The Clean Energy Future Blog

By Coalition for Green Capital

The NY Green Bank recently submitted its 2016 Business Plan which showcased a strong year of performance and plan for the future.

Taken together, NY Green Bank’s closed transactions are estimated to have increased renewable energy capacity by 128MW and saved up to 1 million MWh of electricity from efficiency measures. NY Green Bank’s current portfolio of projects is expected to reduce greenhouse gas emissions by up to 2.9 million metric tons—equivalent to removing more than 37,000 cars from the road for 17 years. The Green Bank has approximately $500 million in its active pipeline, with an additional $121 million in closed deals. As we reported last week, NY Green Bank recently closed a $25 million financing deal with solar provider Sunrun.

Looking forward, the Plan lays out three objectives for the next year:

1. Put ratepayer money to work, prudently: Commit $200 million to NY Green Bank investments over the next year, equating to an average of $50 million in closed transactions per quarter.
2. Mobilize private capital: Achieve an average, portfolio-wide mobilization ratio of at least 3:1, driving towards a ratio of 8:1 across all NY Green Bank investments by 2025.
3. Drive toward self-sustainability: Continue to grow revenues and manage costs to reach self-sufficiency in 2018.

On the drive towards self-sufficiency, NY Green Bank provided data that put it squarely on this trajectory. In the past year, the Green Bank’s revenues more than doubled while expenses grew only 40%. A significant benefit of all Green Banks is that their funding is preserved and repaid over time. This means lower costs for taxpayers, and efficient use of government funds.

That being said, Green Banks should be viewed as a complement to, not a replacement for, other public energy programs. In its Plan, NY Green Bank says it will continue to “take leadership roles in establishing financing approaches and solutions” for other energy programs and objectives in New York State. NY Green Bank gives examples of potential partnership opportunities with NY Prize microgrid program, the State’s community solar initiatives, and businesses providing services to low- and moderate-income customers. This approach fits with the role that Green Banks play in geographies around the country: not only developing new projects and driving scale, but also performing market development and customer engagement activities that remove barriers to existing programs across the state. For example, The Connecticut Green Bank conducted outreach to customers and contractors to help build demand for residential retrofits in the State’s Smart-E program, connecting consumers with both financing and available rebates.

Congratulations to the NY Green Bank team on an impressive year—we’re looking forward to seeing what’s next for New York and Green Banks around the country!

By Coalition for Green Capital

NY Green Bank Announces Closing of $25 Million Loan to Accelerate Investment Residential Solar Installations Across the State

“NY Green Bank today announced the closing of a $25 million loan for Sunrun Inc., which will accelerate construction of more than 5,000 solar projects at homes across New York State. This loan complements a separate $25 million NY Green Bank transaction with Sunrun, announced by Governor Andrew M. Cuomo last month, which provides longer-term financing following completion of the projects.”

Loan Firm Dividend Solar Merges with PACE Financer Figtree, Raises $200 Million

“Dividend is a solar financing firm offering residential loans that include performance guarantees and warranty management. Figtree provides property-assessed clean energy (PACE) financing for energy-efficiency improvements, including solar power and water conservation upgrades. PACE financing allows home or business owners to access long-term financing that is repaid through their property taxes. The merger represents the first-ever combination of a residential solar lender and PACE financing provider.”

Three Amigos Unveil Climate and Energy Plan, NAFTA Changes

“President Barack Obama, Canadian Prime Minister Justin Trudeau and Mexico President Enrique Pena Nieto completed a one-day summit in Ottawa Wednesday, where they unveiled a commitment to see half of the continent’s electricity generated by clean sources by 2025.”

Hillary Clinton Initiative on Technology and Innovation

Earlier this week, Hillary Clinton unveiled her technology and innovation plan. She plans to use funds leveraged by her infrastructure bank to “create a competitive grant program to give cities, regions, and states incentives to create a ‘model digital community.” This continues Clinton’s campaign theme of sparking innovation through private-public investment platforms like the national infrastructure bank.

