A Green Bank is essential because many clean-energy technologies face several unique obstacles along the path to large-scale deployment and then to the delivery of clean energy in our homes. Traditional banks and commercial lenders are reluctant to loan to many of these clean-energy projects with limited track records in the marketplace. And many existing off-the-shelf clean energy and efficiency technologies are abandoned due to a lack of funding as they attempt to be deployed at larger scale.
Indeed, renewable energy investment dropped precipitously in the first quarter of 2009, the period for which complete data are available, to $500 million compared to $2 billion in the fourth quarter of 2008 and $5 billion in the first quarter of 2008.
In order to maximize the leverage of private capital, the Green Bank should have at its disposal a wide range of direct and indirect support tools and incentives to encourage loans to facilitate deployment of clean-energy technology. These direct and indirect incentives tend to reduce the risk to lenders so they are encouraged, in turn, to offer better loan rates to potential clean energy and energy efficiency projects.
A Green Bank capitalized with $10 billion can leverage capital at the standard 10-1 ratio to provide loan guarantees in support of $100 billion in private-sector investment in clean energy. The private sector can also provide an additional $100 billion in equity. As a result, a $10 billion capitalization of the Green Bank translates into $200 billion available for in clean-energy investments. The surge in capital will allow clean-energy projects to be deployed at the operational and commercial level in a shorter timeframe than its standard today.
For more on this topic, please see: