CleanTech Alliance Urges New Clean Energy Fund Round: Position Paper Published

Washington’s Clean Energy Fund:  Jobs Today for a Better Future

Policy recommendations from the CleanTech Alliance Washington, November 4, 2014.  For a PDF Version, go to: Washington's_Clean_Energy_Fu.pdf

The CleanTech Alliance believes that our state has a unique opportunity to claim a leadership role in an important global technology transformation.  In what has been called “Energy Darwinism[1],” worldwide markets are set for radical transformation that can have long-term, meaningful impact on climate change, pollution, and our nation’s economic and national security.  Our state has great entrepreneurs, superior research institutions, and leadership companies eager to lead this transformation.  By acting now, the State of Washington can play a catalyzing role that will enhance our role as a global leader.

Summary

The first Clean Energy Fund, established in 2013, has been a major success:

• The state’s $40 million investment in the Clean Energy Fund has leveraged more than $200 million[2] in matching funds from industry partners to support nearly one quarter of a billion dollars of in-state investment in clean energy projects.

• Those investments have put people to work making buildings more energy efficient, manufacturing smart grid equipment, and adding a capacity to the state’s electric grid.

• New smart-grid technologies, developed and deployed in Washington, are now positioned to sell into rapidly growing global markets.

The State should replenish the Clean Energy Fund in the 2015-17 biennium to extend these achievements.  The CleanTech Alliance recommends that the Governor and Legislature:

• Make a $60 million allocation from the state capital budget to the Clean Energy Fund.

• Extend program principals that made the first Fund a success:

  • Make grants to partners who bring domain expertise, scale, and significant matching dollars;

  • Focus grants on commercializing in-state technologies to solve global clean energy challenges; and

  • Improve access to capital for clean energy companies that face barriers.

Keys to Success for the Clean Energy Fund

The Fund has several program attributes that should persist into a second round of grant-making:

1. Keep the focus on building clean energy jobs in Washington by helping commercialize technologies developed in Washington that can be exported outside the state.

2. Target funds to new clean technologies where state funds lower costs and risks for early adopters to accelerate market acceptance.

3. Continue to require match and thereby leverage the expertise and financial contributions of partners. 

4. Continue to make large grants to entities that can work at scale and have a commitment to engage small and medium size enterprises as suppliers.

5. Close capital gaps where they exist. 

6. Preserve the ability to respond opportunistically to federal funding opportunities that target development and commercialization of new clean energy technologies in-state.

7. Engage outside review panels with industry expertise to assist with evaluating proposals and recommending awards.

Investment Areas for Clean Energy Fund

The state should continue investments in the areas identified in first Clean Energy Fund: revolving loan funds, smart grid grants to utilities, and federal matching funds.

Revolving loan funds.  Craft3 and Puget Sound Cooperative Credit Union have both identified gaps in the credit market for small companies delivering energy efficiency and renewable energy projects in Washington.  They both see an opportunity to grow this part of the credit market as more homeowners and businesses look for ways to lower their energy costs and reduce their carbon footprint.  Technical corrections to the existing language in the revolving loan would remove barriers to broader access to credit from this program.

Smart grid grants to utilities.  The reduction in the cost of electricity generation from photovoltaic systems and other renewable energy sources in the last five years, along with low-cost natural gas, have created conditions for significant disruption in the electric utility sector.[3]  The evolution of energy storage technology—enhanced by the state role in the Clean Energy Fund—as an enabling technology has been promising.  Policymakers and market participants increasingly talk about the rise of Distributed Energy Resources (DER) that offer the promise of a cleaner and more resilient grid but also one that operates much differently than the grid of today.  These trends, along with rising demand for electric vehicle charging, are creating new dynamics in the electric utility sector.  The Fund can help Washington utilities and the vendors that serve them deploy new technologies that will help utilities adapt to the grid of tomorrow. 

Federal match.  Washington has lost competitions for federal clean energy innovation centers to other regions that had a reliable source of matching dollars and were therefore better prepared to compete.  Our state should position itself for success in these regional competitions as well as be ready to make the most of other federal clean energy grant programs.

In addition to these investment areas, the CleanTech Alliance also supports two new areas for investment.

Capital and business talent for early stage start-ups.  The state’s leading research institutions attract researchers in the cleantech space who want to make an impact in the world.  Some of those researchers want to move their technologies into the market through start-up companies, but lack access to capital and the business talent to launch new companies.  The Fund could extend the revolving loan fund model implemented by Craft3 and the Puget Sound Credit Union.  Instead of using Fund grants to capitalize funds that make loans to businesses, the grants might go to entities that make equity investments in early stage companies.  The CleanTech Alliance would favor making grants to entities with objectives for creating public benefits that are also aligned with existing early stage investment funds or angel networks.  This approach is sometimes referred to as setting up a “side car” fund to an existing funding model for early stage companies that would have a focus on clean energy technologies.  In this scenario, other early stage investors provide the “match” and the sidecar contributes no more that 50% of any funding round.  The benefit of this approach is that it can leverage existing models, infrastructure, and expertise.  This effort could be supported using state capital fund dollars or returning payments from loans made by Commerce through the American Reinvestment and Recovery Act.

Flexible funding for new clean energy technology.  A broad spectrum of Washington-based technologies can help increase energy efficiency and reduce carbon emissions.  These include, but are not limited to, biofuels, advanced materials for light weight vehicles, improved building energy efficiency, software, and controls for building optimization, and technologies to reduce energy consumption and emissions on marine vessels.  By applying the principals that the Washington State Department of Commerce used in the smart grid grants to a broader spectrum of technologies, the Department may uncover new technologies where state funding can make the difference in securing a first or second customer for a promising new technology.  The proposal review panel for this flexible funding source would require a diverse group of outside experts to evaluate a broad spectrum of technologies.

The CleanTech Alliance favors placing $15 million into additional revolving loans or early stage investment funds and the balance of $45 million into the remaining categories.  We see a benefit in providing the Department of Commerce flexibility in adjusting how funding is allocated between federal matches, smartgrid innovations, and other clean energy technologies.

Success Breeds Success

Governor Inslee and the Commerce Department, with support from the Legislature, have built a strong foundation in the first Clean Energy Fund.  The CleanTech Alliance and our industry look forward to engaging policy makers in the Executive and the Legislature to extend and improve the Clean Energy Fund in the next legislative session.