Lynn Heller | Founder & CEO, Climate Access Fund

Speaker A: Foreign.

Speaker B: Welcome to the Zenergy Podcast. I'm your host, Karn Takar. Today I speak with Lynn Heller, founder and CEO of Climate Access Fund. Climate Access Fund's mission is to reduce the energy burden of Maryland's financially vulnerable households through access to discounted clean energy via Community Solar. With that in mind, Lynn and I discuss what drew her to launch the Climate Access Fund and why she felt she wanted to deploy social impact capital into this space. We chat about the process of launching a company, how, huh, Community Solar has evolved over the years and ways in which Community Solar can benefit lower income and underserved communities. This interview was recorded prior to the passing of the Big Beautiful Bill. However, Lynn expresses her thoughts on the impact of the ITC being eliminated if it were to be so, and how it could affect developments on the ground. Finally, Lynn breaks down what gives her optimism for the future and what advice she'd give her young graduate school self. Thank you for checking out the podcast. I hope you enjoy my conversation with Lynn Heller. Hello, Lynn. Welcome to the the Zenergy Podcast. It is a privilege to have you on. Uh, after meeting you a couple months ago, I was like, oh, we got to get her on the podcast. Uh, really inspired by your work with the Climate Access Fund and look forward to diving in to the work you're doing today, but also learning a little bit about how you got to where you are. Um, so to kick us off, can you share a bit of about your journey into the climate space? I know you've worked in philanthropy and finance. Would love to hear what ultimately drew you to launch the Climate Access Fund and how your past experiences shaped that decision.

Speaker A: Wonderful. Well, first of all, I want to say thank you so much for inviting me to be on this podcast and for doing this podcast. It's a great service. Um, I am, um, very happy to talk about one of my favorite topics, which is clean energy and climate justice and clean energy access. Um, the way I got to this place is sort of circuitous. Um, I will say my whole career has revolved around social and economic justice in various forms. Um, and I, uh, like to say that I've been bitten by two bugs in my career. Um, the first was when I was visiting a refugee camp on the Thai Cambodian border. Um, when I was spending my first year after college teaching English in Indonesia and I traveled up to the Thai Cambodian border and was so moved by the refugees I met that I came back and that refugee work kind of drove the first, um, third of my career, I would say. And then, um, then I was bitten by the climate change bug. And that was in 2005 when I was at a summer camp reunion in Michigan and I heard someone speak, a journalist who had just visited the Arctic. And this was 2005, so it was not early in. You know, we've been talking about climate change. Some people have been talking about climate change since the 70s, um, but it was early in the modern, uh, sort of discussions about climate change. And he was talking about how climate change impacts were not something that were going to happen at present, couple hundred years from now, they were happening now. And so I, starting in 2005, I came back to Baltimore. At the time I was doing strategic, um, planning for nonprofits as a consultant, um, that had kind of grown out of my having started up a number of nonprofits in the refugee and economic development space and political development space. And I said, I really want to work on climate change. So I came back to Maryland and one thing led to another. I did work in philanthropy, um, and then when I was at a private foundation here in Baltimore that was focused on poverty alleviation, um, I really dove deeply into looking at clean energy access as a way to not just, um, sort of move social justice, move the needle on social justice, but also as a poverty alleviation tool. And I recognized that community solar, and this, um, is sort of an indirect answer to your question, but community solar was a new thing. Starting in 2015, um, the state of Maryland passed a community solar law. But what it, and it created a tremendous opportunity for low income households to be able to benefit from solar power. Um, and we can talk more about that in a bit. But what it didn't do was acknowledge how solar is financed and how project economics work in solar development. And there was a financing gap. So I left the foundation to um, deploy social impact capital into this space.

Speaker B: You can clearly see how those two bugs sort of merge. And it seems like solar, Community Solar specifically does hit at the intersection of both. Um, would love to, love to dive a little bit into what the process looked like from the point of getting that idea and having the awareness that there is sort of this gap that the Maryland bill didn't necessarily address in terms of the financing of community solar projects. And then once you had that idea, like what the actual first steps, uh, were to getting, getting started here.

