Financing Climate Mitigation and Resilience: Lessons from Hawaii

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The Environmental and Energy Study Institute (EESI) held a briefing on innovative efforts to finance and implement climate change mitigation and resilience projects. Featuring a panel from Hawaii, the briefing explored steps the state is taking to reach carbon neutrality and run on 100 percent renewable energy by 2045. Hawaii's Climate Commission staff discussed Hawaii's climate response, and the Executive Director of one of the most robust green banks in the country spoke about its unique features and how it supports companies, communities, and individuals as they work towards Hawaii’s climate goals in an equitable way.

 

HIGHLIGHTS

Alex Kragie, Director of the American Green Bank Consortium, Coalition for Green Capital

• Green banks are financial institutions that connect clean energy projects with capital.
• There are 15 green banks across the United States, which have provided over $4 billion in investment in clean energy projects. The success of green banks at the state level has proven that the model is effective at funding clean energy projects.
• In response to the COVID-19 pandemic, green banks are exploring ways to help partners by supporting supply chains and local economies.
• Transitioning to a clean energy grid over the next 20 years requires at least $225 billion in investment annually, and the world is not meeting this requirement. Immediate investment in clean energy technology is needed to combat climate change.
  • The United States should be a leader in clean energy investment, and low-income communities should not bear the financial burden of transitioning.
  • A combination of public and private investment is necessary because neither sector can fund the entire transition on its own.
• Congress should pass the National Climate Bank Act (S.2057), which was included in the draft CLEAN Future Act. A National Climate Bank would:
  • Provide financial support to invest in larger projects at the federal level that state banks cannot finance.
  • Help establish new state and local green banks.
  • Provide low-cost financing to existing banks.
• Green banks can prioritize underserved and low-income communities, which have to dedicate a greater portion of their budgets to energy. Green bank-funded projects help provide low-cost financing to fund more affordable energy, which provides an opportunity to lower energy bills.
• Mitigation projects such as clean energy installations are generally easier to finance because they generate profits for investors. Green banks are working to finance adaptation projects that are traditionally harder to fund because these projects have fewer profit-generating benefits.

 

Gwen Yamamoto Lau, Executive Director, Hawaii Green Infrastructure Authority (Hawaii Green Bank)

• Climate change and social inequality are major threats to community resilience and sustainability.
• The Hawaii Green Infrastructure Authority (HGIA) was created by the Hawaiian government to democratize clean energy. Hawaii has one of the highest energy costs in the nation and a high cost of living, and nearly half of households are Asset Limited, Income Constrained, Employed (ALICE). Many Hawaiian households also rent, and renters are often unable to access clean energy retrofits.
  • The goals of HGIA are to address market barriers to financing clean energy projects, expand clean energy access and affordability, stimulate private investment, and leverage tools to mitigate risk and reach new markets.
• The Green Energy Money Saver (GEM$) program uses an on-bill repayment mechanism, which allows tenants to repay loans using the utility bill savings generated by switching to clean energy. The obligation for paying back the loan is tied to the electric utility meter rather than a person, which makes projects accessible for renters.
• An example of a project financed by GEM$ is the Kahauiki Village solar microgrid, built to eventually power 153 planned homes. Kahauiki Village, which currently includes 30 homes (representing phase 1), is being built through a public-private partnership to house previously homeless families.
  • The microgrid project would have been unlikely to receive private investment because it was the first project of its kind, its construction costs were frontloaded onto the first phase of the project, and, since no low-income housing tax credits were used, there was no monitoring of ongoing financial viability.
  • When the first 30 families moved into Kahauiki in January 2018, the village was not yet connected to the main utility grid, but the microgrid provided all of the community’s energy needs for months until the grid was eventually connected.
• GEM$ has helped finance community solar and multi-family home projects that make clean energy retrofits accessible to low-income households and renters.

 

Anukriti Hittle, Climate Coordinator, Hawaii Department of Land and Natural Resources

• Hawaii is already feeling the effects of climate change with hotter days, changing precipitation patterns, and an increase in inland flooding that leads to contaminated drinking water. Sea level rise projections indicate that things will only get worse.
  • For a state composed entirely of islands, adaptation is the immediate concern.
• Hawaii has a goal to be carbon neutral by 2045. The state passed Act 32 to create the Hawaii Climate Change Mitigation and Adaptation Commission, which is charged with providing policy direction and planning among state and county agencies and partners; establishing and implementing climate change mitigation and adaptation strategies; and identifying vulnerable people, communities, industries, and ecosystems.
• The commission’s primary mitigation strategy is to reduce ground transportation emissions.
• The commission has a four-point program to support agencies and departments in developing adaptation and resilience:
  • Maintaining information and best practices on adaptation to sea level rise.
  • Guiding counties in planning and permitting.
  • Engaging with communities to determine adaptation strategies.
  • Providing support for the development of vulnerability assessments.
• The Hawaii Department of Transportation and Department of Land and Natural Resources have begun working on green infrastructure projects and are using innovative financing techniques such as green banks.

