Issue Brief | Decarbonizing Healthcare: Clean Energy Projects under the Greenhouse Gas Reduction Fund

Overview

With its recent announcement of grant awards to eight financial entities under the Greenhouse Gas Reduction Fund (GGRF), the Environmental Protection Agency (EPA) has set in motion an historic new initiative that would help bring low-cost financing — totaling $20 billion — to clean energy projects in underserved communities.  Non-profit healthcare facilities, particularly Federally Qualified Healthcare Centers (FQHCs) and Essential Hospitals, are often located in the low-income and disadvantaged communities (LIDACs) that the GGRF is designed to reach. Funds from the GGRF could be an important piece of the puzzle to help finance the up-front costs of projects such as solar + battery microgrids, which can reduce pollution in neighboring communities and increase the resilience of healthcare facilities during extreme weather events. 

More generally, a focus on healthcare facilities in the GGRF is important because these facilities often play a critical role in underserved communities and may serve as “anchor institutions” that can have a positive economic and social influence beyond providing health care service. This suggests that additional efforts to reduce emissions and increase climate resilience present an opportunity to center environmental justice and equitable distribution of benefits from clean energy investments.  As discussed in previous papers in GCC’s series on climate and healthcare, clean energy and low-carbon transportation measures can lower local air pollution in communities surrounding healthcare facilities, increase resilience and access to critical healthcare services during extreme weather events, and provide economic opportunities in underserved communities. 

This issue brief provides background on the National Clean Investment Fund (NCIF) and Clean Communities Investment Accelerator (CCIA) programs of the GGRF and explores four considerations for community-based lenders, health centers, essential hospitals, and others interested in accessing this innovative source of green capital. To maximize GGRF financing for healthcare projects, FQHCs and essential hospitals could take several steps:

• Building on the work of previous initiatives to develop standard templates for healthcare projects that can be modified as needed;
• Engaging local communities about the benefits of projects;
• Educating healthcare facility management about the availability of the new source of financing and the synergies with other Inflation Reduction Act (IRA) incentives;
• Reaching out and providing information to Community Development Financial Institutions (CDFIs) about the unique community benefits of healthcare projects; and ensuring that there are state and local clean energy policies that facilitate GGRF projects.

To take these steps, commnuity health centers and essential hospitals would benefit from additional technical assistance and capacity building to navigate the multiple financing streams necessary to finance clean energy projects.

Background

On April 4, 2024, the EPA announced its selection of grant awards under two competitions under the GGRF – the National Clean Investment Fund (NCIF) and the Clean Communities Investment Accelerator (CCIA).  The GGRF was established under the Inflation Reduction Act to help finance certain clean energy measures throughout the country.  Approximately $14 billion was awarded under the NCIF and approximately $6 billion was awarded under the CCIA. Each of the “grantees” that has received funds under these programs will in turn serve as a financial intermediary, using the monies provided under the GGRF to support a variety of projects in communities across the country. These investments are expected to leverage additional private investment for projects. For example, in its detailed grant proposal description, one of the NCIF grantees says by the end of the program’s seventh year, it projects it will invest $15 of total capital for every $1 dollar of GGRF funds. (Although not the focus of this issue brief, a third GGRF program — Solar for All — has already awarded $7 billion in funds to state and local governments for residential solar energy projects.)

Grantees under each of these programs must emphasize financing projects in low income and disadvantaged (LIDAC) communities. CCIA grantees are required by statute to focus 100 percent of their financing on projects in these communities, while NCIF grantees are required to commit at least 40 percent of funds to LIDACs. 

The two new financing programs have different but complementary focuses to support clean energy projects in underserved communities. The CCIA is intended to deepen the availability of clean financing in underserved communities by supporting community lenders, such as community development financial institutions (CDFIs), credit unions, green banks, housing finance agencies, and minority depository institutions. Five applicants received grants under the CCIA program and each will serve as a non-profit hub whose function is to provide funds and technical support to local lenders in low-income communities. The NCIF program is intended to increase the scale of clean energy deployment and contribute to the transformation of clean energy markets. The three NCIF grantees may fund projects directly or through CDFIs and other community lenders. Below is a summary of the winning institutions, the funding they will receive, and their focus and background.

Summary of GGRF Grantees' Funding and Focus

Qualified Projects

Under both the NCIF and CCIA programs, only “qualified projects” are eligible for financial assistance. Qualified projects must meet all 6 of the following criteria:

• Reduce or avoid greenhouse gas emissions, consistent with the climate goals of the United States to reduce greenhouse gas emissions 50-52 percent below 2005 levels in 2030 and achieve net-zero emissions by no later than 2050.

• Reduce or avoid emissions of other air pollutants.

