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What is the clean energy bank and why is it in Waxman-Markey

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"What is the clean energy bank and why is it in Waxman-Markey"

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While the climate title in Waxman-Markey is certainly unnecessarily weak as is the renewable energy standard, the bill has many other terrific provisions (see “The triumph of energy efficiency” and “Toolbox Assessment” of Waxman-Markey“).  One of those is the Clean Energy Deployment Administration.  The Center for American Progress, long a champion of such a clean energy bank, has a primer I am reposting.

The Green Bank, or Clean Energy Deployment Administration, is a key element of proposed clean-energy policies. The Green Bank would provide more favorable terms to companies””including lower interest rates and a lower cost of debt””to offset the high cost of financing new renewable energy projects through the private sector. This new financing system will spark the clean-energy transformation and accelerate the cost-effective, large-scale deployment of renewable energies. It would help fund the transition to a clean-energy economy while making renewable energy production competitive with current electricity prices and keeping consumer prices low by facilitating the flow of private capital into renewable energy and efficiency projects. Most importantly, the Green Bank will use its partnerships with the private sector to provide the capital investment and financial security that is critical to the long-term viability of the clean-energy economy.

Why do we need a Green Bank?

The Green Bank would address the following issues:

  • The ongoing credit crunch.
  • Job losses in the manufacturing, construction, and financial sectors of the economy.
  • The need for large-scale, predictable financing for clean energy.
  • The lack of scalable and standardized finance models for existing energy-efficient technologies.
  • The risk resulting from fluctuating fossil fuel prices.

How would a Green Bank work?

CAP Action proposes that the Green Bank would:

  • Be structured as a public, non-profit entity wholly owned by the U.S. government with independent funding and flexibility in financing decisions.
  • Take a portfolio approach to investing in projects, targeting projects across the spectrum of relative risk and limiting investment in any single technology.
  • Select projects competitively based on greenhouse gas reductions and avoidance, and prioritize projects that provide the fastest, cheapest, cleanest reduction in greenhouse gases and oil use””projects that today face market barriers in accessing debt financing or credit enhancement.

A version of the Green Bank is included in the American Clean Energy and Security Act, H.R.2454, which the House is scheduled to vote on next week. It would establish a Clean Energy Deployment Administration within the Department of Energy. Representative John Dingell (D-MI) offered the amendment, which was crafted with the assistance of Representatives Jay Inslee (D-WA) and Bart Gordon (D-TN). It contains restrictions intended to limit funding of nuclear power plants.

The energy bill pending in the Senate Energy and Natural Resources Committee also includes a CEDA provision. And Rep. Chris Van Hollen (D-MD) introduced a bill, H.R. 1698, to create an independent Green Bank separate from DOE. Its board would include the Secretaries of Energy, Interior, and Treasury, and Administrator of the Environmental Protection Agency.

Is the Green Bank economically feasible?

Questions of cost and financial viability are of the utmost importance in today’s economic climate. The Green Bank will ultimately prove to be a catalyst for economic recovery; it will leverage public and private capital, encourage businesses to invest again, and help to re-open credit markets by partnering with the private sector and facilitating responsible and diverse investment strategies.

The Coalition for a Green Bank estimates that $50 billion of initial capital could enable the Green Bank to support up to $500 billion in loans over 20 years. This, matched with equity investments, could ultimately translate into $1 trillion worth of clean-energy investments.

Download this memo (pdf)

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9 Responses to What is the clean energy bank and why is it in Waxman-Markey

  1. Albert says:

    Will the government ever sell green energy bonds? There are millions of Americans who want to put their money where their other small daily carbon footprint actions are.

  2. jbrosius says:

    Banks lend based on actual revenue and collateral. For a loan, it is common to require 3 years audited financial statements. These of course in red depict “forward looking statements and forecasts” as not to be relied on. This is common for bank examiners to look at the audits. I keep utilities in my portfolio. They pay reliable dividends. The dotcoms bubble got around revenue and collateral by issuing penny stocks. GE Finance is an example of commercial lending to customers of GE products.

