new legal entities to aggregate multiple portfolio owners’ solar and storage tax credits to create a scaled investment opportunity for investors.

• Provide Credit Enhancement for Performance Risk. There is a need for credit enhancement

• For investors and building owners to reduce technology and performance risk (e.g., “performance loss reserves” to reimburse monetary losses from unrealized economic benefits).

• Provide Working Capital. Fund predevelopment costs and bridge the payment of developers’ fees that are often tied up in multiple projects.

• Provide Long-term Capital. Provide 10-year term capital to take out construction financing (preferably with a 15-year amortization) and as a capital source for on-bill payment programs.

• Fund Leadership Awards to Owners. Provide funding (“Leadership Awards”) to portfolio owners through nonprofit intermediaries for offsetting the organizational costs and new predevelopment costs of first-time solar+storage projects (e.g., technical and legal review, doc prep, assembling additional development team members, compliance, etc.).

• Invest for LMI Expansion. Invest in existing companies active in solar+storage development in the commercial space to expand reach into low-income markets.

• Fund LMI Advocates. Support advocacy organizations to provide information and training to LMI residents on issues regarding resilient solar+storage benefits with the goal of increasing LMI participation in policy discussions.

“This is a critical time for philanthropy to support community energy resilience in ways that harness market forces while acknowledging the market’s limitations,” said Clean Energy Group Senior Finance Director and report co-author Robert Sanders. “Risk-reducing capital investments and market-enabling grants form a powerful stimulus that’s essential for growing solar+storage in low-income communities.”

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