Bob Perciasepe's remarks at the Innovative Financing and Clean Power Solutions Forum

PREPARED REMARKS BY BOB PERCIASEPE

PRESIDENT, CENTER FOR CLIMATE AND ENERGY SOLUTIONS

INNOVATIVE FINANCE & CLEAN POWER, A SOLUTIONS FORUM

WASHINGTON, D.C.

JUNE 25, 2015

Welcome everybody and thank you for being here. I especially want to thank our co-host for today’s event: The George Washington University Law School’s Environment and Energy Program.

My name is Bob Perciasepe and I’m president of the Center for Climate and Energy Solutions, or C2ES.

I think many of you know us, but for those of you who don’t, we’re an independent, nonpartisan, nonprofit group dedicated to bringing diverse interests together to solve our climate and energy challenges.

Today is a perfect example of how we go about doing that. We’re going to be talking a lot about energy efficiency and renewable energy – and how innovative financing can help us increase investment in those areas. I’m pleased to be bringing together top financial experts from Bank of America, JPMorgan Chase, and the Coalition for Green Capital; state leaders from Tennessee and Pennsylvania; and energy leaders from Schneider Electric and Duke Energy. I think this group in itself shows you the mix of people who have to start working harder together to make sure we can make progress on clean energy and energy efficiency.

Finance may or may not have been your favorite class in college, but much of the progress we need to address our climate challenge – more efficiency and more low-carbon energy -- comes down to one question: How do we pay for it? Financing and using markets are ways to accelerate the rate of change.

On the other side of the coin, we’re already paying mounting costs worldwide for climate impacts like increasingly frequent storms and intense heat waves. We’re seeing rising sea levels creating higher risk in coastal areas. We face the prospect of more damage to our infrastructure and more disruptions to our supply and distribution chains, as well as our power and water supplies.

The primary cause of these problems, and you can take this all the way to the Vatican, is us. We’ve been pumping heat-trapping gases into the atmosphere for generations. Last year was the hottest since we started keeping records over 100 years ago.

But we know that there are things we can do. We know what some of the solutions are. We know how to make progress within a generation to change that trajectory. We need cleaner energy, cleaner cars, and more efficient ways to use energy.

Here in the United States, the No. 1 source of carbon emissions is the generation of electricity. EPA is in the process of finalizing a plan that will put a lot of responsibility on states to look at how they can innovate to develop clean power plans to reduce emissions from electric generation. We already have a process underway with light duty vehicles and heavy duty trucks, making them more energy efficient. And we have a lot of opportunity to think about how to do this at the state level for power.

The beauty here is while we continue to think about how to deal with this at the national level, cities and states and businesses are already innovating. They’re already making progress not only in reducing emissions but also in finding ways to accelerate the rate of change and stimulate innovation.

Of course, we want not just clean energy, but also affordable energy. This is a balance we have to have. We’re seeing solar and other renewables drop in price, something that can continue with increased deployment. Efficiency reduces how much energy we use, so that even if there’s a slight uptick in rates, a homeowner’s bill can stay the same.

The objective of having cleaner power and also using less of it provides a real opportunity to find that sweet spot of maintaining that affordability. It’s like what we’re looking at with automobiles. If you use less fuel, the actual cost to own the car is cheaper. The same can be said of energy efficiency in the home, business, and industry.

C2ES found something interesting on affordability when we recently looked at six economic modeling studies of the Clean Power Plan. All of the models project energy efficiency will be the most-used option to implement the plan. The majority of the studies project either cost savings to consumers or total costs of less than $10 billion a year, Per household, that’s about 25 cents a day.

So, how do we get to this future of affordable clean energy and energy efficiency? It takes investment, and that’s what we’re here to explore. How do we catalyze that investment? How do we leverage public funds to get more private dollars? What innovative business models are already working, and how do we scale those up?

It’s not simple. We face some barriers to investment like high upfront costs. If you invest in new windows and solar panels for a high rise, it will take a while to recover those costs in lower energy bills. Another barrier is lack of familiarity. People aren’t sure about new technologies and new financial products, which can make them harder to buy and sell.

Fortunately, there are ways to overcome these barriers. We have a brief overview of some of these options. I’ll mention two: Clean Energy Banks, sometimes called Green Banks; and Energy Savings Performance Contracts.

Clean Energy Banks are generally government-created institutions that can leverage a small amount of public money to increase private investment in clean technologies. Several states have them or something like them – Connecticut, New York, Kentucky, and Hawaii. And others, like Maryland, California, and D.C are thinking about them.

They can provide direct loans, but they also have other tools, such as credit enhancements, letters of credit, and loan loss reserves, that can help lower the risk for private lenders and investors.

So far, Connecticut’s green bank, the nation’s first, has attracted about $9 of private investment for every $1 of public money invested in clean energy projects. The bank oversees more than $100 million in assets.

The second example is an Energy Service Company, or ESCO, whose business model is based on establishing Energy Savings Performance Contracts with customers like cities, hospitals and universities. These contracts let a customer get energy-saving or clean-energy technology at little to no upfront cost. They pay the investment back over time from the money saved through reduced energy bills.

The City of Knoxville, Tennessee, has a 13-year energy performance savings contract that will fund energy efficiency measures at all city buildings, parks and sports facilities. Each year, Knoxville will pay the ESCO a fee based on expected savings from things like better lighting, water conservation, weatherization, and heating and cooling upgrades.

Innovative financial tools are not a panacea, but they are an essential tool to overcoming many of the barriers facing a new technology. They can also engage a broader group of investors, bring more capital to the table, and reduce costs. Those are the conditions that allow new technologies to spread.