Legislature(2021 - 2022)BELTZ 105 (TSBldg)
04/14/2021 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| SB123 | |
| Start | |
| SB123 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 123 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 6 | TELECONFERENCED | |
SB 123-ENERGY INDEPENDENCE PROGRAM & FUND: AIDEA
2:00:46 PM
CHAIR COSTELLO announced the consideration of SENATE BILL
NO. 123 "An Act establishing the Alaska energy independence
program and the Alaska energy independence fund in the
Alaska Industrial Development and Export Authority; and
providing for an effective date."
She invited Morgan Neff to introduce the bill.
2:01:56 PM
MORGAN NEFF, Chief Investment Officer, Alaska Industrial
Development and Export Authority, Anchorage, Alaska,
delivered a PowerPoint to introduce SB 123 and the Alaska
Energy Independence Fund (Alaska EIF). He advised that he
would start by reviewing Alaska's unique energy needs and
its consumption profile. He pointed out that as of 2018, the
U.S. Energy Information Administration (EIA) ranked Alaska
fourth in the nation for total energy consumption per capita
and eleventh in personal income per capita. In addition,
electrical rates for residential, commercial, and industrial
use averaged twice the national average on a kilowatt per
hour (KWh) basis.
He reported that the combination of the high cost of energy
and among the highest rates of consumption burdens Alaska's
economy with the third highest total energy expenditures per
capita. This amounts to about $8,000 per person, which
translates to about $6 billion spent per year on energy or
approximately 11 percent of Alaska's annual gross domestic
product (GDP).
2:03:39 PM
SENATOR REVAK joined the committee.
MR. NEFF directed attention to slide 4 that describes the
Alaska Energy Independence Fund. Often referred to as a
"green bank," Alaska EIF functions as a public-private
entity that uses some public funding to leverage private
sector capital to accelerate investments in clean energy
projects. Specifically, Alaska's banks will be an
instrumental partner to Alaska EIF for the benefit of all
Alaskan communities. He advised that every green bank can be
modeled to fit the needs of the expected demographic and
geographic region but they all serve the public purpose. The
Alaska EIF proposes to meet the public purpose by promoting
sustainable and clean energy projects that fill market gaps
and removing barriers to green energy investment in
partnership with the financial sector and other investors.
The idea is to meet criteria to access federal funds that
may become available through pending federal legislation.
2:05:33 PM
MR. NEFF reported that the proposed initial capitalization
is a $10 million UGF appropriation. This benchmark came
through comparison against several existing Green Banks,
primarily from New York, Connecticut, and Maryland. The
comparisons at the state and county levels were GDP, GDP per
capita, population, and total energy consumption per capita.
He highlighted that as each of these Green Banks gained
scale, they successfully leveraged private capital to
accelerate their programs. He pointed out that New York's
leverage ratio was $6 in private capital for every green
bank dollar. Connecticut's ratio was 8:1 and Montgomery
County Maryland's ratio was 7:1. He said the Alaska EIF
anticipates a similar ratio as it gains scale. For
perspective, the Connecticut Green Bank leveraged nearly $37
million initially to provide over $312 million in total
investments for FY2020.
MR. NEFF pointed out that the initial $10 million
capitalization was weighed against the coalition of green
capital 2020 study of the Municipality of Anchorage that
estimated that $5 million could be deployed into Anchorage
through a directed program that would ultimately create a
significant amount of energy savings and job growth. That
being said, he assured the committee that the proposed $10
million capitalization is for the benefit of the entire
state, not just for Anchorage.
MR. NEFF directed attention to the two fiscal notes attached
to SB 123. One is for the initial capitalization of $10
million and the second is for an increase in AIDEA's budget
for operating expenses. He explained that the fund is
designed to be a self-sufficient entity where the returns
will more than offset the proposed expenses and operating
costs. It will also be in a position to accept operating
capital and additional funding from the federal legislation
that he would discuss later.
2:08:21 PM
SENATOR GRAY-JACKSON asked how the line item "Population"
relates to the numbers.
MR. NEFF explained:
We backed into the population per initial
capitalization for each one of the Green Banks and
then weighted the capital expenditures per capita,
which, again is a population-driven number, into
figuring out where the ultimate capitalization
should be for the Alaska Energy Independence Fund.
