How Recoverable Grants Are Empowering Nonprofits to Go Solar
Innovative funding models like recoverable grants are removing barriers for nonprofits, enabling solar energy adoption and community impact.
As the urgency of transitioning to renewable energy grows, nonprofits—often operating on tight budgets—face significant barriers in accessing clean power. However, innovative funding mechanisms like recoverable grants are shifting this landscape, enabling organizations to install solar arrays, slash energy expenses, and reinvest in communities. This article explores how these grants work, their impact, opportunities for donors, and what the nonprofit solar movement means for the future of sustainable development.
The Unique Challenge Nonprofits Face in Going Solar
Nonprofit organizations serve crucial community functions, from providing food and shelter to education and healthcare. Yet, when it comes to lowering operating costs through solar energy, nonprofits frequently hit a funding wall.
- Lack of Tax Appetite: Unlike businesses or homeowners, most nonprofits are not eligible for major tax credits, such as the Federal Investment Tax Credit (ITC), which lowers the upfront cost of solar installations for for-profit buyers.
- Capital Limitations: Many nonprofits struggle to access grants or loans sizable enough for full solar systems, restricting their ability to invest in long-term savings and sustainability.
- Credit and Collateral Challenges: Traditional lenders are often wary of advancing funds to nonprofits, which may have unstable cash flows or limited collateral.
This means thousands of organizations spend precious funds on utility bills instead of fulfilling their missions—unless creative solutions step in.
What Are Recoverable Grants?
Recoverable grants, also known as zero-interest, repayable grants, are an innovative way for foundations, donor-advised funds, or impact investors to directly finance a project, then recover their principal for future charitable use or redistribution.
Here’s how they work:
- Donors provide capital to a nonprofit as a grant, with an agreement that the funds will be repaid after a pre-defined period (often as energy savings accrue).
- The nonprofit uses the funds for solar installation or other clean energy upgrades.
- Savings generated by lower electricity costs enable the nonprofit to repay the original donor or grant funder, who can then recycle those funds into other community projects.
This creates a cycle of giving, where one donation can catalyze multiple sustainability projects over time.
Why Are Recoverable Grants Suited to Solar?
- Solar installations create predictable, long-term operational savings, making loan repayment viable.
- Unlike commercial Power Purchase Agreements (PPAs), recoverable grants keep ownership and full benefit with the nonprofit.
- They can be structured flexibly to align with donor preferences, organizational needs, and community benefit.
The Social and Environmental Case for Nonprofit Solarization
The push for nonprofit solar isn’t just about cleaner energy; it’s about amplifying social equity and community resilience. When nonprofits reduce energy expenditures, they can:
- Expand core services and outreach.
- Invest in additional staff, programs, or community support.
- Lead by example in sustainability and climate action.
What others are reading
Programs like SRP’s Solar for Nonprofits highlight the direct cost savings already achieved—over $1.1 million collectively so far—demonstrating the real-world impact on organizational capacity and community well-being.
How Do Recoverable Grants Differ from Other Funding Models?
| Funding Model | Eligibility | Repayment | Ownership/Tax Benefits | Community Impact |
|---|---|---|---|---|
| Recoverable Grant | Nonprofits, mission-driven orgs | Principal is repaid after savings accrue | Nonprofit owns system; no tax credits used | Funds can be recycled to other projects |
| Traditional Grant | Nonprofits/charities | No repayment | Nonprofit owns; may miss out on tax incentives | Single-use funding |
| Loan | Entities with creditworthiness | Full repayment with interest | Project or third-party ownership | Potential risk if revenue is unstable |
| PPA (Power Purchase Agreement) | Nonprofits/businesses with good sites | Pay for energy produced; not for system | Third-party owns; monetizes tax credits | Long-term savings but limited equity |
How Do Recoverable Grants Work in Practice?
Organizations like RE-volv, Hammond Climate Solutions Foundation, and others are pioneering recoverable grant models specifically to close the “solar funding gap” for nonprofits. Typical steps include:
- Donor Engagement: Foundations, impact investors, or donor-advised funds allocate capital to a solar nonprofit funder as recoverable grants.
- Project Selection: Funders identify mission-aligned nonprofits—often in underinvested or frontline communities—to receive the grant for solar installation.
- Solar Installation: The nonprofit deploys those funds for a rooftop or ground-mount solar system.
- Savings & Repayment: Reduced electricity bills generate savings; a share of these is used to repay the original grant over five to 10 years (or another agreed period).
- Funds Recycled: Donors can then use the repaid principal for new climate, energy efficiency, or justice-centered projects.
Success Story Snapshots
- RE-volv has helped dozens of nonprofits in underserved U.S. communities go solar, using recoverable grant and similar models to break through traditional funding barriers.
- Organizations supported by SRP Solar for Nonprofits have collectively saved over $1.1 million since 2007, redirecting those funds to direct service expansion in Arizona.
