Federal and State Energy Efficiency Opportunities for Municipalities
(Even for Muncipalities!)
EEA continues to monitor state and federal programs, tax credits, and other opportunities that support municipalities in making energy efficiency and clean energy investments. Contact Rachel Goodgal (rgoodgal@keealliance.org) or Jeaneen Zappa (jzappa@keealliance.org) for more info.
EEA’s Energy Efficiency Opportunities for Local Governments Tracker tracks federally-funded grant opportunities that are available for local governments to pursue energy efficiency improvements. Some of these grant opportunities include funding for other clean energy or environmental justice projects as well as efficiency.
The Energy Efficiency and Conservation Block Formula Grant Program offers funding for states, tribes, and local (certain county & city) governments to reduce carbon emissions, improve energy efficiency, and reduce energy use. Local governments may apply for a voucher for technical assistance, an equipment rebate, or a grant to fund one or more of 15 eligible project types.
- Formula funds are allocated to cities that are one of the top 10 most populous cities within their state or that have a population of at least 35,000; and counties that are one of the 10 most populous counties within their state or that have a population of more than 200,000. Eligible entities are listed here (PA on page 38-39)
- Many eligible local and county governments have not yet applied! Check your eligibility and apply today.
Local governments can use federal tax credits to dramatically reduce the final cost of energy efficiency and clean energy improvements.
Source: Maximizing Impact from the Inflation Reduction Act, Opportunities for Pennsylvania. From the What Works Collective, The Heinz Endowments, and the Pittsburgh Foundation.
The Investment Tax Credit for Energy Property (48) provides a tax credit of up to 30% of the cost of installing renewable energy, if prevailing wage requirements are met.
- This credit is eligible for elective pay (aka direct pay), which means that local governments can get a direct refund for the value of the credit.
- The Investment Tax Credit for Energy Property applies to properties placed in service before 2025. For properties placed in service after 2025, the similar Clean Electricity Investment Tax Credit (48E) will apply. It is also eligible for elective pay.
- These credits are stackable with several bonuses for certain projects located in energy communities, serving low-income communities, and/or using domestic content. It may be possible to receive up to 70% of your investment in direct pay tax credits. An illustration of potential stacking was presented at PEDA’s February 2024 Board Meeting (see slides 13-14).
The Advanced Energy Project Credit (48C) is a tax credit of up to 30% of the cost of advanced energy projects in industrial and manufacturing facilities, if prevailing wage requirements are met.
- This credit is eligible for elective pay (aka direct pay), which means that local governments can get a direct refund for the value of the credit.
- Application required: A total of $10 billion has been allocated for the credits under the Inflation Reduction Act, with $4 billion set aside for projects in certain energy communities over the duration of the program.
The Energy Efficient Commercial Buildings Deduction (179D) provides a significant tax credit to new buildings that outperform the referenced code by at least 25% and retrofits that reduce energy use intensity by at least 25%.
- Projects must meet prevailing wage and apprenticeship requirements to get the full credit.
- For buildings owned by local governments and other tax-exempt entities, the person who designs the property is eligible to take the credit. This allows local governments to significantly reduce the cost of their projects.
There are many additional clean energy-related tax credits that are available to local governments through elective pay.
Learn More:
More Resources:
About Elective Pay for State & Local Governments
All Clean Energy Tax Credits Eligible for Elective Pay
White House Clean Energy Direct Pay Example Cases
IRA Guide for Municipalities (New York State)
Climate Mayors Direct Pay Memo
Complete List of IRA Credits and Deductions – IRS
All IRA Clean Energy Tax Provisions (White House)
Bonus Credits
- Energy Community Bonus Credit
- Low-Income Communities Bonus Credit
- Prevailing Wage & Apprenticeship
- Domestic Content
Details on Elective Pay
Elective Pay and Transferability (IRS general description)
The federal government also offers grants and assistance for local governments to pursue energy efficiency and clean energy in their own buildings and their communities.
EEA’s Energy Efficiency Opportunities for Local Governments Tracker tracks federally-funded grant opportunities that are available for local governments to pursue energy efficiency improvements. Some of these grant opportunities include funding for other clean energy or environmental justice projects as well as efficiency.
Highlight: Community Change Grants (due 11/21, apply as early as possible)
The $2 billion Community Change Grants program funds environmental and climate justice activities to benefit disadvantaged communities. Eligible activities include:
- climate resiliency and adaptation;
- mitigating climate and health risks from urban heat islands, extreme heat, wood heater emissions, and wildfire events;
- community-led air and other pollution monitoring, prevention, and remediation;
- investments in low- and zero-emission and resilient technologies and related infrastructure;
- workforce development that supports the reduction of greenhouse gas emissions and other air pollutants;
- reducing indoor toxics and indoor air pollution;
- and facilitating the engagement of disadvantaged communities in state and federal advisory groups, workshops, rulemakings, and other public processes.
