The Clean Energy Future Blog

By Coalition for Green Capital

Today, Representative Elizabeth Esty (D-CT) and Senator Chris Murphy (D-CT), with co-sponsors from across the country, introduced H.R. 2995 and S. 1406, the Green Bank Act of 2017. This bill creates a United States Green Bank that will support the creation of a 21st century American energy infrastructure by providing a comprehensive range of financing—including loans, loan guarantees and other forms of risk mitigation—on a competitive basis to local Green Banks. The United States Green Bank would solely be a pass-through for allocating funding to qualified institutions, meaning authority over project selection and management would remain with local Green Banks. The United States Green Bank would have an initial capitalization of $10 billion, and a maximum capitalization of $50 billion.

Demand for regional, state, and local Green Banks is high due to the success of early Green Banks such as the Connecticut Green Bank, which has used under $200 million in ratepayer funds to cause over $1 billion in investment in Connecticut’s clean energy and energy efficiency markets in the five years since its creation. State and local Green Banks are operating across the country, and many more Green Banks are in various stages of development. Governor Brian Sandoval (R-NV) became the most recent leader to sign Green Bank legislation in Nevada.

As the nation’s energy generation, transmission, and distribution infrastructure continue to evolve, the United States Green Bank would provide the support necessary for specific areas of the country to address energy infrastructure issues that are most relevant to that region, state, or locality. This could be a transmission project to bring clean energy from remote areas to load centers, accelerating the adoption of distributed energy generation projects in a targeted area, or financing innovative and market-ready technologies such as energy storage.

Green Banks exist to fill financing gaps in clean energy and energy efficiency markets wherever they exist and to use taxpayer and ratepayer dollars more efficiently, getting more bang for every public buck that is used to create a 21st century energy American infrastructure. The possibilities for the application of these funds are wide-ranging, and by working exclusively through regional, state, and local Green Banks, a United States Green Bank will allow for a tailored regional approach to addressing gaps in the market, instead of trying to force a one size fits all approach across the country. Existing Green Banks will be boosted by an infusion of new capital, new Green Banks can be created to address local market issues, and a the United States Green Bank will power the transition to a 21st century American energy infrastructure.

Previous iterations of the Green Bank Act were introduced in 2016 and 2014.

By Coalition for Green Capital

This week, Nevada Governor Brian Sandoval (R) signed a bill establishing a Nevada Green Bank into law. The bill directs the Nevada Governor’s Office of Energy to create an independent, nonprofit corporation named “the Nevada Clean Energy Fund.” The Nevada Clean Energy Fund purpose will be to support the deployment of clean energy technologies in the state. To accomplish this goal, the Clean Energy Fund will offer a range of financing structures, forms, and techniques for clean energy projects.

A Green Bank is an enormous opportunity for Nevada

This bill is the culmination of a multi-year Green Bank effort in Nevada. During the 2015 legislative session, State Senator Pat Spearman sponsored legislation that directed the Interim Legislative Committee on Energy to complete a study of a Nevada Green Bank. The Coalition for Green Capital (CGC) immediately stepped in to offer support on executing the study, working in partnership with the Governor’s Office of Energy to complete the analysis. Over the course of eight months, CGC met in person and by phone with policymakers, clean energy advocates, the regulator, installers and others to understand the clean energy landscape in Nevada.

The study found there was a compelling case for a Green Bank in Nevada. Distributed technologies, like rooftop solar and efficiency, represented at least a $3.5 billion investment opportunity in Nevada. Roughly 90% of Nevada energy is imported, creating an enormous opportunity for Nevada to retain a greater number of energy dollars spent in the state by investing in in-state energy resources. Nevada residents are paying some of the highest electricity prices in the Mountain West. These facts point towards the need for a Green Bank. As stated in the report:

Green Bank investments would increase the state GDP, create new businesses, lower energy costs, and create new jobs. The Connecticut Green Bank, serving a market similar in size to Nevada, has generated almost a $1 billion of total clean energy investment in five years of activity.

The study included interviews with over 50 Nevada stakeholders, who expressed enthusiasm for a dedicated clean energy finance institution in Nevada. Stakeholders noted the difficulty of accessing financing at attractive rates and the decline in energy rebates as key challenges holding back the growth of clean energy markets.

Nonprofit Green Bank model growing more popular

The study recommended that the state create a nonprofit corporation to serve as the state Green Bank, which was the path ultimately selected in the legislation. Through our work across the country, CGC is seeing growing interest in the model of creating Green Banks as independent nonprofits rather than governmental institutions. In addition to Nevada, Montgomery County, Maryland also opted for a nonprofit approach for its county-level Green Bank. While there is no “right” way to create a Green Bank, state and local governments may opt for a nonprofit model to accelerate institutional formation and open the door to more diverse capitalization sources, such as philanthropy.

