Holland & Knight Innovative Energy Financing Primer

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INNOVATIVE ENERGY FINANCING PRIMER Financing New Energy Deployments with Federal, State and Regional Energy Financing Programs in North America

TABLE OF CONTENTS Introduction.............................................................. 2 Major Federal Financing Programs............................ 3

Major Established State-Level Green Banks........... 10 Other Established Green Banks.............................. 13

Department of Energy Title XVII Loan Guarantee Program..........3 Department of Energy Advanced Technology Vehicle Manufacturing Program.............................................................5

Upcoming Green Banks......................................... 14

Department of Energy Tribal Energy Loan Guarantee Program...6

Other Green Bank-Related Activities....................... 16

Department of Agriculture Section 9003 Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program...................................................................8

International Development Banks........................... 18

INNOVATIVE ENERGY FINANCING PRIMER Despite significant fiscal uncertainty and political volatility in the federal government during the past two years, government investment in clean energy has increased overall to a notable degree. Federal programs that were originally developed under the second Bush Administration remain funded at higher or comparable levels today than under the Obama Administration, and attractive financing opportunities remain available from U.S. Department of Agriculture (USDA) and U.S. Department of Energy (DOE) financing programs for qualified applicants.

Moreover, more than a dozen states and local governments have undertaken efforts to establish “green banks” and support economically viable clean energy projects that cannot presently access commercial financing due to market barriers such as federal policy uncertainty, insufficient performance data and lack of sufficient contracting mechanisms for clean energy. Some green banks, such as the NY Green Bank, have had significant success and are expanding their product offerings in the wake of volatility at the federal level, while others have struggled to obtain funding or sustain momentum behind their clean energy initiatives.

Innovative energy financing programs – which include federal loan guarantee programs, regional or state green banks, infrastructure banks and revolving loan funds – are market-oriented approaches to accelerating clean energy deployment, energy security and economic revitalization. Once established, these specialized financial entities can enable self-sustaining private markets and reduce the dependence of innovative energy technologies on government subsidies. Unlike grant or incentive payments, most loan programs and green bank funds are invested at market rates, ensuring that these organizations can cover their own costs while preserving their capital base for future projects. However, given their complexity, few understand the market gap these institutions can fill and the overall value that they can provide to industry.

Federal financing programs are currently best-positioned to fund innovative automotive- and bioenergy-related projects of more than $50 million. There is additional appetite for advanced fossil, nuclear and innovative energy technology projects with contractible revenue streams. Alternatively, regional and state clean energy financing programs can be especially effective for deploying innovative resiliency and battery storage projects with maximum funding in the range of $20 million to $50 million. Although state-level financing programs can be difficult to navigate given the lack of a “one-stop shop,” divergent application processes and varying levels of sophistication across the states, the green banks movement continues to gain momentum. Two examples include New York Governor Andrew Cuomo seeking $1 billion in private-sector investments to exponentially expand NY Green Bank financing options available to clean energy projects as well as members of Congress proposing that federal energy loan programs become available to states.1 Accordingly, federal and state financing programs are very likely to remain viable options for emerging clean technology companies and deployment of resilient energy infrastructure into the foreseeable future. This primer provides an overview of currently available clean energy financing initiatives and how they can support the deployment of innovative energy technologies across North America, including Canada and Mexico. This primer also provides insights and best practices on how to approach pursuing these opportunities and what to expect of upcoming financing initiatives.

For more information on opportunity assessment, project development assistance, how to create a replicable and efficient strategy that’s viable across numerous financing entities or assistance in negotiating a transaction, contact Holland & Knight’s Government Energy Finance Team.