Speaker A: That is a great question. And, and let me start by saying, just because I don't know if all your listeners will be familiar with community Solar. It's. And, and I say community solar with a capital C and A capital S. Um, community solar. There are about 23 states in the country currently that have some form, form of community solar. It is a legislative and regulatory framework which allows individual households to sign up for, to pay for solar power that's generated not on their rooftops. So it's usually commercial scale or even industrial scale. It's usually, uh, on land, but it can be, you think of solar farms, but can also be on rooftops and parking lots of. But it's larger scale. So the project economics benefit from economies of scale. But individual households can sign up for the power that's generated on those larger farms to go into the grid and then they sign up and the power that's coming to their household actually may or may not be solar generated electrons, but they are paying for that power to go into the grid and they're consuming it.

Speaker B: I wonder like how it came about because I have had experience knocking on doors to talk to people to see whether they want solar on their roof. Um, and it's a major just the roof itself, like putting solar on the roof, because there's so many factors that have to align. One, the roof has to be new. If it's not, then you have to replace the roof. That's very costly. Two, people are very sentimental about their houses. So as a result it can be difficult, uh, to make the value proposition in a way that's appealing. But I feel like community solar sort of gets around that in a very, very, uh, innovative way.

Speaker A: That is exactly right. And if you think of, you know, all of the variables as you said, that go into that have to be aligned, everything has to be moving in the right direction. For a household that has the resources, the upfront resources to put solar on their rooftop. Then you think about lower income households, many of whom are renters, they're not owners, so they don't own their own homes. And so they can't decide whether or not to put solar on the rooftops. And so community Solar, the reason it came up in Maryland as a law, is a state legislator actually representing Baltimore City, um, uh, delegate Luke Kleppinger, um, really precisely because of this inequality and this lack of equitable access, said, well, wait a second. Low income, first of all, a lot of people can't put solar even well off. People can't put solar on the roofs because of shading or whatever the reason might be. Um, but second of all, lower income households absolutely can't necessarily always put solar on their rooftops. And so what about community solar to create a more equitable model of solar access and to really bring more sectors of the economy into the clean energy marketplace. I was so excited about this, um, the opportunity that Community Solar created to really reach lower income households and communities. Um, but yeah, it was just an idea. I, you know, initially I was a vice president at a private foundation, local foundation, and I initially just on my own time did research to see whether any this gap was being filled by anybody.

Speaker B: Um, and you didn't even have chatgpt then, so I didn't have a lot of work.

Speaker A: That's exactly right. Imagine that. And speaking of energy consumption, I do want your listeners to know, if they don't already, how much energy is consumed every time they go on to chat GPT or so. Anyway, that's just my little, little public service announcement.

Speaker B: Any.

Speaker A: Anyway, um, I did research, you know, sort of my own informal market analysis, realized there wasn't anybody else filling this gap. Community Solar in Maryland was brand new. There was one, uh, nonprofit in Colorado that was doing similar kinds of work. Anyway, long story short, I went to my then boss and I said, I have an idea. Is it okay if I work part time, um, until such and such a date to figure out if there's a there there? He was very supportive turned out. And so then I did end up talking to a lot of solar developers and I said okay, um, my understanding is that your investors aren't going to want to and commercial banks and everybody else isn't going to necessarily want to invest in projects that serve low income households because low income households may or may not have the credit scores that your investors typically look to. And your investors understandably are going to need to see the cash flow to recoup the costs of having constructed the solar project. So what if we raised social impact capital to sit into a guarantee fund that would make the project whole in the event that low income customers did not pay their bills. Um, the beauty of Community Solar is if someone doesn't pay their bill over a certain period of time, you can remove them from the list and bring somebody else on. Unlike single family rooftop solar, you can't exact once you install the solar, the underlying resident has to pay their bills. Right? Um, but with Community Solar it's a little different. So they said yes, they said great. So I went and raised philanthropic operating money to get started. And um, that was seven and a half years ago.

Speaker B: Was that challenging to do to raise the philanthropic capital to get started since it's a relatively new space?

