We advocate for using modest amounts of government funding to leverage private financing for energy efficiency and renewable energy projects through what are known as “green banks.” These innovative finance institutions drop the risk of clean energy lending for private banks, drawing them into providing affordable and accessible loans for homes and businesses that they would not otherwise participate in.
A green bank in Alaska would keep precious energy dollars in local communities, create jobs and make Alaska a more resilient place to live.
World oil prices have never recovered from their collapse in 2014. Without new state revenues, Alaska’s ability to continue to grant fund renewable energy and energy efficiency programs and projects has effectively ended, with no significant legislative appropriations for clean energy since 2017.
Instead of relying on grants, many other jurisdictions are successfully using modest amounts of government funding to leverage private financing for energy efficiency and renewable energy projects through what are known as “green banks.” These innovative finance institutions can offer credit enhancements such as loan-loss reserve accounts to private lenders. Green banks are able to design loan programs with much lower interest rates and longer repayment periods, allowing borrowers to save more on their energy bills than their monthly loan payment.
Since late 2016, we have been educating policy and business leaders about how green banks work, including testimony in front of the state legislature and meetings with government officials and private banks.
We have been consulting with the chief investment officer of the highly successful Connecticut Green Bank who has visited Alaska three times to help REAP socialize the green bank concept. We are also working with the Coalition for Green Capital, a New York-based think tank that is helping accelerate the green bank movement across the country.
On May 15, 2024, the Alaska legislature passed HB 273 to establish a state green bank as a subsidiary of the Alaska Housing Finance Corporation (AHFC).
In other states, green banks have been instrumental in providing affordable loans to consumers who want to make energy efficiency improvements or install rooftop solar. Those investments often come with generous federal and local incentives, but only if a building owner can come up with the up-front capital for the project in the first place. A green bank will help Alaskans access that up-front capital. We expect that AFHC will design loan programs and products that take advantage of the agency’s deep experience in both weatherization and housing to help Alaskans reduce the cost of heating and electrifying buildings. Eligible technologies in the bill include also include renewable energy generation projects, electric vehicles and EV infrastructure.
Green banks are typically set up to leverage private sector financing, and AHFC is well-positioned to do that given its long history of financing homes in Alaska. The legislation also allows AHFC to set up loan programs that can leverage a portion of the billions of dollars that are now available for green banks through the federal Inflation Reduction Act. More than $20 billon was recently awarded by the EPA to several national and regional green banks that can offer loans and grants to state green banks. The legislation that just passed in Juneau included a $450,000 appropriation to AHFC to hire the appropriate staff to begin setting up the first green bank loan programs, with the expectation that REAP and others will be advocating in the future for larger state appropriations to help capitalize the bank.
Read REAP’s whitepaper on how green banks can help Alaska. Or for more detailed information on how green banks work, read this white paper from the Coalition for Green Capital.