Green Banking in Action
Sara Harari is the Associate Director of Innovation and Strategic Advisor to the president at Connecticut Green Bank. Connecticut Green Bank was established in 2011 and was the first Green Bank in the USA, of which there are now dozens that are live or in formulation. They look to accelerate the green economy by using public dollars to catalyze private investment into clean energy and other environmentally positive solutions. CT Green Bank started with a focus on residential solar deployment, and at 2021 expanded their model to include new areas of environmental infrastructure including climate adaptation and resiliency, land conservation, parks and recreation, agriculture, water, waste and recycling, and environmental markets, including carbon offsets and ecosystem services.
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Episode recorded on June 20, 2023 (aired on July 3, 2023)
In this episode, we cover:
[01:56]: The concept of a green bank
[06:45]: The origins of CT Green Bank
[10:07]: How CT Green Bank determines its priorities
[12:32]: Sara's background and early interest in clean energy
[15:31]: Her work at National Grid
[17:13]: The Green Bank's EV charging carbon credit program
[20:45]: How their scope expanded to include broader environmental infrastructure
[23:05]: Innovative financial incentives and structures to support parks and land conservation
[25:32]: What Green Bank looks for when hiring
[27:30]: Green Bank's open rolling RFP for project ideas and investments made to-date
[32:28]: Areas of innovation Sara is excited about, including the Innovative Energy Solutions program
[34:58]: Federal funding opportunities, including the EPA's Clean School Bus Program and the Greenhouse Gas Reduction Fund
[39:54]: How Green Bank hopes to support the contractor community with workforce development training and pre-apprenticeship programs
[42:52]: Environmental justice at the core of the Green Bank's mission, and examples of working with low and moderate-income homes
[45:56]: How the Green Liberty Notes program works
[47:08]: What Sara is most excited about right now
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Cody Simms (00:00):
Today's guest on My Climate Journey is Sarah Harari, Associate Director of Innovation and Strategic Advisor to the president at Connecticut Green Bank. Connecticut Green Bank was established in 2011 and was the first Green Bank in the USA, of which there are now dozens that are live or in formulation. They look to accelerate the green economy by using public dollars to catalyze private investment into clean energy and other environmentally positive solutions. CT Green Bank started with a focus on residential solar deployment, and at 2021 expanded their model to include new areas of environmental infrastructure including climate adaptation and resiliency, land conservation, parks and recreation, agriculture, water, waste and recycling, and environmental markets, including carbon offsets and ecosystem services. I got to know Sarah as part of my engagement as investor in residence with the Future Climate Venture Studio, a program for early stage climate tech startups that's run by RGA Ventures, the University of Connecticut, and CT Next. Connecticut Green Bank is one of the partners in that program.
(01:15):
And from the minute I met Sarah, I knew our MCJ audience needed to hear from her about how the Green Bank works. But before we do that, I'm Cody Simms.
Yin Lu (01:26):
I'm Yin Lu.
Jason Jacobs (01:28):
And I'm Jason Jacobs. And welcome to My Climate Journey.
Yin Lu (01:34):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:39):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help. Sarah, welcome to the show.
Sara Harari (01:54):
Thanks so much for having me, Cody.
Cody Simms (01:56):
So as I understand it, the Connecticut Green Bank was the nation's first green bank, and I would love to hear from you, what does that mean? What is a green bank and what kinds of programs do you all work on?
Sara Harari (02:11):
We are the first green bank, we started back in 2011. And the basic idea behind a green bank is that we take in limited public funding and we use that to attract private capital to the green economy. And we identify areas that are being underserved by the market and we essentially train private banks on how to work with new technologies and with new communities. We look for areas where people are not installing the new technology, like batteries or rooftop solar and especially in underserved markets, underserved communities, and we think about how finance can actually be a tool to spur development of those technologies in those communities. And we work across the state of Connecticut to think about how we can best serve the state and the policy goals that we have within the state that are pretty aggressive.
Cody Simms (02:57):
So the idea being, let's take something that now I think generally people understand the financing models around, which is commercial solar. But 10 years ago when this was still newer tech, your local savings and loan for example, may not know how to underwrite a large scale commercial solar project. And so Green Bank, you all took it upon yourselves to say, "Hey, this is important." There's tech risk. I guess not really as much today, but maybe 10 years ago there was. And how do we build a model that can attract capital to fund these projects and get them to the point where other forms of commercial capital can then realize that yes, these are safe investments or relatively safe investments that should be adopted more broadly. So you're somewhat catalytic in that regard, but it's still for profit investing. Is that accurate?
Sara Harari (03:48):
That's exactly right. It's like you're reading our website. Yeah, catalytic in investment is part of our DNA. So we think about where has the technology risk been retired. Rooftop solar is a great example. When we started back in 2011, you couldn't just go to your local bank and get a loan, the rates would've been crazy high. And so we think about how we can work with the bank so that you can get a more reasonable rate. Whether you are a small business owner in the state, somebody looking just to improve your home. And we really did start with rooftop solar for residential customers back in 2011. And that portfolio of technologies has grown beyond that to other areas where we feel the technology is mature, but people aren't really adopting it at the rate that we would expect them to hit Connecticut policy goals. Right now we're very focused on storage.
