Transcript www.coalitionforgreencapital.com

Washington, D.C.
202.777.7700
The Role of State Green Banks
Kenneth Berlin
Senior Vice President
(202) 371-7350
[email protected]
Reed Hundt
CEO
(202) 494-4111
[email protected]
www.coalitionforgreencapital.com
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Washington, D.C.
202.777.7700
The Coalition for Green Capital
 Nonprofit 501(c)(3)
organization
 Established in 2012
 Based in Washington D.C.
 Full time staff in DC, NY, CA
Consulting
Modeling
Policy
CGC’s mission is to create
demand for clean energy and
energy efficiency and reduce
carbon emissions by establishing
green banks at the state, federal,
and international levels.
Networking
Advocacy
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Washington, D.C.
The Coalition for Green Capital develops Green 202.777.7700
Banks
that provide:
• Low-cost financing for clean energy projects
• 100% financing for residential and small business energy efficiency
programs
• Greater liquidity for clean energy instruments
• Solutions that address market failures
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Washington, D.C.
202.777.7700
Coalition for Green Capital works at the national level
• American Clean Energy and Security Act: Green
Bank (H.R. 2454) - $7.5 billion
• Senate Energy Committee Bill - 2010 - $10 billion
• Developing new draft federal green bank
legislation
– Federal Green Bank would be funded either by bonds or
borrowing from Treasury
– 75% of funds would be lent to state green banks
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Washington, D.C.
And the Coalition is leading the green bank movement
at
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the state level
• January 2011 – CT Passes CEFIA legislation.
• Early 2013 – Hawaii establishes green bank-type entity
with $100-$200 million in bonding authority.
• February 2013 – Senator De Leon of California
introduces SB798–Green Infrastructure Bank.
• September 2013 – Governor Cuomo of NY files for
utility commission approval of green bank with goal of $1
billion in capital.
• CGC is currently working in 4-7 additional states.
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Washington, D.C.
The Green Bank Approach
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• Repurpose existing state funds into a new entity or within
an existing finance authority so they are:
– Matched with private funds from investors with patient
long-term capital who are seeking a conservative rate of
return
• Use bonding authority to raise additional funds
• Lower the cost of clean energy solutions and address
market failures
• Push programs away from rebates, grants, loan writedowns and subsidies and into revolving loan programs
– In revolving funds same dollar can be used multiple times
• Finance both EE and RE deployment with no tech risks
• Develop different structures for higher risk projects
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Washington, D.C.
The Coalition for Green Capital wants to establish202.777.7700
Green
Banks, design products, lead interstate collaboration
•
To pass green banks, building coalitions in states and analyzing
each state’s legal and energy landscape
• Developing innovative products to stimulate demand for green
bank financing
– Products for solar PV market such as Connecticut Solar Lease
Program 2
– Design green bank product to finance EV charging stations
– Build 100% financing products for EE, paid back through savings
•
Planning Green Bank Academy to facilitate collaboration between
Green Banks
–
Two-day workshop in D.C. for state energy leaders to learn green
bank building tools
–
Will identify ways in which green banks can develop products
together and standardize practices
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Washington, D.C.
Green Banks can pull several levers to make clean
energy
202.777.7700
cheaper
1) Cheap and Available Financing
2) Securitization
3) Scale
4) Technology Advances
5) Subsidies & Tax Policy
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Washington, D.C.
Green banks can reduce financing costs across clean
202.777.7700
energy markets with many financial tools
Green Bank Products
Markets
Direct Debt
DG Solar
Wholesale Debt
Subordinated Debt
Apply Any
Product to
Any Market
Residential EE
Commercial EE
Loan Loss Reserves
Low-Income
Credit Enhancements
Utility-Scale Generation
Warehousing
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Washington, D.C.
Because Green Banks are nonprofit, financing costs
for
202.777.7700
clean energy are lower
Expected Returns of Typical Clean Energy Investors
Investor Group
Required Return
Commercial Debt
6%
Tax Equity
12%
Developer Equity
15%
Green Bank Debt
2%
Rather than maximizing return, Green Banks offer cheap capital in order to
lower consumer payments for clean energy
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Washington, D.C.
The Brattle Group “Rooftop Solar PV Green Bank202.777.7700
Financing Model”
• Focused on incremental benefits of Green Bank funding at project level
• Based on illustrative specifications provided by CT Clean Energy
Finance and Investment Authority (CEFIA) and the Coalition for Green
Capital (CGC)
• Model derives key metrics for behind-the-meter solar:
Specifications including:
Key metrics:
• Installed costs
• Retail cost2
• Regional capacity factors1
• Equity returns
• State policies and incentives1
• Installed capacity per dollar of
Green Bank Debt
• Capital structure including
Green Bank Debt
1. Initially shown for Connecticut
2. In the form of a 2013 levelized cost of
electricity, net of state incentives and RECs.
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Washington, D.C.
Illustrative Base Case
202.777.7700
Under above
assumptions, reliance on:
•
Tax equity
•
State incentives
•
RECs
Would hold retail costs at
$0.210/kWh (without
Green Bank Debt)
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Washington, D.C.