  3. First, a question with a “Green Bank” in both the Senate and House version of the climate change bill — does it ensure that it will make it in the final version of the bill, the one signed into law by President Obama?

    It also seems that there’s a lot of private venture capital money flowing into the sector, most have a short/medium-term investment approach (five years- max), but the clean energy investment cycle requires more time. In this context the government seems to be the only entity able to be a viable long, long-term investor.

  4. Pierre Bull says:

    We want to make sure the clean energy bank is specific to energy technologies that are truly clean and renewable (please no nukes!). Standardized finance models are a long overdue piece of the energy efficiency ‘conundrum’.

  5. James Newberry says:

    Would someone please show me how “clean/green” energy is federally defined. Since we are seeing the planning buildup of dozens of new atomic fission plants (an industrial scheme rejected by investors in the US decades ago) and the possibility of expansion of electric generation through fossil based gas, there seems to be manipulation of terminology and agendas. We may end up with the credit default swaps of “safe atomic fission, clean coal and fossil gas.” Then the future will be more over than already projected by climate catastrophes because we will have spent our capital, or what’s left of it and US credit.

  6. Anyone can read the bill at

    http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h2454ih.txt.pdf
    or
    http://thomas.loc.gov/cgi-bin/query/z?c111:h2454:

    It may be 932 pages, but all of it is double spaced, w/ narrow columns of about 10 words/line.

    Dull, but accessible.

  7. Modesty says:

    For commenters above.

    To read the relevant amendment (Dingell, Inslee, Gordon, 40 pages), see:
    http://energycommerce.house.gov/Press_111/20090519/hr2454_I_D_dingell.pdf

    Or, for the whole bill as currently amended, see:
    http://energycommerce.house.gov/Press_111/20090609/hr2454_committeereport.pdf

  8. Peter Croft says:

    I find this assessment of W-M persuasive:

    http://www.energybulletin.net/node/49264

    “China and the developing world are watching the US to see if it is serious about combatting climate change. Waxman-Markey, the bill and the legislative process, sends a clear signal: not very. A leaky, easily subverted bill where if everything goes right – getting through Congress without being further watered down and then expertly administered over a long introductory period – there will be maybe a 4-7% reduction in emissions from 1990 levels by 2020. Not a strong, positive signal.”

  9. This raises the question of when someone is going to be savvy enough to add the “Architecture 2030″ Plan to the climate bill. Architecture 2030 is a group of prominent architecture, engineering, and building firms, backed by the American Institute of Architects, major banks, and others, that are pushing a Plan to help restart the severely depressed housing construction industry.

    Their Plan is a very simple proposal to leverage hundreds of billions of dollars of private investment by using $30 Billion to pay for substantial mortgage interest buydowns for the purchase of new homes, or remodel of existing homes. To qualify, the new home or remodel would need to meet greatly improved energy standards, so this not only jump starts the housing sector but moves it quickly into better building practices:

    http://energyeconomyonline.com/Architecture_2030_Plan.html

    As the housing sector began the recession and no effective help has yet come its way, the Architecture 2030 Plan is not just a climate & energy proposal, it is a very powerful stimulus to move us out of this recession. The residential construction industry currently has about 20% unemployment.

    Most legislators know that in order to get something controversial passed, it is necessary to have something in the bill that clearly helps people. Where do we see this in the Waxman-Markey bill in any way the public can identify?

    Adding the Architecture 2030 Plan would include in the Bill the separate “Housing Stimulus Bill” originally promised at the time the massive $787 Billion Stimulus Bill was passed. No “Housing Stimulus Bill” ever materialized, and the main stimulus bill did next to nothing for the construction industry.

    The housing sector is still waiting and people are out of work and desperate. Add the Architecture 2030 Plan to the Bill and you will give a lot of wavering Representatives and Senators a “reason to vote for the Bill”.