The Biden administration announced on Tuesday morning that it will be allocating $250 million in formula funding for energy efficiency upgrades and retrofits of commercial and residential buildings.

The Department of Energy will be accepting applications for these resources from all 50 states, five U.S. territories and the District of Columbia, through the Energy Efficiency Revolving Loan Fund Capitalization Grant Program — an initiative of the recent bipartisan infrastructure law.

States and territories will be able to use grants to establish what is known as “revolving loan funds” — or pools of capital from which loans can be made for clean energy projects, according to the Energy Department.

Governments can then use these revolving loan funds to invest in energy audits, energy efficiency upgrades and retrofits of residential and commercial buildings.

“Energy efficiency is one of the most cost-effective and easiest to deploy solutions we have to combat climate change and reduce energy costs,” Secretary of Energy Jennifer Granholm said in a statement.

According to the Energy Department, the grant program aims to advance President Biden’s goals of building an equitable and affordable clean energy economy, while promoting energy justice and financial gains for historically disadvantaged communities.

With the funding from this program, states and territories can create or enhance revolving loan fund programs that provide energy efficiency loans to commercial and residential building owners, the statement explained.

Participating states and territories can also leverage capital from private, philanthropic and other sources to augment the impact of federal funding, according to the Energy Department.

A revolving loan fund is what the Energy Department described as an “evergreen” source of funding, as money received from repaid loans is continuously recycled as loans for new projects.

Meanwhile, energy efficiency loans for residential customers tend to be low risk and have a high repayment rate, a recent study from the agency found.

In addition to using the funds to provide loans for energy efficiency audits and upgrades, states can use up to 25 percent of the resources for grants and technical assistance to low-income homeowners and small businesses, the Energy Department said.

This stipulation, the agency explained, is in line with the Biden administration’s Justice40 initiative, which aims to direct 40 percent of benefits from federal investments to disadvantaged communities.

To this end, the Energy Department said it would be working with states to ensure that revolving loan fund programs prioritize those communities that have faced underinvestment in energy efficiency deployment.

Funding will be available for each state, territory and the District of Columbia in a format that fosters greater impact in states with higher energy consumption and carbon emissions, according to the Energy Department.

Forty percent of the funds will be allocated to all state energy offices per the State Energy Program formula, while the other 60 percent will go to a subset of priority states.

“By expanding access to energy efficiency upgrades for American families and small to medium-sized businesses, we will generate energy savings and deliver cleaner air,” Granholm said.

Doing so, she added, will help “states and historically underserved communities experience the broad benefits of energy efficiency.”