With the bill now signed, the next step is the actual formation of the institution. CGC looks forward to continuing our engagement in Nevada and supporting in-state partners as the formation process gets underway.

Nevada’s entrance onto the Green Bank scene is the latest indication that the Green Bank movement is picking up steam. Nevada joins states such as Connecticut, New York, and Rhode Island in establishing state-level Green Banks. Earlier this year, the mayor of DC announced her intention to form a Green Bank. At the end of last year, US Green Banks had participated in over of $2 billion of clean energy transactions. Expert observers have noted that demand for state and local Green Banks may accelerate in reaction to the US withdrawal from the Paris Agreement, as leaders pursue alternative pathways to lowering emissions. Green Banks are particularly attractive for policymakers because they do not depend on federal policies to have a positive impact on local jobs and energy markets.

Resources:

• Nevada Green Bank Study (June 2016)

By Coalition for Green Capital

The track record shows that a Green Bank can drive more investment, more clean energy, and more CO2 reduction per dollar of public cost than current programs.

The longest running Green Banks in the U.S. have now been operating for over five years. Green Banks have driven over $2 billion of clean energy investment in the U.S., and $26 billion globally as of 2016. Collectively those Green Banks have driven more than $3 of private investment per each $1 of public investment used.

But, now that the track record exists, it is important to ask if Green Banks really are accomplishing good outcomes and getting value for public money. Should policymakers invest public money in Green Banks?

A simple way to answer that question is to compare Green Bank outcomes to those of what can be considered the “benchmark” policy for clean energy investment across the country – utility efficiency incentive programs. Utilities use ratepayer and public funds across the country to offer nearly $8 billion per year through incentive programs to spur demand for efficiency and “procure least cost resources.” Regulators direct utilities to operate these programs to reduce overall energy demand and defer construction of new generation capacity.

Green Banks are intended to achieve similar (though slightly different) energy, economic and environmental outcomes. They seek to maximize the deployment of affordable clean energy (renewable and efficiency) and maximize total investment (both public and private). Green Banks use a range of financing techniques and program design structures to draw in capital and make markets grow.

Incentives and Green Banks are complementary and often are used together in the same project. Cash grants and rebates can entice demand, and financing can enable would-be adopters to buy clean energy technology with no upfront cost. It is not an either/or. Since incentive programs exist everywhere, though, they provide a useful basis of comparison of what energy, economic and environmental outcomes can be achieved with public investment.

The best point of comparison is Connecticut, whose Green Bank has operated for over five years. And because the Green Bank was capitalized by re-directing a small portion of the funds previously used for incentives, the state provides a test case for Green Bank evaluation.

The case for Green Banks is clear. On many energy, economic and environmental metrics, the Connecticut Green Bank has superior outcomes.

• In the three years from 2014 to 2016, the CT Green Bank has saved or generated 50% more clean energy per dollar of public cost than the incentive programs. Even if the Green Bank lost every dollar it loaned (turning that loan into a cost), the Green Bank would still perform on par with incentive programs.

• And the Green Bank has reduced 50% more CO2 emissions per dollar of public cost than incentives. Again, even if the Green Bank lost every dollar it loaned, the Green Bank would still perform as well as the incentive programs.

• Green Banks leverage more private clean energy investment per dollar of public investment than the incentive programs. Over the last three years, the Green Bank leveraged $4.65 of private investment per dollar of public investment, compared to only 90 cents of private investment for incentive programs.

• The Green Bank also puts more of its money into project investment rather than operating expenses. Over the last three years, only 25% of the funds used by the Green Bank went to operating expenses. For the utility incentives, this figure is 34%.

• The higher leverage and operating efficiency means that the Green Bank drives 5x more clean energy investment per dollar of public cost than the incentive programs.

• In addition to realizing greater energy, environmental and investment outcomes, the Green Bank has actually paid dividends to the state. The Green Bank has paid $25.4 million to the state government to fill budget shortfalls. This is possible because the Green Bank preserves capital by offering financing. Incentive programs cannot make these kinds of direct cash dividends.

By these measures of capital efficiency and outcomes, Green Banks represent a strong and wise investment of public funds. And policymakers around the country can realize similar benefits by creating and funding their own Green Banks.

As stated before, Green Banks and incentives are complementary. There need not be a debate between financing versus subsidies (though some organizations continually want to force that debate). But a data-driven analysis shows us that Green Banks can clearly improve the energy, economic and environmental outcomes any state aims to achieve through public investment in clean energy deployment.

