Catalyst with Shayle Kann - Frontier Forum: Is America’s green bank ready?

Episode Date: August 13, 2024

America’s green bank – officially known as the Greenhouse Gas Reduction Fund – is ramping up. Thanks to the Inflation Reduction Act, the federal government is sending $27 billion to a network of non-profit organizations, state green banks, and local private lenders to fund distributed energy projects.  The pressure is on to invest those dollars quickly and efficiently. The GGRF won’t be considered successful if it only deploys that $27 billion – it will be successful if it catalyzes 5x more in capital deployment.  That means building a transparent market with uniform lending standards for CDFIs and local banks – lenders that may be touching solar, storage or other distributed energy deals for the very first time.  The money is headed out the door. Are lenders ready to deploy it?  This week, we're featuring a conversation with Amanda Li of Banyan Infrastructure and Billy Briscoe of the Clean Energy Fund of Texas. It was recorded live as part of Latitude Media's Frontier Forum series.  We'll unpack the details, the urgency, any potential gaps, and the stakes for building a market. This episode was produced in collaboration with Banyan Infrastructure. Read more of Banyan’s insights into the GGRF here.

This is a branded podcast from Latitude Studios. Billy Briscoe spent 25 years advising Fortune 1,000 companies. Today he leads Texas's first Green Bank, a nonprofit that finances clean energy for Texans with limited access to the banking system. We want to make certain that we have as many Texas families as possible participating in this energy transition. And so that's sort of the mission of our Green Bank. It is to get as much assets under management that's patient, that's low cost,

and distribute out to our citizens. And in April, the fund got a large capital infusion. Well, today is Earth Day. And President Biden is marking this day with a big announcement. To reduce family energy costs for folks with low of modern incomes today, Environmental Protection Agency will invest $7 billion from my inflation reduction act in a new program called Solar for All. That $7 billion is part of a larger $27 billion package called the Greenhouse Gas Reduction Fund.

also known as America's Green Bank. With a $156 million solar-for-all grant, plus a partnership with another nonprofit with access to $5 billion in GGRF grants, the Clean Energy Fund of Texas is hustling to invest those dollars quickly and efficiently across the state. We're trying to figure out how we can make one plus one equal more than two. And by that, Billy means turning those federal grants into a real market.

We'd be lucky if we get another $27 billion investment into this initiative in the next 15 years. So we had better be doing all we can do to make certain that we can replenish, recycle, redeploy on a going forward basis. And so when you use that word hustle, how much of a hustle is it, and is it representative of the hustle of other organizations or preparing, negotiating terms, and preparing for this influx of capital? It's a startup. Texas, you know, it's kind of a big state.

And so that's a lot of territory to cover. But we also have to make certain we have the human capital in place in order to put the programs together. reach out to the communities. You know, we're full throttle. We've been full throttle for the better part of a year and a half, and it definitely resembles a startup feel. Meanwhile, others with that startup mentality are coming into the market to help.

People like Amanda Lee, the co-founder and CEO of Banyan Infrastructure. There's a lot of all that can happen within renewable energy financing and broader sustainable infrastructure financing, but we're really trying to tackle some of the lowest hanging fruit, inefficiencies, and processes, and data wrangling.

Banyan Infrastructure is a technical technology company focused on streamlining deal flow across sustainable finance. It works with large Wall Street banks, with investment funds, developers, and it's increasingly focused on smaller local lenders who are funding community solar, efficiency retrofits, or rooftop PV, deals that require a lot of work relative to their size. And that's a level of overhead and time and effort that small, nimble lenders, startups, as Billy just said, right, you know, may not have the resources to. have at scale, and we really don't want that to be a bottleneck.

And so this effort can best be transformational if it leverages as many best practices, tools, and systems as possible. The GGRF is suddenly leveraging local banks and community lenders that may not have much experience funding clean energy. So Banyan is devoting a lot of attention to the program. And so when we saw that the GGRF finally got the green light, we were first and foremost thrilled for the industry and the country, but definitely knew we had to help because we,

We're layering that complex transaction that needs help to begin with, with additional complexities like compliance to the EPA, with additional community stakeholders. All of these are great that we want to be doing more, right, and engaging more, but it means more moving pieces, more data. I'm Stephen Lacey. This week, we're featuring a conversation with Amanda Lee of Banyan Infrastructure and Billy Briscoe of the Clean Energy Fund of Texas. It was recorded live as part of Latitude Media's Frontier Forum series. Federal dollars are headed out the door to build America's Green Bank network. Are lenders ready to deploy it? We'll unpack the details, the urgency, any potential gaps, and the stakes for building a market.