MR. NEFF said the expectation is that the Alaska EIF will
generate many economic benefits. It has the potential to
provide a meaningful economic effect through lower cost of
energy, lower cost of living, creation of substantial new
jobs and businesses, and increased discretionary income that
can help drive long-term compounded GDP growth for the
state.
MR. NEFF directed attention of slide 7 to highlight the
economic benefits of the Alaska EIF. He said this fund is an
opportunity for the $8,000 average annual cost of energy per
Alaskan to be offset and the savings redeployed into the
Alaska economy as discretionary spending. He pointed to the
examples on the slide that show the savings for Alaskans if
their average energy costs were 10 percent to 30 percent
lower. He noted that this could free up from $589 million to
$1.7 billion in discretionary spending every year.
2:10:40 PM
MR. NEFF turned to slide 8 and reiterated that this fund is
aligned with federal legislation H.R. 806 Clean Energy and
Sustainability Accelerator Act and S. 283 National Climate
Bank Act so it can receive capital to enhance the total
investments in the Alaska Energy Independence Fund. Current
estimates indicate that Alaska could receive about $130
million in aggregate.
MR. NEFF stated that the mission of the fund is to make
capital more accessible to borrowers for sustainable energy
development projects. It also emphasizes the incentive for
co-investment in the non-fossil-fuel energy sector through
partnerships with AIDEA and AEA, the Alaska financial
sector, private investors, and philanthropic donors.
2:12:39 PM
MR. NEFF directed attention to slide 10 regarding financing
and investments and paraphrased the bulleted points that
read as follows:
• The Fund would leverage its capital alongside
Alaska's financial sector to enhance total
investment in Alaskan clean energy programs and
projects.
• Eligible to make loans, provide credit enhancement
structures, purchase loans, provide development
funding and other forms of financing for
sustainable energy development in Alaska's
commercial, residential, and industrial market
sectors.
• The Fund would consist of appropriations made by
the legislature, loans or other assets transferred
to the Fund by AIDEA, unrestricted loan payments,
interest, or other income earned on loans,
investments or assets of the fund, and available
federal funding.
2:13:06 PM
SENATOR STEVENS joined the committee.
MR. NEFF discussed the functions of the Alaska Energy
Independence Fund from slide 11. He stated that the market
for loans for sustainable energy development is greatly
underserved and a foreign concept to conventional lenders.
Alaska EIF thus will play a pivotal role in incentivizing
private sector participation. He suggested that the various
financing structures will help address the conventional
barriers and mitigate the perceived risk. Ultimately, the
typical investments of the fund will look and feel like a
loan or credit enhancement structure, which aligns with
AIDEA's current and historical management expertise.
He reviewed the barriers to investment, the solution, and
examples. The first barrier is perceived credit risk. In
that situation, the fund can offer credit enhancement
through a loan-loss reserve that can provide risk mitigation
and incentivize private capital to lend at a lower rate for
a longer time. He highlighted that the fund can address the
administrative burden associated with multiple small
projects by aggregation of small loans until they meet scale
to attract private capital. He said one of the largest
barriers is that most conventional private capital lenders
do not have the technical expertise to fund more labor
intensive or innovative transactions. Due to Alaska's unique
energy landscape, the combination of AIDEA, AEA, and the
proposed five-member advisory board will able to provide
technical legwork that ultimately will add incremental value
and partnership relationships through Alaska's financial
community. Ultimately, this will further enhance energy
investments in communities throughout Alaska. The fund can
address the final barrier to investment of marginal
economics by stepping in to improve the overall economics
for both private capital investors and the borrower. He said
this will help promote the scale and adoption of the
program's initiatives.
2:16:17 PM
MR. NEFF directed attention to the program workflow graphic
on slide 12. He said it exemplifies how the Alaska Energy
Independence Fund would deploy its financing tools as it
interacts with the private lending sector, borrowers,
lenders, and contractors. This relationship will require a
full training, certification, and engagement program with
approved contractors and vendors to enhance compliance and
efficiency of the program. He noted that on the proposed
advisory board, AIDEA and AEA will continue to run parallel
studies to identify leading edge technologies and critical
relationships to advance the fund and serve communities more
effectively.
