US States compete on Green Banks, with CA the latest / Penn's warehouse issues $31m energy efficiency bond

We’re beginning to see some friendly competition emerging among US States around Green Banks. New York Governor Cuomo a few weeks ago announced the setting up of a new Green Bank.

Pennsylvania two weeks ago issued a $31m (climate) bond, bundling 4,700 residential energy efficiency loans. The bond was issued through a new facility to aggregate energy efficiency loans called WHEEL, developed with the help of the Energy Programs ConsortiumCitiBank and PACE pioneer Cisco de Vries of RenewFund. The ambition is to develop a refinancing warehouse that can also be used by other States, because no single State has enough loan volume to do bonds at the size they really need to be. Have a peek into their thinking here.

But there's more.

The CDFA and the Clean Energy Group held a useful Clean Energy Muni and State Bonds Forum in Washington DC last Wednesday. Very interesting was the news that State Revolving Funds, mainly used for water and sewage investments, can now - as a result of a recent court decision - be used for credit enhancing renewable energy and energy efficiency bonds. Expect action in this area.

But what was most interesting was the friendly banter among State representatives about Green Banks.

At the Forum NYSERDA Treasurer Jeff Pitkin reminded everyone about Cuomo's Green bank announcement, noting that New York State has been doing a lot of that work already (have a look at their long list of programs) with the new Green Bank expected to give their work greater profile as well as bring in some new programs.

Then Mike Paparian of the California Pollution Control Financing Authority told the audience that his State Treasurer (and Climate Bond Standards Board member) Bill Lockyer had quietly put out an announcement the day before that California now has a Green Bank. Big News? It’s certainly very good news, but Clean Energy Muni and State bonds was at pains to say that the Green Bank is not a new institution, but simply “a more useful description” of two existing programs.

Which made me look again at the two programs:

  • The California Pollution Control Financing Authority, of which Paparian is executive director. This is a "conduit entity": it issues tax-exempt bonds ($13 billion so far) that help industry and government build qualified renewable energy, pollution reduction and waste recycling projects.

  • The California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) - now that is a long acronym. CAEATFA has a range of tools, from providing sales tax exemptions for "green manufacturing" (solar, electric cars, etc) to providing credit enhancements to banks and municipalities providing residential energy efficiency and renewable energy finance.

Next it was the turn of Connecticut, who say their new Clean Energy Finance and Investment Authority is a basically Green Bank. They're right.

Pennsylvania's new bond is broadly part of its wide-ranging “Keystone Home Energy Loan Program”.

Once you start poking around you find a lot of interesting programs in US States operating like small Green Banks: Oregon has its Energy Trust, and Delaware its Sustainable Energy Utility. Delaware notably did what they called the "first Energy Efficiency tax-exempt bond issue" in US — a $72.5m bond in August 2011, with proceeds going to "energy conservation projects".

The challenge for all of them now is generating demand - getting consumers and business to decide on an energy efficiency retrofit. This is a common problem in every country running energy efficiency programs, even Germany with their virtually zero-interest loan program. More on that topic in future posts.