1. U.S. Senate. The Energy and Natural Resources Act of 2017. 115th Congress. S. 1460.

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Major Federal Financing Programs Department of Energy Title XVII Loan Guarantee Program The DOE supports the commercial development of innovative clean energy technologies through its Loan Programs Office (LPO). Authorized by the Energy Policy Act of 2005, the Title XVII Loan Program enables the DOE LPO to issue loans ranging from several million to more than a billion dollars for advanced fossil, advanced nuclear, renewable energy and energy efficiency projects that employ “new or significantly improved technology.” Since late 2013, DOE Title XVII has announced nearly $25 billion in new loan guarantee authority across three solicitations, which remain open and actively seeking qualified applicants as a result of continued congressional support and new programmatic direction.2 Under Title XVII program authority, the DOE can guarantee loans for up to 80 percent of total project costs for eligible proposals. As a condition to issuing a loan guarantee, however, Title XVII requires the DOE to obtain an appropriation from Congress for the Credit Subsidy Cost (CSC)3 of issuing a loan guarantee, or otherwise obtain a deposit from the borrower in the amount of the CSC. As of this writing, LPO maintains $28.7 billion in total loan guarantee authority, with $170 million appropriated to cover CSCs for renewable energy and energy efficiency projects. Application fees for all three solicitations are the same: $50,000 for a Part I submission and $350,000 for a Part II submission. For loan applications that do not exceed $150 million, the Part II submission fee is reduced to $100,000.

Submission deadlines for Part I and Part II applications occur every two months.

Upcoming Part I deadlines in 2018: •

September 19

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November 14

Upcoming Part II deadlines in 2018: •

October 17

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December 19

The latest program updates and application deadlines are provided through notices of supplemental guidance posted to the official Title XVII solicitation page.4

Renewable Energy and Energy Efficiency Solicitation In mid-2014, LPO issued a solicitation for up to $4 billion in loan guarantees for innovative renewable energy and energy efficiency projects that reduce greenhouse gas (GHG) emissions; this authority was subsequently expanded to $4.5 billion in 2015. Key technology areas of interest include advanced grid integration and storage, drop-in biofuels, waste-to-energy and/or efficiency improvements. This solicitation is unique in that $170 million has been appropriated to help cover CSCs above 7 percent.

2. For additional background on these recent developments, see our related post on Holland & Knight’s Government Energy Finance Blog (“Omnibus Saves Department of Energy Loan Program and Adds New Direction,” March 27, 2018).

3. The Credit Subsidy Cost is the net present value of the estimated long‐term cost to the U.S. government of a loan guarantee, as determined under the applicable provisions of the Federal Credit Reform Act of 1990. In other words, it is the “premium” paid to the government in return for its guarantee.

4. U.S. Department of Energy: Title XVII Open Solicitations.

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Advanced Fossil Energy Solicitation In late 2013, the DOE LPO issued a solicitation for up to $8 billion in loan guarantees for innovative fossil energy projects that reduce GHG emissions through resource development, carbon capture, low carbon power system and/or efficiency improvements; this authority was subsequently expanded to $8.5 billion in 2015. This opportunity may provide key support for innovative energy, materials and fossil-derived biofuel technologies, which might otherwise find limited options in commercial finance markets and do not qualify under the renewables solicitation.

Advanced Nuclear Solicitation In late 2014, LPO issued a solicitation for up to $12.5 billion in loan guarantees for innovative nuclear energy and front-end nuclear projects that reduce GHG emissions. Key technology areas of interest include advanced nuclear reactors, small modular reactors, uprates and upgrades of existing facilities, and front-end nuclear projects.

Holland & Knight Insights •

Despite significant political uncertainty during the past two years, the DOE LPO recently gained renewed political support and clear congressional direction to continue to process applications in the Consolidated Appropriations Act of 2018.

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Program has clearer congressional direction and greater on-record support than it has had since the American Recovery and Reinvestment Act of 2009 was signed into law.

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While the program remains a viable and politically stable financing solution, it is critical for a participating company to have a political strategy that complements its program strategy.

