By the end of this fiscal year, the Connecticut Green Bank expects to attract $500 million in private investment for clean energy projects, doubling last year’s total and matching the amount of private capital injected into Connecticut’s clean energy economy over the last 10 years.
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By the end of this fiscal year, the Connecticut Green Bank expects to attract $500 million in private investment for clean energy projects, doubling last year's total and matching the amount of private capital injected into Connecticut's clean energy economy over the last 10 years.
“Our board wants us to hit very bold targets,” said Bryan Garcia, president and CEO of the Green Bank. “We are confident we can achieve them. We are in a very rapid growth market.”
What started off as a revolutionary, first-of-its-kind concept four years ago, the Connecticut Green Bank has grown into a national and international model for the next generation of clean energy financing. Its programs — attracting interest from places as far away as Australia, Malaysia and Ukraine — go beyond the traditional government subsidy model by leveraging limited public funds to privately finance clean energy projects.
“Connecticut being the first to be established and saying, 'See, this concept works,' is a great example to other green banks looking to set up in their own states,” said Alfred Griffin, president of the New York Green Bank, which was created in 2014. “It takes it from a theoretical concept to getting it done.”
The Connecticut Green Bank reached another milestone in August when it became the first green bank to crowdsource solar loans, partnering with a California firm to sell $1 million in loans to investors who could buy in for as little as $25. The bank is working on other initiatives too: It's developing a new program to provide solar to low-income residents, revamping its popular commercial property clean energy financing, and preparing to issue green bonds, said Garcia.
An idea, enacted
When Gov. Dannel P. Malloy first took office in 2011, he called upon Yale law and environmental professor Dan Esty to take charge of the soon-to-be-created Department of Energy & Environmental Protection, which Malloy wanted to use to set statewide energy policy.
Esty was intrigued, in part, because he had a lot energy policy theories and wanted to test them in practice, including concepts like renewable energy credits, using property values to support clean-energy projects, and — most significantly to the Green Bank — reducing direct government spending on projects like solar installs by using public funds to spur private investment.
“We needed to push the clean energy envelope further and faster … and we had to show these ideas worked,” Esty said.
The quasi-public Connecticut Green Bank — originally called the Clean Energy Finance & Investment Authority and later renamed in 2014 — was formed out of the bones of the Connecticut Clean Energy Fund, which primarily used government subsidies to finance renewable projects.
Garcia was tapped as the organization's founding CEO in 2011. From the start, his chief objective was to woo private investment for the clean energy industry. Program heads were told not to worry about crafting perfect policy and instead focus on signing deals for their programs.
When, for example, the concept of allowing building owners to finance clean energy improvements by placing a voluntary assessment on their property tax bill was put into practice in the first quarter 2013 — called the Commercial Property Assessed Clean Energy program (C-PACE) — the Green Bank had the first project in place by April of that year, which was a solar installation at a Norwalk shopping center. The team scored its second project, at the Bushnell Performing Arts Center, in June 2013 and accumulated a $20 million project backlog within a year.
To attract private investment, the Green Bank then bundled those loans and secured $24 million in funding from California-based Clean Fund, which was the first time ever a private financial institution purchased clean energy loans.
Meanwhile, by developing new programs for residential solar installations — including partnering with one installer to serve entire cities and towns under the Solarize Connecticut program — the Green Bank decreased government spending on solar projects by 70 percent while increasing solar-array demand by 2000 percent, Garcia said.
In its first four years, the Green Bank supported the creation of 120 megawatts of clean energy projects, compared to the 40 megawatts its predecessor, the Connecticut Clean Energy Fund (CCEF), generated in 11 years.
The Green Bank's leverage ratio is also significantly higher, Garcia said. For every $1 CCEF spent in public funds, it got $1 in private investment. The Green Bank's ratio has been $5 in private investment for every $1 in government funding, and Garcia hopes to grow that ratio to 10:1 this fiscal year.
“Small states can make a big difference, too. We might never have the amount of projects that big states like California have, but our example of leadership will help other states and countries make an impact on the clean energy world,” Garcia said.
An idea, replicated
Other states are now following Connecticut's clean energy financing model. In 2014, New York set up the U.S.'s second green bank; California and Rhode Island soon followed suit. Maryland started implementing the concept this year and has Connecticut's former C-PACE administrator, Jessica Bailey, advising its programming.
Nevada and Michigan are considering setting up green banks and New Jersey Gov. Chris Christie called Garcia about using some green-bank concepts as the Garden State refocuses its energy policy following Superstorm Sandy.
The U.S. Department of State has sent representatives to Connecticut to learn how the idea could be implemented in other countries, and Garcia said he has a delegation from Ukraine coming to visit later this year.
The green bank model is catching on internationally, said Reed Hundt, CEO of the New York City-based Coalition for Green Capital, which advises governments on how to fund clean energy. Australia and the United Kingdom have established the first green banks in other nations.
“Our phone is ringing off the hook, and I don't know how to deal with all the demand,” Hundt said. “The growth rate in Connecticut is spectacular, and people are taking notice.”
Hundt said his organization is working with governments in Virginia, Vermont, Washington, D.C., a cohort of southeastern states, and even Germany and Malaysia on green-bank financing.
More goal-oriented ideas
The Connecticut Green Bank's crowdsourced solar loans, announced in August, grew out of a desire to reach a lower class of investors, Garcia said. The organization traditionally worked with regional banks and national investors but wanted to provide investment opportunities to people who could only afford to bet as little as $25-$100.
The Green Bank's latest idea is to provide a way for low-income residents to install residential solar panels. It has partnered with Louisiana solar installer PosiGen to develop a product with affordable public and private financing.
The Green Bank also will make some changes to its C-PACE program later this year, designed to attract more private investors to commercial projects.
“What we are showing other states is you can increase demand while at the same time decrease the subsidy,” Garcia said.
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