1. April 2011
Building a Productive, Expanding,
Sustainable Energy Economy:
Cutting the Cost of Clean Solutions
Coalition for Green Capital
Reed Hundt, CEO
(202 494 4111, rehundt@yahoo.com)
www.coalitionforgreencapital.com

2. Who we are and what we want to do
1. The Coalition for Green Capital (CGC) is a non-profit consortium of energy industry leaders including
renewable resource developers, original equipment manufacturers, investors, lawyers, financial advisors,
and consultants dedicated to a clean energy economy built on low-cost, profitable, sustainable energy
generation and consumption
2. The CGC seeks to build a productive, expanding, and sustainable economy by:
 Creating an Energy Investment Trust (EIT) that provides long-term, low-cost financing for clean
energy solutions
 Reducing taxes on innovative goods and services in the clean energy sector
 Removing the regulatory barriers to innovation in clean energy goods and services
 Creating state-level Green Banks
 Creating an International Green Bank, also known as the “Global Investment Trust for Clean Energy”
3. Contact the CGC at www.coalitionforgreencapital.com, or:
-Reed Hundt, CEO (202 777 7700, rehundt@yahoo.com)
-Ken Berlin, General Counsel (202 371 7350, kenneth.berlin@skadden.com)
-Alex Kragie, Vice President (202 579 2354, alex@coalitionforgreencapital.com)
-Sarah Davidson, Vice President (202 577 1605, sarah@coalitionforgreencapital.com)
2

3. Investment in clean energy generation and consumption
faces obstacles
 Major projects require high capital expenditures with a long amount of time
required for even modest returns
 Entrepreneurial breakthroughs have created only modest value in this sector
 Federally-funded research and development is not fully matched by industry
R&D
 Business models are jeopardized by volatility in commodity pricing
 The playing field isn’t level; renewable energy must compete with incumbent
players who have enjoyed decades of greater federal support and thus have
benefits of scale economics
3

4. Profound changes in last three years have raised hurdles
for investment in clean energy solutions
 Demand for new-build electric generating capacity has dropped and will not rise
significantly until excess capacity is absorbed
 Demand for energy in China is rising significantly, which attracts investment for
research and development, deployment, and deployment at scale
 Substitution of clean for non-sustainable energy in the US will occur only if old peak
and base-load facilities are replaced by new plants
 Creating energy-efficient buildings will occur only if investing firms are rewarded for
creating efficient solutions
 Unpredictable emissions regulation delays investment decisions
 State regulators often do not permit utilities to capture value from cost synergies,
research and development, efficiency, or shifts to sustainable electricity
4

5. The cost and price of clean energy solutions must go
down so as to expand addressable market
 To cope with lower prices for energy commodities and low electricity prices,
lower the cost of capital for clean energy solutions through use of long-term,
low-cost financing
 To expand investment in clean energy solutions, eliminate capital gains and
income tax on future returns from innovative goods and services in the clean
energy sector
 To increase research, development, and deployment in the energy sector,
reform regulations to enhance investment in and returns from research,
development, and deployment
5

6. Electricity in the USA is not a growth business
 Electricity power generation in the
U.S. between 2008 and 2009 dropped
by 4.1 percent, with a projected
annual growth rate of only 0.5%
between 2010 and 2035. As of
October 2010, YTD electricity
production is only back at 2008 levels
 Energy efficiency reduces
consumption
 Utilities are adjusting downwards
even long-term demand projections
Source: EIA, Annual Energy Outlook and Electric Power Annual
Also: http://www.eia.doe.gov/cneaf/electricity/epm/table5_2.html and
http://www.eia.doe.gov/oiaf/aeo/electricity.html; AWEA; (http://www.eia.doe.gov/cneaf/electricity/epm/table1_1.html)
6

7. China uses low-cost finance to expand clean energy
solutions
“China's real advantage lies in the  China will spend $765 billion on its clean energy
ability of solar panel companies to form industry by 2020
partnerships with local governments and
then obtain loans at very low interest
rates from state-owned banks.”  Many U.S. companies are leaving the U.S., not
-Michael El-Hillow, Evergreen because of lower Chinese labor costs, but because
Solar CEO, explaining China is providing low-cost financing and other
Massachusetts plant closure incentives
 Evergreen Solar, the nation's third largest solar
“If you change the interest rate half a
percent or 1 percent, the difference is manufacturer announced that it was closing its
amazing, because the cost is all at the plant in Massachusetts and laying off 800
beginning.” workers
-Dennis Bracy, CEO of the US-
China Clean Energy Forum
http://www.nytimes.com/2010/09/09/business/global/09trade.html
7

8. As stimulus effects have faded, wind deployment has
dropped sharply
 Wind deployment in the United States dropped from 9,581 MW in 2009 to
~5,115 MW projected in 2010
10000
8000
6000
US Wind
Capacity
4000 Additions
2000
0
2009 2010
Source: EIA, Annual Energy Outlook and Electric Power Annual
Also: http://www.eia.doe.gov/cneaf/electricity/epm/table5_2.html and
http://www.eia.doe.gov/oiaf/aeo/electricity.html; AWEA; (http://www.eia.doe.gov/cneaf/electricity/epm/table1_1.html)
8