Speaker A: It was very challenging. I was at a big advantage in that I was already in the philanthropic community. So I had contacts, um, and I had friends, colleagues who were in other private foundations. Um, even so those friends and colleagues are very good at saying no, even to their friends and colleagues with a great idea. So it was not a shoo in and you're exactly right to point out that it was. I was asking private foundations to do two new things, not just one, but two. One, enter into a new sector of solar energy none of them really knew, had worked in solar energy before. Um, two, I was asking them to um, expand their use of impact investing program related investing that some foundations were taking baby steps across the country. Some foundations have been doing it for years, including the one where I worked, the ABLE Foundation. Um, but most foundations really hadn't done much. They were very interested, but they hadn't really gone to the place of okay, what if I, instead of putting all this money in the form of a grant, what if I loan the money at 1, 2, 3% interest and then I get the money back but it achieves the same purpose? Or, or I set up a guarantee fund. Um, so I was asking them to, I was pushing the envelope on two

Speaker B: fronts and it wasn't amazing, I bet at that. Well, thank you for your service in setting the stage because now uh, at least we're seeing more financing on the community solar front. So the early movers, uh, everyone appreciates your work. So thank you. And can you talk a little bit about how, how it's grown since those years, like what were some of the early hiccups and what have you seen really evolve in this space which has unlocked it, uh, to the, to the, I mean we are seeing a lot more community Solar across the U.S. um, so I would love to like get a sense of what has facilitated that growth. Of course some of these factors that we've talked about, like having to avoid the roofs or also uh, the credit worthiness, uh, piece and things like that. But would love to hear from your perspective.

Speaker A: Yeah. So, um, I can't speak too well about the growth of community solar across the country other than I do participate in national networks. Um, but I can really speak to the growth of community solar in Maryland. And uh, it has been part of our early role was to spend time at the Public Service Commission, um, doing advocacy, um, to the extent our 501c3 status allowed it, which there are rules about how much advocacy and what kind of advocacy 501s can do. Um, but we did do a fair amount of advocacy in Annapolis, in Maryland, at the Legislative level and then also at the regulatory level before the Public Service Commission, um, they had working groups that had to implement the new community solar law. And this was again new to the Public Service Commission. It was new to all the players.

Speaker B: Um,

Speaker A: um, was a lot to work through. Um, and I saw my role as really being the spokesperson for lower income households because there were developers on the work group, there were utilities in the work group. Um, I was also representing environmental organizations because I uh, serve on the board of an environmental advocacy group. But really I was very much focused on carving out, uh, or preserving from the law implementing the low income benefits in such a way that it really maximize benefit to lower income communities. Um, since that program was implemented through the Public Service Commission, it has taken off in Maryland. Um, because if you have incentives, um, and you have, in a lot of ways you have land. You had a lot of solar developers coming to Maryland because there weren't too many states that actually allowed community solar. Um, the problem is that a lot, as far as I can tell, is a lot of the community solar to date has been built on open tracts of land. And I actually as an environmentalist, um, would much rather see us developing solar on our built environment before we develop solar on open green space, particularly arable land. Absolutely not forested land. Right. Um, for climate purposes, we need to maintain as much green space as possible. The problem even today is that there aren't. The project economics of putting solar on rooftops and parking lots are more challenging and more difficult. So you need more financial incentives than you do building large commercial community solar farms on large tracts of land. So the developers all went to the large tracks of land. And in answer to your question of sort of how I've seen the market evolve, uh, we as an organization, the Climate Access Fund, have evolved in response to the evolving market because we are very firmly committed to our role of filling financing gaps. We do not duplicate effort. We're too small to com. We don't compete with commercial banks, we don't compete with large private developers. We really just try to be disciplined about using flexible, creative approaches to capital raising and financing to fill gaps in the market. And the gaps in the market I see still, still today are they continue to be lower income, um, access to a lesser extent. And we could talk about that, but also there are gaps. We're not using enough of our parking lots. We have so many parking lots that could have parked solar canopies over them. It's just expensive. And I have some solutions in mind.

Speaker B: But um, that's Actually funny that you meant because as you were speaking I was thinking to myself, there are so many parking lots which provide a lot of opportunity for solar canopies. But as you mentioned, they're expensive. I was actually working on one myself. Um, and it's coming out around to around $4 a lot, which compared to utility, uh, scale solar on land, or even rooftop solar is just significantly more.

