A REPORT TO THE KRESGE FOUNDATION, SURDNA FOUNDATION, AND THE JPB FOUNDATION A RESILIENT POWER CAPITAL SCAN How Foundations Could Use Grants and Investments to Advance Solar and Storage in Low-Income Communities Robert G. Sanders and Lewis Milford, Clean Energy Group February 2017 RESILIENT A project of + = ii ABSTRACT This report, one in a series of reports by Clean Energy Group and Meridian Institute on advancing resilient power in low-income communities, seeks to address how foundations can best develop a portfolio of capital interventions—from grants to impact investments— that together would successfully scale up the solar+storage/resilient power market to benefit low-income populations and to advance their missions. It provides a capital scan of foundation opportunities and actions to guide foundation financial support for this market. ACKNOWLEDGEMENTS This report was prepared for The Kresge Foundation, Surdna Foundation, and The JPB Foundation as part of the Resilient Power Project, a joint project of the Clean Energy Group (www.cleanegroup.org) and Meridian Institute (www.merid.org). This project works to expand the use of clean distributed generation for critical facilities to avoid power outages; to build more community-based clean power systems; and to reduce the adverse energy-related impacts on poor and vulnerable populations. The authors of this report would like to thank Maria Blais Costello, Sarah Galbraith, and Seth Mullendore of Clean Energy Group for their contributions and review of this report. The authors would espe- cially like to thank all of the interviewees for their time and insights that informed this report. Without their input, this report would not have been possible. DISCLAIMER This report is for informational purposes only. The authors make no warranties, expressed or implied, and assumes no legal liability or responsibility for the accuracy, completeness, or usefulness of any information provided within this document. The views and opinions expressed herein do not necessarily state or reflect those of report’s funders or any of the organizations and individuals that have offered comments as this document was being drafted. The authors alone are responsible for the contents of this report. The information contained within is subject to change. It is intended to serve as guidance and is not intended to provide investment advice or a recommendation or solicitation to invest in any particular securities, organizations, or projects that may be mentioned. RESILIENT A project of Clean Energy Group + = Clean Battery Climate Lighting & Running Telecom Elevators & Savings & Life- Energy Storage Mitigation Electricity Water Accessibility Revenue Supporting Technology RESILIENT POWER PROTECTING COMMUNITIES IN NEED © CLEAN ENERGY GROUP A RESILIENT POWER CAPITAL SCAN 1 Contents 2 Preface 3 Executive Summary 9 SECTION ONE Solar+Storage Markets Are Expanding with High-End Customers 11 SECTION TWO Solar+Storage Markets in Low-Income Communities Lag Behind 17 SECTION THREE Capital Scan Interviews 22 Examples of Investment Vehicles 19 SECTION FOUR Barriers and Interventions 20 Barrier 1 – Need for an integrated development finance model 24 Barrier 2 – Lack of internal capacity of portfolio owners, advocates, officials 26 Barrier 3 – Insufficient data collection, policy research, economic analysis 29 Barrier 4 – Need for additional capacity of technical service providers 31 Barrier 5 – Inadequate market rules, incentives, and regulatory policies 35 SECTION FIVE Conclusion 36 APPENDIX A Capital Scan Matrix of Barriers and Proposed Interventions 40 Other Resilient Power Resources 41 About the Authors 42 Endnotes 43 About the Resilient Power Project COVER PHOTO: © BRIGHT POWER 2 Preface OLAR ELECTRICITY PLUS BATTERY leveraged impact they can achieve in moving the larger storage (solar+storage) provides energy resilience, market towards community resilient power projects. reduces electric bills, and provides a powerful The proposed interventions in this report are not means of integrating higher percentages of provided as investment advice or as recommendations Sclean renewable energy into our grid supply. or solicitations to invest in any particular organization, But to date, solar+storage installations have largely project or financial security. The recommendations made targeted high-end commercial markets to reduce electric in this capital scan are offered as being representative of bills. With few exceptions, low-income markets have the types of investments and grants that would help build not yet benefited from these technologies. the market for solar+storage technologies to benefit low- The challenge is how to expand this quickly developing income communities. A full due diligence review of any