Flipping the Switch: Catalytic Capital for Renewable Energy
Located on the “quiet side” of Maine’s Mount Desert Island, Tremont is a fishing town with a significant influx of summer tourism in typical years, thanks to nearby Acadia National Park. While the town is small, with only 1,529 year-round residents, its leadership values using natural resources sustainably. So, when the town was looking for ways to reduce the fiscal and environmental costs of its energy needs, it made sense to look to solar.
At the time of the Tremont solar installation, in early 2019, Maine was not yet a “solar-friendly state.” The policies on the books didn’t provide the regulatory predictability developers desired and Maine was last among New England state in solar energy development and solar job creation. But that didn’t stop Tremont from pushing forward with the installation of a new array on the town’s capped landfill. Now operational, the array generates 100 percent of the electricity needed for the town’s municipal buildings.
Because solar development was relatively uncommon in the state at the time, it took a unique partnership between a local solar installer, The Nature Conservancy of Maine and community development financial organization (CDFI), Coastal Enterprises, Inc. (CEI), to make it happen. The Nature Conservancy provided a grant to CEI that lowered the total cost of the loan. The partnership worked together to develop a power purchase agreement (PPA) financing structure that allowed Tremont to purchase the array with no upfront cost and a fixed six-year electricity purchase rate that is lower and more predictable than their previous grid-based costs.
“This solar project is a win-win for the community,” said Tremont Town Manager Christopher Saunders. “It lowers the town’s long-term energy costs and is good for the environment.”
In June 2019, just months after the Tremont array went live, state legislators passed new legislation that encouraged both grid-scale and distributed solar, and suddenly the future for solar in Maine was a lot brighter. As municipal managers like Tremont’s Saunders shared their positive experiences with solar arrays with their peers in other communities, interest in municipal installations increased. However, since the legislative shift incentivizing entry to the market was so new, local banks weren’t familiar with the financial structures.
CEI’s mission is to grow good jobs, expand environmentally sustainable enterprises, and increase more broadly shared prosperity in Maine and other rural regions. CDFIs, including CEI, develop a deep connection to the communities where they do business, which translates into a willingness and commitment to one-on-one technical assistance and specialized programs that are often too time-consuming or costly for mainstream financial institutions to consider. Often, CDFIs demonstrate proof of concept and demand for a new financial product, which serves as a catalyst for investment from more traditional lenders. In the words of John Egan, CEI’s Chief Investment Officer, “We take the sharp edges off the new stuff and bring it more mainstream.”
To expand municipal solar in Maine, this has meant helping interested community banks learn the ropes through participation in a CEI municipal solar loan. CEI takes the lead in organizing, negotiating and documenting a solar financing transaction, while the community bank provides funding dollars and, in the process, learns how to replicate the model on their own. The involvement of community banks, along with the changes in legislation, has allowed the scale of projects to expand across rural Maine, often bundling multiple communities as solar energy off takers (or purchasers) – a move that increases adoption of solar technology across the state and allows everyone to benefit from economies of scale.
Communities of all sizes across Maine are taking advantage of the new solar environment and demand shows no sign of slowing down, even in the current COVID-19 pandemic. Municipal leadership and their communities continue to seek the environmental and financial benefits of renewable energy; the state is developing plans to make Maine carbon-neutral by 2045. While the benefit of lower-rate and fixed, rather than variable, electricity costs continues to make financial sense for municipalities. The savings to the municipality can either be passed on to taxpayers or utilized to support services and programs, a valuable opportunity as communities deal with extra costs and support demands due to the pandemic.
On the supply side, the logistics of solar installation allow employees to continue to work safely under social distancing guidelines and some local installers are nearing capacity, offering the promise of future job creation in addition to the fiscal and environmental benefits. CEI has led 11 municipal solar financings in the last two years, representing over $6,000,000 in total loans provided within that time frame. The community profiles are as varied as Freeport, a popular tourist destination and city of 8,000 in southern Maine, and Caribou, a town of about 1,800 that is less than 12 miles from the Canadian border.
“The inspiring part of this work is when rural Maine communities recognize solar power as not only good environmental stewardship, but also an economic gain,” Egan added. “Now that the arrays are on town land, renewable energy generation goes from an abstract concept to something everyone can see and spark conversation. As investors, we demonstrate that renewable energy is for everyone, not just for wealthy communities.”
See this issue’s featured video about Goranson Farm.
As more communities and traditional lenders tackle municipal solar financing in the state, CEI is already looking toward the next opportunity to expand access to financing for solar installation in Maine. In addition to one-off installations with businesses and farms, CEI is developing a model for Resident Owned Communities (ROCs), manufactured housing neighborhoods owned and governed by the residents that work in ways similar to a mini municipality. CEI is in the process of identifying a ROC to serve as this model’s Tremont, the community that will prove the benefits of solar for its residents and, if successful, act as the first domino in a chain of solar electricity adoption benefiting similar communities across the state.
Article by Leah B. Thibault, Marketing Manager for Coastal Enterprises, Inc. Leah manages marketing and communications initiatives at CEI, with a focus on storytelling. As a writer, her work has appeared in GreenMoney Journal, Triple Pundit, Food Industry Executive, USDA Rural Cooperatives Magazine and Taproot Magazine. In addition to her work at CEI, Leah runs a small business as a craft pattern designer and previously worked in the nonprofit performing arts and educational sectors. Leah holds a B.A. from Willamette University in Salem, Oregon.