The Clean Energy Future Blog

By Coalition for Green Capital

Policymakers and stakeholders often ask CGC what it takes to create a Green Bank, and whether legislation is required to create a Green Bank. Though legislation is not necessary in all states, it is often used to create a new Green Bank financing entity. Legislation can define the mission of the Green Bank institution, name the source of capitalization, determine Green Bank authorities, and clarify many other critical elements of the Green Bank. Some states have existing entities that already have Green Bank-like authorizations, which can be turned into full-fledged Green Banks through a regulatory or administrative action. CGC has helped many states identify its own path to Green Bank creation. For those seeking more information on legislative options for creating a Green Bank, please read CGC’s detailed briefing on the common components of Green Bank legislation and the options a state can pursue to tailor a Green Bank to its own market conditions.

By Jeffrey Schub

Paul Krugman wrote yesterday that a carbon tax would be an ideal “economics 101” policy solution to correct for the externality of carbon emissions. Krugman argues that, despite a carbon tax being the most efficient solution, “second-best” approaches that are less efficient will be the likely outcome. This need to settle for second best is due to political intransigence in Congress. Krugman’s assessment of the politics sadly may be correct, but his analysis of the policies leaves out important details.

First, Krugman says that policies like fuel economy standards and net-metering are inefficient compared to a clean and clear carbon tax. A fuel standard is inefficient in the pure economics sense because the government dictates the outcome, rather than allowing the market to determine the most efficient level of emissions reductions (as theoretically happens with a carbon tax). But net-metering is not at all like a fuel standard. Net-metering, the policy of mandating utilities to buy solar power generated on rooftops, actually opens up and expands electricity markets. Net-metering can be viewed as an extension of the electricity market deregulation of recent decades. Net-metering allows anybody that can produce power to sell it into the grid. Yes, the price the utility pays for that power is important and is worth debating, But there is no debate on the notion that open access to markets is a good thing and actually increases market efficiency.

Krugman’s second point worth closer examination is his assumption about investment. Krugman says that creating a carbon tax will send a clear signal to investors of where they should now invest, eliminating the need for subsidies or loan guarantees for clean energy. While a carbon tax itself might be clear, the outcomes and new market realities produced by that carbon tax would be incredibly challenging to predict. Yes, a carbon tax will increase the price of carbon-based electricity, but by how much? Is it enough to make clean electricity cheaper than the carbon-based electricity? This change in market prices will play out in an incredibly complex and perhaps unpredictable way in every single power market in the country. This tremendous uncertainty will likely slow investment in carbon-based power, but it will not immediately drive investors to clean energy alternatives. More likely, investors will see looming uncertainty in power prices and hold their money on the sidelines until markets stabilize under the new carbon tax. In the meantime, clean energy alternatives that warrant investment will be left waiting.

A carbon tax is indeed a clear and crisp policy tool that comes straight out of “economics 101.” But the reality of how that tax may play out is far harder to predict. Green Banks, publicly-capitalized financing entities that offer low-cost and long-term capital for clean energy, must be created to fill the clean energy financing gap. Green Banks can ensure that clean energy technology is deployed where it is economically viable, and that uncertainty around subsidies and tax policy does not sink clean energy markets just as they are about to take off.

