Finding Financing Solutions with State Energy Banks


States are exploring energy banks as a way to promote energy efficiency, renewable energy and resiliency. Energy banks combine public sector funds with private sector financing to lower the cost of renewable or energy-efficient technology investments.


State energy banks are public-private partnerships that combine public funding with private capital and expertise to promote renewable and efficient energy technology.

They are public or quasi-public banks that provide an array of financing tools, including direct loans, co-investing, Property Assessed Clean Energy (PACE) financing, on-bill financing or on-bill repayment, credit enhancements and bonds. An energy bank can also utilize innovative or new financing arrangements that may be deemed too risky for the traditional banking industry to assume without public support.

State energy banks can serve to consolidate and coordinate existing renewable energy and energy efficiency programs that may be housed across various departments, programs or authorities—allowing a state to deploy a cohesive clean energy financing strategy. The goal of a state energy bank is typically to become financially self-sustaining after an initial commitment of public funding, providing long-lasting support for renewable energy and energy-efficient investments.

A 2012 report by the Brookings Institute identified three common structures for energy banks. The first model, which has been implemented in Connecticut, is a quasi-public corporation that uses existing state dollars for loans and leveraging private capital. The second structure, used in New York and Hawaii, modifies an existing economic or environmental state authority from a grant to a lending model and then introduces private investments. The third model modifies or creates an infrastructure bank that finances renewable energy or energy efficiency projects in addition to lending for traditional infrastructure projects.

Energy banks can be tailored to meet states’ specific energy or environmental goals. State legislation can determine eligible projects and sectors; the financing tools available; project guidelines; sources of initial capital; and the goals of the bank, including increasing energy security, energy resilience, domestic energy usage, low-carbon energy or local economic development.

Benefits and Challenges

Energy banks require initial public funds, such as state funds, federal grants, system benefits charges, foundation grants, private investments or bonds. While these funds may need to be authorized initially, they are then managed separately from state budgets. Energy banks efficiently leverage public funds with the multiplying effect of private sector investments.

State-led banks can reduce or eliminate upfront costs for renewable energy and energy efficiency investments through low-interest financing at commercial rates. The statewide scale of investments makes technology more competitive, drives down projects costs and helps overcome market barriers.

Additionally, a lending model—as opposed to a grant model—establishes a source of revolving capital that can lead to financial sustainability.

However, energy banks face some challenges. Energy banks assess environmental or resiliency benefits alongside economic benefits when weighing investments. These benefits may not always align and banks must determine procedures when a project with high resiliency value will only generate moderate economic benefits, and vice versa.

Additionally, inconsistent federal support for renewable energy may reduce potential benefits for investors. While energy banks can have statewide impact, this scale may be insufficient to impact the energy sector as a whole or national policy. Lastly, energy banks require time to establish financial sustainability: the Connecticut Green Bank was established in 2011 and achieved partial securitization in 2014.

Increasing Resiliency and Energy Security

State legislatures have increased their focus on energy security and resiliency, especially after the extensive damage to electrical transmission and distribution infrastructure caused by Hurricane Irene and Superstorm Sandy.

In addition to the millions of utility customers who lost power in each weather event, states had hundreds of energy assets and public facilities located in affected areas.

State governments and energy banks can identify potential projects that can both decrease vulnerabilities if power is disrupted by increasing on-site power generation or microgrids. For example, New Jersey’s Energy Resilience Bank (ERB) has directed financing to support microgrid “islanding” during outages. This would equip photovoltaic panels with advanced inverters, allowing customers to temporarily disconnected from the electric grid, or operate on “island mode,” during outages and generate electricity without harming utility crews repairing damaged equipment on the same grid. Normally, solar panels are no benefit during a power outage since they automatically disconnect to protect repair crews.

State Action

Five states have established energy banks or bank-like structures. In the 2014 legislative session, Maryland enacted study legislation (below). Arizona and California also introduced legislation. There has also been federal discussion on the formation of a federal energy bank, most recently through the Congressional Green Bank Act of 2014 and the Clean Energy Projects Green Bank (both pending). For an update on 2015 state action, please visit our 2015 Energy Efficiency Legislative Update.


Connecticut established the nation's first “green” energy bank. In 2000, the legislature created the Renewable Energy Fund (later renamed the CT Clean Energy Fund) to fund more than $150 million in renewable energy projects, education programs and technology investments. In 2011, the state legislature consolidated the CCEF and other state programs to establish the quasi-public Connecticut Energy Finance and Investment Authority (CEFIA). CEFIA is funded with both private and public capital, including proceeds from the Regional Greenhouse Gas Initiative (RGGI), commercial electric bills, federal funds and grants, and private capital. Legislation in 2014 renamed CEFIA as the Connecticut Green Bank.

The bank coordinates state energy finance programs, which include alternative fuel vehicles and infrastructure and energy storage; the bank also has a mandate to enable efficiency improvements in at least 15 percent of single-family homes by 2020. Additionally, the bank is authorized to enter into contracts to perform loan organization services. The goals of the bank include energy security and reliability, as well as jobs and local economic development. CEFIA’s 2013 annual report states the authority has invested more than $220 million, creating 1,200 jobs and avoiding 250,000 tons of greenhouse gas emissions. The bank has a leverage ratio of 10:1, where every public dollar invested corresponds to $10 of private investments.

