Financial Strategies for Renewable Energy

By Greg Pahl
Published on February 27, 2018
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Financing projects is vital to any new project, including renewable energy.
Financing projects is vital to any new project, including renewable energy.
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Power from the People by Greg Pahl book cover.
Power from the People by Greg Pahl book cover.

Power from the People (Chelsea Green Publishing, 2012) explores how homeowners, co-ops, nonprofit institutions, governments, and businesses are putting power in the hands of local communities through distributed energy programs and energy-efficiency measures. Over 90 percent of US power generation comes from large, centralized, highly polluting, nonrenewable sources of energy. It is delivered through long, brittle transmission lines, and then is squandered through inefficiency and waste. But it doesn’t have to be that way. Communities can indeed produce their own local, renewable energy.

One of the biggest issues for most projects is how to finance them. Renewable energy technology tends to be fairly expensive and usually requires a lot of upfront equity and debt financing as well as seed capital to cover early development costs. This can be a daunting challenge for most communities or local organizations, depending upon who is actually organizing the project. Nevertheless, there are a number of financial tools available. You will probably want to take advantage of as many as possible. For additional ideas on local financial strategies, see the first book in the Community Resilience Guides series, Local Dollars, Local Sense by Michael Shuman.

Traditional Funding

One of the first places to look for financing for small, locally owned projects is a local bank. Local bankers have an obvious interest in their community and in establishing or maintaining financial relationships with local residents. They may not be familiar with the latest renewable energy technologies, but if the benefits to the local community are carefully explained, some bankers may be persuadable. If there is no local bank in your community, a regional bank is the next possible source. There are also a number of commercial finance companies that specialize in renewable or green energy projects.

It is also possible that a local business or cooperative might be willing to be an equity investor or participant in a local renewable energy project, depending on their appetite for federal or state tax credits. Some states also offer low-interest loan programs for renewable energy projects. Admittedly, obtaining a loan of any kind has been a challenge for most small businesses since 2008. But if your project is well conceived and structured, and if you are able to take advantage of some of the incentives or tax credits that are often available, you should be able to arrange financing.

Property Assessed Clean Energy Programs (PACE)

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