2:17:10 PM
MR. NEFF displayed the mission statements of AIDEA and AEA
at the top of slide 13. He read the following text in the
first paragraph on the slide:
The purpose and function of the AK EIF aligns with
AIDEA's existing scope managing investment funds,
such as the Arctic Infrastructure Development
Fund, Sustainable Energy Transmission and Supply
Development Fund, Loan Participation Program
(Enterprise Development Account), and Development
Project Financing (Economic Development Account).
He highlighted that since 1967, AIDEA has been a financially
self-sustaining public corporation that has directed more
than $3 billion into economic development throughout Alaska
while returning about $40 million in dividends to the state,
which is well in excess of its initial capitalization. AIDEA
ended 2020 with $1.4 billion in assets. AIDEA's sister
company, the Alaska Energy Authority, currently serves about
197 communities in rural Alaska, provides technical
assistance to entities through the circuit rider program, and
provides engineering and project management expertise.
MR. NEFF stated that SB 123 factors in the combined effort of
AIDEA as investment and management expertise in partnership
with AEA's energy and technical expertise. This allows the
fund to leverage the combined existing infrastructure to help
service and keep the Alaska Energy Independence Fund
operating costs low, which could benefit borrowers.
Additionally, the bill proposes a five-member board selected
by the Governor to provide guidance and information but it
would not supersede the governing authority of AIDEA's and
AEA's independent board.
MR. NEFF concluded the presentation displaying AS
44.88.010(a)(10). It is the primary driver for AIDEA's
mission and goals and aligns with the Alaska Energy
Independence Fund.
2:19:25 PM
At ease
2:19:42 PM
CHAIR COSTELLO reconvened the meeting and asked Mr. Neff to
walk through the sectional analysis.
2:2007 PM
MR. NEFF read the following sectional analysis for SB 123:
Section 1
Amends AS 44.88.070 Purpose of the authority
to add "sustainable energy development" under the
various means of financing and means of
facilitating financing provided.
Section 2
Amends AS 44.88.159(a) under Interest rates
to add "the Alaska energy independence fund (AS
44.88.452) under AS 44.88.450-44.88.456."
Section 3
Amends AS 44.88.159(b) under Interest rates
to add "the Alaska energy independence fund (AS
44.88.452) under AS 44.88.450-44.88.456."
Section 4
Amends AS 44.88.159(g) under Interest rates
to add reference to "sustainable energy
development".
Section 5
Amends AS 44.88.178 Creation of
subsidiaries to allow the authority to create
one or more subsidiaries "for the purpose of
administering, operating, or expanding the Alaska
energy independence program." It also states,
"Subject to limitations for the use of the
economic development account under AS 44.88.172
and the Alaska energy independence fund under AS
44.88.450-44.88.456," in reference to the
authority's ability to transfer assets to a
subsidiary created under this section.
1:44:52 PM
Section 6
Amends AS 44.88 by adding four (4) new
sections:
AS 44.88.450 Alaska energy independence
program creates the program within AIDEA to make
loans and provide other forms of financing for
sustainable energy development in the state and
establishes an Advisory Board, consisting of five
members appointed by the Governor, to make
recommendations to AIDEA on the fund programs and
best practices.
AS 44.88.452 Alaska energy independence
fund establishes the fund within AIDEA for the
uses and purposes of AS 44.88.450-.456. It states
the fund consist of appropriations made by the
legislature, loans or other assets transferred to
the fund by AIDEA, unrestricted loan repayments,
interest, or other income earned on loans,
investments, or assets of the fund, and available
federal funding. The fund is not an account in the
revolving loan fund (AS 44.88.060) and requires
AIDEA to account for the fund separately from the
revolving fund. Finally, this section allows AIDEA
to create additional accounts in the fund; and to
transfer amounts between accounts in the funds
(subject to agreements made with the holders of
AIDEA's bonds or with other persons).
AS 44.88.454 Sustainable energy development;
powers and duties of the authority outlines
AIDEA's abilities, subject to AS 44.88.450-.456:
• Establish a subsidiary corporation subject to the
requirements of AS 44.88.178;
• Establish financing programs and products that
AIDEA deems necessary to encourage and promote
sustainable energy development in the state;
• Invest in eligible sustainable energy development
alone or with other investors (including private
capital providers);
• Provide capital and fund management to eligible
sustainable energy development and specifies in
what forms this is allowable;
• Make and execute contracts and other instruments
to implement AS 44.88.450.456;
2:24:25 PM
• Acquire real or personal property by purchase,
transfer, or foreclosure when the acquisition is
necessary to protect AIDEA's interest in a loan or
other financial product;
• Enter into lease-purchase agreements (subject to
AS 36.30.085);
• Defer principal payments or capitalize interest on
loans;
• Provide financing and services to municipal energy
improvement assessment programs established in
accordance with AS 29.55.100; and
• Exercise any other power necessary to implement AS
44.88.450-.456.
