Maine has New England’s most energy-intensive economy, expending roughly $6 billion annually – primarily on imported oil and gas for heating and transportation. Global warming could worsen the fiscal drain through a combination of rising costs and declining revenues.
The state must overhaul its energy sector to reach its climate targets for 2050, which include cutting greenhouse gas emissions by 80 percent over 1990 levels and generating all of the state’s electricity from renewable sources.
Ninety percent of heating systems and vehicles in the state need to be electrified, said Michael Stoddard, executive director of Efficiency Maine Trust, and the grid requires upgrades.
“We need to run a marathon, and we need to get started,” he said.
But the success of this race hinges on finding capital to invest.
To help finance this energy transformation, Maine may create a green bank, a nonprofit or quasi-governmental institution that uses public funds to leverage private capital for renewable energy and climate adaptation. This approach, used in more than a dozen states to date, helps “finance reach underserved parts of the market,” according to Abraham Wapner, program director at the nonprofit Coalition for Green Capital.
A green bank could help Maine meet the significant cost of “decarbonizing” Maine’s economy, which Steve Clemmer, director of energy research at the nonprofit Union of Concerned Scientists, puts in the range of $40 to 50 billion by 2050. Freedom from fossil fuel reliance would offer Maine greater economic resilience, but the upfront investment could reach $60 billion, according to a recent estimate by economist Richard Silkman.
The challenge of finding funds is compounded by an economic downturn the International Monetary Fund describes as a “crisis like no other.” Maine’s projected revenue shortfalls over the coming three years are expected to be upwards of $1.2 billion.
Ideas for stretching limited public funds surfaced this summer from the Maine Climate Council. Half of its work groups recommended that the state pursue some sort of green bank to help finance its plans for energy, buildings and climate resilience.
There’s a clear need for “significant and creative finance mechanisms,” said Hannah Pingree, council co-chair and director of the Governor’s Office of Policy Innovation and the Future. The total cost of reaching Maine’s climate targets is not yet defined as the Council is still weighing priorities and strategy timelines. A consultant recently delivered some draft figures, but those numbers can’t be shared yet because the “data is not fully complete and agreed upon,” she noted.
Pingree expects that the final climate action plan adopted by her council, due to the Legislature by Dec. 1, will recommend that Maine move quickly to identify funding gaps, determine appropriate types of climate financing, and recommend “the right venue” for new financing programs.
“Other states have shown there are opportunities,” Pingree added, describing some models as “hopeful.”
Charlie Colgan, a former Maine state economist who directs research at the Center for the Blue Economy in Monterey, Calif., agreed.
“This (challenge) is hard but it’s not impossible,” he said. “There is money available, just in places that Maine has never thought to look before.”
‘Democratizing’ clean energy
In June, roughly 100 people participated in an online Green Bank Summit to explore whether Maine might benefit from the formation of a green bank.
Green banks — by various names — have become an important tool for what is sometimes called the “democratizing” of clean energy, freeing citizens from polluting, high-cost fuels and fostering greater climate resilience in economically vulnerable communities.
Solar power, in particular, is often viewed as out of reach for lower-income homeowners and renters. While access is improving with community solar farms, where shares are not tied to home ownership, barriers remain for low-income and moderate-income Mainers who seek to rely on renewable power.
Older housing often requires efficiency upgrades first, and Maine lacks the money to meet increased demand for those residential loans, Stoddard said. Nor does Efficiency Maine have the capital to make low- or no-interest loans for solar installations.
Hoping to gain new financing ideas, Maine is looking to states that have successfully mobilized more capital for energy efficiency, renewable power and climate adaptation.
Models of innovation
Connecticut Green Bank (CGB), the nation’s first such institution, has deployed more than $1.7 billion toward clean energy projects since its formation in 2011, directing much of it toward low and moderate-income households, and small businesses for projects such as solar power generation and energy-efficient retrofits. For every public dollar invested, said its president, Bryan Garcia, eight dollars of private investment on average has been raised.
Recognizing the limitations of public funding and the need for rapid climate progress, CGB is now “asking taxpayers to invest with us,” Garcia said. In July, it launched an inaugural $16 million issuance of low-denomination “Green Liberty Bonds.” The bank sought to “give people something beyond the ballot box” to support climate action, Garcia noted, and they responded; within two weeks, the bonds had sold out.
The bank’s latest bond offering builds on nearly a decade of work and a “track record established across different programs,” Garcia acknowledged. Just moving from legislative approval to operations took the better part of CGB’s first two years, he recalled, given that “a lot of new operating procedures” are involved when a financial entity scales up to serve new markets.
Other green banks also develop financing for climate adaptation projects such as road or pump station elevations, green infrastructure like living shorelines, backup power options, stormwater management and urban tree planting.
Maine could establish a bank that funded both clean energy and resilience infrastructure, said Keith Bisson, president of the Maine-based nonprofit Coastal Enterprises, Inc.
The Rhode Island Infrastructure Bank, which grew out of a Clean Water Finance Agency, offers municipalities loans at rates from 20 to 33 percent below market so they can implement measures to build resilience, said Jeffrey Diehl, its executive director, recognizing that “a dollar invested today (in climate adaptation) saves you six dollars down the line.”
The bank also contracts with engineers who are “loaned” to municipalities to help them “prioritize, write requests for proposals, interpret energy audits and oversee (renewable energy) installations,” Diehl said.
Fitting into the financial landscape
While each green bank is structured differently, most work with community banks and credit unions to lower barriers to lending — using loan guarantees or loan loss reserves that reduce lenders’ risks, and aggregating loans to increase their appeal to investors. These approaches can help convince bankers and investors that “putting their capital to work for clean energy isn’t as risky as they think it is,” Garcia said.