9. To persuade utilities and regulators to replace
conventional electricity with clean solutions, prices have
to vary state by state
9

10. Lowering cost of debt will reduce delivered price of
electricity for clean solutions
Prepared by an energy
investment firm using public
data sources
Notes:
-Assumes that all after-tax free
cashflows from the project
are financeable, net of cover
ratios
-CAPEX costs do not include
significant transmission
system upgrades
-The CAPEX here is based on
reported project cost data for
the ARRA grant program
through November 2010,
with a 10% discount to
account for reductions in
equipment costs since 2009
in projects being built in
2011 and 2012 timeframe
-The two cases describe the identical
project, but commercial
banks will finance a more
Low-cost financing reduces the delivered electricity prices of these actual wind conservative wind case
projects by 15-20% to the point of being cost-competitive with new-build conventional (requiring the 1.4x cover
ratio)
coal and gas-fired power plants in each region to meet incremental energy demand -The two cases assume the sale of
growth: identical quantities of
electricity
- Note (1): LIBOR rate based on
•With low-cost financing provided by the Energy Investment Trust, the internal rate of return LIBOR swap curve for last 5
can be maintained while keeping the cost to consumers at or below current delivered electricity years, Treasury based on
rates for the same period.
costs (see highlighted sections above, where the cost of delivered electricity is reduced by
$10/MWh or more because of the low-cost financing offered in the right column versus 10
10
available bank financing in the left column).

11. Low-cost long-term financing can lower the delivered price of clean
energy while still attracting private investment
Assumptions: Market Financing EIT Financing
Notes:
CAPEX - Northeast (Rhode Island) [$/kW] $4,180 $4,180 - CAPEX is the EPC price of a
CAPEX - Plains (Kansas) [$/kW] $4,190 $4,190 solar photovoltaic system priced
CAPEX - Southwest (Arizona) [$/kW] $4,190 $4,190 at $3.75/W, plus $.25/W debt
service reserves, $.08/W
Tenor Years 10 20 development expenses, $.04/W
financing fees, $.06/W for
Solar Case/Coverage DSCR 1.40x 1.30x interest during construction,
working capital, and maintenance
Interest Rate [%] 6.8% 4.5% reserves.
- Project is depreciated using
Balance at Maturity Balance Fully Repaid Balance Fully Repaid MACRS, and assumes a 30%
investment tax credit
IRR to Equity (Leveraged) 11.0% 11.0% - Both financing cases assume the
same system sizes, production,
Revenue Requirement (2012 Power Price) O&M, etc.
@ 2% Escalation - Production estimates for each
region:
Northeast [$/MWh] $152/MWh $118/MWh Northeast: 1208 kWh/kWp
Plains [$/MWh] $140/MWh $109/MWh 13.8% NCF
Southwest [$/MWh] $112/MWh $87/MWh Plains: 1382 kWh/kWp
15.8% NCF
•Low-cost financing reduces the delivered electricity prices of solar photovoltaic projects by Southwest: 1675 kWh/kWp
19.1% NCF
20-25%, this puts solar within striking distance of current peak power prices, and generates - Assumes a 1MW distributed
electricity at the time when its most needed (peak hours) at the location where its most generation project.
needed (close to the load).
•With low-cost financing provided by the Energy Independence Trust, the investors’ internal rate of
return can be maintained while keeping the cost to consumers at or below current delivered peak
power prices. The cost of delivered electricity is reduced by $25-34/MWh because of low-cost
financing offered in the right column versus currently available bank financing in the left column.
11

12. Standard commercial debt limits wind projects to high-
priced, high-capacity states
-- The boxed area of the table shows a cross-section of representative project capacity factors across the
country, and how power prices impact potential returns for each different wind regime
-- The East coast primarily sees projects at 35% NCF or less, and the West coast is mostly at 30-41% NCF
-- Only the Plains are at 44% NCF or above
2012 Price
[$/MWh]
with
2% annual
escalation
-- 10% Internal Rate of Return (IRR is the percentage contained within the boxes above), is
considered the minimum for leveraged project finance
-- IRR table above for an example wind project using Commercial Bank Financing at $1,963/kW
installed cost and current tax policy: financing terms of 6.75% interest rate at 20% leverage
Prepared by investment firm specializing in wind energy transactions based on data from independent wind development companies and public sources
12
Note: Net Capacity Factor is a measure of the actual amount of power produced during a year. Calculated by dividing total net energy production by the 12
maximum theoretical possible annual production from the nameplate capacity