• Deliver additional benefits to American communities within one or more of the following seven categories: climate change; clean energy and energy efficiency; clean transportation; affordable and sustainable housing; training and workforce development; remediation and reduction of legacy pollution; and development of critical clean water infrastructure.

• Support projects that may not have otherwise been financed. 

• Mobilize private capital, which EPA has said can include funds raised from private capital providers such as commercial banks, funds from philanthropic sources, and equity contributions from project sponsors themselves.  

• Support only “commercial technologies”, which is defined as previous deployment of the technology at least three times for a period of at least five years in the United States for the same general purpose as the project, activity, or technology.

In addition to meeting these criteria, the GGRF highlights three priority project categories for financial assistance:

• Distributed energy generation and storage, defined as projects “that deploy small-scale power generation and/or storage technologies (typically from 1 kW to 10,000 kW), plus enabling infrastructure necessary for deployment of such generation and/or storage technologies.” 
  
  
• Net-zero emissions buildings, defined as projects “that either (1) retrofit an existing building, making a substantial contribution to that building being a net-zero emissions building and as part of a plan for that building achieving zero-over-time, or (2) construct a new net-zero emissions building in a low-income and disadvantaged community.”
  
  
• Zero-emissions transportation, defined as projects “that deploy zero-emissions transportation modes, plus enabling infrastructure necessary for zero-emissions transportation modes—especially in communities that are overburdened by existing diesel pollution, particulate matter concentration, and degraded air quality.”

Most of the detailed proposals from the NCIF and CCIA grantees reflect the potential to finance projects at healthcare facilities. For example, two of the NCIF grantees, CUF and PFC, reference community health centers in their proposals. The other successful NCIF grantee, CGC, includes a market segment in its proposal—small business/nonprofits—that would appear to encompass certain healthcare facilities. The proposals of the five CCIA grantees also appear to signal the potential to fund projects at healthcare facilities, either by mentioning healthcare facilities directly (NCN), by referencing “community infrastructure” projects (OFN, JCF, ACC), or by discussing projects at “commercial facilities” (Inclusiv). 

Low Income and Disadvantaged Communities (LIDACs)

Under the NCIF program, the financial entities selected by EPA are required to use at least 40 percent of grant funds for the purpose of providing financial assistance in low-income and disadvantaged communities. The successful applicants all committed to a higher percentage, with CUF committing to at least 60 percent, CGC committing to at least 50 percent, and PFC committing to at least 75 percent of investments being in LIDACs, rural and Tribal communities.

Under the GGRF, LIDACs must meet the criteria in one of the following four categories:

1. Communities identified as disadvantaged by the Climate and Economic Justice Screening Tool (CEJST);
   
2. A limited number of additional communities identified as disadvantaged by supplemental indexes in the Environmental Justice Screening and Mapping Tool (EJScreen); 
3. Geographically dispersed low-income households; and
4. Properties providing affordable housing.

Categories 1 and 2 would be applicable to some healthcare facilities (discussed below), while categories 3 and 4 are intended to apply to residential projects at households in rural areas and public housing.

As healthcare facilities, community lenders, and community members consider the opportunities presented by the GGRF for financing clean energy projects, here are four strong reasons for supporting projects at healthcare facilities in underserved communities.

#1: Clean Energy at Healthcare Facilities can Reduce Disaster Risks and Benefit Air Quality in Communities 

Climate change puts hospitals and healthcare centers at risk, especially for underserved and vulnerable communities. Extreme weather events have can have multiple impacts on healthcare facilities,  including closure and evacuation of hospitals, loss of valuable medications from the lack of refrigeration, disruptions to supply chains, damage requiring infrastructure repairs and cleanup, situations that cause patients to postpone or cancel care, loss of digital patient data, and difficulties in retaining staff. Overall, these events can affect the bottom line of healthcare facilities through increased costs and lost revenues. At the same time, hospitals themselves may be a source of pollution in a community through onsite burning of fossil fuels to power HVAC systems or fuel backup generators. Hospital fleets, which may include a variety of vehicles, can contribute to air pollution in local communities. Transportation for employees and patients can also add to local pollution, and many underserved communities lack access to EV-charging facilities.

#2: Projects at Many Federally Qualified Healthcare Centers and Essential Hospitals Would Meet GGRF Criteria

The qualified projects criteria for GGRF as described above would likely be met by projects at healthcare facilities. For example:

Reduce or Avoid GHG Emissions: Many of the clean energy projects that healthcare facilities may be interested in implementing would likely satisfy this criterion. Examples of such projects include: (a) solar microgrids with battery storage, including replacing diesel-fueled emergency backup generators with solar + battery storage; (b) electrification of fossil-fuel-powered HVAC systems and (c) installation of EV charging stations, potentially for use by staff, patients, and community members. 

