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Last month, the Greenhouse Gas Reduction Fund (GGRF) committed to sending $27 billion to a range of organizations to support local climate and clean energy projects. In the coming months, this funding will accelerate everything from community solar power to home energy efficiency improvements, bringing the benefits of the energy transition to homes across the United States.
Jahi Wise, who oversaw GGRF implementation until he retired last week, told me on September 3 that the program will ultimately fund tens of thousands of projects. “This is a show of faith in the American community and the American people,” he said.
Indeed, the program, created by the Inflation Reduction Act (IRA), has been praised by environmental groups for bringing the energy transition to low-income areas and communities of color in particular. But the projects funded by the fund are just the beginning. And it won’t stop there after supporting a few local organizations. The GGRF has the potential to spur the broader financial innovation needed to encourage the private sector to invest in local clean energy projects, unlocking the trillions of dollars needed for the energy transition.
“This is really a game of scale,” Wise said. “The idea here is to use this public capital to spur financial innovation and financial products that will allow more projects to get completed.”
The GGRF is a short section of the IRA creation that is easily overlooked in a sweeping piece of legislation. When the law was rushed into law in 2022, synopses often listed the fund as one brief item in a long list of new programs. But the fund is the largest tax-exempt item in the law.
Its structure is also a bit complicated: it is divided into three sub-programs, each of which provides funding to independent non-profit organizations. These organizations are responsible for using the funds, meeting with project developers, entrepreneurs, and communities to find the most effective way to use the funds while still meeting the obligations and guidelines set by the GGRF.
The fund’s novelty is also its strength: While the federal government has a variety of programs aimed at supporting innovative companies and new technologies, this fund is explicitly aimed at promoting projects that deploy mature technologies locally, meaning the benefits of the energy transition will be felt directly by people on the ground, especially in underserved communities that have historically been ignored by clean energy entrepreneurs.
Potential financing tools are varied and include loans for specific projects, debt to help companies enter new markets, and loan guarantees to communities deemed a credit risk. These are not new mechanisms, but innovation comes from adapting them to fit the specific needs of clean energy projects, especially in communities where private capital has not yet funded these types of projects. “Innovation here is often a strategic injection of capital into a product that already exists,” Wise says.
The private sector is key to the success of the GGRF: First, the fund wants to raise $7 from the private sector for every $1 of public funding it puts in. This would quickly deplete even more of the funds allocated by the IRA.
But in the long term, the program’s impact will also depend on whether private capital continues to fund the same types of projects. The GGRF offers an opportunity to prove that these deals make sense to return-focused investors. “The idea here is not to just approach mission-aligned funds,” Wise says. “It’s also to dig deeper — areas of the market that are less about mission and impact, but where we know there’s a lot of capital that’s needed.”
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