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Department of Energy Advanced Technology Vehicle Manufacturing Program The DOE supports the commercial development of advanced technology vehicles and associated components through its Advanced Technology Vehicle Manufacturing (ATVM) Loan Program, which like Title XVII is administered by the LPO. ATVM is a direct loan program established pursuant to Section 136 of the Energy Independence and Security Act of 2007. Under the ATVM Program, automobile manufacturers or advanced vehicle automobile component or material manufacturers are eligible to obtain direct loans from DOE for projects that re-equip, expand or establish manufacturing facilities in the U.S. that produce “ultra-efficient vehicles,” passenger automobiles, light duty trucks or associated components that meet DOE’s emission and fuel economy standards for “advanced technology vehicles.” To date, DOE has funded five loans under the ATVM program totaling $8.4 billion, approximately one-third of its $25 million loan authority. The ATVM program is not subject to an expiration date, and despite previous congressional efforts to rescind ATVM’s funding, the program and its remaining $16.6 billion in loan authority remains available for qualified projects.

Program Outlook ATVM is currently soliciting quality applications on an ongoing basis. Program officials remain vocal in promoting the use of DOE’s capital for industry scale-up and improvement projects. For companies seeking to expand materials, component or manufacturing lines, ATVM offers an attractive opportunity for low-interest capital, lower fees relative to Title XVII programs, and a precedent for both high-value loans and the program office’s willingness to interpret its legislative mandate as broadly as possible (e.g., loans in support of companies beyond established automakers, such as Tesla and Fisker).

ATVM has a varied record across its five-loan portfolio but a less than 2 percent default rate by dollar value. Expect the program to continue to push currently established program priorities, such as strategic and creditworthy partnerships on the part of applicants; advanced vehicle technologies in the consumer vehicle category (less than 8,500 pounds) rather than fleet or commercial vehicles; and a strong focus on electric vehicle technology (e.g., advanced lithium battery components, charging infrastructure and vehicle lightweighting to offset heavy battery systems). While private financing is often available and at attractive, comparable rates to low-interest federal loans for established automotive manufacturers – innovative vehicle technologies remain challenging to finance at a rate comparable to this program.

Holland & Knight Insights •

Despite not having closed a loan in seven years, ATVM remains one of the most attractive vehicles for government financing for eligible and competitive program applicants given its low financing costs and strong political support.

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ATVM is particularly well-positioned to support vehicle-related manufacturing and production in the Midwest.

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Prospective applicants should arrange an introductory conversation with ATVM program staff to confirm eligibility and appetite for the proposed project concepts.

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Like Title XVII, it is critical for a participating company to have a strong political strategy that complements its program strategy.

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Department of Energy Tribal Energy Loan Guarantee Program The DOE supports economic opportunities for American Indian tribes through its Tribal Energy Loan Guarantee Program (TELGP), which has up to $2 billion in loans available for energy development projects. Under this solicitation, the DOE can guarantee up to 90 percent of the unpaid principal and interest due on any loan made to a federally recognized tribe. The program requires the tribal borrower to invest equity in the project and for all project debt to be provided by nonfederal lenders. A total of $8.5 million has been appropriated by Congress to cover CSCs associated with these loan guarantees. Application fees are $10,000 for the Part I application and $25,000 for the Part II application, both significantly below the Title XVII solicitations.

Program Outlook With the program only recently funded under the Fiscal Year 2017 Omnibus Spending Bill, DOE officially opened the doors of the TELGP in July 2018. This is the first time the DOE LPO has extended loan guarantees to projects on tribal lands and/or partly owned by tribal entities. Loans can be for a broad range of energy projects with a focus on commercially proven technologies, including: •

electricity generation, transmission and/or distribution facilities, utilizing renewable or conventional energy sources

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energy storage facilities, whether integrated with any of the above

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energy resource extraction, refining or processing facilities

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energy transportation facilities, including pipelines

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district heating and cooling facilities

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cogeneration facilities

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distributed energy project portfolios, including portfolios of smaller distributed generation and storage facilities employed pursuant to a unified business plan

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Uniquely, the TELGP is structured to have the flexibility to finance a wide variety of projects structures and types, including: generation projects serving both nontribal customers and residents of Indian lands, wherever constructed; transmission projects facilitating the sale of electricity generated on Indian land to outside markets; transmission projects across Indian lands, connecting outside generation to outside markets where no tribal customers are served; and projects in which a tribal borrower participates as an investor but bears no other direct relationship to the tribe or Indian lands. In cases where projects are not located on tribal land, applicants are strongly encouraged to outline in their applications how the project measurably benefits one or more tribes.

