For years, banks have been financing large renewable energy projects, from large-scale solar parks to far-reaching wind farms. But smaller projects, like installing a heat pump in someone's home or retrofitting affordable housing, are often overlooked. They simply haven't been lucrative enough.
But the demand is there, which is why advocates have been clamoring for the federal government to support the so-called green bank, which will finance these types of projects.
That green bank is now a reality. On Thursday, the EPA Announced that had awarded $20 billion in Inflation Reduction Act grants to eight organizations that will use the money to make loans that will help with those projects.
“It's an opportunity to show that this works and creates real benefits on the ground for people across the United States,” Dawn Lippert, founder and CEO of Elemental Exceleratorhe told TechCrunch, adding that “tribal communities, rural communities, low-income and disadvantaged communities are really the focus here.”
In fact, more than $14 billion of the funds will go to communities that fit those descriptions, the EPA said.
What's more, since the money will be used for loans, it can be recycled once those loans are paid off. Green bank lending also has a pretty good track record. The Connecticut Green Bank, for example, has a default rate that is we go with another commercial lenders both in residential and commercial portfolios.
In addition to providing financing for energy improvements, the Greenhouse Gas Reduction Fund, as it is known, hopes to attract seven dollars of private capital for every dollar it distributes. In fact, that might be a conservative figure: McKinsey hopes The new green bank should attract more than $12 of private investment per dollar on its balance sheet.
The United States is expected to need $27 trillion by 2050 to reach net-zero carbon emissions, McKinsey estimates, which could make the green bank's $20 billion look small. But its ability to stimulate private investment and the fact that it is not a one-time donation should allow it to have an impact that extends beyond its initial bottom line.
Founders and investors should also see some benefit. Although the money is primarily intended for consumers and small businesses, equity investments are a possibility, Lippert said. Additionally, funding should stimulate demand for technologies that have been tested and ready for commercial implementation.
For those not yet, green bank loans should have a cascading effect, sending a signal to founders and investors that there are markets for consumer-level climate technology that works for low-income and disadvantaged communities.
“This $20 billion of funding will have a truly significant impact on creating jobs, reducing costs for American families, and creating a healthier, safer future for our children,” Lippert said.