(04:31):
It's something that people have a lot of familiarity with. They understand what Tesla is and what Generac is and what the benefits are of having storage in your basement or in your garage. But we're not really seeing adoption and part of it is because it's upfront cost is so high. And so thinking about how can financing be part of the solution, we use our limited public funding. We take in a small return on people's utility bills. We also get funding from other sources as well. And we basically use that to work with our local credit unions to say, "Okay, if we are in the mix, how does that change how you view it?" So for every public dollar that we invest, we're attracting $7 of private capital into the market through a couple of different innovative financing strategies that I'm happy to talk through too if you'd like.
Cody Simms (05:17):
So the money that you all are able to bring to the table is money that's come from the public realm in some way, shape or form. It sounds like there's a small surcharge on a utility bill or whatnot that's programmatic, that generates income into green bank and then allows you to walk up to a commercial financing partner and say, "Hey, we'll bring this to the table. Can you build a program around that?"
Sara Harari (05:38):
That line item on utility bills is definitely part of the funding we share with our state run energy efficiency programs. So the incentives and rebates that you get in most states in the United States are coming from that same pot of money in Connecticut. We also take in money from the Regional Greenhouse Gas Initiative, RGGI, which is a multi-state collaboration to reduce the emissions in the Northeast. So we get a small surcharge of the benefits allocated to Connecticut from that. We also have the ability to issue our own bonds. We have a great program called the Green Liberty Bonds and now the Green Liberty Notes, that essentially allow everyday people like you and me to buy into the Green Bank investment funding for the Green Liberty Notes is a minimum purchase of a hundred dollars. So you give us a hundred dollars, we take it for a year, we invest it on your behalf and we return a set rate of return to you.
(06:27):
And that money that you give us is then going to help in this program, small business owners in Connecticut adopt energy efficiency technology with zero interest loans on their utility bills. So you can directly invest with us in improving the Connecticut green economy. So we have a couple of different ways that we take in funding for our programs.
Cody Simms (06:45):
Super cool. I'm going to come back to the green bonds because there's a bunch of questions I want to ask about that. But before we do that, just the broader context. So I was looking before our conversation, I found the website of the American Green Bank Consortium, which says that there are now 39 partners, 18 of which are active, eight new ones that are operational in 2021, 2022 and eight states passed or introduced new green bank legislation in '21/2022. So this is a growing phenomenon where there are state green banks, there are county level green banks, but Connecticut Green Bank was the first one in the US. How did this happen? What was the impetus for the green bank to get going in the first place?
Sara Harari (07:25):
Back in 2008, the Waxman Markey Bill was circulating through the federal legislative process that included a lot of things like a cap and trade system, and a federal green bank was one of them. Basically leveraging this idea that we need private capital in the markets, rebates, incentives, tax credits, they're all great tools but without financing you're really not going to go the distance. So that circulated around the federal government ultimately failed, and the architects of the Federal Green Bank concept went and shopped it around to different states to say, "Hey, how about you guys try this first and see how it goes, and then maybe one day it'll end up back at the federal level." And so Connecticut bid, our governor and our regulator decided to move forward with adopting it and the Connecticut Green Bank was born. We spun out of an existing clean energy investment innovation fund that was run by our sister quasi public in Connecticut, which is a Connecticut Innovations, a venture capital fund.
(08:24):
So we had some funding that was really focused on clean energy innovation, so there was an expertise concentration in that area that got shifted over to be the green bank. So in 2011 we got started with some seed funding with the funding that I mentioned earlier from the line items on the utility bills and really got started. And then you mentioned the American Green Bank Consortium. So we've done a lot of work with them. We were formed by an act of the legislature, which really dictated the shape of the green bank. In Connecticut, and part of what I love about all the new green banks that got started is their shape is really dictated by the ways that they're set up. So if you look at us, we're doing mostly retail loans right now, we're lending to homeowners and business owners, whereas the New York Green Bank tends to be more focused on utility scale solar projects, very focused on how do you support community solar, which in Connecticut we have a much more limited program there's not as much of a need for financing there.
(09:19):
There's some brand new green banks that are getting started out in Nevada that have just a few staff that are thinking about how they can do programs that are best fit for them. And we've worked closely with the American Green Bank Consortium to build a toolkit of the programs that have worked here in Connecticut that we're happy to export our knowledge to other places. So it's exciting to see the growth of it. And then now it's back at the federal level in the federal discussion.
Cody Simms (09:45):
Super interesting nuance there that different states, different counties are going to have different financing programs and priorities. I am loving your cat. We have a cat walking across the video screen here as we're recording, which is... What's your cat's name, Sarah, if you don't mind?
Sara Harari (10:01):
Her name is Thursday.
