Green Banks and Financing the Energy Transition – In Conversation w/Andrew Kessler

In Conversation w/Andrew Kessler

In this episode of Pivotal180 in Conversation, we interview Andrew Kessler, President of New York Green Bank. Andrew shares with us the mission of the New York Green Bank and how it’s uniquely designed to catalyze investment in clean energy and climate tech, as well as background on a few of the specific initiatives that New York Green Bank is working on. He also shares his insight about how Green Banks across the US can play a crucial role in the energy transition, and how sharing of information and lessons learned can enhance the efficacy of these institutions.

Interview Transcript 

Welcome everyone. Thanks for joining the latest installment in Pivotal180’s interview series, Pivotal in Conversation. We have a really fantastic conversation for you today.  I’m very pleased to have Andrew Kessler of the New York Green Bank joining. He’s the president of the Green Bank. It’s a really fantastic organization, and has a pretty unique role in energy finance. So, very grateful that you could join us today, Andrew looking forward to this conversation.  So welcome. Thank you.

Thank you.

Yeah, and just to kick us off, for our viewers who might not know that much about the Green Bank, could you share a little bit about the New York Green Bank’s mission, and its unique role in financing the energy transition?

Sure, Sure. I’d be happy to. And again, thanks for the opportunity to be a part of of this. New York Green Bank – we are a division of NYSERDA. We’re a state sponsored billion dollar investment fund. We invest in clean energy and sustainable infrastructure within New York State.  Our, our, our mission is really to support project developers, building owners, project managers, energy service companies, and, and other sustainable infrastructure market participants to, to help them finance viable projects within New York State that decarbonize our, our economy. Especially where funding from traditional financiers may not be available. So think of it as, as, as gap filling.  An important gap filling role. You know, we’re the largest green bank in, in the United States and, and, and our mission, you know, along with our colleagues at NYSERDA is to support the achievement of New York states ambitious climate goals through, through this market transformation role that I, that I just discussed briefly.

We, you know, we want to mobilize private investment in New York State. And, and so, you know, we do that across a number of different technologies and sectors.  We look to finance economically attractive and techno technologically viable projects that have the potential to reduce greenhouse gas emissions. But as I said, where per, perhaps for various reasons, there may not be appropriately priced capital from private lenders that are ready to, to, to fund into these, these projects. And that might be due to several factors. You know, it could be because the financing needs are too small for, for them relative to, to the businesses that they’re, they’re already, you know, actively involved in, or maybe they’re considered too bespoke and unfamiliar. And, and that happens with, with asset classes that are less mature than others.

And so, we’ll, we’ll roll up our sleeves and we’ll create the precedent, share those structures with, with the marketplace and, and start building, you know, a track record that ultimately will get the attention of the private market. There may be some other reasons. There may be the perception that there’s, there’s more risk around the technology or the type of business model that’s being suggested. Again, you know, sometimes it takes, you know, several transactions to, to get folks comfortable with a particular new business model, new approach, new technology. You know, we’re not venture technology investors, so we are very confident that whatever we do, the credit market, you know, should be comfortable with as well. We’ll take the first lead take the lead on, on, on, on occasion, on,, on technology risk, but, but the, the diligence we have done, we feel would stack up very nicely with  with the type of risk profile that that traditional lenders you know, would not see as, as being outside of their norm. And then, lastly, just more generally, as I said, there may be just sort of limited precedent. It could be from a structural perspective. I already talked about it from being a, from a technology perspective or from a business model perspective, but for various reasons, you know, there the, there’s something new and un, you know, unfamiliar.  And so again, we’ll take that, we’ll take that we’ll take those steps to, to, to not only get the transaction done on market based terms that we, we feel would be quite attractive to, to the credit market, but we’ll share those, those structures in a very transparent way. Perhaps in the next deal we’ll, we’ll, we’ll, we’ll, we’ll, we’ll see if we can bring on some additional lenders right into our transactions.

And maybe, you know, maybe a few months later we’ll see them do their own deal.  So that’s really, that’s really what,  you know, what, what we try to do, and we’ve been very successful at that. Community Solar is a great example. Happy to talk to you more about that. And then going forward, we’re doing the exact same things we’ve already been successful in, in certain asset classes in new ones, and new more emerging ones. Clean transportation, for example, where folks are still trying to figure out, you know, how to underwrite into charging infrastructure. There’s a lot of new business models that are being developed, you know, but that’s important infrastructure that needs to get built. Or, or, or energy storage, same thing. There’s still a lot of uncertainty as far as how to underwrite into that asset class. I’ll pause there. Happy to, to, to get in any, any more details, but I know you have some additional questions.

Yeah, there’s a, there’s a lot there. And it’s an important niche. It sounds like it’s both been impactful in implementing important projects with, you know, tried and tested technologies, but also a bit of a catalyst in energy finance in terms of pushing more capital towards, towards those technologies and, and the sector. So lots of exciting things happening. Are, are there any, I mean, you mentioned, you know, community solar, you mentioned charging infrastructure. Are there any specific projects or initiatives in the banks’ portfolio that you foresee as kind of being the most transformational to the energy sector, or that are the most exciting to you? Love to hear a little bit more about, yeah, specific projects.

Sure, sure. And I, I touch briefly on, on a couple of them, but, but I’ll, I’ll maybe maybe address them a little in a little bit more detail. You know, we’re, as I mentioned, we’re our focus is to animate, you know, private funding in New York State. And, and as we look ahead, where are those funding gaps that are holding back some important areas and sectors that, that, that, that are, are going to unlock the decarbonization impact that, that we need to have in New York state.  And clean transportation and energy storage, building decarbonization, those three in particular, you know, are, are areas of, of focus for us. You know, these technologies are being deployed in a variety of different business models right now and, and revenue structures, but they’re not yet, many are not yet standardized. And certainly in terms of how, how the credit market thinks about them, there’s still, there’s still some uncertainty around that. So we see these as, as ripe areas for us to really dig into and create some of the investment precedents that can be replicated and scaled. You know, we released our second annual impact report and that, so I would, I would, you know, certainly direct your, your, your listeners and viewers to that. Cause I think that tells a really compelling story about how we’re looking ahead and that’s highlighting not only our accomplishments since inception, and by the way, next year’s our 10 year anniversary. Wow. So we’re really excited about that.  But, you know, we’ve got a lot of, lot of work to do going forward, and that that report lays out some important areas of priority. We, we’re also quite focused on equity. And so you’ll see in that, in that report, a significant focus on making sure that, that all of these developments, across these various asset classes are being, are benefiting all New Yorkers, particularly in those areas where there’s historic, where there’s been historical disadvantage. And, and so frontline communities, disadvantaged communities, you know, it’s really critical for us to, to ensure that that decarbonization is taking place at pace in those areas as well. And we’ve ramped up a number of different product offerings to support, to support particularly clean energy and decarbonization within the building infrastructure space. So, so again, that, that report that I highlighted, I think, you know, provides some really interesting descriptions that get into some detail around that. But I would highlight one of them, one of them that we’re launching next year is a pathway called the Community Decarbonization Fund. It’s a $250 million funding opportunity that, that we’re where we are effectively providing capital to established lenders that are already active within disadvantaged communities, where we can expand their balance sheet to do more. Specifically more within, within the decarbonization and renewable energy context, obviously. And so that would be discretion, fairly low cost, discretionary funding opportunity to help them expand their, you know, continue to close into the, the demand for their capital, hopefully in, in ways that, that continue to address, you know, decarbonization within their communities.

Yeah. That does sound really impactful. There’s a lot going on at, at the Green Bank. Yeah, some really exciting initiatives, and we can also link to some of those resources or, or projects on your website with the interview for viewers who want to learn more as well.

A last question for you, Andrew. You know, the New York Green Bank is not the only Green Bank. Certainly,  it’s a, a leader among this type of institution. And so I’m curious, you know, given the current state of clean energy markets, where we are right now, what’s your vision for the role of green banks? So even, you know, beyond New York Green Bank, over the next several years, in order to achieve, you know, maximum impact?

