A ‘green’ bet of 1 billion
A “green” bet worth $ 1 billion
With its new “Green Bank”, New York aims to boost smart grid and solar and wind power technology.
The solution to global warming is evident – the reduction of greenhouse gas emissions. Achieving this goal requires radical actions.
Few understand this as well as Richard Kaufmann, a former Goldman Sachs executive and Morgan Stanley, whom New York governor Andrew Kouomo has appointed as the first “tsar” on the state’s energy issues. Kaufmann envisions New York – a clean energy center of the 21st century. For now, however, he admits that the State remains an energy dinosaur of the 20th century.
“We are not on the road to sustainability either environmentally or financially,” Kaufmann says. “We do not install enough equipment for renewables, and we do not get the boost of economic growth that a transition to a new energy economy could secure. We need to rethink what we are doing. ”
To begin this process of re-discovering the state’s energy function, Kaufmann has taken some radical initiatives. Earlier, this year, a $ 1 billion state-owned financial startup was set up, N.Y. Green Bank. The hope is that, through strategic lending, the state will be able to give the private sector an incentive to contribute to the transformation of the New York energy system. If this works, then it could be applied to other states.
According to the OECD, N.Y. Green Bank is just the second institution of the kind in the US that belongs to the state. Connecticut launched a green bank in 2011, but on a smaller scale, with a total assets of $ 117 million.
The energy challenges for New York are many and great. The state falls short of California and other major states in relation to the adoption of renewable energy sources. New Yorkers also pay very high electricity prices, one of the largest in the US. At the same time, the demand for electricity is low and the cost of maintaining an old network is growing. The cost of simply maintaining the outdated New York electricity grid for the next decade is estimated at $ 30 billion.
Kaufman promotes regulatory reforms that will encourage state-owned utilities to implement energy efficiency programs and promote investment in smart grids. Thus, it is expected that the energy burden and the need to maintain expensive standby power plants will be reduced.
Other states have tried similar measures with a moderate degree of success. Although wind and solar energy are growing rapidly, their share of total US energy production is just 4%. Kaufmann hopes the Green Bank will boost New York overtaking this figure over the next few years. The bank, funded by a fee paid by electricity consumers, aims to finance clean energy projects across the state, and is set to announce its first investments this fall.
It is true that some within the environmental community worry that $ 1 billion as a capitalization is not enough to make New York green. In addition, energy is a capital intensive sector.
But Kaufmann believes the first step for the Green Bank is to show he can make money. If the bank is profitable, it will be self-sufficient. And it will be able to use that amount in such a way that it will have a serious, long-term impact on the clean technology industry. “We want to secure a market return for our capital and then get out of the way,” says the energy tsar. “We want to be at the cutting edge of new markets by providing the necessary support to fully involve the private sector.”