Cody Simms (10:03):
Thursday. Oh, I'm watching Wednesday on Netflix right now. So Thursday it is. So how are the different priorities, I guess established? You said Connecticut is mostly focused on residential and retail oriented programs, whereas New York is heavily focused on utility scale projects. To some extent you have to be able to map this back to a rate of return, because again you're not a grant program. You are actually needing to return capital to private investors in addition to, I assume some kind of evergreen pool for the green bank itself. How do you figure that out? How do you determine which projects are the right ones to focus on?
Sara Harari (10:40):
It's a great question. There's an intersection of need, technology, reliability and the areas where we're able to capture return that really dictate it. And to be clear, not every program that we run produces a return. Some of them, for example, when we were running a program around rooftop solar for low income homeowners. That is very closely tied to state policy goals, to our justice 40 goals. It's less important for us that one produces a return than it is for some of our more market rate customers. And so we do look across our entire portfolio to say, how do we balance this so that we are sustainable, so that we are training the banks. But it's not like we're a traditional bank we don't have a mandated return or even a mandated greenhouse gas reduction. It's us looking across the entire portfolio of policy to say, where are we falling short? Where can capital be a solution here? What's ready to move?
(11:37):
And then really focusing in on that. So in Connecticut, our largest emitting sectors are transportation, which is 40% of our greenhouse gas reductions. Then residential is 19% and commercial industrial is 19%. So in Connecticut the buildings themselves are a big source of emissions and so that has really driven us to focus in on that. The rooftop solar was also a state mandate that we examined that the battery behind the meter battery storage program that we're running right now, which is for residential and commercial customers was a regulatory mandate that we administer the program. So it's sort of a combination of where is the ball, how do we go to it, and also what balls are kicked towards us that we figure out a way to solve.
Cody Simms (12:19):
Sarah, your role as associate director of innovation, I assume you have quite a bit of your day focused on where are we looking next? What's the next wave of programs we could be thinking about as opposed to necessarily administering the existing ones? Let's talk about you and your background and what your day-to-day looks like and how you got into that function at Connecticut Green Bank.
Sara Harari (12:39):
I got interested in clean energy when I was in high school. I did a science fair project that looked at if we put a wind turbine in my parents cul-de-sac, could it power our house? And it used bad science. I'm just going to say that right up front. I put a utility scale Vestas wind turbine on my parents' residential property. And got the miraculous result that it could power not only my parents' house but all the homes on the block. So despite the bad science, I was hooked. I was started to think about how can clean energy be not only a good solution from an environmental perspective, but also from a financial perspective. And went to college, studied engineering, went and worked as an energy engineer for five years, came out the other side of that saying, I want to go beyond just a building improvement perspective. I want to go beyond just energy efficient buildings and power plants. How do we really start to make a change more broadly?
(13:31):
And in grad school I got very interested in the idea that technology is being developed at a much faster rate than it's being adopted, and that we don't see wide scale adoption of technology even though it's proven successful in pilot projects. And identified really the intersection of utility regulators and utilities as a main failure point where a lot of those technologies don't move forward.
Cody Simms (13:58):
They're just too risky generally. Is that correct?
Sara Harari (14:01):
Yeah, A too risky is part of it. I would say it's more misaligned incentives. The utilities certainly perceive those technologies as more risky even if they have been proven. The other big problem there is that utilities are incentivized based on their ability to install large capital intensive infrastructure. They earn a set rate of return on most of their capital investments. And so for them, if you could find a cheaper, more flexible solution that's not necessarily in their best interest from a financial standpoint. You really need to create the environment in which they are incentivized to move forward, it's derisked for them. They're not penalized if something fails during the piloting process. And really thinking about that as a main challenge.
Cody Simms (14:48):
Hence why a network of independent distributed energy resources like solar may be less appealing to a utility than building a new natural gas plant that they can amortize financing around.
Sara Harari (15:01):
Yeah, the financing is a big part of it. And then the reliability is the other big part. If you have a power plant that utility controls and they are penalized every time that it's not producing a hundred percent of the energy, and they have the choice between a power plant that is entirely under their control or a hundred different solar plants, they're going to choose the one that's under their control because that's the benefit of centralized large scale, very predictable power compared to more distributed resources. And so right now the incentives aren't aligned between the two of them. Coming out of grad school, I went to National Grid, I worked at the utility for a few years inside the belly of the beast, thinking about how do you start to move this conversation forward from the inside. And really got to learn a lot about the nitty-gritty of, how do you talk to the person that's sitting in the control room whose responsibility it is at the end of the day to say, yes, this is or isn't safe for the interconnection team or the engineers who are looking at what does this mean to the rest of the system when we interconnect something new.
(16:01):
I do really enjoy the technology side of it. And then the green bank started launching a new program and asked if I would like to come think about it from the financing side. And I said, "Yes, yes I would." Because it's not just the technology that you need to be in line to start to accelerate the adoption of some of this advanced technology. It's also the funding source. Because a lot of these are very capital intensive projects as we've talked about. And so how can you start to leverage creative ways to build those projects? And it's not just creative interconnection, creative engineering, it's also the creative financing that goes with it. Yes. To circle back to your original question, I'm a nerd about it and I spend a lot of my time thinking about that now.