This section (AS 44.88.454) also allows AIDEA
to adopt regulations to implement AS 44.88.450-
.456, including:
• An application process for acquiring financing
under the Alaska energy independence program;
• Qualifications for applicants applying for
financing under the program;
• Record keeping requirements to accumulate and
track measurable data related to the fund; and
• Fiscal controls for the fund.
AS 44.88.456 Limitations on financing; use as
security prohibits AIDEA from using the fund
established in AS 44.88.452 to make a loan
guarantee if the amount exceeds $20 million unless
AIDEA has obtained legislative approval. It states
financing under AS 44.88.454 is limited to the
life of eligible sustainable energy development,
with financing limited by the estimated useful
life of the project. Finally, it states AIDEA may
use the fund established in AS 44.88.452 as
security for a bond guarantee as long as it does
not conflict with subsection (1) of this section.
Section 7
Amends AS 44.88.900 Definitions to add
definitions for "sustainable energy development"
and "eligible sustainable energy development".
Section 8
Provides a January 1, 2022 effective date for
this Act.
2:25:57 PM
CHAIR COSTELLO referred to the language on page 1, lines 10-
13, and asked for examples of sustainable energy development
and if there was a definition in statute. She also asked for
examples of the energy projects AIDEA has been involved in
prior to this proposal.
MR. NEFF replied the definition is on page 8, lines 26-28,
under AS 4.88.900. He explained that it is written broadly
to address both urban and rural access to this type of
program. To the second question, he said AIDEA has been
involved in multiple energy projects, most recently with oil
and gas developments. They have also collaborated with the
Alaska Energy Authority under the SETS program, which is the
statutory transmission and supply program for the SSQ
transmission line. He restated that the Alaska Energy
Independence Fund focuses specifically on non-hydrocarbon,
renewable energy sources typically used for scalable
sustainable projects throughout Alaska.
CHAIR COSTELLO asked him to read the definition of
"sustainable energy development" into the record.
2:28:32 PM
MR. NEFF read the definition in Section 7 of the proposed
paragraph in AS 44.88.900. It read as follows:
Sec. 7. AS 44.88.900 is amended by adding new
paragraphs to read:
(20) "sustainable energy development" means
(A) renewable energy generation from sources
that are continually replenished by nature,
such as the sun, wind, water, and biological
6 processes;
(B) building energy efficiency, including
fuel switching to 8 renewable fuels and
electrification; (C) industrial
decarbonization;
(D) electrical infrastructure incorporating
(i) energy storage to support clean energy
distribution, including remote and non-
remote microgrids and smart-grid 13
applications; and
(ii) other sustainable technologies
including distributed generation, advanced
battery, and combined heat and power;
(E) greenhouse gas emissions reduction
through processes including regenerative
agriculture, reforestation, afforestation,
and forestry 18 management;
(F) clean transportation, including battery
electric vehicles, hydrogen vehicles, plug-
in hybrid electric vehicles, and other zero-
emissions vehicles for consumers,
businesses, government, and public transit;
(G) electric vehicle charging and fueling
infrastructure; and
(H) any other emissions reduction or energy
efficiency technology the authority
determines to be consistent with the Alaska
energy 25 independence program;
2:30:01 PM
SENATOR STEVENS noted that the definition seems to be
applicable to business and perhaps municipalities. He asked
if a percentage of the funds would be allocated for loans
to homeowners or if they might be left out.
MR. NEFF replied the design is to benefit homeowners with
weatherization and rooftop solar type projects. He
emphasized that the definition provides broad access for
sustainable energy projects. He added that Green Banks
typically are available for the residential community. That
is one reason for the tool to aggregate small loans to make
it more attractive to the private investment community.
SENATOR STEVENS said he appreciated hearing that.
CHAIR COSTELLO thanked Mr. Neff and invited Chris Rose to start
his presentation.
2:32:04 PM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), Juneau, Alaska, stated support for SB 123 and applauded
Governor Dunleavy for introducing the legislation to establish
the Alaska Energy Independence Fund (AK EIF). He thanked Bert
Hunt for the hours he spent explaining the green bank concept
over the last 4.5 years and Jeff Schub for his tireless advocacy
of clean energy financing and both for their time and effort to
understand Alaska's unique energy landscape.
2:33:12 PM
MR. ROSE began his presentation by giving a brief overview of
REAP. He paraphrased the text on slide 2 that read as follows:
Founded in 2004, REAP is a statewide nonprofit
coalition of over 60 electric utilities, Alaska Native
Corporations, clean energy developers, businesses and
other NGOs
REAP's mission is to increase renewable energy
development and promote energy efficiency in Alaska
MR. ROSE described the education and programs that REAP
supports, focusing on the people who will operate and maintain
the energy projects.
• Three K-12 educators, with support from the Office of
Naval Research (ONR), work with teachers and students
statewide on STEM [Science, Technology, Engineering,
and Math] education.
• With ONR support, REAP helped launch the Alaska
Network for Energy Education and Employment (ANEEE) to
fill gaps in sustainable energy education throughout
the state.
• REAP is involved in the Sustainable Southeast
Partnership (SSP) with small communities in Southeast
Alaska.
• REAP is a new partner in the national Energy
Transition Initiative Partnership Program. As one of
five subcontractors, REAP is helping the U.S.
Department of Energy bring the expertise of four
national labs to Alaska and other rural communities
nationwide.
MR. ROSE displayed examples of REAP Advocacy from 2008 to the
present. The list included the following:
2008: Renewable Energy Fund, $100 million ($270
million total)
2008: $360 million to AHFC for home weatherization
($640 million total)
2010: Emerging Energy Technology Fund House Bill 306
(State Energy Policy)
2016: SB 196 (PCE Endowment)
2017: Property Assessed Clean Energy (C-PACE) 2014-
2021: Railbelt Electric Grid Reform
2017-2021: Green Bank
MR. ROSE related that REAP was a primary advocate of the
Renewable Energy Fund, which helped put renewable energy
projects on the map, particularly in rural Alaska. The fund has
financed the building of more than 80 projects over the last 12-
13 years. Last year, REAP supported legislation to create the
Electric Reliability Organization mandate for the Railbelt. REAP
also has been working on the green bank concept for several
years.
2:35:30 PM
MR. ROSE displayed a graphic that illustrates how much Alaskans
collectively spend on electric, heating, and transportation
energy each year. He noted that when an intern created the slide
several years ago, Alaskans were spending approximately $5
billion annually and Mr. Neff pointed out that the figure is
close to $6 billion today. Importantly, about 20 percent of that
energy is wasted. Thus the title on the slide, "Alaska's Annual
Billion Dollar Bonfire." This translates to each of 730,000
Alaskans per year throwing away more than $1,000. He agreed with
Mr. Neff that a goal is to redeploy that money into the economy.
He pointed to the next slide that warns against waste and
describes energy efficiency as the "First Fuel." He said
employing efficiency measures is always the fastest and easiest
way to achieve energy independence. To Senator Stevens' question
about whether homeowners would be included, he said he believes
that one of the first programs will be for residential consumers
and commercial consumers who are more rural and unable to take
advantage of programs like the commercial property-assessed
clean energy (CSPACE) that the legislature authorized and the
Municipality of Anchorage developed.
MR. ROSE described the weatherization and rebate programs that
the Alaska Housing and Finance Corporation (AHFC) has
administered since 2008 as the catalyst for financing clean
energy. The initial program allowed more than 50,000 Alaskan
homeowners to make their homes more energy efficient. AHFC
estimated that the average cost-saving for homeowners was 30
percent. Collectively, the average annual savings is equivalent
to more than 25 million gallons of home hearing fuel. He
acknowledged that the state cannot afford to continue the
weatherization program.
2:38:21 PM
MR. ROSE highlighted that the Renewable Energy Grant Fund is
responsible for more than 80 projects since inception in 2008.
AEA estimates that collectively, these projects save the
equivalent of 30 million gallons of diesel fuel on an annual
basis. He noted that the legislature has not appropriated
significant funds to this fund for a number of years. This is
another illustration of the need for the Alaska Energy
Independence Fund; grants cannot do it all.
