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Clean energy fund gets promotion, targets industry
The remade Connecticut Clean Energy Fund will launch new programs in the coming months to make clean technology more affordable and bolster the energy industry in the state.
After two months of delays due to the state budget uncertainty, the newly created Clean Energy Finance and Investment Authority soon will have a full board of directors able to make decisions, raise capital and institute progressive initiatives designed to help business and residents upgrade to environmentally friendly energy.
"This is a model that is going to do much more to drive innovation," said Dan Esty, commissioner of the Connecticut Department of Energy & Environmental Protection. "Our hope is to turn Connecticut into the leader on clean energy in the country."
After the Connecticut General Assembly approved energy policy reform legislation in June, the old Connecticut Clean Energy Fund was scrapped in favor of a more autonomous model less constrained by the state's unsteady finances.
The Connecticut Clean Energy Fund, formed in 2000, was funded by a charge on ratepayers' electric bills and later by proceeds from the Northeast cap-and-trade system, the Regional Greenhouse Gas Initiative. That funding totaled about $32 million per year, which the fund could use to subsidize clean energy projects such as solar or fuel cell installations.
The problem with this model was the fund annually ran out of money and had to choose which projects received grants. The funding almost always went to solar projects. The program was administered by a handful of staff members operating within Connecticut Innovations, the state's quasi-public technology investment organization.
The new CEFIA is its own quasi-public agency tasked with making the state a leader in clean energy, moving beyond simple funding of projects. Its main source of financing remains the $32 million per year from ratepayers and RGGI, but the organization can issue bonds, secure federal grants, receive philanthropic donations and raise private capital to accomplish its goals.
"It gives us a great deal of flexibility in obtaining sources of financing," said Dave Ljungquist, CEFIA associate director for project development.
CEFIA will be led by an 11-member board of directors, but six of those seats were vacant as of Aug. 17, preventing the agency from forming a quorum and making decisions on various programs. With Gov. Dannel Malloy preoccupied in reaching a concession deal with state employee unions, the agency appointments were held up.
Esty said he expects the final appointments to be made in the next several days. CEFIA will start making decisions on programs in the fall and be in full working order by the end of the year.
Freeing up a large chunk of the fund's $32 million are the new zero-emissions and low-emissions renewable energy credit programs. Large-scale commercial projects that would have gone to the Clean Energy Fund for grants now will get funding directly through the utilities via ZRECs and LRECs.
This gives CEFIA more funding to focus on other programs, designed to help smaller businesses and residents to convert to clean energy.
"CEFIA is going to be developing a lot of new exciting programs," said Matthew Stone, energy and environmental associate with Hartford law firm Pullman & Comley LLC. "It will help out the business community."
A major obstacle for businesses and homeowners in converting to clean energy technology is the large upfront cost of the technology. A solar photovoltaic array or an energy efficient hot water heater will pay back the costs over time through energy savings, but the businesses or homeowner must still bear the burden of purchasing the system.
CEFIA wants to develop a loan program where businesses and people wanting to install new technology can receive no-interest or low-interest financing to pay for the upfront costs and have the monthly payments be below the monthly energy savings, Ljungquist said.
"That will blow the market wide open," Ljungquist said.
The agency is developing pilot programs for businesses to install combined heat and power system, and for farmers to install biomass digesters. Each program will receive $2 million, enough for five businesses and 10 farms.
From the Clean Energy Fund, the agency is keeping a residential solar photovoltaic program, but it is tasked with higher goals. CEFIA is required to help fund 30 megawatts of residential solar electric over the next 10 years, equivalent to installing 1,000 home arrays each year. In its best year, the Clean Energy Fund never provided grants for more than 700 projects each year.
"That is going to be a significant boost," Ljungquist said.
CEFIA also plans to work with the state's utilities and their Connecticut Energy Efficiency Fund, as CEFIA tasks now include energy efficient projects. By joining with utilities such as United Illuminating and Connecticut Light & Power, the agency should be able to leverage more private capital for its programs.
But in creating CEFIA, the state didn't do everything it needed to make clean energy more affordable, said State Sen. John Fonfara, D-Hartford, who co-authored the legislation creating the new agency.
CEFIA is a strong start on making Connecticut a progressive clean energy state, but the General Assembly should have approved more funding than just the $32 million from ratepayers and RGGI, said Fonfara. The agency needs more dedicated sources of funding from the state to truly accomplish its goals.
"Electric ratepayers shouldn't be the only source of funding to move us off foreign countries and fossil fuels," Fonfara said.
A key idea behind forming CEFIA was to leverage all this funding for clean energy projects into a creating a bigger clean energy industry in the state, Fonfara said. As more projects receive funding, eventually new companies should form or move into Connecticut, bolster production, attract talent, develop the workforce, create a supply chain and spark research and development into new, cheaper clean technologies.
More funding can make these more of these projects happen faster, Fonfara said. In the 2012 legislative session, Fonfara said he intends to create additional sources of CEFIA funding.
The agency still is in a state of flux and it soon will have a better understanding of how best to accomplish its goals as the board seats fill up, programs begin and the financing arm ramps up, Esty said.
Providing financing through CEFIA to make clean technology affordable is fundamental to the state's energy policy goals, Esty said.
"It is a model that is already attracting attention from around the country and the world," Esty said.
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