(16:46):
So from the green bank's perspective, now I'm looking at what is already technologically mature that we can start to provide financing and funding for in the next year or two that can hit Connecticut policy goals? And then what will be technologically mature five to 10 years from now that we need to start paying attention to now, as it goes through that piloting incubation stage so that by the time it comes out of it, we're ready to say yes, you can secure financing from us to deploy it everywhere.
Cody Simms (17:13):
Let's dive into a couple of examples. So I saw, it looks like a relatively new program is EV charging carbon credits. Where you're helping to connect operators of EV chargers in the state to allow them to somehow register through you and monetize carbon credits. Is that an accurate program? Is that a good example of a sort of bleeding edge financing program you're working on?
Sara Harari (17:36):
I would say that's a great example. So the EV carbon charge program is something that got started a few years ago based on our expertise with renewable energy credits. So as you may know, if you have a solar system it generates two sources of revenue. It both generates the power that you can sell or use, and then it also generates a renewable energy credit. Which is essentially the clean part of the clean energy that you're producing. So you can actually sell that on as a separate revenue stream. And when we started looking at how do you tackle some of these other parts of the emissions ecosystem, especially as I mentioned earlier, transportation is 40% of our emissions in this state. How do you start to monetize the clean aspects of clean transportation, not just the vehicles and the charging infrastructure, but how can you actually give credit to a car that's charging at a time when it's using clean energy or that is avoiding the use of a gas or diesel car.
(18:33):
And so we worked with the carbon registries across the country over a process that took a couple of years, and finally was set up in the past year and we've started to run the program now. So if you own an EV charger anywhere in the country actually, you can come and register that EV charger with us at the Connecticut Green Bank and we bundle them all together, and then we go and we monetize them and then redistribute the credits back out to you. So we will take all of your information about, who was charging at your charger, when were they charging, what was the grid like at the time when they were charging? And we take that and we sell them as a bundle on the market and then come back and redistribute it. So it's basically creating an additional revenue stream for EV adopters of all types.
Cody Simms (19:22):
Sarah, that sounds to me like a startup pitch. I could imagine a startup coming to MCJ and it's like, "We're working on being the registry for EV charging credits and we're going to take a cut of every credit that we sourced and we're bundling the set of nationwide EV chargers together to do that." How did Green Bank take that on as an initiative and do you imagine eventually handing something like that off to a partner to run?
Sara Harari (19:46):
We got started because there was a couple of our staff that were very passionate about EVs, and were thinking about it and had expertise with Rex. That's a relatively rarefied Venn diagram of overlap between people that understand carbon markets enough to think about setting that up and also have the patience to go through the three to four year process that we went through to get certified by the registries to do it, and also have a relationship with some of these larger names. This is nascent for us where it's set up and now we're thinking about how do we use it. In part we didn't want to overhype it before it was set up and established. That's something that we're struggling with a little bit on our environmental infrastructure scope expansion too, but is our first step down that road of thinking about how can we use it? How do we support people to create these additional revenue streams for them? We're certainly thinking about how we can use it to support EV adoption in Connecticut as an additional revenue stream.
Cody Simms (20:45):
Interesting. And let's hit on that scope expansion generally. Because as we discussed really the origin story of Connecticut Green Bank was very much around rooftop solar and solar financing, but clearly you now have expanded into totally broader climate mandate, I guess is maybe the way I would think about it. Was that an intentional decision point in the life of Green Bank to do that at some point?
Sara Harari (21:08):
Yeah, our staff is very passionate about serving the entirety of the green economy. And so since we started in 2011, we've facilitated over two and a quarter billion dollars of investment in the Connecticut green economy in clean energy, energy efficiency programs. It's safe to say that the model of green banking works in Connecticut. We've supported the deployment of over 500 megawatts of clean energy. And so the question that we were faced with was, "Okay, if this works for clean energy, what else could it work for?" Two years ago, our governor in recognition of the good work that the Green Bank had done, supported a scope expansion for the Green Bank. So the Green Bank is now empowered to invest in other areas of environmental infrastructure, which is a very large catchall term. But for us means water, agriculture, parks and recreation, land conservation and waste and management. And it also allows us to create new carbon markets and revenue streams as we need to, to support these environmental markets.
Cody Simms (22:08):
Always with the goal of catalyzing some kind of market activity that can lead to a for-profit mechanism. That's always the pathway, is that the North Star?
Sara Harari (22:19):
I wouldn't say that it's always about a for-profit mechanism, but it is identifying the ways that that capital can be catalytic in this space. And weaving together streams of funding and financing that others may not have thought of or might not have realized that were accessible to them. So a good example for right now that's crazy out there but is also super exciting to me is parks and recreation. Because if you went to a bank now they would understand that the savings that you get on your rooftop solar is a revenue stream that they can find against through a power purchase agreement. But what does a power purchase agreement look like for a park? What's the revenue stream that you're going to provide financing against? That's a great area for the Green Bank to go out and explore. So one of the areas we've been kicking around the idea of internally and with some partners is something that we're tentatively calling Park RX. Which is saying, "Hey, what if you could persuade doctors to prescribe time in parks?
