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Md. ‘green bank’ bill seeks to boost financing for clean energy projects

Even though the state spends hundreds of thousands of dollars every year on clean energy programs to meet greenhouse gas reduction standards, a study from the Maryland Clean Energy Center found that private investments are largely out of the picture and should play a bigger role. A bill in the legislature seeks to change that.

If passed, House Bill 705 and Senate Bill 726 would establish a “green bank” called the Clean Energy Technology Financing Fund to attract private-sector money that can be used to provide loans, gap financing and other services to low- and moderate-income households and small businesses looking to make energy upgrades.

“This is an economic development effort,” said Katherine Magruder, executive director of the Maryland Clean Energy Center, which led a two-year study as part of a 2013 General Assembly directive.

The study found the state needs help from the private sector to stimulate the clean energy sector.

“Today, Maryland spends nearly half a billion dollars per year on clean energy programs, with effectively all of that capital going to grants and rebates. These programs play a vital role in attracting demand for adoption and raising awareness of clean energy. However, they largely are not designed to stimulate the private, third-party investment that is needed to truly bring markets to scale,” the study said.

The study’s findings led to the creation of the bill sponsored by Del. Dereck E. Davis, D-Prince George’s County, and Sen. James N. Mathias, Jr., D-Somerset, Worcester, and Wicomico Counties. The bill has been referred to the House Economic Matters Committee, which is chaired by Davis, and the Senate Finance Committee, of which Mathias is a member.

Jeffrey Eckel, President and CEO of Hannon Armstrong, Sustainable Infrastructure. (Maximilian Franz/The Daily Record)

Jeffrey Eckel, President and CEO of Hannon Armstrong, Sustainable Infrastructure. (Maximilian Franz/The Daily Record)

For Maryland to meet its legally mandated Renewable Portfolio Standard, the state will have to invest $5.7 billion between now and 2022, but the state’s “clean energy investment need” is more than $8 billion, the report said.

“That cannot come from public-sector spending,” said Magruder.

If passed, the program would be financed by using $30 million of an unappropriated fund balance within the Maryland Strategic Energy Investment Fund, which includes revenue from the Regional Greenhouse Gas Reduction carbon allowance auction.

The small-business community also sees benefits in having a green bank as a way to expand businesses while making loans available to low- and median-income customers, including new business that want to be energy efficient but can’t afford the initial capital expense.

Michael Giangrandi, chairman of the Maryland Alliance of Energy Contractors, which represents more than 400 contractors in the state, said he’s seen what a lack of financing can do to his industry.

When customers wanted to get a loan for upgrades, the best loans available came with hefty interest rates. More than half of the deals would fall through, said Giangrandi, who is also the president and owner of A.J. Michaels in Baltimore.

For the past few years, Giangrandi and other Maryland contractors have been participating in the Maryland Home Energy Loan Program with the clean energy center, which gives customers 10 percent interest loans. The program has been successful and has a low delinquency rate because people were able to use their savings from the energy-efficient equipment to pay off their loans, said Giangrandi.

While the program will run out of money in the coming months, the establishment of the green bank will fill that gap, he said.

“It’s an exceptionally beneficial program for job creation and for promoting programs that will save energy.”

Jeff Eckel is CEO of Hannon Armstrong, a publicly traded energy financing company in Annapolis. He said he was initially skeptical about green banks because he’s generally not in favor of government-run banks. His firm is now a lender to Connecticut’s green bank, and he supports the Maryland legislation. He supports green banks because they allow “funding transactions in investment technology that are too early stage or too small attract private sector funding.”

Eckel has been a board member at the Maryland Clean Energy Center and was part of the steering committee that conducted the green bank study.

“I think this is part of the solution.”

Other states, including New York, Rhode Island and Hawaii, also have green banks.

Jeff Schub, vice president of the Coalition for Green Capital, which advised Maryland on the green bank study, said the state will be following a “well-tread path” if it passes the bill.

“I think this bill is a very wise move for the state.”