‘Green Banks’ Can Be Strong Facilitators, Report Says

As state governments look for ways to encourage investment in clean energy and energy efficiency, some are forming so-called “green banks” that leverage capital to assist businesses and homeowners.

The American Council for an Energy-Efficient Economy (ACEEE) recently undertook a study of several green banks and determined that they have great potential to drive clean energy projects, but the mechanisms they use need refining.

“Green banks are still relatively new, and there is significant opportunity to expand and refine program offerings,” ACEEE concluded in its report, entitled Green Bank Accounting: Examining the Current Landscape and Tallying Progress on Energy Efficiency. “In particular, green banks’ potential to facilitate combined delivery of renewable energy and energy efficiency programs has not been fully maximized to date. Refining program marketing and delivery in order to maximize combined projects will be an important step in meeting increasingly ambitious state goals for clean energy deployment.”

The report noted that public policy is important in guiding green bank activity. “Without explicit policy directives carried out by green banks, today’s investment industry may not have sufficient incentive to develop specialized financing products for low-income and multifamily markets or conduct outreach to these communities.

“Data collection efforts need to be improved and standardized in order to truly assess the additional impacts of the financing programs offered by green banks. Green banks have ambitious goals of deploying clean energy technologies and delivering energy savings. It will be important to understand the incremental impacts of financing in deploying clean energy and energy efficiency, especially if states are interested in increasing the role of the private market in achieving overall energy savings goals,” the report continues.

ACEEE found that green banks have the potential to be powerful instruments. “Because they leverage private capital and recycle public dollars, green banks offer an opportunity for states to expand energy efficiency and clean energy deployment. But they work best when they leverage existing resources. By partnering with utilities and program administrators to create a single package from a variety of services, including financing, rebates, and project guidance, green banks can break down more barriers than any one of these approaches could alone.”

For the report, ACEEE reviewed current and planned portfolios of green banks to better understand their role. “We found that established institutions like Connecticut Green Bank tend to have portfolios emphasizing renewables. In contrast are programs, like Nebraska’s Dollar and Energy Saving Loans, that were developed with a specific mission to save customers money through efficiency investments, rather than to spur the clean energy economy more generally. … We found relatively few projects combining energy efficiency and renewables.”

ACEEE found that more-established green banks like Michigan Saves have been able to increase leverage ratios over time and have been particularly successful in residential markets.

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