(23:19):
And what if you could get health insurance providers to recognize that that actually reduces people's risk, and therefore has a lower exposure to potentially high health insurance costs? Can health insurance actually be a revenue stream to support parks? So that is very similar to how we structure the solar PPA but is in a totally different area. And then we're also considering really different kinds of financial incentives and structures. For example, when we're looking at land conservation, one of the trending topics I would say in this area is something called buy, protect sell. Which is if you have a large area of land that is up for sale, that say the Nature Conservancy wants to purchase, but they don't have the money on hand at the time that the land goes up for sale. Perhaps the Green Bank would consider purchasing that, holding it until the Nature Conservancy had the capital to provide it.
(24:15):
And through our intervention would have to, for instance, allow access to the local community for dog walking or would have to ensure that there was a reforestation effort on the piece of property, something else that aligned with the Connecticut policies.
Yin Lu (24:31):
Hey everyone, I'm Yin, a partner at MCJ Collective, here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning, and doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community. A number of founding teams I've met, several nonprofits have been established and a bunch of hiring has been done.
(25:06):
Many early stage investments have been made as well as ongoing events and programming like monthly women in climate meetups, idea jam sessions for early stage founders, climate book club, workshops and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (25:32):
Sarah, one of the things we pride ourselves at MCJ is being what we call breaking down silos to enable climate innovation. We're trying to bring together people from all sorts of different walks of focus to come together and think about climate solutions. And everything I'm hearing from you is Green Bank is right in the middle of doing that. Just at a different scale, different area of implementation than obviously MCJ is, which is much more community focused. When you're trying to bring new people into Green Bank, how do you figure out if they have the right skillset in terms of thinking outside the box, to use a totally cliched phrase to describe innovation. To think in these de-siloed ways to connect all these dots and connect these synapses. How should funding solar energy at a park be funded by health insurance potentially?
Sara Harari (26:20):
Are you talking about individuals or are you talking about partner organizations?
Cody Simms (26:23):
No, individuals. How do you bring the right people in to think this creatively? Because this is, we are really talking about very creative programs that no one is serving up to you. Sounds like you all are coming up with some of these ideas.
Sara Harari (26:35):
Yeah. So when we look to hire staff or find great partners to work with, I think we look for flexibility and of thinking and also are you willing to get really nerdy about it? Does that really get you jazzed about addressing the climate crisis that we're facing? And we have a mission statement that has to do with how we serve the green economy of Connecticut by working with private banks, but we also have a vision statement which says, the vision of the Green Bank is that we are guided by love for humanity. And so can you really bring that love of solving the world's problems and to create a better future together? And are you willing to say yes in an area where a lot of other people are saying no or at least to say what if? I think that that's really what I look for when I'm building partnerships with people and individuals and what we try to attract for our staff.
Cody Simms (27:30):
Wow, I love it. And one thing I noticed on your website is that you have open rolling RFP. Or request for proposal where it looks like anyone can submit an idea into Green Bank of, here's a potential project. Have you had anything come through there that you all have spent considerable time on and potentially even implemented?
Sara Harari (27:53):
The capital solutions, RFP is as you said, an open rolling RFP, and it's basically saying, "We have money. Come bring us a good idea. We'll see if we can work together on it." And to go back to my earlier point that Green Bank really only provides investment in technologically mature solutions. But even if the technology is mature, that doesn't mean it's being adopted or doesn't mean it's being adopted well. And so the projects that we have that RFP opened two years ago now, we have made a few investments through that. It's really thinking about what are the new structures that we can't do ourselves but that we want our partners to do. So one of the investments that we've made through it is with PosiGen. So they took a loan from us to create a leasing product for low income customers in underserved communities in Connecticut for battery storage.
(28:41):
So we're running a behind the meter battery storage program. One of the things that we are mandated by our regulator is to deploy that technology not only to market rate customers, but that 40% go into low income households and underserved communities. And leasing products are a really good way to support deployment of technology that's capital intensive like batteries. So the agreement through the Capital Solutions is we give PosiGen a working capital loan, they use that money to buy batteries and then to offer leasing products. We've also provided investments in technology like anaerobic digesters through that program. We looked at how can we start to support some of these technologies that are in a demonstration form where one might be persuasive to support more. Right now I'm actually doing a big clean transportation deep dive with some of the staff and so we're starting to look at, is there a partner that we can attract using that Capital Solutions RFP, that perhaps needs funding to offer a new model to, for example, garbage truck haulers in the state or school bus providers.
(29:44):
So definitely a fun flexible tool. Our chief investment officer hasn't quite started avoiding my calls yet when I call him to say, "Hey, can this apply to this?" So...
