In the Connecticut Green Bank’s five short years of existence, it’s sparked substantial private sector interest in clean energy financing. With a secondary market in sight and new initiatives for manufacturers, the Green Bank is hoping to take that to the next level.
The Green Bank’s Commercial Property-Assessed Clean Energy, or C-PACE, program provides a useful measure of the organization’s influence in increasing private investment into the world of clean energy. The Green Bank is now nearing 200 applications for C-PACE since the program’s inception in 2013, with projects ranging in size from $30,000 to $8.3 million.
Bryan Garcia, president and CEO of the Green Bank, said that as C-PACE has picked up steam, the Green Bank has invested less and less public money into energy improvements in the state of Connecticut.
“We were trying to demonstrate to the market that there were endless consumers who wanted energy improvements,” Garcia said.
The Green Bank has also made moves toward the establishment of a secondary market in clean energy finance, a move that could help to accelerate institutional investment in that sphere. The Green Bank saw its first private securitization of C-PACE assessments in 2014.
The Green Bank then partnered with Hannon Armstrong on its C-PACE program in late 2015. Hannon Armstrong committed $100 million in financing to the program and ultimately hopes to build a pool of PACE-assessments that can be securitized, rated by an agency and sold on the secondary market, said Parker White, Hannon Armstrong’s director of commercial real estate.
“We want to be able to facilitate the Connecticut Green Bank’s mission of providing capital to those who need it to improve the building stock to be more sustainable,” he said. “We also want to be able to generate a pool of PACE assessments that are professionally underwritten and professionally structured so that they can be presented to a secondary market with a gold standard seal of approval.”
What Hannon Armstrong especially liked about C-PACE was its standardization across the state, White said. A PACE project in Hartford is underwritten to the same requirements as a project in Stamford, in other words.
“Being able to look at Connecticut as a single program with consistent standards across the program substantially alleviates the challenges that can go into an otherwise fragmented underwriting process,” he said.
For now, White doesn’t want to put a time estimate on when Hannon Armstrong will offer that pool of securitized PACE assessments to the secondary market. Presently, he said, the firm’s focus is on the initial origination and underwriting of those financing vehicles.
Education And Activism
The Green Bank hopes to generate more interest in the C-PACE program with its new Energy on the Line initiative. That program, a partnership between the Green Bank and the Department of Economic and Community Development, provides grants up to $50,000 to manufacturers for energy efficient improvements to their properties. Those funds can complement work done through the C-PACE program, Garcia said.
If the program attracts 10 or 20 applicants, that should signal to the market that manufacturers do indeed want clean energy improvements, he said.
The Green Bank, and others, would also like to stimulate more interest in energy improvements on the part of non-owner occupiers, who be a tougher sell than owner-occupiers who naturally have an immediate interest in reducing their energy burden.
That’s something that Kent McCord also sees as an obstacle to rolling out more green energy across Connecticut. McCord is now the director of business development in the state of Connecticut for Solect Energy, a developer of commercial-scale solar photovoltaic projects. Based in Hopkinton, Massachusetts, Solect expanded into Connecticut late last year, and the company tapped McCord to lead its efforts in the Nutmeg State.
The Green Bank was at least one draw in bringing Solect to Connecticut. McCord told The Commercial Record that state policies and programs aimed at encouraging energy efficient upgrades to buildings, along with traction in the market that’s already underway, were several big draws. But he said Solect also saw opportunities in the Nutmeg State.
“We think it’s a little bit underserved in the midmarket commercial building space and that’s where we specialize,” he said. “I think the fact that the Green Bank has commercial financing solutions is a strength for the Connecticut market. I think that came into the decision making to some degree.”
Solect’s move into Connecticut may be an example of the ripple effect clean energy policies can have for a state. Those energy upgrades mean work for developers, like Solect, and for contractors who install those solar panels. With the infrastructure firmly in place to support these types of projects, Garcia said the challenge now is getting consumers to act on it.
“You can think of C-PACE as an innovation,” he said. “It’s a financial product we’ve developed, but the challenge really is how do we educate households and businesses to see the value of clean energy, and then how do we activate them to make that decision? The challenge is education and activation.”
