Coalition for Green Capital

Our co-chairman Reed Hundt has been regularly blogging on issues relating to the Green Bank on TPM Cafe at Talkingpointsmemo.com. Here are some of his latest posts:

How to create millions of jobs By Reed Hundt - January 31, 2010, 11:50PM The White House estimates that the jobs bill could cost 100 billion dollars. Roughly that amount will create about a million jobs. That is eight million less than the goal of full employment by end of 2012. The gap is to be closed by private sector investment. The key to catalyzing rapid private sector investment is action, both by way of regulation and modest financing.

Agencies can open closed markets and create new markets that call for new investment. In the communications sector that would occur if the FCC added certain new spectrum to the pool of commercially available airwaves, or changed universal service to match broadband investment. In the energy sector a national renewables standard plus a very modestly funded Green Bank would cause utilities to invest in retrofits and clean electricity generation. The Green Bank would need capital in an amount equal to about five percent of the desired lending, as long as the target projects are not technologically risky and can couple with a power purchasing agreement that assures the clean electricity will be purchased. Thus capitalization of $10b would produce about $200 billion in lending, which is matched up with $200 billion in equity investing would total $400 billion, and create about four million jobs, as well as replace about a fourth of the carbon-intensive electricity generation of the United States with cleaner alternatives, ranging from wind, solar, biomass and natural gas in the short term to nuclear and geothermal in the longer run.

With current tax treatment and low cost financing, all the alternatives can be brought on to the grid at or below existing electricity prices for at least the next three years. It's reasonable to believe that a million new jobs could be created over three years from this effort, which of course would also guarantee that America would lead the world in carbon abatement.


Congress will not, and should not, buy services or hire people in enough volume to create full employment. Therefore, the executive branch has to choose between a regulatory program for job creation or trust in the natural resilience of the American economy. Surely the unreconstructed and still shaky pillars of the economy ought to give the White House a healthy fear of excessively modest action, especially when the useful regulatory interventions are in any case pro-competitive, pro-climate, pro-productivity.




President Clinton By Reed Hundt - January 29, 2010, 9:36AM President Clinton has been endorsing a Green Bank. See as follows:


A million green jobs, cheap!

Obama's green-collar economy dream may wilt in his deficit freeze. But Bill Clinton says he knows how to save it

BY JOE CONASON

...At least one substantive answer was provided to the Obama White House by former President Bill Clinton. For several months, Clinton has been lobbying administration officials, notably including Vice President Joe Biden, to create a new energy efficiency loan guarantee program that he says could result in well over a hundred billion dollars in new investment -- and employ more than a million workers to install green retrofits on commercial, institutional and residential buildings.

Last fall, Clinton directed staff at the Clinton Climate Initiative -- one of his foundation's programs -- to prepare a lengthy memo on the problems and potential of a Federal Energy Efficiency Loan Guarantee Program. According to their analysis, such an initiative could require as little as $9 billion in commitments by the U.S. Treasury to leverage $$67 billion in bank financing, because the savings on energy retrofits are both substantial and reliable. In a late October 2009 memo to Biden, White House energy advisor Carol Browner and Obama economic advisor Larry Summers, Clinton said he believed that the loan to guarantee ratio actually could be as high as 10-to-1. Under that scenario, banks would lend building owners as much as $150 billion if the Treasury put up $15 billion -- and every billion dollars would create between 7,000 and 9,000 jobs in the construction, architecture and manufacturing industries.

The Clinton memo recommended further that the program be structured so that loan applications would lead to construction starts within five months. Promoting this idea among Democrats in Congress as well as administration officials, Clinton has noted that if the loan program could be implemented swiftly and successfully, a million new jobs would become available before the November midterm elections.

While there are many reasons why building owners and lenders have failed to capitalize on the savings available from energy retrofits, there is little disagreement on their benefits for both markets and society. Other countries, notably including Germany and Sweden, have made great progress toward their own carbon-emission objectives by deploying such "unsexy" measures...





A Bank by Any Name By Reed Hundt - January 23, 2010, 12:16PM Senator Jeff Bingaman (D-NM) has joined Congressman Van Hollen (D-Md) in calling for a Green Bank to be created as part of the prospective jobs bill. They are both to be praised, and listened to.

Here are some basic reasons they are right:

First, there is a crisis in lending to all alternative energy technologies. In the absence of reliable demand for clean electricity, continued anxiety about all loans from commercial banks still burdened by troubled assets, and worries about technological risk, the reality is that even conventional clean energy projects are not attracting financing that is adequate to assure returns to equity above modest hurdle rates, without raising prices for the resulting electricity to levels that are unacceptable to regulators or customers in unregulated markets. For less conventional projects, the situation is worse.

Second, to create millions of jobs in this sector starting right away and extending for at least the next three years there are no ways to proceed other than a combination of:

-- financing immediately deployable wind and solar and biomass projects,
--financing natural gas,
--financing efficiency gains implemented by utilities and energy service companies,
--giving tax credits and grants in lieu of credits to all financed projects (extending the stimulus, in effect),
--extending department of energy support of innovative breakthrough technologies,
-- and giving tax credits to home owners for efficiency gains.

There is no way to achieve the Van Hollen goal of several million new jobs by 2012 without all these steps. And there is no way that this goal is impractical in execution or undesirable as a policy matter.

