Green Banks got a $27 billion boost from the new US Climate Law

Contractors install SunRun solar panels on the roof of a home in San Jose, California, U.S., on Monday, Feb. 7, 2022. California regulators are delaying a vote on a controversial proposal to slash incentives for home solar systems as they consider revamping the measure. Photographer: David Paul Morris/Bloomberg

By Jennifer A Dlouhy, Bloomberg

When nearly 2,000 solar panels are installed on top of the Henderson-Hopkins elementary school in east Baltimore next year, they will generate enough carbon-free power for 175 area residents. The project will reduce greenhouse gas emissions and bring the economic benefits of renewable energy to a disadvantaged neighborhood.

Yet traditional finance steers clear of ventures like this one, with lenders often wary of the high credit risks, potentially long payoff periods and uncertainty of investing in low-to-moderate-income communities.

And in dense urban areas, some projects — such as community solar — are too small to be seen as worth the effort, even if they are critically important to decarbonizing the US electric system and ensuring all Americans are part of the clean energy transition.

Enter the green bank. These nonprofit funding institutions, just given a massive boost by the Inflation Reduction Act, are designed to provide innovative financing to renewable power ventures, building retrofits and clean transportation projects typically shunned by investors. With taxpayer dollars and creative deals, they can help recruit private-sector capital off the sidelines and into underserved markets, leveraging as much as $8 in private funding for every $1 that comes from the government.

In the case of the Baltimore project, support is flowing from a mix of state grant money, philanthropic dollars and crowd-funded investments, all organized by the Climate Access Fund, a startup green bank. “We are pushing the envelope on every piece of the capital stack,” said Lynn Heller, the fund’s chief executive officer.

The idea isn’t new: Countries including Rwanda, Australia and Japan already have national green banks. Supporters have spent more than a decade pushing them in the US, even pitching them as a way to help juice the nation’s recovery after the 2008 financial crisis. There are at least 22 green banks around the country now, starting with Connecticut’s, which was set up in 2011. These have so far synced about $2.5 billion of their own capital with some $7 billion in private money to spur green projects that might not get funding otherwise.

The new US climate law plows $27 billion into an Environmental Protection Agency fund for green banks. The EPA has six months to dole the spending to nonprofit organizations to rapidly deploy low- and zero-emissions products, technologies and services.

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