It would be such a travesty if the reason why programs are slower or less profitable or not working because people are spending too much time trying to figure out where the data is, is the investment good, is it compliant, and working on reporting rather than working with their communities, and working with understanding how they're not. that data is working. Now, you both said, when we were talking about this, you both said that you've been on a lot of industry events and talk to people who don't really understand the GGRF fully. Maybe some haven't even really heard about it out in the industry. So let's explain the programs first. Amanda, over to you first. There's three different programs under the GGRF. Explain how they work.

Where are we in the process of distributing funds and getting agencies ready to administer them? Here, Stephen. For all three of these sub-programs, there's this overall goal for mobilizing funding towards projects that combat the climate crisis and really build much need resiliency, cost savings, and really lasting impact for critical communities. So that's uniform for all three. The first one, we have $14 billion going towards the National Clean Investment Fund, NCIF. It funds three national non-profits that will partner with private capital, providers and deliver financing at scale to businesses, communities, et cetera. Then there's the $6 billion clean communities investment accelerator, CCIA. It funds five nonprofit hubs that will be focused on rapidly building financing capacity to their network of hundreds and thousands in some cases of community lenders. And then finally, we have $7 billion going towards solar for all grants, SFA. We love acronyms here.

for all to 60 states, tribal governments, municipalities, nonprofits that focus on expanding residential, multifamily, community solar to low-income and disadvantaged communities. Currently, all the recipients have been selected and are at the point that right now organizing internally with their sub-constituents, with the EPA, to really be ready to disperse funds as soon as later this year. But we all know we're hoping for as soon as possible, so really rallying at the moment. So let's paint the picture of what this could and should look like and then use that to talk about the steps in getting there. So the goal of GGRF, as we've said, is to build a real robust market for local lending across efficiency, electrification, distributed energy that benefits largely underserved communities.

And so if that's executed well, what does that private sector lending ecosystem actually look like? and what's the impact? Billy, what should this look like if all running well and as intended? Well, I think what it means for us, you know, is trying to establish sort of an investment thesis, a credit criteria for deployance capital on both to our consumer-based lenders, I mean borrowers, as well as our C&I, large-scale macro investing. As any cycle investment cycle, you'll have the bubbling up, if you will, of a, securitized assets and you'll have the recycling of cash. So we've got to make certain that we, on the front end, appreciate that while we are in an impact investment fund, we are an impact

investment, big investment fund. And so we have to make certain that as we go off to the secondary markets, that this is an asset that's attracted to other secondary investment opportunities. We've got to try and standardize as much as possible that process. Again, those criteria and those and those deals mitigate default. And if we do that appropriately, I think that this first investment cycle will be much more able to compete and replenish and have a second and third and fourth investment cycle. So that's what we're kind of focused on within the clean energy front of Texas. Yeah, Amanda, you want to riff on that? Like, if this is going smoothly, what should it look like? Yeah, for sure. I think exactly echoing what Billy said, but you really

then make a market, right? End-to-end liquid market that even before the GEOPLE, GGRF, you know, was struggling to manifest, right? That movement from a small local project can really get funding, right, from a GDRF lender, maybe blending it with a private local lender so there's a more robust capital stack. And then those projects can be bundled upwards to maybe a mid-sized lender or a national hub, cross between multiple portfolios, and then continue to recapitalize. sold or securitized on Wall Street. And that turns that $27 billion into the hundreds of billions that we really hope for,

not only for this market with GDRF, but certainly my own hopes and dreams are that really bleeds into the broader, you know, multi-trillion dollar market, is that we actually figured out how to do small-scale, distributed lending to local critical communities beyond GDRF. And everyone sort of is now talking, connected, knows how to do this. and knows how to mobilize capital. So let's talk about standardization. I was recently talking to Jager Shah, who's the director of the loan programs office,

on an episode, and we were talking about GGRF, and he was discussing this need for standardization. And, you know, in a non-technical way, he said, well, a lot of these local lenders and CDFIs, like they like to do weird stuff, right? And if you don't, if you're, like, doing all this bespoke lending, it's going to be hard to securitize these assets.

