This week, the federal government announced it would invest $20 billion in low-carbon energy production through subsidies to “green banks.”
Funding under the Inflation Control Act of 2022 will be channeled through eight regional financial institutions and nonprofit organizations across the country dedicated to clean energy and climate solutions. It also helps fund residential heat pumps, local wind and solar power development, and other energy-efficient upgrades in low-income, rural, and tribal areas.
It is hoped that government support will mobilize private investment in such projects.
Investing in renewable energy is often not very profitable to begin with. And projects in low-income areas are more likely to be passed over by investors.
“Typically, the highest proportion falls into the high-risk category,” said Daniel Schwartz of the University of Washington's Clean Energy Institute.
He said some federal funding could make the agreement even more favorable because it would reduce portfolio risk.
The Environmental Protection Agency expects the program to generate $7 in private investment for every federal dollar spent.
“For a long time, we didn't have that kind of capital,” said Donna Gambrell, director of Appalachian Community Capital, which distributes $500 million in green bank funds.
He said it could help finance everything from electric delivery trucks to rooftop solar panels in coal country. “We really help families and businesses build wealth, generational wealth,” she said. and reduce carbon emissions.
Still, Dan Schrag, a professor at Harvard University's School of Earth and Planetary Sciences, said $20 billion in federal dollars represents a drop in the bucket of the energy transition.
“Last year, the world spent $1.7 trillion on clean energy, and it wasn't enough,” he says.
Schrag said to really get private investors excited, the federal government needs to help make renewable energy more profitable than fossil fuels.
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