Eligible Entities are either:
1) A partnership between two community-based non-profit organizations (CBOs).
2) A partnership between a CBO and a local government or an institution of higher education.
Federal Assistance Program:
Energy Savings Performance Contracting (ESPC) Campaign
The Department of Energy’s Energy Savings Performance Contracting Campaign provides public sector building owners with technical assistance, peer knowledge sharing, and recognition to reduce their energy use through energy savings performance contracting. Energy savings performance contracting is a method of financing in which the upfront costs of a project is repaid through energy savings over a number of years.
This is a five-year campaign just launched in January 2024. Public sector building owners can enroll for more information and assistance. Sign up for the ESPC’s newsletter (bottom of the page) to get updates on the program as well as notification of useful information from other agencies that can help you pay for energy efficiency upgrades.
The Energy Efficiency and Conservation Block Formula Grant Program offers funding for states, tribes, and local (certain county & city) governments to reduce carbon emissions, improve energy efficiency, and reduce energy use. Local governments may apply for a voucher for technical assistance, an equipment rebate, or a grant to fund one or more of 15 eligible project types.
- Formula funds are allocated to cities that are one of the top 10 most populous cities within their state or that have a population of at least 35,000; and counties that are one of the 10 most populous counties within their state or that have a population of more than 200,000. Eligible entities are listed here (PA on page 38-39)
- Many eligible local and county governments have not yet applied! Check your eligibility and apply today.
Climate Pollution Reduction Implementation Grants
State and Metropolitan Statistical Areas receiving planning funds from the CPRG were required to submit their Priority Climate Action Plans by March 1. All of the eligible entities in our two states submitted their plans, which are available on the EPA’s website. These entities are:
- New Jersey
- Pennsylvania
- Allentown-Bethlehem-Easton (Lehigh Valley RPC)
- New York-Newark-Jersey City (New York City Economic Development Corporation)
- Philadelphia-Wilmington-Camden (Delaware Valley RPC)
- Pittsburgh (Southwestern Pennsylvania Commission)
Implementation grant applications from eligible municipalities were due April 1. Funds are expected to be announced in July 2024.
Pennsylvania offers technical assistance and financing options that can help you measure your energy usage, plan projects that will reduce it, and fund your project.
State Local Climate Action Program & Shared Energy Manager
Pennsylvania DEP runs the Local Climate Action Program, which provides free technical and personnel assistance to local governments that want to reduce greenhouse gas emissions. Local governments can join a September-May cohort or subscribe to a flexible timing approach to access tools at their own pace. This program can help you create an actionable plan to address climate change in your community.
Shared Energy Manager provides personalized technical assistance to up to 20 local government entities each year. Shared Energy Manager can conduct energy assessments, renewable energy studies, and other services to implement their climate action plans. Each cohort of 20 is part of a full calendar-year program. Municipalities should apply as soon as possible for 2025.
State Financing Opportunities
Municipalities can get help financing their efficiency projects through the Guaranteed Energy Savings Act (GESA); the Green Energy Loan Fund, and from their utility, if it is covered by Act 129 or has a voluntary program. Learn more about these programs here.
Guaranteed Energy Savings Act (GESA)
The Guaranteed Energy Savings Act allows schools and other government entities a streamlined way to procure large-scale energy efficiency upgrades with no upfront cost. Projects must use approved contractors, and costs are paid by future operational savings yielded through energy reductions.
Green Energy Loan Fund
The Green Energy Loan Fund is a revolving loan program run through the Department of Environmental Protection. This revolving loan fund finances energy conservation and efficiency improvements of retrofits, gut rehabs, and new construction in commercial properties, nonprofit facilities, local government buildings, multifamily residential buildings, and industrial plants. Building owners, developers, and commercial tenants are all eligible and can apply for loans of $100,000 – $2,500,000+.
Act 129
Act 129 is Pennsylvania’s flagship energy efficiency law. It requires electric distribution companies with over 100,000 customers to reduce energy use within their service territories. The utilities must offer incentives to local government customers. Find program offerings here:
Duquesne Light
FirstEnergy Companies
PPL Electric
PECO
Local Government Energy Audit
Any energy efficiency project should start with an energy audit, and New Jersey’s Local Government Energy Audit Program helps local governments examine their facilities and see how they can improve their energy use. The program subsidizes up to 100% the cost of the audit. Eligible entities must complete an application and workbook and submit utility bills to apply.
Utility Programs
Under New Jersey’s required energy efficiency programs, all regulated gas and electric utilities are required to offer incentives to local governments. Find your utility here.