Source: Chuck Abbe
Four years ago, I joined Environmental Defense Fund to work on climate policy as I believe that the issue is one of the most critical challenges of our era. I felt that my background working on Wall Street could be put to good use in crafting finance policies that help fight climate change. I chose EDF because they are the environmental organization that best understands how to use market mechanisms to deliver environmental solutions.
Tomorrow will be my last day at EDF, but I am not leaving because of any disappointment with the organization or any decline in my commitment on climate issues. At this point in time, new market mechanisms to finance clean energy are in place. The biggest contribution I can make is to switch to the private sector and demonstrate how well these mechanisms can deliver job-creating private investment.
Over the past several years, On-Bill Repayment (“OBR”) and Property Assessed Clean Energy (“PACE”) programs have been developed that are expected to allow for significantly increased investment in energy efficiency and solar generation projects. State of the art PACE programs are up and running in California for commercial and residential properties, and in Connecticut and Ohio for commercial properties. Texas and New Jersey are expected to also launch programs in coming months. Later this year, Hawaii is expected to start the country’s first open-source OBR program that EDF helped design. Read More
PACE financing allows home owners to install solar panels and repay the loans through their property tax bill. Photo source: Michael Coghlan Flickr.
Last week saw the completion of two exciting finance transactions that will increase investment in and reduce costs for clean energy projects.
In the first transaction, Renovate America, announced that it raised $50 million in venture capital funds to expand operations. The San Diego-based company develops residential Property Assessed Clean Energy (PACE) programs, which allow home owners to repay loans for energy efficiency and/or renewable generation through their property tax bill. Renovate America runs the successful HERO program, which in its first two years of operation provided $130 million in financing to homeowners in western Riverside County to retrofit their homes and reduce electricity bills.
So far this year, Renovate America has invested an additional $120 million to fund retrofits across California. EDF hopes the recently announced $50 million capital injection will not only allow Renovate America to continue its California expansion, but to expand to other states in the near future as well. We plan to work closely with Renovate America and their primary competitor Renewable Funding, which closed its venture round in April by raising $20 million. EDF’s collaboration with both companies will help additional states create residential PACE programs, attract investment for homeowners, and create jobs. Read More
Last week, Connecticut’s Clean Energy Finance and Investment Authority (“CEFIA”), the state’s Green Bank, announced the sale of $24 million in loans for clean energy retrofits of commercial properties. The loans were originated through the state’s Property Assessed Clean Energy (PACE) program, which allows property owners to access 100 percent up-front financing for energy efficiency and renewable energy improvements on their buildings. Repayment is attached to a lien on the property tax bill, making PACE loans very attractive assets for investors.
According to Jessica Bailey, Director of PACE for CEFIA, “Connecticut’s PACE program is able to provide financing for commercial property owners to implement money saving clean energy projects. Without PACE, most of these property owners might not have access to attractive financing and these projects would not be completed.” Read More
While 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. Read More
Wayne National Forest
Up 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. Read More
In 2010, I began working on financial policy at EDF. Our objective was to implement policies that would allow private sector companies to profitably deliver financing solutions to residential and commercial property owners footing the upfront cost of money-saving energy efficiency and clean distributed generation (such as rooftop solar) projects. While the residential solar market was already gaining steam at the time, most of the other markets had very limited momentum. But after attending the clean energy finance conference that EDF co-hosted yesterday with Citi, energy efficiency solutions provider Elevate Energy, and law firm Wilson Sonsini Goodrich & Rosati, it appears that the market for financing clean energy projects is beginning to accelerate rapidly.
The agenda featured 12 private companies from the clean energy sector (Kilowatt Financial, Clean Power Finance, Renovate America, AFC First Financial Corp., Renewable Funding, Clean Fund, Joule Assets, Noesis Energy, SCIEnergy, Metrus Energy, Hannon Armstrong, and Honest Buildings), plus a few more in the audience, that are executing a wide range of transactions using Property Assessed Clean Energy (PACE), On-Bill Repayment, Energy Services Agreements (ESAs), and many other innovative techniques to fund the transition to a low-carbon economy. Read More