5 May 2011
A ‘Green Bank’ would provide more flexibility and financing tools than popular US policies such as the loan guarantee and Treasury grant programmes, financing experts said.
Senate energy and natural resources committee chairman Jeff Bingaman (D-New Mexico) and ranking member Lisa Murkowski (R-Alaska) may revive plans to set up such a bank – known as the Clean Energy Deployment Administration (CEDA) – to help clean energy projects access low-cost capital. So far, CEDA has failed to gain traction despite bipartisan support.
The nonpartisan Congressional Budget Office has said CEDA would need about $9.6 billion in start-up capital and legislators must find a way to offset the entire amount, Murkowski said.
“An offset will not only help CEDA become a reality, it will help us hold the line on new spending and ensure we do not make our deficit any worse,” she said. “But despite the high initial costs … I believe CEDA is a smarter way for the federal government to promote clean energy technologies.”
Congress took a major step toward addressing the persistent inability of clean energy projects to obtain financing by creating the Department of Energy’s (DOE) loan guarantee programme in 2005, but it has been “less than perfect” in terms of its implementation, Murkowski argued.
Independent observers have been impressed with the recent progress and professional skills of the DOE team, but remain concerned about the multi-agency review process and the uncertainty of the yearly budgeting cycle, said Dan Reicher, executive director of the Steyer-Taylor Center for Energy Policy & Finance at Stanford University.
“Commercialising energy technology requires a new, more effective approach and that approach is CEDA,” he said. “Congress needs to enact CEDA this year.”
CEDA would have the flexibility to administer different types of credit instruments such as loan guarantees, insurance products and clean energy backed-bonds to accelerate private sector investment, Reicher said.
Green Bank cheaper than other policies in the long run?
CEDA would only need a one-time appropriation, becoming a self-sustaining entity based on “profit participation” mechanisms that would allow it take a financial stake in the projects it backs.
“This, in my view, is fiscally responsible,” said Kassia Yanosek, a founding principal of energy investment and advisory firm Tana Energy Capital.
In comparison, the Section 1603 Treasury grant programme is uncapped and will cost about $10 billion through the end of 2011.
While CEDA would be established as an agency within DOE, it would have a separate administrator and a board of directors, a similarly independent structure to the Federal Energy Regulatory Commission, which “will provide a nimbleness which has eluded DOE’s loan guarantee programmes”, Yanosek added.
CEDA would make compliance with a national Clean Energy Standard, which the committee is considering and US President Barack Obama supports, much more affordable, by expanding the use of innovative technologies and driving down costs, Reicher said.
“That’s why I am, to be honest, frustrated with the Obama administration not stepping up in support of CEDA as a complement to the clean energy standard which it is strongly supporting and advocating,” he added.
Even the US Chamber of Commerce, known for its anti-government policies, supports passage of CEDA.
“I must be clear, the label ‘clean energy’ is not reserved solely for renewables, but must be accurately applied to any and all new technologies and processes that reduce environmental impact, whether it be clean coal, advanced biofuels, natural gas vehicles or natural gas transportation fuel, advanced nuclear or energy storage,” said Christopher Guith, vice-president for policy at the Institute for 21st Century Energy, an affiliate of the US Chamber.
Gloria Gonzalez
