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Green Bank Standardization & Collaboration
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Transcript of Green Bank Standardization & Collaboration
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Introduction to Standardization & Collaboration
Alfred Griffin, President, New York Green Bank
February 7, 2014
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Multiple phases of market support
1 • Government Subsidies
2 • Green Bank Financing with Reduced Subsidies
3 • Green Bank Financing with No Subsidies
4 • Private Sector Financing Only – FINAL GOAL
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Private capital inadequate today to reach goal of sustainable clean energy markets
• Private capital markets not supplying enough capital to make significant market penetration
• Clean energy projects cannot access cheaper and larger pools of investors in the public capital markets
• Green banks provide bridge to self-sustaining markets by facilitating financial market development
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Green banks animate capital markets to reduce cost of capital, need for government support
• Green bank investments directly leverage private sector investments
– Each transaction draws more private capital, increases private sector familiarity, comfort with clean energy investing
• Can also attract private capital by facilitating financial market development
– Standardization and collaboration are path to bringing mature financial mechanisms to clean energy
– Green banks show private investors the way
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Green banks address barriers to development of clean energy financial markets
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Private capital seeks scale
• Large private investors not interested in small investments
Inconsistent documents, methods, structures
• Inability to easily pool and assess investments hinders private investment, development of mature secondary markets
Low transparency on loan and project performance
• Lack of consistent and large pools of data on loan and project performance make it difficult to assess risks, increase capital cost
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Green banks can be hubs of standardization, coordination
Green banks create scale
• Aggregate demand, increase portfolio size for private investors
• Programs administered across states create even larger markets
Green banks can create, implement standardized processes
• Develop standard legal docs, financial docs, processes, structures
• Market position gives path to actually implement
Data can be pooled and shared by green banks
• Gather critical project and loan performance data
• Share across states to dramatically increase data
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Can take direct action to access cheaper capital, broaden pool of available capital
For example:
• Standardized contracts make bank underwriting simpler and cheaper
• More and consistent data makes it easier to assess risks, reduces cost of capital
• Common payment structures (on-bill, PACE) across states reduce perceived deal complexity
• Shared program structures lead to larger loan warehouses, reduced barriers to securitization or private placement
• Joint RFP’s create scale efficiencies to draw in larger private capital pools at lower cost
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Standardization opens up access to public markets
• Largest and cheapest pools of capital are in publicly traded markets – specifically bond markets
• Today public market investors cannot access clean energy
• Standardization by green banks will create mechanisms and practices necessary to create bridge
• Goal is market where typical investor can buy clean energy bonds, support by pool of underlying projects
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Working groups will consider real opportunities for standardization and multi-state collaboration
• What should green bank underwriting guidelines be?
• What quality standards will green banks enforce for
underlying technology?
• How should shared warehouses be structured?
• What laws must be the same across states to facilitate
consistent program structure?
• How can states work together to access cheaper capital?
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Green Bank Academy
Washington, DC February 6-7, 2014
www.greenbankacademy.com