State-level initiatives are underway to protect at-risk clean energy ventures

In the rapidly evolving landscape of clean energy, a shift in strategy is underway as federal financing for numerous projects faces an uncertain future. According to Jigar Shah, a key figure who led the Loan Programs Office during the Biden administration, states could play a crucial role in providing funding for these initiatives due to their potential for economic development.

The New York Power Authority recently took the lead in this transition, using a Request for Information (RFI) to find clean energy projects within the state. This proactive approach could serve as a blueprint for other public entities with bonding authority, who can adopt the RFI method to identify promising clean energy projects.

The federal government's role in clean energy investment is shifting from a load-bearing center to a supporting structure. The Inflation Reduction Act and Bipartisan Infrastructure Law have provided substantial funding to the clean energy sector, but this support may soon dwindle. In this context, existing projects that have already been vetted by the federal government are primed for state-level investment.

Several states, including New York, Connecticut, Maryland, and California, have been at the forefront of this transition. They have developed or strengthened Green Banks in recent years to support climate project financing, anticipating potential reductions in federal Department of Energy funding. These Green Banks could provide a vital lifeline for high-impact clean energy projects in the U.S. that were shovel-ready before funding was withdrawn or threatened to be withdrawn.

A "matchmaking platform" could further facilitate this transition, connecting potential projects with state-level investment. Such a platform could leverage the superior bond ratings of state institutions, reducing borrowing costs and providing a more stable financing environment for clean energy projects.

The private sector, including EV startups like Slate Auto, also has a significant role to play in this new paradigm. However, a collaborative, polycentric strategy is needed to ensure the long-term, politically durable, and economically durable success of clean energy projects.

A new white paper outlines a roadmap for scaling subnational project finance for climate projects, based on conversations with developers, financiers, and local-level stakeholders. This roadmap could guide the transition from a top-down, regulatory-driven, federal funding-driven strategy to a more sustainable, subnational-led approach.

As the Senate works to protect clean energy by shoring up some protections, there is a small window for non-federal actors to save numerous projects. Revolving loan funds, joint procurement, and public equity participation are financing mechanisms that could be used to stabilize these projects and secure their future.

In this critical moment, identifying projects in need of support is crucial to securing financing for them. The Department of Energy's Loan Programs office remains a focus for such projects, and existing databases of projects funded by or proposed for funding under the IRA or IIJA can be utilised to identify projects ripe for state-level investment.

The subnational landscape is primed to step up in this current moment, with the ecosystem of green banks expanding dramatically in recent years. This shift towards subnational leadership could herald a new era of sustainable, economically viable, and politically durable clean energy investment.