The refinancing of energy development projects that have already completed construction are not eligible under TELGP; however, the DOE may issue loan guarantees for the financing of substantial improvements or modifications to existing facilities.

Unlike other LPO loan guarantee programs, the tribal program is structured to be a partnership between eligible lenders and the DOE, similar to the DOE’s Financial Institution Partnership Program (FIPP). Eligible lenders include commercial banks or other nonfederal lenders with suitable experience and capabilities. A tribe seeking financing would apply to an eligible lender, which in turn would apply to the DOE for the partial guarantee. TELGP program also allows for projects to be partially owned by nontribal participants.

Submission deadlines for Part I and Part II applications occur every two months. Upcoming Part I deadlines in 2018: • Round 1 – September 19 • Round 2 – November 14 Upcoming Part II deadlines in 2018: • Round 1 – October 17 • Round 2 – December 19 The latest program updates and application deadlines are provided through notices of supplemental guidance posted to the official TELGP page.5

Holland & Knight Insights •

TELGP provides a unique opportunity for tribal projects to receive low-cost financing, a considerable barrier for many tribal projects, which often run into difficulties with attracting the capital needed to develop projects in remote areas.

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Given the complexity of the DOE LPO and the recent inclusion of the TELGP, applicants are strongly encouraged to carefully review the solicitation details and set up a meeting with the DOE’s Loan Origination Division.

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Like Title XVII, it is critical for a participating company to have a strong political strategy that complements its program strategy.

5. U.S. Department of Energy: Tribal Energy Loan Guarantee Program

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Department of Agriculture Section 9003 Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program Section 9003 of the Farm Bills from 2008 and 2014 authorizes the USDA to guarantee loans of up to $250 million for the development and construction of commercial-scale biorefineries utilizing new and emerging technologies that produce advanced biofuels, renewable chemicals or biobased products. To date, the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program (9003 Program) has been funded through approximately $460 million allocated to cover the program’s credit subsidy costs, which could then be leveraged three to four times to fund an approximately $1.5 billion to $2 billion loan guarantee facility. To date, more than 15 conditional commitments have been issued by the program, of which only five have achieved financial close due to various programmatic and awardee-specific developments.6 The application process includes a Letter of Intent, followed by Phase 1 and Phase 2 submissions. USDA will invite eligible, competitive proposals to submit a Phase 2 application following a positive determination of a Phase 1 submission.

Program Outlook After years of stalled projects and program improvements, the 9003 Program had an unprecedented year in 2017.

In the second half of the year, the program issued numerous conditional commitments and closed its first transaction since 2011. This significant development is a result of the improved program structure, technology advancements and state-level market drivers such as the California Low Carbon Fuel Standard (LCFS).

Unlike years past, the 9003 Program no longer formally makes an estimated amount of funding available through a biannual Notice of Funding Announcement (NOFA). Instead, the program remains open on an ongoing basis, accepting applications on April 1 and October 1 of each year until appropriations have been expended.7 Approximately $600 million remains committed to projects with active conditional commitments that have yet to close; this number has decreased significantly as the result of USDA’s recent efforts to deobligate hundreds of millions of dollars of conditional commitments from stalled projects. These deobligated funds are now being made available to projects that have yet to reach conditional commitment and new applicants. Therefore, up to $1 billion remains available for new applicants interested in entering the program in 2018, making the 9003 Program an attractive opportunity for equity investors and new projects alike.

6. For additional background and history on the 9003 Program, see our related post on Holland & Knight’s Government Energy Finance Blog (“USDA Loan Guarantee Funding Solicitation Announced,” July 1, 2015).

7. According to program regulations, if the application deadline falls on a weekend or an observed holiday, the deadline will be the next federal business day.

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Farm Bill Reauthorization In addition to currently available funding under the 9003 Program, the possibility remains for additional budget authority and subsequent loan guarantees through new appropriations in the upcoming Farm Bill. The program is well positioned on Capitol Hill due to its economic value to rural America. While the prospects of passing a Farm Bill this year remain uncertain, draft bills from the House and Senate both authorize $75 million in new discretionary authority each year through 2023. Accordingly, the 9003 Program remains an attractive, viable and proven path to commercialization for bioenergy-related technologies due to its recent successes, relatively low cost of applying and competitive lending terms.

