What Housing Entities Need to Know About the Solar for All Program
By Joel Laubenstein
7 min read
The $7 billion Solar for All (SFA) program under the Greenhouse Gas Reduction Fund (GGRF) offers housing authorities and other owners of affordable housing portfolios a significant opportunity to reduce energy costs for residents, create local jobs and introduce the benefits of renewable energy and energy efficiency to disadvantaged communities.
Given SFA funding has now been obligated to prime recipients, it’s unlikely that the pending change in the presidential administration will retroactively cancel the program or claw back funding. However, housing authorities and owners of affordable housing who have “shovel-ready” projects that meet program requirements will be best positioned to secure funding and should remain diligent about preparing for the project start date.
Where Do Things Stand Today?
Under SFA, monetary grants were awarded to 60 recipients—which includes states, nonprofits and tribal consortiums—for clean energy and greenhouse gas (GHG) emissions-reducing projects in low-income and disadvantaged communities (LIDACs). Each recipient’s award was unique, depending on the plan they put forth in their application.
While the recipients have been selected, funding from the SFA program has not yet begun to flow through to subrecipients for projects. The 60 SFA recipients have recently adjusted their plans to meet requested changes from the Environmental Protection Agency (EPA) and align with the exact dollar amounts they were awarded, which in most cases vary from initial applications. It is expected that most recipients will begin to distribute their funding to subrecipients—such as housing authorities, not-for-profits, developers, local governments and tribes—starting in mid to late 2025.
Given that the 60 recipients’ awards and agreements from the EPA are different, so are their plans for how to allocate the funds they have received and what their subrecipients will have to do to apply for and comply with to receive funds. It’s up to each individual recipient to structure fund distribution as they see fit, but many of the projects will likely take on the form of a loan or grant program.
Several recipients named potential sub-recipients as part of their funding application; however, most are still looking for projects to support. For a project to qualify for SFA funding, the only two main EPA requirements are that it must be a qualified project (eligible technology, residential rooftop solar, residential-serving community solar, associated storage and/or enabling upgrades) and it must be in a LIDAC community. The remaining requirements for receiving SFA funds are dependent on the recipients’ unique plans and program goals.
Navigating the unique requirements to ensure SFA funding will pose a challenge for project owners (subrecipients) if they are not fully prepared.
What Should SFA Funding Seekers Be Doing to Prepare?
While the 60 recipients are working to finalize plans, this is a prime opportunity for housing authorities and owners of affordable housing to get organized and put themselves in a strong position for funding and readiness. During this planning period, subrecipients—potential and actual—must strategize to get themselves shovel-ready by considering what additional capital may be needed, and by determining how they’re going to ensure compliance with the recipients’ program requirements.
Capital Stack Considerations
Once a decision to fund a project or portfolio of projects has been made, the details of the funding package (capital stack) must be designed and documented. Intending to stretch the available SFA funding to create the greatest impact within the target community, subrecipients should be looking at all potential capital sources. This could include a mix of SFA funding, additional GGRF programs, like the National Clean Investment Fund (NCIF) and Clean Communities Investment Accelerator (CCIA), philanthropic foundation contributions, credits or other incentives from the Inflation Reduction Act and, if part of a larger repositioning project, may include Low Income Housing Tax Credits. When considering additional funding options, housing entities need to understand where direct pay tax credits come into play.
The direct pay tax credit is earned and paid after a solar or storage project has been “placed in service,” which differs from SFA funding that will likely be given upfront, depending on the recipient’s program. This means that housing entities will need to have interim or “bridge” financing to pay for project costs during the construction phase in advance of any tax credit payment from the Internal Revenue Service (IRS).
These other capital sources can be used to augment SFA project funds, defray project “soft costs” and serve as bridge financing in conjunction with the IRA direct pay tax credits. Whatever the use, subrecipients will need well-thought-out financial packages and subsequent documentation, such as grant applications, financial proformas and other analyses required to obtain funding from these entities.
Given the technical nature of building a capital stack and the many layers of assurance, housing entities should look for a technical assistance partner. An experienced advisor can ensure proper analyses and documentation are provided, not only to enable bridge funding but also to maximize the direct pay tax credits in a compliant fashion to avoid future recapture risk from the IRS.
Compliance Considerations
While renewable energy projects have been around for years, few project stakeholders have taken the time to fully decode the subtleties of what federal programs like the GGRF require. The devil is truly in the details and many project managers are unaware of how complicated program execution can be, especially with all the compliance stipulations. As housing entities begin to think about their capital stack and building their SFA programs, they need to consider how they’ll ensure compliance with all stakeholders and their requirements, including the EPA, the recipient and other entities related to their capital stack, like the IRS.
Do housing entities understand all the program compliance requirements? Can in-house personnel manage it or will extra assistance be needed? If they haven’t already been named a subrecipient, what entities at the state and national level can be contacted to improve program understanding and start a dialogue around when competitive solicitations begin? These are all important questions that every subrecipient should be considering as they plan for SFA projects.
If housing entities are planning to leverage some of the IRA bonus credits in addition to the base credit, such as the domestic content bonus credit or the energy community bonus credit, then they need to consider what additional qualitative and quantitative metrics and deliverables will need to be tracked to ensure compliance.
Other considerations need to be made for additional federal or state programs or acts in place, like the 2021 Build America, Buy America Act (BABA). Under BABA, all iron, steel, manufactured products and construction materials used in federally funded projects for infrastructure are required to be produced in the U.S. While this program aims to create jobs, boost the economy, strengthen supply chains and empower businesses in the U.S., demonstrating compliance will be a key factor to a project’s success. SFA subrecipients will need to work with recipients to identify and continually update a list of suppliers of solar panels, storage systems and other components, such as inverters, that meet BABA requirements.
The logistics and project management complexity, combined with the technical demands of SFA projects, calls for unique strategies and tools for effective program management. Project owners are wise to seek experienced advisors to help guide them through the process.
The Solar for All Program is A Once-in-a-Lifetime Opportunity – Don’t Miss Out
Many are excited about the large SFA program because it will enable over 900,000 households across the country in low-income and disadvantaged communities to benefit from distributed solar energy. However, the program comes with complex requirements and evolving guidelines, leaving many recipients and subrecipients operating in the dark. To help navigate this, subrecipients should look for an advisor who can help build your program, simplify reporting and ease the compliance burden throughout the project’s lifecycle. After the work of building a program that relies on SFA and other IRA-related funds, the last thing a housing entity wants to do is risk being sanctioned over compliance issues.
There is no better time than now for housing authorities and owners of affordable housing portfolios to implement solar projects using federal incentives and programs. Given the importance of the SFA program for residential solar projects in lowering the cost of energy and making buildings more energy efficient, these entities need to work quickly to best position themselves to receive funding from the SFA recipients and get shovel-ready.
