Using Creativity to Unlock Commercial Solar: Catalytic Capital

By March 30, 2020 June 13th, 2020 Financing Solutions

New Resource Solutions was founded to unlock commercial solar projects – a goal that is shared by communities across the United States and around the world.  One powerful mechanism we identified to potentially unlock billions of dollars in commercial solar projects is called “Catalytic Capital”. At a basic level, Catalytic Capital brings with it either no or below-market return expectations in order to jump-start more sustained investment. In practice, however, it represents much more than that.

Across the country, thousands of foundations, family offices, mission-focused organizations, and high-net-worth individuals crave a way to financially support their specific interests—be it in a certain geographic region or aligned to a particular social or environmental mission. They seek methods to invest or grant capital philanthropically in a way that provides the most long-lasting benefit for each dollar deployed. These mission- and impact-oriented funders want to shift their broader, publicly focused investments into more narrowed interests.

At the heart of this movement lies the desire to transition to clean and less expensive energy sources, like solar. Here’s the simple equation:

The goal of this capital is not a one-time plug for a handful of solar projects; rather to catalyze a virtuous cycle of solar installation and investment. Sadly, no easy way exists today to develop and deploy solar-focused Catalytic Capital programs in an efficient, effective manner (e.g., as a program that yields $4+ of new solar project construction for each $1 of catalytic capital deployed).

NRS is working with regional and national partners to innovate solutions and close that market gap. Using tech-enabled research and analysis to provide third-party perspectives and guidance on what is possible given the corresponding capital goals and market constraints, we are making great headway. Recently, Athens, Ohio-based NRS had the privilege of collaborating with the Central Appalachian Network (CAN) to explore this very concept across our shared home in the Appalachian region of the US.  Central Appalachia has historically been a challenging region for solar to boom due to existing market forces and regulatory constraints, but with the proper deployment of Catalytic Capital, we believe the region can begin to catalyze for long-term, sustainable solar market growth.An example of Catalytic Capital at work here is a grant to non-profits equal to the lost value of the Federal Investment Tax Credit (ITC). Usually, these customers could use a Power-Purchase-Agreements (PPAs) for third-party private ownership of the solar panels.  However, numerous states disallow PPAs, which disproportionately impacts those non-profit entities unable to monetize the ITC. In this example, Catalytic Capital accomplishes numerous goals:

  • Generates near-term business opportunities and jobs for local installers and equipment suppliers. If the Catalytic Capital is substantial enough to support numerous projects, it may even justify a new expansion office for an installer, providing even more jobs (and solar projects) in the region.
  • Provides ongoing operational savings for the non-profit so that resources may be allocated in other ways over the next 30 years.
  • Creates a local solar ally for similar future initiatives.
  • Demonstrates the demand for solar if more financing options were to be made available through regulatory changes.

Some other examples of Catalytic Capital structures could be used here are:

NRS is focused on changing the game for commercial solar finance and we’re particularly excited about this Catalytic Capital initiative. Have a look at the exciting details of these and other groundbreaking Catalytic Capital tools in our Central Appalachian White Paper published on CAN’s website here:  https://www.cannetwork.org/new-white-paper-clean-energy-investment-in-appalachia/.  It exemplifies a key component of our mission as a Certified B Corporation: accelerating a global culture shift to redefine success in business and build a more inclusive, non-extractive, and sustainable economy.

Contact Marc Palmer (mpalmer@newresourcesolutions.com) with any comments or questions related to Catalytic Capital and commercial solar.