The proposal would create a non-profit organization that would design and run the bank under the supervision of an 11-member board of directors.
Illinois would get a “green bank” to fund equity-focused clean energy investments as part of the latest version of the Clean Energy Jobs Act pending before the state legislature.
If the proposal passes, Illinois will join more than a dozen states, including Florida, New York and Connecticut, which use publicly funded green banks to leverage private investments in renewable energy, l ‘energy efficiency and other projects, especially in communities under-represented in clean energy. economy.
The state-level proposal comes as a federal bill with bipartisan backing would create a national green bank – dubbed the Clean energy accelerator – which would work in tandem with state banks.
The general idea of green banks is that they can provide loans directly for projects that would not otherwise be funded, because traditional financial institutions see them as too risky, too small, or because they are unfamiliar. with the saving of clean energy. sectors.
Green banks can also leverage private investment by making it more attractive for banks or other lenders to offer standard loans or other finance for clean energy projects. Green banks can promise to cover loans in the event of a default by a beneficiary, for example, and by assuming that risk, they can convince banks to offer loans at reasonable interest rates rather than refuse loans. or apply high interest rates.
This is especially useful if a traditional lender does not understand the potential benefits of solar power or energy efficiency, for example, or if a small business or church does not have enough credit history to receive the credit. loan required.
“This is not about concessional financing, it is about reducing the conditions for private capital to where they already should be if they had more clarity on the level of risk,” said Jeffrey Schub, executive director of the Nonprofit Coalition for Green Capital, which pushes the national acceleration plan. “A commercial bank might not lend to an efficiency project for less than 10% [interest] but that doesn’t mean it justifies 10%, because there really is no risk – it should be 4 or 5%. The high rate, said Schub, “is simply because this bank has little prior experience – does not know the depth of the market.”
A Annual Report of the Coalition for Green Capital and the American Green Bank Consortium says that in 2019, the country’s green banks invested $ 1.5 billion directly and leveraged $ 3.8 billion in private investment. About a third of the investment went to the development of community solar energy. And, said Schub, defaults on bank loans are extremely rare.
Through its support to state banks or direct investments, the proposed national green bank could also finance solar energy, storage and energy efficiency for low and moderate income households, as well as vocational training, electrification of home heating, grid infrastructure to facilitate renewable energy, electric vehicle conversion, large-scale renewable energy construction, and more.
Find the money
The proposed Clean Energy Jobs Act in Illinois does not include detailed details of how the green bank would be structured, but it calls for the creation of a nonprofit entity that would design and manage the bank under supervision. a council of 11 members of six elected. and five appointed members, including one representative from a minority-owned company and others with equity expertise, and two union representatives. The proposal was developed in consultation with the Coalition for Green Capital and reviewing best practices from other state-owned banks, including one in Connecticut, said John Delurey, Midwest director of Vote Solar.
“Once we realized that the barriers to capital and funding were among the most insidious and prevalent,” said Delurey, people working on the bill consulted with community partners and minority-owned businesses. to propose the green bank proposal.
The description of the Green Bank’s Clean Energy Jobs Act points out that it would prioritize investments in underrepresented communities and environmental justice and funding for projects run by and employing Blacks, Indigenous people and people of color. .
The green bank would be separate but would complement the mission of other equity-focused programs proposed in the Clean Energy Jobs Act, including workforce training and an accelerator for clean energy companies owned by, employing and serving marginalized communities.
Delurey said the wording of the bill is “designed to inform the structure of the nonprofit organization. [running the bank] itself, to ensure that the board is representative of the communities it helps serve, to have safeguards for the loans they can make, and specific products as suggestions, filling specific gaps in the financing landscape.
The Clean Energy Jobs Act calls on the Illinois Green Bank to raise $ 100 million in seed capital funded by a pollution tax on fossil fuel extraction and emissions. Delurey said the bank could receive additional funds from philanthropists, the federal government and other sources.
“We anticipate that a lot of federal money will be looking for regional and state entities to receive it and deploy it,” Delurey said. “That’s one of the reasons we’re trying to get this started as quickly as possible.”
Schub explained that the national bank proposed by federal legislation would make its own loans and would also provide financing and logistical support to state green banks. He noted that the majority of green bank investments come from leveraging private finance, but as some state-owned banks are becoming more “financially mature,” they are increasingly able to offer finance directly.
Versions of the national green bank proposal were passed twice by the United States House of Representatives in 2020, as part of infrastructure and energy innovation bills, and a bill with the proposal to the US Senate was co-sponsored by the then senator. Kamala Harris. President Joe Biden has included a green bank in the climate and environmental justice proposals. Therefore, the promoters are confident that a federal program will be created by law in the near future.
“It’s not really about politics, it’s always been a bipartisan or non-partisan issue,” Schub said. “The biggest hurdle has always been funding – many states don’t have a billion dollars like New York State to put in its green bank to provide seed money for investment. Illinois didn’t have the financial resources, and now every state is under strain. ”
A federal bill, as he and other supporters see, would pave the way for green banks in Illinois and other states.
Job creation and equity
Climate Jobs Illinois, the coalition of unions heavily involved in energy law negotiations, supports the federal green bank’s proposal, in part because they hope it would fund their project Carbon-Free Schools Program. This program would create 4 gigawatts of solar and energy efficiency improvements in Illinois public schools, in part through the allocation of renewable solar energy credits to schools and the creation of a low interest rate loans.
Specifically, the plan would finance school-owned solar power with 1.5% interest rates backed by a state-run revolving loan fund, partially capitalized with federal funds.
The labor coalition recently released statements from U.S. senators and representatives from Illinois – including Representative Raja Krishnamoorthi, co-founder of the bipartisan Congressional Solar Caucus – calling for investments in clean energy infrastructure with union provisions and other labor provisions.
“If ever a year ago [to pass the national bill]that would be all, ”said Matt Lehner, spokesperson for the union coalition. “The stars are aligned.”
Lehner said the coalition does not have a position on a state-run green bank, as proposed in the Clean Energy Jobs Act.
The Clean Energy Jobs Act is supported by clean energy advocates and consumer and community groups, while renewable energy developers typically support competing bills known as the Path to 100. During a press conference announcing the reintroduction of the Clean Energy Jobs Act during this year’s legislative session, elected officials spoke of the need to boost clean energy development – including through green banking – in communities under-represented in the clean energy economy and disproportionately affected by fossil fuels.
“We have a plan to create tens of thousands of high paying jobs,” said State Senator Robert Peters, member of the Black Caucus. ” Let’s be clear. We don’t just want [electric vehicle] charging stations, rooftop and community solar power and energy efficiency programs in black neighborhoods and communities. We want black workers to set them up and we want black owned businesses to design the projects and build them.
“We are in the midst of three crises – public health, economic and a crisis of systemic racism. … To get us out of these crises, Chicago and Illinois should be at the forefront of moving from the rust belt to the green belt. Clean energy must become an engine of security and stability in our communities.