States Exploring Clean Energy Banking to Leverage Scares Resources
Clean Edge News
A number of states are now exploring a variety of ways to leverage scarce public resources with sophisticated banking and finance mechanisms according to a recent briefing from Brookings and the Coalition for Green Capital. Epitomized by Connecticut’s Clean Energy Finance and Investment Authority (CEFIA), the proposed new finance entities entail the creation by states of dedicated clean energy banks that leverage public money with private sector funds and expertise. The new brief (part of the Brookings-Rockefeller Project on State and Metropolitan Innovation) describes Connecticut’s design of the nation’s first “green” bank and proposes ways other states might get into the act.
By consolidating several existing programs into a new quasi-public corporation and then securing for the new entity the ability to raise and leverage funds from private sources, Connecticut set up the nation’s first clean energy finance bank that leverages scarce public dollars with private capital so as to provide a combination of low-interest rate funding for clean energy projects and low-cost up-front loans for energy efficiency projects. Connecticut has thus been making progress at transitioning its clean energy programs away from relatively expensive grants, rebates, and other subsidies toward the attraction and deployment of private capital to finance commercially available clean energy technologies.
Drawing on such models as the Overseas Private Investment Corporation, the Export-Import Bank, and several foreign examples such as U.K.’s Green Investment Bank and Australia’s proposed Clean Energy Finance Corporation, the authors of the briefing argue Connecticut has pushed ahead, despite partisan gridlock on energy policy at the federal level, and that other states aim to do so as well. Looking forward, the briefing concludes that states can choose among at least three bank models, which are:
- Establish, as in Connecticut, a quasi-public corporation into which are combined existing state clean energy and energy efficiency funds so as to permit private investment in the bank and enable the new entity to make loans and leverage its capital with private capital
- Repurpose portions of one or more existing financing authorities from a grant to a lending model and then through a partnership agreement combine the financing authority’s funds with private funds
- Adjust an existing or new infrastructure bank so as to attach a clean energy finance bank to fund energy projects to a bank lending to traditional infrastructure projects