Regarding the solar + battery storage systems, in March 2023, the Center for Medicare and Medicaid Services (CMS)--the agency that administers major healthcare programs in the U.S. and sets requirements for hospitals that are Medicare and Medicaid providers — issued a waiver that allows the use of this technology for emergency backup power in hospitals. Previously, hospitals were required to have diesel or other fossil-fuel powered generators as emergency backup systems. The waiver opens the door to greater use of solar + battery microgrids at healthcare facilities.

“Not Otherwise Financed”: Non-profit healthcare providers, especially those catering to underserved communities, often face significant financial challenges that hinder their adoption of clean energy projects. Limited access to capital, tight budgets, and competing priorities make it difficult for these institutions to invest in initiatives like energy efficiency upgrades or onsite solar installations. Many non-profit medical centers are unable to implement such projects due to their high initial costs, with some failing to secure financing.          

Serving a LIDAC: Many healthcare facilities, particularly Federally Qualified Healthcare Centers (FQHCs) and essential hospitals are located in LIDACs. 

• FQHCs are community-based organizations that provide healthcare services to all patients, regardless of their ability to pay. There are over 1400 FQHCs across every U.S. state and territory, providing access to affordable healthcare services to 31.5 million people. FQHC’s are required by law to have 51 percent of their board positions filled by patients, with the remainder of the board members from the community.
• Essential hospitals provide a safety net for communities, including the uninsured and underinsured, low-income patients and other marginalized people. A recent report on more than 300 members of the America’s Essential Hospitals network indicates that such hospitals served communities in which 14.6 million individuals live below the poverty line. A GCC assessment of Essential Hospitals members with the CEJST tool found that roughly 35 percent are in LIDAC communities, which is defined as (1) located in a census tract that meets one of the socio-economic, environmental, or other burdens used for screening in the tool; or (2) in land within the boundaries of a federally recognized Tribes. (GCC did not assess how many additional essential hospitals are in disadvantaged communities based on the supplemental indexes in EJ Screen — the Environmental Justice Screening and Mapping Tool.)

#3: Recent Health Care Initiatives Provide a Good Starting Point

Healthcare organizations are increasingly working to reduce their GHG emissions through internal commitments, and through a variety of broader initiatives, including the National Academy of Medicine (NAM) Action Collaborative on Decarbonizing the U.S. Health Sector, the White House-Department of Health and Human Services (HHS) Health Sector Climate Pledge, the HHS Office of Climate Change and Health Equity (OCCHE) Catalytic Program on Utilizing the IRA, and the newly proposed CMS Voluntary Decarbonization and Resilience Initiative.

Even more directly, there have been two initiatives designed specifically to support community health centers with installation of solar + battery storage projects — the CHARGE Initiative and Direct Relief. CHARGE is a partnership between the National Association of Community Health Centers (NACHC); Capital Link, a non-profit organization that works with health care facilities to plan for sustainability and growth, access capital, and improve and optimize operations and financial management; and Collective Energy, which “works with critical health facilities to identify energy goals, designs bespoke power solutions based on site-specific needs, and installs solar + storage systems with trusted partners to save health centers money while ensuring they can continue to operate during grid outages.” The CHARGE program has 12 projects at healthcare centers in the final stage of development and approximately 130 additional projects in the investment pipeline. Climate United Fund, one of the NCIF grantee institutions, references Capital Link in its detailed grant proposal as a Transaction Partner that has an existing network of community health facilities. 

Direct Relief’s Power for Health Initiative installs renewable backup power in community health centers and free clinics to provide power for healthcare facilities during power outages. The initiative provides grants for solar + storage systems to build resilience from extreme weather events and provide continuity of care for critical health services in vulnerable communities.

Finally, some CDFIs and other GGRF financial entities have experience with clean energy projects at healthcare facilities. For example, OFN provided funds to a CDFI in Kentucky that financed solar and battery back-up for the Lakeshore Enterprises medical building — a 15,000 square feet healthcare facility in a rural coal-impacted community.

#4: GGRF Financing Can Complement Existing Federal, State, and Private Incentives

The Inflation Reduction Act contains significant incentives for energy efficiency and renewable energy that hospitals and large health organizations may be able to use to fund projects to reduce direct on-site emissions and electricity used at their facilities. In many cases, these IRA incentives can be “stacked” to supplement GGRF financing. 

Most importantly, the Investment Tax Credit (ITC) provides a one-time 30 percent tax credit based on the costs of a project if the project is under 1 MW or meets prevailing wage and apprenticeship requirements. This can be supplemented by “stackable” IRA bonus incentives of 10 percent each for:

• Projects that meet domestic content requirements;

• Facilities in “energy communities,” which includes (1) communities with brownfields; (2) areas with employment or local tax revenues related to fossil fuels and above average unemployment; and (3) areas in which a coal mine or coal-fired power plant has been closed; and

• Facilities in low-income communities and Tribal lands. 

