Community Development Innovation Review

March 2014

Bringing Down Green Financing Costs: How a State-sponsored Bank Might be the Key


The costs of clean energy solutions are falling. As one example, solar panel prices are down more than 50 percent in the last three years. Costs of batteries, wind turbines, and fuel cells have also declined. As promising as that is, soft costs—installation, permitting, and financing—now account for nearly two-thirds of the cost of a residential solar system, and they have not declined. There is little hope of providing clean energy solutions at scale until the soft costs are brought under control. One promising innovation is a state-sponsored “green bank” to lower finance costs for the deployment of clean energy. Despite nearly record low interest rates, financing costs for the clean energy sector remain high—not for the largest, utility scale projects—but for smaller projects, including small business and residential. Because the ongoing costs of clean energy are very low, given that wind and sunlight are free, the solution to reducing clean energy costs is reducing the upfront costs. And costs are costs—whether they are hardware costs or financing costs. The key reason of why financing costs are high for clean energy is that the industry is financed in an old-fashioned, anachronistic way. The energy technology deployed may be 21st century, but the financing structures used are out of date.

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Other articles in this issue

Mixing Asset Building with Energy Efficiency: A Recipe for Financial and Environmental Sustainability

The Future of the Clean (Green) Economy

Cleaner Energy and Health: Household, Local and Global Benefits

Financing Energy Efficiency Retrofits of Affordable Multifamily Buildings

Manufactured Homes Help Both Save the Planet and Save Money for Low-Income Owners

Utilities and Community Developers Partner to Improve the Energy Efficiency of Affordable Rental Housing Nationwide

Integrating Energy Efficiency into Mortgage Financing: Promising Efforts in the New York City Multifamily Building Sector

Home Energy Efficiency and Mortgage Risks: An Extended Abstract

Charter Schools Ripe for Green Investments

Financing Energy Efficiency in Low-Income Multifamily Rental Housing: A Progress Update from the Low Income Investment Fund

Neighborhood Health: A New Framework for Investing in Sustainable Communities

Understanding the True Benefits of both Energy Efficiency and Job Creation

Can Cities Lead the Way in Innovative Energy Retrofits for Single-Family Homes?

Lenders’ Property Standards and Energy Efficiency: The Vital Link for Affordable Housing

Energy to Heal: Health Care, Climate Change, and Community Resilience