Speaker A: Yes, yes, yes, no, I remember you were doing that and I applaud you and um, would love to hear how that effort is going. Um, but yeah, so in terms of how the market has evolved, um, it's grown tremendously, which is wonderful from a climate perspective. We need all the solar power we can get. Um, it has not grown or developed as much into the potential it has, it hasn't reached the potential of true equitable access to solar that it could. Um, and equitable access to solar in my mind is not just being able to purchase the solar power that's generated somewhere else, which is what community solar allows for, and being able to purchase it at a discount, a substantial enough discount that it matters, but it's also about who owns these solar projects and who benefits from the long term wealth creation of these 25 to 30 year solar arrays. We have done a lot of work through, thinking about, experimenting, talking with people around the country about how you can try to ensure that asset, the generation of these assets and asset ownership remains in under, historically disinvested and underserved communities. So it's great to serve these communities, individual households with solar power. But it's even better if you can figure out the right financing mechanisms and structures, project structures, to allow them to ultimately own the assets. And we have really tried to do that. The recent developments in Washington are making that and many other things extremely difficult,

Speaker B: which we're definitely going to get to. But before getting there, I feel like this is a really interesting, innovative piece where communities can actually end up owning the solar systems that are, uh, providing them with electricity. So what are some of the models that you've seen to work as it pertains to providing that ownership capability?

Speaker A: So this actually could be a good segue into some of the challenges we're facing, um, with this new administration. Because one of the really great innovations of the Inflation Reduction act, which was passed by Congress, um, and the Biden administration, um, to invest money that would leverage lots of capital, lots of private capital, and really sort of exponentially grow the clean energy economy. Um, one of the really innovative aspects of that law was what's called direct Pay and um, direct pay allows for nonprofits and government entities to be tax equity investors. So as you know, but not all listeners may know, solar projects rely on tax credits from the federal government, um, which was an initial policy mechanism to incentivize solar development. Just like we have had lots and lots of similar mechanisms to incentivize fossil fuels. Over the last more than 100 years, we've had subsidization like nobody's business in fossil fuels. One of the ways that fossil fuels has been incentivized is through tax credits. This is a similar use of tax credits in the solar development world. So, um, what direct pay has done is said, okay, well, instead of only allowing only structuring tax incentives so that big banks or big private entities can be the tax equity investors, let's open up that opportunity to nonprofits and local governments to be the owners, the tax equity investors and owners of these systems. So that is a tremendous opportunity that the reconciliation bill isn't directly eliminating, but they're making it, um, so difficult with some of the other terms that that may be eliminated. If that's eliminated, that is a really unfortunate, um, development. There are even greater threats to solar energy from this reconciliation bill. We'll see what happens in the Senate. Um, but that is one way that local communities can own the asset in the end is through this tax equity mechanism where they invest and then they get, instead of they don't pay taxes. So they couldn't get a tax credit from the federal government, but they would get a direct payment in essentially in lieu of taxes, or in lieu of a tax credit, they'd get a direct payment for that same amount of invested capital.

Speaker B: Got it, Got it. That makes a lot of sense. So sticking to this thread of, um, some of the challenges we're seeing with the reconciliation bill, what are your thoughts on the impacts of the ITC being eliminated? Do you think that would put solar projects at the community solar level to a full standstill, or how do you think that will impact development on the ground?

Speaker A: I can just to create a, uh, I was going to say a verbal visual, which doesn't make a lot of sense, but it is kind of a visual that I'm going to sort of explain, um, for listeners. If you think of 100%, you know, the capital stack of a solar project of any size, but let's say a community solar project, if it costs $100 right now, the Baseline Investment Tax Credit, or ITC is 3, 30%. So that means of that hundred dollars that it costs to build that solar array 30% of the tax eligible costs which may be $95 out of the hundred or something. But let's, for the sake of explaining this let's just say it's 100% of the cost. So $30 of that 100 is paid for in the form of a tax credit. Then the remaining 70% of the cost of building constructing the project is equity and debt. So if you eliminate and then there have been additional bonus tax credits which for example we have a project in East Baltimore Solar for us at Henderson Hopkins that is operational and it's saving, it's on the rooftop of a charter school and it's saving 150 to 160 low income households 25% on their electricity bills. Um we qualified were approved for a bonus tax credit of 20%. So that means 50% of the project is covered by the ITC. Um, if all of that ITC goes away. So not just the bonus which is intended to go away in the House reconciliation bill, but if that 30% goes away too over. It wouldn't go away immediately. It would go away. I think it's by 2029 or 2030. I can't even imagine what that would do to solar projects. I don't know that it would eliminate it but it would definitely mean that only big private investors would be able to benefit and big commercial banks. So you certainly wouldn't be able to have small projects in historically disinvested and underserved communities. Um getting these projects and asset ownership it would be much, much more difficult to finance.