He displayed the chart of Lazard's Levelized Cost of Energy
Analysis - version 12.0. He said this is an unsubsidized
analysis that looks at the cost of generating power from a
number of different alternative energy and conventional
resources. He pointed out that in the last decade the cost of
solar has dropped 90 percent and the cost of wind has dropped 70
percent. REAP would like people to have access to these
resources whenever possible.
2:39:51 PM
MR. ROSE reviewed the following points to explain why private
financing for clean energy is lacking:
• Currently, clean energy financing has a relatively
short track record. His analogy is people could not
get a car loan when cars were first invented because
banks were unfamiliar with cars and did not understand
how to price the risk. Now, a loan for a car that
depreciates when driven off the lot is available for
about 3 percent. However, somebody might have to pay
8-10 percent for a loan to make their house more
energy efficient or to install rooftop solar.
• Clean energy projects of $10,000 to $20,000 are small
for banks, but they become more interested when the
loans are aggregated so there is volume.
• The secondary market for these types of loans has been
lacking.
• Human and organizational inertia. Things do not change
very fast but a green bank or a fund like the Alaska
Energy Independence Fund can accelerate change.
MR. ROSE reviewed the following elements of Green Banks:
• A focus on commercial technologies. This is not for
experimental or emerging technologies.
• A dedicated source of capital. The Governor is
recommending a $10 million initial appropriation.
• A focus on leveraging private investment. The idea is
to leverage the initial $10 million and perhaps
achieve an 8:1 ratio of private capital to green bank
dollars like Connecticut has done.
• A relationship with government. This is why it makes
sense for AIDEA to house the Alaska Energy
Independence Fund.
2:42:24 PM
MR. ROSE listed the following functions of Green Banks:
• Design Loan Products & Programs to De-Risk and draw in
the private sector
• Educate Private Banks on the Opportunity
• Market Loan Products and Programs so people actually
use it
• Leverage Private Investment Capital
MR. ROSE concluded his presentation listing the things that SB
123 would do, should it pass:
• Lower the energy burden for Alaskans
• Develop new investment opportunities for Alaskan
lending institutions
• Create jobs and promote business development, just as
the AHFC Weatherization program did
• Keep precious energy dollars circulating in the
economy. Saving a billion dollars per year in energy
costs and redeploying the savings will be a boon to
the economy
• Having the Alaska Energy Independence Fund will
position the state to receive federal operating and
investment capital
CHAIR COSTELLO thanked him for his efforts to make energy costs
in Alaska more affordable.
SENATOR HOLLAND asked when the Green Bank programs started in
New York, Connecticut, and Maryland.
MR. NEFF replied the Connecticut Green Bank started in 2012, the
New York Green Bank started in 2014, and the Montgomery County
Maryland Green Bank started in 2018.
SENATOR HOLLAND commented on the potential difficulties
associated with starting a Green Bank in Alaska and asked if
there would be tracking or the ability to review the progress of
the program in 5-10 years.
MR. NEFF answered yes; it will be analyzed and reported on like
other AIDEA funds.
SENATOR HOLLAND asked for the projected length of the loans.
MR. NEFF replied it depends on the underlying project, the
ability to aggregate small loans, delineate the risk, and
replenish the capital to reinvest into Alaskan communities.
CHAIR COSTELLO invited Bert Hunter to give his presentation.
2:48:55 PM
BERT HUNTER, Executive Vice President and Chief Investment
Officer, Connecticut Green Bank, Stamford, CT, stated that his
overview of the state-sponsored Green Bank would talk about what
a Green Bank does, how it interacts with the market, and the
effect it has had. He suggested that it could serve as a frame
of reference for the proposed Alaska Energy Independence Fund.
MR. HUNTER reviewed the following points to describe the
Connecticut Green Bank: [Includes some formatting changes.]
Quasi-public organization Created in 2011 and
successor to the Connecticut Clean Energy Fund.
Focus Finance clean energy (i.e. renewable energy,
energy efficiency, energy storage, alternative fuel
vehicles and infrastructure, etc.).
