This is the last Solar Lead for 2020, as GTM Squared takes a break until January. We will return in the new year with a look forward at the key trends that will shape solar in 2021.
Since Connecticut lawmakers established the state’s green bank in 2011, the financing institution has invested more than $1 billion in its residential solar program, helped fund significantly more solar installations in majority Black and Hispanic neighborhoods than in majority-white neighborhoods and launched “green liberty bonds,” with proceeds going to project financing.
As the first green bank established in the U.S., Connecticut’s model is often held up as a paragon for what the institutions can accomplish. Numerous states have followed its lead, starting 19 green banks (some states have more than one). The Coalition for Green Capital, a nonprofit organization advocating for the formation of green banks, is tracking efforts in an additional 19 states.
Now proponents want to expand the concept to the federal level. And though advocates have been pushing the idea for more than a decade, supporters see the incoming Biden administration as a sympathetic partner.
With Biden soon to occupy the Oval Office and members of the U.S. Congress still quibbling over stimulus, the coming months represent a “critical window” for a national green bank to gain traction with federal policymakers, said Jeffrey Schub, executive director of the Coalition for Green Capital, at a December 8 event.
The green bank model
Green banks are financial organizations, usually nonprofits, designed to infuse capital into climate-focused projects or sectors that otherwise couldn’t secure funding. While the organizations rely on public funds to get off the ground, their most significant capital comes from private investors. Money can be distributed through loan guarantees, debt, equity and other financing structures.
In the U.S., groups such as the Coalition for Green Capital, along with backers in Congress, envision a national model that builds on the success of state green banks, tying together a network of local institutions with a federal structure and $100 billion in seed funding.
Green banks typically leverage private investment levels that are an order of magnitude greater than their initial allocation of public investment. The Connecticut Green Bank, for instance, turned $36 million in public money into $427 million in investment in 2019. A national green bank with $100 billion in government appropriations would leverage $463 billion in investment in its first four years, according to estimates by the Coalition for Green Capital.
The idea of a national U.S. green bank first got attention as the U.S. was rebounding from the Great Recession. In 2009, Sen. Chris Van Hollen (D-Maryland) introduced the Green Bank Act. That same year, Sen. Jeff Bingaman (D-NM) introduced the American Clean Energy Leadership Act, which contained a provision for a green-bank-like structure called the Clean Energy Deployment Administration. Though Congress and the Obama-Biden administration ultimately sent $90 billion to the clean energy industry as part of the stimulus plan, the green bank concept stalled.
Since then, Van Hollen and other Democratic lawmakers, including Rep. Debbie Dingell of Michigan and Sen. Ed Markey of Massachusetts, have continued to support the concept. Most recently, in 2020, ideas drawn from Dingell and Markey’s National Climate Bank Act, an initiative that proposed $35 billion in investment over six years, passed the House twice as part of different packages. It wasn’t taken up by the Senate.
Because green banks focus on widespread deployment, the Coalition for Green Capital argues that the model plugs in nicely with the Department of Energy’s existing clean energy deployment programs focused on research, development and commercialization, such as federal loan guarantees or Advanced Research Projects Agency-Energy (ARPA-E) grants.
“We’re on the very verge of the opportunity to bring government and private-sector money together and push right through the open doors technology has created for all of us,” Reed Hundt, CEO of the Coalition for Green Capital, said at the December event.
The conversation is particularly salient at a time when the U.S. is struggling with the economic implications of the coronavirus pandemic, according to supporters like Sen. Markey.
“We know through smart investments, national standards and a commitment to environmental justice that we can make this green job sector an integral part of the economic recovery, which we have to have in 2021, 2022 and beyond,” Markey said at the event.
Democrats make the case
Over the years, lawmakers have introduced several pieces of legislation focused on green banks, including the National Climate Bank Act and the National Green Bank Act of 2019.
Though this year the prospect of a national green bank won bipartisan support in the House as part of infrastructure and energy packages, supporters blamed Congress' overall lack of momentum for its inability to move forward. With a new administration elevating support for clean energy nationally, green bank backers think the idea could cross the finish line in the coming year.
Passing the concept would be a “quantum leap forward” after “four years of a president who lived on the lie of climate denial,” said Sen. Van Hollen at the event.
Advocates and lawmakers expect green bank provisions, under the name "Clean Energy and Sustainability Accelerator," will be taken up as part of a larger infrastructure or stimulus package that Congress evaluates early in the new year.
“If we move anything on energy and climate, this will be at the center of that change,” said Markey.
The concept’s fate almost certainly depends on the result of the Jan. 5 runoff elections in Georgia, however, which will determine party control of the Senate.
Every lawmaker who spoke at the Coalition for Green Capital’s event is a Democrat, but Hundt said green banks are gaining in popularity in red states. Still, it remains unclear how much bipartisan support the policy can get in Congress.
“I support the accelerator as a tool focused on funding state-level activity through green banks. But I should also tell you this really has to be a bipartisan effort to succeed,” said James Glassman, a former fellow at the conservative think tank American Enterprise Institute who served as Under Secretary of State for President George W. Bush.
Glassman — who has criticized the Kyoto Protocol’s greenhouse gas restrictions as “draconian” — said Republicans need to get behind infrastructure funding to maintain support. But he also proffered a more conservative vision of what a supportive financing institution could look like: Republicans in the House introduced the Infrastructure Bank for America Act earlier this year; rather than relying on congressional appropriations of public money to get started, the bank would encourage private investment through tax incentives.
Green banks worldwide
Internationally, green banks have cropped up in countries such as India, Norway and South Africa. Nations such as Kazakhstan, Cambodia and Uganda are all working on standing up green banks, according to a 2020 report from Rocky Mountain Institute, the Natural Resources Defense Council and the United Kingdom’s Green Finance Institute. Countries accounting for 55 percent of global gross domestic product and 43 percent of global carbon emissions have set up green banks.
The United States already accounts for a significant portion of the nearly 30 green banks worldwide. But just 4 percent of green banks now under development are located in North America, per the report.
With Biden targeting 100 percent clean electricity by 2035 — an exceedingly ambitious goal without Democratic control in Congress — green bank supporters are hoping the idea finally gets adequate momentum. Last week, Sen. Markey said the plan “meets all of the standards” the president-elect has created for his administration and promised to push the concept as a top priority in 2021.