Section 4: Beneficial Electrification Program Planning

Program Funding

Why It Matters

To spur change on a large scale, utilities may decide to seek out external sources of capital to expand their ability to support various types of electrification projects. This page features key federal, state, and private funding opportunities to bringing beneficial electrification programs to life.

Finding Capital: Stacking Financial Opportunities

An essential step in developing a beneficial electrification program is to identify and address the various advantages and disadvantages of using different sources of funding to deliver benefits to customers.

Grants can help accelerate the launch and scaling of a program. Applying for and receiving grants from federal and state sources is a common strategy used to fund the initial “startup capital” needed for an energy improvement program.

Financing may be one of the options the utility leverages to expand opportunities to more members who are typically unable to participate in rebate programs due to upfront costs. Some utilities have developed relationships with third-party financial institutions and lenders to administer loans, manage lending compliance, and access additional funding beyond what is available from internal sources.

Featured Funding Option

Rural Energy Savings Program (RESP)

Electric co-ops and other rural utilities have access to unique funding opportunities through the U.S. Department of Agriculture. Administered by the Rural Utilities Service (RUS), RESP provides zero-percent loans to rural utilities, green banks, credit unions, CDFIs, and nonprofits, for clean energy upgrades.

Top 16 RESP Recipients, updated Q4 2023

Borrowers can use on-bill financing (OBF) programs to re-lend capital for behind-the-meter clean energy, fuel-switching, and energy efficiency for homes and businesses. Since its inception in 2016, RESP has awarded more than $477 million in no-interest loans, primarily to rural electric cooperatives. The loans can be used for a variety of measures, including building envelope upgrades, on- and off-grid renewable energy systems, lighting, water and waste efficiency, irrigation and permanently installed energy storage devices. Beneficial electrification projects are eligible!

Eligible borrowers include rural electric cooperatives, rural utilities, and a group of rural utilities serving a census-designated place with a population of 50,000 or less are the main recipients of RESP funds. RESP loans can be used for a variety of measures, providing the utility or eligible borrower can justify the cost-effectiveness of the measures for the end-user. These programs approve ratepayer applicants through bill payment history instead of credit scores, and prioritize cost-effectiveness and flexibility. Utilities can even apply for funds to fully replace manufactured homes!

Further Transportation Programs

The Clean School Bus Program, administered by the U.S. Environmental Protection Agency (EPA), is one of the first new programs launched out of the Bipartisan Infrastructure Law of 2021. The program will provide $5 billion through FY 2026 to replace existing school buses with electric and other zero-emission bus options. In October 2022, EPA announced the first round of awards, granting $913 million to fund 2,468 new school buses across 391 school districts. Electric buses accounted for 95% of the awards. EPA also announced a waitlist made up of 1,400 school districts’ requests for more than 9,000 additional buses. The next application period is expected to open in early 2023.

  • Rebate amounts vary based on vehicle type and district priority level, maxing out at $375,000 per Class 7 zero-emission bus in prioritized districts

  • Applicants may apply for funding for up to 25 vehicles

  • Prioritized school districts, including rural and low-income areas, are eligible for more funding per bus and receive preference in the selection process

  • Rebates are made based on a signed purchase order, limiting the financial strain on the award recipients

Diesel Emission Reduction Act (DERA)

Information for funding regarding the reduction of harmful diesel emissions, especially from school buses, is available for state and tribal governments through the EPA.

Volkswagen Settlement Funds

Typically the funds are administered through a state’s Department of Environmental Quality or Ecology, though some states have elected to use different agencies. Some states target electrification while others cover a broader range of newer diesel, propane, and CNG vehicles. Utilities can support and coordinate with school districts to help ensure that these investments are targeted toward beneficial electrification.

Lending Institutions

Green banks leverage private capital to provide flexible and affordable long-term loans to customers to fill market gaps and improve accessibility, including by deploying innovative tools like inclusive on-bill financing programs. There are more than 20 green banks in 15 states and are continuing to grow and expand to more states. Examples include the Connecticut Green Bank, Michigan Saves, Hawaii Green Infrastructure Authority, Nevada Clean Energy Fund, Colorado Clean Energy Fund, and North Carolina Green Energy Fund.

Local banks and credit unions may prioritize support for economic and community development and provide low-interest loans for beneficial electrification programs. Examples include Sooper Credit Union, Puget Sound Cooperative Credit Union, and SAFE Federal Credit Union.

Community Development Finance Institutions (CDFIs) are mission-driven institutions that help finance underserved markets, such as rural communities or low-income markets. Examples include Inclusiv, NeighborWorks Capital, Craft3,and Solar and Energy Loan Fund.

Private Financial Partners are companies that provide turnkey or customized finance program assistance or administration. Examples include Renew Financial and Slipstream.

Cooperative Banks, namely CFC and CoBank, are traditional capital providers for rural electric cooperatives and in the past have indicated an interest in beneficial electrification and on-bill financing.

New Federal Options from the 2021 Bipartisan Infrastructure Deal

In November 2021, the United States Congress passed the Infrastructure Investment and Jobs Act. This bill passed with strong bipartisan support and provides a major investment in a wide variety of beneficial electrification initiatives, including in transportation and building electrification and support for utilities to strengthen our electric grid. Now, federal agencies are working to establish details and regulations for the various programs authorized by the bill. This space will be updated as relevant programs are launched. In the meantime, here are key pots of funding from the bill:

    • $500M to fund the Safeguarding Tomorrow through Ongoing Risk Mitigation (STORM) Act, establishing a revolving loan fund for cities to mitigate risks from natural disasters (floods, hurricanes, and other hazards) and land use codes to promote resilient infrastructure development.

    • $500M in grants for energy efficiency and renewable energy projects in public schools.

    • $3.5B in funding towards the Weatherization Assistance Program, enabling low-income households to invest in energy efficiency and weatherization upgrades (e.g. insulation, LED lighting, and heat pumps).

    • $11 billion in grants for states, tribes, and utilities to enhance the resilience of the electric infrastructure against disruptive events such as extreme weather and cyber-attacks.

    • $3 billion expansion of the Smart Grid Investment Matching Grant Program, focusing on investments that improve the flexibility of the grid. These include upgrading existing transmission and distribution systems, and other actions, like deploying energy storage.

  • $7.5B for EV charging infrastructure

    • $2.5 billion over five years for charging and fueling infrastructure grants, which will help communities to install new charging infrastructure for electric vehicles and clean alternative fuel vehicles. Rural areas and low- income neighborhoods will be prioritized.

    • $2.5 billion for formula funding that will be distributed via state DOTs.

    • $2.5 billion for funding to be distributed via competitive grants.

    $5 Billion Clean School Bus Program

    • $2.5 billion dedicated to help school districts acquire electric school buses.

    • $2.5 billion for schools to purchases a wider variety of alternative fuel and zero-emission school buses, though electric buses are eligible.

State Funding Options

Utilities should develop relationships with the state energy, transportation, and environment offices to learn how to most effectively apply for and deploy program funding. Successful applicants often demonstrate how stakeholders work together, building on relationships that have developed and strengthened over time. (See the Toolkit page on External Stakeholders)

State energy offices are often responsible for overseeing the distribution of funding for beneficial electrification from the federal government and other sources.

State environmental agencies could be a strong partner in electrification efforts and help access funding sources including funding to reduce diesel emissions and air pollution.

State transportation departments, which might manage federal highway and infrastructure funding, could help advance efforts to electrify transportation.