Cody Simms (29:55):
And Sarah, you obviously personally really keep your finger on the pulse of what's happening in climate tech and in startups. I believe you're on the board of Climate Haven, which is a New Haven focused incubator program around climate tech and clean energy. You and I got to know each other through the Future Climate Venture Studio, which is a program between University of Connecticut, RGA ventures, the Connecticut Green Bank, PURA and CTNext. I'm curious what you're looking for as you're spending time with, in many cases, often earlier stage startups and what your eye is toward when they might be a company you could potentially build a program around at Green Bank.
Sara Harari (30:35):
That's a great question. So I do do a lot of work with these earlier stage companies. I do that because of what I talked about earlier where, we really need to start learning now as those technologies are being piloted, what is going to be successful? What has a potentially broad reach? What isn't just a science fair experiment? In those cases, I would say that it's not so much the technology that I'm looking for, it's more the use case, the application, the customer problem that they're trying to solve. Because the Connecticut Green Bank rarely does company specific investments. We will do things like, we now allow in investment in fuel cells. It wouldn't be like we now allow investment in this specific fuel cell. And so thinking about what's coming down the pike and what are the new business models to serve it. For example, through that R G A ventures that you mentioned, I met a company that was thinking about capsule farming that's co-located with stores where they can grow produce.
(31:32):
Something like that could really tie in with our new agriculture focus. How do you support local small scale agriculture in communities that are food deserts? Starting to think about that. If in the future we were to support a project like that, it likely wouldn't be company specific. It would be, we have decided that in order to support Connecticut policy goals, we need to support projects like this and we're going to make a pot of funding available or financing available to entrepreneurs that can prove to us that they're out of maturity, where they can use that capital to achieve the outcomes that they promise us.
Cody Simms (32:08):
Yeah, like the EV charging carbon credit program that we talked about is a great example of that where you're not working with any one EV charging manufacturing business. You're opening up a platform and allowing many of them to participate, but at some point you had the aha that, hey, there's a carbon credit type of model that could be applied here generally.
Sara Harari (32:27):
Exactly.
Cody Simms (32:28):
And then beyond that, are there areas of innovation today that are big priorities for you to be paying attention to, generally?
Sara Harari (32:36):
One of my favorite innovation hubs that I participate in the state is the Innovative Energy Solutions program, which is a program that's run by our state energy regulator, PURA. And they basically said, "Hey innovators, come demonstrate your technology in our grid. We'll give you up to $5 million and 12 to 18 months to prove that it works, and we will strongly encourage the utilities to partner with you to make that happen." The theme that we chose for our first cycle was, demand side flexibility. Which means what happens at the edge of the grid where we're using power to change how the entire system works. That's a real area of interest for me personally, both from my background designing those end use systems in the start of my career to the utility side where I was before this role to now, to really start to think about how do you put more solar and storage in EVs and heat pumps and everything onto this system and have it integrate cost effectively.
(33:32):
It's a crazy big challenge. I'm interested in how we can reduce the interconnection and integration costs of new technologies and how that can be a platform and a tool to help support the transition. I'm spending a lot of time thinking about that, especially as we look at clean transportation. If you put one EV in your house, it's probably not that big of a challenge. But if you want to switch over a school bus fleet and you have to create a depot where you can charge 50 buses overnight, that's going to be a giant drain on the grid in that location and likely is going to be very expensive to build the electrical infrastructure needed to connect those buses into the system. And so what are the creative ways that we can start to deploy technology to support the integration of all of these different kind of assets? That to me has been a big focus.
(34:23):
One of the other drums I won't stop beating is up until this point, our grid has been set up to essentially be load following. So when you turn on the light switch, make sure that there's power there for you. But as we start to shift to a paradigm where we have more intermittent renewables that are located in more places around the grid, we need to start shifting how and when we use power to match the power that's being generated. And so solutions like that that allow the cost effective integration of both the generation and the consumption of power, I think are paramount of importance right now.
Cody Simms (34:58):
Your example gave me another question in a different direction I want to jump off on, which is how closely do you follow federal policy programs and think about the implications of those at the state level, relative to seeing bottoms up where there's startups or innovation or ideas happening and use those to identify potential programs. I'll give you a very specific example. You talked about clean school buses and what a giant load it would be on the grid wherever you're going to set up a charging facility for these school buses. Well, the EPA has a whole clean school bus program where they are subsidizing EV school buses for school districts that can sign up and say, "I want one of those." And so I don't know how much the awareness of that program is driving the need to solve that problem somewhere locally in Connecticut, relative to just, this is an idea that you're obviously seeing the adoption of electrify everything at every inch of startup land, and so clearly we're going to move to EV school buses at some point.
Sara Harari (36:00):
I follow the federal funding requests as closely as I can. There are so many of them and they come out so quickly from so many different areas. But it's a once in a generation opportunity for us to take in federal funding and identify how we can use it to really spur change. So it's been very exciting both from the Inflation Reduction Act and the Bipartisan Infrastructure Law. And on the example that you gave with the clean school buses, that's a great program. Electric school buses are so expensive though that funding that came out in the first round, basically covered the cost for a single electric school bus per district. It didn't cover the charging, it didn't cover the technical assistance that would be required for the district to go in and identify which route is it going to cover, where do we put it, how do we do it? And so at the state level, that's more our Department of Energy and Environmental Protection that's working with the district to receive it. But we are working with them.
