The Most Important Infrastructure Number No One is Talking About

The Most Important Infrastructure Number No One is Talking About

May 25, 2021 On May 13, 2021, the White House released recommendations for the creation of a geospatial Climate and Economic Justice Screening Tool that would help ensure that 40 percent of the benefits of investments in climate and clean infrastructure target disadvantaged communities. The tool, created as part of the Biden administration’s Justice40 initiative, should be in place by July, and will be used for siting for renewable development. We believe the emphasis on environmental justice (EJ) generally and this tool specifically will ensure federal dollars are allocated to key climate and clean infrastructure investments. President Biden’s infrastructure proposal, The American Jobs Plan (AJP), put EJ concerns front and center in his Build Back Better campaign, prioritizing “addressing long-standing and persistent racial injustice.”

according to the White House

We believe the report will change substantially from draft to final and raise opposition for some of its content, particularly its stance that both carbon capture utilization and storage (CCUS) and nuclear procurement are “examples of the types of projects that will not benefit a community.”  These statements are contrary to current White House policy statements. The White House Environmental Justice Advisory Council that developed the report is a public advisory committee and as such are simply a set of nonbinding recommendations. To wit, the report indicates it “has not been reviewed for approval by the Environmental Protection Agency (EPA) or Council on Environmental Quality (CEQ), and hence, its contents and recommendations do not necessarily represent the view and policies of the EPA or CEQ, nor of other agencies in the Executive Branch of the Federal government.” Implementing EJ has never been successful historically and the schisms between the authors of this report and current White House policy suggest EJ implementation will continue on a bumpy road, even with the full endorsement of the president. That said, we still believe this administration will marshal its abilities and its grant-making authorities to help ensure a significant portion of the flow of capital and projects stemming from the infrastructure package will result in benefits and investments in disenfranchised communities.

Although the term “benefit” is used generally in the AJP, the White House report provides examples of programs that can be used to benefit disadvantaged communities including clean transportation, regenerative agriculture, green housing, community solar, and clean drinking water.

Capstone believes the themes and implementation tools are positive signs for investments focusing on cleaner air, decarbonization, and employment in rural areas and low to middle income (LMI) communities evidenced by the success of similar themes and programs in states including New York and California. The state of New York established a similar 40% benefit requirement in the 2019 Climate Leadership and Community Protection Act, which resulted in community solar development incentives for 6GW of third-party PV development, and additional incentives for development in LMI communities. California has used a geospatial screening tool known as CalEnviroScreen since 2013 to identify communities most impacted by pollution and socioeconomic inequities as a part of the California EPA’s EJ program, and uses this tool in the siting process for EJ-minded clean energy and infrastructure development. We believe federal programs benefitting disadvantaged communities will make up a large portion of the $625 billion-750 billion in physical and environmental infrastructure spending included in our base case for the next five years.

Importantly, the White House report offers an outline for how federal investments can be used to meet the 40% goal. The report recommends creating a green bank to provide low-interest loans that can be securitized and which cover 100% of costs. The goal is “to scale up rooftop and community solar, energy efficiency upgrades, and resilience projects in frontline and low-income communities.” As such, we highlight these areas as ripe for investment and potential public-private partnerships, specifically:

Community Solar

The White House Environmental Justice Advisory Council (WHEJAC) recommends the US Department of Energy (DOE) Office of Energy Efficiency and Renewable Energy “establish a grant program that incentivizes community solar projects in cities and rural communities with discounted subscriptions for low-income households whose monthly cost burden for conventional electricity is 12.5% or greater, first prioritizing households with the greatest energy burden.” The report also recommends infrastructure investments that provide opportunities for “indigenous peoples’ community organizations, grassroots organizations, and entrepreneurs to receive relevant infrastructure funds for the development of their own capacities for infrastructure projects, such as community solar.” We expect community solar to continue to experience tailwinds as policymakers and regulators strive to meet EJ goals at the state and federal level.

Energy Efficiency

The WHEJAC recommends financing energy efficiency projects with green bank loans. It recommends expanding the US Department of Agriculture Rural Energy for America Program “to tax-exempt entities including nonprofits and government entities and increase program funding to $100 million per year to support tribal energy and energy efficiency projects.” Additionally, the report recommends the DOE fund and expand “energy conservation, efficiency, customer engagement, and demand response programs,” with “Quick-Start Energy Efficiency programs” including “widescale solar water heaters implementation, energy audits, appliance replacement programs, tuning up air conditioners or replacing old ones, expanding low-income weatherization programs, and energy literacy and prosumer education programs.” WHEJAC also offers energy efficiency-related recommendations for the US Department of Housing and Urban Development (HUD), USDA, and the US Department of Labor. These policies are additive to extensions of energy efficiency tax credits proposed in the AJP.

Clean Transportation

The report includes recommendations for the US Department of Transportation, DOE, HUD, and EPA, including investment in transportation hubs in LMI communities, electrification of public fleets, and the development of alternate shared transit entrepreneurship programs through seed funding for startups in this space.

FERC Appointment: Senior Counsel for Environmental Justice and Equity

In addition to the White House EJ-related developments, on May 20, 2021, the Federal Energy Regulatory Commission (FERC) announced the appointment of former National Resource Defense Council Senior Attorney Montina Cole to serve as Senior Counsel for Environmental Justice and Equity, signaling an increase in focus on EJ-related issues at the regulatory body that oversees natural gas pipeline approvals, licenses hydroelectric power plants, and regulates the nation’s energy markets. In the announcement, FERC Chairman Richard Glick said the appointment will “work on building a culture and program that ensures FERC appropriately integrates environmental justice and equity issues in [its] decision making.” 

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