This Op-Ed is brought to you by Brad Dockser, CEO of GreenGen, a multi-national company that transforms the world’s built environment through innovation and solutions by integrating energy, real estate, technology, and capital markets to Operate in the Green.
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To say that the United States is at a pivotal moment in its battle with Covid-19’s adverse economic effects would be an understatement at best. After months of patchwork state and local lockdowns, policymakers at all levels are working hard to facilitate the transition from economic rescue and rehabilitation to eventual recovery.
Many of these measures — from paycheck protection for small businesses to direct payments for individuals — are underwritten by Congress to supplement state and local authorities’ efforts to mitigate the pandemic’s worst economic outcomes. Fortunately, these and other legislative efforts have so far proven effective at achieving this end, at least in the short-term.
Joblessness has hit clean energy hard
However, despite the recent marginal improvement, the U.S. jobless rate rests at over 13 percent, stubbornly higher than the levels reached during the depths of the Great Recession. This troubling statistic certainly won’t be helped by the impending expiration of federal unemployment relief.
The rapidly materializing reality is that Washington’s piecemeal approach is not enough to restore the economy’s pre-pandemic momentum. This is especially evidenced by the U.S. clean energy sector which, by mid-May, has shed more than half a million jobs, as the outlooks for new renewable energy capacity additions, infrastructure improvements and other indicators of climate action grow increasingly uncertain.
Helping clean energy could bring back thousands of jobs
Investors, consumers, business and civil society leaders in the U.S. clean energy and infrastructure space are united in their appeals for lawmakers to heed the calls of their constituents and other stakeholders. It is critical to intervene on behalf of the clean energy industry precisely because it’s the industry best positioned to deliver effective, enduring economic relief, while addressing the existential risk of climate change.
An approach focused on clean energy and infrastructure will not only bring thousands of newly jobless Americans back into the workforce in the short- and medium-terms, but will also relieve external pressure upon an industry whose expansion yields net gains for climate change mitigation and adaptation.
Existing proposals ‘benefits too few projects’
Of course, this is easier said than done. After months of concerted campaigning, the most significant reprieve that Washington has granted the clean energy industry has been through tax equity financing, or the extension of safe harbor deadlines concerning production and investment tax credits for primarily wind and solar energy developers.
While this maneuver resembles the type of government assistance for which some industry stakeholders have recently advocated, it simply benefits too few projects. Even for the projects that these extensions do serve, the advantages they afford eligible developers risk being offset by the pandemic’s lingering, industry-wide effects, such as supply chain disruptions, reduced power demand and weakened investor confidence.
Coupled with the estimated multi-trillion dollar price tag associated with shifting the U.S. power grid to 100 percent renewable energy within the decade and Congress’s pressing obligation to reevaluate its appropriations priorities, it’s clear the U.S. clean energy sector is faced with an increasingly daunting financial shortfall if it is too achieve its potential. If lawmakers allow this to widen, they can expect to see the clean energy labor market continue to loosen.
The case for alternative renewable energy financing options
This is the impetus behind the recent decision by GreenGen to join more than 100 U.S. environmental non-profit organizations, clean energy companies and utilities, financial institutions and funds in collectively urging Congress to reconsider establishing an alternative renewable energy financing mechanism proposed as part of the National Climate Bank Act of 2019.
In the United States, the rationale for this particular mechanism – a Clean Energy Jobs Fund (CEJF) – is supported by similar investment programs administered by state and local level “green banks” across the U.S. which, since 2011, have activated upwards of $5.3 billion in clean energy investment nationwide, according to the American Green Bank Consortium. And of that sum, nearly three quarters ($3.8 billion) originated from private sector sources.
What this shows is the extent to which public dollars allocated via a rigorous, well-designed CEJF can help mobilize and catalyze private investment. Even still, this is not the most appealing aspect of a jobs-oriented clean energy investment fund.
Why a Clean Energy Jobs Fund would be a good idea
The true strength of a federally owned, nonpartisan and nonprofit CEJF as envisioned in the National Climate Bank Act is its ability to be financially self-sustaining after securing sufficient initial capitalization. Revenues from the collection of debt service payments and other fees on CEJF loans will be deposited back into the Fund, effectively replenishing its initial appropriations investment.
In this regard, the CEJF retains one of the more attractive details of the Clean Energy Deployment Administration (CEDA) – green bank – that was introduced in Congress as part of the broader response to the Great Recession of the late 2000s.
This CEDA and other proposed U.S. CEDAs are mostly modeled after other mission-successful, quasi-governmental, domestic financing institutions (e.g. Export-Import Bank; Development Finance Corporation), as well as certain low-cost financing entities for renewable energy that are found abroad.
Governance benefits of CEJFs
And as evidenced by state and local green banks, the corporate governance and financing structures underpinning the CEJF equip its administrators with a level of discretion not enjoyed by its private sector counterparts. Hence, the Fund’s managers can more easily make investments (i.e. committing 20% of investments to frontline, low-income and climate-impacted communities) that are typically deemed too risky by traditional financiers, use alternative metrics to determine ROI and, important in today’s day and age, respond more swiftly and effectively to crisis.
Details aside, Covid-19’s impacts upon the U.S. clean energy sector clearly show that Washington can no longer afford to delay adequately supporting the industry. The political, economic and social costs of not providing more robust and responsive public assistance would be particularly disastrous on many levels.
Brad Dockser is the CEO of Green Generation, a global energy solutions provider that engineers and implements energy efficiency solutions to lower buildings’ operating costs while improving sustainability.