A new program offered by the state of New York aims to provide financing alternatives and greater liquidity to the state's renewable energy marketplace.
Richard L. Kauffman, Gov. Cuomo's energy and finance chairman, tells Solar Industry the New York Green Bank will offer loans and grants to further clean energy deployment, coordinate and leverage the state's clean energy spending, and alleviate financial market barriers that currently impede the flow of private capital to clean energy projects.
Kauffman, who joined the Cuomo administration in January to lead New York's energy finance efforts, explains the Green Bank will endeavor to ‘partner with private-sector lenders by providing financial products such as credit enhancement, loan loss reserves and loan bundling to support securitization and build secondary markets.’
He says the bank's programs will support economically viable clean energy projects that cannot currently access financing due to market barriers, such as federal policy uncertainty, insufficient performance data and the lack of publicly traded capital markets for clean energy.
These barriers limit private-sector capital flows into otherwise attractive renewable-energy and energy-efficiency projects, creating gaps in the clean energy finance market. By alleviating these barriers, the Green Bank will enable the flow of private capital to fill these market gaps.
As far as timing, the New York Public Service Commission (PSC) is expected to formally approve the program in December, with full operation expected in the first quarter of 2014, according to Tom Congdon, assistant secretary of energy for Gov. Cuomo.
To capitalize the program, The New York State Energy Research and Development Authority (NYSERDA) filed a petition with the PSC to redirect approximately $165 million in uncommitted funds from the energy efficiency portfolio standardÂ (EEPS) and the renewable portfolio standard (RPS) for its initial capitalization, upon which the PSC is expected to rule. Additional funding is expected to come from the Regional Greenhouse Gas Initiative.Â
When fully capitalized, the Green Bank is expected to have a $1 billion balance sheet.
Kauffman, formerly senior advisor to U.S. Secretary of Energy Steven Chu, says the program attempts to answers the age-old financing conundrum, one that has vexed the renewable energy for some time.
‘There's been a debate about how to finance clean energy that's gone on for many years and what the role of government should be,’ notes Kauffman. ‘It's not likely that a federal financing entity to support clean energy is going to occur anytime soon.’
Therefore, he says, proactive states should begin thinking about financing alternatives. In fact, he says several states, such as Connecticut, Hawaii and Massachusetts, have already enacted financing vehicles.
‘Theoretically speaking, the Green Bank idea has merit,’ notes Chris Diaz, principal at Bellaire Bluffs, Fla.-based Seminole Financial Services. He says the program could be just the tonic needed to bring more liquidity to the marketplace – particularly for rooftop and distributed solar projects in the 100 kW to 5 MW range where investment dollars capital has been extremely limited.
For his part, Kauffman says the Green Bank is designed to be flexible enough to support financing only when it is needed.
‘Through solving these financing gaps, we will be able to get a meaningful return on ratepayer dollars,’ he explains, adding that when the financing markets return, ‘the Green Bank can step out of the market and allow the private sector to take over completely.’
Borrowing a line from Supreme Court Justice Louis Brandeis, Kauffman says, ‘The idea here is for states to be the laboratories for democracy.’