While a few states, including Connecticut, New York and Rhode Island, have established green banks, Washington, D.C., has become the first city in the nation to establish one. In sum, the goal of a green bank is to facilitate the expansion of renewable energy, reduce energy costs and greenhouse gas emissions, and create green jobs.
Green banks are quasi-public institutions that are capitalized with public funds, which are used to offer loans, leases, credit enhancements, and other financial services to close funding gaps for clean energy projects.
Green bank financing enables capital to fill gaps in economically viable, low-risk, public and private clean energy projects by reducing real and perceived risk, absorbing transaction costs and providing private investors the chance to learn about new market opportunities with the security of government partnership.
Because a green bank's public dollars are generally used for financing, rather than for grants, the funds are preserved through loan repayment.
Typically, green banks invest in mature clean energy projects, including commercially viable technologies, such as solar power systems, energy efficiency measures, water management systems, and clean transportation infrastructure and equipment. Typically, they do not invest in early-stage technologies or in clean energy companies.
For example, electrical contractors will have the opportunity to offer D.C. green bank financing to their customers, such as those who wish to install solar panels and other energy improvement projects.
Washington's green bank in specific is designed to:
- Attract private capital at a ratio of five private dollars to every one dollar of public investment
- Use bonding authority to increase capacity, accelerate lending and recapitalize funds
- Be a break-even entity, in which the revenues earned from financing activity cover its operating costs
Washington's green bank will have a funding level of $7 million per year for five years. The funds will be generated from the city's renewable energy development fund, which utilities and energy suppliers pay into if they do not hit their emissions targets.
"Washington, D.C., is a global leader on environmental issues, and by establishing a green bank, we will continue to build on the progress that helped us become the first LEED Platinum city in the world," said Mayor Muriel Bowser. "I look forward to working with all of the businesses, non-profit organizations, and residents that will benefit directly this new tool."
The bank is expected to have its board appointed by early 2019, and the first financial projects are expected to be available in the fall of 2019.