Speaker B: Yeah. Which is really sad because like you said there's so many benefits on top of the climate element for solar. Uh, uh, especially as people, more people start using ChatGPT. They're, they're driving up electricity demand that's going to drive up costs. Um and 20 25% for, for a low income person saving that on their bill. That's, that's major. So fingers crossed. The Senate ultimately makes it a little better. At least in 2029 was in the initial bill. Unfortunately they moved it up to, they did two months after the bill is enacted. So very near term but hopefully the Senate uh, fixes that. So we'll see. Fingers crossed.

Speaker A: Well and to your point if I could just jump in, we haven't even talked about the jobs um, that are created through the whole clean energy economy and solar development. But, but that's another reason that we really focus on local ownership and the smaller projects located in the underserved communities because of the job creation. When you have job. When you have big solar farms out in, you know, suburbs or rural areas, the jobs are there, right? If you have them in rural, underserved rural areas like in Western Maryland or the Eastern Shore, that is really important. The jobs need come along with the solar. If you have them in urban areas, historically disinvested urban areas, the jobs come along with solar development. And so that is a really critical piece. And then, um, between the jobs, the bill reduction, and the asset ownership potential, it's a true economic development tool, um, in addition to being a climate mitigation tool.

Speaker B: Especially in a state like Maryland, which imports such a high percentage of its electricity, I think the number is 40%. Um, so those elements that you just mentioned are only intensified because you can't really get those same benefits through other energy development initiatives because there, there isn't that opportunity in a state like Maryland. Um, so I think, I think it would be, It'd be pretty hard, uh, if some of these tax credits do get taken away. But would love to hear your thoughts on whether the state, you feel like the state just through your experience, uh, building Climate Access Fund here, um, and like, seeing the policy evolve. There have been many recent, like, very positive developments I felt, on the state side with, for example, this new siting bill, uh, that was recently passed through the legislature. Um, I know there's some movement on trying to extend the SREC credits. Would, uh, love to hear whether you feel like the state could step in in a bigger way, potentially in the case that the federal government doesn't act here.

Speaker A: Um, that is a great question. And actually, before I address that question, I do want to just point out that I read somewhere that 80% of the benefits of the Inflation Reduction act thus far have been to red states. Um, and I think that's what's such a shame about this, is that there, again, it's just misinformation. It's seen as a political bill when actually it really has bipartisan benefit. Um, but in answer to your question, we're facing a bit of a perfect, um, storm here in Maryland, um, in that we have three things going on at once. One is, I should say, an economic perfect storm. And I'm not an economist, so just this is a layperson's perspective. But one, we have all of the cuts coming, um, from Washington. Two, we have all of the lost jobs coming from Washington, um, and Maryland is the single state with the most to lose in terms of federal jobs because we're right next to Washington D.C. um, and then three, we had our legislature this past legislative session. Our session is January to April. Um, was facing a $3 billion budget deficit. So this was not. Maryland has been a leader in solar policy, in climate policy. This was not a stellar year for Maryland. Um, I should say the fourth piece of our perfect storm is that we have um, increasing Demand for energy. AI ChatGPT um, and um, our regional grid does not have sufficient capacity and some would argue has been mismanaged so that we are facing a um, real crisis, um, between energy supply and demand. So this perfect storm of all these four things means that we are facing some real economic challenges in Maryland which makes it extremely difficult to um, pass the kind of legislation we really need to move the needle and to take up the mantle when the federal government is um, sort of, what's the word? Um, uh, not obviating but not meeting its responsibility. Um, so I'm not terribly optimistic that Maryland is going to be able to um. The governor, yes, the solar siting bill was good in some ways because it allowed the Public Service Commission more decision making authority. I will say I think I might be alone in being disappointed that the bill did not focus. Again I think Maryland, we have not done a good job of focusing on incentivizing um, solar development in the built environment. We've been very focused on large scale projects which again from a climate perspective is really important. Um, from an energy supply and demand perspective is really important. But from a social equity perspective and from an environmental use perspective, we need to be focused on the built environment.

Speaker B: How can we do that more? How can we focus more on the built environment?

Speaker A: It's very difficult because it's really, it is more expensive. There are more and more solar developers developing rooftop solar on large buildings as more. The easiest thing to do is go put solar on a large track of land. That's going to cause, create the best return on your investment as a solar development. Second, you go to a large warehouse and you do rooftop solar on a large warehouse. Third, you look at parking lots and you look at smaller rooftops. Um, we haven't quite gotten there yet. My own solution is, or proposed solution is instead of using grant money, which we're still doing through the Regional Greenhouse Gas Initiative and the Solar Energy Investment Fund, instead of spending that in the form of grants, which to me is a 20th century solution, we have got to do a better job of moving into the 21st century and using clean energy finance and green banks as the solution. So instead of spending a dollar in the form of A grant, you, you spend the dollar in the form of innovative financing that will leverage private capital so that you $1 becomes $4 or $6. $1 isn't just $1. Um, we're not doing a great job of that. Maryland has three green banks. My own, which is very small and focused on low income access to community solar. We have the Maryland Clean Energy center, which is sort of the statewide green bank. And then we, Montgomery county has its

Speaker B: own green bank, which is how I got the project finance. It's such a good point. Without that financing, it just wouldn't pencil out.

Speaker A: Exactly.

Speaker B: It's a very good point.

Speaker A: Yeah, yeah. So to me the solution is use the green banks that you have to leverage more private capital instead of spending. We need grants too, because there's some low income projects, for example, that require grant funding because there is no return energy storage. It's very difficult to have that to create an ongoing stream of operating revenue from battery storage. So you need a certain amount of grant money for that. You need a certain amount of grant money or very low cost capital for parking canopies. But there are a lot of different creative ways that we can use our financing. Let's not just think of grant funding, let's think of, of other types of financing.

Speaker B: Amazing. Well, thank you so much for this incredible conversation where you've touched on many different important issues and it's truly great to hear your perspective. Final question. Well, I kind of two questions because I have to ask you one of them. Um, so I'll just club them together. What gives you the most optimism? Looking ahead. And then secondly, this is for all of those grad school students out there who are, who I know are listening. Um, if you just reflecting through the lens of your inspiring career, could go back in time and give yourself a piece of advice. As you were graduating, um, from grad school, does anything come to mind?

Speaker A: Wow. Um, what a good question. Good couple of questions. The first one is a little bit easier for me to answer. My optimism comes from two things. One, all of the smart young people like yourself who are committed to doing the right thing. And I come across folks like that right and left, and it's really encouraging. Um, and I'd like to say I have three of my own kids who I like to say are smart young people, um, who are committed to doing the right thing. Um, and then the other piece of optimism is what has been unleashed by the, by recent developments in public funding and financing is a national network of organizations, individuals that is just blown up over the last couple of years because of the Inflation Reduction Act. And even if those are forced to hit the pause button or go dormant or barely survive for a few years, they are not going away. And climate change is here to stay. Clean energy is here to stay. The rest of the world is moving ahead. Um, this is not a permanent situation. I am optimistic that we are moving in the right direction in the big picture, the arc of justice and the arc of climate mitigation, uh, is moving in the right direction. Um, advice I would give my graduate student self.

Speaker B: Um,

Speaker A: be a good listener. Um, be open to thinking outside the box. Um, follow your dreams and your passion and listen to your gut. I think those are the things that I would. Um, the advice that I would give.

Speaker B: Amazing. Amazing. Thank you again so much, Lynn, for joining the podcast. It's truly wonderful to have you on. Really appreciate you taking the time.

Speaker A: Well, Karen, thank you so much. Um, really appreciate the invitation. It's been such a pleasure talking to you and let's stay in touch.

Speaker B: Thanks so much for checking out the Zenergy podcast. If you enjoyed today's episode episode, please take a moment to rate and subscribe to the podcast. It would mean so much to me and the rest of the team. We release episodes every Thursday, so stay tuned for all new episodes featuring industry leaders building a cleaner, greener future for us all. See you next time.

Speaker A: Uh, Sam,