Advocating, Establishing, Capitalizing a Green Bank
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Transcript of Advocating, Establishing, Capitalizing a Green Bank
Advocating for, Establishing, and Capitalizing a Green Bank
• Ken Berlin, SVP and General Counsel, CGC, moderator
• Mike Paparian, Deputy Treasurer, State of California Office of Treasurer Bill Lockyer
• Greg Hale, Senior Advisor to Chairman of Energy and Finance, State of New York
February 7, 2014
Create green bank with multi-step process
• Advocacy
– Build coalition of stakeholders to support green bank creation
• Pass Legislation or Regulatory Change
– Determine capital source and organizational entity
• Establishment
– Raise funds and design organizational structure
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First advocate for governor support, pass new law, regulations
• First establish base of support in your state
– Organize key stakeholders – clean energy organizations, businesses, nonprofits, state agencies
– Collaborate to produce materials – legal analysis, org analysis, market assessment, green bank benefits, identify capital sources
• Identify legislative partners
– Work with state legislators or regulators to build support for passage
• Bring to governor to gain endorsement
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Assess possible organization placement as part of advocacy
• What are the potential structures?
– 1) Quasi-independent, 2) Part of state agency, 3) Part of infrastructure bank
• What existing structure can green bank be part of?
– Energy office, Treasurer, clean energy agencies, finance authorities
– Do these entities have legal ability to create new subsidiaries? Can they perform green bank actions? If not, need to pass law.
• By legislation or by administrative action?
– Can do administrative action when the existing entity has adequate legal authority to act as a green bank
– Otherwise, legislation is needed
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Pros and cons of using existing entity
• If placed in existing entity, green bank can leverage resources and capabilities
– Org may already have good market knowledge, industry relationships, internal data and management systems
– Careful capabilities assessment can determine what can be shared
• But there are challenges to redirecting state agency
– Requires cultural shift within organization
– Need new staff with experience and knowledge of finance
– Repurposing may take as much time as creating new organization
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Must decide what projects and markets to address
• What types of projects could green bank finance?
– Low-risk energy generation/savings projects – solar, wind, efficiency
– Innovative high risk or manufacturing project – requires different business model, VC-type structure and expertise
– Infrastructure – large public works, such as transmission
• What specific markets will green bank address?
– Perform initial market assessment in early stages, need to provide scope of potential work to move legislation
– What is market size? Current penetration? Where are the financing barriers? Unmet demand?
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Org placement may define capital sources
• Repurpose existing funds through legislation
– Can tap cap-and-trade or existing grant program revenue
– Can it be done without annual appropriation?
• Issue Bonds
– Need bonding authority, issue org bonds
– Means green bank must deliver returns to investors
– Can use creative structures to leverage authority of other offices
– If there is existing bonding authority is it adequate or is new legislation needed?
• Regulatory surcharge
– Redirect system benefits charge, spreads burden across ratepayers
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May consider non-government sources of capital
• Direct Private Investment
– Rather than (in addition to) partnering with private capital at investment level
– Allow private investors to take equity stake in green bank itself
– Must be structure like any other company with financial statements, clear record of ownership between all investors (state and private)
– Does not work if green bank is a government entity
– Green bank could enter partnership with private entity (joint-venture)
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After assessment, speak to nonpartisan green bank benefits
• Many reasons to support green banks no matter the political environment
– Creates cheaper, cleaner, more reliable energy
– Lowers electricity bills, saves money for consumers
– Uses less public dollars, leverages private sector and recycles
– Stimulates local economies, direct and indirect job growth
– Facilitates private capital market development
– Money goes into revolving loan fund, creates scale
• A new model for more efficient government that creates economic gains for consumers and enables private sector
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Move quickly to build green bank, invest after passage
• Define organization strategy and mission
– Align green bank around clearly stated goals
• Build organization
– Hire staff, develop internal management processes, design data management tools, create financial statements
• Refine market assessment
– Build on early market assessment to segment the market, identify target customers, develop customer acquisition strategy
• Develop products and find private partners
– What capital structures and at what terms? How much private capital and at what terms?
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Three past and current examples of process
• Connecticut
– Long advocacy process, carefully crafted legislation, governor support with strong alignment of key agencies, multiple funding sources, repurpose existing entity
• New York
– Long advocacy process, upfront endorsement of governor, chose regulatory path, commission approval to repurpose surcharges, department within existing state energy office
• California
– Ongoing advocacy process, robust engagement of key stakeholders, have legislative support, considering various organization options
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Green Bank Academy
Washington, DC February 6-7, 2014
www.greenbankacademy.com