Here’s What the WSJ Op-Ed Got Wrong on the Accelerator

Read Professor Tice’s opinion piece in the Wall Street Journal here.

Clean Energy Accelerator Would Build on Bipartisan Successes Modeled By States

By Richard Kauffman

NYU Adjunct Professor Paul Tice correctly points out (May 23, 2021, WSJ) that “not enough attention is being paid to some of the details” of President Biden’s American Jobs Plan. Then, ironically, he gets wrong at least four major details of the Clean Energy and Sustainability Accelerator, a key part of the President’s plan.

The Accelerator would be an independent nonprofit that received up to $100 billion in a single-shot deposit of capital. It in turn would fund 21 existing nonprofit “green banks” in 15 states, as well as new green banks in other states. Over the last decade state green banks have leveraged $2 billion of public dollars with $6 billion of private capital into $8 billion of public-private investment into profitable clean energy infrastructure. My personal experience with this development was as founder of the New York Green Bank (NYGB), which has made half the investment made by all green banks and on which the Accelerator is modeled.

Professor Tice’s first error is the claim that there “is no pressing financial market gap.” The New York Green Bank’s $1.2 billion in capital commitments is evidence that market gaps exist. Private sector companies see palpable gaps in financing for smaller distributed energy projects, for solar, energy efficiency and storage projects. The fact that the New York Green Bank charges market rates for its loans demonstrates that private lenders aren’t generally doing the job.

Tice’s second mistake is to criticize the Accelerator for having the flexibility to offer in a variety of financial techniques, including different debt instruments and guarantees. It is this very flexibility that has enabled the New York Green Bank to adapt to ever changing gaps in private sector financing markets. In contrast to private lenders, green banks are willing to put in the time to incubate financing structures where gaps exist. However, once at scale, private sector entities have taken over opportunities. Community solar was once seen as too small and risky for private lenders. Thanks to green banks, this is no longer the case.

Tice’s third mistake on details is that he thinks the Accelerator’s borrowing on the deposited public capital would be backed by the full faith and credit of the United States. He links the Accelerator to Fannie Mae and Freddie Mac where there was an implied federal guarantee. The Accelerator bill in the House makes it clear that the Accelerator is independent of government, governed not by federal employees but an independent board, precisely to be sure no one in business would make the professor’s blunder of considering Accelerator borrowing to carry a federal guarantee.

Tice’s fourth mistake is to claim the Accelerator is only a Democratic Party idea. In states where green banks already exist they typically are bipartisan. In recent weeks, Alaska has proposed its own state bank. The Accelerator bill in the House has bipartisan support.

Justice Brandeis called states the laboratories of democracy. State green banks have been laboratories of clean energy finance for a decade. They work. They harness markets and create jobs as well as reduce carbon emissions. They help build resilient infrastructure. They help ensure that the benefits of energy transition are shared by everyone. It’s time to take the idea nationally to give every state their benefit.

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