As the nation continues its transition to clean energy, innovative financing programs are one way states are attracting significant private investment in energy efficiency and renewable energy, while boosting their economies, saving consumers money, and reducing emissions.
New analyses from the Union of Concerned Scientists (UCS), in coordination with the Northeast Solar Energy Market Coalition (NESEMC), shows how Maine, New Hampshire, and Vermont could use modest levels of public funds to greatly increase private-sector investment in clean energy, by offering a more comprehensive approach to financing local clean energy projects.
Together, these three states could leverage $35 million of public funds into a $748 million investment in renewable energy and energy efficiency projects over the next 15 years.
The analysis shows how these states could expand existing clean energy financing programs to make additional low-interest loans and other financial products available to homeowners, businesses, farmers, schools, and municipalities who want to make energy efficiency improvements, install solar panels and wind turbines, or invest in other types of clean energy projects.
A successful track record
The basic approach of clean energy financing programs is to leverage a pool of public-sector funds to garner a larger pool of private-sector investments in renewable energy and energy efficiency. They do this by bringing together a suite of financial products that support the development of clean energy projects. Just as important, these programs raise awareness of clean energy technologies and their benefits and remove barriers to private investments in these resources.
Other Northeast states like Connecticut, New York, and Rhode Island are demonstrating the success of these comprehensive clean energy financing programs. For example, Connecticut and New York have achieved an average leverage ratio across their programs of more than $5 of private funds to every $1 of public funds over recent years. Connecticut has generated nearly $1 billion in clean energy investments since 2012, with 90 percent of that coming from the private sector, while creating almost 8,300 jobs and reducing carbon emissions by 1.4 million tons.
The analysis builds on a series of UCS reports released last year in Michigan, Pennsylvania and Virginia, as well as a report highlighting successful clean energy financing programs already operating in other states and Germany. According to the Coalition for Green Capital, 7 states and 6 countries are operating comprehensive clean energy financing initiatives (see map below).
Building on existing clean energy policies and programs
Maine, New Hampshire, and Vermont already deploy a number of financing programs and incentives to invest in energy efficiency and renewable energy. For example, Efficiency Maine, the New Hampshire Community Development Finance Authority (CDFA), and the Vermont Energy Investment Corporation (VEIC) all offer a variety of financing and incentive programs to increase energy efficiency and renewable energy in homes, businesses, schools, farms, and municipalities. A more comprehensive approach to financing clean energy could expand, enhance, and supplement these laudable programs
All three states also have other proven policies to support clean energy investment including renewable electricity standards, energy efficiency resource standards, public benefits funds, net metering, building energy codes, utility rebates, and property-assessed clean energy financing (PACE). They are also part of the 9-state Regional Greenhouse Gas Initiative (RGGI), a market based program established in 2009 to reduce power sector carbon dioxide emissions. Revenue collected from the sale of CO2 allowances under RGGI is also an important source of funding for clean energy programs in all three states.
In addition to complementing existing policies, financing programs have been effective at addressing key market barriers such as providing loans to cover high upfront costs, aggregating loans for smaller projects to make them more attractive to financial institutions, providing underwriting support to help traditional lenders improve their knowledge of new technologies and lower risks, and increasing customer access to low cost capital.
Driving clean energy investments and emission reductions
Based on the experiences of existing clean energy financing initiatives, UCS analyzed the potential impact of expanding clean energy financing in Maine, New Hampshire, and Vermont. Using the initial $35 million in public funds to create revolving loan programs, with loan repayments regularly returned to the program to fund additional projects, the three states could leverage a $748 million investment in renewable energy and energy efficiency projects over the next 15 years.
By 2031, expanded clean energy investment across these three states could:
- Support the deployment of 190 megawatts (MW) of new solar- and community wind-power projects, producing enough clean power to meet the annual electricity needs of more than 49,000 households
- Save homes and businesses $89 million on their annual electricity bills by investing in efficiency
- Reduce carbon dioxide emissions by more than 513,900 tons, equivalent to taking 97,500 cars off the road
Benefits of expanding clean energy financing in three New England states by 2031
A more coordinated and comprehensive approach is needed
A comprehensive clean energy financing strategy in Maine, New Hampshire and Vermont could be an effective tool for expanding and enhancing existing programs and policies, while leveraging additional private-sector investment, increasing the sustainability of clean energy markets, and improving access to clean energy in low-income communities.
Adding a greater focus on financing—as well as better coordination of programs both within and across the states—could be a cost-effective strategy to help these states reach their long-term goals for clean energy, carbon reduction, and economic development.