solar+storage market in ways that benefit low-income specific investment opportunity exceeds the scope of this communities, affordable housing, and critical community capital scan, and each foundation should rely on its own facilities as well. What are the right investments, educa- due diligence analysis before making an investment. tional tools, technical assistance, and policy supports that are needed to drive the emerging market to help meet low-income needs? In May 2016, The Kresge Foundation and Surdna Foundation (with additional support of The JPB Foun- dation) commissioned Clean Energy Group (CEG) to conduct a “capital scan” of grant and investment opportu- nities in the resilient power space. The resulting report is part of the Resilient Power Project, a joint project of the CEG (www.cleanegroup.org) and Meridian Institute (www.merid.org). This project works to expand the use of clean distributed generation for critical facilities to avoid power outages; to build more community-based clean power systems; and to reduce the adverse energy- related impacts on poor and vulnerable populations. For this report, CEG conducted over thirty interviews with market participants across the resilient power value chain, including solar+storage developers, affordable housing owners and advocates, NGOs, government officials, financial institutions, private foundations, and investors. We have identified five categories of market barriers that must be addressed if this market is to serve low- income communities. These barriers, in turn, require a broad range of grant and investment interventions. Importantly, we identify these interventions based on the © ZORIAH/WWW.ZORIAH.COM A RESILIENT POWER CAPITAL SCAN 3 Executive Summary BENDING THE ARC OF SOLAR+STOragE TECHNOLOGIES TO SERVE LOW-INCOME MARKETS HROUGHOUT THE COUNTRY, THERE IS A can generate their own renewable power and, once clean energy divide between the haves and the the system is paid for, can continue to generate this have-nots. The tremendous success of clean power without future energy bills. energy technologies like solar photovoltaics T(PV) over the last decade has largely bypassed low- and We also know that more storage in the power system moderate-income (LMI) communities. Now, the more allows for greater penetration of intermittent solar on the affluent communities and large commercial companies grid, reducing our reliance on fossil fuels and addressing around the country are installing energy systems using climate change. And we have seen recently new studies the combination of solar PV and battery storage (solar+ showing how proper siting of storage can reduce emissions storage) technologies for economic and resiliency benefits, in low-income communities by displacing the need for assisted by generous public subsidies collected from all gas peaker plants.5 The environmental and health benefits taxpayers and utility customers. Low-income customers of storage are just beginning to be realized. have not been able to access these same benefits. But to date, solar and storage installations are mostly This clean energy and equity problem presents a timely serving only the high-end commercial markets. Hundreds opportunity to bend the arc of this successful technology of solar+storage projects are now in the development trend to ensure that low-income communities share in pipeline in California and other states.6 Commercial these new technology markets. businesses, typical first adopters, are installing these tech- nologies to improve their bottom line—mainly by com- It is unmistakable that solar and storage is entering bining solar+storage to reduce electric bills. The projects a robust, market acceleration phase. For the first time, are largely economically driven, not done for environ- renewable technologies like solar are outpacing the instal- mental or public health reasons. lation of fossil fuel generation.1 While the costs of solar are continuing to decline, battery storage also is expected With few exceptions, low-income markets have not to follow that low-cost trajectory.2 Many expect the costs yet benefited from these technologies for any purpose, of battery storage to fall by half in the next four years.3 whether for reducing their power bills or decreasing emissions from local power plants. There are a few low- The “Holy Grail” of renewable technology—battery income community projects in development in New York, storage—is taking off like never before, to provide energy New Jersey, and California, for example, where favorable resiliency, reduce electric bills, and deliver the flexibility markets and subsidies exist. But there are probably fewer to allow for increased deployment of renewable power.4 than fifty solar+storage projects in development across