Cody Simms (36:55):
We had Katie Dykes on the pod before, so any listener who wants to go learn what DEEP works on in Connecticut, go back to the archives and check it out.
Sara Harari (37:03):
Yeah, we're working with Katie's amazing team on this program. And so they're thinking about how do we do technical assistance? How do we do a state funding match for that federal money, which isn't required for the EPA Clean School Bus program, but is required for a lot of other ones. From the Green Bank side, we're starting to think about, "Well, do they need financing for the chargers? Do they need bridge loan financing?" Which is around the idea that the grant or the incentive might not be available until you can prove that the technology is up and operational, but you need to buy it six months to a year earlier. Where do you get that money from to buy the equipment until you can prove that it's operational? For us, the federal government is a very creditworthy counterparty. If you have the paperwork that says, "The government will pay me back once this project is going." That is a relatively straightforward for us to write a bridge loan for.
(37:56):
Another great example around school buses is one of the most expensive parts aside from the bus is actually the site work that's required to deploy them. So you need to basically dig a hole to put the wires in to install the chargers. And if you think at some point in the future you're going to do 20 of them, it's much more cost-efficient to do it all one time rather than having to bring the backhoes back, bring the teams back, do it all a second time, a third time, a fourth time as you add additional buses. So is there some kind of financing that we can provide them that allows them to do the cost of 20 buses worth of site work, at the time where they receive the grant. So that in the future if they go in and they decide to do other buses as is mandated by the Connecticut policy, they won't have to bear the additional cost of the site work at a later date.
Cody Simms (38:49):
Thank you for riffing on that question. That was exactly what I was hoping to hear.
Sara Harari (38:54):
The big thing for us right now at the federal level is the Greenhouse Gas Reduction Fund. So that's 27 billion for a National Climate bank that was actually partially modeled off of the success we've had in Connecticut. And so that's going to be a national entity that's administered by the EPA, [inaudible 00:39:12] is a nonprofit that can lend both to us so that we can have a lower cost of capital when we lend out. And that also can support the development of smaller state and local green banks around the country and perhaps even provide direct investments themselves. So there's a lot moving on the federal level.
Cody Simms (39:30):
And is that still require Congressional approval or is that in the process of being deployed now?
Sara Harari (39:35):
It is. That 27 billion is with the EPA. They're going to release funding requests this summer. We'll all be working together to submit proposals for what that national nonprofit could look like, and hopefully the funding will be dispersed in the next year or so. It's required to be dispersed by September of 2024.
Cody Simms (39:54):
Riffing on your prior answer on the example you gave about rolling out a school bus charger program, what struck me was the workforce side of that. It's one thing to provide funding for all these projects, it's another to have people who can actually deploy them. How involved does Green Bank get in supporting workforce development? How involved do you get in solutions for contractors to help them manage cash flows and all of the things they need to manage around their businesses to actually get these projects in the ground?
Sara Harari (40:26):
The answer probably is not as much as we could. I think for us, when we identify the programs that we want to go after, economic development is a really important part of the projects that we support. What is the tax revenue that's being generated from those projects? What are the job hours that are created from the projects that we support? We do work very closely with our contractor community in the state of Connecticut on the different programs. We pre-qualify a set of contractors that can participate in our programs, our energy efficiency, our solar, our storage programs, and we try to provide training for them on the areas that are new to them. For example, we launched the storage program last year, making sure that any installer that was interested had access to the manufacturers about the technology and what its capabilities were and how do you sell it, and how do you talk to customers about it, how do you install it?
(41:18):
So we do work with the contractor networks pretty closely on those programs. But I think a big trend that we're starting to see, especially that's driven by the federal funding is a need for community-based agreements for bigger projects, and starting to think about how can the community have a voice in how money gets spent and how funding gets allocated. And a big part of those conversations are workforce development training, pre-apprenticeship programs. And we have worked a little bit with our labor network in the state to support it. Somebody that's doing really good work there in Connecticut is the Connecticut Roundtable on Climate and Jobs. They're just doing phenomenal work to connect workforce development with the clean energy economy.
Cody Simms (42:04):
I haven't run the numbers, but when you talk about ROI that feels like an area you could generate some pretty significant ROI, if you can figure out how to attribute it, I would think.
Sara Harari (42:13):
Yeah, we actually do track all of the job hours that we create on our website. If you give me a second while we keep talking, I can pull it up.
Cody Simms (42:22):
Go for it.
Sara Harari (42:23):
Since we started in 2011, the Green Bank has supported the creation of more than 26,720 direct, indirect and induced job years.
Cody Simms (42:31):
Wow.
Sara Harari (42:32):
So information like that is really important when we go to speak to our state representatives around the impact that the Green Bank is having across the state.