By Reed Hundt

Hope or heartbreak is at hand for everyone who believes America should show how to stop destroying the climate by burning coal to make electricity. On the side of hope, solar panel installers now offer homeowners a deal not to be refused: pay no money down, and buy about three-quarters of your electricity off your own roof at a lower price than the utility is selling it to you. A half of all roofs are technically suitable for solar panels – enough roof space that solar can take the place of coal in the nation’s generation fleet. On the heartbreak side, because rooftop solar has less than one percent share of the generation market, its growth rate of around 40-50% is too slow to curtail greenhouse gas emissions as quickly as needed to save the world.[2] The solution is to repeat for rooftop solar what the United States did for the Internet in the 1990s. When the Clinton Administration took office in 1993, Internet access in homes was non-existent. But about one-fourth of American homes had personal computers.[3] Virtually all had telephone lines. So, with the encouragement of the White House, the FCC ordered (among other things) that everyone could connect their home computer to the telephone line – without paying anything extra to the telephone company. Internet access providers marketed this sweet deal to consumers. AOL rose to the top of the heap in providing what became known later as narrowband Internet access.[4] By the end of the 1990s Internet penetration in homes approached 50%.[5] To keep alive hope for averting climate catastrophe, solar panels need to cover half of American rooftops in the same amount of time it took the Internet to reach that mark – seven years. That’s about twice the current solar installation rate. As Paul Krugman acknowledged in a recent opinion piece in the New York Times, “the science [behind solar energy] is solid; the technology is there; the economics look far more favorable than anyone expected.” All that stands in the way of solar adoption: “a combination of ignorance, prejudice and vested interests.”[6] The key is to let solar rooftop installers use the electric grid in the same way that the FCC let the Internet access companies “borrow” the telephone lines. The telephone companies did not like the FCC’s actions. They knew the Internet would force sweeping change to their businesses, destroying many companies (like the entire long distance industry, for example) in the process. In an effort to protect their carbon-related business interests, the Koch brothers, who are always setting new lows in obstinate opposition to progress, are pouring money into campaigns to fight any and all incentives for solar energy.[7] Utilities, with the exception of a few that have joined in the race to the rooftops, do not like the prospect of solar supplanting their own supply of electricity.[8] But like computer owners taking up the Internet, rooftop solar installers should pay nothing for connecting to the electric grid. In fact, if they make more electricity off rooftops than the occupants use, the utility should buy that surplus at a price that gives credit for reducing carbon emissions. Solar installers should be unregulated. They should pay no new taxes. Homeowners should not be charged anything extra by utilities for using less grid-supplied electricity. Existing tax credits for rooftop solar should be maintained until the market is fully saturated. Most utilities are opposing all these measures in almost all states, as are the Koch brothers.[9] Unlike the FCC in the 1990s, no federal agency has yet tried to set a national policy of giving the electric grid to rooftop solar. Nor has Congress conveyed to an energy agency greater legal authority for imposing change as it did with respect to the FCC in the bipartisan 1996 Telecommunications Act. Until the country gets a more visionary Congress, states need to pass law and issue regulations welcoming rooftop solar’s use of the utility’s lines. In this way, the rapid spread of distributed, cleaner, and cheaper power will change the world, just in the nick of time. State green banks can enable any town or city to go all green, and to sell their surplus clean electrons back to the grid.[10]

[1]The author was the FCC chairman in 1993-97 and is now the CEO of the Coalition for Green Capital.

[2] http://thinkprogress.org/climate/2014/01/02/3110731/california-rooftop-solar-2013/

[3] https://www.census.gov/prod/99pubs/p20-522.pdf

[4] http://www.nytimes.com/2003/02/03/business/as-broadband-gains-the-internet-s-snails-like-aol-fall-back.html

[5] http://en.wikipedia.org/wiki/Internet_in_the_United_States#Schools_and_Libraries_Program_.28E-Rate.29

[6] http://www.nytimes.com/2014/04/18/opinion/krugman-salvation-gets-cheap.html?ref=paulkrugman

[7] http://www.nytimes.com/2014/04/27/opinion/sunday/the-koch-attack-on-solar-energy.html

[8] http://e360.yale.edu/feature/with_rooftop_solar_on_rise_us_utilities_are_striking_back/2687/

[9] http://www.nytimes.com/2014/04/27/opinion/sunday/the-koch-attack-on-solar-energy.html

[10] http://www.nytimes.com/2014/05/01/business/energy-environment/a-ghost-town-going-green.html?emc=eta1&_r=0

By Coalition for Green Capital

After reading about the recently introduced Green Bank Act of 2014, one of your first questions might be, “Why $50 billion?”

In short, $50 billion leveraged through a federal Green Bank just might be enough to finance the renovation of America’s power platform.

The Connecticut Green Bank has achieved a leverage ratio of 10:1 meaning that for every single dollar of public capital deployed by the Green Bank, 10 dollars have been invested by the private sector. The Green Bank Act of 2014 stipulates that the federal Green Bank has the authority to offer low-interest loans of up to $500 million to any state Green Bank that operates under similar principles and has its own matching funds. So, in a state such as Connecticut, the $500 million from the federal Green Bank, matched with the state-funded $500 million, would provide access to $10 billion of public-private capital invested in clean energy.

Extending this math to the federal Green Bank, if all $50 billion of federal funds were matched by state funds (totaling $100 billion) and the bank were to achieve a 10:1 leverage ratio, Green Banks could produce $1 trillion of investment in clean energy and energy efficiency!

Roughly $1 trillion of public-private investment transformed the telecommunications platform in the 1990s. A similarly sized investment could catalyze a similar transformation of America’s outdated power platform. And Green Banks can help us get that $1 trillion.

Read the factsheet on the Green Bank Act of 2014.
Read the full text of the Green Bank Act of 2014. 

By Coalition for Green Capital

Earlier today, Congressman Chris Van Hollen (D-MD) introduced the Green Bank Act of 2014 in the House. Cosponsors of the bill include House Representatives: Earl Blumenauer, Gerry Connolly, Elizabeth Esty, Jim Himes, Eleanor Holmes Norton, Jim Langevin, and Louise Slaughter. Senate cosponsors include Richard Blumenthal and Chris Murphy. The Green Bank Act of 2014 would establish a Federal Green Bank with a maximum capitalization of $50 billion from Green Bonds and the authority to co-fund the creation of state-level Green Banks with a low-interest loan of up to $500 million. Senator Chris Murphy of Connecticut also introduced a companion bill in the Senate.

Like various state green banks, the Federal Green Bank would provide financing for clean energy and energy efficiency projects that cannot deploy at scale due to lack of reasonably priced financing. Specifically, the Green Bank will address “financing gaps” where credit worthy projects are currently unable to receive adequately low-priced financing from the private capital markets.

A Federal Green Bank, as proposed in the new legislation, would provide low-cost and long-term financing for clean energy and energy efficiency projects in partnership with private investors. This activity would animate private sector investment, reduce the cost of renewable sources of power and accelerate the deployment of clean energy technology in the United States. The Federal Green Bank will also catalyze the development of state green banks through its authority to offer low-interest loans of up to $500 million to any state green bank that operates under similar principles and has its own matching funds.

CGC’s CEO, Reed Hundt, says: “Chris Van Hollen and his colleagues in the House and Senate have come up with an ingenious way to help fund state green banks. If this bill were passed, all states would have the option of receiving substantial funding from the federal government to help finance on a local level the move to the new power platform. Cleaner, cheaper, and more reliable electricity is what every state could deliver to its citizens with the help of the Van Hollen Bank.”

According to the legislation, the Green Bank will initially be supported with $10 billion in “Green Bonds” issued by the Treasury. The Bank will have a 20 year charter and the ability to acquire another $40 billion from Green Bonds. These funds will spur development of clean energy markets through loans, loan guarantees, debt securitizations, insurance, and other forms of financing support or risk management for qualified clean energy and energy efficiency projects. The legislation includes tax provisions on deductibility of foreign-related interest expenses to offset the Green Bank cost.

CGC is thrilled to see how this legislation will help state clean energy finance institutions reach their full potential!

By Coalition for Green Capital

CGC congratulates Rhode Island gubernatorial candidate Gina Raimondo on the announcement of a Rhode Island Green Bank as part of her state environmental policy plan!

“With the reality of climate change we need to be increasing our efforts to make our state more energy efficient, reduce our dependence on fossil fuels and adapt to its impact. Rhode Island can become a model for the entire country on renewable energy usage and climate change preparedness.”  Learn more here