- Hammond Climate Solutions Foundation has paired recoverable grants with public rebates and incentives to maximize the impact and reach of existing clean energy funding.
Who Can Fund Nonprofit Solar—and Why?
Unlocking clean energy for nonprofits is not just a local benefit; it supports systemic decarbonization and addresses environmental inequities. Types of donors and their motivations include:
- Foundations aiming for impact: Climate, justice, health, and social equity-focused foundations can anticipate multiple waves of benefit per dollar granted.
- Donor-Advised Funds (DAFs): These vehicles allow individuals to make a one-time philanthropic gift, then recycle returns to keep giving over time.
- Impact Investors: Individuals or organizations wanting measurable climate/social returns alongside financial stewardship may find this model appealing.
- Community Members: Local supporters can directly accelerate solar adoption in neighborhood service organizations, amplifying local resilience.
Matching Grants and Federal Incentives: A Powerful Combination
Pairing recoverable grants with other funding sources can amplify impact. Notably:
- Federal Incentives: The Investment Tax Credit (ITC) now covers 30% of the system cost through at least 2032. Nonprofits can participate via direct pay or partnership arrangements.
- Public Sector Grants: Programs at federal, state, and local levels provide funds for tree planting, infrastructure, and renewable energy in communities of greatest need.
- Local Utility Programs: Utilities like SRP in Arizona offer grants or match-funding to install nonprofit solar arrays, creating multisource project stacks.
Overcoming Barriers: Why Not All Nonprofits Can Go Solar—Yet
Despite these promising models, some significant hurdles remain:
- Capacity/Lack of Dedicated Staff: Securing and managing grants requires staff time many nonprofits lack.
- Site Suitability: Not all properties can support solar due to shading, ownership, or technical constraints.
- Program Complexity: Navigating incentives, insurance, project timelines, and board approvals can be daunting.
- Upfront Fundraising: Even with zero-interest terms, many nonprofits must commit to multi-year repayments, which may be a new frontier for risk-averse boards.
Frequently Asked Questions (FAQs)
Q: What is a recoverable grant, and how does it differ from a typical loan?
A: A recoverable grant is a philanthropic investment that acts like a zero-interest loan for a charitable project. It differs from traditional loans in being more flexible, requiring no interest, and allowing funds to be recycled for further impact once repaid.
Q: Why can’t nonprofits use tax credits directly to go solar?
A: Most U.S. tax credits, such as the Investment Tax Credit (ITC), reduce federal tax liability—which tax-exempt nonprofits do not have. However, changes from the Inflation Reduction Act are increasing nonprofit access through direct pay or partnerships.
Q: What happens if a nonprofit cannot repay a recoverable grant?
A: Terms are usually designed to minimize risk, often linking repayment to actual savings achieved. If unexpected issues emerge, many donors are willing to restructure, convert the recovery to a traditional grant, or extend terms.
Q: Can small nonprofits with limited resources benefit from these programs?
A: Yes, many recoverable grant providers focus on accessibility and technical assistance to ensure small or under-resourced organizations benefit, though project readiness, staff support, and site suitability remain important.
Q: How can my organization get started?
A: Research organizations such as RE-volv, Hammond Climate Solutions Foundation, and your local utility’s nonprofit solar offerings. Prepare your board and facilities team, assess site suitability, and apply for the next funding round if eligible.
The Future: Toward an Equitable Clean Energy Transition
As more funders and donors embrace recoverable grants and hybrid funding models, the pathway to nonprofit solar adoption becomes ever clearer. These mechanisms not only multiply the impact of philanthropic dollars, but also foster climate justice and community empowerment. By investing in nontraditional financial tools, we can ensure the benefits of clean energy—and the resilience it brings—are accessible to all sectors of society, especially those serving at the frontlines.
Resources for Nonprofits and Funders
- RE-volv: Specializes in solar financial tools for nonprofits, including recoverable grants and promissory notes.
- Hammond Climate Solutions Foundation: Develops clean energy funding tailored to nonprofit missions, including recoverable grants coupled with public incentives.
- Energy Funds for All: A portal for federal and state funding opportunities covering solar, energy storage, and nature-based solutions for nonprofits.
- SRP Solar for Nonprofits: Local utility offering direct funding, technical support, and matching grants in Arizona.
Further Reading
- The Role of Impact Investing in Climate Action
- Navigating Federal Clean Energy Grants: A Guide for Nonprofits
- Solar Power: A Game Changer for Community Development
References
- https://re-volv.org/recoverable-grant/
- https://www.srpnet.com/account/donate/solar-nonprofits
- https://energyfundsforall.org/find-funding-for/nonprofits/
- https://www.hcs.foundation/solutions
- https://www.nrutilities.com/renewable-energy-grants-non-profits
- https://prowly.com/profiles/journalists/sami-grover
- https://re-volv.org/re-volv/media/
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