Third, it is long past time to stop saying "it would take too long" to get a lending authority up and running. I have myself started a half dozen companies that commenced operations in less than a month after incorporation. Starting is not the same as total completion of a full range of activities, but starting is progress and also is job creation. The success stories of the Haitian relief effort (and there are some), the recovery of the cellular networks after various natural disasters, numerous military responses -- many other examples teach that in a couple of weeks productive and complex efforts of all kinds can achieve measurable and meaningful outcomes. The entire Obama transition was start to finish a 90 day story of business creation and completion, going from zero to a massive output of very good -- in my opinion -- thought and research. The Nixon Wage and Price Administration was created in 17 days and by 30 days had preliminarily impacted all businesses in America. I could go on. As FCC chairman and CEO, I was responsible for a team that reorganized the 2,000 person agency, hired 400 people, laid off hundreds, closed dozens of offices, put the agency on the Internet, and overhauled regulation in virtually every sector of the communications and media parts of the economy at the behest of Congress. All delays were a function not of the limits of human endeavor -- the great people at the FCC knocked themselves out and the industries gave great input on infinitely complex issues. Delays such as they were came from the regulations of the administrative process, the oversight of OMB, the regulations relating to government contracting, and judicial review. Anyone at the Department of Energy today could tell you that the same problems slow sometimes to a maddening pace their efforts to create jobs in conventional and in breakthrough technological areas. Hardly any words are needed in a jobs bill to speed activity, without sacrificing transparency, integrity of thinking, or any of the virtues of good governance. I have been fortunate to run or co-run companies, coalitions, commissions, cases, an agency, and various campaigns for causes. I am absolutely convinced that honest and wise disbursement of other people's money --- taxpayers' or investors' or contributors'-- is not guaranteed by complex, time-insensitive and redundant reviews of action. It is guaranteed by transparency, accountability, hard work, good culture, clear governance -- and simple straightforward and expeditious decision-making. Time, by contrast, will kill all deals, and thwart all efforts to any goal.

Fourth, venture capital and private equity and utilities and home contractors and manufacturers and all interested investors all have to be given the boost of low cost long term financing if we want both large scale immediate job growth and also a steady path from a carbon intense to a clean platform for our economy. I see brilliant technologists -- such as Bill Gates just this week -- extolling the virtues of cutting edge breakthrough inventions; others are sure that nuclear power is the right future for America; some are convinced that just funding single deployments of difficult technologies will prove or disprove everything we need to know; and some believe a third or more of all needed energy can come from wind and sun in conventional existing form factors. This reminds me, with a blinding flash of recognition, of the debates about the new thing called the Internet that occurred in dozens, probably hundreds in fact, of meetings that as FCC chair I attended or called in 1993-97. Everything said in total proved to be right and almost no specific idea turned out to be exactly right. But here is what I learned: only when the big, conventional, incumbent proprietors of the existing fixed line and cable networks decided to participate in the great conversion to mobility and data did we see the future really unfold. So there is no bright line between conventional and breakthrough, and no clear demarcation between an invention and a deployment of something conventional. Much learning in fact comes from repeated practice as opposed to laboratory experiment or single field tests of any scale.
What is important is to have entrepreneurs push incumbents and have incumbents respond by adopting conventional changes now and more innovative changes just a little later. That way progress is made, and fascinatingly it turns out that the conventional deployments -- wind and sun and biomass and gas in the case of energy, and narrowband internet in the case of the salad days of the Internet -- create the demand for more innovative approaches. As an example, if we finance 30 gigawatts of wind projects starting now (all possible), that will be a huge demand market for all the storage technologies that venture capitalists and energy department researchers can come up with. So too narrowband internet created demand markets for Cisco and a platform for Yahoo!, only to give way in time to broadband. I need hardly add, but will, that the million more new jobs and 2.1 trillion dollars of net stock sales that came from the Internet driven investments were well received by the country and the otherwise hard to please tax authorities of government at every level.

What's the therefore? It is that I hope the proponents of financing breakthrough technologies that will pay off in distant years (which we surely need) and those desirous of financing wind, sun, biomass and gas right away could agree -- and agree with the efficiency mavens too -- that the right answer is ALL, and not all of one and none of the others.

Fifth and last, we have to aim for cheap and abundant clean energy that replaces carbon intensive energy, and we have to achieve that replacement much sooner than 2020 and thereafter for two huge reasons: we need the jobs now and we need to stop climate change now. I say "cheap" because no new technology has ever conquered the world by coming in as an expensive but identical version of an existing good or service. The problem is that clean and "dirty" electricity consist of identical electromagnetic waves. If clean costs more than dirty, why would we think everyone will buy it? There are only two solutions: raise the price of "dirty" or lower the price of clean. In politics as in many other walks of life, "both" is often a great answer and "both" is the right response to the "identical wave" problem. We want the price of "dirty" to go up and the price of "clean" to go down. As it happens, by the inexorable mathematics of capital formation, the lower the cost of capital, the lower the necessary price for the product produced by that capital. In other words, use a long term low interest bond to fund the clean energy project and the project owners need to charge customers a lower price in order to make a fair return. Specifically a conventional wind project can needs a 6 or 7 cent per kilowatt hour wholesale price in order to compete with "dirty". With Green Bank financing that is doable right away. Without Green Bank financing the price has to rise to 11 to 12 cents, and then the project is competitive only in very high price states like Hawaii, Connecticut, and parts of California.

As to raising the price of "dirty" that is the purpose of a cap or a carbon tax. It is important. It is desired. But even if the House climate bill were passed, it would not raise the price of "dirty" sufficiently to make "clean" competitive without Green Bank financing until at least 2020 or possibly longer. In short, "both" is the right answer: lower the price of clean now, raise the price of dirty as soon as the economic health of the country and the political make-up of Congress permit.




Posted by: Alex Kragie