Cody Simms (42:40):
From other impactful metrics perspective, we've talked about megawatt hours deployed, we've talked about, I don't know if you gave numbers on emissions reduced, but clearly you're actively reducing emissions. You just talked about job hours and we've talked about dollars. How do you think about environmental justice? How do you think about the support you give to different communities and how do you track and manage all of that as well? Because that feels like maybe the hardest thing to figure out how to potentially report around.
Sara Harari (43:11):
Working to support all Connecticut residents to have healthier, cleaner outcomes is part of our core mission. And we have adopted just 40 goals in line with the federal government, which means that 40% of the investment that we make need to be in communities that have been disproportionately harmed by climate change. And that can be cut a lot of different ways, whether you're looking at household income or Community Reinvestment Act or if you're using the state or the federal environmental justice metrics. But if you look across all of it right now we're at about 53% of our investment going into low income and underserved communities. It is very important to us. One of the things that we're particularly proud about is that we are a solar with justice state, which means that low and moderate income residents of Connecticut are actually installing solar at the same rate or greater than residents with higher income.
(44:04):
So we supported a program called Solar for All between 2015 and 2021, that supported more than 3000 solar installations going into homes that were owned by low and motor income residents in Connecticut. And that was paired with energy efficiency and a solar lease. And one of the big innovations there was actually looking at how do you support the underwriting of low income customers in a way that a traditional bank might not. So if you had a bore credit score or if you weren't able to report a higher income to a traditional bank, you might not look like a credit worthy customer. But to us, we were able to actually underwrite those customers. The last thing I'll say about that is that I believe that our best work is done when we're working closely with trusted community partners and actually going out and speaking to and listening to the voices of the community.
(44:56):
We do a lot of work with Operation Fuel, who's our state's fuel bank. And we're thinking about how can we support the deployment right now of residential storage in those same customer groups. And one of the things that we've heard most often is, why should I have to pay for the utility not doing their job? And that's a really valid question from somebody who you're asking to invest $10,000 into a storage system. Starting to think about what are the needs of those communities? How do you start to shift that conversation to, "Oh, if I install storage, it means I don't need to worry about food spoilage. In the event of an outage I won't need to replace all of the food and the medicine that I'm storing in my fridge." And that can be a real benefit to a customer who is very sensitive to the cost of that outage. Thinking about how can our investments and our role bring in other parties like traditional banks, like the installers to these communities that might otherwise be able to benefit from the green economy.
Cody Simms (45:56):
And on the inclusion front, coming full circle to something we talked about at the beginning, you mentioned you also have these green bond programs that anyone can invest in as a way to deploy their investment dollars into clean energy projects or green projects. Are you seeing a broad set of retail investors investing with you through that, or is it mostly commercial capital right now and you're just intentionally keeping it inclusive?
Sara Harari (46:22):
A little bit of both. So the way that the Green Liberty Notes works right now is every quarter we issue $250,000 worth of investment opportunity that's been oversubscribed for the past few rounds. And we prioritize smaller investors in the stack. So if somebody comes in and they want to buy $10,000 worth of stock, and that's what pushes us over the $250,000 cap, we'll say you can only buy $8,000 worth of bonds. We're going to instead allocate that extra 2000 towards the smaller investors. So we do try to privilege the smaller investors in each funding round, and that's been relatively successful. We do have larger participants in the program, but we make room for the little guy too.
Cody Simms (47:08):
Sarah, I think we could keep going for a long time. I'm conscious of our time recording here, and I guess the last question I would ask for you is, what's next for you? You were focusing on so many different topics at once. It's got to be exhilarating and exhausting at the same time. Where are you looking next?
Sara Harari (47:25):
No, Cody. I love it. I love multitasking and getting inspired by the great creative ideas that people bring to me so it doesn't feel super overwhelming. I think that the areas that I'm most excited about that are going to happen in the next six months are that federal funding hitting through the Greenhouse Gas Reduction Fund and starting to envision how does this entire sector change when you have $27 billion that come in that is expected to be used this way? How do we build new partnerships to reach new customers, to hit some of the clean energy goals that we have in the state, the clean economy goals. And then the other big one for me is that regulatory program that we talked about, the Innovative Energy Solutions. The applications to our second round were due last week, and I'm really excited to dig in to see what entrepreneurs think that they can do better than we can. Because I'm sure that they have ideas, and I'm excited to see what comes out of that to create and build the new clean economy grid system.
Cody Simms (48:25):
Sarah, I've super enjoyed getting to know you through the Future Climate Venture Studio program. It's been inspiring to learn more about the Green Bank in Connecticut and all the work you're doing, and I'm really grateful for you. That you used to taking the time to come on here and share your learnings and knowledge with all of us.
Sara Harari (48:41):
Thanks, Cody. I had a great time this afternoon.
Jason Jacobs (48:43):
Thanks again for joining us on the My Climate Journey Podcast.
Cody Simms (48:47):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (48:56):
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter @mcjpod.
Yin Lu (49:09):
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ venture funds. Be sure to subscribe to our newsletter on our website.
Cody Simms (49:19):
Thanks, and see you next episode.