In May 2014, the bank achieved a new level of financial sustainability through securitization of a bundled portion of its commercial Property Assessed Clean Energy (PACE) loans to a finance company.


In 2011, Hawaii launched a green bank-type institution called Green Sun Hawaii using American Recovery and Reinvestment Act of 2009 funds. Green Sun is administered by the Hawaii Community Reinvestment Corporation. Green Sun provides credit enhancements through loan-loss reserves and works with private lenders to finance renewable energy and efficiency projects for both residential and commercial customers.

Legislation enacted in 2013 created a green infrastructure authority, the Green Energy Market Securitization Program (GEMS); 2012 legislation to establish a green bank failed. GEMS is a loan fund supported by low interest utility tariff-secured bonds that are sold to private investors. GEMS will authorize bonds and operate a $100 million on-bill repayment program to finance renewable energy, energy efficiency and demand response projects in homes and businesses.


In the 2014 legislative session, the General Assembly enacted Senate Bill 985. The legislation requires the Maryland Clean Energy Center, in collaboration with the Maryland Energy Administration, to conduct a study of green banks and clean bank financing initiatives. The legislation requires the study to include aspects such as implementation and funding. Additionally, the Clean Energy Center is directed to consult with specific organizations and persons, including the Coalition for Green Capital, utilities, industry representatives and financial organizations. The Center must submit a preliminary report on December 1, 2014 and the final study must be submitted by December 1, 2015.

New Jersey

The New Jersey Board of Public Utilities announced the launch of an Energy Resilience Bank (ERB) in October 2014. The New Jersey Economic Development Authority and the New Jersey Board of Public Utilities have joint oversight of the ERB. The bank is currently funded with $200 million in public capital from the state’s Community Development Block Grant Disaster Recovery allocation. The bank will be administered by the state and will focus on projects that have both economic and resiliency benefits.

Following Superstorm Sandy, New Jersey determined that only seven percent of its total wastewater capacity has distributed generation that can be islanded. The first series of projects will support distributed energy resources at critical facilities, with a preliminary focus on water and wastewater treatment plants. The bank is currently seeking applications for these treatment plants in areas affected by Sandy. Projects can include CHP, fuel cells, retrofits, microgrids and off-grid solar inverters with battery storage. The bank’s financial model will support 40 percent of a project’s unmet need through grants and forgivable loans; the remaining percentage is financed through a loan with two or three percent interest and a 20 year term. The bank will also work with applicants to identify other possible funding sources.

In the 2014 legislative session, the General Assembly passed legislation to establish an energy resilience bank, however Governor Christie vetoed the legislation stating the bill did not identify funding sources and presented barriers to eventual capitalization of the bank. Additionally, at that time the Energy Resilience Bank had already been proposed by the governor and the United States Department of Housing and Urban Development had approved use of community block grant funds for the bank.

New York

In his state of the state address in 2013, Governor Cuomo proposed the establishment of a state green bank. The New York Green Bank was established later that year by a Public Service Commission order after a petition for the bank’s capitalization was filed by the New York State Energy Research and Development Authority (NYSERDA). The commission determined the bank would serve as a division of NYSERDA, as the bank aligns with the NYSERDA’s mission to reduce dependence on fossil fuels, lower energy bills, reduce emissions, create economic development and improve resiliency. The Green Bank is funded with both private and public capital, including $165.6 million allocated from the Energy Efficiency Portfolio Standard, Renewable Portfolio Standard, and system benefits funds.

The Green Bank will focus on projects that are economically viable but were not financeable prior to the bank’s establishment due to an undeveloped secondary market for clean energy financing, the large upfront costs of some projects and other market barriers. The Green Bank provides bonds, credit enhancements, loan warehousing, direct lending and investing, and structured products.

In October 2014, Governor Cuomo announced the bank’s first transactions, which totaled more than $800 million and will result in an annual reduction of 575,000 tons of carbon dioxide. Initial transactions include small-scale commercial solar installations, CHP projects and energy efficiency retrofits. Unlike other energy banks that operate specific programs, the New York model allows private investors to identify projects. The bank has an open solicitation for financing for projects that include renewable energy, energy efficiency, natural gas-fired CHP, electric vehicle infrastructure, fuel cells, anaerobic digester gas systems and offshore wind.


In 2013, Vermont enacted legislation to establish the Vermont Clean Energy Loan Fund (VCELF). The VCELF will serve to consolidate existing renewable energy and energy efficiency programs in the Vermont Economic Development Authority (VEDA). The bill authorizes VEDA to borrow up to $10 million from the State Treasury for loans, loan guarantees and other forms of financing for commercial projects; while additionally providing $6.5 million to finance residential energy efficiency improvements. The VCELT currently does not include private sector funds.

Legislation in 2014 granted the Treasurer additional flexibility to structure a credit facility for the benefit of VEDA to provide funds for sustainable energy projects through the VCELF.