Green Bank Benefits
Lower Energy Costs
Green Bank financing helps deploy clean energy solutions that can lower energy bills for consumers and businesses with no upfront cost. By installing energy efficiency technologies, borrowers use less energy overall. And as the cost of renewable energy technology like solar PV continues to fall, “going solar” is now cheaper than grid electricity in many markets. The cost of financing is a significant driver of the price of renewable electricity, so by providing low-cost financing Green Banks can help lower the clean electricity prices for consumers. Through Green Bank financing, customers can save money on their electricity bills every month with no upfront cost.
Preserving Public Capital
Using public dollars for Green Bank financing, rather than subsidies, allows governments to preserve limited public dollars. Rather than have a constant flow of funds devoted to subsidies that perpetually go out as expenses, the Green Bank operates as a break-even entity that earns a return on its capital. Loans for clean energy projects are paid back to the Green Bank, which can then recycle and revolve those funds back into the market. When clean energy markets are robust and mature, Green Bank capital can then be returned to the public or used for other purposes. This process significantly reduces the public cost of supporting clean energy markets.
Green Banks can make each public dollar go further by leveraging private capital through innovative financing structures. Green Banks can leverage up to 10 private dollars of investment for every public dollar of capital used. And because the public dollars invested are repaid, that same public dollar can be used again to leverage another private investment. The combination of this initial leverage and long-term compounded leverage means that a given public dollar can leverage upwards of 20 private dollars of investment. This benefit stands in stark contrast to many existing programs that have relatively low leverage, if any, and public dollars that only leverage private investment once because they are used as subsidies.
Driving Private Investment
The Green Bank concept is based on the reality that the public sector alone cannot supply the amount of capital needed to rapidly transition to a clean energy economy. Therefore the Green Bank is designed to drive and ultimately rely on private sector investment. Green Banks provide financing tools and market development structures that attract, or “crowd-in,” more private sector investment. As investors become more familiar with clean energy markets and risks, the immense profit-making opportunity in clean energy will become apparent. Private investment can then increase, with capital offered at reasonable rates, and Green Bank investment can be pulled back.
Economic Development and Job Creation
With investment and construction comes economic growth and jobs. Green Banks stimulate this positive economic activity and add to GDP through additive capital investment. By definition, clean energy projects must be built locally, which means local businesses and jobs will be created to serve the increasing demand for clean energy. Governments can employ Green Banks to not only lower energy costs and reduce emissions, but to also build a fast-growing clean energy economy.