Clean energy finance banks or “Green Banks”
The Green Bank opportunity has emerged just as the US clean energy industry is poised at an important crossroads –
Led by wind, the renewable energy industry is a job creator. NRDC was also busy last week –
However, much of this economic activity is at near term risk if Congress cannot find a way to extend the production tax credit (“PTC”
A green bank can be formed at the federal or state level –
Green Banks stimulate additional private sector investment. Currently, due to the European banking crisis and other factors, there is a limited amount of bank debt available to fund clean energy projects. A Green Bank lending alongside private lenders will create capacity for those lenders to participate in more deals. This is particularly important in large projects, like offshore wind. In areas like financing energy efficiency retrofits in buildings where banks need an incentive to enter an unfamiliar market, the Green Bank can provide tailored insurance to lenders to enable them to take the leap. NRDC and the City of New York have pioneered just such an approach with the New York Energy Efficiency Corporation (NYCEEC). A properly structured Green Bank will never “crowd out” private investors since its role is not to compete with private investors but to facilitate additional investment by them. Indeed, as the purely private market evolves to fill the gap, the Green Bank should change its products and sector focus to fill the then-current “green need”
Green Banks morph to fit to local conditions. In keeping with tried and true American tradition, each state can act a laboratory, borrowing what works from other states but ultimately designing its own program to fit its own needs. As discussed in detail in the report, Connecticut last year established the first state Green Bank though new legislation that repurposed several existing funds and programs and it is now examining how to effectively scale up PV market in state. Other states may decide to create “financing windows” within an existing clean energy policy framework without passing new legislation or create banks that combine the financing of clean energy with the financing of infrastructure like bridges and roads. It’
