LectureHop: Mean Green Finance Machines
Written by Bwog Staff
Financiers, environmentalists, and concerned citizens packed into Faculty House on Thursday night for “Innovative Methods of Green Energy Finance”, a panel discussion sponsored by the Earth Institute. Steven Cohen, Executive Director of the Earth Institute, opened discussion with a simple observation, “Most people are aware of the need to switch from a fossil fuel based economy to one based on renewable energy.” Given this consensus, the moderator mused, why is there need for a discussion of “Innovative Methods of Green Energy Finance”? Shouldn’t the merits of green energy, financially and environmentally, speak for themselves? He argued that they succeed in doing so. But sadly, from his perspective, initial costs inherent in switching to green technologies have clouded the long term vision of investors and stymied those with little cash or credit available. With this paradox in mind, Cohen opened discussion to the night’s panel.
From the beginning, Property Assessed Clean Energy (PACE) loans took center stage. PACE loans are loans made to property owners by municipalities to retrofit buildings with green technologies like solar panels, as well as to make environmentally friendly upgrades like installing double-paned windows. The innovative aspect of PACE loans is that the cost of repaying them is embedded in the property tax of the person taking out the loan. In this way, individuals do not continue to pay for upgrades to the property if they move away. Also, the increase in property tax is more than offset by savings in utility bills. This is what one panelist referred to as the “beauty” of the PACE system: even after taking out a loan, property owners are essentially earning money.
Given the success of PACE programs in a handful of communities across the country, panelists were asked to consider how the loan programs might be “scaled up”. One panelist pointed out that the spread is already underway, as both Bedford, NY and Babylon, NY are considering similar programs. Another panelist claimed that large capital providers were key to the expansion of loan programs. A third agreed, saying that PACE programs have been a “tale of haves, have nots, and innovative thinkers”. Using decidedly Marxian language to describe a purely capitalist phenomenon, she said that wealthy communities have the money to begin programs on their own while less affluent communities lack the capital to get similar loan systems off the ground.
And this is where the innovative thinkers (i.e. investors) come in. To fund PACE programs, simply securitize and package the debt of homeowners! Given the recent financial crisis, your correspondent found it somewhat suspect that derivatives based on loans to homeowners would be the financial backbone of the green revolution, although the PACE mechanism seems to be working swimmingly where it has been implemented.
As discussion wrapped up, moderator Cohen inquired as to which policy initiatives each panelist would bring to fruition if they had a “magic policy wand”. One panelist suggested a Google Maps-esque overlay showing energy consumption, which would help individuals understand how much energy they consume compared to other parts of the population. Magic policy wand apparently in mind, this bold young panelist admitted, “I wanna make a joke about Harry Potter.”