New York’s Green Bank Announces Its First Transactions

piggy bank blogOn October 22, Governor Cuomo announced the first seven projects that will receive support from New York’s Green Bank: a state-sponsored financial entity that aims to partner with the private sector to develop clean energy projects in New York.  The deals have not closed, but the projects represent more than $800 million in clean energy investment (most of which will come from private parties).  A short description of the seven projects is available here.  The projects include a small-scale commercial solar project in Lackawanna (south of Buffalo), co-generation facilities in New York City, and energy efficiency projects across the state.  Partners for this round of transactions include Ameresco, Bank of America Merrill Lynch, BQ Energy, Citi, Deutsche Bank, First Eastern Investment Group, First Niagara Bank, GreenCity Power, M&T Bank, Renewable Funding, Sustainable Development Capital, and Tulum Management.

The idea behind the Green Bank is to attract private funds to the clean energy space by using financial mechanisms, such as credit enhancement, loan loss reserves, project aggregation, and loan bundling, to smooth market hurdles such as those presented by policy uncertainty, lack of demonstrated scale and transactional precedents, and lack of experience among potential lender institutions.  New York hopes to earn market rates on investments while demonstrating arrangements that can be replicated in purely private transactions and encouraging in-state market activity.

Green banks are a policy mechanism on the rise.  Connecticut’s green bank (the Clean Energy Finance and Investment Authority or CEFIA) was established in 2011 and claims that for every dollar of funds it has invested in clean energy, $10 has been invested from private sources.  Other states are developing similar programs.

The green bank structure has the potential to facilitate expanded investments in clean energy.  Green banks can leverage public funds to greater effect (not to mention earn returns), have the potential to expand existing markets, and can be structured with the flexibility to adjust to market needs and target particular market challenges.  Long-term, if green banks can build institutional competence and develop replicable transactional models, their impact could be multiplied manyfold.

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