Exxon Touts Carbon Tax to Oil Industry

“Exxon MobileCorp. is ramping up its lobbying of other energy companies to support a carbon tax, marking a shift in the oil giant’s approach to climate change as the industry faces growing pressure to address the politically charged issue.”

By Coalition for Green Capital

Last week, the New York Green Bank announced it will provide $25 million in working capital to Sunrun, one of the nation’s leading residential solar companies. The NY Green Bank estimates this will accelerate the construction of 5,000 solar projects in New York. The deal comes on the heels of the announcement last month that the New York Green Bank will also provide Sunrun with a separate $25 million project financing loan.

By offering a portfolio of solutions, Green Banks are able to tackle multiple market barriers to clean energy growth. In the case of Sunrun, these deals separately address two critical areas for a company that is looking to scale rapidly: the most recent deal provides Sunrun with needed short-term liquidity, while the project financing deal enables Sunrun to ramp up longer-term borrowing as it grows its project pipeline. Together, these two deals will help Sunrun manage its growth, which means more clean energy in New York and elsewhere. Barriers to clean energy growth often vary by company or technology. In energy efficiency, for example, common barriers include limited financing options and limited consumer awareness. As a result, a Green Bank might provide both low-interest loans for residential retrofits and also conduct marketing outreach to contractors and homeowners to stimulate demand for retrofits. The flexibility to offer multiple solutions in the same market is a unique feature of Green Banks compared to more traditional public grants or loan programs.

As is typical with Green Bank transactions, both Sunrun deals included significant participation from the private sector. The New York Green Bank’s $25 million project financing loan, for example, was part of a broader $340 million round led by private lenders. In our conversations with private lenders, we continue to hear a hunger for new investment opportunities, especially as interest rates remain exceptionally low. As a result, private lenders say they are very interested in participating in the kind of high-quality, clean energy deals brought about by Green Banks. This suggests we can continue to expect Green Banks to leverage a significant amount of private sector dollars, increasing overall investment in Green Bank geographies.

By Coalition for Green Capital

The successful state-level Green Banks may be getting a national sibling in 2017. If elected, Secretary Hillary Clinton has pledged to create a $25 billion national infrastructure bank. The bank would fund projects of “regional and national significance” with an emphasis on “projects to modernize our energy, water, broadband, and transportation systems.” Clinton recently vowed to move on her infrastructure plans within the first 100 days of her presidency.

Clinton estimates that the activities of the $25 billion bank would create an additional $225 billion in private investment – a ratio of private to public capital of 9:1. This is in range with the impact on private investment that we’ve seen state and other national Green Banks achieve. Moreover, this impact can be achieved from a self-sustaining pool of capital, rather than one-off grants. In fiscal year 2015, the Connecticut Green Bank sparked $365 million in clean energy investment, more than the total amount of investment generated in 11 years by the prior grant-giving entity. Earlier this spring, Clinton pointed to the Connecticut Green Bank as an example of the type of work the national infrastructure bank would do:

Connecticut is leading the way. You have something called a green bank, a green bank that helps to fund energy efficiency and clean, renewable energy jobs. When I’m president, I want to have a national infrastructure bank that will fund these kinds of projects, that will make us richer and cleaner. – Hillary Clinton, April 24, 2016

Representative Chris Van Hollen first proposed the creation of a national green bank in 2009. Van Hollen reintroduced the legislation in 2014, which garnered 11 co-sponsors: Representatives Blumenauer, Cartwright, Connolly, Courtney, Esty, Himes, Langevin, Moran, Norton, Scott, Slaughter. A companion Senate bill was also introduced in 2014 by Senator Chris Murphy and co-sponsored by Senator Richard Blumenthal.

In creating a national Green Bank, the US would join other advanced economies such as the UK, Australia, and Japan. In each case, the national government seeded a new lending institution with public capital, which then invests in clean energy projects in partnership with the private sector. The public capital drives greater private investment in underserved markets to fill gaps. And because the capital is lent, rather than given away as a subsidy or expended (as is typical for traditional infrastructure like roads), the government actually gets its money back. A new national infrastructure bank in 2017, designed to leverage more private investment in a clean energy platform, would finally bring these proven and powerful financing techniques to the federal level.

