Author Archives: Brad Copithorne

The spread of green banking paves the way for clean energy investments

rp_Brad-Copithorne-Photo1-200x3001.jpgWhile no two “green banks” are exactly the same, the idea behind these government-created financial institutions is to dramatically expand the clean energy market. Rather than providing grants to stimulate clean energy investment, green banks use attractive interest rates and other incentives to leverage money from the private sector.

In addition to offering attractive interest rates, loan-loss reserves and other market supports, these innovative banks draw on deep expertise from the public and private sectors to help demonstrate the profitability of clean energy investments.

By the end of the year, green banks should be up and running in Connecticut, New York and Hawaii. We hope that California will follow soon. These states form a vanguard that has recognized the value of using a small amount of public capital to generate significant private investment in clean energy.

It’s working in Connecticut

In 2012, Connecticut created the first green bank, known as CEFIA,  in the United States. It did so by combining several state agencies, increasing their responsibility and funding, and leveraging a small amount of public funds to generate lots of private-sector investment. According to CEFIA’s 2013 annual report, for every one dollar of ratepayer funds CEFIA invested, roughly $10 was invested by private sources.

Connecticut’s Property Assessed Clean Energy program accounts for much of this investment. It lets commercial customers finance clean energy upgrades to their buildings through their property tax bill with no money down.  Additionally, CEFIA has been able to create an innovative financing solution that is expected to dramatically expand the market for solar projects on commercial properties. Read More »

Posted in Clean Energy, Jobs| Comments closed

Connecticut’s Green Bank Uses PACE to Accelerate Commercial Solar, California Expected to Follow

rp_Brad-Copithorne-Photo1-200x300.jpgUp to now, the most popular and cost effective forms of financing solar projects have been leases and Power Purchase Agreements (‘PPAs’), which allow homeowners to install solar photovoltaic (PV) systems on their property and purchase power from the system’s output via a financial arrangement with a third-party developer who owns, operates, and maintains the solar panels.

Unfortunately, these creative financing mechanisms have not generally been available for commercial property owners. The only exceptions were buildings owned (or leased for a very long time) by investment-grade entities such as Google, Walmart, or a state or local government. Most small or medium businesses, office buildings, shopping centers, and apartment buildings could not access financing for money-saving solar projects as investors have been wary of extending 20-year solar financings for most commercial properties.

Fortunately, our good friends at Connecticut’s Green Bank (CEFIA) have created the first solar leasing investment fund that uses Property Assessed Clean Energy (PACE) to provide investors assurance that they will be repaid. The ‘CEFIA structure’ allows commercial property owners to sign a lease or PPA in the same manner and terms as their investment-grade brethren. The only difference is that payments are linked to the property tax bill and survive foreclosures. Since the taxman almost always gets paid, this structure allows investors to consider a much wider range of commercial credits. Read More »

Posted in Clean Energy, Energy, Energy Efficiency, Smart Grid| Comments closed

PACE Financing for Clean Energy, Part 2: Lowering the Funding Costs

rp_Brad-Copithorne-Photo-200x3001.jpgYesterday, my colleague Scott Hofmeister described an insurance pool that California has introduced to help communities integrate Property Assessed Clean Energy (“PACE”), a unique program that allows homeowners to finance money-saving clean energy retrofits through their property tax bill. These programs are popular in Sonoma, Orange, San Diego, Riverside, San Bernardino, Kern, and Fresno Counties, and we expect them to spread rapidly throughout the state.

Home Energy Renovation Opportunity (HERO), a residential PACE program run by Renovate America that has partnered with the Western Riverside Council of Governments, has funded over $180 million of clean energy retrofit projects in a little more than two years of operation. These investments are expected to save homeowners more than 2 billion kilowatt-hours, reduce consumers’ utility bills by almost $500 million and avoid more than 1.4 million metric tons of CO2 emissions, or the equivalent of removing almost 300,000 passenger vehicles from the road for a full year. And notably, the HERO program is entirely funded by private investors.

If the whole state of California embraced PACE at the same rate as Riverside County, residential PACE could generate up to $3.5 billion of private investment. That could create more than a few high quality local jobs.

Last week, about $100 million of the HERO financings were securitized and sold to investors by Deutsche Bank. The terms of the transactions indicate the incredible power of the PACE structure and potential of these clean energy investments. Despite all of the financings coming from a single county, 20 year maturities for the underlying loans, and an overcollateralization of only 3%, the rating agency provided a AA rating, the second highest possible, for these financial assets. For comparison, geographically diversified pools of unsecured 10-12 year energy efficiency loans may require overcollateralization of 20+% to achieve BBB ratings. Read More »

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Funding the Future with a California Green Bank

rp_Brad-Copithorne-Photo-200x3001.jpgTwo weeks ago, State Senator Kevin de León introduced a bill to establish the first “Green Bank” in California, a bold proposal that would unleash low-cost financing opportunities for clean energy projects throughout the Golden State.

