Crews install solar panels at a home in Thomas Township, Michigan in 2014. Credit: Associated Press / Saginaw News / Jeff Schrier

The Union of Concerned Scientists says Michigan could turn a $105 million public investment into roughly $3 billion in private sector clean-energy projects through 2030.

By modeling successful programs in other states, a UCS report released last week says a “green bank” geared specifically toward clean energy could also help Michigan achieve federal pollution targets.

Michigan would join a growing number of states using the model to leverage clean-energy investment, which has already happened in places like New York and Connecticut.

“Michigan has a long history of using public funds to attract private investment,” said Sam Gomberg, Midwest energy analyst for UCS.

In addition to traditional business development programs, the UCS notes Michigan’s revolving loan fund for renewable and energy efficiency projects, Property Assessed Clean Energy financing, and a nonprofit created through funds from the Michigan Public Service Commission that offers energy efficiency loans.

Gomberg also sees green banks as an alternative to traditional discussions about clean energy development amid the “difficult political environment” of clean energy standards.

“We started to look outside the box,” he said. “This is not a substitute for clean energy standards, but it’s one way to continue moving the ball forward while the Legislature continues to debate.”

State lawmakers are yet to finalize the next phase of Michigan’s energy policy. The last major revision — which set a 10 percent renewable energy standard — leveled off at the end of 2015.

While Gomberg says green bank financing is unlikely to achieve the same results as a 1.5 percent efficiency standard or a target percentage for renewables, “There are some ancillary benefits to this.”

Specifically, traditional banks aren’t as well-versed in providing loans to homeowners that also go toward, say, installing solar panels.

“Not only does a green bank insert direct capital into these investments, but it also helps get the financial sector more comfortable,” Gomberg said.

How it would work

The UCS modeled a program that takes a one-time $105 million public investment and leverages it into $3.3 billion in private development through a 15-year revolving loan program. The public investment could come from existing state funds or by issuing bonds to private investors.

By using a variety of financial tools — including credit enhancements and direct lending — to attract a pool of private investments, the UCS report says a Michigan green bank could support the deployment of 685 megawatts of new solar power and save ratepayers $322 million annually through energy efficiency.

Additionally, the program could reduce the state’s carbon emissions by 3.9 million tons per year, or 13 percent of the emissions reduction target for Michigan under the Clean Power Plan.

Green banks catching on

According to Advanced Energy Economy, a national trade group for clean energy development, green banks are among four trends to watch this year in energy finance.

Green banks have been adopted in various forms in Connecticut, New York, Hawaii, California and Rhode Island.

According to the Coalition for Green Capital, which offers support to states exploring the green bank concept, another seven states and Washington D.C. are exploring the idea. A proposed $13 billion constitutional amendment in Ohio meant to drive clean energy infrastructure also reportedly includes the formation of a green bank.

And in December, the Global Green Bank Network was established during the Paris climate change negotiations.

But finding public funding remains a challenge for states, according to the Brookings Institute.

“In state after state,” Brookings noted in June, “strong interest in green banking or strong demand for green bank products has collided with the limited resources available to capitalize the new institutions.”

Last year, Brookings called on the federal government to help states cover the upfront public costs. The federal government has “billions of underutilized dollars” to help green banks along, which could be allocated with relatively simple changes to financing rules, Brookings senior fellow Mark Muro writes.

“Significant federal dollars exist that could, with modest administrative adjustments, expand the nation’s green bank movement, with significant benefits for clean-energy deployment, regional economies, and the climate,” Muro says.

Andy compiles the Midwest Energy News digest and was a journalism fellow for Midwest Energy News from 2014-2020. He is managing editor of MiBiz in Grand Rapids, Michigan, and was formerly a reporter and editor at City Pulse, Lansing’s alternative newsweekly.