Energy Department’s loan program helped Tesla; now it needs to help low-income communities

While most people have heard of Tesla, far fewer have heard of the United States Department of Energy Loan Programs Office, a $40 billion fund inside the DOE that helped fund one of Tesla’s first car factories and launch the company. 

The DOE loan fund has an important, but limited, scope to assist private sector companies with innovative initiatives. And while this is important, its scope must be expanded so it can support the energy transition for a far greater number of Americans, including the widespread adoption of proven technologies especially in low- and moderate-income and underserved communities.

Home energy use is one of the key contributors to climate change. If we as a nation are going to reduce greenhouse gas emissions, we must improve the efficiency of our buildings by adding insulation, replacing old lightbulbs with LEDs, installing efficient heating and cooling systems, and switching to renewable energy sources. But for many, access to these upgrades are out of reach despite providing individuals and their communities with greater energy security.

One of the pillars of Secretary Granholm’s agenda at the Department of Energy is environmental justice and targeted investment in disproportionately impacted low- and moderate-income and underserved communities. Congress should authorize the DOE to expand the definition of innovation and go beyond technology definitions to provide for innovations in deployment and financing approaches that provide greater access to the benefits of proven clean energy technology for under-represented and low-income communities. In energy terms, this means community solar, rooftop solar + storage, even virtual power plants. This could also mean decommissioning dirty and expensive “peaker” power plants that are often found in poorer neighborhoods, reducing cost and complexity of safe power grid maintenance, and creating greater resiliency for our communities.

For example. By expanding DOE’s authority today for the Loan Programs Office, Congress could effectuate change tomorrow, allowing families struggling to make repairs and/or create resiliency in homes and infrastructure destroyed or damaged by Hurricane Ida to provide loan funds to help them begin.

Or communities could begin solar and battery storage deployment to reduce or eliminate grid dependency when the power goes out — as we’ve seen in the West with wildfires and elsewhere with flooding and wind damage.

Lives are lost when the power goes out — but we have the solutions that can prevent that. The DOE’s loan guarantee program needs to be mobilized to address these urgent needs.

DOE has more than $40 billion remaining loan and loan guarantee authority that could be used for energy investments across all markets, including projects that benefit underserved communities and customers. We believe the program should be modified by Congress to include loans and guarantees on proven technologies like solar, electrification of home appliances and heat pumps to low-income and disadvantaged communities, all of which are currently excluded. All Americans — but especially low- and moderate-income Americans — would benefit from the savings associated with these measures.

While these technologies aren’t new, the business models and financing approaches are the “innovation” that needs support — Congress needs to expand the definition of “innovation” when it comes to low-income communities. Unlocking this critical resource would save low-income Americans money, combat climate change, aid in America’s energy transition, create jobs, all while making our most vulnerable communities more resilient. It’s a win-win, as amending the program guidelines would allow DOE to make low-risk, high-volume investments that benefit more Americans.

There is no question, the low-income housing sector is underserved in energy efficiency and renewable investments. Current rebate programs, tax incentives, and low-interest loans are often not designed to take into account the financial situations of low-income homeowners and those in disadvantaged communities. By redirecting DOE loan funds to develop innovative programs to support low-income retrofits, reduce barriers to access, and break down funding silos, the program could make a significant impact on greenhouse gas emissions while creating real economic opportunity within the energy transition markets.

Mark Wolfe is an economist specializing in income inequality and serves as the director of the National Energy Assistance Directors Association.

Kerry O’Neill is the CEO of Inclusive Prosperity Capital, a national nonprofit lender that provides clean energy finance for low- and moderate-income housing and other underserved markets.