 

Adam Borrello, Executive Director, North Shore Community Land Trust of Hawaii

• The North Shore Community Land Trust’s mission is to “protect, steward, and enhance the natural landscapes, cultural heritage, and rural character of ahupua’a” (historic land divisions) in northern Oahu.
• The Land Trust was created in response to potential land developments and opportunities to preserve land, which often manifest as legal battles. However, landowners are often willing to give land up for conservation.
• The Land Trust partners with landowners, government, NGOs, and the community to identify areas to conserve and restore. Funding comes from local, federal, and non-profit partners.
• The Kahuku Kawela Forever project is an example of the Land Trust working to find a solution between the local community and the owners of a resort on the North Shore. Over 1,000 acres were set aside to be preserved, and the organization is now working to preserve the land’s environmental integrity and recreation opportunities for the community.
• Thanks to restoration efforts, species that are otherwise losing habitat are returning to and thriving on restored habitat.

 

Q&A

 

What are the next steps you foresee green banks taking?

• Kragie: Green banks focus on tackling the toughest tasks in financing clean energy and adaptation. This includes financing energy storage, which is currently commercially viable but not widely deployed. Adaptation and resilience is another upcoming frontier. Green banks also focus on supporting traditionally underserved areas and low- and moderate-income communities where loans are more difficult to get.
• Yamamoto Lau: Expanding funding sources and working to facilitate the adoption of new technologies until traditional lenders are comfortable with financing those projects.

 

How might green banks evolve to become a bigger resource for adaptation efforts?

• Hittle: A possible frontier is in managed retreat. There are currently policy incentives to put infrastructure back in place when disasters happen rather than looking for a better place to go, and green banks may be able to incentivize people going somewhere else when they rebuild after disasters. Green banks may also be able to bring private and public funds together to make public infrastructure stronger and more resilient.
• Borrello: For small non-profit organizations that do work that is difficult to monetize, the idea of even a small bank loan is daunting. Green banks fulfill a vital role, but they may not be an ideal option for land conservation projects.

 

How can the lessons of Hawaii be applied to other islands or coastal communities that are dealing with similar challenges?

• Kragie: Existing green banks are not able to access their full range of capabilities at current funding levels. Giving green banks more resources through a national climate bank would allow them to increase capacity.
• Yamamoto Lau: The green bank consortium is collaborative. If other states want to start a green bank, existing green banks are willing and able to assist new ones.
• Hittle: Hawaii’s adaptation and mitigation commission is still in its early phase and is still learning from colleagues in other states. Resilience to disaster events is not built in a day. An event may happen in a day, but responding to events and preparing for future events is a long process.
• Borrello: Funding must be a priority. The Land Trust recently hosted a group from island communities in Korea that cited similar challenges in obtaining necessary funding.

 

What steps are green banks taking now in response to the COVID-19 situation?

• Kragie: The priority right now is finding ways for green banks to assist communities and workforces that are struggling. The secondary focus is on ensuring that people realize that now is a great opportunity to transition to clean energy since interest rates are low and construction could help people find work.
• Yamamoto Lau: We need to deal with the pandemic now, but keep our eyes on recovery. Funding green banks helps low- to moderate-income households put money in their pockets.

 

Financing climate resilience projects is essential, but it is a tough nut to crack because the return on investment is not always clear. During this briefing, panelists discussed efforts in Hawaii and across the country to finance and carry out projects to address sea level rise and increase coastal resilience. From organizations partnering with federal agencies to increase nature-based solutions along the coast to incentives designed around insurance pricing, these innovative climate and financing solutions will be key to addressing climate impacts around the country.

States across the country have set ambitious climate goals, and understanding how to fund these initiatives in an equitable way that sees a return on investment is essential. Congress will play a key role in unleashing the potential of financing to decarbonize the economy and increase resilience to climate impacts. Learn about work happening across the state of Hawaii and how it can be replicated and scaled in your state or district.