Expanding the Benefits of Clean Energy Through Innovation
Decarbonizing the grid and enabling a more sustainable future
Authors: Chris Rittenhouse, Head of Project Finance, and Adam Woda, Community Solar Lead
Approximately 2/3 of Americans are ineligible to enjoy the benefits of participating in rooftop solar1, making solar energy a relatively inaccessible product. Considering the economic benefits of community and rooftop solar, especially with over 30 million households strained under a high energy burden2, it becomes critical to remove barriers to solar access for underserved communities. Some states, mainly those in the Northeast and mid-Atlantic, provide low-income customers with access to community solar through legislation and subsidies. Community solar, according to the Coalition for Community Solar Access, refers to local solar facilities shared by multiple community subscribers (typically households and small businesses) who receive credit on their electricity bills for their share of the power produced.
While these programs have created opportunities to participate in locally sited clean energy projects in a meaningful way, the existing community solar structure relies too heavily on legislative action and state subsidies to provide energy bill savings to residential and small commercial consumers. So, we set out with Google to accomplish three goals:
Deliver value to end-users, especially those typically harmed by fossil fuel power generation (low-to-moderate income (“LMI”) communities)
Create a community-based solar program that is not geographically or legislatively constrained; and,
Ensure that program benefits reduce energy burden for LMI customers and maximize local impact.
Reducing barriers to entry and socializing the benefits of clean energy
In the Summer of 2021, Google and EDP Renewables NA DG, the distributed generation subsidiary of EDPR NA kicked off efforts to rethink the way that large corporations and developers interact with community stakeholders. The focus was to extend benefits to local communities specifically in geographies where state-level incentives and policies are not available. The product of our collaboration is a first-of-its-kind partnership for corporate engagement in distributed generation that directly invests in, and provides long-term benefits to, LMI households and communities. Funding comes, in part, through Google’s purchase of a premium renewable energy credit dubbed the “ImpactREC™” over the course of fifteen years, being generated from participating solar power plants EDPR NA DG develops.
“RECs” are renewable energy credits—the ‘green’ part of renewably produced energy that can be sold separately from the energy itself and a way of certifying that the power produced and used was done so in a sustainable, renewable, way. The ImpactREC™ on the other hand, carries with it additional covenants that ensure the economic benefits are transferred directly to community stakeholders. In this specific deal we ensure impact flows through to communities in three meaningful ways:
Reducing energy burden sustainably through a community investment fund (“CIF”),
10% of energy revenues flow to LMI customers as a bill credit, and
Siting requirements to ensure maximum benefits flow to the most vulnerable.
All told, Google and EDPR expect the first framework to yield 500MWAC of distributed solar by 2028 without EDPR (or any adoptive developers) achieving excess windfalls at the customer’s expense.
Achieving scale without the need for additional legislation
This new structure allows us to build a faster-to-market, scalable, solar program that can be deployed to any U.S. State that is subject to the Federal Energy Regulatory Committee’s (the “FERC”) rules. Three key pillars that this program is founded upon, and that can be replicated elsewhere, are:
Premium fixed revenue contract that smooths out the inconsistent (seasonal) cash flows, in this case in the form of a Renewable Energy Credit payments;
Financial benefit transfer to low-income customers in a form that directly reduces utility bill costs; and
Flexibility to optimize portfolio performance over the duration of the contract and ensure continued delivery of benefits to the community.
The mechanics above already exist in current transactions and regulatory programs, but they don’t necessarily work together to deliver an optimized outcome. We are excited to share additional details in future blog posts and explore the structure of the partnership in more detail. Our goal is to iterate on this work in collaboration with new partners and in various communities.
Community investment and empowering environmental justice
We set out with Google to extend the benefits of clean energy to underserved communities and change the way community-based clean energy projects are developed, ensuring that project investment flows down to communities we serve. By providing direct energy bill credits, we are working to reduce short-term energy burden (the amount of a customer’s income that they must allocate towards energy costs) and help households get out of the vicious cycle of energy poverty.4
Through a Community Investment Fund, we will invest in pre-weatherization upgrades that put households on the path to energy efficiency and resiliency. The CIF will work alongside the bill credits to provide direct savings to customers and reduce their energy spend.
In addition to bill credits and energy efficiency programs, the portfolio will create local jobs and tax revenues directly in the communities that need them the most, not only reducing their energy burden but improving their health as well5. Through Google and EDPR’s collaboration, we have established a rigorous set of siting standards to ensure that at least 35% of the projects are placed in and around the communities that need these benefits the most.
By creating a program that aligns with the values of local communities as opposed to pure financial benefit, EDPR and Google are looking to change the paradigm and acceptance of solar, ideally creating a positive feedback loop that can be emulated by others in the future. This initiative reinforced for us both why we spend countless hours developing distributed generation projects.
We would be remiss not to thank a few of our partners, including Baker Botts’ Global Projects partner Ellen Friedman, who represented EDPR NA DG in connection with negotiating the Framework Agreement, including in connection with energy regulatory matters.
We invite—and indeed encourage—those of you out there interested in learning more to partner with us in revolutionizing how to create investments that last through greater distributed generation development across North America.
- In 2010, World Economic Forum defined energy poverty as the lack of access to sustainable modern energy services and products. To be more precise, it is not only a matter of sustainability: energy poverty can be found in all conditions where there is a lack of adequate, affordable, reliable, quality, safe, and environmentally sound energy services to support development. (https://www.habitat.org/emea/about/what-we-do/residential-energy-efficiency-households/energy-poverty)
- According to Harvard University’s T.H Chan School of Public Health, “Lower emissions associated with renewable energy help to reduce premature death, heart attack, asthma, and hospitalization for cardiovascular and respiratory issues.” The benefits of renewable energy extend well beyond just the financial ones we have discussed so far.