And so the lack of uniformity in lending for distributed energy is a problem that has long plagued the sector. And this is an issue if we want to grow this market, recycle the capital. So, Amanda, one of the ways in which this lack of standardization could slow deals? Yeah, I think I really do want to then take one step back and expand what we mean by standards, right? because there's a really wide range of that. And I think sometimes people get nervous when we even mention, like, let's drive towards standards. The lack of standards means the program is going to fail, right? Because it can mean everything from, right?

Everyone uses the exact same financial product and underwriting criteria and credit box and documents and operating principles. But that can be fairly extreme. There's a view of the world where standards can be a little bit more incremental, right, where parts and bits of a credit box or document are shared in a way that, again, drives to a little bit more uniformity that drives to better ability to mobilize quickly and reduce overhead. And that's the friction point to answer your question that we're trying to avoid, which is that if there is a complete opposite of standards, every single loan, document,

transaction is unique in every possible manner, it's really going to make it much slower to deal with, right? So we're going to be able to put out less projects, impact our communities, a much slower rate than we want to. But they also add to overhead costs, right? These are not huge lenders with infinite teams of analysts that can really pound against the paper, right? It's going to mean that we're really spending limited resources to all be pooled together on top of a single transaction. And that could make a transaction hard to engage with both from the GGRF participant itself, who, you know, again, is. trying to split time, but also broader than that, right, Wall Street, which certainly doesn't want

to be looking at a thousand different documents that all are different, right? You almost want to be told, hey, this pool of 100 assets all uses the exact same of these six documents, except for, like, this one section here that'll be different. Please only spend legal dollars here and not like a thousand times more legal dollars reading every single section. I would piggyback on what Amanda's same because she's absolutely right. There will be a vark of activity that happens over the next three, four years that will begin to shape and define what those standards are. And so I think what we've got to be in the business of doing over this time period is making certain that we are creating positive trends as opposed to negative trends. And when you think about standardization

within the consumer market base, it's just, you know, you have to think a little bit outside the box in terms of what are the key decision trees that results into a yes in deploying micro amounts of capital. That's going to look significantly different than when you're talking about your commercial and industrial deployment of capital and put no seals together. It's a little bit more in human capital intensive. And that trend would look different. That standard would look different. So it's the hope of, I think, us within this community that will have a little bit of leave time to begin to develop, if you will, renewable energy standards around microlending and macro lending that will stand the test of time

as traditional lending has. And so what does that mean, Stephen? It means doing all the things that traditional lenders, at least from a green bank perspective, traditional lenders have done, but being a little bit more patient, being a little bit more industrious, imaginative on how we can employ capital for our mission-critical goals. Amanda, do you feel like local, community lenders are grappling with this in a way that you think is sufficient for executing this program? Certainly the efforts today, right, including everyone coming into this session,

right, and trying to discuss and collaborate is moving in that right direction. And the level of activity we're seeing is really heartening. But certainly there are still many steps to take, right? Where we're moving towards, we need to be. We need to be. We need to be a lot of to understand and hear out all constituents, right? There's a lot of concerns if we choose the wrong standards, for example, it'll make programs prohibitive to certain communities. Or if you choose the wrong standards, the other direction, right, you'll make it prohibitive to Wall Street. And so the important piece that's happening right now is to make sure that all stakeholders at the table from those who are applying for the loans to those who are managing and distributing

them to those who will be buying them. If we could all really have alignment early and often, that's going to really help. And at the same time, trying to apply a bit of an iterative principle that that Billy was sort of alluding to, which is not only to be going to come to the table, but be able to try to meet in the middle and try things out because it's really not going to be perfect today and day one. And, you know, as we collaborate, we need to try to take incremental steps forward, do quick learnings and over the course of the program really be winnowing in on. So it gets better

