EY panel discusses Solar for All grants and what’s next | EY

Solar for All (SFA) grant applicants who were recently approved for funding received award notification from the Environmental Protection Agency (EPA) in April 2024 – and are currently planning their programs and preparing for launch. During a recent discussion hosted by Ernst & Young LLP (EY US), panelists from public and private sector organizations shared insights and answered questions from grant applicants and members of the SFA ecosystem.

Below are the key takeaways from the resulting white paper, intended to help awardees design and implement the program.

1. Key capabilities

A. Tax breaks – For approximately 40% of people primarily from low- and moderate-income (LMI) and disadvantaged communities (DAC) households, the benefits of clean energy tax incentives were out of reach due to a lack of tax liability or initial flexibility financial necessary to apply for a loan and wait for the refund.

• To help address this Section 48 tax credit challenge, the Inflation Reduction Act (IRA) allows monetization through corporations selling credits or a direct payment option, allowing nonprofit entities and government agencies, including states, to own solar PV residential assets and rent them back to ineligible households.

B. Developing Workforce – Currently, many states lack the labor force to cope with the expected increase in demand for solar panel installation. SFA allows 25% of allocated funds to be used for non-technical activities, which may include workforce development programs such as partnerships with higher education institutions and workforce groups to provide training and outreach to diverse contractors.

• Awardees’ investment in partnerships and workforce development programs can result in a number of additional benefits, including increased community confidence, spurring economic development and increased solar energy use in target communities.

C. Effective use of SFA funds – A key pillar of the SFA enables awardees to leverage private markets and capital to increase the impact of the public funds awarded. It is possible to pool and securitize SFA loans to tap into financial markets (similar to the mortgage-backed securities offered by Fannie Mae and Freddie Mac), thereby creating a secondary market that can expand the impact of SFAs and increase the speed at which initially mobilized funds you can “roll back” to newly created programs.

• Award recipients have room for creativity and innovation to engage with the private sector and multiply the impact of their SFA programs.

2. Notable implementation challenges

A. Regulatory landscape – State regulatory contexts for residential and community solar vary significantly. While some states have favorable policies (including common renewable energy legislation enacted in 24 states), others have policies that may prevent implementation of some aspects of the SFA, including restrictions on third-party ownership of community solar equipment or unfavorable metering policies net. Award winners in states that lack favorable solar policies will face additional obstacles to maintaining SFA programs.

B. Creating and managing programs – It is likely that award recipients will need to implement several new multilateral programs to achieve SFA goals. Programs can be created to serve specific households, target communities, or project types. Each program is likely to have unique factors (e.g., financial structures, public policy, regulatory environment) that must be considered in program design.

C. Implementation of SFA funds – Disbursing solar financing to LMI and DAC households will be a challenge given that financial institutions currently rely on credit scores (e.g., FICO) to make consumer lending decisions. While part of SFA’s intent is to make capital available to LMI and DAC households who would otherwise not have access to traditional lines of credit, there remains a challenge in mitigating default risk when implementing SFA-financed loans or leasing products.

• Award recipients can partner with organizations already doing similar work (such as green banks, community development financial institutions (CDFIs) and community development credit unions), as well as traditional lenders, and draw inspiration from the innovative solutions that are already available on the market.

D. Ecosystem education – Realizing the full potential of SFA requires comprehensive education and involvement of all ecosystem participants. To achieve this goal, there is a need for education tailored to specific stakeholders, including target communities, employee and contractor communities, nonprofits, CDFIs, and local governments. Education about SFA is paramount to both program adoption and implementation.

Collaboration is key to the success of Solar for All programs. Many of the winners will be operating in uncharted territory and launching first-of-its-kind programs; open collaboration and knowledge sharing can make these programs successful.