Efforts are underway at a state level to protect energy projects at risk, particularly the ones that prioritize clean energy sources.

In the rapidly evolving landscape of clean energy, efforts are being made to stabilize high-impact projects and prepare the sector for long-term stability. A new white paper has been created, outlining a roadmap for scaling subnational project finance for climate projects.

The white paper suggests several strategies, including the use of revolving loan funds, joint procurement, and public equity participation. Revolving loan funds, which provide lower-cost debt financing and attract private capital, can recycle loan repayments for future projects. Joint procurement allows multiple buyers to coordinate purchases, increasing volume and reducing costs. Public equity participation allows states to take small ownership stakes in projects, sharing both risks and revenues.

The focus on Washington, D.C., for scaling clean energy is beginning to shift towards a longer-term, politically durable, and economically durable, polycentric strategy. The federal support is still crucial, but the spotlight is moving towards state-level initiatives. The subnational landscape is primed to step up in the current moment, with the ecosystem of green banks expanding dramatically in recent years.

One example of the private sector's increasing role in the clean energy sector is Slate Auto, an EV startup backed by Jeff Bezos. This startup, which is entirely privately funded, serves as a testament to the potential of private investment in clean energy.

States like Portugal, Spain, Italy, France, Germany, and the Czech Republic are also leveraging financing mechanisms to secure funding for their large clean energy projects. Institutions like the European Investment Bank (EIB) have provided substantial funding for renewable energy expansions and grid modernization through multi-hundred million euro loans to companies like EDP Renewables, ERG Group, ČEZ, and Naturgy.

However, regulatory frameworks like Basel III, although designed to secure banks, complicate financing by increasing capital requirements for clean energy loans, particularly impacting emerging and developing countries that need funding for climate-critical projects. This highlights the need for a new financing paradigm.

Unfortunately, many clean energy projects currently face uncertain futures due to the withdrawal of federal financing. The New York Power Authority recently used a Request for Information (RFI) to find clean energy projects in the state, and efforts are ongoing to protect clean energy by designing a new financing paradigm.

A possibility of creating a matchmaking platform to connect potential clean energy projects with state-level investment could also help in this regard. Existing databases of projects, such as those funded by or proposed for funding under the Inflation Reduction Act (IRA) or Bipartisan Infrastructure Law (IIJA), can be utilised for this purpose.

Moreover, Jigar Shah, who led the Loan Programs Office during the Biden administration, suggests that states could subsidize projects based on their potential for economic development. States need to understand what makes a good clean energy project, as they currently lack the resources to fill the vetting role that the federal government previously held.

Projects seeking funding from the Department of Energy's Loan Programs office are in need of immediate bridge funding or investments. The influx of funding from the IRA and IIJA has provided significant momentum to the clean energy investment landscape, but this funding is now at risk of disappearing.

In conclusion, the shift towards subnational project finance for climate projects is a promising development. By leveraging the resources and expertise of states, philanthropies, green and infrastructure banks, and other financial institutions, we can build up and demonstrate the capacity of subnational players to drive progress in clean energy. This approach, if successful, could provide a sustainable and resilient financing framework for clean energy projects, helping to combat climate change and promote economic development.

Efforts are underway at a state level to protect energy projects at risk, particularly the ones that prioritize clean energy sources.