Role of Green Banks and Energy Efficiency Financing

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1 Role of Green Banks and Energy Efficiency Financing 2014 ACEEE Energy Efficiency Finance Forum May 12, 2014 Jeffrey Schub, Vice President Coalition for Green Capital

2 Green banks overcome existing barriers to financing A Green Bank is a state lending agency that provides clean energy financing in partnership with private lenders to facilitate greater private market investment and accelerate deployment of clean energy. Current Barriers to Financing Capital is expensive Financing gaps Small, disaggregated projects Green Bank Solutions Lower the cost of capital Facilitate increased financing Animate private capital markets 2

3 Five Green Bank steps for more capital at better terms Invest directly with public dollars Use credit enhancements to draw in private dollars at better terms Recycle public dollars to reinvest and re-leverage Familiarity, standardization and data draws even more private dollars at even better terms Warehouse and securitize to build bridge to largest and cheapest pool of capital public markets 3

4 Green banks provide debt and related financial products to draw in private capital at better terms 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 4

5 Get more clean energy with fewer public dollars and with greater private sector investment Consumers Get clean energy with no upfront costs Savings match payments Reduced capital costs expands pool of viable projects State Government More efficiency 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. 5

6 Coalition for Green Capital partners with states to help create and develop green banks 501(c)(3) leading green bank effort at state, federal and international levels Partner with state leaders to organize outreach, research and analysis to support green bank establishment Worked closely with CT and NY to pass legislation or get regulatory approval and stand up green banks Organize events like Green Bank Academy, work to connect states to collaborate and coordinate green bank efforts 6

7 Growing momentum behind Green Bank concept Washington, D.C. Connecticut Green Bank New York Green Bank Green Bank-like programs Hawaii GEMS solar finance program Pennsylvania WHEEL energy efficiency finance program More in the pipeline Legislation introduced in California to create a Green Bank Maryland General Assembly directed state to study potential role and impact of a Maryland Green Bank CGC is working with many other states at varying stages of Green Bank consideration 7

8 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 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 8

9 Potential capital sources and organization structures depend on existing landscape Capitalization Sources - New or Repurposed Regulatory Surcharge Legislative Appropriations Cap-and-Trade or RPS Revenue Issue Bonds Organization Placement Government Agency Quasi-Independent Independent Non- Profit 9

10 Swelling Green Bank interest carrying idea back to Federal level Green Bank Act of 2014 Introduced by Rep. Chris Van Hollen Responding to state leadership and experimentation Revisiting issue after bi-partisan support in

11 Thank You Jeffrey Schub, Vice President Coalition for Green Capital 11