Holland & Knight Insights •

The 9003 Program had an unprecedented year in 2017, issuing numerous conditional commitments and closing its first transaction since 2011.

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The 9003 Program has approximately $1 billion in loan authority remaining.

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Along with the Section 9003 Program’s relatively low cost of applying and competitive lending terms, its recent success and available capital highlights an attractive opportunity for equity investors and new projects in the bioenergy technology sector.

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Major Established State-Level Green Banks Several states have established green banks with significant project pipelines and existing funding authorities.

While each is unique in terms of how companies can get involved, these major green banks are already filling a gap in federal funding support for the deployment of clean energy technologies.

New York The NY Green Bank is the largest U.S. green bank and was established in 2013 by Governor Andrew Cuomo as a division of the New York State Energy Research and Development Authority (NYSERDA) after receiving an initial capitalization of $210 million. Since its first financial product offerings in early 2014, the NY Green Bank has established a track record of financing solar, wind and other sustainable energy projects. By the end of 2017, NY Green Bank had invested approximately $440 million throughout the state. For 2018, NY Green Bank is exploring new strategies and mechanisms to leverage an additional $1 billion in third-party capital to support the state’s clean energy goals.

NY Green Bank financial products include: •

Warehousing and aggregation credit facilities

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Term loans and investments

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Credit enhancements

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Construction finance

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Construction finance plus term loans and investments

The NY Green Bank project portfolio includes: •

$3.1 million construction loan and term loan facility for BQ Energy to complete a 2.8-megawatt (MW) solar project on a remediated landfill

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$48.3 million term loan and seasonal variable funding note for NYC Bike Share LLC to deploy 10,000 bikes and 600 stations throughout New York City

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$45 million term loan facility for Plug Power Inc. to support deployment of its hydrogen fuel cell systems within fleets of forklifts and other distribution center vehicles

Holland & Knight Insights •

NY Green Bank is one of the best capitalized and most sophisticated state green banks, with expanded funding authority anticipated in the near future.

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All financing opportunities are made available through open solicitations, many of which are open on a continuous basis.

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NY Green Bank is unique in that it is integrated with broader state policy initiatives, which enables it to more easily overcome some of the obstacles associated with financing projects such as energy storage and bioenergy.

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California California’s green bank is called the California Lending for Energy and Environmental Needs (CLEEN) Center and was established in 2014 under the California Infrastructure and Economic Development Bank (IBank). The CLEEN Center utilizes IBank’s access to capital markets to assist local government agencies, schools, nonprofits, universities and hospitals in financing energy efficiency and environmental projects that support the state’s greenhouse gas reduction goals. Loans and bonds can be used for a variety of energy conservation, renewable energy, transportation and related projects. CLEEN programmatic objectives include providing access to low-cost financing vehicles, reducing the cost of clean energy and energy efficiency projects, leveraging existing public programs and funds to attract private sector investment, and encouraging private investment by reducing the overall risk of clean energy projects.

CLEEN financial products include: •

Direct loan financing from IBank

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Tax-exempt bonds in amounts from $500,000 to $30 million

The California IBank project portfolio includes: •

$2.9 million loan to the Monterey County Housing Authority for rooftop and carport solar installations, as well as energy efficiency and heating, ventilation and air conditioning (HVAC) upgrades

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$25 million loan for the city of Santa Cruz to improve its water treatment and distribution, specifically benefitting the Santa Cruz Safe and Reliable Drinking Water Project

Holland & Knight Insights •

Accessing financing from California’s CLEEN Center can be more complicated than the other major established green banks given its defined set of tools.

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While applications for CLEEN financing are continuously available, program officials encourage calling to confirm interest in a proposed project before applying.

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CLEEN’s Statewide Energy Efficiency Program (SWEEP) is well-suited to solar, wind, biomass and hydroelectric technologies.