Click here for the details of the supporting analysis.

By Coalition for Green Capital

The Coalition for Green Capital hosted a high-level roundtable on Green Banks in Emerging Markets on April 21, 2017 in Washington, DC. The event, organized alongside the IMF spring meetings, featured leading climate finance experts from government, private finance and the NGO community. The day was organized as a discussion, exploring how Green Banks (through either purpose-built entities or adaptations of existing institutions) might facilitate an increased flow of investment into low-carbon projects in developing economies at the scale required to achieve international climate goals. The session was engaged, wide-ranging and productive and was grounded in an understanding that business-as-usual will not get us to our goals. As estimated by the OECD, post-Paris commitments by Development Financial Institutions will result in an approximate increase of $46 billion annually (including public finance + private leverage) towards the annual low-carbon investment gap[1].  This only fills 6.1% of the IEA estimated $759 billion annual gap that exists between current investment levels and the “Meet NDC” scenario[2].

The discussion was also grounded in an understanding that getting private capital to move quickly and at scale will require market conditions that will support both competitive returns and provide affordable low-carbon for customers. To achieve these conditions of attractive returns and affordable energy, discussion focused on understanding the gaps and barriers that need to be bridged and how national Green Banks can play a useful role in the evolving climate finance architecture.

A key take away from the discussion was that Green Banks offer a flexible model for country-specific approaches. It was noted that form must follow local function, and the first step is to identify what local barriers exist. Taking the Green Bank concept forward, will require a shift from the general macro concept to identifying country-specific opportunities around priority markets, gaps and barriers. Participants acknowledged that powerful new approaches are needed that are focused, accelerated, dedicated, at scale and local.

It was also noted that the time is ripe for innovative thinking about local ownership of climate finance. Participants pointed out that investment decisions are inherently local, and there is growing demand for local solutions.  Post-Paris, as countries around the world look to convert their NDCs into investment pipelines, Green Banks offer a useful mechanism to support local ownership and increasing investment in a way that allows for autonomy,  flexibility and valuable political signaling.

Major themes of discussion centered on speed, scale, focus, retail and wholesale bridges, capacity (either new or adapted) and mainstreaming green investment. The discussion also focused on the need to address resilience and adaption as part of the climate finance approach in emerging markets.

Next steps coming out of the event are for CGC to incorporate the ideas and thinking that emerged from the scoping session into recommendations for the Hewlett Foundation on how to approach Green Bank creation (through new and/or existing institutions) in developing countries. CGC’s approach will focus on two broad levels. First, we will work to identify a small set of promising pilot countries or sub-national locations for potential Green Banks and build a phased implementation plan around these initial locations. Secondly, we will use these pilot projects to develop systematic approaches to institutional engagement of capital providers, investors and other major stakeholders in the clean energy finance architecture.

[1] OECD, “2020 Projections of Climate Finance Towards the USD 100 Billion Goal; Technical Note,” 2016.

[2] Clean energy includes renewable energy, energy efficiency, and other low-carbon technologies, such as nuclear and CCS. IEA, “World Energy Outlook – 2016,” OECD/IEA, 2016.

By Coalition for Green Capital

Reed Hundt, the CEO of Coalition for Green Capital, recently delivered a presentation for the International Monetary Fund on the potential for clean energy and 5G communications technology to drive global economic growth.

Reed discusses the clean energy investment opportunity presented by the annual global investment need of $200 billion over the next 25 years. The amount of total investment in energy doesn’t need to change—but the share of investment that goes to carbon vs clean must be reversed. This “big switch” is an opportunity that will drive global growth, and increase climate security.

The slides for Reed’s presentation are available here.

By Coalition for Green Capital

Since the first Green Banks in the US were founded, the number and investing pace of these institutions has ramped up.

CGC reviewed annual reports and transactions at six US-based Green Banks from their inception through fiscal year 2016. At the end of 2016, the transactions these institutions participated in represented more than $1.6 billion of cumulative clean energy investment. Nearly $1 billion of that total came from private sources, demonstrating the continuing ability of Green Banks to leverage private dollars.

The investment pace is poised to accelerate in fiscal year 2017. Last month NY Green Bank  announced the close of 13 transactions, totaling over $900 million. This set of transactions alone places total investment well over the $2 billion mark.

The six Green Banks reviewed were: the California Lending for Energy and Environmental Needs (CLEEN) Center, the Connecticut Green Bank, the Hawaii Green Energy Market Securitization (GEMS) Program, the Montgomery County Green Bank, the NY Green Bank, and the Rhode Island Infrastructure Bank.