DATE
October 8, 2012
To:
Margot Brandenburg, Rockefeller Foundation
From:
Jeffrey King, Clean Economy Development Center
Re:
Close of grant report, Rhode Island clean energy project
The Clean Economy Development Center (CEDC) has completed its one-year commitment in
Rhode Island, developing a strategy to build good jobs through building efficiency in
coordination with the office of General Treasurer Gina Raimondo. This memo summarizes
work done on the project, successes and challenges, outcomes possible with additional
support, and links to national ongoing efforts.
WORK COMPLETED
Despite the challenges of an intervening special session of the legislature, CEDC made
progress by completing:
• Multiple trips to Rhode Island, including meetings with: Treasury Staff, City of
Providence, Economic Development Corporation, Emerald Cities, LiUNA, the
Governor’s office, Admiral’s Bank, Environment NE, state legislators, the state energy
advisor, the Housing Authority, the Energy Efficiency Resource Management Council,
private capital investors, National Grid, contractors, and the Rhode Island Foundation
• Frequent follow up calls and conference calls with key players
• Convened a meeting of stakeholders to explore a plan for $360 million in retrofits of
Providence City Schools, plus additional meetings to refine that plan and present it to
the Treasurer
• Document review and summary of relevant bills passed in the last legislative session
and existing statute
• Connected Treasurer Raimondo to the Clinton Global Initiative where Rhode Island
was featured in a speech by AFL-CIO President Rich Trumka and the Treasurer
declared her intention to retrofit the Department of Transportation building as a
beacon for public efficiency
• Commissioned Drinker Biddle and Reath to write a summary powerpoint of best
practices in retrofit financing to guide future work.
• Prepared three implementable plans as menu of options for the Treasurer: Retrofit of
Providence Public Schools, Retrofit of Department of Transportation building, and a
residential program with Admirals banks to finance and market home retrofits.
CEDC entered this project anticipating challenges in identifying suitable projects and partners.
Initial project identification proceeded much more quickly than anticipated, giving CEDC three
different viable implementation and financing routes:
Financing municipal and state large scale retrofits
The benefits of large scale projects are that they bring in outside capital, have lower and fewer
coordination hurdles, and provide showcase projects. Several entities, most notably Rhode
Island Economic Development Corporation (EDC), favored focusing on these buildings and
piloting financing vehicles, including off-balance-sheet models, to tip municipalities towards
execution. Since local governments already had funding to purse performance contracting,
CEDC and the Treasurer’s office could provide the final push to make a pipeline of projects
viable. In the meeting with Mike Sabitoni from LiUNA, Matt Stark from the City of Providence,
and Andew Cortes from Building Futures, it became clear that significant progress had been
made in Providence to identify specific projects and to create the data streams necessary for
financing. All that was needed was a source of capital and a mechanism.
An additional project was available through the Department of Transportation. This building,
located adjacent to the Capitol, would have provided a showcase project, even though the
retrofit financing was a standard certificate of participation (COP) model. However, because the
mechanisms for retrofitting this building were relatively simple, the Treasurer could pilot use
of pension funds or other sources of capital with little risk.
Coordinating an on-bill repayment residential program
A program focused on small scale residential would likely only need to coordinate existing
assets, market programs, and provide a platform to remove burdens from the customer.
Integrating on-bill repayment with National Grid could make a fully robust program. A
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residential program would touch more consumers than a large-scale project, and would create
many jobs for small businesses and local RI contractors. It would also have an easier path for
financing. However, a residential program may require creating a new entity along the lines of
Clean Energy Works Oregon, and the logistics and leadership of such an entity may be
cumbersome. Nevertheless, the Office of Energy, Admirals Banks, and other entities seem
committed to this path.
SUCCESSES AND CHALLENGES
Despite having three viable paths for implementation, CEDC was not able to complete project
implementation on the timeline described in the scope due to mitigating factors. The success
and challenges in implementation are described below:
Successes:
• Asset/challenge map defined: The first step in the project was to define the assets
and challenges to implementing a clean energy jobs strategy. CEDC assessed existing
programs and policies for viability in assisting project financing and implementation
along the potential project routes. CEDC also mapped out the influential stakeholders
and persons in the space and has made progress in meeting with key people.
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• Initial financing model options explored: CEDC has began discussions with large
multinational financial entities that have a strong interest in financing efficiency and
distributed generation projects. For residential projects, Admirals Bank has shown
strong interest to piloting a low cost loan program.
• Utility role defined: Rhode Island's utility environment is conducive to efficiency
projects. With a single, statewide, decoupled gas and electric utility, the state has a
coherent, single point of contact for utility engagement. Moreover, high utility rates
and strong efficiency mandates mean National Grid is motivated to engage on
efficiency. Similar to work done in Connecticut, CEDC is examined repurposing public
benefits charge money to leverage financing.
• Workforce coordination begun: CEDC has had several meetings with Mike Sabatoni,
head of the state building trades council, and Andrew Cortes of Providence Plan, a
workforce engagement NGO. CEDC is actively worked to build existing workforce
training, equity, and access into all of the potential projects.
Challenges:
• Leadership is essential but not sufficient. CEDC has strong initial leadership from
the Treasurer. The Treasurer provided critical connections and access. However,
CEDC learned that while leadership is essential, it takes sustained commitment of time,
resources, and personnel to launch a complex process.
• Projects need leadership, not the other way around. CEDC began by engaging
leadership, and sought projects to utilize the leadership. CEDC found, too late, that a
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better model is to find projects that are ready to move, and match those projects to
catalytic leaders.
