Green banks and clean energy

Kenneth Berlin

By most accounts, Kenneth Berlin is a Washington insider.

General counsel to Washington, D.C.-based Coalition for Green Capital (CGC), Berlin has worked as a U.S. Dept. of Justice environmental advocate, led the Environmental and Climate Change Practice of law firm Skadden, Arps, Slate, Meagher & Flom, and chaired the board at the Center for International Environmental Law.

At CGC, Berlin advocates for government investments in efficiency and clean energy programs, including “green banks.”  Berlin was fresh from helping the Connecticut legislature create one such bank, a quasi-public corporation called the Clean Energy Finance and Investment Authority.

Sustainable Industries recently caught up with Berlin in Seattle, as he addressed “Transitioning to a Clean Energy Economy” for the Washington Clean Technology Alliance. 

SI: If you could wave a magic wand, what would you make happen?

Berlin:  In the short term, the 2012 U.S. Congress would pass a limited energy bill that provides innovative financing and tax policies for clean energy initiatives; and in 2013, it would broaden that with renewable energy standards, efficiency provisions, and the framework for conversion to a clean energy economy.

SI: What are the advantages of green banks?

Berlin: 'Bank' is a misnomer. is a misnomer. They’re funding institutions, designed to safely leverage public dollars into massive public-private investments in clean energy and efficiency projects. They can be set up as hybrid for-profit, or not-for-profit institutions; they can raise capital and debt from public and private sources. And they can reduce, or eliminate the need for energy tax credits for each clean energy project. They’re set up to loan 100 percent of the cost of energy efficiency projects to utilities, at a low rates, with the loan repaid through on-bill financing. The projects would create jobs and lower electricity prices, without additional costs to taxpayers.

SI: Given the current contentious political climate, where do you see possibilities for making progress on clean energy?

Berlin: There’s strong underlying support for an energy bill and the measures required, but even though members of Congress broadly support it now, many can’t vote for it for political reasons. After the next presidential election, we are hoping that the political climate will change. It could be under Obama, but some Republican presidential candidates also support this.

SI: As federal funding is not an option for creating a green bank, what other options do you see?

Berlin: First, we hope to be able to borrow from the federal Treasury and combine that borrowing with private funding. Second. we hope to set up as many state and regional green banks as possible. But over the long term, we still think we need a federal green bank. If necessary, we’ll set it up as a private green bank, in the hope that we could eventually convert it into a public-private partnership. We think that if we can borrow federal funds, it should be possible to find private investors who will take around an 8 percent rate of return over 20 years on safe projects, paid through long-term power purchase agreements. Green banks are designed to be low-risk institutions that lend conservatively.

SI: Can you see the possibility of energy generation and fuel sourcing breaking out by region, for example, the Northwest using primarily hydro and biofuels, the Midwest using wind and ethanol, etc.?

Berlin: It’s a matter of efficient vs. inefficient. Right now, old, inefficient coal plants are still producing power, but the costs of pollution control equipment will probably force many to close. Deutsche Bank predicts that about 60 percent of all coal plants will close by 2030. We expect that natural gas plants will replace them, but fracking issues still need to be overcome before we can be sure that that there will be enough cheap natural gas. We hope green banks will provide a significant amount of the low-cost financing that will help make it cost competitive for energy efficiency and renewable energy plants to complement those natural gas plants.

SI: Would green banks fund only proven technologies, or would they take some risks on new or experimental ones?

Berlin: We need to encourage innovation through research, and through helping create the demand and markets for innovative new technologies. There is a debate over funding deployment of current technologies vs. R&D for new ones, but we need both. Everybody is looking for breakthrough technologies, but we don’t want to develop ideas and then see them go to China and get developed, and leave us behind. Part of the way we promote clean energy to decision makers is on the basis of keeping America a leader in this area. Also, the structure of our electric power system has not changed substantially for more than 100 years.

So the green bank we are proposing would primarily fund proven technologies to create dependable rates of return and attract investors. But we also support a separate green bank that supports innovation or one green bank with separate subsidiaries that support deployment and innovation. There are hundreds of new technologies out there and more need to be developed. The question is how to get them to scale and to market economically.

SI: So this all comes down to humans. Where is the tipping point?

Berlin: Right now, people are told that extreme weather conditions are random or cyclical events. I think that as they see these occurrences over time, the climate change case will become stronger and stronger. We also have to get the message out. Climate scientists always present nuanced findings, which works for science, but not for public relations. Whether the case will become strong enough before it is too late is another question.

I think the tipping point will arrive when politicians in Washington feel they can push this issue through. For now, we’ve chosen not to take a systematic approach. Passing carbon taxes or national cap and trade legislation would have set a carbon price on the fossil fuel system. So instead, we must make progress in increments, in funding here, tax incentives there, clean energy legislation elsewhere. Each item we can get done now helps move us closer to getting broader legislation, and more things done later. We just have to put together enough building blocks, so in the aggregate, we achieve systemic change.