The $20 billion US green bank program just funded its first

Climate United also hopes that this first funding of pre-construction expenses for mid-sized solar installations, a cost category that includes permitting and interconnection fees and which developers now pay themselves, will help other private sector lenders. reduce the delta between real risk and perceived risk in the market, she said.

But perhaps more fundamentally, Bafford said, the Scenic Hill transaction was shovel-ready and needed financing within a time frame that we could meet and meet the federal program's requirements.

Find projects that meet the rules of green banking programs

One of the program's most demanding requirements is set by the Build America Buy America Act, part of the bipartisan infrastructure law passed in 2021. The law requires that certain federally funded infrastructure projects, including including those of the green bank, use iron, steel and manufactured products. , and building materials produced in the United States

Scenic Hill is prepared for that, Halter said. In 2022, the company launched its American Made, Arkansas Built supply chain initiative, which includes U.S.-based companies such as panel maker First Solar, solar tracker giants Nextracker and Array Technologies, the manufacturer inverter company Yaskawa Solectria Solar, electrical equipment supplier Shoals Technologies Group, and steel pipe and tube manufacturer Zekelman Industries.

This effort began after the passage of the Inflation Reduction Act, which created lucrative tax credits for U.S.-based clean energy manufacturers, as well as domestic content requirements and incentives for projects clean energy company seeking tax credits and federal funding. The goal was to make it as easy as possible to increase the national content percentages of our projects, Halter said.

Scenic Hill also helped create solar construction and contracting opportunities for Arkansas companies instead of relying on all out-of-state partners, Bafford said.

Halter pointed to B&K Electrical Contractors, a Little Rock-based electrical contractor that Scenic Hill hired for its first commercial solar projects with cosmetics maker LOral USA at facilities in Arkansas and Kentucky. Now we use them in our projects, and they have been used by other solar developers in the state as well, he said.

What makes this project transformational?

Given all the work Scenic Hill has done to create a growing commercial solar operation in its region, why does it need financial support from Climate United? To answer this question, Bafford highlighted several challenges that Scenic Hill and other solar developers face in tapping into new markets.

One of the biggest challenges for developers of commercial and industrial solar projects is the lack of access to capital to finance these pre-construction costs, Bafford said. These include acquiring land, placing deposits for solar panels and other equipment, and obtaining interconnection rights to allow solar energy to flow to public grids. Developers typically pay these costs out of their own equity.

Currently, institutional capital does not support this stage of development, she said. These are gaps that put small projects and developers at a disadvantage in the market. We are trying to show that this is an activity where it is possible to invest.

And what's difficult for solar developers nationwide will likely be especially difficult in Arkansas, which now ranks 27th among states for solar, with just 1.35 gigawatts deployed, according to the trade group of the Solar Energy Industries Association. The state has relatively cheap electricity rates, making it difficult for solar projects to be economically competitive. The vast majority of the state's solar energy comes from large-scale projects built under utility contracts, and relatively little comes from mid-sized solar projects serving commercial, industrial, and institutional customers.

If it proves financially viable, the ability to borrow money to cover pre-construction costs could help boost commercial solar energy in Arkansas and beyond, Halter said.

To the extent that you have to dedicate a significant portion of equity to these expenses, well, you basically have two choices, he said. The first is to do less, you will eventually run out of equity. The second is to raise more equity capital, which is harder to do and more expensive for small solar developers than for large, utility-scale clean energy projects.

That, in turn, ends up increasing the cost to potential buyers of electricity from these types of solar projects, he said. If your costs increase and the availability of capital decreases, the only positive outcome is the electricity price you charge your customers.

Halter wasn't ready to speculate on how Climate United's funding might change that dynamic for solar developers like Scenic Hill. However, if the first to achieve something like this succeeds, it will give more confidence to those who follow, he said. What you want is for all of this to evolve.

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