Green Banks can make residential solar cost competitive
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in Connecticut with a 20% investment
Green Bank Makes Clean
Energy Cost Competitive
Retail Price
in CT
• In Connecticut, for example,
Green Bank debt brings price
of solar electricity below retail
• Highlights significant impact
financing cost has on clean
energy price
• Assumes only 20% Green
Bank debt investment
• Inclusive of current
Connecticut subsidies
1) Capital structure is 20% Green Bank Debt, 20% Commercial Debt, 48% Tax Equity and 12% Developer Equity. Assuming Green Bank debt
offered at 2% for 15 years, Commercial debt is at 6% for 6 years, developer equity return is 15%, tax equity return is 12%, 15-Yr REC price is 3
cents/kwh and 6-Yr State Incentives are 22.5 cents/kwh.
Source) Rooftop Solar PV “Green Bank” Financing Model, Sponsored by The Connecticut Clean Energy Finance and Investment Authority and the
Coalition for Green Capital, Developed by the Brattle Group. Available for download from: http://www.coalitionforgreencapital.com/the-model.html
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Washington, D.C.
Potential Impact of Green Bank Debt
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Green Bank Scenarios1 defined per capital structure scenarios shown below:
1Green Bank scenarios for illustration purposes.
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Washington, D.C.
If Green Banks provide enough investment and solar
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install costs come down, prices will drop dramatically
Price of Electricity from Solar (cents/kWh) in CT
as a Function of Green Bank Debt and Installed Cost
Solar Install Cost
($/Watt)
% of GB Capital in Structure
0%
10%
20%
30%
$4.5
21.0
18.7
16.3
14.0
$4.0
17.4
15.4
13.3
11.2
$3.5
13.9
12.1
10.3
8.5
$3.0
10.3
8.8
7.2
Pink-highlighted prices are below current retail
electricity price in Connecticut
5.7
Other Assumptions
• Developer Equity Return: 15%
• Tax Equity Return: 12%
• Total Leverage: 40%
• Commercial Debt Interest: 6%
for 6 years
• Green Bank Interest: 2% for 15
years
• 15-year RECs: $0.03/ kWh
• 6-year State Incentives:
$0.225/ kWh
Capital Structure is 20% Green
Bank Debt, 20% Commercial
Debt, 48% Tax Equity, and 12%
Developer Equity.
If solar installed costs drop to $3.5/watt and 30% of investment comes from Green Bank, the
consumer needs to pay only 8.5 cents/kWh to pay back investors with adequate profit.
Source: Rooftop Solar PV “Green Bank” Financing Model, Sponsored by The Connecticut Clean Energy Finance and Investment Authority
and the Coalition for Green Capital, Developed by the Brattle Group. Available for download from:
http://www.coalitionforgreencapital.com/the-model.html
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Washington, D.C.
Green Bank investment + Private investment leads
to
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more clean energy projects
Technically Feasible Projects
Typical Capital
Structure
Green Bank Capital
Structure
Economical
Projects
High Capital Costs Push
Consumer Payments Above Retail
Electricity Price
Lower Capital Costs Reduce
Consumer Payments To or
Below Retail Rates
Green Bank investment attracts private investors and
increases size of clean energy market.
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Washington, D.C.
As Green Banks get paid back, they re-use money
and
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leverage private capital to expand clean energy investing
Illustrative Example of Green Bank Recycling and Leverage
Original Investment
Year 0: Initial
investment
attracts
private capital
• Same Green Bank dollars
invested multiple times, releveraging private dollars
Year 6:
Investment
is fully
repaid
• Recycling multiplies total
clean energy investment
First Recycling
Year 6: Funds are
recycled into a new
investment,
attracting more
private capital
Year 12:
Investment is
fully repaid
Second Recycling
Public funds are lent
Public funds are repaid
Year 12: Funds
are recycled into a
new investment,
attracting more
private capital
Year 18:
Investment is
fully repaid
• Illustration is conservative, as
loan repayments occur
constantly and cash can be
redeployed throughout period
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Source) Based on CGC research in New York for the New York Green Bank in conjunction with Booz & Co.
Washington, D.C.
Green Bank Models
202.777.7700
We have found that there are three leading models for
state green banks:
1
Connecticut Model
2
State Clean Energy Financing Authority Model
3
Infrastructure Bank Model
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Washington, D.C.
1
The Connecticut Model
202.777.7700
• Established Clean Energy Finance and Investment
Authority (CEFIA): a quasi-public corporation that
consolidated several existing funding sources
• Given the power to issue bonds
• Authorized to raise funds from private sources of capital
capped at an average rate of return set by the board
• Permitted to finance up to 80% of the cost to develop
and deploy a clean energy project and up to 100% of
the cost of financing an energy efficiency project
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Washington, D.C.
202.777.7700
2
The State Clean Energy Financing Authority Model
• Part of the state government, not a quasi-independent
governmental entity
• Separate entity would need to be established to raise
private funds and partner with the state financing
authority under a formal partnership agreement
• As in the Connecticut model, a state would determine
whether it could consolidate other funds into the green
bank authority
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Washington, D.C.
The Infrastructure Bank Model
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202.777.7700
•
Clean energy projects and general infrastructure
projects to be financed by a combined state energy
and infrastructure authority or bank
•
Because of differences between infrastructure and
clean energy finance, we recommend that the bank
create separate “windows” for each
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Washington, D.C.
202.777.7700
The Role of State Green Banks
Kenneth Berlin
Senior Vice President
(202) 371-7350
[email protected]
Reed Hundt
CEO
(202) 494-4111
[email protected]
www.coalitionforgreencapital.com
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