In June, two Connecticut Democrats, U.S. Rep. Elizabeth Esty and Sen. Chris Murphy, introduced the Green Bank Act in Congress with the goal of establishing a new federal funding vehicle for clean energy projects.
The legislation would create a National Green Bank that finances existing and new “green banks” at the state and local levels. Those institutions would follow the funding model first established by the Connecticut Green Bank by merging public funds and private-sector investment for loans to finance clean energy installations at both homes and commercial buildings. Esty and Murphy proposed an initial $10 billion operating budget for the federal initiative, which could increase up to $50 billion.
The Connecticut Green Bank, originally the Clean Energy Finance and Investment Authority, was established as a public agency in July 2011 to replace the Connecticut Clean Energy Fund as the state’s funding source for residential and commercial clean energy installations. Six years after its launch, Green Bank officials said it has coordinated the financing of projects totaling more than $1 billion, with an average of $6 from private capital providers for every $1 of public money invested.
As of the end of 2016, the Green Bank reported it has backed the development of approximately 215 megawatts of clean power generated by 20,000 projects that directly or indirectly created roughly 13,000 jobs, while reducing carbon dioxide emissions by more than 2.6 million tons.
New York followed Connecticut’s example in December 2013, when Gov. Andrew Cuomo announced that the state was putting $210 million in initial funding into a new Green Bank entity, with $165 million redirected from other state programs and $45 million from the nine-state Regional Greenhouse Gas Initiative. While the New York Green Bank replicates Connecticut’s public-private partnership model, it is not a standalone entity as is Connecticut’s. Instead, it is a $1 billion component of the state’s Clean Energy Fund, a $5.3 billion, 10-year financing commitment.
As of the end of 2016, the New York Green Bank reported 18 closed transactions totaling $305 million in financing. Last year saw a major leap in the Green Bank’s activity: prior to 2016, it generated only a little over $54 million in clean energy project financing.
For the 2016-17 fiscal year that ended in March, the Green Bank reported $2.7 million in net income from $291.6 million in investments. New York officials have not reported the number of jobs created by the 3-year-old initiative and the ratio of public to private financing for projects.
In July, the Connecticut Green Bank was honored with the Innovations in American Government Award from Harvard University’s Kennedy School of Government, where it was cited as a success that is “spurring the adoption of similar efforts by states and cities across the country.”
Yet only four other states — California, Vermont, Hawaii and Rhode Island — and Maryland’s Montgomery County have their own Green Bank. No other state legislature is currently considering such a proposal. There is no city-sponsored version of the program, although Mayor Muriel Bowser in Washington, D.C., recently proposed one for her municipality.
The Connecticut Green Bank has generated more red ink than green bounty, ending the 2016 fiscal year with a $25 million deficit, up from a $10 million deficit for fiscal year 2015.
“If this was a private company, this would be out of business,” Charles Meyrick, assistant professor of business and economics at Bridgeport’s Housatonic Community College, said of the state’s Green Bank. “You can’t have negative equity.”
For the proposed National Green Bank, Esty and Murphy are seeking initial financing through a Treasury Department bond issue. That’s a departure from the financing mechanism used in Connecticut, which Meyrick described as “a surcharge imposed on Connecticut rate payers through their electric bills. These are funds taken away from individuals and families that might have been able to do something else with their money — something more productive than green energy projects.”
Karl Rabago, executive director of the Pace Energy and Climate Center in White Plains, observed that the Green Bank’s public-private partnership model moves away from the tradition of public funding for the energy sector. “Government support of nuclear energy goes back for many decades and government support of coal has been in place for a century,” he said. “We still don’t have robust markets for clean energy and this model moves from direct government dollars to private investment in the markets.”
The proposed National Green Banks would leave project approvals to state and local Green Banks. “States have different mixes of energy needs and resources,” Rabago said. “That’s the right way to go.”
But Meyrick expressed concern that federal bureaucrats and elected officials could be unduly influenced to back clean energy projects. “There is a greater risk of money being spent unwisely and a greater risk of lobbyists using campaign donations to influence politicians,” he warned.
The Democrats’ National Green Bank proposal could be doomed from its inception in the nation’s divisively partisan political climate and with Republican control of both Congress and the White House. Esty and Murphy when introducing the bill criticized President Trump’s decision to withdraw the U.S. from the Paris Agreement, a move which Esty said “put at risk thousands of American jobs and threatened our nation’s ability to compete economically with the rest of the world.”
“Even though the Trump administration chose to turn its back on our planet, we can choose to push back by investing in cleaner ways to power our world,” Murphy said.
J.R. Romano, chairman of the Connecticut Republican Party, said the Democrats’ bill “is more about political grandstanding than promoting a program that works. It sounds great, but anything the federal government does, it doesn’t do well. Plus, our energy costs in the state are increasing.”
At the University of Bridgeport, Elif Kongar, chairwoman of the Department of Technology Management, said “environmentally benign endeavors” such as the National Green Bank proposal, “especially if they foster economic growth,” are worth pursuing. “Given the diminishing resources, increasing raw material prices, growing electronic waste, etc., such initiatives are almost always timely,” she said.