Financing Clean Energy for Climate Adaptation

Author: Robert Sanders, Clean Energy Group | Projects: Clean Energy Finance, Resilient Power Project

RPP-Concept-Paper-Warehouse-Credit-featuredA new report by Clean Energy Group proposes bundling loans for resilient power projects, such as solar PV with battery storage, to get this clean energy market to scale. The report shows how to use an old finance tool, a warehouse credit facility, to assemble portfolios of loans for resilient power projects, which will protect vulnerable populations from power outages during severe weather events.

This report, Ramp Up Resilient Power Finance: Bundle Project Loans Through a Warehouse Facility to Achieve Scale, explores using this proven loan bundling approach to finance resilient power projects across the country, to move from financing of single projects to financing of many projects in a loan portfolio. The warehouse credit facility model has been used for other commercial and consumer loan obligations, such as mortgage lending, for decades. But it has not yet been used for these kind of clean energy infrastructure projects. This paper explains how this finance tool can be used develop community-scale “resilient power” projects that will keep the power on when the grid goes down.

Resilient power, sometimes called “energy assurance,” is the ability to provide needed power, independent of the grid. Our electric grids are vulnerable to storms, tornadoes, wildfires and other disasters. The elderly as well as disabled and low-income populations are particularly vulnerable to the effects of power outages, as are critical facilities such as hospitals, policy stations and emergency shelters. The ability to generate electricity to power critical facilities and infrastructure during power outages from the grid is paramount in emergency planning.

A broad range of resilient power projects have been developed to date, from small residential energy storage systems to multi-megawatt grid scale storage projects. But all have one feature in common: they are financed on a one-off basis.

If integrated clean energy plus storage technologies are to develop to scale, then a new financing framework will need to be built to finance multiple, aggregated, resilient power projects. This is especially important for what could be called climate adaptation projects—the new infrastructure communities must install to protect against severe weather events, which includes access to reliable electric power. We will need this infrastructure all over the country, and a top priority is to figure out how to finance it.

In addition to proposing the warehouse credit facility model as a viable financing method, Clean Energy Group calls for a broader conversation about creating durable models of climate and clean energy finance. The report raises some key questions market players like states, communities, and developers need to address on how to finance resilient power projects at scale:

  • Can we develop a more robust financing strategy to aggregate resilient power projects to get to scale?
  • Can the existing green banks or similar financing entities in states work toward together to create a warehouse credit facility to aggregate pipelines of resilient power financings?
  • Can a warehouse credit facility be used to provide liquidity for both large resilient power projects (waste water treatment facilities, utility-owned micro-grids) and for smaller community resilient power facilities (multifamily affordable housing and assisted living facilities, emergency shelters, police and fire services, dialysis and community health centers, publicly-owned buildings.)?
  • What market segments of resilient power projects are likely to yield sufficient pipelines of projects to result in a marketable security? Is there an opportunity to roll up similarly structured transactions from multiple jurisdictions and across state lines to increase the size of the ultimate security?

The paper suggests that these questions can be answered in the affirmative, and we are on the cusp of developing new finance tools for community-scale, resilient power infrastructure.

Resilient Power Equality: Providing Reliable Electricity Solutions to Everyone

Authors: Robert Sanders and Lewis Milford, Clean Energy Group | Projects: Clean Energy Finance, Resilient Power Project

When it comes to reliable energy technologies to protect against power outages, there is a disparity between the haves and the have-nots. Call it “resilient power inequality.”

Today, some of the most innovative energy technologies used to protect against power outages can be found in high-end private companies such as financial data centers and banks. They have the money to protect economic transactions from power outages and to invest in expensive technologies like fuel cells and fly wheels. They don’t rely only on diesel generators to protect their critical electric loads in storms or severe weather events.

In affordable housing, senior centers, and assisted-living facilities, it’s a different story. Ironically, where there is the greatest need to protect people from severe weather and power outages, the technologies used are usually second-best. You find outmoded diesel generators, or nothing at all, to protect the most vulnerable from the damaging effects of power outages.