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CLEEN is actively seeking new projects and very interested in working with companies and developers to finance energy infrastructure projects.

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Connecticut The Connecticut Green Bank, the nation’s first green bank, was established by the Connecticut General Assembly in 2011. It evolved from the Connecticut Clean Energy Fund and the Clean Energy Finance and Investment Authority, which was given a broader mandate in 2011 to become the Connecticut Green Bank. As a first mover in green banks, Connecticut has upended the government subsidydriven approach to clean energy by working with private-sector investors to create low-cost, long-term sustainable financing to maximize the use of public funds.

The Connecticut Green Bank aims to facilitate the state’s clean energy goals while supporting job creation and local economic development.

Connecticut Green Bank financial products include: •

Low-interest, no-money-down financing for home energy upgrades

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Low-interest, no-money-down financing for residential and commercial building owners to pay for energy improvements over time via property tax benefits

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Rebates for residential solar photovoltaic systems

The Connecticut Green Bank portfolio includes: •

$5 million investment to reduce operating costs and improve comfort, safety, value and affordability for tenants of Connecticut’s aging multifamily housing stock and help economically struggling homeowners make necessary energy-efficient upgrades

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$2 million investment into the Quantum Biopower facility to help annually divert 400,000 tons of food waste from Connecticut landfills, displace 5,000 tons of carbon dioxide and produce 7.5 million kilowatt hours of renewable energy

Holland & Knight Insights •

Connecticut established the first major state green bank, which has provided a template for other states to replicate.

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The Connecticut Green Bank makes financing opportunities available through a number of programs that target residential, commercial and public entities.

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While smaller in size, it remains instructive for the growth and expansion of other state-level green banks.

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Other Established Green Banks Some states or counties have established green banks with relatively small funding authorities but that nevertheless are engaged in local clean energy deployments. These small green banks may become more common.

Hawaii The Hawaii Green Infrastructure Authority was created by Act 211 in 2013. The Hawaii Green Energy Market Securitization (GEMS) Program was created by the Green Infrastructure Authority and other agencies to provide innovative financing products that bring clean energy technologies to Hawaii ratepayers, particularly underserved ratepayers. The program provides low-cost capital to finance solar photovoltaic systems and other clean energy improvements for those who have difficulty obtaining financing for clean energy improvement projects. GEMS strives to greatly reduce energy expenses and advance Hawaii’s aggressive clean energy mandates.

Rhode Island The Rhode Island Infrastructure Bank (RIIB) was established in 1989 as the Clean Water Finance Agency and was significantly expanded in 2015 to include energy and brownfield remediation initiatives. This expansion of authority significantly enhanced RIIB’s ability to provide competitive financing to infrastructure projects. RIIB works collaboratively with public and private capital providers to develop and deploy solutions that support and finance investments in the state’s infrastructure and green energy initiatives. RIIB’s first two roles are creating a centralized statewide Property Assessed Clean Energy (PACE) administration and creating a municipal building upgrade financing program. RIIB is Rhode Island’s central hub for financing infrastructure improvements for municipalities, businesses and homeowners.

Michigan Michigan Saves Holland & Knight Insights is a financing program • The proliferation of smaller green banks underscores the growing momentum of established in the green banks movement nationwide.

2009 through • Smaller green banks can provide companies an entrée into financing small clean a grant from energy projects that can be replicated or expanded into broader opportunities. the Michigan Public Service Commission before becoming fully independent in September 2011. Since then, Michigan Saves has been awarded several grants from local state agencies and the DOE to expand and enhance its programs. Michigan Saves partners with private lenders and energy providers to help residents take control of their energy costs through efficient and renewable projects. Michigan Saves is dedicated to making energy improvements easy and affordable through stimulating and supporting investments for energy improvements. The program reached a milestone in mid-2017 when it helped homeowners and businesses install 1 MW of solar energy across the state.

Maryland The Montgomery County Green Bank (MCGB), established in 2016, is the nation’s first county-level green bank.

