Creating State Financing Tools to Make Clean Energy Markets Grow Quickly

Transcription

1 Creating State Financing Tools to Make Clean Energy Markets Grow Quickly Reed Hundt, CEO, Coalition for Green Capital ABA GPSI Committee Meeting October 22, 2014

2 How to de-carbonize our economy; how to move to a new clean energy platform Total needed investment: $200 billion a year for 20 years Must maximize private sector investment by contributing some public sector capital Must keep clean energy prices affordable for all Americans Must accelerate growth in top priority clean energy markets So invent state by state green banks a specialized form of infrastructure investing 2

3 What is a green bank? A green bank is a state charted financing authority that leverages private capital with public dollars to grow clean energy markets quickly. The goals are to return all capital to taxpayers, boost private sector investment, and maintain affordable energy prices to consumers. Deploy public capital efficiently to maximize private investment Green Bank Implement new market behavior and lower price to spark demand Inefficient Capital Markets Clean Energy Market Tepid Consumer Demand 3

4 What difference does a Green Bank make? Helps state move from cash grants to tax-payer-neutral financing Reduces price of clean energy for consumers Attracts far more private capital into clean energy markets In Connecticut, the Green Bank has grown the residential distributed solar market by 80% CAGR, while reducing state cash grants per kilowatt by 68% expanded clean energy market from $25M/yr to $150M/yr in 3 years created a larger market for commercial PACE loans than any state lowered statewide electricity prices combined $1 of state capital with $10 of private capital to increase clean energy investing at an annualized growth rate of 100% filled gaps in residential lending, expanding total residential investment 4

5 CGC drives green bank movement across the country CGC Engaged with 10 States CA MD NY CT MN OH DE HI NV VT 5

6 Green bank s goal is to transform clean energy markets Four Green Bank Objectives 1 Accelerate growth of all clean energy markets Fill gaps in commercial investment; maximize private:public leverage Maximize consumer demand for clean energy by facilitating affordable prices and up-front financing Build self-sustaining loan programs to maximize efficiency of public dollars while holding taxpayer harmless 6

7 Solar Install Cost ($/Watt) 1 Solution: Accelerate growth by delighting consumers with no upfront cost & lower price of clean energy Price of Electricity from Solar (cents/kwh) in CT as a Function of Green Bank Debt and Installed Cost % of GB Debt in Solar Project 0% 10% 20% 30% $ $ $ $ Green-highlighted prices are below current retail electricity price in Connecticut Public/private combined finance = affordable prices to consumers. 30% Green Bank debt lowers price by at least a 33%. Source: Rooftop Solar PV Green Bank Financing Model, Sponsored by The Connecticut Green Bank and the Coalition for Green Capital, Developed by the Brattle Group. Available for download from: Assumptions: Developer Equity Return is 15%, Tax Equity Return is 12%, total leverage is 40%, Commercial Debt is 6% for 6 years, Green Bank Debt is 2% for 15 years, 15-Year REC price of $0.03/kwh, 6-year state incentive of $0.225/kwh. Structure is 20% Green Bank Debt, 20% Commercial Debt, 48% Tax Equity and 12% Developer Equity 7

8 Annual kw of PV Installed 1 Example: Connecticut Green Bank expands solar market with financing tools for installers 20,000 18,000 16,000 14,000 Annual Connecticut Residential Solar Market (kw) CT Green Bank Established 12,000 10,000 8,000 6,000 4,000 2,

9 2 Solution: Use financing techniques to leverage multiple private dollars per public dollar Credit Support Co-Investment Warehousing Senior Private Capital Green Bank Capital Project Green Bank Credit Enhancement Project Green Bank Origination Project Private Capital Private Purchase of Portfolio 9

10 2 Example: CT Green Bank sets national example for public-private investment partnerships 10:1 Leverage 10 dollars of private investment per 1 dollar of green bank investment Prior CT subsidy system only had 1:1 leverage Landmark Securitization Green bank bundled and sold 80% stake in C-PACE loans to private investor, option to sell another 10% First deal of its kind in the nation 10

11 3 Solution: GB increases demand with aggregation, info-sharing, targeted campaigns; not just finance Financing Eliminate Upfront Costs Online Tool Gives Personalized Solar Options for Roofs Solarize Campaign Lower Price as More Enroll Consumer Demand 11

12 3 Example: CT Green Bank makes cheaper price and cost savings transparent and accessible Geostellar Solar Tool and C-PACE Savings Report 12

13 Levelized Cost of Energy (cents/kwh) 4 Solution: Cheap capital and declining technology costs mean cash grants can be reduced Price of Residential Solar in Connecticut (cents/kwh) Grid Price With Grant Cash Purchase with Grant No Grant PPA Finance No Grant 13

14 Installation Cost ($/watt) Installed Capacity (kw) 4 Example: Connecticut Green Bank changes grants to loans, and expands solar penetration $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $ ,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 $ Cost to Consumer Subsidy Installed Capacity 0 14

15 CGC established nation s first green bank in Connecticut and remains close strategic advisor Connecticut Green Bank Established in 2011 through bi-partisan, nearly unanimous legislation ~$40 million in annual funding by redirecting existing ratepayer system benefits charge and through revenues from regional cap-and-trade Quasi-public agency, mix of gov t-appointed and independent directors CGC Role: Policy advocacy and stakeholder engagement prior to legislation Development of legislative strategy and drafting of bill Implementation and guidance of org and product strategy On-going advisory work CEO Reed Hundt is active board member 15

16 CGC drove creation of more green banks New York Green Bank Established in 2013 Division of state energy office $1 billion upfront capitalization CGC Role: Advocated for GB policy Developed business plan Assessed market needs through interviews Modeled financial product California Clean Energy Finance Center Established in 2014 Part of CA Infrastructure Bank Bank taps capital markets CGC Role: Created stakeholder working group to lead advocacy Defined CA GB opportunities Drove legislation that led to formation by Gov. Brown. 16

17 A green bank by any name is a sweet idea The spread of green banking paves the way for clean energy investments New Jersey Energy Resiliency Bank Deploying $200M in Sandy funds to finance grid resiliency Initial focus on Fuel Cells, Solar + Battery and CHP Joint agency under NJ Econ Dev. and utility regulator Hawaii Green Energy Marketization Securitization New $150M in bonds backed by existing ratepayer surcharge Focus on low-cost solar financing for low & middle income Program is part of new Green Infrastructure Loan Fund 17

18 The numbers are in: Green Banks work CT Clean Energy Market Size ($M) $218 Use of CT Public Dollars Loans Grants 23% 66% $ % $15 FY 2012 FY 2013 FY 2014 FY 2012 FY 2013 FY

19 Thank You Comments and Questions: Reed Hundt, CEO, Coalition for Green Capital