Well, this is a historic time right now. The, it really is. The, the Inflation Reduction Act, the IRA, that recently passed, really provides a, a real interesting opportunity, historic opportunity for, for, for the concept of, of Green Bank, either on a national basis and as well as, you know, within states, even within smaller regions. You know, really, enables, you know, catalyzes, that, that type of activity. So we’re, we’re really, we’re really excited about that opportunity. You know, we are focused on working with the marketplace and other, other actors to, to prepare ourselves for applying into that funding pathway. The, the, the, the IRA includes a $27 billion provision to support states and, and green bank-like entities. And so we do see an enormous opportunity for a significant increase in resources towards decarbonization activities, across all these various asset classes that I’ve talked about.

We, we’re also very pleased to see significant amount of funding to be allocated specifically within that, for disadvantaged communities. So, 7 billion of the 27, has a hundred percent of that, of that, of those, of that capital needs to be, for the benefit of disadvantaged community. Again, going back to equity, it’s really important, not just in New York state, but, but it’s so, so great to see that, as a very significant element of the IRA funding as well. And then, just in, in general, look, we funding gaps persist across, you know, across the United States, obviously. And so, you know, as a very collaborative entity, you know, we have, and contin will continue to, to be a resource to, to, to states that are standing up similar entities. You know, we, we, we’ve certainly have a lot of wins behind us that we can share best practices around.

We haven’t been successful in everything we do, and we can share those learnings too, so people don’t have to, you know, can avoid, you know, some of the, the some, some of, some of the areas where, where we have been less impactful as we had expected to be. So that, that collaboration,  you know, I think is gonna be super helpful as these monies are, are, introduced in, into these, different areas, different states, different communities, for, for people to know that they can reach out to us, and, and, and, and if we can understand their specific needs, how they think about the capital, and their context, we can hopefully try to apply some of the almost 10 years of experience that we have, to help them accelerate the impact that they can have in their local communities.

Yeah, that’s a great point. And I think, yeah, that, that 10 year milestone, that you mentioned really speaks to the, the experience and, yeah, lessons, lessons learned that the institution has. Lessons learned. Yes. Yeah. Lessons learned. So yeah. That’s, that’s really important. And, and quite frankly, what that creates also is that is a re reverse pathway so that, other approaches, other, other laboratories, if you will. Yes. And experimental situations, and we can learn from too. And we can keep trying new things to find the right combination of approaches, again, to make the most impact per dollar spent.

Yeah, that’s fantastic. I love, I love hearing about both the, you know, the focus on equity, but also the vision for, you know, collaboration between these institutions. Because I think, as you mentioned, the, the sharing of lessons learned, is just so valuable, if we’re, if we’re all in this together and, you know, in this new, new frontier for energy transition and clean energy in the US. So very exciting. Really looking forward to, you know, seeing the new developments at New York Green Bank.  I think all of our viewers are going to probably head to the website if they’re not already familiar with the institution, because so many fantastic initiatives as you, shared with us today. So, and,

And, and we are, we’re, we’re engaging with, with a third party to help us revamp some of the messaging on our website to make it easier to find information. So be on the lookout for hopefully some good enhancements. And I just want to give a shout out to you guys, because Pivotal180 has been a super helpful partner, both in terms of training some of our transactors with best practices, particularly on the modeling side, as well as some of some other activities that we’ve done with you. We appreciate, the support that, that you’re providing to the marketplace.

Yeah. Thanks Andrew. I know, I know our team has really loved working with your team, so that’s, that’s great to hear. And yeah, looking forward to continued, continued collaboration. That’s, Yeah, it’s fantastic to have you in, in this conversation today, kind of bringing things full circle. Yeah.

Well, thank you so much. Really appreciate the opportunity to tell our story and be on, on this with you.

Yeah. Thank you, Andrew. This has been really fantastic. Thank you for joining. Thanks.

To learn more about some of the work that New York Green Bank is doing, check out their Impact Report:

New York Green Bank Impact Report 

If you’d like to be connected to their team, please reach out to Pivotal180 at sales@pivotal180.com

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