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Michigan Saves is one of the oldest and most effective green bank programs in the country, drawing about $30 in private investment per every public dollar invested.

As President-elect Joe Biden’s transition team prepares its green economic recovery plan, a Michigan clean energy finance program could provide a bipartisan model for how to spur energy savings and job growth.

Biden has already proposed a national green bank as part of his $2 trillion plan to achieve carbon neutrality by the middle of the century. The initiative would provide capital to help finance projects such as rooftop solar panels, electric vehicle charging stations, weatherization and building efficiency upgrades.

Similar programs exist in about a dozen states, and among the oldest and most effective is Michigan Saves. Supporters say the decade-old program could serve as a blueprint for a federal program, and that they are thrilled to see the president-elect supports the idea.

“Every single business and house is going to have to have some kind of improvement in the way they use energy … and there’s a lot of opportunity for green banks to play a big role in that,” said Mary Templeton, director of the Michigan Saves green bank. 

In just over a decade, Michigan Saves has helped secure about $270 million worth of loans for more than 15,000 individuals and businesses. It has also drawn about $30 of private investment for every public dollar spent, representing the nation’s highest return on investment. 

So far, less than 1.5% of Michigan Saves borrowers have defaulted on loans — a far lower rate than is typical for other common types of loans — partly because they’re typically paid off over 15 years at 5% interest. 

“We have been able to negotiate really good rates because we have that loss reserve,” Templeton said.

Michigan residents and businesses looking for financing find a contractor for a quote, apply for a loan on Michigan Saves’ website and work with one of 16 partner credit unions. Michigan Saves works with contractors who take a “holistic” approach that’s needed to maximize the investment.

Other green banks use different approaches. Steve Clemmer, director of energy research and analysis for the Union Of Concerned Scientists, noted revolving funds are common, and some directly lend to borrowers. Since lenders view small loans as risky, some banks aggregate them and sell them as securities. Other programs add an assessment to a property tax bill and use the savings in utility bills to pay off the tax debt. 

Proponents note that a national bank is also a job creation proposal that’s sorely needed during the pandemic. A $100 billion national bank would create more than four million jobs, according to the Coalition For Green Capital. 

The high jobs return on relatively low public investment is a result of how the model spurs private investment. Collectively, green banks in the U.S. have facilitated more than $5 billion in loans and generated on average $3 in private investment for every $1 of public money. That effect “is really powerful” and creates jobs in markets around the country, said Jeffery Schub, executive director of the Coalition For Green Capital. 

The U.S. House in 2019 passed legislation to create a $35 billion national bank, though it stalled in the Senate. But there’s bipartisan support in the Senate for investment in clean energy infrastructure projects, which could put pressure on Mitch McConnel to move a green bank proposal forward on its own or as part of a larger relief or infrastructure package. 

“The dynamics here have changed and will change on Jan. 21 when we have a new president,” Schub said, noting that several “red” states like Florida and Alaska have green banks. 

But the program isn’t without its challenges — limited public funding caps the number of loans Michigan Saves can back. The program was seeded in 2009 with a $6.5 million grant from the Michigan Public Services Commission and received some federal funding through 2013. It’s been able to “recycle” that money, and will receive a $1 million boost as Michigan pushes toward its goal of carbon neutrality by 2050.  

“The barrier is simply funding for an organization like Michigan Saves — it needs hundreds of millions of dollars, if not billions, to meet market demands,” Schub said.  

It’s also unclear how accessible the program is to low-income residents. Templeton said about 55% of Michigan Saves’ loans have gone to Michiganders in low- to moderate-income census tracts, but the nonprofit is just now beginning to do a deeper analysis of loan recipients. It partly addresses the situation by offering longer-term loans for people with credit scores above 600. In some utility districts, it can offer loans with proof of 12 months of on-time payments to the utility, regardless of credit score. 

“We’d love to do more of that … especially in underserved and low-income and communities of color — that’s on our radar,” Templeton said. Biden’s energy plan calls for 40% of its spending to take place in low-income communities, though that doesn’t specifically speak to a green bank. 

Clemmer also noted that some banks’ resources are directed toward utility-scale or larger infrastructure projects. But he said utilities have other funding sources that they can tap, and added that he believes “green banks should be targeted at underserved markets.”

While there’s strong evidence that the model works as intended, it’s more difficult to quantify its impact on climate change. Clemmer stressed that green banks aren’t “a silver bullet solution,” but a “key part of a comprehensive policy to achieving clean energy goals.” 

“It doesn’t replace the need for renewable portfolio standards or clean energy standards, but it does address a gap — all this stuff needs to be financed, and it’s really a daunting challenge to address the funding gaps in markets in underserved markets,” Clemmer said.

Tom Perkins

Tom Perkins is a freelance reporter based in Detroit.