The purpose of the MCGB is to increase investments and implementation of energy improvements across all sectors in the county. MCGB aims to create affordable, low-upfront-cost financing options for clean energy and energy efficiency upgrades for residents and businesses. This goal is achieved through spurring private capital investment, providing for programs to target and open up new markets, and contributing to a growing regional market. In 2017, MCGB established key leadership positions and launched its first programs for residential and commercial property owners.

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Upcoming Green Banks In addition to the established green banks, several states and the District of Columbia have undertaken preliminary efforts to form green banks that have not yet fully come to fruition. These newest green banks are likely to build upon the momentum from other states. In particular, Nevada and New Jersey are positioned to become reputable green banks in the months and years to come.

Nevada In June 2017, Governor Brian Sandoval signed the Nevada Clean Energy Fund (NCEF) into law. The NCEF aims to finance the use and harnessing of clean energy projects in the state for both commercial and residential projects.

This fund offers a range of financing structures, forms and techniques for clean energy projects to improve the standard of living by promoting more efficient and lower-cost clean energy projects that result in high-paying, long-term jobs. Full implementation of the NCEF is dependent upon funding for initial capitalization and operating expenses.

District of Columbia The Coalition for Green Capital (CGC), in partnership with the Center for Climate and Energy Solutions (C2ES) and Capital E, was awarded a contract with the District Department of Energy and Environment (DOEE) to consider a number of innovative clean energy policy mechanisms. This included the creation of the DC Green Bank.8 From 2015 to 2016, CGC worked with policymakers, existing institutions and market stakeholders to identify the potential need and opportunity for dedicated public financing entity. The District has very ambitious sustainability and clean energy goals, which CGC found would require more than $1 billion of clean energy investment. CGC also found that cost-effective distributed solar and efficiency opportunities were untapped in the District. CGC put forward a set of recommendations for the DC Green Bank’s creation and a plan for how it could coordinate with an effective set of programs already in place. CGC then worked closely with the DOEE and the Mayor’s Office to develop DC Green Bank legislation that was later introduced as the Green Finance Authority Establishment Act of 2017.

8. Department of Energy & Environment: DC Green Bank.

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Pennsylvania In 2015, CGC began working in partnership with the Pennsylvania Chapter of The Nature Conservancy (TNC) and with the support of state officials to produce two reports for Pennsylvania. The first report, the Pennsylvania Clean Energy Market Report, maps out existing programs and policies in the clean energy space, sizes the potential market for various clean energy technologies and identifies clean energy market gaps. The second report, the Pennsylvania Energy Investment Partnership Report, explores possible green bank (or “Energy Investment Partnership”) structures as well as a set of financing solutions and products that a green bank could use to animate more clean energy market activity in Pennsylvania.

CGC’s work with TNC in Pennsylvania is ongoing.

New Jersey Governor Phil Murphy’s clean-energy platform aims to put New Jersey on a path to 100 percent clean energy by 2050.

Current programs that are primarily driven by mandates and rebates are insufficient to spark largescale deployment and achieve these goals. In a recent report, the Environmental Defense Fund (EDF) recommends that the state should catalyze private investment through dedicated clean energy finance institutions and innovative financial structures, i.e., a green bank. New Jersey could establish this focused financing operation within a new public state bank, by expanding the New Jersey Environmental Infrastructure Trust (EIT) or by creating a new stand-alone green bank.

State officials have indicated a growing interest in established a stand-alone green bank in New Jersey similar in structure to those in Connecticut and New York.

Holland & Knight Insights •

The significant number of upcoming green banks underscores the growing momentum of the green banks movement nationwide.

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Companies interested in financing projects in New Jersey and the District of Columbia should follow the development of the aforementioned programs, as these programs are highly anticipated given the current political landscape and clean energy-related work to date.

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Other Green Bank-Related Activities Some states have initiatives that, while not technically green banks, perform functions that mirror those of established green banks. Many of these are post-American Recovery and Reinvestment Act of 2009 (ARRA) revolving loan funds that helped kick start the green bank movement. Given that these banks are not primarily dedicated to clean energy deployments, there is limited availability and authority for infrastructure-scale projects.

