Financing Community Clean Energy Projects in 2026
Four priorities for aligning community clean energy projects with investor and lender requirements without federal dollars
2025 marked a structural shift in clean energy and community development finance. Federal programs had been providing or promising flexible capital to make clean energy projects less risky for lenders and investors. Many of those programs are now gone. While that has upended workplans and made financing harder, it has not reduced demand nor commitment for clean energy in communities.
Against this backdrop, RMI convened 70 practitioners in late 2025 from green banks, community lenders, regional and commercial banks, and impact investors to surface the most pressing challenges and priorities for 2026. The message was clear: organizations are moving forward, even in tougher terrain. Participants remain motivated and are actively seeking solutions to ensure communities have access to resilient sources of capital for clean energy projects when federal dollars aren’t available.
Across conversations, one familiar but unresolved challenge rose to the top: many community clean energy projects can work on paper, but they don’t fit mainstream capital’s “credit box” — the criteria banks and investors use to decide what they will fund, including cash flow predictability, counterparty credit, and deal size and structure. This misalignment is most acute for smaller deal sizes, in new markets, or with unfamiliar or credit-constrained counterparties.
Federal programs were designed to help bridge these gaps by providing flexible capital that could absorb risk and fragmentation. With that support receding, the work ahead requires sharper execution: clearer roles, stronger coordination, and financing approaches that help projects fit within the credit box without relying on perpetual subsidy.
The convening brought to light four priorities for 2026:
- Fix affordability gap: Strengthen concessional balance sheets for institutions that can absorb cash flow risk and provide products that improve project economics for low-income and underserved customers.
- Address risk perception gap: Map and standardize credit enhancements to build investor confidence and move from bespoke risk mitigation to scalable structures.
- Close market access gap: Identify asset classes ready for standardization and aggregation, and support warehousing to connect small or fragmented assets to secondary markets.
- Resolve ecosystem capacity constraints: Invest in subnational financing ecosystems that can turn localized solutions into investable markets by diagnosing constraints, enabling institutional specialization, and strengthening coordination across the finance stack.
Why Community Clean Energy Projects Don’t Fit Traditional Lending Models
Most climate finance work, at its core, is about moving assets into the credit box. Trying to convince lenders and investors to abandon their risk-return requirements is a dead end; the work is in identifying and addressing the specific frictions that keep otherwise viable projects from being financed.
In practice, clean energy assets tend to fall outside the credit box for one or more of three reasons.
The first is an affordability gap. This is a failure of economic viability where projects don’t generate sufficient or stable cash flows at price points end users can afford, failing the credit box’s cash-flow and repayment assumptions. Even when technologies are cost-effective at a system level, the revenue model breaks at the household, small business, or community level, particularly in low-income or underserved markets. This is fundamentally a cash-flow problem, not a technology or performance risk issue.
The second is a risk perception gap, where assets may cash flow on paper, but investors are uncomfortable with real or perceived risks — including performance uncertainty, counterparty credit quality, or regulatory and policy exposure — and they demand protections accordingly. Unfamiliar risks are frequently overweighted, keeping otherwise viable projects sidelined because investors aren’t confident that assets will perform as advertised.
The third is a market access gap, where assets can’t reach investors who want to buy them. Even when projects perform well individually, they may be too small, bespoke, or scattered to meet investors’ size and standardization needs. Because each deal is different, lenders and investors must spend significant time and money to review, structure, monitor, and service them, and those costs can outweigh the returns. This is made worse by inconsistent deal flow, limited performance track records, and too few actors positioned to hold projects on their balance sheets long enough to enable bundling them, building scale, and bringing them to larger, more liquid secondary markets.
The priorities for 2026 that surfaced in our convening flow from these gaps.
Priorities for 2026 to Align Projects with Investor Requirements
Fix affordability gap: address the economics
When affordability is the binding constraint, the solution needs to improve what customers can actually pay, not shift risk around the capital stack. Tools like guarantees protect lenders after default, but they don’t reduce the likelihood of default.
Affordability tools improve project economics. On-bill mechanisms make repayment easier and more reliable by tying payments to utility bills and expected savings. Interest rate buydowns lower monthly payments, improving borrower cash flow. Lease structures can lower upfront costs or shift performance and maintenance risk away from customers. Technology bundling can also lower costs in certain instances, such as when pairing efficient heat pump upgrades with rooftop solar results in more affordable electricity.