• Significant ground presence is needed. CEDC was funded to do limited trips to
Rhode Island, relying on local contacts to do face to face meetings in the interim
between trips. CEDC discovered that it was necessary to have far more face and
ground time in the state, which was not possible in the funding arrangement.
• Navigating turf politics more difficult than anticipated: As with any state, turf
politics are challenging. However, the smaller number of players in the efficiency and
renewable energy community in Rhode Island made the challenge particularly acute.
Nevertheless, CEDC successfully navigated each issue with personal engagement and
transparent communication of goals, objectives, and credit sharing.
• National Grid is a multistate utility: While there are many advantages to working
with National Grid, because it is a large utility with headquarters outside Rhode Island,
and has many existing efficiency programs, it is difficult to engage or access
entrepreneurial decision makers in the company. Without significant political effort,
the tendency will be towards business as usual.
• Initial defined projects appear to be less viable than thought: While CEDC believed
that the initial project list was close to implementation, political and bureaucratic
realities made those projects less viable. CEDC stepped back to begin evaluation of
Warwick public schools as an implementation platform, but this process was more
lengthy than activating shovel ready projects. In the end, the activation energy for new
project was too much for the middle period of the commitment.
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NEXT STEPS
While CEDC was not able to move to the implementation phase of the commitment, it did
identify key next steps and laid a foundation for future work. In addition, CEDC used its
experience in Rhode Island and other place to develop a set of potential policies for
implementation. With a market identified and policy tools developed, CEDC can work to define
specific projects and execute them through dedicated on-the-ground participation.
States across the U.S. are trying to create programs and entities that can accelerate investment
in clean energy - both renewables and energy efficiency. Last year, Connecticut passed a bill
creating a "green bank" to use ratepayer dollars for clean energy financing. In Hawaii, the
legislature just passed a bill to create an account to fund clean energy projects. And Oregon has
had a long standing State Energy Loan Program (SELP) which has formed the core of its efforts
to create new policies that bring low cost capital to projects. These are just a few examples.
Yet what constitutes a truly successful financing program? In actuality, no one program or
policy is sufficient to capture the range of pathways available to leverage low cost capital and
deliver that capital to projects. As states move from older tax incentive models to direct
financing assistance and leverage of private capital, there are several generic types of tools and
programs that constitute an effective program. Some states have implemented more, some
fewer, and all have room for innovation. CEDC can help states move towards a clean energy
financing "checklist" below.
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 Ongoing source of low cost loan funds sufficient to meet demand: The backbone
of any financing entity is the ability to loan money for projects at interest rates
that are better than what is generally available on the market. This financing can
revolve - monies loaned out that are repaid can be loaned out again. However,
the most effective programs need to have enough loan capacity to meet demand
for multiple projects, and the ability to assess and evaluate projects of many
different types. If there is insufficient capital available, the uncertainty of funds
availability may lead those seeking loans to decide the risk is not worth
application or project development.
 Credit enhancement fund of one-time dollars, an ongoing stream of money, or
both: For some projects, low cost capital isn't enough to make debt feasible,
especially on deep retrofits with long payback periods. Having a fund linked to
loan funds that can bring down the interest rate and/or project cost can create
demand for loan funds and catalyze more viable projects. Such a fund could have
one off deposits of funds for economic development or energy development. For
example, a legislature could appropriate dollars as available to accelerate
projects. However, such a fund could also have an on-going stream of dollars,
such as from a public benefits charge. An important variation of this fund is the
ability to use a stream of payments, such as from energy savings, to repay the
principal of the debt. This arrangement allows for publicly facilitated paid
savings models in public buildings.
 Pathways for private capital and ability to link it to (2): Not all loan money should
or can be public capital. Programs that can accept and blend private capital into
the loan mix offer a more varied portfolio of loan services. Private capital may be
from institutional investors, may be pension funds, or may be any other kind of
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low cost, patient capital. It is important to link this capital back to the credit
enhancement fund and generate data from projects sufficient to convince
investors that the risk profile is measurable, known, and competitive.
 Flexible management entity that delivers financing to project: Having low cost
capital available is insufficient if projects have difficulty accessing it. Projects may
be large or small scale renewables of many different types of technologies, or
may be efficiency projects in industrial, commercial, public, or residential
buildings, each with their own unique characteristics. Managing that level of
complexity when evaluating loans requires broad technical expertise, customer
service, and a relationship with contractors to ensure job quality.
 On-bill repayment: For efficiency projects in particular, paying for retrofits
through the utility bill can create additional financial security, and can ease
repayment for customers. The on-bill repayment mechanism should be linked
back to the financial entity.
 PACE enabling legislation: Property Assessed Clean Energy, or PACE, is a method
of repaying retrofit financing on the property tax bill. While infeasible for many
types of residential projects, it can be a mechanism for repayment in commercial
projects, and is especially useful for local government participation.
 Statewide metrics for tracking progress and prioritizing investment: No matter
the type and source of capital, it is critical to track progress and prioritize
investment to provide assurance to investors (which in many cases is the public).
Energy performance scores, regular evaluation, and ongoing monitoring and
verification are all part of a successful program. These can be done by private
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entities (like ESCOs), non-profit entities, public bodies, or public private
partnerships.
These categories are complex, and clearly can encompass multiple kinds of projects. There are
also many other kinds of financing arrangements, such as tax credits, feed-in tariffs, or grants.
This matrix focuses solely on financing of the type that might be obtained from a "bank".
Together, these strategies, gleaned from Rhode Island and other states, provide a pathway to
strong projects and programs.
APPENDICIES
1. Report to the General Treasurer of Rhode Island: Financing Programs for Energy
Efficiency and Renewable Energy: Implementation at Scale (draft) – Drinker Biddle and
Reath
2. Template Community Benefits Agreement and workforce standards
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