Massachusetts The Mass Save Residential HEAT Loan Program provides low-interest loans for the installation of qualified energy efficient improvements in Massachusetts homes and rental properties. It is offered through a partnership between local lenders and the Mass Save sponsors, including the state’s investor-owned gas and electric utilities and the Cape Light Compact, to their residential customers. The program is one of the largest residential energy efficiency lending initiatives in the nation and serves as the state’s primary tool to overcome the “first cost” barrier to adopting energy efficiency upgrades − the initial capital outlay.

Texas Texas LoanSTAR (Saving Taxes and Resources) is a low-interest revolving loan program that finances energyrelated, cost-reduction retrofits for state, public school, college, university and nonprofit hospital facilities.

Borrowers repay loans through the stream of cost savings realized from their energy cost-reduction projects.

The LoanSTAR Program Administrator should be contacted for information on current loan interest rates. As of December 2017, LoanSTAR has funded more than 290 loans totaling more than $457 million.

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Montana The Alternate Energy Revolving Loan Program (AERLP)9, administered by the Montana Energy Office, provides low-interest loans to individuals and organizations that seek to build alternative energy production facilities or implement energy conservation measures in Montana. The AERLP provides loans to individuals, small businesses, local government agencies, units of the university system and nonprofit organizations to install alternative energy systems that generate energy for their own use. The program is funded by air quality penalties collected by the Department of Environmental Quality (DEQ) and also used funding from ARRA. The next funding round is tentatively planned for July 2018.

Holland & Knight Insights •

While not all green bank or green bank-like activities have maintained momentum since their inception, the latest wave of green bank startups could help states such as Montana recapitalize their programs.

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The Massachusetts Mass Save Program finances traditional energy efficiency upgrades such as HVAC solutions as opposed to renewable energy deployments.

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Even if a state doesn’t have an established green bank, development bank or revolving loan fund, it is likely that notable financing assistance beyond tax incentives may be available in the form of bonds or grants. This is especially true for states such as Oregon, Missouri, Louisiana and Mississippi.

9. Montana Department of Environmental Quality: Alternative Energy Revolving Loan Program.I 17

International Development Banks Canada The Canada Infrastructure Bank (CIB), established in 2016, seeks to attract private sector and institutional investment into new revenue-generating infrastructure projects that are in the public interest through targeted financial incentives and structures. Projects of interest include public transit systems, trade and transportation corridors, and green infrastructure projects – especially those that reduce GHG emissions, deliver clean air and safe water systems, and promote renewable power. Although CIB is still establishing key leadership positions, the bank aims to start approving projects by the end of 2018.

CIB is very well capitalized, with 35 billion in Canadian dollars (approximately $27.2 million) in authority available to leverage alongside private sector investments. CIB intends to leverage three to four private sector dollars for each federal dollar it invests. The bank seeks projects that will contribute to long-term economic growth and support the creation of middle-class jobs. The bank will also offer expertise that could include helping investors predict project revenues before they make a commitment. CIB has also been designed to consider bankrolling crossborder projects that are partly located in Canada but will bring financial benefits to the country.

Holland & Knight Insights •

Although technically not a green bank, CIB could provide a similar set of financing opportunities for projects located in Canada.

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Notably, CIB has numerous financing tools that it can deploy in a flexible manner, making it attractive to a wide array of industry sectors.

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CIB is currently in the establishment phase, but given the significant amount of work and commitment from the Canadian government, it is expected to present significant opportunity for innovative energy financing in the relatively near term.

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CIB just recently began accepting applications, but it already has a strong pool of applicants that are highly motivated to work in an efficient manner.

Government Energy Finance Contacts Taite R. McDonald Partner Washington, D.C. 202.469.5200 taite.mcdonald@hklaw.com

Michael Obeiter Senior Public Affairs Advisor Washington, D.C. 202.469.5483 michael.obeiter@hklaw.com

To stay updated on news, analysis and strategies related to accessing government grants, loans and contracts from states and federal agencies, including the Department of Energy, Department of Agriculture and Department of Defense, visit Holland & Knight’s Government Energy Finance Blog.

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