Clean Energy Accelerator Could Spur Unprecedented Investment and GHG Reductions

With the potential to leverage $463 billion of investment and create four million jobs in just four years, the proposed federal Clean Energy Accelerator is being described as both the biggest investment opportunity of the century and one of the most potent tools to transition America to a clean energy economy.

The U.S. House of Representatives has voted three times to pass bi-partisan legislation creating a Clean Energy Accelerator, including the vote to pass the INVEST in America Act in July. President Biden included a $100-billion Accelerator in his American Jobs Plan and efforts to make that proposal a reality took a large step forward in July when Senator Chris Van Hollen announced that the Accelerator was included in the recently announced Senate budget plan, a step toward inclusion in a Senate reconciliation bill.

“Climate change is a global crisis, and every American is paying the price – from rising health costs to the dangerous and expensive consequences of flooding,” said Senator Van Hollen. “That’s why I re-introduced our plan to create a national Clean Energy Technology Accelerator, which would leverage public and private funds to invest in clean energy technologies and infrastructure. This legislation creates an engine to expand our green economy free of more costly carbon pollution while creating good-paying jobs and putting more green into the wallets of workers in Maryland and across the country, and I am pleased that it is part of our budget plan in the Senate. As we work with the Biden Administration to rebuild our infrastructure and meaningfully address climate change, clean energy innovation must be a top priority to secure a more equitable future for generations to come.”

It is a policy model that Van Hollen understands extremely well. Van Hollen is a founder of the green bank movement in the U.S. The proposed Clean Energy Accelerator would essentially function as a national green bank by providing funding to regional, state and local green banks; facilitating the startup of green banks in currently unserved areas; and participating in financing clean energy projects of strategic national significance.

Across the country, green banks have already proven to be an effective financing tool for the clean energy economy. In its “Green Bank Industry Report 2020,” the Coalition for Green Capital concluded that “green banks drove a record amount of clean energy investment in 2020, mobilizing $1.69 billion of total investment with $442 million of green bank funds.” That investment was generated by the American Green Bank Consortium’s 22 members in 16 states and the District of Columbia.

Green banks and the proposed Clean Energy Accelerator constitute “a market-based solution that is bringing private capital into the clean energy financing markets,” said Alex Kragie, director of the American Green Bank Consortium.

U.S. green banks typically attract $3 of private investment for every $1 of public funds. Over the past decade, green banks have leveraged $1.9 billion of their own funds to generate $7 billion of total investment in clean energy projects.

“Green banks exist to fill gaps in financing markets,” Kragie said. “Our job is to coax private capital into areas where investment is not flowing right now into clean energy technologies.”

By providing a credit enhancement, filling a subordinated debt position in a capital stack or offering other investment services, green banks lower the perceived risk of clean energy projects that may be unfamiliar or unconventional to private lenders or lack the 50-plus-year commercial track record that banks often prefer.

That support, Kragie said, “has enabled projects to happen that previously didn’t pencil out for private lenders,” such as solar installations or energy efficiency improvements at small to mid-sized businesses or clean energy upgrades in traditionally disadvantaged communities.

For example, the Montgomery County Green Bank partnered this summer with Sandy Spring Bank to provide flexible financing to help re-open the Olney Ale House. Arranged through the Commercial Loan for Energy Efficiency and Renewables (CLEER) program, the loan will help the restaurant recover from a 2019 fire and the COVID-19 pandemic by financing the installation of more efficient cooking equipment, windows, air handling units and climate controls. It will also enable the owners to reconfigure the kitchen to accommodate the restaurant’s growing take-out and delivery business resulting from the pandemic.

Green banks have financed solar installations and energy efficiency improvements in multi-family buildings and individual homes, often focusing on serving lower income residents and historically disadvantaged communities. In 2020, the Montgomery County Green Bank financed improvements in 547 households.

The Clean Energy Accelerator, with a proposed upfront capitalization of $100 billion, has a mandate to direct at least 40 percent of its investment to disadvantaged communities in order to give a broader range of people opportunities to improve the energy efficiency of their homes or businesses, lower their energy costs, access clean and more resilient energy systems, create healthier environments, and support economic activity within their communities. That mandate will also ensure that more funds go to “smaller scale, disaggregated projects in disadvantaged communites, such as projects under $1.5 million, that otherwise have trouble attracting private lenders,” Kragie said.

The proposed Accelerator would drive the clean energy transition by focusing on investments in seven areas: renewable energy; buildings; transportation; grid infrastructure; industrial decarbonization; forestry and agriculture; and resilience.”

Analyses of the Accelerator have concluded the initiative could generate $884 billion of total investment and deliver cumulative greenhouse gas emissions reductions of 2.5 billion metric tons over the course of a decade. By 2030, the Accelerator could deliver one-fifth of the emissions reductions needed for the United States to reach net-zero emissions by 2050.