Role of Green Banks and Energy Efficiency Financing

Transcription

1 Role of Green Banks and Energy Efficiency Financing NGA State Workshop on Innovations in Energy Efficiency Policy February 20, 2014 Jeffrey Schub, Vice President Coalition for Green Capital

2 Agenda Washington, D.C. 1) What is a Green Bank 2) What are the Benefits of a Green Bank 3) Examples and Current Status of Green Banks 4) Establishing and Developing your State s Green Bank 5) How Green Banks Accelerate Energy Efficiency Adoption 2

3 Coalition for Green Capital partners with states to help create and develop green banks 501(c)(3) leading green bank effort at federal and state level Nearly achieved federal passage in 2009 Worked closely with CT and NY to pass legislation, get regulatory approval and stand up Green Banks Organize events/webinar like Green Bank Academy Leadership Reed Hundt, CEO former Chairman of FCC from Ken Berlin, SVP former head of Skadden environmental practice 3

4 Can pull multiple possible levers to reduce cost and expand market for clean energy Scale Economies Technology Advances Subsidies & Tax Policy Cheap & Available Financing Green Banks Pull This Lever 4

5 Green banks overcome existing barriers to financing and reduce the cost of capital A Green Banks is a state lending agency that provides clean energy financing in partnership with private lenders to reduce the cost of clean energy, accelerate deployment, and facilitate greater private market activity. Barriers to Financing Capital is expensive Financing gaps Small, disaggregated projects Green Bank Solutions Lower the cost of capital Cover all upfront costs Development of private markets 5

6 Green banks provide debt and related financial products to lower rate, extend term across markets Green Bank Products & Services Direct Debt Wholesale Debt Subordinated Debt Loan Loss Reserve Warehousing Securitization Standardization Data Collection Possible Mechanisms On-Bill PACE EPC s Markets Residential EE Oil-to-Gas Conversion C&I EE Multifamily & LI EE MUSH EE Distributed Generation Utility-scale Generation Electric Vehicles 6

7 Green banks capture power of financial recycling and leverage 7

8 Get more clean energy at lower cost, use fewer public dollars, simulate private markets Consumers Lower price for clean energy Get clean energy with no upfront costs Reduced capital costs expands pool of viable projects State Government More clean energy per public dollar by leveraging private funds Loans are recycled, re-leverage private Facilitates transition from grants to loans Private Investors Increase flow of private investment with less risk Standardized lending lower barriers and cost of lending Facilitates growth of secondary markets As private investment increases and cost of capital declines, need for Green Bank activity is reduced. 8

9 Growing number of Green Banks and similar entities around the country Connecticut Clean Energy Finance Authority (CEFIA) First official state-wide green bank, created in 2011, capitalized with system benefit charge and RGGI, quasi-independent New York Green Bank (NYGB) Most recent state-wide green bank, received initial ~$200M, will grow to $1B, part of existing NYSERDA entity Kentucky Green Bank Revolving loan fund from ARRA funds used to give low-cost loans to state agencies for efficiency upgrades, public dollars only Similar Programs Hawaii GEMS Pennsylvania WHEEL 9

10 CEFIA and NYGB have different objectives and therefore offer different services Washington, D.C. Connecticut - CEFIA New York - NYGB Mission Cheaper, cleaner, more reliable Fill market gaps Primary Goal Maximize deployment Animate private markets Method Low-cost retail lending Commercial-rate wholesale lending Customers Product & Marketing Strategy End-users (homeowners and businesses) Products developed internally, marketed by CEFIA with partners to customers Products C-PACE, Solar Lease, Solar Loan TBD Financial and clean energy intermediaries Seeking product/investment ideas from industry, no direct marketing 10

11 Each state has unique path to Green Bank, but several common steps to follow Build coalition of stakeholders to support Green Bank idea Develop critical supporting content legal analysis of state landscape, initial market assessment, state-specific benefits Advocate to governor/legislature with single voice Incredibly difficult to create Green Bank without governor support Pass legislation or take administrative action Can do administrative action when the existing entity has adequate legal authority to act as a green bank Otherwise, legislation is needed 11

12 Assess possible organization placement as part of advocacy What are the potential structures? 1) Quasi-independent, 2) Part of state agency, 3) Part of infrastructure bank What existing structure can green bank be part of? Energy office, Treasurer, clean energy agencies, finance authorities Do these entities have legal ability to create new subsidiaries? Can they perform green bank actions? If not, need to pass law. Pros and cons of using existing entity Org knowledge & capabilities versus culture & appropriate staffing 12

13 Potential capital sources may be defined by organization placement Washington, D.C. Repurpose existing funds through legislation Can tap cap-and-trade or existing grant program revenue Can it be done without annual appropriation? Regulatory surcharge Redirect system benefits charge, spreads burden across ratepayers Issue Bonds Need bonding authority, issue org bonds Means green bank must deliver returns to investors Can use creative structures to leverage authority of other offices If there is existing bonding authority is it adequate or is new legislation needed? 13

14 Example: CEFIA s C-PACE is increasing commercial efficiency deployment Dozens of states have PACE legislation, but few have volume - why success in Connecticut? CEFIA is both central administrator and financier Towns must sign up individually, nobody would do but GB EE low priority, need specific dedicated institution Need consistent technical/financial underwriting standards GB creates scale from aggregated demand to attract capital Requires carefully written legislation 14

15 CEFIA can sell-down loans to recycle funds After lending, CEFIA sell loans to replenish cash Avoid holding notes and tying up funds for long time Bundle loans, sell in tranches Recycling funds accelerates deployment Step 1: CEFIA lends to customers Step 2: CEFIA bundles loans Step 3: CEFIA sells loans, gets cash Step 4: CEFIA makes new loans In first 6 months, 23 deals with $18.4M in financing. 15

16 CGC can provide more info and state-specific guidance on green bank Washington, D.C. Green Bank Academy part 2 Webinars on more specific green bank topics Free legal analysis of existing orgs and capital sources from Latham & Watkins Strategize stakeholder outreach and coalition building 16

17 Thank You Jeffrey Schub, Vice President Coalition for Green Capital 17