Green Bank FAQs
For instance, Green Bank financing can allow consumers to save money every month by financing clean energy generation (such as solar panels) and energy efficiency upgrades. Consumers’ monthly savings on energy bills can be greater than the monthly repayment, which results in instant positive cash-flow.
Green Banks directly create jobs in their state or market. By providing project financing for clean energy and energy efficiency installations, Green Banks stimulate local industry and create demand for new employees. There is also secondary job creation, as related service industries must grow in order to support the clean energy projects facilitated by the Green Bank.
By using limited public dollars to leverage private investment, Green Banks are able to do all this without expensive government subsidies or giveaways. Contributing to economic security while cutting state and federal deficits are priorities for both parties and Green Banks offer an attractive alternative to business as usual. In leveraging more private investment in clean energy, Green Banks speed up and scale up the transition to clean energy economy, allowing governments to hit their clean energy goals and reducing the total emissions from the energy sector.
For more information, see our page on Green Bank Benefits.
Green Banks fill these financing gaps in partnership with private lenders by co-investing, offering credit enhancements to private banks, and warehousing clean energy projects. For instance a Green Bank may provide a loan loss reserve to limit the credit risk of borrowers, thereby allowing a private bank to lend at reasonable rates. Green Banks follow this common model, offering products that induce greater private investment.
Parts of the energy sector are already publicly-financed, such as municipal utilities or federal administered agencies like the Tennessee Valley Authority and the Bonneville Power Administration. In fact, electricity services are one of the few large-scale public goods that are not regularly financed by the government. Therefore the government’s entry into clean energy financing should not be viewed as an intrusion into private markets. Rather, a Green Bank is the application of commonly used government tools to create numerous public goods and facilitate the development of private markets.
By using a public-private partnership model, Green Bank investments drive the flow of capital that helps all participating businesses make money. In this way, Green Bank activities enable private activity in clean energy markets. Using public money to create this benefit, in addition to the transition away from subsidies towards financing, represents a new, smarter way of facilitating clean energy market activity.
Under this new model, Green Banks will help clean energy markets move past the current subsidies, and draw in the critical private investment that is currently slow to enter the market. Over time, after subsidies are reduced and there is adequate private capital, a Green Bank’s role will be limited to only serving areas of the market that still need help moving beyond subsidies.