and better, faster and faster as we move on. And Amanda, what are some of the other potential bottlenecks that you are helping lenders work through right now? Yeah, I think there are some foundational ones, right? Beyond standards as an industry, which is something, again, as we've mentioned, is distributed infrastructure as a whole is grappling with. Some of the participants of the program are newer to green lending as a whole, right? Where there is, you know, deep expertise in community lending that will be invaluable to the program, but perhaps more a nascent experience with running a solar program or an energy efficiency program where there are new concepts around project finance or energy savings or ITC adders

that'll need to be quickly learned and to be. be able to be implemented, right? And again, that moves back to that collaboration where we'll need to make sure we're not trying to reinvent the wheel, right? People, there are many industry veterans that you've engaged with even on many of these sessions like here that have done green lending for decades and are ready to come to help share their insights, blend those insights with community lending so that we can move a bit faster. And so that certainly is that that aggregation and dissemination of how energy and infrastructure lending is working on today is as a core part of readiness.

Again, Amanda and I are young for a couple different reasons. Not only we partners, but we speak the same kind of language. She's exactly right. We just got to, you know, I think you asked a question earlier, Steve, even about one of the things that the GDRF means and what people are, how can we clearly define what it means? I think that we've got to get to a quick decision on terms and conditions. and the speed of which we can access capital so that everyone else on the other side understands it, we can begin to package it in a way that gets to, again,

our consumer base, our micro-lenders, micro-borrowers, as well as our C&I. You've got to have terms and conditions. We've got to have speed of which we can, some sort of arc in which we can access DGRF because that's going to allow us to, again, put together packages and stack capital with other sources. Oh, I guess I realize I'd be a missed to not also mention,

And of course, there's also post-getting the best practices out the door, the reporting compliance piece is the other sort of friction point. We're trying to make sure is as low friction as possible, right? That the report to the EPA, the ultimate reports will need for secondary markets, as you know, are part of that capital stack, are not burdens up, right? Obviously, at the moment, the compliance pieces with the EPA are still in many ways in negotiations or in development, hopefully coming out soon. soon, right? So the law of leading indicators around the need for, for example, Davis-Bacon and prevailing wage compliance, Bill's America by America, you know, carbon reporting, et cetera, are already sort of more well-known, but final guidance is still coming out. But regardless of what that is, making sure that that is clear, consistent, easy to report on to make sure that there

are the processes, people, and tools in place to make sure that as we think around reporting and compliance on this program. Our ultimate dreams are making it a really positive experience, right? Where it's reporting it to be a place where you're celebrating wins, right? And we're, you know, showing this program's successes and impact on communities and the planet and the wealth created for all the participants. Rather than being this tedious exercise at the end of the quarter that everyone sort of dreads as we wrangle spreadsheets.

It's going to be a bit of a – it's going to be very complex. it probably needs to be. There's going to be very strenuous compliance components to it that requires us to update EPA as well as capital impact directed funding entities. What impacts are being realized in real time. And so the more standardized I process, the better. And I believe that at the end of the day, we'll have hopefully one or two standard platforms out there by which we can upload our data into so that makes it easy and really mitigate costs because compliance is costly. And one way to reduce that is having standardization. You both mentioned when we were talking previously that there are a lot of developers

and installers in the clean energy industry. They're not familiar with the GGRF and they have a lot of questions. So, Billy, from your experience, from where you're sitting, what kind of clarity are industry participants seeking. Don't mean it's not like a broken record here. They're seeking terms, you know, conditions by which they can get access to capital. They're looking to figure out what kind of carrot comes with it, meaning what type of compliance, federal compliance requirements are associated with that capital, i.e., build America, Buy America, Davis Bacon, those types of things.

And they're looking for speed. When can they have access to it? I think that in and of itself, if I had to list the top three, those are the top three I'm experiencing. So terms, speed, requirements, adders. Amanda, what are the most important questions in your mind coming from the industry? I think one of the top ones to even encourage engagement is that it's not going, it's almost like a reassurance that it's not going to be overly burdensome, right? And a lot of the veterans have seen government programs and incentives that, you know, it's almost feels like it's not worth applying for, right? So we've had developers come to us and be like, oh, you know, I want to see where the dust settles, right?