I recently had the opportunity to testify at a hearing on the bill to discuss the best practices for green banks across the country and how the program would work in California.

First, a bit more on Green Banks:

At its core, the program is a clean energy finance bank set up by the state, designed to enable increased investment in clean energy projects and companies by working closely with the private sector to remove financial or structural barriers.   The goal is simple: increase the amount of clean energy at a low-cost and encourage private investment by reducing the overall risk of clean energy projects.

While the concept is new to California, Green Banks have already taken root in other states. Connecticut established the first program in 2012, New York’s version launched a few weeks ago, and Hawaii is expected to come online this summer. Read More »

Posted in Clean Energy, Energy, Energy Efficiency| Comments closed

Hawaii Taps On-Bill Repayment Program for Clean Energy Financing and Job Creation

 

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(This post originally appeared on the EDF's Energy Exchange blog)

EDF has been advocating for states to establish On-Bill Repayment (OBR) programs that allow property owners and tenants to finance clean energy retrofits directly through their utility bills with no upfront cost. California and Connecticut are working to establish OBR programs, but Hawaii is expected to beat them to the punch. Hawaii’s program is critical as electric rates are about double the average of mainland states and most electricity has historically been generated with dirty, expensive oil.

Given the potential of OBR to lower electricity bills, reduce that state’s carbon footprint, and expand job growth in the clean energy sector, EDF has been working closely with Hawaii and multiple private sector investors for the past year to develop their OBR program. Once formally launched later this spring, Hawaii’s program will be one of only two in the nation, preceded by New York who enacted their program in 2011.

OBR in a nutshell

Here’s how OBR works: Banks and other private investors team up with contractors and project developers to create competitive options for installing energy efficiency or renewable generation projects. Linking the repayment to the customer’s utility bill is expected to lower financing costs, increase availability of credit for projects that might not otherwise qualify, and allow owners to finance long payback projects without fear of needing to refinance if they sell the property. Read More »

Posted in Clean Energy, Energy, On-Bill Repayment| Comments closed

PACE 2.0: California Leading the Next Evolution in Clean Energy Finance

Brad Copithorne_jpgProperty Assessed Clean Energy (PACE) is an innovative financing technique for clean energy retrofits that was first developed in Berkeley in 2008, giving energy efficiency projects a huge boost throughout the U.S.

Here’s how it works: Property owners agree to a long-term tax assessment on their home or building in exchange for the upfront funding to pay for a retrofit. What’s great about the program is its ability to essentially eliminate one of the biggest barriers to energy efficiency retrofits: up-front costs.

And, just as with any other property tax assessment, the obligation transfers to the new owner upon a sale of the property.  This transferability allows property owners to consider projects with longer payback periods as the obligation does not become immediately due upon sale.

From a lender’s perspective, because this obligation is part of a property tax bill it has a very high likelihood of being repaid, even under a foreclosure.

Successful PACE programs have the potential to net great results from reducing greenhouse gas emissions and improving energy efficiency to reducing total energy costs for both residents and businesses.

Unfortunately, in July 2010, the Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, threatened to take action against homeowners and municipalities that participated in PACE programs for residential properties.  FHFA’s pronouncement has effectively curtailed most residential PACE programs, with the exception of Sonoma and Riverside counties in California.

Sonoma and Riverside counties have clearly demonstrated that there is significant consumer demand for clean energy retrofits that improve comfort and save money.  To date Sonoma has financed $52.8 million of PACE retrofits.  Renovate America, which provides funding for the Riverside program, has funded $134 million of projects in that program and a recently launched similar program in San Bernardino County.

California Governor Jerry Brown has long supported residential PACE programs as a strategy to create jobs, save homeowners money, and improve the environment.  The governor’s office has been working diligently for the past three years to come up with a solution that will satisfy FHFA and reinvigorate PACE across California.

Last week, California announced preliminary regulations that would provide funding intended to make Fannie and Freddie whole if they foreclosed on a property with an unpaid PACE obligation.  The program is closely modeled after a Vermont PACE program that was able to get a waiver from FHFA.

In December, Mel Watt was approved as the new Director of the FHFA.  EDF urges Mr. Watt to quickly provide California with a waiver so that we can put Californians to work on clean energy retrofits across the state and establish a model for residential PACE 2.0 that can be used across the country.

Posted in Clean Energy, Energy Efficiency, General| Comments closed
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