Address risk perception gap: reallocate or clarify risk
Even when cash flows are adequate, investors may hesitate if they don’t trust the counterparty or don’t fully understand performance risks. This is where credit enhancement tools are most effective. Guarantees can protect against downside outcomes, especially for newer or unfamiliar asset types. Insurance can transfer specific, well-defined risks. Loan loss reserves can absorb expected losses when defaults are possible but limited.
Standardization helps here, too. Consistent underwriting, contracts, and performance data help make unfamiliar risks clearer, more comparable, and easier to price.
Today, credit enhancement tools are often highly customized and designed deal-by-deal. While helpful in specific cases, this fragmentation makes it harder to attract larger pools of capital.
Close market access gap: build liquidity pathways
Even well-performing assets can’t scale if they can’t reach liquidity. Moving capital at scale requires a sequence of steps: first, standardizing rules, contracts, and data where appropriate; then, aggregating assets through warehousing or pooling; and finally, accessing secondary markets.
Intermediaries play a critical role in this process. Bond banks and other centralizing entities or capital markets-facing intermediaries can turn small or fragmented projects into investable portfolios or securities. They lower the cost of capital by pooling assets and making it easier to sell or refinance assets once they reach scale.
Credit enhancements may be required at the point of sale to meet investor requirements. But the constraints show up earlier — in how assets are originated, standardized, aggregated, and held. Credit enhancements can’t substitute for those steps.
Resolve ecosystem capacity constraints: strengthen subnational financing ecosystems
Ecosystem and institutional capacity constraints determine whether the solutions to the three gaps described above can be developed and applied effectively.
Subnational financing ecosystems could be a powerful forum for coordinating the problem-solving and action needed in the years ahead. With federal pullback — and because conditions vary widely by place — these ecosystems are where solutions to the three gaps must ultimately be executed.
In practice, however, subnational financing ecosystems are themselves constrained because many places lack institutional capacity, functional coverage, and coordination to deploy solutions effectively.
This shows up today in a few ways. In many places, institutions are too small or undercapitalized to operate at scale; key entities that should play critical ecosystem functions are missing or underleveraged; and coordination remains weak — both among local actors and between local markets and the secondary capital markets they depend on.
Subnational financing ecosystems can become engines for action across the other three priorities outlined above, but only if underlying capacity constraints are addressed through investment in three essential priorities.
- Diagnosis and learning: identifying which constraints are binding for specific assets and communities, testing solutions, and building a place-based track record over time.
- Role clarity and coordination: enabling institutions to focus on what they do best and what the market needs — whether customer-facing origination and affordability, credit enhancement, or warehousing, aggregation, and capital markets access — rather than duplicating every function everywhere and competing for the same limited pools of concessional capital. Scaling the right interventions depends on clear, differentiated roles, sufficient institutional capacity, and effective coordination mechanisms.
- Capital translation: connecting local lending activity to national and institutional capital markets by converting fragmented assets into standardized, investable portfolios and turning local proof points into models that can scale.
Building the Systems Community Clean Energy Finance Needs
To overcome longstanding challenges in affordability, risk perception, and market access, the next phase of community clean energy finance must focus on moving assets into mainstream capital’s credit box at scale without subsidy. That means building subnational systems that can do this work and endure as federal support ebbs and flows.
In practice, this comes down to building financing systems that make projects affordable for customers, reducing perceived risk for investors, and creating clear pathways to scale. Rather than relying on one-off tools, the emphasis shifts to how these elements work together consistently across markets.
Delivering on these priorities will require capital sources better suited to long-term market building — and, critically, will create the conditions for more of that capital to participate. Local deposits can anchor community lenders and green banks focused on affordability and origination. Centralizing entities can manage complexity and timing mismatches, aggregate assets and demand, and connect local lending activity to secondary markets and pooled issuance platforms. Institutional investors and bond buyers can then provide the liquidity needed to recycle capital and scale what works.
Progress in addressing binding constraints across affordability, risk, market access, and subnational capacity is connected and reinforcing. The result is a financing system that can support community clean energy investment at scale across regions and regardless of the availability of federal support.