The transition to clean energy isn’t just about improving the environment. It’s about building stronger local economies, creating good jobs and lowering costs for businesses and homeowners. But figuring out where to start and how to pay for energy improvements are big barriers for many people, especially in underserved communities.
That’s where green banks come in. These entities are market-barrier busters that solve problems for homeowners, lenders, contractors and governments. They help people answer questions like “What improvements should I make?” and “Who can I trust to make them?”
According to the Environmental Protection Agency, green banks focus on underserved market sectors and complement existing clean energy programs by targeting market gaps. Green banks are meeting the moment by bridging these market gaps through financing renewable energy projects, reducing carbon emissions and filling a growing demand for sustainable investments.
“Green banks are like the caulk that fills the cracks in the clean energy ecosystem.”
— Julie Metty Bennett, CEO, Public Sector Consultants
What is a green bank?
Green banks are mission-driven institutions, also known as clean energy finance programs, that help communities, businesses and people invest in energy efficiency and renewable energy. They leverage public and private funds to improve access to capital, connecting ambitious energy goals to real-world projects. This has resulted in increased affordability and accelerated clean energy adoption, economic development and environmental benefits. The benefits of green banks include:
- Making clean energy improvements affordable: Green banks use public dollars to attract private investment, enabling them to offer affordable, low-interest loans with extended terms for energy upgrades like insulation and high-efficiency equipment such as heat pumps, lighting and motors.
- Connecting customers to incentives: Rebates and other financial incentives are offered by utilities and other partners, further reducing project costs.
- Taking the stress out of projects: A network of trusted, qualified local contractors eliminates the guesswork in identifying optimal clean energy improvements and ensures high-quality installations.
- Helping all communities transition to clean energy: From small towns to major cities, green banks provide financing solutions tailored to local needs.
- Creating economic growth: Green banks increase demand for energy-efficient technologies, supporting contractors and clean energy workers.
Making the case for green banks
Clean energy technology is more available to people than ever before, but many people don’t know where to start — or worry it’s too expensive. Green banks help shape the local market and make clean energy more accessible and affordable for everyone.
Many people don’t realize how much they can save with energy efficiency upgrades or are unsure which upgrades to prioritize. Green banks provide information and connect borrowers with trusted contractors.
Drafty rooms in the winter? High energy bills in the summer? Green banks help people make upgrades that keep homes and businesses comfortable year-round.
With affordable financing, people can install energy-efficient appliances, solar panels and better insulation -- reducing monthly utility bills.
As more people invest in clean energy, demand for skilled workers grows. That means more opportunities for electricians, HVAC technicians and construction crews.
Lower energy costs mean more money for groceries, medical bills and other essentials. Comfortable homes mean fewer health risks and happier families. When businesses and homeowners save on energy, they reinvest in their communities. When contractors see demand for energy-efficient upgrades, they create jobs. These programs and others like them improve lives and grow economic opportunities.
Clearly, there’s a lot more to green banks than environmental benefits. Green banks boost local economies and help people save money while improving home comfort. PSC figured that out more than 15 years ago when we were instrumental in creating the nation’s first nonprofit green bank — Michigan Saves.
Since Michigan Saves was launched, PSC has played a foundational role with other green banks, including supporting the development of the DC Green Bank and the Minnesota Climate Innovation Finance Authority, as well as creating and incubating the Indiana Energy Independence Fund, the Clean Energy Jobs and Justice Fund in Illinois and the Washington State Green Bank.
Green banks in action
Michigan Saves has shown what’s possible when smart financing meets community needs. Here’s what they’ve accomplished recently:
- Financed more than $675 million in energy improvement loans to Michigan residents since the program began.
- Helped 50,000 residential customers with trusted, affordable financing solutions that lower utility bills and help make homes more energy efficient and comfortable.
- Expanded its contractor network to over 1,000 companies, ensuring projects are completed by trustworthy local businesses.
- Launched a $5 million grant program called Oakland SAVES in partnership with Oakland County to help homeowners reduce energy costs — with over 1,050 households approved in less than a week.
- Supported nonprofits, tribes, schools and governmental entities with direct lending through the Bridge Financing Program that leverages federal tax credits for solar power, geothermal heat pumps and battery storage through the Inflation Reduction Act’s direct pay provision.
- Established the Lead Poisoning Prevention Fund to fill a critical gap for homeowners and income-property owners who don’t qualify for free home lead services.
- Created the Septic Replacement Loan Program in partnership with the Michigan Department of Environment, Great Lakes, and Energy to help people replace failing or near-failing septic systems and connections to municipal sewers.
- Partnered on a $35 million green housing initiative with the Michigan State Housing Development Authority. This program will finance energy-efficient rental housing construction and renovations in underserved communities.
Expansion of the Detroit Loan Fund
A 2018 Michigan Saves study found that Detroit residents were nearly twice as likely to be denied compared to other residents of Wayne County when applying for loans for energy retrofitting or energy efficient equipment. Out of this research the Detroit Loan Fund (DLF) was created. In 2022 the DLF program resulted in $1 million in loans distributed in just nine months, helping 114 households. The DLF was revolutionary because it eliminated credit score barriers to improve equitable access to financing. This program is now known as Access Energy and is expanding statewide based on the early success of the DLF program.
Green banks benefit everyone
Growing the clean energy sector through affordable financing means more stability for homeowners and more high-paying jobs in our communities. Green banks make this cycle possible.
No matter who you are or where you live, green banks can benefit you.
- Homeowners save money and enjoy more comfortable living spaces.
- Workers and job seekers benefit from new opportunities in the clean energy industry.
- Local and state governments can create targeted programs to support their communities.
- Businesses and commercial property owners cut costs and improve work environments.
- Lenders get access to the growing, high-potential energy efficiency and renewable energy markets and are able to provide more value to current customers including competitive rates and terms.
- Policymakers and economic development leaders benefit from job growth and business expansion to drive economic development, reduce energy burdens and ensure communities aren’t left behind in the clean energy transition.
A green light for green banks
Green banks are scaling up nationwide. Our strong track record of successfully advising, building and operating green banks proves that we have the network and technical know-how to get the job done. We understand how to design green banking programs that meet the needs of diverse communities, whether urban or rural — single-family homes or small businesses.
Now is the time to build on this momentum. Whether you’re a homeowner looking for affordable energy upgrades, a city leader exploring clean energy programs or a business owner interested in cutting costs — green banks can help.
From market analysis and program design to stakeholder engagement and strategic leadership, we help locally engaged teams develop customized clean energy financing solutions.
Check out how we develop, strategize and scale programs to grow green banking in your state and local community.