Can ‘green banks’ bring clean energy to the masses? The United States is betting on this with $27 billion

Have you heard of the gold rush? Get ready for the green rush. With nearly US$370 billion (475 billion Canadian dollars) on the table, the race will soon be south of the border to secure some of the clean energy money expected to flow from the inflation-reducing law Democrats hope to pass in the future. week.

“Green banking” is one way the Biden administration intends to distribute billions of dollars aimed at accelerating the adoption of solar, wind, geothermal and other forms of renewable energy.

They are semi-public entities intended to attract private investment in small-scale green energy projects, such as residential solar installations, energy-efficient building modifications and various forms of electricity.

It’s been around at the state and local levels in the United States, Australia, and elsewhere for more than a decade. Canada plans to spend $15 billion over three years on its iteration, known as growth fund. The Infrastructure Bank of Canada is a similar public-private initiative but has a much broader mandate and has been Criticize for its failure to attract sufficient investment and stimulate the privatization of public services.

Senate Majority Leader Chuck Schumer at a news conference on the inflation-reduction law outside the US Capitol this week. Green banks are one way the government hopes to speed up its financing for renewable energy. (Drew Angerer/Getty Images)

The proposed US legislation is expected to allocate $7 billion to state green banks and $20 billion to the National Green Bank, with $8 billion earmarked for low- to middle-income communities.

“One of their strengths is that they are driven by a mission to take an interest in spreading clean energy,” said William Barber III of the Alliance for Green Capital, a nonprofit group that advocates for green banks.

They are trying to “de-risk” investments and reduce the initial cost of project financing in order to bring more of them online faster with the aim of helping governments achieve their emissions reduction goals.

Assuming the risks

“We’re taking a slightly more risk-taking stance so the lender feels a little more comfortable,” said Tom Dew, CEO of Montgomery Green Bank County in Rockville, Maryland.

One reason green banks do this, says Dew, is that they know how to assess the future energy savings a project will generate and factor them into financing.

“Maybe they are [conventional banks] “I can’t quite understand how the energy savings will happen,” he said. “We’re willing to take this risk-taking stance because we know that’s what will happen.”

The UK used a green bank to finance offshore wind projects such as the Rampion Offshore Wind Farm, 13 kilometers off the coast of Sussex, but sold it five years after it was set up. (Mike Hewitt/Getty Images)

Green banks use so-called credit boosters such as loan guarantees, loan loss reserves or lower interest rates to help businesses and residents get the loans they need to start and run businesses.

“They are able to be more flexible in terms of their creditworthiness or toward underwriting, and they can create products that serve communities in unconventional ways,” said Sandra Purwohi, director of federal advocacy for E2, or Environmental Entrepreneurs. That represents green companies and investors.

When they put capital into a project, they expect it to be paid back. It is a not-for-profit, but it is not a donor agency and is not intended to replace other incentives such as tax credits or rebates.

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Banking to save energy in the future

Montgomery County Green Bank was founded about seven years ago with $18 million in government funding and today it is funded by an annual allocation of 10 percent of the Maryland gas tax.

One of the projects it funded was the $1.5 million renovation of a 233-unit apartment building in Tacoma Park.

The Homeowners Association had trouble getting a bank loan to fund the kind of energy-efficient upgrades it wanted, so it approached the Green Bank, which eventually loaned them $1.2 million in partnership with two community banks, and put together the rest of the condo board.

The Tacoma Overlook Condominium Homeowners Association, above, in Tacoma Park, Maryland, used a green bank to fund upgrades that would make the building more energy efficient. (Jason Burles/CBC)

“Condo associations have very limited ability to borrow from traditional banks, because the condo association doesn’t actually own property that can be secured in the way you would a mortgage on your home or condominium when you get it,” said Tim Goodson, president of the condo board, who oversaw the project. Mortgage loan “.

The board was able to put in an energy-saving boiler, a more efficient thermostat, a small energy heating system and natural gas that saves some of the electricity and helps heat boilers and water tanks.

The bank estimated that the upgrades would generate about $70,000 in energy savings, and Goodson says they’ve already hit more than $90,000 annually on the project. He said the building had gone from the 50th percentile in terms of efficiency to the sixth.

“We are more efficient than 94 percent of the buildings in the country,” said Goodson, 51, who now lives in Syracuse, New York, but maintains a unit in the building and still chairs the board of directors.

