Driven by customer demands, legislative mandates and macro-level market trends, utilities are expanding beyond initial efforts to “go green” to include comprehensive, analytically based enterprise-wide sustainability plans. Utilities with plans already in place as well as those still considering their strategy will gain value and potentially save money by matching their sustainability activities to funding opportunities through the American Recovery and Reinvestment Act (ARRA), as well as other grant funding opportunities.
Particularly now, with local budgets stretched thin, familiarity with grant funding is increasingly important. In fact, ARRA can be viewed as merely a funding mechanism for an overall sustainability approach. Those utilities that see sustainability as an integral and strategy-based approach will be best positioned to act on various opportunities as they arise.
Many electric utilities are taking decisive steps to develop a comprehensive enterprise-wide sustainability strategy. Once initial strategy elements are in place, such as a clear, policy-aligned vision, quantifiable goals and tangible metrics, a utility can then consider multiple grant opportunities as part of their financing mix. Based on the strategy development work that such utilities have already done, they are well positioned to act.
In one example, the optimization analysis of various energy efficiency options provided input to the strategy required for the Energy Efficiency and Conservation Block Grants at the city level. In another example, having done the background strategy work to develop a business case for full deployment of Advanced Metering Infrastructure (AMI) resulted in a high degree of preparedness for leading a Smart Grid Investment Grant application. And for yet another utility, their strategy development identified the best match as pursuing a Weatherization Assistance Program grant.
Developing a Strategy
A strong sustainability program is enterprise-wide and aligns with the overall goals of the utility; this is not as much a “land rush” mentality purely focused on one area of current stimulus funding as a long-term strategy that results in associated opportunities now and as they may evolve over time. An issues-based planning process that is grounded in the concept of the triple bottom line – integration of economic, environmental, and social aspects as illustrated in Diagram 1 – forms the basis of the direction.
Each utility will develop a tailored set of strategy elements, which will serve as the guide for all sustainability activities – including decisions related to grant funding opportunities.
The first step in accessing grant funds is to develop an integrated sustainability strategy and comprehensive plan. At best, a long-term strategy is based on a sound understanding of the various drivers – regulatory, customer and financial. Developing background knowledge from the customer’s point of view, often involves conducting market research and various analyses to fully understand customer perceptions and associated need for an enhanced focus on sustainability.
After surveying its customers, one multi-service utility provider discovered a “green gap” – a significant chasm between customer desire for environmentally conscious behavior and their perceptions of utility performance, as illustrated in Diagram 2.
Supported at the highest organizational levels, the “green gap” became a call-to-action, which resulted in the development of an enterprise-level initiative. Again, the development of such a strong baseline analysis and strategy directly supports grant-funding applications.
Identifying Programs
Another critical step in creating a comprehensive sustainability approach is to analyze various programs to identify the most cost-effective portfolio to meet the utilities’ goals. Several existing and potential programs can be analyzed using various decision support tools, such as R. W. Beck’s Optimity model.
Using such an optimization model allows simultaneous evaluation of a variety of factors including program performance in terms of greenhouse gas reductions, renewable portfolio standards, customer adoption/penetration rates, use of renewable energy credits, and a variety of goals and limitations, such as financial resource availability, customer costs and limitations on rate increases. Diagram 3 shows a sample output of this model. Again, having such work finished makes targeting and prepared grant applications more streamlined.
Grant Funding
Once a utility has a sustainability strategy in place, investments must be made to implement the plan. The financial resources can be drawn from a variety of sources including the usual sources (e.g., rates); however, in today’s constrained economy, the consideration of funding sources must also include grants as a sustainability funding mechanism. ARRA illustrates the opportunity, with money flowing to Smart Grid Demonstration and Investment Grants, Energy Efficiency and Conservation Block Grants, Resource Assessment and Interconnection Level Transmission Analysis and Planning, Weatherization Assistance, Transportation Grants, and Energy Efficiency Information and Communication Technology. The US Department of Energy (DOE) allocates ARRA funding, as shown in Diagram 4.
State energy offices are active and have various pools of money that they are obligated to distribute. Although not as significant in terms of dollar volume as the large programs directly granted through the Department of Energy, there
are other grant funding sources as shown on the matrix in Diagram 5 and the bullet list, following.
Accessing ARRA Funds
How does a utility access this money to fund its sustainability plan? Utility management needs to conduct a careful review of ARRA and other grant allocations while considering all aspects of its sustainability plan as well as the stated objectives of the granting agency. The details of each federal grant are clearly stated in the Funding Opportunity Announcement (FOA); all such announcements are available through various government web portals such as www.grants.gov and others.
Competitive grants require a utility to articulate its value differentiators, bearing in mind that DOE (the funding agency for ARRA) typically receives many more times the applications than it has resources to fund. This is where the development of a strategy map can be of great value as it focuses the organization on its core messages. The ability to successfully compete for such grants is a key reason that having a strategy with strong background analytics already in place serves a utility well.
For one utility provider, its sustainability approach and program optimization analysis led it to a set of confident decisions about which program to pursue. One such program undergoing preliminary business case evaluation was an AMI deployment. When the Smart Grid ARRA funding announcement was issued, this utility was well positioned with a “shovel ready” project that it could modify/expand to fulfill the DOE requirements. Another example includes a collaborative state-wide Smart Grid initiative that started developing a comprehensive strategy prior to the issuance of the final DOE announcement.
In addition to federal programs, states across the country are offering funding sources for sustainability programs. Utilities need to keep in mind these local programs and consider them as potential funding opportunities as well. The DOE alone has announced 24 grant opportunities, so the scope of stimulus funding opportunities can quickly become overwhelming.
Creating a matrix, such as the one in Diagram 5, helps match sustainability strategy to various grant dollars. With this matrix, utilities can recognize relationships between current and planed projects and various funding programs.
This sample matrix illustrates one example of several funding opportunities and the match of various programs to funding sources. Although the details represent only a simple snapshot in time of various funding possibilities at the federal and state level, this represents the many and varied possibilities.
For example, one municipal utility included the following detailed list as possibilities on their grant matrix.
Energy Related Programs
- Energy Efficiency & Conservation Block Grant
- Small Hydropower Loan Program
- Renewable Energy Rebates & Grants Program
- New Energy Economy Development
- Clean Cities
- Smart Grid Demonstration
- Smart Grid Investment Grant Program
Infrastructure Programs
- Capital Investment Grants for Transit Projects
- Broadband Loan Program
Social Programs
- Community Development Block Grants
- Community Services Block Grants
- Homeless Prevention and Rapid Re-Housing Plan
- Public Housing Capital Fund Formula Grants
- Neighborhood Stabilization Program
- Capital Funding Recovery Competition
- Juvenile Accountability Block Grant
- Justice Assistance Grant
Moving Forward
Although many of the current grant application deadlines are fast approaching or in some cases have already passed, utilities should not discount government funding if they have missed a particular deadline. As discussed above, there are many potential funding sources and others likely to surface over time.
Moving forward, grant funding can be considered in the financing mix for almost all sustainability-related projects. Government investment in sustainability may well continue in the coming years, so there is the ongoing potential for a long-term opportunity as part of the overall resource pool. Particularly in today’s economic and political climate, utilities would be well advised to become familiar with the challenges and opportunities of grant funding and consider it as a routine part of their business strategy.
About the Author
Lynn Adams is a vice president at R. W. Beck, an SAIC company, where she leads the firm’s utility business consulting initiative. Her recent work has focused on integrating sustainability approaches in response to legislative, political and market demands. She co-authored “The Art of Strategic Leadership,” which defines a planning methodology to develop an efficient and effective business direction.
