Heavy hitters form $500M joint venture to expand community solar to disadvantaged communities

Reactivate, a new joint venture with half a billion dollars in backing, says it has figured out how to profitably develop community solar projects to serve low- to moderate-income communities.

Lafayette Square, an impact investment firm, and Invenergy, one of the largest private independent power producers, launched Reactivate this month. Lafayette Square and Invenergy will provide capital, technical help and dedicated personnel to manage and operate Reactivate’s solar projects.

In addition to getting lower-income households access to solar, Reactivate also wants to get them access to solar jobs. It aims to train workers in historically underrepresented segments of the workforce. The company also plans to create opportunities for businesses owned by minorities and women.

Reactivate has a goal of deploying $450 million to $550 million over the next three years, with an average investment project size of $10 million. The overarching goal is to develop a total of 300 megawatts to 400 megawatts of renewable energy projects. By 2030, Reactivate aims to bring online ​“3 gigawatts of renewable energy capacity, save $50 million in energy costs for [low- and moderate-income] households, sign 100 contracts with minority or women-owned contractors, and facilitate workforce training for 2,500” workers from underrepresented communities, according to a press release.

How community solar works

Historically, residential solar has been limited to monied homeowners with high FICO scores.

Community solar democratizes access for households and businesses that can’t install their own solar systems because they have financial constraints, are renters, live in multitenant buildings or have unsuitable roofs.

A community solar array — typically less than 5 megawatts in size — has many subscribers, individuals as well as organizations, instead of the usual one or more corporate buyers of large-scale solar. Subscribers pay a monthly fee and then receive a credit on their electricity bills for the power produced from their fraction of the solar array, which helps to offset their electricity costs. Project developers typically make contractual agreements with utilities; the terms are governed by policies that differ from state to state. In many states, community solar policies have garnered bipartisan support.

Community solar projects can provide the benefits of solar for lower-income customers who are typically excluded from access, all while building a more resilient and distributed electric grid.

Making the business case for community solar 

John Moran, managing director at Lafayette Square, told Canary Media that his team has ​“figured out the financial model behind community solar. We saw the kind of public policy the states wanted, as well as the cost savings from community solar for the low- and moderate-income segment.”

He explained how Reactivate will get rolling. ​“We’re going to be working through subscriber organizations that will go out and get the initial subscriptions and make sure that the projects are 100 percent subscribed. One of the subscriber organizations we’re working with can get the utility data from the customer bills in that area and determine if customers are enrolled in an energy assistance program. From New York’s perspective, that would qualify as [a low- to moderate-income] customer.”

New York’s community solar policy offers a per-watt incentive to developers based on the percentage of low- and moderate-income subscribers for a particular project, according to Moran, so a project serving this market segment comes with significant financial advantages. New York also offers consolidated billing to community solar subscribers: Instead of getting a separate bill for their solar subscription, the cost is included in their power bill. ​“If you’re signed up for a community solar project, you see your cumulative savings — you look back after two years [and] you’ve saved $500,” he said. ​“For someone with a heavy energy burden, where a significant portion of their budget is directed toward paying the electric bill, that’s a significant savings — and you don’t have to do anything for it.”

Moran said that Reactivate is initially going to buy projects from solar developers, and then eventually do its own greenfield project development. When that starts to happen, it will collaborate with its engineering, procurement and construction (EPC) contractors to incorporate job training into the process. Reactivate will ​“work with our EPC partners to get as much workforce training on the projects as possible, providing apprenticeship hours and working with local community colleges,” he said.

“No one should be left behind in the transition to sustainable energy,” Jordan Leventhal of Invenergy wrote in a LinkedIn post about the launch of Reactivate.

According to the Solar Energy Industries Association, 41 states and Washington, D.C. have at least one community solar project online, making for a total of 3.6 gigawatts of community solar installed cumulatively across the U.S. through Q3 2021. More than 4.3 gigawatts of capacity are expected to be added to the U.S. community solar market over the next five years, according to SEIA.