Part of a high-temperature heat pump in Berlin. Pumps make homes cool and heat more efficient and reduce carbon emissions. The legislation proposed by US President Joe Biden includes funding for heat pumps and other measures to improve energy efficiency. (Lizzie Nessner/Reuters)

When electricity prices rose earlier this year, a new heating and power system enabled them to generate more electricity at home at a lower cost than they could buy from utilities.

“It is the ownership that gets the long-term benefit,” Deo said. “It takes seven years to pay off that loan, and from there forward, these systems last much longer…you see that it comes back to yourselves with lower operating costs.”

Technical expertise

Part of what green banks say they bring to the table is having employees with the technical knowledge to assess the viability of projects. This was something of an attraction for DC solar contractor Flywheel Development when it went through DC Green Bank to fund a solar roof on a rental building in a low-income neighborhood in the city’s northwest.

“Their level of basic knowledge is much higher,” said Jessica Bates, co-founder of Flywheel. “The lenders we contacted have much less institutional knowledge in terms of the basics of how to finance solar energy… what are the sources of income and how do they even work?”

“Their basic level of knowledge is much higher than that,” said Jessica Bates of green banking experience about the financial viability of solar and other forms of clean energy. Her company Flywheel Development is installing commercial and residential solar power around the capital (Cazi Stastna/CBC)

The project cost about $132,500, with the Green Bank providing $80,000, the company $26,000, and the city’s renewable energy program providing the rest. The private lender and the green bank will co-finance the long-term loan that enables Flywheel to oversee the project for the duration of the 15-year contract with the city and the property owner.

The roof will produce an average of 25,000 kWh per year, which is enough to supply six families. In this case, the households that supply it are not actually in the building. The electricity generated is fed into the city’s grid and allocated to low- and middle-income residents through a program called Solar for All that covers half of their utility bill.

Flywheel makes its money by selling electricity to the city and through solar credits, which sell for about $365 to $435 per megawatt-hour in the capital, where utilities must generate 10 percent of their power from local solar sources by 2041.

Flywheel installed SunStyle solar panels on the roof of an apartment building in Suite 4 in Washington, DC. Energy fuels a community solar program for low- and middle-income residents. (Jason Burles/CBC)

The neighbor’s eyes are sunshine with doubt

Lorenzo Barnes, 70, lived in the area where Flywheel rode a solar roof for 25 years and watched it rise from his adjacent apartment.

“There was no building here that had this,” he said.

Lorenzo Barnes, 70, who lives next door to the building where Flywheel installed the solar roof, said the project sparked curiosity in the neighborhood but would prefer if the landlord cleans up the yard. (Jason Burles/CBC)

He and a resident of the building that was in the house when CBC visited the project looked skeptically and said they wish the landlord would use some of the benefits he gets from renting out the roof space for better property maintenance.

“Who knows this is a typical project?” Barnes said, pointing to the trash cans in the front yard. “People would have come to see it more if it had been better to keep up.”

The national scale will allow for expansion

Solar makes up a large part of what green banks finance, and everything from residential rooftops to farmers’ fields and church properties, the kind of projects that may struggle to attract private capital, tend to favor large-scale solar generation.

“This is funded all day,” Bates said, referring to what is known as utility-scale solar. “But often that market doesn’t overlap with the community-wide installations that we do.”

Solar panels are more expensive than solar panels but cover more area and form part of the roof rather than sitting on top of it. (Jason Burles/CBC)

Skeptics say truly viable projects should be funded through traditional banks, but proponents argue that they bring investment to communities that would not normally attract green energy projects despite bearing the brunt of pollution and environmental degradation.

“These disadvantaged, low-to-middle income or BIPOC areas are often the areas most in need in terms of advance assistance to see the deployment of a clean energy project,” Barber said.

However, green banks’ reliance on government funding makes them vulnerable. The nation’s first green bank in Connecticut had to do it restructuring itself After the budget crisis forced the state to cut its financing and began to issue bonds to increase capital. The United Kingdom sold its Green Bank five years after its creation and was criticized for overlooking its mandate.

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If the National Green Bank continues to move forward, it will allow a broader range of projects than state banks can currently fund, proponents say, including things like installing transmission lines across state lines or in remote communities.

“We have a limited window in which we have to make a massive investment in clean energy,” Barber said. “We’re talking about a huge opportunity to scale up electrification, so the National Green Bank will allow us to do that.”

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