Overall, projects that meet all of these requirements could potentially get credits of up to 60 percent.

Unlike past clean energy tax credits, which could only be claimed by tax-paying entities, the ITC and other IRA tax provisions have an “elective pay” option (also known as “direct pay”), which would allow non-profit hospitals with no tax liability to take advantage of incentives to install clean energy systems at their facilities. Previously, tax exempt entities were not eligible for these credits because they pay no taxes. Through the elective pay option, these entities can receive a payment from the federal government for the value of the credit.

In addition to these new IRA incentives, additional funding sources used by healthcare facilities in the past include state grants, rebates, and other incentives for energy efficiency and solar energy programs for commercial buildings (see a comprehensive listing of incentives by states). In addition, energy savings performance contracts have been a source of funding for some healthcare facilities. Under these contracts, an energy service company (ESCO) installs and maintains energy efficiency measures at a healthcare facility and is paid back out of energy savings.  All of these can now be further complemented by low-cost financing from the GGRF. In addition, conventional loans from commercial banks can be paired with capital from the GGRF to cover the full cost of a project, providing an overall cost of financing that is significantly less than market rate.

Challenges and Next Steps 

Standing Up the NCIF and CCIA Programs

The GGRF represents a significant new source of clean energy financing for underserved communities, but there are challenges ahead to get the funds flowing to projects. The eight grantees in the NCIF and CCIA program must negotiate final agreements with EPA before funding can begin. EPA is also developing guidance on several key issues, including reporting requirements (e.g., key metrics to estimate GHG reductions) and processes. EPA’s guidance also may clarify details associated with what constitutes “qualified projects”, particularly regarding net zero building decarbonization efforts. Finally, there will be a need for guidance and outreach from EPA on labor provisions mandated under the IRA, including Davis-Bacon and Buy America requirements. 

Building Capacity

A recent issue brief by the Center for Impact Finance at the University of New Hampshire highlighted the need to drive demand for GGRF projects, including through education, technical assistance, and capacity building. For FQHCs and essential hospitals, there are multiple competing priorities and they may not have the capacity to navigate the multiple financing streams, design and construction processes, and permitting issues necessary to develop clean energy projects. Despite variation among different healthcare facilities, standardized templates would be a good starting point for specific types of projects. These templates could build on the work of the CHARGE initiative and other healthcare organization projects and could be a collaborative effort of the NCIF and CCIA financial entities. The templates could be modified based on the specific circumstances of a healthcare facility. 

Similarly, many community-based lenders such as CDFIs and credit unions lack extensive experience with clean energy financing and will require training and technical assistance. The development of standardized financial products will help, as will collaborative efforts to provide technical assistance. A summary of a recent workshop of community based lenders noted that  “shared climate ‘back offices’ can help capacity strapped lenders integrate green processes and products more quickly. Further, centralized platforms for tools, resources, and best practices can streamline information access and drive market-wide learning.” 

State and Local Policy Challenges

There also may be a need to address state and local policies that affect the ability to add solar panels and battery storage at a facility or to connect to the electric grid. With the GGRF and new sources of financing under the IRA there are new opportunities, but state and local issues, such as delays or high costs for interconnection with the electric grid,  could slow the adoption of solar + battery for healthcare centers and hospitals. In addition, state-level incentives such as net metering and renewable portfolio standards with distributed generation “carveouts” can further incentivize and lower the cost of installing solar panels at healthcare facilities. 

Despite the challenges, the scale of GGRF funding provides an important opportunity to help healthcare facilities in underserved communities become more resilient and reduce their carbon footprint. Going forward, there could be a concerted effort to increase awareness of GGRF financing for healthcare facilities in conjunction with broader outreach efforts on IRA implementation, such as OCCHE’s Catalytic Program on Utilizing the IRA at HHS. In addition, outreach and education efforts by the associations for community health centers (the National Association of Community Health Centers) and essential hospitals (America’s Essential Hospitals) will be critical to broaden participation in the GGRF by healthcare facilities. 

*This Issue Brief was written by Joe Kruger, Affiliated Fellow at the Georgetown Climate Center, and Willow Prall and Muna Ugwu, students in the 2024 Georgetown Climate Law practicum class. Saeyeon Kwon, a Research Assistant at GCC, provided research support.

This Issue Brief is a companion to a three-part series on health care delivery organizations and climate action. Read all three Decarbonizing Health Care reports:

• Clean Energy Policy Options
• Low-Carbon Transportation Policies Can Reduce Health Care Emissions and Benefit Local Communities
• New Policies Can Build Markets for Low-Carbon Supply Chains