Balance Sheet Approximately $77 million net position
& $213 million assets in FY20
Revenue & Funding from a variety of sources,
including:
State Support $0.001/kWh surcharge on electric
ratepayer bills (about $7-$10 per household per year ˜
$24-26M per year) and Regional Greenhouse Gas
Initiative about $3-5 million per year (for renewable
energy) Federal Support competitive solicitations
(e.g., SunShot, USDA, etc.) and non-competitive
resources (e.g., ARRA-SEP)
Portfolio Cash Flow Approximately $8 million/year
Bonds & Borrowing issue "green liberty bonds,"
bank loan facilities, tax equity investors, and
foundations (e.g., PRI's)
MR. HUNTER displayed the organizational chart for the
Connecticut Green Bank Board of Directors on slide 3. The
governor and legislative leaders appoint the members in addition
to three ex officio members. They are quasi-independent but the
state is active in the governance process. Four committees
support the governance of the Green Bank, one of which approves
the transactions. The board meetings are open to the public and
all materials and videos from the meetings are posted online.
2:52:41 PM
MR. HUNTER explained that the general idea of all Green Banks is
to leverage limited public resources with private capital. Each
Green Bank is formed to address the sustainable energy issues
relative to the area where it is formed and the needs of the
particular demographic. He advised that the Connecticut Green
Bank had five key energy challenges to address when it formed.
These were very high energy costs, a majority of buildings over
50 years old, an unreliable grid, over-reliance on nuclear and
natural gas energy sources, and perennially constrained
government spending.
The Connecticut Green Bank was established to take over an
existing clean energy fund. They used that fund's revenue stream
to fund operations and investments.
MR. HUNTER turned to the chart on slide 5 that illustrates the
three distinct ways Green Banks leverage public capital to bring
in private capital. First, they co-invest in transactions,
usually as a subordinated lender, which makes the investment
more attractive by reducing risk and/or enhancing returns for
the co-investor. Second, they offer credit support, usually in
the form of a loan loss reserve, by shouldering a portion of the
credit loss with private capital. Finally, they warehouse
smaller transactions and aggregate them until they attain the
critical size for investment by others.
He directed attention to the examples of the programs and
products on slide 6 of the three methodologies described in the
previous slide for leveraging public capital with more private
capital.
2:57:34 PM
MR. HUNTER explained that the graphics on slide 7 are a reminder
that the Connecticut Green Bank works with its energy utility
partners through a home energy services program, a similar
program for multi-families, and a program for small businesses.
Those programs are also available to state and municipal
governments.
2:58:04 PM
MR. HUNTER directed attention to the charts on slide 8 of the
Green Bank aggregate investments by source from inception
through 2020. He highlighted that it took a year to organize
staff familiar with lending practices, private capital, and
marketing. As of 2020, they have deployed $2 billion into the
market using about $300 million of public capital for a leverage
ratio of more than 6:1.
He described the graphics on slide 9 as an illustration of the
social and environmental impact of the Green Bank working with
its partners. Two billion in investment has generated $100
million in state tax revenues from individual, state, and
corporate taxes. Over 23,000 jobs have been created while
reducing the energy burden on more than 55,000 families and 375
businesses. Nearly 9 million metric tons of greenhouse gas
emissions have been avoided.
MR. HUNTER said the charts on slide 10 illustrate the growth of
the loans and investments overtime. In 2012, the investments
totaled $13 million or 14 percent whereas the cash represented
70 percent of the balance sheet. In 2020, loans and investments
totaled $180 billion. Slide 11 shows an overview of the loan
portfolio. He listed C-PACE, Commercial Solar & EE, the
discontinued Residential Solar Funds, and Grid Tied Projects.
The latter are larger projects like fuel cells, wind, hydro, and
micro grids.
He described slide 12 as a somewhat complicated organizational
overview of the Connecticut Green Bank. He noted that SB 123
authorizes the Alaska Energy Independence Fund to set up
subsidiary entities and advised that the Connecticut Green Bank
has made good use of such entities to protect cash flows for
investors. The slide shows an array of funds and transactions as
well as banks that participated in different ways in the
programs and investments.
3:01:42 PM
MR. HUNTER said slide 13 shows the public private partnerships
of the Connecticut Green Bank that represent nearly every
conceivable investor or lender in the marketplace. He listed
credit unions, community banks, community development financial
institutions, private equity, major global banks, and insurance
companies. He assured the committee that these types of
investors would find their way to Alaska.
3:02:27 PM
MR. HUNTER turned to slide 14 that highlights Green Liberty
Bonds. He noted the investor website at
www.greenlibertybonds.com/ provides updated information on the
issuance activity. He turned to slide 15 and reported that their
bond issuances over the last three years total more than $80
million. They are proud to have won three awards.
