Can investment districts bring more clean energy to minorities?

The nonprofit Center for Social Inclusion has developed an innovative policy paper called "Energy Investment Districts" that could attract clean energy financing and distributed generation to minority and low-income communities.

Ethnic minorities will be a majority of the United States population before 2050. This paper offers clean energy financing professionals an opportunity to think creatively about ways to reach these markets.

"We're trying to change the conversation and the narrative around renewable energy generation and really focus it in on the fact that communities of color can be in this new energy economy," said Anthony Giancatarino, coordinator of research and advocacy at the CSI. "They have the assets and the tools to do so. They just need the resources. Upfront costs are a huge barrier to participation."

District structure

The policy paper advises states or municipalities to create Energy Investment Districts. These districts would consist of Energy Investment Trusts working in partnership with community-run councils. The trusts could be run by community development financial institutions (CDFIs), nonprofits, government agencies or multiple organizations.

States that have home rule laws can create organizations of this kind at the municipal or local level. States that do not have home rule laws would need to initiate this process at the state level.

The trusts would seek opportunities to funnel capital into local distributed renewable energy and energy efficiency projects. To do so, they could consider a wide variety of capital sources such as federal organizations, infrastructure bonds, workforce funding, revolving loan funds, foundations, property-assessed clean energy programs, linked deposit programs, pooled investments in LLCs, crowdfunding programs and direct public offerings.

The paper does not explore the need to build partnerships with financing organizations. However, without access to financing expertise, EIDs would be unlikely to succeed in locating and leveraging resources for their communities.

"It's going to require a bit of outreach and networking," Giancatarino said.

Pilot programs and preexisting models

Parts of this concept already have been tested. Ohio, Arkansas and Connecticut already have created energy improvement districts that operate similarly to EIDs but do not focus on minority and low-income communities. They also do not include community councils that review the programs' performance data and authorize projects.

The CSI developed this concept after an extensive review of existing programs. Some program models that influenced the paper were those created by Delaware's Sustainable Energy Utility, DC Sustainable Energy Utility, Clean Energy Finance and Investment Authority, Massachusetts Clean Energy Center, Co-op Power, Boston Impact Initiative and CDFIs.

"It would be great if we could pilot this idea to see how it plays out," Giancatarino said. "We have a lot of sticks in the fire. We're involved in talking with communities about what's involved in building renewable energy locally in an equitable way."

It's possible that the first EID may be created in California. Giancatarino said the CSI is having conversations with an organization there that may pilot this concept.

Community-oriented approaches

The CSI's work is grounded in a community-oriented viewpoint. The policy paper proposes a structure for the EIDs that is based upon this perspective.

"People need agency and people need the ability to participate in the decision-making process at the local and state levels," Giancatarino said.

The trusts each would have a board of directors. The CSI recommends that these boards include both community representatives and local citizens with technical expertise.

The policy paper recommends regular engagement with citizens via community councils. These councils also would review performance data to ensure that projects are on track to accomplish their goals.

Involving community councils in authorizing energy-related projects and reviewing their performance data may seem unusual to some stakeholders. This is not an entirely new concept, however. It is aligned with ideas promoted by the Institute for Local Self-Reliance, an organization that advised the development of this policy paper.

"We think community-scale energy is a really viable wave of the future," Giancatarino said.

Participation obstacles

Giancatarino said there is a misalignment between the types of energy efficiency measures and programs that exist today and the obstacles faced by many minority and low-income community residents.

"A lot of our policies are really steeped in property ownership," Giancatarino said.

While around 25 percent of white United States citizens are not homeowners, Giancatarino said, this number doubles to nearly 50 percent for blacks and Latinos.

Many energy efficiency and renewable energy programs focus on homeowners rather than renters, although this has changed somewhat with the arrival of community solar gardens.

"There's a lot of challenges for communities that do own their homes," Giancatarino said. "There's also structural housing issues as well — from lead to leaky roofs."

EIDs would have to develop plans to address these structural issues along with energy efficiency and renewable energy. If they provide funding for energy measures alone, they may not succeed.

Environmental hazards

According to Giancatarino, the CSI is taking a climate resilience perspective in advocating for prioritizing distributed generation in communities that are at high risk for climate impacts and coal pollution. However, the policy paper does not specify how communities might be designated as high-priority and does not propose coordination between EIDs.

"Communities that have been burdened … through coal pollution, are on the forefront of climate change and need to be resilient need to be the top priority," Giancatarino said. "If we can target the hardest-hit and fix that problem, that's going to open up options for all to engage."

Top image by kmlmtz66 via Shutterstock. This article first appeared at Clean Energy Finance Forum.