Roundtable Recap: Show Me The Money

Greg Hale, Susan Leeds, and Rory Christian“Show me the money.” I guess a lot of people feel that way, because the roundtable event Economics of Energy Retrofits quickly sold out, was moved to a bigger venue, and then sold out again. But once you get a room full of people together, can you explain financing to them in terms they can understand?

Greg Hale (NY Governor’s Office) and Susan Leeds (New York City Energy Efficiency Corporation) tried mightily. They are seasoned veterans and hold senior positions in key institutions, but both found it hard to describe how money gets from bank coffers into project budgets without using terms like “securitization” and “back leveraging.” (I checked, but no, it’s not a yoga pose.)

Maybe understanding the deeper financial machinations isn’t the point, though. The real problem is that the largest barrier to energy efficiency financing is complexity (or as Leeds puts it, “perceived complexity”; maybe people are making it worse than it has to be, although I perceived it as pretty complex myself). To get the gears of energy efficiency loans turning, we’ve got to make it seem easy, normal, and routine. Since energy efficiency is solid business, it should be the darling of private markets, right? Nevertheless, for now, there’s a role for government and nonprofit lenders in the process. By showing how it’s done, again and again, they can prove the concept and make it commonplace. Then the private sector will (hopefully) take it from there, says Leeds.

Moderator Rory Christian (Environmental Defense Fund) wanted to get a better handle on New York’s Green Bank, a state-sponsored investment fund. Hale explained in clear terms the visionary thinking behind this new institution. Traditionally, 80% of state incentive programs have been spent on one-time projects. Hale said that the state’s goal with Green Bank is to “migrate away from a perpetual incentive structure at ratepayer’s expense” to a sustainable financing model. The state gets much more leverage from loans than from one-time incentives, since the funds are returned to be loaned again. 

Hale was honest about his initial doubts that NYSERDA, sometimes noted for its bureaucracy, could make the Bank work. But he says the authority has “embraced the Bank, and senior management is working hard to make it happen smoothly.” The Bank will take loan applications on a rolling basis, without a deadline, and Hale says that the Bank won’t operate under what he called the NYSERDA “cone of silence” – loan officers will be able to work with applicants to improve their application at every step of the process.

Unlike Green Bank, NYCEEC (now spun off from New York City government) deals directly with customers as well as other lending institutions. A growing focus is on reaching owners, especially co-ops and condos, when they are financing other building improvements and engaging with lenders. Doing so allows energy efficiency to “tag along” on larger projects. An example is the M-PIRE loan product, offered in conjunction with Fannie Mae. “We can do a lot, but we have to focus on the capital event in the building,” Leeds said. That’s code for “they’re doing a renovation already” but I’ve heard that from my friends on co-op boards, too. And she had the most reassuring words of the whole event: “If you have a project, bring it to us.” How simple is that?

Ultimately, the whole point of Green Bank and NYCEEC is to overcome barriers to energy efficiency lending. As Hale noted, energy savings are not the main goal of the real estate community, so “even if it makes financial sense, it’s a distraction.” He mentioned other barriers to improvements, including working with co-op boards, split incentives between landlords and tenants, and a lack of experience with technologies like cogeneration. Do you think these new lending schemes will help? Let us know in the comments.