By Coalition for Green Capital

Yesterday in San Francisco, global leaders in the field of innovative clean energy finance gathered in advance of the 7th Clean Energy Ministerial. The event brought together policymakers, practitioners and thought leaders on Green Banks and Green Bonds. The forum was hosted by the U.S. Department of Energy, and featured the Organisation for Economic Co-operation and Development (OECD) and the new Green Bank Network (GBN). Meeting participants shared best practices and identified opportunities to advance Green Bank and Green Bond solutions around the world.

This event could not have occurred at a more critical moment. As the energy ministers of the world’s largest economies gather today in San Francisco, the question they face is no longer “What commitments must we make to halt rising carbon emissions?” The question is now, “How are we going to pay for what we all committed to do last December in Paris?” And yesterday’s meeting on finance covered many of the approaches that will be a critical part of the answer.

Green Bank leaders from Japan, Connecticut, Hawaii, California, and the UAE attended to describe the new methods they are implementing to leverage limited public capital with greater private investment. And pioneers in the field of green bonds from Climate Bonds Initiative and IFC updated the group on the quickly growing industry and global landscape of issuances.

Green Banks and Green Bonds are two sides of the same coin – institutions designed to attract and deploy capital for clean energy projects; and a tried-and-true mechanism to raise capital from public markets for clean energy deployment. Many trillions of dollars must be mobilized to meet the Paris climate commitments. And achieving this goal will not be possible without a network of dedicated institutions around the world, and efficient means for drawing in capital for renewable energy and energy efficiency projects.

Highlights from the meeting include:

• The OECD released a first-of-its-kind publication on “Green Investment Banks”. It provides a comprehensive overview of the Green Bank concept and a survey of existing institutions. CGC was honored to support and provide content to the OECD in its efforts on this paper. This publication builds on years of prior OECD research and conferences on Green Banks.

• Participants were given a detailed update on the progress of the new Green Bank Network. Announced in December in Paris, the GBN will be a central global hub for best practices, data and know-how on Green Banks. Founded by Green Banks in Connecticut, New York, UK, Australia, Japan and Malaysia, CGC and NRDC are spending 2016 standing up the organization and building network capabilities.

•  The OECD and the GBN together were pleased to announce that the next OECD Green Investment Finance Forum will take place in Tokyo on October 13-14. In only its third year, the GIFF has become a premier global event on innovative clean energy finance methods. The first two events in 2014 and 2015 were notably keynoted by Al Gore. This year’s GIFF will be preceded by an event hosted by Japan’s Green Finance Organisation, and will serve as a gathering for the Green Bank Network.

The Green Bank movement is at an inflection point. Only five years ago, the Green Bank concept was a small pilot in policy and financial innovation. Today, Green Banks have animated over $10 billion in clean energy investment. They are increasingly viewed as a critical lever for driving public and private clean energy investment and meeting national and sub-national level goals for clean energy deployment. As the world considers how to finance their new low-carbon futures, Green Banks will play a critical role. Events like yesterday’s and the coming OECD & GBN gatherings in Tokyo are essential, so that leading know-how can rapidly spread to new markets and ensure no nations are left behind in the clean energy transition.

Simon Upton, Environment Director of the OECD laid the problem out clearly: any dollar invested today in infrastructure that is not green is either locking us into climate damage, or locking us into economic damage through stranded assets. This means in order to meet the Paris commitments, all new investments in infrastructure moving forward must be clean, better and cheaper. We must mainstream clean energy investment. This is our challenge.

Green Banks help meet this challenge by entering markets where capital markets are slow to invest, where perceived risk, lack of scale, or lack of history limit private investment. As private bankers at the CEM event reminded us, there is plenty of capital waiting on the sidelines. And smart institutional investors are looking for long-term investments that are green, have cash generating fundamentals, and won’t become stranded. Green Banks help bridge the gap, and help individual projects and portfolios connect with the deep pools of capital necessary to meet our toughest infrastructure challenges.

