In this year’s State of the State address, one of initiatives New York Governor Cuomo promised to implement is a NY Green Bank, and now he’s taking steps to make it a reality.
He asked the Public Service Commission to release $165.6 million as seed money for the $1 billion bank – which will be used to encourage private lenders to support renewable energy projects in the state.
It will offer its initial financial products early next year.
“Through the New York Green Bank, we will leverage public dollars to attract private sector investment into building a new clean energy economy that will help make our state greener and create jobs,” Cuomo says. “As a public-private partnership, the Green Bank will implement a pioneering approach that strategically and efficiently uses limited state resources to drive investment into critical areas of the economy. With this initiative, we will promote job growth and business development, improve resiliency and air quality, and lower costs for consumers while providing them with greater choices and value for their money.”
Financial products – including credit enhancement, loan loss reserves and loan bundling – will support economically viable renewable energy projects that don’t currently have access to private lenders.
Barriers such as federal policy uncertainty, insufficient performance data, and the lack of publicly-traded capital markets for clean energy limit private sector capital flow into otherwise attractive renewable energy and energy efficiency projects.
Public funds from NY’s Energy Efficiency Portfolio Standard and/or Renewable Portfolio Standard will be matched by private-sector funds. The Bank will also coordinate the $1.4 billion currently allocated among various state agencies for efficiency and renewable energy programs.
“By incorporating a financing model into the State’s clean energy support toolkit, the State will derive greater private sector leverage from scarce public funding than the current incentive model alone,” notes Richard Kauffman, Chairman of Energy and Finance for NY State.
Over the next five years, the Bank can at least double the amount of private capital available to grow these markets, and over 20 years, it could deliver almost 10 times more private capital.
The ultimate goal is to enable a stand-alone, dependable private sector financing market that no longer needs government support.
A Green Bank can also help further lower solar prices, for example. Although solar panel prices have dropped dramatically, the cost of solar systems in the US is still much higher than in Europe because of soft costs, such as taxes, permitting and zoning fees.
Green banks can lower soft costs “by making capital more accessible and affordable to installers. And if the availability of inexpensive capital is able to attract enough investors and installers to expand the solar PV market, the policy, permitting, and zoning processes associated with solar installations should become better understood and less laborious,” notes the Coalition for Green Capital.
NY is the second state to create a Green Bank after Connecticut passed legislation in 2011. Connecticut’s bank is much smaller – only $50 million. Oregon also has a bank in its 10-year Clean Energy Plan.
On a national level, Representative Chris Van Hollen (D-MD) introduced the Green Bank Act of 2009, which would have set up a bank as an independent, tax-exempt, wholly owned US corporation.
The UK’s Green Investment Bank has $999 million – it began operating in May. The bank’s first investments will be in offshore wind farms and energy efficiency programs.