Last week, in part 1/2 of this 2 part series, we explored the basic ideas regarding the development and mission of a green bank.
This can be boiled down to three market conditions (capital, confidence, convenience) and the key decisions that must be made in terms of structure, goal, strategy and governance in order to form a green bank. In essence, a green bank needs a goal, yet in order to define the goal, gaps in clean energy finance delivery must be identified. Only then can a green bank be optimally structured to provide market solutions.
In this, part 2/2 of a green bank blog post series, we explore the types of solutions that a green bank can offer, once the aforementioned market research and institutional structuring of the green bank has been done.
Solutions to clean energy finance market gaps generally fall into two major categories:
- Solutions that improve the uptake and availability of products currently available in the marketplace.
- Solutions that involve introducing new products previously unavailable to the marketplace.
The following list represents specific categories and roles a green bank can undertake to improve existing products:
- Risk Reducing Tactics:
- Credit enhancements: loan guarantees and loss reserves, debt service reserves
- Direct investment
- Provide confidence through government based financial product sponsorship
- Standardization Increasing Tactics:
- Standardize underwriting
- Standardize documentation
- Standardize financing process across financial institutions
- Develop centralized marketing from trusted central (green bank) entity
- Volume Increasing Tactics:
- Simplify and Streamline Financing Process
- Coordinate clean energy industry participants
- Educate owners and contractors
- Reduce closing costs
- Subsidize (improve) interest rates
- Lengthen terms
- Liberalize underwriting
- Organize a multi-lender bid process for owners
- Increase convenience by placing servicing on-bill (utility)
Green Banks can also fill market gaps by introducing new products previously unavailable to the marketplace such as:
- Residential or
- On Bill Repayment (OBR)
- Partner with utility and implement OBR with service disconnection or without service disconnection (for failure to pay utility bill)
- Credit Enhanced loan products (not an entirely new product, but one that would otherwise be unavailable without a green bank’s input) such as:
- Unsecured residential loans for energy efficiency and renewable energy
- Commercial equipment leasing
HB&C has extensive experience with green banks as a market leader specializing in clean energy finance program design, market research, and advisory services. To start a conversation today, fill out the contact form below or call us directly at (720) 420-7648.