This document discusses the role of green banks in facilitating private sector investment in clean energy by reducing barriers through standardization and collaboration. It outlines four phases of market support moving from government subsidies to fully private financing. Green banks can help accelerate this transition by developing standardized processes and sharing performance data to demonstrate the viability of clean energy investments at scale. This increases transparency and allows private capital to access larger and more cost-effective public markets. The document proposes that green banks work together across states through standardization of contracts, underwriting guidelines, and program structures to further reduce costs and risks and attract more private sector capital into clean energy markets.

1. Introduction to Standardization
& Collaboration
Alfred Griffin, President, New York Green Bank
February 7, 2014

2. Multiple phases of market support
1
2
3
4
• Government Subsidies
• Green Bank Financing with Reduced Subsidies
• Green Bank Financing with No Subsidies
• Private Sector Financing Only – FINAL GOAL
2

3. 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
3

4. 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
4

5. Green banks address barriers to development of clean
energy financial markets
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
5

6. 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
6

7. 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
7

8. 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
8

9. 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?
9

10. Green Bank Academy
Washington, DC February 6-7, 2014
www.greenbankacademy.com