Guest post by Bettina Bergoo
Regardless of the news coming out of Washington, New York State is among the leaders of continued US action on climate change. That leadership is demonstrated in two newly released Request for Proposals (RFPs) that are expected to significantly boost the state’s pipeline of solar and energy efficiency projects that currently have a hard time finding financing.
The goal of the new approach is to make financing a clean energy system quicker and easier by standardizing the loan application process so that solar and energy efficiency equipment becomes as easy for companies to finance as industrial machinery or vehicles.
This effort is the fruit of NY Green Bank’s countless conversations with active participants in New York’s clean energy marketplaces, through which it identified energy efficiency in commercial and multifamily buildings and small-scale solar PV systems serving corporate and industrial customers as two segments of the clean energy market that are potentially very large but are constrained by market fragmentation and lack of standardized financing options.
A main reason for these barriers is that while homeowners taking out loans have easily accessible standard credit, or “FICO”, scores and big public companies have credit ratings by rating agencies, the same does not exist for commercial and industrial scale projects. This makes it more complicated—and thus more expensive and time intensive—for financiers to assess the risk of financing clean energy for these types of end users.
Based on its intensive stakeholder engagement process, NY Green Bank discovered that in spite of the lack of credit scores, a set of best practices has emerged about what constitutes a good, “bankable” project. With its new RFP approach, NY Green Bank has collected this set of best practices and defined a standard “box” for projects to fit into. Projects that fit into this box are eligible for NY Green Bank financing, so project developers know exactly how to design a project in order to qualify.
NY Green Bank is a core piece of NY Governor Cuomo’s comprehensive energy strategy, Reforming the Energy Vision, which aims to achieve a 40% emissions reduction and lead to the state’s generating 50% of its electricity from renewable sources by 2030. Since its launch in 2014 as a division of the New York State Energy Research and Development Authority, NY Green Bank has committed over $346 million to eighteen transactions, which is expected to lead to deployment of projects in New York State with a total value between $1 billion to $1.4 billion.
Financing a clean energy system shouldn’t be any more complicated than for a piece of machinery or a car. NY Green Bank’s standardization and simplification of its loan process is movement in the right direction toward realizing that end.