While the inconvenience, disruptions and dangers of power outages are well known, what is not often realized is the disproportionate impact of power outages on low-income and vulnerable populations. These communities include elderly and disabled citizens who rely on electricity for survival, such as power that is needed for elevators, mobility equipment, refrigerating for medicines, heating and cooling systems, respirators and to pump water for buildings taller than two or three floors. These vulnerable populations have more difficulty responding and recovering from the destruction caused by extreme weather events and related power outages. At the same time, they are frequently left out of advances in modern power-protection technology such as renewable energy and energy storage that make clean, resilient power possible.

But this story is changing in several important ways.  Some recent developments involving solar and energy storage suggest that states and municipalities have begun to embrace resilient power as a public good that should be available to all.

We can provide reliable, resilient power to critical facilities and vulnerable populations by using clean, distributed generation, such as solar PV, together with energy storage. These “resilient power” systems can withstand storms, and they can continue to supply needed power when the larger grid goes down.  (See “Resilient Power: Evolution of a New Clean Energy Strategy to Meet Severe Weather Threats.”)

Some resilient power applications require significant storage capacity to cover critical electric loads for water treatment facilities and refrigeration for food distribution centers. But other applications require only modest energy storage capacity and can be combined with energy efficiency measures. For these facilities, only a limited amount of resilient power may be needed to power critical lighting, air conditioning and medical/communications equipment. If designed properly, solar and storage technologies can allow residents to shelter in place in times of extended power outages, thus reducing the demand on overwhelmed first responder and emergency shelter services when the power goes out.

One good sign that we are starting to see is strong interest from developers and owners of affordable housing, elderly, and assisted-living facilities to develop solar and storage projects to protect the most vulnerable among us. If this trend takes hold, we could see the benefits of reliable, resilient, clean energy technology innovation make their way to those who need it the most.

Clean Energy Group is engaging with affordable-housing and other developers in major cities across America to team up with solar storage developers to ensure that critical building loads are covered when the power grid fails. (See for more info.) We also see interest from city officials to bring solar and energy storage systems to police and fire facilities, schools, and community emergency centers. States like Massachusetts are funding resilient power projects to ensure uninterrupted critical community services during outages (see our recent blog on this topic here).  CEG staff is working with city leaders to conduct city-wide implementation strategies to develop resilient power projects involving critical community service facilities. We also see owners and developers of supportive housing in discussions to incorporate solar storage in their portfolio of buildings.

All of these projects start by identifying which critical loads absolutely need to have power during an emergency, what the maximum power draw is for each critical device, and for how long the critical loads need to be covered. A range of financing options are identified once the project development team has prepared a detailed project budget, an operating plan and financial pro forma.

It’s important to note that many of these resilient power projects are structured with no up-front costs to the building owner. This can happen because important new FERC rules provide battery storage systems with revenue streams for grid services, and that revenue can be used to help finance more resilient buildings (see our recent webinar on this topic here).

A key question facing project developers and other stakeholders is how to get to scale: can an efficient finance mechanism be created to incorporate resilient power in affordable multifamily housing and community facilities across communities, and across the country?  Right now, all of these projects are being developed with “one-off” project financing.

CEG is working on a new finance strategy to begin to address that question through project aggregation. It would create a credit facility that would “warehouse” many resilient power transactions to be bundled (or securitized) and sold to investors. For a scalable financing strategy to work, there needs to be successful project aggregation. Multiple project pipelines need to be identified involving solar and energy storage developers, as well as affordable housing, community development and related financial intermediaries.  We would like to connect with more municipal leaders and developers across the country who want to learn more about how these systems can better protect communities.

The good news is that more communities are beginning to plan and build resilient power projects to protect their low-income and vulnerable populations from power outages, broadening access for all members of their community to equal resilient power opportunity.

For more information on this topic, see Clean Energy Group’s 1/30/15 webinar “New Initiatives in Community Resilient Power.”

Massachusetts Announces Second Round of Resilient Power Project Grants

Author: Todd Olinsky-Paul, Clean Energy Group | Projects: Clean Energy Finance, Clean Energy States Alliance, Resilient Power Project

blogphoto-ResilienceThe Massachusetts Department of Energy Resources (DOER) has announced its second round of resilience program awards, and once again, the results are extraordinary.

In the first round of the $40 million Community Clean Energy Resiliency Initiative, DOER awarded $7.4 million for six municipal projects, of which three included solar + storage.  DOER also made 27 technical assistance grants to help municipalities prepare project proposals for round 2.

In round 2, DOER awarded $18.5 million to 15 municipal resiliency projects, two-thirds of which incorporate solar + storage.

The round 2 projects include:

Cambridge: Battery storage with a 170kW solar PV system to support a drinking water treatment plant during short grid outages, and the Water and Electrical Department offices, the water laboratory, and the municipal emergency operations center during longer outages.

Cape and Vineyard Electric Cooperative: 1,356 kW solar PV with 512kW battery backup to supply resilient power to the Dennis Yarmouth Regional High School, a regional emergency shelter that also serves as a food preparation and distribution center for the community.  The battery would also be used to reduce demand charges through peak load shedding at the school during regular, non-emergency operation.

Greenfield: Battery storage paired with a 207kW solar PV installation at the local high school. Currently, the back-up power at the site is supplied by diesel generators that will operate for 2-3 days, but recent severe weather events have resulted in power outages lasting up to one week.  The high school provides emergency shelter and services to the town’s growing elderly and high-needs populations.

Holyoke: Solar PV plus batteries will be installed at three different project sites to provide resilient power for 100% load for up to three days. The fire headquarters will receive a 53 kW photovoltaic system and a 300 kWh battery bank, which will run in combination with an existing backup generator. Mt. Tom Tower, the emergency communications tower for the city, will receive a small PV system, a small wind turbine, and a 200 kWh battery. And the Dean School, a community shelter, will receive a 600 kW PV array with a 483 kWh battery bank, which will run in combination with an existing back-up generator.

Medford: The city will install solar PV with battery storage at the Department of Public Works and at the Andrews School, along with islanding equipment at each site.

Metropolitan Area Planning Council, Beverly: The city will install a 232kW PV array with 77kWh of battery storage, which will power four critical facilities at the Beverly Cache Site in the event of a power outage. This site serves as a Regional Equipment Cache for the Northeast Massachusetts Homeland Security Region, as the location of the Beverly, MA Civil Defense Department, and as the home base of Massachusetts Task Force 1, one of the nation’s 28 FEMA Urban Search and Rescue Teams.

Metropolitan Area Planning Council, Wayland: Islanding capability and advanced switches will be installed at Wayland Middle School, a regional shelter, to augment a proposed PV carport.  This would allow solar to decrease the burden on the diesel back-up generator during a grid outage. Battery storage may be added at a future date.

Northampton:  The city will construct a microgrid with on-site renewable generation and battery storage to serve three high priority emergency facilities: the Smith Vocational and Agricultural High School, the Department of Public Works, and Cooley Dickinson Hospital.

Sterling: Battery storage will be added to increase the resiliency of Sterling’s solar microgrid, providing resilient power to critical services at the police station and dispatch center. The battery array will also be used daily to provide real-time demand response, frequency regulation services, and off-peak to on-peak load shifting.

In addition, DOER awarded grants to Barnstable for a CHP system to support the Barnstable Intermediate School (a public shelter), to Boston for a CHP system to support the Boston Medical Center and a nearby emergency communications structure, and to the Greater Lawrence Sanitary District for CHP units and anaerobic digesters to provide resilient power to the wastewater treatment plant.

These projects will bring real benefits to communities all over Massachusetts.  In future severe storms, when the electric grid goes down, the people in these communities will be able to rely on emergency services provided by facilities equipped with clean, resilient power systems.

Clean Energy Group is proud to have supported Massachusetts DOER in their resilient power program, and looks forward to continuing to work with DOER in the coming years.

For information on the first-round DOER grants, visit the Community Clean Energy Resiliency webpage.