By Coalition for Green Capital

By Andrea Colnes and Stacy Swann – Coalition for Green Capital & Climate Finance Advisors

We are in the second week of the UN Climate Summit in Paris, and while we wait for the negotiators to finish their hard work, private sector and finance continue to show they are ready and prepared to increase their efforts and do their part to address climate change. Just this weekend, major businesses stepped up their pledges to do more to address climate change, including Unilever, L’Oreal, Virgin Atlantic and Harley Davidson, among others. All very good news.

Yesterday, two new climate finance initiatives were launched at COP 21 that have the potential to significantly scale financing for clean, green and resilient investments. But they also have the possibility to do more. In addition to helping to expanding finance through institutions at local, regional and national levels in countries around the world, these also complement – and directly contribute to – larger efforts to transition to a sustainable financial system.

The first was the launch of the Global Green Bank Network, a group of six green banks and two leading non-profit groups established to help meet the urgent need of increasing and accelerating investment in renewable energy and energy efficiency worldwide.

The Global Green Bank Network is a project of the Coalition for Green Capital and the Natural Resources Defense Council (NRDC), in partnership with the OECD and the Green Banks of the United Kingdom, Australia, Japan, Malaysia, New York and Connecticut in the United States. Green Banks are, in essence, public-private partnerships designed to leverage private capital, expand markets, and maximize the impact of public funds in accelerating clean energy deployment and economic development. Many are capitalized with public funding for specific purposes around scaling up climate-smart private investment. By developing financial partnerships that reduce risk and accelerate market expansion, Green Banks support the capacity of mainstream financial institutions to invest in the transition to a low-carbon economy.

The second was the launch of the Principles for Mainstreaming Climate Action within Financial Institutions. The Principles are supported by 26 financial institutions from around the world, with combined balance sheets worth more than $11 trillion. Unlike Green Banks, many of these institutions have investment mandates that span a wide range of sectors and activities. The Principles provide a set of five areas financial institutions must address in order to integrate climate considerations into the “core” of their investment and advisory operations. Thus, the title “mainstreaming”.

The banks that signed on to the Principles included all of the Multilateral Development Banks (MDBs), many large European and developing country Development Finance Institutions (DFIs), as well as several large private sector banks from both developing countries and Europe.  Notably, many developing country financial institutions are supporters of the Principles, including banks from Turkey, South Africa, Malaysia, and Morocco. India has two influential domestic banks—YES Bank and IDBI—supporting the Principles.

These announcements are important for two reasons: First, they will help all their members—whether Green Banks or financial institutions seeking to integrate climate change into the core of operations—share experience and leverage knowledge in key areas. The demand for this kind of knowledge-sharing is high within both initiatives.

Whether through the platform of the Principles or the Global Green Bank Network, what members seem to really want to learn is, in very practical terms, how to better implement and scale up financing. There are emerging practices that exist within institutions around the world, and members of these initiatives are interested in learning from each other. They want to know what tools have worked? How do peers address risks from climate change? How do they track, monitor and count investments and their impacts? This reflects, we believe, the recognition that many institutions now understand significant potential opportunities to support a net-zero economy. But also the recognition of the risks climate change presents to their business, and thus the speed at which they (and the rest of the financial system) need to orient their financing to address a 2°C-warmer world. Having these types of coalitions to share and leverage knowledge will help more banks do more in this area, and do it better.

The other reason these are important initiatives is the impact they could have on “system change” that economists have argued is required to meet the needs of a 2°C-warmer world. The work of the UN Inquiry on the Design of a Sustainable Financial System, the Risky Business report, and efforts by the Bank of England have raised the question about whether the financial system as a whole is adequately addressing not just opportunities to scale up financing, but also risks that climate change might pose to financial markets.

Any system is but a collection of actors. In this case both the Green Banks, and those banks ensuring climate is more progressively “mainstreamed” are providing a platform that has potential to contribute to the necessary system change highlighted by the likes of UN Inquiry, Bank of England and Risky Business. Green Banks already incorporate climate into the “raison d’etre”—or DNA—of their organizations, and the Principles help move climate more progressively into the DNA of existing financial institutions. Initiatives and coalitions such as these announced yesterday in Paris can also collectively help move climate considerations more fully into the DNA of the larger financial system.