The CLEAN Future Act Holds New Promise for Green Banks | Article

The magnitude of investment needed to solve the climate crisis far surpasses the current capacity of existing financing programs. States (and some local governments) have taken the lead in developing and implementing innovative financing programs to provide funds for clean energy investments. In 17 states, green banks are funding low-cost clean energy projects that help lower greenhouse gas emissions and utility bills.

Green banks are mission-driven public or nonprofit financial institutions that leverage public and private funds to invest in clean energy projects. Twenty green banks nationwide currently provide low-cost capital for renewable energy projects by filling-in market gaps, removing barriers for private capital entrance into clean energy projects, and de-risking capital by creating credit enhancements (including loan loss reserves and loan guarantees). Green banks expand clean energy markets by offering tools such as property-assessed clean energy (PACE) programs, power purchasing agreements for solar installations, and on-bill financing programs.

On-bill financing has been a key area of focus for EESI for the past decade. Cost-effective projects—financed by a utility and repaid as an energy bill line-item—can help homes and businesses reduce their energy burdens and their reliance on fossil fuels. Critically, on-bill programs can be designed in an equitable way to create affordable energy-efficient and clean energy solutions for just about anyone. On-bill programs like Green Energy Money Saver (GEM$) in Hawaii and Switch It Up! in Washington state have made significant strides in improving the affordability, accessibility, and equity of cost-effective clean energy investments.

But despite their successes, on-bill programs are not available everywhere. And neither are green banks, although their numbers are growing. House Energy and Commerce Committee Chairman Frank Pallone (D-N.J.), Rep. Bobby Rush (D-Ill.), and Rep. Paul Tonko (D-N.Y.) included key proposals in favor of both on-bill financing and green banks in the CLEAN Future Act, which was recently introduced. The bill would move the United States towards a clean energy economy by establishing a nationwide 100 percent clean electricity standard by 2035; providing funds for resilient infrastructure (including building retrofits); investing in distributed renewable energy and microgrids; addressing climate impacts on environmental justice communities; and putting a down-payment on a national climate bank.

The CLEAN Future Act would create the Clean Energy and Sustainability Accelerator, or national green bank, and capitalize it with $100 billion to invest in renewable energy, energy efficiency, and clean transportation technologies to reduce carbon emissions, particularly in “climate-impacted communities.” Funds would be distributed to existing and new green banks across the country with a mandate to invest 40 percent of the capital in clean energy projects and climate-resilient infrastructure in these communities. A green bank like the Hawaii Green Infrastructure Authority could use these low-cost resources to finance distributed solar energy for communities of color and Native Hawaiian communities using GEM$. Other green banks could use funds from the Accelerator to establish their own innovative programs to address financing gaps in their states and cities.

How would this work in practice? EESI’s experience with the Rural Energy Savings Program (RESP) provides a useful example. Administered by the U.S. Department of Agriculture, RESP offers loans to rural utilities and eligible entities for energy efficiency and clean energy projects in rural areas (with fewer than 50,000 inhabitants), provided the projects are cost-effective and reduce energy usage for customers. As of April 2020, green banks are eligible to apply for zero-percent loans from RESP. With EESI’s help, green banks have applied for RESP loans to help homes and businesses invest in clean energy upgrades, such as solar energy installations, that reduce greenhouse gas emissions by offsetting fossil-fuel generated electricity. Energy-efficiency improvements address health and safety issues often found in older housing stock, which is more prevalent in rural areas, while reducing the energy burden for low-and medium-income households.

Federal loan programs, such as RESP, offer a template for how green banks could deploy National Climate Bank capital to help environmental justice communities and rural communities increase the accessibility and affordability of clean energy. By leveraging low-cost federal capital for clean energy, green banks are uniquely positioned to provide affordable financing (and grants) to help states and the United States meet their energy and climate goals. Developing a resilient infrastructure to meet current and future climate and power-grid challenges is only possible by enlisting all of the financial tools at our disposal, including green banks.

Author: Miguel Yanez