The Illinois Statehouse in Springfield. Credit: Jim Bowen / Creative Commons

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The proposal would create a nonprofit that would design and run the bank with oversight from an 11-member board.

Illinois would get a “green bank” to finance equity-focused clean energy investments under the latest version of the Clean Energy Jobs Act pending in the state legislature. 

If the proposal passes, Illinois would join more than a dozen states including Florida, New York and Connecticut that use publicly funded green banks to leverage private investment for renewables, energy efficiency and other projects, especially in communities that have been underrepresented in the clean energy economy. 

The state-level proposal comes as a federal bill with bipartisan support would create a national green bank — dubbed the Clean Energy Accelerator —  that would work in tandem with state banks. 

The general idea of green banks is that they can provide loans directly for projects that would not be funded otherwise, because traditional financial institutions see them as too high-risk, too small, or because they aren’t familiar with the economics of clean energy sectors. 

Green banks can also leverage private investment by making it more attractive for banks or other lenders to offer standard loans or other financing to clean energy projects. Green banks can promise to cover loans if a recipient defaults, for example, and by taking on that risk they can convince banks to offer loans at reasonable interest rates rather than denying loans or charging high interest rates. 

This is especially helpful if a traditional lender doesn’t understand the potential payoff of solar energy or energy efficiency, for example, or if a small business or church doesn’t have enough credit history to receive the needed loan.

“It’s not about concessional finance, it’s about driving down the terms of private capital to where they should already be if they had more clarity on risk level,” said Jeffrey Schub, executive director of the nonprofit Coalition for Green Capital, which is pushing the national accelerator plan. “A commercial bank might not loan to an efficiency project for less than 10% [interest] but that doesn’t mean it warrants 10%, because there’s really no risk — it should be 4% or 5%.” The high rate, Schub said, “is just driven by that bank having little prior experience — not knowing the depth of the market.”

An annual report from the Coalition for Green Capital and the American Green Bank Consortium says that in 2019 green banks nationwide invested $1.5 billion directly and sparked $3.8 billion in private investment. About a third of the investment went to develop community solar. And, Schub said, defaults on the banks’ loans are extremely rare. 

Through its support of state banks or through direct investments, the proposed national green bank could also finance solar, storage and energy efficiency for low- and moderate-income households, plus job training, electrification of home heating, grid infrastructure to facilitate renewables, electric vehicle conversion, utility-scale renewable construction, and more. 

Finding the money 

The Clean Energy Jobs Act proposed in Illinois does not include extensive details about how the green bank would be structured, but it calls for the creation of a nonprofit entity that would design and run the bank with oversight from an 11-member board of six elected and five appointed members, including a representative of a minority-owned business and others with expertise in equity, and two labor union representatives. The proposal was crafted in consultation with the Coalition for Green Capital and by looking at best practices of other state banks, including Connecticut’s, said John Delurey, Midwest director of Vote Solar. 

“Once we realized that barriers to capital and barriers to financing were some of the most insidious and pervasive,” Delurey said, those working on the bill consulted with community partners and minority-owned businesses to come up with the green bank proposal.

The Clean Energy Jobs Act’s description of the green bank emphasizes that it would prioritize investment in underrepresented and environmental justice communities and the funding of projects run by and employing Black, Indigenous, and people of color. 

The green bank would be separate from but complement the mission of other equity-focused programs proposed in the Clean Energy Jobs Act, including workforce training and an accelerator for clean energy businesses owned by, employing and serving marginalized communities. 

Delurey said the bill language is “designed to inform the structure of the nonprofit [running the bank] itself, to ensure the board is representative of the communities it helps serve, to have guardrails for the lending they can do, and specific products as suggestions, addressing specific gaps in the financing landscape.”

The Clean Energy Jobs Act calls for Illinois’ green bank to raise $100 million in seed capital funded through a pollution tax on fossil fuel extraction and emissions. Delurey said the bank could receive additional funding from philanthropists, the federal government and other sources. 

“We anticipate a lot of federal money will be looking for regional and state-based entities to receive and deploy it,” Delurey said. “That’s one of the reasons we’re trying to get this off the ground as soon as possible.”

Schub explained the national bank proposed by federal legislation would make loans of its own and also offer funding and logistical support to state green banks. He noted that the majority of green bank investment comes through leveraging private financing, but as some state banks get more “financially mature” they are increasingly able to offer financing directly. 

Versions of the national green bank proposal passed the U.S. House of Representatives twice in 2020, as part of infrastructure and energy innovation bills, and a bill with the proposal in the U.S. Senate was co-sponsored by then-Sen. Kamala Harris. President Joe Biden has included a green bank in climate and environmental justice proposals. Hence proponents are confident that a federal program will be created by legislation in the near future. 

“It’s not really about politics, it’s always been a bipartisan or nonpartisan issue,” Schub said. “The main barrier has always been funding — lots of states do not have a billion dollars like New York state to put into its green bank to provide seed capital for investment. Illinois has not had financial resources, and now every state is even more stretched.” 

A federal bill, as he and other proponents see it, would pave the way for green banks in Illinois and other states.

Creating jobs and equity 

Climate Jobs Illinois, the coalition of labor unions heavily involved in negotiations over energy legislation, are backing the federal green bank proposal, in part because they hope it would fund their proposed Carbon Free Schools program. That program would create 4 gigawatts of solar and spur energy efficiency upgrades in Illinois public schools, in part through earmarking solar renewable energy credits for schools and creating a low-interest loan fund.

Specifically, the plan would finance solar owned by schools with 1.5% interest rates supported by a state-run revolving loan fund, capitalized partly with federal funds. 

The labor coalition recently released statements from U.S. senators and representatives from Illinois — including Rep. Raja Krishnamoorthi, co-founder of the bipartisan Congressional Solar Caucus — calling for clean energy infrastructure investments with union and other labor provisions. 

“If there’s ever a year [to pass the national bill], this would be it,” said Matt Lehner, a spokesperson for the labor coalition. “The stars are aligned.”

Lehner said the coalition does not have a position on a state-run green bank as proposed in the Clean Energy Jobs Act. 

The Clean Energy Jobs Act is backed by clean energy advocates and consumer and community groups, while renewable developers generally support competing proposed legislation known as Path to 100. At a press conference announcing the reintroduction of the Clean Energy Jobs Act in this year’s legislative session, elected officials talked about the need for spurring clean energy development — including through the green bank — in communities underrepresented in the clean energy economy, and disproportionately affected by fossil fuels. 

“We have a plan to create tens of thousands of good-paying jobs,” said state Sen. Robert Peters, part of the Black Caucus. “Let’s be clear. We don’t just want [electric vehicle] charging stations, rooftop and community solar, and energy efficiency programs completed in Black neighborhoods and communities. We want Black workers installing them and we want Black-owned businesses designing the projects and getting them built.

“We are in the midst of three crises — public health, economic and a crisis when it comes to systemic racism. … To move us out of these crises, Chicago and Illinois should be at the forefront of moving from the rust belt to the green belt. Clean energy must become an engine of safety and stability in our communities.” 

Kari Lydersen

Kari has written for Midwest Energy News since January 2011. She is an author and journalist who worked for the Washington Post's Midwest bureau from 1997 through 2009. Her work has also appeared in the New York Times, Chicago News Cooperative, Chicago Reader and other publications. Kari covers Illinois, Wisconsin and Indiana as well as environmental justice topics.