(Lowering barriers to lending helps convince private investors that) putting their capital to work for clean energy isn’t as risky as they think it is.”
— Bryan Garcia, president of Connecticut Green Bank
Garcia recommends that states create a dedicated finance entity whose “sole focus is climate.” But Pingree isn’t prepared to say whether Maine will need to “create a super-organization to do all this,” or whether a more decentralized approach might work – housing new finance programs within entities such as Finance Authority of Maine (FAME), Maine Municipal Bond Bank and Efficiency Maine Trust.
David Gibson, who organized the recent online meeting, and, in a prior job, led efforts to create the Nevada Clean Energy Fund, anticipates that representatives of Maine’s finance agencies will need to discuss at length the benefits and downsides of various structures. Wherever the fund is ultimately housed, he said, it’s critical that it be led by people with a background in finance, investment and banking.
Maine also needs to commit to capitalize the bank from the outset, Gibson said. Nevada created a structure that “sat for two or three years before there was funding” from local and national foundations to get it operational.
Funds from the feds?
Most green banks are launched with public money that can be largely self-sustaining when used as a revolving loan fund. While state resources are in short supply, Maine could dedicate federal dollars to establish a bank if the state receives further pandemic recovery support.
The House of Representatives recently passed a Moving Forward Act that includes an amendment to “establish a national climate bank to finance targeted deployment of clean energy and other decarbonization technologies and climate-resilient infrastructure.” The bank would fund its own projects and help capitalize state and local green banks.
Wapner, at the Coalition for Green Capital, sees momentum building for a national climate bank, which is supported by Democratic presidential nominee Joe Biden.
“Come January, there’s a very real chance that money could come available,” Wapner said.
State Treasurer Henry Beck would like Maine to have completed the strategic planning necessary to take advantage of that opportunity.
“I feel a sense of urgency if there is going to be federal funding available for clean energy (for Maine) to quantify the need and see where there are gaps,” he said.
Other federal actions could shape state financing, noted Clemmer, citing how an extension of tax credits for electric vehicles, energy efficiency and solar installations could help support loan programs in Maine. A federal infrastructure bill might complement state-level investments in the grid, climate resilience measures and EV charging.
During the last session, the Maine Legislature’s Joint Standing Committee on Energy, Utilities and Technology considered a bill, LD 1634, to create a Maine Clean Energy Fund capitalized through a $100 million general fund bond issue. The Committee amended the bill into a resolve that the Maine Climate Council should assess financing options – a measure tabled when the Legislature adjourned early.
The bill’s sponsor, Rep. Stanley Paige Zeigler (D–Montville), is concerned that all Mainers get ready access to cleaner, more affordable power, and he sees a green bank as helping. There are “tons of ways we could fund this,” he said, with options that extend well beyond bonds and federal grants.
Maine already uses proceeds from the Regional Greenhouse Gas Initiative to fund millions in efficiency upgrades (through loans and incentives administered by Efficiency Maine). While Maine has not formally signed onto the Transportation Climate Initiative, a counterpart to RGGI focused on reducing vehicular emissions, that effort could potentially generate ongoing funds for clean energy and climate adaptation.
Other funding ideas include fees on oil and gas wholesalers for carbon dioxide emissions and – as CGB has demonstrated – investments from individuals. In Maine, Bisson has found an “appetite among people to put their money to work” here.
“We’re increasingly seeing banks getting more involved in clean energy financing,” he said.
While few green banks are attracting institutional investors, according to Wapner, that partnership could over time bring major capital. Gibson said that as of December 2019, the Maine Public Employee Retirement System had $1 billion invested in fossil fuels, which it has been under pressure for years to divest.
Some states have forged partnerships with utilities that front money for efficiency or solar projects, then recoup those expenses from customers through on-bill financing. Zeigler doesn’t see that option working in Maine because public trust in the state’s largest utility, Central Maine Power Co., is so low.
Some Maine municipalities offer PACE (Property Assessed Clean Energy) loans to homeowners, which allows them to finance energy upgrades through loans secured against the property and collected through property taxes. But banks can resist having mortgages subordinated to the loan. A bill to create a commercial PACE loan program in Maine advanced in the Legislature last session but was tabled in the March adjournment.
Depending on what happens with carbon markets in coming years, Garcia sees great potential for Maine’s abundant forests and regenerative agricultural lands to be valued – in global markets – for their capacity to hold and store carbon. That could open new opportunities for investing in land conservation. At least one land trust in Maine has sold forest carbon offsets to expand its land stewardship work.
‘How our lives could be better’
Maine is enduring a summer of record-breaking heat and persistent drought, making the prospect of a warming world less abstract. A recent poll of 500 residents found that 77 percent are concerned about climate change.
That concern may be magnified by the coronavirus epidemic that has already claimed the lives of nearly 200,000 Americans. Maine voters are sensitive to climate, Beck said, and now “people have seen governmental failure to respond to a natural disaster.”
Yet even as more people confront climate impacts, talk of “decarbonizing the economy” and “meeting climate targets” can seem abstract. A stronger selling point for this change, said Bisson, is ‘how our lives could be better.”
The prospect of clean, reliable and local energy could mean fewer and shorter outages, and more accessible backup power. Add in cleaner air, better buildings, quieter vehicles, more resilient farms and businesses, strong job growth and a planet more likely to remain livable, and the full payback becomes more apparent.
The upfront investment needed to get there is unprecedented, Stoddard said, noting that the dire ecological and economic situation requires an overwhelming response.
How fast could Maine propel an energy transition with creative financing?
As Bisson said, “What COVID has shown us is how quickly we can adapt when we need to.”