Connecticut to set up green bank?

6 June 2011

Stymied so far at the US federal level, green bank supporters appear close to winning legislative support for the first such state-level institution in Connecticut.

The Connecticut legislature is expected to vote this week on a bill authorising a green bank, which will provide financing for clean energy and efficiency projects in the state.

“I think the chances are very, very good,” Ken Berlin, general counsel for the Washington, DC-based advocacy group Coalition for Green Capital, told Environmental Finance at the Financing Energy Efficiency in the Commercial Building Sector conference in New York last week. “It was the highest priority of both the legislature and the governor. [But] you still have to get it through.”

Connecticut could secure the bank’s start-up funds through an existing charge on electricity bills used to fund clean energy and efficiency projects and revenues generated from auctions of carbon allowances from the Regional Greenhouse Gas Initiative, he said.

Once the Connecticut bill passes, the coalition plans to turn its attention to developing green banks in California, Colorado and Maryland.

Nation-wide green bank also vital - Coalition

The coalition is also working to develop financing options for clean energy and efficiency projects at the national level and the proposed Clean Energy Deployment Administration (CEDA) is vital to these efforts, Berlin told the conference.

The coalition successfully lobbied the House of Representatives to approve $7.5 billion in seed capital for CEDA, more commonly known as the green bank, in the energy and climate bill it adopted in June 2009. But the Senate failed to follow suit amid a contentious debate about the carbon trading programme.

“The fundamental approach we’re taking on everything is if you can’t raise the cost of carbon, you’ve got to lower the cost of clean,” Berlin said. “You’ve got to lower the cost of energy efficiency. The more you do that with financing, the less government money you need.”

The Senate energy and natural resources committee, led by chairman Jeff Bingaman (D-New Mexico) and ranking member Lisa Murkowski (R-Alaska), will continue amending a new version of the CEDA bill later this month. Republicans like the idea of a green bank, but “nobody’s really willing to push these things,” Berlin said.

But unlike the House bill, the new Senate version would borrow the $10 billion needed to launch the bank, which could help boost its prospects. “Right now, you can’t have anything that seems to add to the federal deficit,” he said.

The green bank proposed by the coalition would use the borrowed government money to raise matching funds from private investors, providing a rate of return for investors of about 8%, and would charge credit subsidy fees to projects.

The coalition is promoting the development of one or more national banks and several state banks. “Anything that can compete with each other, we think would be a healthy development in this area,” he said.

These green banks are critical because they can provide much of the funding needed for clean energy and efficiency investments, Berlin said. A key issue with energy efficiency retrofits is figuring out how to provide 100% of the upfront costs that borrowers would repay out of their energy savings, he said. A McKinsey report estimated it would cost $520 billion to reduce energy use by 23% by 2020, a figure that some observers think could be as high as $1.8 trillion.

“The government appetite to do that is not going to be at the level of $500 billion or $1.8 trillion,” he said. Utilities “will provide upfront financing. Some of them will do a very good job of that, but again they’re not going to have the appetite for the level that we’re dealing with.”

Gloria Gonzalez