Maine is looking to successful financing models in other states as it seeks ways to fund a statewide energy overhaul and climate adaptation measures.
By Marina Schauffler
September 13, 2020
Green banks can help provide clean energy financing to markets that are not well served now, like low to moderate-income homeowners. Connecticut Green Bank’s Solar for All Program, for example, has helped facilitate installation of more than 2,800 residential solar power systems in the past five years. Photo courtesy of the Connecticut Green Bank.
Maine has New England’s most energy-intensive economy, expending roughly $6 billion annually – primarily on imported oil and gas for heating and transportation. Global warming could worsen the fiscal drain through a combination of rising costs and declining revenues.
The state must overhaul its energy sector to reach its climate targets for 2050, which include cutting greenhouse gas emissions by 80 percent over 1990 levels and generating all of the state’s electricity from renewable sources.
Ninety percent of heating systems and vehicles in the state need to be electrified, said Michael Stoddard, executive director of Efficiency Maine Trust, and the grid requires upgrades.
“We need to run a marathon, and we need to get started,” he said.
But the success of this race hinges on finding capital to invest.
To help finance this energy transformation, Maine may create a green bank, a nonprofit or quasi-governmental institution that uses public funds to leverage private capital for renewable energy and climate adaptation. This approach, used in more than a dozen states to date, helps “finance reach underserved parts of the market,” according to Abraham Wapner, program director at the nonprofit Coalition for Green Capital.
A green bank could help Maine meet the significant cost of “decarbonizing” Maine’s economy, which Steve Clemmer, director of energy research at the nonprofit Union of Concerned Scientists, puts in the range of $40 to 50 billion by 2050. Freedom from fossil fuel reliance would offer Maine greater economic resilience, but the upfront investment could reach $60 billion, according to a recent estimate by economist Richard Silkman.
The challenge of finding funds is compounded by an economic downturn the International Monetary Fund describes as a “crisis like no other.” Maine’s projected revenue shortfalls over the coming three years are expected to be upwards of $1.2 billion.
Ideas for stretching limited public funds surfaced this summer from the Maine Climate Council. Half of its work groups recommended that the state pursue some sort of green bank to help finance its plans for energy, buildings and climate resilience.
Hannah Pingree, co-chair of the Maine Climate Council
There’s a clear need for “significant and creative finance mechanisms,” said Hannah Pingree, council co-chair and director of the Governor’s Office of Policy Innovation and the Future. The total cost of reaching Maine’s climate targets is not yet defined as the Council is still weighing priorities and strategy timelines. A consultant recently delivered some draft figures, but those numbers can’t be shared yet because the “data is not fully complete and agreed upon,” she noted.
Pingree expects that the final climate action plan adopted by her council, due to the Legislature by Dec. 1, will recommend that Maine move quickly to identify funding gaps, determine appropriate types of climate financing, and recommend “the right venue” for new financing programs.
“Other states have shown there are opportunities,” Pingree added, describing some models as “hopeful.”
Charlie Colgan, a former Maine state economist who directs research at the Center for the Blue Economy in Monterey, Calif., agreed.
“This (challenge) is hard but it’s not impossible,” he said. “There is money available, just in places that Maine has never thought to look before.”
‘Democratizing’ clean energy
In June, roughly 100 people participated in an online Green Bank Summit to explore whether Maine might benefit from the formation of a green bank.
Green banks – by various names – have become an important tool for what is sometimes called the “democratizing” of clean energy, freeing citizens from polluting, high-cost fuels and fostering greater climate resilience in economically vulnerable communities.
Solar power, in particular, is often viewed as out of reach for lower-income homeowners and renters. While access is improving with community solar farms, where shares are not tied to home ownership, barriers remain for low-income and moderate-income Mainers who seek to rely on renewable power.
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Older housing often requires efficiency upgrades first, and Maine lacks the money to meet increased demand for those residential loans, Stoddard said. Nor does Efficiency Maine have the capital to make low- or no-interest loans for solar installations.
Hoping to gain new financing ideas, Maine is looking to states that have successfully mobilized more capital for energy efficiency, renewable power and climate adaptation.
Models of innovation
Connecticut Green Bank (CGB), the nation’s first such institution, has deployed more than $1.7 billion toward clean energy projects since its formation in 2011, directing much of it toward low and moderate-income households, and small businesses for projects such as solar power generation and energy-efficient retrofits. For every public dollar invested, said its president, Bryan Garcia, eight dollars of private investment on average has been raised.
Bryan Garcia, president and CEO of the Connecticut Green Bank
Recognizing the limitations of public funding and the need for rapid climate progress, CGB is now “asking taxpayers to invest with us,” Garcia said. In July, it launched an inaugural $16 million issuance of low-denomination “Green Liberty Bonds.” The bank sought to “give people something beyond the ballot box” to support climate action, Garcia noted, and they responded; within two weeks, the bonds had sold out.
The bank’s latest bond offering builds on nearly a decade of work and a “track record established across different programs,” Garcia acknowledged. Just moving from legislative approval to operations took the better part of CGB’s first two years, he recalled, given that “a lot of new operating procedures” are involved when a financial entity scales up to serve new markets.
Other green banks also develop financing for climate adaptation projects such as road or pump station elevations, green infrastructure like living shorelines, backup power options, stormwater management and urban tree planting.
Maine could establish a bank that funded both clean energy and resilience infrastructure, said Keith Bisson, president of the Maine-based nonprofit Coastal Enterprises, Inc.
The Rhode Island Infrastructure Bank, which grew out of a Clean Water Finance Agency, offers municipalities loans at rates from 20 to 33 percent below market so they can implement measures to build resilience, said Jeffrey Diehl, its executive director, recognizing that “a dollar invested today (in climate adaptation) saves you six dollars down the line.”
The bank also contracts with engineers who are “loaned” to municipalities to help them “prioritize, write requests for proposals, interpret energy audits and oversee (renewable energy) installations,” Diehl said.
Fitting into the financial landscape
While each green bank is structured differently, most work with community banks and credit unions to lower barriers to lending – using loan guarantees or loan loss reservesthat reduce lenders’ risks, and aggregating loans to increase their appeal to investors. These approaches can help convince bankers and investors that “putting their capital to work for clean energy isn’t as risky as they think it is,” Garcia said.
(Lowering barriers to lending helps convince private investors that) putting their capital to work for clean energy isn’t as risky as they think it is.”
— Bryan Garcia, president of Connecticut Green Bank
Garcia recommends that states create a dedicated finance entity whose “sole focus is climate.” But Pingree isn’t prepared to say whether Maine will need to “create a super-organization to do all this,” or whether a more decentralized approach might work – housing new finance programs within entities such as Finance Authority of Maine (FAME), Maine Municipal Bond Bank and Efficiency Maine Trust.
David Gibson, who organized the recent online meeting, and, in a prior job, led efforts to create the Nevada Clean Energy Fund, anticipates that representatives of Maine’s finance agencies will need to discuss at length the benefits and downsides of various structures. Wherever the fund is ultimately housed, he said, it’s critical that it be led by people with a background in finance, investment and banking.
Maine also needs to commit to capitalize the bank from the outset, Gibson said. Nevada created a structure that “sat for two or three years before there was funding” from local and national foundations to get it operational.
Funds from the feds?
Most green banks are launched with public money that can be largely self-sustaining when used as a revolving loan fund. While state resources are in short supply, Maine could dedicate federal dollars to establish a bank if the state receives further pandemic recovery support.
The House of Representatives recently passed a Moving Forward Act that includes an amendment to “establish a national climate bank to finance targeted deployment of clean energy and other decarbonization technologies and climate-resilient infrastructure.” The bank would fund its own projects and help capitalize state and local green banks.
Wapner, at the Coalition for Green Capital, sees momentum building for a national climate bank, which is supported by Democratic presidential nominee Joe Biden.
“Come January, there’s a very real chance that money could come available,” Wapner said.
State Treasurer Henry Beck would like Maine to have completed the strategic planning necessary to take advantage of that opportunity.
“I feel a sense of urgency if there is going to be federal funding available for clean energy (for Maine) to quantify the need and see where there are gaps,” he said.
Other federal actions could shape state financing, noted Clemmer, citing how an extension of tax credits for electric vehicles, energy efficiency and solar installations could help support loan programs in Maine. A federal infrastructure bill might complement state-level investments in the grid, climate resilience measures and EV charging.
During the last session, the Maine Legislature’s Joint Standing Committee on Energy, Utilities and Technology considered a bill, LD 1634, to create a Maine Clean Energy Fund capitalized through a $100 million general fund bond issue. The Committee amended the bill into a resolve that the Maine Climate Council should assess financing options – a measure tabled when the Legislature adjourned early.
Rep. Stanley Paige Zeigler (D-Waldo County)
The bill’s sponsor, Rep. Stanley Paige Zeigler (D–Waldo County), is concerned that all Mainers get ready access to cleaner, more affordable power, and he sees a green bank as helping. There are “tons of ways we could fund this,” he said, with options that extend well beyond bonds and federal grants.
Maine already uses proceeds from the Regional Greenhouse Gas Initiative to fund millions in efficiency upgrades (through loans and incentives administered by Efficiency Maine). While Maine has not formally signed onto the Transportation Climate Initiative, a counterpart to RGGI focused on reducing vehicular emissions, that effort could potentially generate ongoing funds for clean energy and climate adaptation.
Other funding ideas include fees on oil and gas wholesalers for carbon dioxide emissions and – as CGB has demonstrated – investments from individuals. In Maine, Bisson has found an “appetite among people to put their money to work” here.
“We’re increasingly seeing banks getting more involved in clean energy financing,” he said.
While few green banks are attracting institutional investors, according to Wapner, that partnership could over time bring major capital. Gibson said that as of December 2019, the Maine Public Employee Retirement System had $1 billion invested in fossil fuels, which it has been under pressure for years to divest.
Some states have forged partnerships with utilities that front money for efficiency or solar projects, then recoup those expenses from customers through on-bill financing. Zeigler doesn’t see that option working in Maine because public trust in the state’s largest utility, Central Maine Power Co., is so low.
Some Maine municipalities offer PACE (Property Assessed Clean Energy) loans to homeowners, which allows them to finance energy upgrades through loans secured against the property and collected through property taxes. But banks can resist having mortgages subordinated to the loan. A bill to create a commercial PACE loan program in Maine advanced in the Legislature last session but was tabled in the March adjournment.
Depending on what happens with carbon markets in coming years, Garcia sees great potential for Maine’s abundant forests and regenerative agricultural lands to be valued – in global markets – for their capacity to hold and store carbon. That could open new opportunities for investing in land conservation. At least one land trust in Maine has sold forest carbon offsets to expand its land stewardship work.
‘How our lives could be better’
Maine is enduring a summer of record-breaking heat and persistent drought, making the prospect of a warming world less abstract. A recent poll of 500 residents found that 77 percent are concerned about climate change.
That concern may be magnified by the coronavirus epidemic that has already claimed the lives of nearly 200,000 Americans. Maine voters are sensitive to climate, Beck said, and now “people have seen governmental failure to respond to a natural disaster.”
Yet even as more people confront climate impacts, talk of “decarbonizing the economy” and “meeting climate targets” can seem abstract. A stronger selling point for this change, said Bisson, is ‘how our lives could be better.”
The prospect of clean, reliable and local energy could mean fewer and shorter outages, and more accessible backup power. Add in cleaner air, better buildings, quieter vehicles, more resilient farms and businesses, strong job growth and a planet more likely to remain livable, and the full payback becomes more apparent.
The upfront investment needed to get there is unprecedented, Stoddard said, noting that the dire ecological and economic situation requires an overwhelming response.
How fast could Maine propel an energy transition with creative financing?
As Bisson said, “What COVID has shown us is how quickly we can adapt when we need to.”
By Peter Behr
Aug. 31, 2020
A very unusual bond offering hit the market last month: $16.8 million in $1,000 chunks offered first to ordinary investors, a strategy that reached back to the public war bonds that helped the U.S. bankroll World War II.
They are called Green Liberty Bonds, issued by a state-backed nonprofit called the Connecticut Green Bank to add capital to the bank’s campaign to fund rooftop solar panels on the state’s homes and business.
The bonds were snapped up, even with the state shut down by the COVID-19 pandemic that forced the bank to market them with online webinars. Nearly $10 million worth were purchased by individual investors, with the proceeds going to help fund the bank’s programs.
The bond sale is an innovation from the Connecticut Green Bank, which is pioneering an unconventional strategy for using state policy to accelerate investments in clean energy at the community level, said bank President Bryan Garcia. The bank’s complex program structure includes solar installations, home energy investments and renewing hydroelectric dams on state rivers.
With state budgets hit hard by the pandemic, the transition is essential, Garcia said in an interview. “Government isn’t going to solve this problem, so we have to enable more private investment to come in to finance clean energy so we can scale it up and get it deployed,” he added.
Instead of tapping the federal budget for support, as the Obama administration did a decade ago with its clean energy stimulus grants and loan guarantees, the Connecticut strategy is to entice commercial bank lending to accelerate clean energy investments. The private loans are coupled with federal solar tax credits where they can be used, an assessment on Connecticut ratepayers that comes to under $10 a year, and state greenhouse gas reduction credits.
“The prior model was just giving the money away,” Garcia said. A dozen other states and the District of Columbia have followed Connecticut’s lead with a green bank or similar strategy. Green lending is part of Democratic presidential nominee Joe Biden’s energy platform and the climate platforms of House and Senate Democratic leadership (Climatewire, Aug. 26).
Last month, the House authorized creation of a federal green bank to be funded with an initial $20 billion stake. Two dozen state governors acting through the U.S. Climate Alliance wrote congressional leaders calling for enactment of a similar measure in the Senate.
“The momentum for a national climate bank is stronger than it’s ever been in more than a half-dozen years” of pressing the strategy with Congress, said Jeffrey Schub, executive director of the Coalition for Green Capital.
The program poses a contrarian question for Biden and progressives on his side: Does green energy need an infusion of green capitalism to hit its far-reaching climate and job growth targets?
And it may offer a counterpoint to accusations that Biden and his party would turn clean energy programs into socialism, said Reed Hundt, a director of the bank and former Clinton administration official who is considered a father of the green bank strategy. “The green bank is designed to accelerate market trends, not fight them,” Hundt said.
More support for solar
Between the Connecticut bank’s formation in 2014 and mid-2019, it has spent $260 million on its agenda while raising $1.42 billion from banks and other private investors, according to its most recent audited financial statement. It has funded solar panels and other projects for more than 40,000 homes and 375 businesses in the state, generating $87 million in state taxes. The clean energy projects will reduce carbon emissions equal to the reductions from removing 1.1 million vehicles from the road, the bank said.
The added solar power is still a fraction of the state’s power generation, which totals 10,464 megawatts, according to the U.S. Energy Information Administration. But according to solar developer James Moore, it has opened an important door for residential solar development.
“What the Green Bank has done has shown leadership in ways to make more projects work financially for Connecticut business and homeowners, that leverages private financing as well,” said Moore, co-president of SunCommon in Waterbury, Vt. His company’s solar unit installations in Vermont and New York’s Hudson Valley approach 100 MW.
Soon after Connecticut’s green bank opened, Garcia met with members of the state’s banking association, who were not happy with the new competition.
“They said, ‘The last thing we want is another state bank standing in front of our business,’ and I was like, ‘Whoa. Well, my goal is to enable more of your private capital investment to solve the problems that the state is trying to address, which is climate and clean energy,'” Garcia said.
Over the past decade, banks and credit unions have become a lot more comfortable with solar lending, which is winning a place alongside car, mortgage and home improvement loans, Moore said.
The steep decline in the costs of solar power to customers, compared with utility electricity rates, created a built-in dividend that property owners can tap either by buying or leasing solar units, Garcia said.
The bank’s C-PACE solar program looks to private banks to fund an approved solar installation. The costs are spread over a 15-20-year term, like a mortgage, but are added to the owner’s property tax bill. The payments go to the bank, which reimburses the private lender.
Garcia said that for a typical customer, solar installation in the state now delivers power at 12 to 13 cents per kilowatt-hour, 6 cents better than the utility’s bill.
“The solar contracts deliver a predictable value over a long period of time,” Moore said, with the rooftop electricity offsetting a large part of the monthly electricity bill. Customers “know they will be able to offset a large portion of their electric bill for decades to come.”
“The banks see they can get positive cash flow from day one,” he added.
In moving to a climate bank strategy, Connecticut officials are accepting the opposite sides of the lending equation. They have gained the leverage of a fivefold increase in clean energy investments thanks to the impact of borrowed capital, but have exposed the state and its citizens to the risks of customer delinquency and default. A collision between leverage and risk played out disastrously in the 2008 mortgage banking collapse.
“To engage private investors into this market, somebody had to take the risk,” Garcia said. If a solar customer can’t keep up loan repayment, the private investors are paid first, the Green Bank last. “If the household stops paying the bill, who is left holding the bag? The Connecticut Green Bank,” he said. “We are first at risk for non-repayment.”
He cited the bank’s capital, $211 million for the fiscal year ending June 2019, as the foundation of its strength. “We fully believe people will pay us back,” he said.
But it was clear the pandemic’s huge impact on the economy created a new, unimagined test. The business shutdown in Connecticut reduced electricity rates. The state’s unemployment rate soared from 3.8% in February to 10.2% in July.
Before this year, the default rate on the bank’s projects averaged 1% or less, its audit reported.
“When COVID hit, every financial institution took a look at, what are the risks of non-repayment?” Garcia said. Bank policymakers came up with a plan that gave solar customers an option to defer payments due this year, adding a year to the end of the lease period, he said. “We want to help customers manage through this challenging time,” the bank president said.
Connecticut Green Bank reported that 10 property owners in the main solar unit program, representing $11.8 million in installations or 16% of the total loan program, inquired about the deferral program. Seven ultimately received six-month extensions in payments.
“So far very few [customers] have come to us and said they needed to restructure their payment this year because they were struggling,” Garcia said. “Knock on wood.”
“Worrying about [defaults] is like worrying about fraud in mailed-in ballots,” said Hundt. “It’s fantasy.”
One of the distinguishing features of the National Climate Bank Act is that it funds an independent, nonpartisan non-profit to operate as the country’s national green bank. It does not create a new agency or government owned-corporation. This is a very intentional and critical design element, and last week the Australian government shows us why.
In a new “Orwellian” proposal, the Australian Energy Minister introduced legislation that will provide its national green bank with AUD 1 billion in new capital to finance an expanded list of eligible technologies that now includes natural gas and coal-fired generation.
The green bank, the Clean Energy Finance Corporation (CEFC), has driven nearly $20B into renewable, efficiency, transmission, and sustainable agriculture projects, among many other innovative solutions. It is the world’s largest and most successful national green bank, proving out the model, expanding clean energy markets, lowering GHG emissions, and mobilizing private investment.
Unfortunately, the CEFC was established as a government-owned corporation, with the national government in control of its charter and investment mandate. The result has meant that since the day it was created, it has been fighting for its continued existence and climate-focused mission.
As politics and control of government has changed in Australia, so too have attitudes towards the CEFC. Opponents have tried to shut it down, change its mission, sell it and increase its required rate of return so as to shrink the market for viable investments. The fact that the organization has persisted and continued to invest effectively is a testament to the CEFC’s leadership and professional staff.
But it’s also a huge warning sign to those in the U.S. hoping to implement lasting climate finance policies. A government-owned corporation or agency within government can easily be dismantled, shut down or countermanded as politics change. Look at the DOE Loan Programs Office, for example. This kind of political interference is particularly harmful to any finance-based policy solution like a green bank, where long-term stability and reliability is essential for partnership from market actors.
This is precisely why the National Climate Bank must be an independent nonpartisan non-profit. If we want it to survive the inevitable political change that comes and goes over the next decade, any financing solution placed within the federal government itself just won’t cut it.
FOR IMMEDIATE RELEASE
Aug. 25, 2020
Senate Climate Committee Backs New National Climate Bank Nonprofit
Mirrors House Climate Crisis Committee Action Plan Rec
New initiative would create 5M jobs, with requirement to prioritize investment in frontline and communities of color
WASHINGTON —The Senate Democrats’ Special Committee on the Climate Crisis has included a National Climate Bank nonprofit in its blueprint on how to solve the climate crisis while putting millions back to work. In its report, the committee wrote, “Green banks and climate banks have proven to be effective tools for leveraging clean energy investment, and Congress should act to further expand such tools.”
Earlier this summer, the House Select Committee on the Climate Crisis included the National Climate Bank nonprofit in its action plan. A day later, the chamber passed its infrastructure bill that provided $20 billion to start the nonprofit.