CHAIR COSTELLO thanked Mr. Hunter and asked Jeffrey Schub to
begin his presentation.
3:03:39 PM
JEFFREY SCHUB, Executive Director, Coalition for Green Capital
(CGC), Washington, D.C., stated that CGC is a nonprofit
organization that works nationwide with stakeholders,
governments, market participants, and capital providers to
design and launch public clean energy finance entities like the
Alaska EIF and the Connecticut Green Bank. CGC has been
delivering technical assistance for more than a decade at the
state and federal level and multiple countries.
MR. SCHUB stated that the model of Green Banks is proven and
repeatable. The cumulative investment mobilized by similar
institutions totaled more than $5 billion in 2019 and the latest
numbers bring the total investment to more than $7 billion.
These kinds of institutions are mobilizing $3 of private
investment, on average, for each public dollar. The leverage
ratio varies by state, product, and investment. He highlighted
that a number of Green Banks particularly focus on underserved,
low-income communities chronically left out either due to lack
of access to capital or lack of marketing to those households so
the benefits of transitioning to clean energy are sometimes hard
to access. Institutions around the country like the Energy
Independence Fund have had noteworthy success driving investment
into these underserved communities.
He displayed a color-coded map of the U.S. that shows the states
with existing Green Banks, Green Banks in development, and
states that do not have Green Banks. The map shows that the
Green Bank model is spreading across the country irrespective of
politics. He said it turns out that in any state, using limited
public funds efficiently to drive private sector activity has
widespread appeal for lowering energy costs, creating new jobs,
increasing resilience, and sparking new business creates value.
He acknowledged that Alaska's energy needs are different from
states that have proven track records, but assured the committee
that the Alaska Energy Independence Fund will finance projects
and drive economic activity that fits the state. That is the
fundamental reason the model has been so successful. The tools
and mechanisms are portable, but the markets to which they are
applied, the customers they serve, and the energy needs vary by
state. That is why the proposed EIF must be Alaska-based and
directed by Alaska experts.
3:07:14 PM
MR. SCHUB reported that in 2020 CGC analyzed the opportunity for
a Green Bank in the Municipality of Anchorage and found
significant investment need and opportunity in three markets.
These were a small-scale solar generation, residential heating
and electric efficiency, and commercial building upgrades via C-
PACE financing. He agreed with the previous presenters that this
is representative of the opportunities statewide to fill needs
and gaps in areas with different energy profiles.
MR. SCHUB directed attention to slide 6 that highlights the
bipartisan legislation co-sponsored by Representative Don Young
to establish a $100 billion Clean Energy and Sustainability
Accelerator to provide capital to entities nationwide like the
Alaska Energy Independence Fund. There has been strong support
from key Alaska stakeholders and just last week 250 businesses,
capital providers, trade groups, organizations, and utilities
across the nation signed a letter urging Congress to pass this
policy. Importantly, President Biden expressly endorsed the
"Accelerator" in his proposed infrastructure package, The
American Jobs Plan.
3:09:36 PM
MR. SCHUB explained that slide 7 [that has images of renewable
power, buildings, grid, transportation, industry, sustainable
agriculture, and climate resilience] highlights the broad scope
of potential uses of the Alaska Energy Independence Fund to meet
Alaska's energy needs. He concluded the presentation stating
that the Alaska EIF would provide a new pathway to invest in
disadvantaged and underserved remote communities to ensure
equitable access to lower energy costs and economic development.
He summarized his intention in the brief presentation to provide
broad context for what is happening across the country on this
policy, express strong support specifically for SB 123, and
thank Alaska leaders for their support of the Green Bank model
and creation of the Alaska Energy Independence Fund.
3:11:21 PM
CHAIR COSTELLO asked if the timing of the legislation coincides
with the anticipated receipt of American Recovery Act funds to
provide the seed for the Alaska EIF.
MR. SCHUB answered yes; the expected timeline for passing The
American Jobs Plan or "infrastructure package" is by the end of
September. If that becomes law, it is highly likely to include
the accelerator legislation.
3:12:47 PM
CHAIR COSTELLO opened public testimony on SB 123; finding none,
she closed public testimony. She welcomed letters of support and
said she would share them with the committee.
[CHAIR COSTELLO held SB 123 in committee.]