Is it worth my time trying to engage? Or is it like, hey, the moment I blink at it, they're going to ask for like 7,000 forms to be filled out for even for me to figure out whether we pre-qualify? And I think that's certainly top of mind of all the people. participants, right, to make sure that it doesn't feel like that to the developers, right? How do we make it so that not only for, you know, veteran developers out there and they feel like it's going to be a program that is well run and, you know, it's worth perhaps filling out a little bit more of the compliance parts of it, right, and that there's tools and systems

placed to streamline that a little bit, but that even the smallest developer out there, right, the local community developer, all right, that is on the ground. and maybe newer and smaller is also able to engage as well, right? And we're not only creating new capacity at the local lending level, but we're creating new capacity at the local developer level as well. I think we need to address the bigger question about post-election outcomes. A lot of people are probably wondering what the potential political risk is if there's a change in the administration.

I know the EPA has to obligate funds by the end of, of September, sort of reducing that political risk. But what are the potential risks with the change in administration? I hope that it's my hope that there would be no significant, successful attempts to plow back the GDR funding. I do believe, as many of you have, many of the participants know, that there have been several bills filed to try and do so with little success at this point. But, you know, in a new administrative regime, who knows? But I do believe once it's obligated, once we get through all of the T's and Cs with the EPA, it becomes much more legally and politically, much more difficult to plow back capital. It's already been obligated and deployed, or at least beginning to be deployed.

So, you know, there's a bit of a race there, and I think timing matters. We'll have to see, Stephen. I do feel like similarly, right, once funds are out, rescinding feels or even obligated, you know, very little precedent for any of that. But broadly as well, I mean, less so in the last year where there have been some of these bills that Billy has mentioned. But there was a lot of support across the aisle, right? I mean, Billy's sitting here from Texas, right? Dollars flowing to his local communities, local voters and constituents,

and many of the local CDFIs and Green Banks receiving dollars are across all the stakes and local communities, regardless of who's being voted for, right? And we're hoping, especially as these details and TZC are finalized, there'll be the ability to really highlight how beneficial they'll still be to all Americans. And hopefully that level of marketing in some ways helps to make it clear that this is one of the programs

that has as broader support across the country. And if I can add one more to Amanda's point, What we will lack in being, hopefully within the first 12 months of having, you know, big demonstrations of projects where you've deployed these things, you have a lot of solar forms, if you will. I think what we will gain, if you will, is as Amanda is mentioning, direct community investment. There's a huge workforce component to this. There's a huge economic development component to GRF. dollars would be pushed down to the communities, and it would need to be pushed down to the communities in advance of building large-scale solar farms or resiliency farms.

So you'll begin to see the impact throughout the ecosystem from a workforce development perspective and from a community engagement perspective, and then you'll see projects probably towards the third or fourth quarter of next year. Amanda, do you have any sort of market success stories or case study? that illustrate how to effectively execute deals of this size or an entire program. I'd be curious to hear some case studies of what's being done well and how that applies to projects under the GGRF. Yeah, I think one of our earlier case studies was actually with one of the more established Green Banks here with New York Green Bank, where programs and there's a series of spreadsheets and systems that are really causing a lot of investment to be moved to people who are managing those spreadsheets, right?

And really changing that from that type of headache in some ways, right? And not only headache for the bank itself, right, but everyone involved as we try to figure out, well, where are documents, right? where are we in this process, where for reporting beyond them to their constituents and capital providers and secondary markets are those key documents and details around the deal. To really making that, you know, a streamlined portal to allow for information to come in, be processed, be analyzed, and be reported outwards was some of our earliest work that we did. and was still remember those first conversations with an analyst that basically said, like, my job before this, right, was basically nonstop trying to figure out whether this one

spreadsheet was in good shape, right? And now afterwards, right, I get to work on more investment processes, right? I get to analyze the data rather than make decisions around it. I get to be doing higher order type of activity. And that's what we hope and dream for everyone who's participating. in this, which is with the limited teams that any analyst on Billy's team here, right, is not wasting any time doing that and instead has time to engage with the community and has time to be doing more than being ball-necked in the stream of, again, what almost sounds like

