In his State of the State yesterday, New York Governor Andrew Cuomo laid out his plan to make the state a clean tech leader. Cuomo proposed extending a program to increase solar panel installations for homes and businesses and investing in an electric car network with statewide charging stations and incentives to build charging infrastructure. He also appointed Richard Kauffman, senior advisor to Energy Secretary Chu, as “Energy Czar,” a cabinet-level post that will coordinate the state’s clean-tech agenda and the overall energy portfolio.
Cuomo also proposed creating a Green Bank that would leverage public dollars to attract private sector matching funds for clean energy projects. The Bank would also coordinate all of the state’s clean energy programs. Currently, $1.4 billion is spent by various state entities on renewables and energy efficiency. Roughly 80 percent of this funding is a one-time subsidy. The bank would begin with $1 billion, funded partly through leveraging funds from energy efficiency portfolio standards, renewable portfolio standards and/or the system benefit charge.
There is always the concern that public-private partnerships result in public funds being used to subsidize private profits. A recent report from the Office of the Inspector General at the Department of Transportation found that public-private partnerships have a higher cost of capital than traditional public financing for transportation projects. One reason for the higher cost is that, unlike pure public financing, public-private partnerships involve equity investors who expect a high rate of return, which requires a larger profit margin.
On the other hand, given the volatility of federal support for renewable energy development, a steady support mechanism would provide needed market stability. The drama around the renewable energy production tax credit renewal hurt the wind industry and created an unstable market dynamic that prevents meaningful investment. Steady support through Green Bank financing may make the market outlook for renewables more attractive to investors.
The Green Bank is not a new idea. Back in 2009, a similar effort was made at the federal level when the House Energy and Commerce Committee approved the creation of a federal clean energy bank. The bank was never created and now that the GOP controls the House, time and money is spent on trying to find clean energy conspiracies that don’t exist.
The Green Bank could provide the support needed to meaningfully transition to a clean energy future. 2012 was the hottest year on record and with our level of energy consumption (Americans consume more energy just in air-conditioner use than the total amount of energy used in all of Africa), we cannot continue to be powered by fossil fuels if we hope to stave off the worst impacts of climate change. We need to transition to a clean energy economy and we need to do it now. A Green Bank could help put us on the right energy path.