So much of the investment in the energy sector is fossil fuel-based. The kind of non-extractive, clean energy economy that BIPOC and frontline communities are trying to build requires a massive shift in investment and finance. Renewable energy policies should steer investment away from the same fossil fuel based economy that continues to pollute, damage, and intentionally lock out communities of color.
100% regenerative policies should include the following elements:
No state subsidies to fossil fuels. Redirect resources towards the development of community-owned renewable energy systems, such as microgrids.
No regressive financing. The burden should not be on people with lower incomes to finance the transition to 100% regenerative energy. Although a vast majority of ratepayer funded state incentive programs are regressive, there are some models of non-regressive financing programs that include:
- Solar Massachusetts Renewable Target (SMART) Program: “SMART Program is a long-term sustainable solar incentive program sponsored by Eversource, National Grid and Unitil. SMART will encourage the development of solar photovoltaic (PV) technology by supporting 1,600 MW of new solar generating capacity.”
- Solar on Multifamily Affordable Housing (SOMAH) Program: “[P]rovides financial incentives for installing photovoltaic (PV) energy systems on multifamily affordable housing. The program will deliver clean power and credits on energy bills to hundreds of thousands of California’s affordable housing residents. Funded through greenhouse gas allowance auction proceeds, SOMAH has a program budget of up to $100 million annually and an overall target to install 300 megawatts of generating capacity by 2030.”
Finance reforms for large-scale utilities. As discussed earlier, utilities are regulated according to structures based on an outdated system of large, fossil fuel-powered generation. To build a modern grid suited to the next century’s needs, the utility business model must transform. Some finance reforms include:
- Revenue decoupling: switching utility plant’s profit margins to the number of customers serviced, rather than the total amount of power sold;
- Performance target incentives that meet the utilities’ energy savings targets by returning a set percentage of the program costs to them.
Shift away from tax credits to incentives or grants. Solar financing is typically based on an Investment Tax Credit. “The ITC is a dollar-for-dollar credit for expenses invested in renewable energy properties, most often solar developments. The Consolidated Appropriations Act of 2016 extended the ITC through 2019 as a 30 percent credit for qualified expenditures.” This system may not work for low-income communities because they generally do not have a tax appetite encouraging them to take advantage of the incentive. Instead, 100% regenerative policies should shift to incentives and grants, especially for renewables in BIPOC and frontline communities.
Shift financing to public banks. Advocates should encourage public banks to finance renewable energy projects to benefit local communities, such as multifamily affordable housing, community centers, churches, and local schools.
Required data and reports from utilities. 100% regenerative policies should mandate that utilities track data and provide public reports that outline which communities benefit from energy efficiency and renewable energy programs.
Promotion of Green Banks. “Green Banks help secure low-cost capital for clean energy projects including solar at favorable rates and terms to both traditional and otherwise challenging market segments. The availability of low-cost financing is a critical factor for achieving cost-competitive solar energy. Reduced interest rates, extended term lengths, and low or no money down finance offerings can help ensure that solar adopters achieve energy bill savings, provide pricing certainty, and enable investors to achieve attractive investment returns.”
Examples of existing Green Banks in the United States include:
- Connecticut Green Bank
- NY Green Bank
- California Lending for Energy and Environmental Needs
- Rhode Island Infrastructure Bank
- Montgomery County Green Bank (Maryland)
- Hawaii Green Energy Market Securitization
Examples of inclusive financing
Each state will need to conduct its own research to determine the financing necessary to achieve 100% regenerative energy goals. Dedicated funding for more expensive technologies, such as storage, should be a complement to financing for cost effective solutions. Examples of inclusive financing models include: