The Clean Energy Future Blog

By Coalition for Green Capital

Washington, D.C.– The Coalition for Green Capital issued the following statement after the House of Representatives passed the Build Back Better Act:

“We applaud the House passage of the Build Back Better Act, which includes the Greenhouse Gas Reduction Fund that is meant to fund a national green bank,” said Reed Hundt, CEO of the Coalition for Green Capital. “We thank Congresswoman Debbie Dingell and Chairmen Frank Pallone and John Yarmuth for their support, leadership, and vision over the many years culminating in today’s historic vote.”

Background

President Biden included the Clean Energy and Sustainability Accelerator, a national green bank that would inject funding into state green banks, as a key climate provision in the American Jobs Plan. The House passed the Accelerator as part of the INVEST in America Act (H.R. 3684), marking the third time it passed with bipartisan support. Republicans voting in favor of the Accelerator include Congressmembers Don Bacon (NE-2), Brian Fitzpatrick (PA-1), Jeff Fortenberry (NE-1), John Katko (NY-24), Christopher Smith (NJ-4), Jefferson Van Drew (NJ-2), and Don Young (AK).

In a July letter to congressional leaders urging action on climate infrastructure, over 140 mayors called for the creation of a national green bank. Earlier this month, 10 governors on the front lines of the climate crisis called on Congress to pass the Clean Energy and Sustainability Accelerator, because doing so would be one of “the most impactful actions to protect our climate” and environmental groups echoed that message.

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By Coalition for Green Capital

Washington, D.C.—  On the first day of the U.N. Framework Convention on Climate Change Conference of the Parties (COP26), the White House released a fact sheet outlining bold plans and action taken by the Biden administration to address the climate crisis, including the recently released framework for the Build Back Better plan. The fact sheet released today named the creation of the Clean Energy and Sustainability Accelerator, the national green bank, as a key policy proposal to invest in the clean energy economy and reduce greenhouse gas emissions.

The fact sheet reads, “The [Build Back Better] framework will set the United States on course to meet its climate targets, achieving a 50-52% reduction in greenhouse gas emissions below 2005 levels in 2030 in a way that grows domestic industries and good, union jobs and advances environmental justice. Specifically, it will […] Advance environmental justice through a new Clean Energy and Sustainability Accelerator that will invest in projects around the country, while delivering 40% of the benefits of investment to disadvantaged communities, as part of the President’s Justice40 initiative.”

President Biden included the national green bank that would inject funding into state green banks, as a key climate provision in the American Jobs Plan. The House passed the green bank as part of the INVEST in America Act (H.R. 3684), marking the third time the Accelerator has been passed by the chamber. In a July letter to congressional leaders urging action on climate infrastructure, over 140 mayors called for the creation of a national green bank. Last month, 10 governors on the front lines of the climate crisis called on Congress to pass the National Green Bank, because doing so would be one of “the most impactful actions to protect our climate” and environmental groups echoed that message.

Read the White House fact sheet here.

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By Coalition for Green Capital

Green Bank Will Lower Energy Costs, Create Jobs, Fight the Climate Crisis

Washington, D.C.– Reed Hundt, CEO of the Coalition for Green Capital, issued the following statement after funding for a national green bank was included as part of the Build Back Better budget reconciliation framework released by the White House:

“The Coalition for Green Capital came together 11 years ago in the belief that public-private investment could accelerate the inevitable, vital transition from the old carbon power platform for the economy to the new, cheaper, more widely available, and safe clean power platform. In these years we have worked with hundreds of people in more than 30 states to create state and local green banks that have proved the useful, financially prudent and environmentally just precepts we have all advocated from the inception of this effort.

“In these same years we have worked with many Senators and Representatives in support of repeated legislative initiatives. In particular Senators Ed Markey and Chris Van Hollen and Congresswoman Debbie Dingell have been unflagging champions. In 2019, 2020, and 2021 this team introduced legislation in the Senate and House to fund a national climate bank by the name of Clean Energy Sustainability Accelerator, a 501(c)(3) nonprofit. They have been joined in this and similar legislative efforts by ​​Senators Durbin, Stabenow, Murphy, Blumenthal, Whitehouse, Schatz, Heinrich, Booker and Warren, as well as former Senator Harris, now Vice President. 

“In 2021 President Biden adopted this initiative as a core component of what has become known as Build Back Better. And today the President announced that this measure will be part of the reconciliation legislation. As soon as the appropriate process is concluded we hope and expect the waiting state and local green banks will be supercharged with new funding and other projects critical to the President’s agenda and the country’s future will be underwritten. This is what a legislative victory looks like, and we express the deepest congratulations and gratitude to all who made this possible, especially including President Biden, Senator Van Hollen, Senator Markey, and Congresswoman Dingell.”

BACKGROUND

President Biden included the national green bank that would inject funding into state green banks, as a key climate provision in the American Jobs Plan. The House passed the green bank as part of the INVEST in America Act (H.R. 3684), marking the third time the Accelerator has been passed by the chamber. In a July letter to congressional leaders urging action on climate infrastructure, over 140 mayors called for the creation of a national green bank. Last month, 10 governors on the front lines of the climate crisis called on Congress to pass the National Green Bank, because doing so would be one of “the most impactful actions to protect our climate” and environmental groups echoed that message.

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By Coalition for Green Capital

Washington, D.C.— A new report released by Energy Innovation that projects the greenhouse gas emissions impact of the Build Back Better legislation says that funding a new national  green bank would represent a “historic investment” in clean energy. The report, authored by Megan Mahajan and Robbie Orvis, used the Energy Policy Simulator to estimate the impact to greenhouse gas emissions, costs, jobs and public health based on the climate provisions found in the infrastructure bills under consideration by Congress.

In reference to the Clean Energy and Sustainability Accelerator, Mahajan and Orvis said, ”One particularly promising provision is the Greenhouse Gas Reduction Fund, which would set aside $27.5 billion to create a national green bank.” Though the impact of the provision is not specifically modelled in the study, the report goes on to say the policy “would represent a historic investment that could catalyze emerging clean energy industries.”

“It’s clear that a federal green bank would be a historic investment in bringing clean energy projects to local communities and driving reductions in greenhouse gas emissions,” said Reed Hundt, CEO of the Coalition for Green Capital. “As proposed in the Build Back Better plan, funding for the Accelerator would generate billions in clean energy investment, create millions of jobs and reduce emissions by 500 million metric tons over the next decade.”

Third-party experts have estimated that over ten years, a $20B upfront capitalization of the Accelerator will:

• Support 500 million metric tons of cumulative emissions reductions with 92 million metric tons of those emissions reductions occurring in President Biden’s target year of 2030.
• Drive $200 billion of total investment in clean energy projects.
• Create 2.4 million jobs.

Read the report from Energy Innovation here.

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By Coalition for Green Capital

Washington, DC– The World Energy Outlook report released this week by the International Energy Agency highlights the urgent need for wealthy nations to accelerate their investments in clean energy in order to meet goals of net zero emissions by 2050. The report highlights key investment strategies and tools, many of which are already being deployed by green banks across the country, that are much needed to ensure an expeditious and equitable transition to clean energy.

According to the report, to get the world on track for net zero by 2050 by the end of the decade, annual global clean energy investment must quadruple from last year’s investment level by 2030, growing from $1T to $4T annually. The public sector contribution of this will similarly have to increase from $300B to $1.2B

The summary reads:

“Achieving rapid clean energy transitions depends on enhancing access to low cost finance for clean energy projects. This means channelling retained earnings from the balance sheets of large energy companies, as well as opening funding from a range of companies and external sources – notably banks and the enormous pools of capital in financial markets. We estimate that around 70% of clean energy investment will need to be carried out by private developers, consumers and financiers responding to market signals and policies set by governments. But an expansion of public sources of finance is also required. Public actors, including state-owned enterprises (SOEs), often have a key part to play in funding network infrastructure and clean energy transitions in emissions-intensive sectors. Public finance institutions will need to catalyse private capital, and their role is especially important in the NZE, where their investment more than doubles compared with the APS.”

“Experts continue to point to key features of the Clean Energy and Sustainability Accelerator as vital functions for financing our transition to clean energy,” said Reed Hundt, CEO of the Coalition for Green Capital. “With $7 billion generated in clean energy investments over the last decade, the green bank model is a proven method for providing local solutions for local problems.”

Over the last decade, the 23 green banks that exist today have generated $7 billion in clean energy investment, with $1.5 billion of this investment taking place in 2019 alone. This summer, the New York Green Bank closed a $314 million private capital raise with Bank of America, the largest ever by a green bank in the U.S. Elsewhere, green banks have funded community solar and energy efficiency projects for frontline communities and low-income residents.

Read the WEO summary on “Mobilising Investment and Finance” here.

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By Alex Kragie

You are peering over the edge of the tallest diving board at your neighborhood pool, excited about the possibility of a jump into the refreshing water below. You take a few steps back and then run forward but you stop short, not quite able to summon the will to take the leap. What if you belly flop and your friends laugh at you? What if the water is too cold? As you consider all the ways this simple action could go wrong, your friend whooshes past you on the diving board, taking a big confident leap high into the air, and enters the refreshing water with barely a splash. After that, it’s easy to take a leap of your own, and you spend the rest of the day diving and swimming with your friends.

If you are a private sector lender, the friend that so gracefully sprinted by you and led you into the water is a green bank. Green banks exist to fill gaps in the financing markets for clean energy. If the pace of investment into clean energy markets is not flowing at the rate necessary to address the climate crisis, you can bet that a green bank can show up and accelerate that pace. 

Spoiler alert: there’s plenty of work for green banks to do. According to researchers from Princeton University, the United States alone requires $2.5 trillion of investment into clean energy and energy efficiency above business as usual in the next ten years alone if we want to have a shot at net-zero emissions by 2050.  On top of this, the patterns of new technological rollouts throughout the 20^th century demonstrate that a business-as-usual approach to deployment will result in the benefits of the new technology (in this case dollar savings and cleaner air to breathe) will not accrue to traditionally disadvantaged and underserved communities unless there is an intermediary whose job it is to ensure these communities see these benefits. Again, this is a role that green banks play. 

The latest and greatest example of green banks opening up investment opportunities for private sector lenders came this summer, when NY Green Bank raised $314 million by selling the right to receive loan payments on a portion of its portfolio to Bank of America. For those who don’t live and breathe finance every day, this is a process known as securitization, where a buyer (Bank of America in this case) purchases assets (loans receivable) from the seller, NY Green Bank, in exchange for cash. This is the largest ever private capital raise by a green bank in the United States, and it demonstrates the quality of the loans on NY Green Bank’s balance sheet. Since its creation in 2014, NY Green Bank has built out a large portfolio of loans across sectors and technologies, most notably including $385 million in loans to community solar projects in New York State, effectively creating the market for these types of deals in the state. 

The types of projects that NY Green Bank has lent to are solid, credit-worthy projects that have been unable to access private capital markets at affordable rates. Affordably priced private capital has not flowed to these projects for the same reason that you just couldn’t quite take the jump off that diving board. Because green banks like NY Green Bank are mission driven, they can set that leadership tone, demonstrate the attractive nature of less-well-understood clean energy financings, and pave the way for private lenders to follow their lead, which is what is happening in this example. 

Private sector lenders didn’t make the initial loans that NY Green Bank made because they weren’t traditional transactions. They support sustainable infrastructure project types that had not yet been financed at scale, and so, for private sector lenders, there was some concern about whether or not the projects would be able to meet the level of return to make the project worthwhile (known as an internal rate of return). In short, there were loans to good, solid projects to be made, but it was unclear to private sector lenders whether the loans were profitable enough to justify making. Because NY Green Bank has financed these loans and demonstrated that they are in fact profitable enough, Bank of America  viewed the performance of NY Green Bank’s loans and determined that the water is pretty warm and it’s time to dive in. And it’s not just NY Green Bank proving that these investments are viable: 99.62 percent of green bank loans in the United States (measured by dollar value) have been repaid to their green bank lender. This means that green bank loans by dollar amount have a default rate of 0.38 percent, which any finance expert would tell you is great performance.

This $314 million infusion of cash will allow the organization to continue to invest in new projects in illiquid financing markets (meaning that currently  there are few lenders willing to offer appropriately priced capital for these projects)  in New York State, including in disadvantaged communities. Many projects in low-income communities, communities of color, and climate-impacted communities do not have access to the type of affordable financing that can make these projects work to lower energy costs to the end users. 

That is where NY Green Bank is stepping into the void, starting with a strong focus on affordable housing electrification in the state. Just like it dove into the New York State community solar market in the 2010s, NY Green Bank is jumping confidently into the pool by offering financing that delivers benefits to disadvantaged communities and aims to bring its private sector counterparts in along with it.

This type of transaction could become routine with the creation of a national green bank, known as a Clean Energy & Sustainability Accelerator. This Accelerator would, well, accelerate the pace of investment into clean energy technologies around the country, just like we’ve seen in New York. And by requiring standardization in green bank loans funded by the Accelerator, we will see securitizations along the lines of what NY Green Bank has achieved. The Accelerator is currently included in the House and Senate budget resolutions that could become law this fall as part of a budget reconciliation bill. If an Accelerator is funded at $100 billion, which is the amount allocated in the House and Senate bills led by Representative Debbie Dingell and Senators Ed Markey and Chris Van Hollen, the Accelerator is projected to create four million jobs in four years and generate $880 billion of total investment into clean energy. This latest NY Green Bank transaction gives a taste of what could be accomplished with a fully funded Accelerator — and that would make a big splash in finally tackling the climate crisis.

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¹ https://netzeroamerica.princeton.edu/img/Princeton_NZA_Interim_Report_15_Dec_2020_FINAL.pdf

² https://greenbank.ny.gov/-/media/greenbanknew/files/2020-21-NYGB-Impact-Report.pdf

³ https://coalitionforgreencapital.com/wp-content/uploads/Impact-Investment-Jobs-and-GHG-Impact-1.pptx