Looking to Fund a Clean Energy Project? You Need a Green Bank.

New state-run investment funds could create a real marketplace for alternative energy projects — and bring down costs for all of us.

National Journal
Nancy Cook
Add to Briefcase
Nancy Cook
July 17, 2014, 1 a.m.

Any­one in search of fin­an­cing for a clean- or re­new­able-en­ergy pro­ject need look no fur­ther than the state of New York. In Decem­ber 2013, New York launched its first-ever “green bank,” an am­bi­tious state-run $1 bil­lion in­vest­ment fund meant to help fin­ance the kinds of loc­al en­ergy-ef­fi­ciency and clean-en­ergy pro­jects that big­ger fin­an­cial in­sti­tu­tions typ­ic­ally over­look.

The goal of New York’s green bank is two­fold. First, the state hopes to cre­ate a genu­ine mar­ket­place for green pro­jects, sup­por­ted by the private sec­tor. Second, the green bank (and its fin­an­cing of pro­jects) aims to bring down the cost of these tech­no­lo­gies for res­id­ents. “It’s not just about tack­ling cli­mate change,” says Richard Kauff­man, chair­man of the New York State En­ergy Re­search and De­vel­op­ment Au­thor­ity. “It’s really about the over­all cost of en­ergy in the state.”

New York is not alone in latch­ing onto the idea of chan­ging the way it funds clean-en­ergy pro­jects. Con­necti­c­ut in­tro­duced a green bank in Ju­ly 2011, while of­fi­cials in Hawaii are in the pro­cess of start­ing one. Cali­for­nia, Mary­land, and New Jer­sey have also con­sidered or in­tro­duced sim­il­ar le­gis­la­tion or pro­pos­als. While the ex­act design of green banks dif­fers from state to state, the goal re­mains the same: to change the way loc­al gov­ern­ments fin­ance clean and re­new­able en­ergy. The green banks also seek to show loc­al fin­an­cial in­sti­tu­tions and in­vestors that money can be made in de­vel­op­ing this par­tic­u­lar mar­ket.

Re­think­ing the fin­an­cing mod­el of green en­ergy is par­tic­u­larly im­port­ant now, as re­search from of the Brook­ings-Rock­e­feller Pro­ject on State and Met­ro­pol­it­an In­nov­a­tion has shown. State budgets face in­creas­ing fin­an­cial pres­sures and don’t have the money to per­petu­ally fund grants for clean-en­ergy ini­ti­at­ives. In ad­di­tion, the fed­er­al gov­ern­ment’s stim­u­lus money from 2009 funneled more than $150 bil­lion to clean-en­ergy pro­jects from 2009 to 2014 through lend­ing, tax ex­pendit­ures, and loan guar­an­tees, Brook­ings es­tim­ates. As that cash works its way out of the loc­al eco­nom­ies, it leaves a void in the fin­an­cing of these pro­jects — a void that the New York green bank hopes to fill.

So far, New York has fun­ded its green bank by re­dir­ect­ing some ex­ist­ing state grant money and by rais­ing roughly $165.6 mil­lion through clean-en­ergy sur­charges on util­ity cus­tom­ers. Now, the bank has about $218.5 mil­lion on hand and ex­pects the rest of the money to come through by the end of the year to add up to a bal­ance sheet of $1 bil­lion.

By the end of 2014, the bank also plans to an­nounce some of the deals it has made with oth­er fin­an­cial in­sti­tu­tions to lend money for vari­ous pro­jects, says Al­fred Griffin, pres­id­ent of the New York Green Bank and a former banker for Cit­ig­roup Glob­al Mar­kets Inc. Of­fi­cials at the New York Green Bank were re­luct­ant to lay out the ex­act num­ber of pro­pos­als the bank has re­ceived in its first six months of op­er­a­tions; Griffin would say only that the pitches covered the gamut of clean-en­ergy tech­no­lo­gies in­clud­ing sol­ar, wind, stor­age, and en­ergy ef­fi­ciency. The one area that the New York green bank prob­ably won’t ven­ture in­to is the big trans­ac­tions that already at­tract fin­an­cing. “The large $100 mil­lion util­ity-scale pro­ject does not need our help be­cause big banks will em­brace those deals,” he says.

That’s the pur­pose of the New York green bank, to fin­ance clean-en­ergy deals that big­ger or more tra­di­tion­al fin­an­cial in­sti­tu­tions deem too small-bore and to prove the tech­no­lo­gies work well enough. Sup­port­ers hope that the fin­an­cing will help to cre­ate de­mand and, ul­ti­mately, bring down the costs. “The goal of the green banks is to lower the cost of clean en­ergy by lower­ing the cost of cap­it­al,” says Reed Hun­dt, CEO of the Co­ali­tion for Green Cap­it­al, a not-profit that ad­voc­ates for green banks at the loc­al level, and former chair­man of the Fed­er­al Com­mu­nic­a­tions Com­mis­sion. “You want con­sumers to buy more of it. We want to have a clean en­ergy sub­sti­tute for car­bon.”

Green banks ex­ist just at the state level for now. Demo­crat­ic Rep. Chris Van Hol­len of Mary­land has in­tro­duced fed­er­al green-bank le­gis­la­tion, but it has yet to re­ceive trac­tion in Con­gress. Pro­ponents are ex­cited about this new mod­el for fin­an­cing and pro­mot­ing clean en­ergy. “I think this a break­through for en­ergy strategy more broadly,” says Daniel Esty, a pro­fess­or at Yale Law School and former com­mis­sion­er of the Con­necti­c­ut De­part­ment of En­ergy and En­vir­on­ment­al Pro­tec­tion. “We’re try­ing to nor­mal­ize the flow of in­vest­ments in­to clean en­ergy and re­duce the cost of cap­it­al to the pro­jects,” he adds. Said like a good cap­it­al­ist — and a green ad­voc­ate.

What We're Following See More »
SAYS TRUMP JUST ATTACKING REPUBLICANS
Former Top Aide to McConnell Says GOPers Should Abandon Trump
1 days ago
THE LATEST
“YOU CAN’T CHANGE HISTORY, BUT YOU CAN LEARN FROM IT”
Trump Defends Confederate Statues in Tweetstorm
1 days ago
WHY WE CARE
CEOS HAVE BEEN FLEEING FOR THE EXITS
Trump to End Business Councils
2 days ago
THE LATEST
FROM STATEMENT
McConnell: “No Good Neo-Nazis”
2 days ago
THE LATEST
NO FORMAL LEGISLATIVE EFFORT
CBC Members Call for Removal of Confederate Statues from Capitol
2 days ago
THE LATEST

"Members of the Congressional Black Caucus are reviving calls to remove Confederate statues from the Capitol following the violence at a white nationalist rally in Virginia." Rep. Cedric Richmond, the group's chair, told ABC News that "we will never solve America's race problem if we continue to honor traitors who fought against the United States." And Mississippi Rep. Bennie Thompson said, “Confederate memorabilia have no place in this country and especially not in the United States Capitol." But a CBC spokesperson said no formal legislative effort is afoot.

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login