After struggling to restore millions of people's power in the wake of Superstorm Sandy, New Jersey has become the first state with a “green” bank focused on energy resilience.
Superstorm Sandy knocked out power to more than 2.5 million people in New Jersey. Sharon Karr/FEMA
Almost two years after it tore a deadly and costly path through the Northeast, Superstorm Sandy still stands as one of the most important events in the history of disaster preparedness. The desire to be more resilient in the face of these big and increasing storms kicked into high gear planning efforts by states and localities across the country. But it takes money to take action. And as governments are finding out, it’s hard to find money in today’s tight budgets.
If one of the biggest stumbling blocks to increasing a community’s sustainability and resilience is financing, then New Jersey’s in good shape. This summer, the Garden State created an energy resilience bank to “fund projects that will help prevent a reoccurrence of the energy disruptions and build energy resilience,” according to the state’s proposal for the bank. The idea essentially is to set up a dedicated source of funding for projects that will provide clean, more reliable energy at critical infrastructure such as water and wastewater treatment plants, hospitals, shelters, emergency response centers, schools, and transit systems.
Through revolving loans and grants, the bank will support projects that include installing microgrids, distributed generation (where electricity is generated from multiple small energy sources such as fuel cells or solar panels), smart grid technology and energy storage. Initially, the bank will be funded using $200 million from New Jersey’s Community Development Block Grant-Disaster Recovery allocation from the U.S. Department of Housing and Urban Development (HUD). When that runs out, says Greg Reinert, director of communications for the New Jersey Board of Public Utilities, the state will allocate funds. The ultimate goal, though, is to bring in private capital.
That is, after all, how “green” or “infrastructure” banks are supposed to work, by facilitating private-sector financing. And New Jersey’s energy resilience bank is really just another green bank. Increasingly, states and localities have been looking at these government-created institutions as a way to finance renewable and clean energy projects. It’s a relatively new idea in that the first state to open a green bank was Connecticut in 2011. New York followed next. And now California is considering one. New Jersey’s bank is unique in that it is the first of its kind to focus on energy resilience. But both Connecticut and New York are using their green banks to pay for resiliency projects, too. In the case of Connecticut and New York, they are funding microgrid projects.
The purpose of green banks is simple: Mitigate risk to attract private investors. One way green banks do this is by providing lenders insurance against default. So if a project fails and a borrower doesn’t repay a loan, a private lender won’t lose its entire investment.
In the New York-New Jersey region, according to HUD, electrical infrastructure is particularly vulnerable because 75 percent of power generation lies in flood plains where there’s a 1 percent annual chance of flooding. In addition, power grids are mostly underground and at risk from flooding. That, and the fact that the United Nations puts the cost of climate change in the trillions, is the impetus behind New Jersey’s decision to create a financial framework for its resiliency efforts. More often than not, governments leave funding questions for later. But New Jersey’s energy resilience bank, says Reinert, “puts the money up front.”
This article was originally published by Governing.
This article was originally published by Governing.
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