Green lenders, community developers and clean energy financiers have long claimed that many projects in their pipelines remain economically viable even without the federal funding that was awarded through the Greenhouse Gas Reduction Fund, part of the Biden-era Inflation Reduction Act.
With the promise of such federal funding rapidly fading, the networks of green bankers are scrambling to find the money to back up those claims. At highest risk: Projects that serve low-income and other hard-to-reach communities.
A federal appeals court on Tuesday issued a long-awaited decision, ruling that the Trump-era Environmental Protection Agency was within its rights to freeze up to $20 billion in GGRF financing that was approved by Congress, awarded by the agency and placed at Citibank under legal contracts with three coalitions selected to establish a distributed “green bank.”
About $3 billion appears to have been deployed before the freeze, leaving the amount in the Citibank accounts at approximately $17 billion, as ImpactAlpha reported in July (see, “Coalition for Green Capital places $2.7 billion in ‘green bank’ funds with Apollo, Brookfield and Energy Capital Partners”). Last month, the EPA moved to end a separate program, Solar for All, that provided grants to states and organizations to help low-income households and communities lower their electricity costs with affordable solar energy.
The lead plaintiff in the suit, Climate United, said it was weighing its legal options. The coalition had been awarded the largest share of the GGRF funding, $7 billion, to finance electric trucks, community solar, green buildings and other projects, said it was considering
“We will continue to press on for communities across the country that stand to benefit from clean, abundant, and affordable energy,” Climate United Beth Bafford said in a statement. “This is not the end of our road.”
Climate United and the other networks of green lenders have been scouring their pipelines for projects that pencil out on their own and can thus attract commercial capital. And they have been scrambling to find other sources of capital, via state programs or philanthropic funders, to de-risk projects that may need subsidies to bring clean energy benefits to marginalized and underserved communities.
“The clean energy transition order of magnitude is trillions of dollars per year globally,” Curtis Probst of the New York City Energy Efficiency Corp., or NYCEEC, said on an ImpactAlpha Call in June. “There is a lot of capital out there, and there are a lot of projects that still can get funded. We see a lot of projects that are penciling out.”
Justice Climate Fund, which had been awarded nearly $1 billion to provide financial and technical support to help community lenders and minority-owned banks scale up their green lending capacity, analyzed 100 projects in its network’s pipeline and found about two-thirds, totaling about $1 billion, that may be able to move forward, Justice Climate’s Amir Kirkwood said on the call.
On the call, Bafford cited electric trucks and truck charging as a particularly compelling opportunity for commercial financing, along with lending for pre-development and construction of solar projects that bring down energy costs and decarbonization of schools, health centers and small commercial properties. In building decarbonization, the group is tapping into member organization Calvert Impact’s C-PACE program, which provides low-cost state financing for multi-family and commercial building energy retrofits.
Mobilizing capital
The appeals court ruling overturned a preliminary injunction granted in April by a federal court that sought to unfreeze billions of dollars held at Citibank in accounts set up for the awardees. Since February, EPA administrator Lee Zeldin has been trying to cancel the grants and claw back the Congressionally approved funding.
A federal judge in April found that Zeldin’s terminations violated the law and the Constitution and ordered the $20 billion in funds to be released, but stayed her preliminary injunction pending the appeal.
The appeals court, in a 2-1 ruling, with two Trump appointees in the majority, would send the case to the Court of Federal Claims, which hears contract disputes. Such a move could set back the grant recipients’ legal battle by a year or more and open the door to EPA seizing the funds. The three-panel appeals court gave the GGRF grant recipients time to petition for an en banc hearing by a fuller slate of appellate judges.
In a searing 61-page dissent, Judge Cornelia Pillard excoriated the majority’s decision, saying their reading of the case as a simple contract dispute “allows the government to seize Plaintiffs’ money based on spurious and pretextual allegations and to permanently gut implementation of major congressional legislation designed to improve the infrastructure, health, and economic security of communities throughout the country.”
Leaning in
The GGRF was intended to be the kind of transformational funding necessary to kickstart a green lending network, or distributed green bank, that could reach deep into overlooked communities. The program was designed to leverage at least seven times the federal funding in private capital and to become self-sustaining over time.
Grant recipients surfaced a pipeline of deals and demand from urban, rural and Tribal communities. As their suit against the EPA and Citibank has languished, they have been exploring alternative funding sources and strategies that could allow some of the projects to go ahead, tapping state funding and incentives, philanthropic loan guarantees, and existing financing programs for solar and buildings.
“The whole reason we exist is to lean into these challenges and opportunities when others lean out,” Bafford said in June.
Probst said NYCEEC is leveraging city and state programs, loan guarantees and other mechanisms to fund projects, as it has for 15 years. NYCEEC has mobilized more than $500 million in financing since 2010, halfway to its goal of $1 billion by the end of this year.
There are also opportunities to take cost out of the equation, particularly in the residential solar market, which has been plagued by permitting costs and hidden fees that are passed on to consumers. An analysis by Tesla, which via its SolarCity acquisition, has installed solar and storage systems for nearly 20 years, found that up to 40% of solar costs could be cut without government incentives. Some of the savings would require permitting and other policy reforms, but AI and digital tools, along with smarter hardware choices and better training, could reduce so-called “soft” costs.
Regardless of the legal outcomes, Bafford said, Climate United is looking across its toolkit to push forward with clean energy investments, “so that we can continue to drive the benefits of the transition in the places and for the people that don’t naturally stand to benefit but, really, who should.”