scary compliance that we've described on this webinar to transform that into instead, no, right, it's not overwhelming. It can really be processed in a streamlined manner, and we can do better. Piggybagging on what Amanda's mentioned. You know, the lead time of these deals are a lot longer than what we probably see in traditional capital deals. And sometimes that could be a benefit. Unfortunately, 10 days ago in a wee hours of the morning around 4 a.m., about 3 million

or so Houstonians woke up to darkness, right? And it was a very bad storm. We had been sourcing a deal for the better part of 10 months now. And the manner in which we're thinking about putting this deal together now, now that we're going to add DDRF monies. Well, before, we were focused purely on what I would call demand-side activity, talking about more efficient products and energy-efficient light bulbs and insulation, greener roofs, and things like that. Now we're talking about taking a pause, if you will, same project, bringing along DGRF funds to also consider some supply-side activity around solar and battery,

So that that energy-efficient building went from just thinking about how to drive down cost to now being a producer, if you will, of energy potentially and a battery storage hub. Now it becomes a resiliency hub, right? So it becomes a location where communities who experience an event, and we're a frontline community here in Houston that experience these events, can now have a resiliency hub to go to for a break, if you will, of not having electricity or power and AC and those kinds of things. And so that's sort of a real-life example. If Amanda can help us, which they will be helping us on, you know, put these deals together on the back end, making certain that we are compliant, making certain that we're reaching our energy reduction goals. We can spend more time, as you mentioned, out in the community looking for, looking a pair, if you will, better projects to make sort of a demand-side project now, a demand and supply-side project.

So to recap here, you know, you both talked about the urgency. of making sure that these funds are tracked and deployed efficiently. We talked about the need for collaboration to get the terms and the standards right. This is all happening very quickly. So what advice, just to recap, what advice would you give to the lenders and the program administrators to help turn this $27 billion into something much greater? Billy, we'll start with you. I can only echo what we're doing.

and that is to get our systems in place, understand what secondary markets are requiring. I mean, a secondary market participant like a Goldman or a Merrill, one of the traditional larger entities might require, and we'll require something different than the teacher's retirement fund or some sort of, you know, municipality. And so we've got to understand we won't be attractive maybe to some and we will be attractive to others and make certain that our internal decision process, investment process, and theses align with who we're targeting. We've got to scale quickly and we've got to scale with talent. We've got to scale with creative talent, if you will. We've got to do a lot with little and collaborate with our partners around the country as well as locally. We've got to meet very, very, very aggressively with our

community-based organizations. We've got to identify projects that we can have some soft and immediate wins on that carry us forward to those more difficult ones. It's a lot, Stephen, and I I don't pretend like it's not, but it's a lot. And fortunately, I have a good team of folks, both internally as well as the external partners like Amanda and Danion, who's helping us along in that process. In Amanda, final word, what are the most important operational best practices right now that people need to be thinking about? Well, I think there are a laundry list of those. Instead of really reading out through that, it's to come in and collaborate, right? We're happy to share that. We're actually issuing a white paper on operational best practices soon around some of these key metrics and processes.

There are so many people at the table trying to help and certainly not going alone and not just partnering with one type of counterparties, right? It's not just Wall Street or just CBO community-based organizations or just other Green Banks or CDFIs, but all stakeholders being collaborating together. including vendors like Banyan and people trying to provide technical assistance, right? Bits and pieces of the solution are all, I think, already here and it's just about gluing it together. Come and talk to us. Amanda Lee is the co-founder and CEO of Banyan Infrastructure. Thanks, Amanda. Thank you.

And Billy Briscoe is the CEO of the Clean Energy Fund of Texas. Thank you so much, Billy. Thanks, Stephen. This conversation was recorded live as part of Latitude Media's Frontier Forum with Banyan Infrastructure, and there's so much more to the conversation. This is an edited version. So if you want to watch the full video with all the listener questions

about additional details around the GGRF, head on over to Latitudemedia.com and click watch recording. And if you want to read some additional coverage and get some more details on the GGRF, we've got some links in the show notes. Thanks so much for listening.