“Momentum has never been stronger to start a National Climate Bank—nor has the urgency. America needs jobs that build a cleaner and better future now, and this is a proven way to do it,” Coalition for Green Capital Executive Director Jeffrey Schub said. “Now is the time for the Senate to finish the job and take up the House-passed bill that provided $20 billion for the National Climate Bank.”
Nearly 100 organizations have sent a letter to U.S. Senate leaders requesting future economic recovery legislation include such funding. With tens of millions of Americans filing for unemployment due to the COVID-19 pandemic so far and studies showing that up to 42 percent of those jobs will not return, the groups argue that Congress must urgently make long term investments that create jobs and build a cleaner future.
As envisioned in H.R. 5416 and S. 2057, the green bank nonprofit model would pair each public dollar with multiple private ones to build a range of clean energy projects throughout the U.S. This includes renewable power, building efficiency, grid infrastructure like transmission, industrial decarbonization, clean transportation, reforestation and climate-resilient infrastructure. Because the dollars are repaid over time, they can be recycled to make additional investments in the future.
A significant portion of investment must go to low-income, frontline and communities of color. This means benefits and job creation will be prioritized in climate-impacted communities, many of which have also been hard hit by the COVID-19 pandemic.
The most common question about the proposed National Climate Bank is, what the organization will actually do. The concept of leveraging private investment, and delivering job creation and environmental justice benefits can be compelling. But there is nothing more clarifying than the real-world example themselves.
That is why CGC and its partners have been working hard to create a series of detailed “use cases” that illustrate precisely what markets the Climate Bank – or the Clean Energy and Sustainability Accelerator as it was named when it passed the House last month – will invest in. They explain what the barriers are that slow investment and technology adoption, and the exact interventions the Accelerator and its state/local green bank partners will make overcome those barriers and drive investment. The detailed transaction schematics show the flow of money, how the end-users and the clean energy industry benefit, and how new opportunities for private investment are created.
And we are pleased to share here the first of these uses cases, focusing on delivering lower-cost solar power to low-to-moderate income (LMI) households through community solar installations. Community solar is an exciting application of solar PV technology because it enjoys the scale benefits of ground-mounted, grid-tied larger projects while delivering the economic benefits of rooftop solar PV to participating households.
Community solar also presents a solution to the inherent inequity of rooftop solar – one has to own a home in order to put solar panels on the roof. Homeownership rates are decline as income level falls, which means LMI households who rent are left out of the rooftop solar revolution.
However, simply signing up hundreds of LMI households to subscribe a community solar project isn’t so easy. There are a number of barriers that slow investment and ultimately participation of LMI households. These include:
- Community solar projects are complex and expensive to develop and pull together, even more so when the serve LMI households due to high marketing and subscription management cost;
- Capital providers that would normally invest or lend to a community solar project are hesitant to do so if the subscribers (and the repayment source) are LMI households because the lack of repayment data from this set of customers leads to a perception of high repayment risk; and
- If capital is extended to projects, it is likely at a cost that results in a solar price offered to potential subscribers that is actually more expensive than current power prices.
In this first case, two interventions are presented to overcome these barriers. The first, developed by the Maryland-based Climate Access Fund, is the LMI Revenue Guarantee Fund. The Accelerator would provide the seed capital necessary to create the Fund, which would in turn provide a partial guarantee to the private capital providers. This guarantee will stand behind the LMI household subscription payments, ensuring that up to pre-determined limits, private capital providers can be certain they will earn the revenue they expect from the project.
The purpose of this intervention, besides unlocking clean energy and savings for LMI households, is to build up a track record of real data on the true repayment risk so that in the future private capital will flow into these projects more freely and at prices that accurately reflect the risk. There are 50 million LMI households in America, and every one of them deserves cleaner and cheaper energy, whether or not they own their own home. The Accelerator can unlock this investment and market opportunity with this intervention.
The second intervention offered is modelled off the work of NY Green Bank. High upfront development costs are not only a barrier to project completion, but have negative impacts upon project completion. Development capital is expensive, so the more that is used in the more, the higher the resulting price of solar power is going to be in order to generate revenue sufficient to repay the development capital.
But some of the development capital is used to pay costs that are actually very low risk. For example, community solar projects often need to pay a significant upfront interconnection fee to the grid operator or utility to secure the right to sell its power into the grid. This fee is paid well before the project is operating and generating revenue. So the developer must use expensive development capital to pay this fee. However, for a well-structured and planned project, the likelihood of that project ultimately reaching completion and producing revenue is high. So the Accelerator, again working with state/local green bank partners, will extend an interconnection fee bridge loan, which is at a lower cost than the limited development capital. And the bridge loan is repaid upon project completion.
The benefit to this intervention is that the developer can proceed quickly with project development without seeking raise additional capital or tapping into expensive capital on hand. And the project costs overall are lower because the bridge loan has a lower cost of financing than the development capital. This lower development cost translates to lower solar prices for customers once the project is operational. Lower solar prices mean more customers and a larger total addressable market.
Both interventions are principled designed to achieve the same goals: unlock private investment that wouldn’t otherwise flow into clean energy projects, and do so in a way that delivers more and cheaper clean energy to end customers. And in the case of LMI households, in particular, expanding access and lowering energy burdens are critical to ensuring a just and equitable transition.
This is just the first of many cases. Here are just few more in the pipeline:
- Aggregation of small business upgrades through commercial property assessed clean energy warehouse facilities
- Lowering the upfront cost of rooftop solar through REC-based upfront financing
- Swapping coal power for renewable power for rural electric co-ops + decommissioning and worker transition support
- Whole home clean energy and resilience upgrades for LMI households
- Home electrification financing with electric heat pumps
So stay tuned for these and many more use cases to see exactly what the Accelerator will do and how it will equitably create jobs, reduce emissions and lower energy costs.
For over a decade CGC has held fast to these core principles to guide a clean energy transition:
- consumers should pay less, not more, for clean energy;
- every American should have clean energy and access to the financing necessary to get it; and
- public funds should mix with private as needed to provide that abundant, affordable finance.
The institutional embodiment of these principles is the green bank. And Congress is now closer to creating a massive version of a green bank than it has been since 2009. Outside Congress, the topic of clean energy finance is being taken up by a growing and diverse set of stakeholders.
Last week, Rewiring America released a remarkable and novel analysis that calculated precisely how many heat pumps, electric vehicles, miles of transmission line and other electrification-focused solutions are needed to decarbonize America. And it prominently described how the method and cost of financing are essential components of our nation’s climate strategy. “If done right, innovative low–cost financing will be the most effective way to ensure equity and universal access to cheap, reliable energy in the 21st century.” The report’s companion “Handbook” goes further to say:
When people talk about the total cost of solving climate change, it sounds enormous, often in the trillions. This is exactly the wrong way to approach it. We should think about how much money it will save us. We must ask ourselves the question, “What market conditions, and at what interest rate, can we make solving climate change save us money?” We must then write the regulations and build the institutions and policies that make that possible.
Thankfully, the institution needed to deliver this kind of finance has already been designed, it has been road tested globally and in America for a decade, and the bill to create it has already passed the House of Representatives with $20 billion of funding.
The National Climate Bank Act was introduced by Senators Markey and Van Hollen, and Rep. Debbie Dingell in 2019. And last month it was passed as part of the $1.5T Moving Forward Act with $20 billion of capitalization for the independent non-profit that what was renamed the Clean Energy and Sustainability Accelerator. It was endorsed in the House Climate Crisis Committee’s report and included in the Energy & Commerce Committee’s CLEAN Future Act climate package. It has the support of nearly 100 organizations, including environmental and clean energy leaders. And the non-profit national green bank has the support of 7 out of 10 voters nationally, including majorities of voters across parties.
The Reconstruction Finance Corporation (RFC) is often looked to as the model for what is necessary to build our clean energy future. However, the RFC hasn’t operated in over half a century, while green banks are operating right now, designed for the very crisis we are confronting. They are proving in real time precisely how to do it.
In the U.S. green banks at the state and local level have financed more than $5 billion of clean energy and resilience projects, leveraging nearly $3 of private investment per public dollar. And every one of those projects saves money for the customer, and many were designed specifically for low-income communities. Globally, green banks have driven over $50 billion of investment.
As the Rewiring America report explains so well, merely saying something must be financed is not enough. The details matter, and we cannot wait until after the institution is formed to figure them out. Green banks are working as we speak to refine the precise techniques that will be deployed quickly at scale when the national green bank is launched. We must use the green bank tools, built for this exact purpose, that are right in front of us.
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