13. Low-cost, long-term financing expands the scale of wind
projects to the East and West coasts and into the Mid-West
2012 Price [$/MWh]
with
2% annual escalation
--IRR table for an sample wind project using EIT Financing at $1,963/kW installed cost and current tax policy:
financing terms of 4.50% interest rate at 34% leverage
--The larger scope of the shaded scenarios significantly increases the economically-attractive wind generation
that can compete with new build fossil-fuel power plants to provide energy for incremental demand growth by
lowering the power prices necessary to hit target rates of return or opening areas with lower wind resources to
provide equivalent power prices; by some estimates, approximately 120 GWs of lower-NCF wind resource
become competitive with new conventional generation.
Prepared by investment firm specializing in wind energy transactions based on data from independent wind development companies and public sources
13
Note: Net Capacity Factor is a measure of the actual amount of power produced during a year. Calculated by dividing total net energy production by the 13
maximum theoretical possible annual production from the nameplate capacity

14. Energy Investment Trust can make projects in marginally
windy areas economically feasible
Long-term, low-cost loans would expand the geographic market for wind projects to the
orange and brown areas above– substantially increasing investment in more than 20 states
14

15. EIT will create substantial additional wind investment in
at least 15 states without raising their electricity prices
WA NH
MT ND VT ME
OR MN
ID WI MA
SD NY
WY MI RI
IA PA CT
NE NJ
NV OH
IL IN DE
UT CO WV VA MD
CA
KS MO KY DC
NC
TN
OK
AZ NM AR SC
MS AL GA
TX LA
FL
AK
HI
Illustrative
15

16. Energy Investment Trust can make projects in marginally
sunny areas feasible
16

17. EIT will create substantial additional solar investment in
at least 14 states without raising their electricity prices
WA NH
MT ND VT ME
OR MN
ID WI MA
SD NY
WY MI RI
IA PA CT
NE NJ
NV OH
IL IN DE
UT CO WV VA MD
CA
KS MO KY DC
NC
TN
OK
AZ NM AR SC
MS AL GA
TX LA
FL
AK
HI
Illustrative
17

18. With EIT support, equity investors can fund more projects
–small changes to capital structure have big impacts
Without EIT Financing – 20:80 Debt/Equity ratio Including EIT Financing – 34:66 Debt/Equity ratio
 34% NCF, $70/MWh power price  34% NCF, $57/MWh power price (~20% reduction through use of EIT)
 11% leveraged rate of return  10.5% leveraged rate of return
 When considering the net cashflows to the equity investor, the present value of  When considering returns to both debt (interest) and equity, the up-front
equity capex is equal to the sum of the present value equity cashflows and the net capex and the returns on the required capital are still 85% of the total cost
tax benefit (26%+9%=35%); this value equals the up-front equity capex at the
of a wind project, with only 15% of the lifecycle cost being the operating
hurdle discount rate
expenses; but with the EIT the debt capex has increased from 9% to 16%,
 85% of the total cost of a wind project is related to capital cost and the return on
so that the effective power price can be ~20% lower
the investment, with only 15% of the lifecycle cost being the operating expenses
18

19. An Energy Investment Trust should supply long-term,
low-cost finance– without a Congressional appropriation
 In order to achieve these goals, the US needs a private-sector run patriotic
corporation called the Energy Investment Trust
 The EIT would be capitalized by the government one time, in return for a security
that requires repayment to government by a full lump sum at the end of ten years
(like a balloon loan), so there’s no score
 The EIT would be a for-profit/non-profit hybrid
 All revenue resulting from loans based on government funding would not be
distributed as profit
 Income from equity raised by the EIT would be distributed at below market rates
 At the end of ten years, the projects are re-financed and/or Congress makes
another capital investment
 EIT debt would not be federally guaranteed (not a GSE)
 The EIT would be a private corporation, so the government has no equity
 Therefore the EIT would not be a government agency and would not fall under
NEPA or Davis-Bacon Act
19

20. EIT could enable private sector to invest in:
 Financing of smaller scale, community-oriented renewable projects that are
starved of capital
 Financing electric vehicle fleets
 Financing charging stations for utilities to serve EVs
 Adding a layer of cheap equity or debt (or both!) to a CEDA project to
spread high Internal Rate of Return CEDA money farther
 Rolling out energy storage at large scale
 Replacing retiring coal plants with coal with CCS technology or natural gas
 Building transmission lines for a municipal utility that can’t raise rates
 Building a new generation unit for a municipal utility that can’t raise rates
 Adding to a Rural Utilities Service (RUS) loan for a rural utility that needs
capital to replace defunct coal but can’t raise rates
 Scaling out distributed nuclear or Combined Heat and Power
 Continuing Department of Energy research and development and
deployment that lacks new appropriations and doesn’t qualify for CEDA
20

21. Create a long-term tax holiday for “innovative” energy
goods and services
 To complement this Energy Investment Trust, Congress should create a ten-
year tax holiday (no state or federal taxes of any kind) for “innovative” energy
goods and services, stipulating that only CEDA and EIT projects are
“innovative” by this definition
 Private sector investors can add assumed capital gains and income tax
payments to their return expectations
21

22. Promoting research and development on a long-term
basis requires rewards for such expenditures
 Regulators should not be permitted to deny utilities cost recovery for
reasonable research, development, and deployment
 Utilities should voluntarily dedicate 20% of their research and development to
add to the capital of the Energy Investment Trust– in order to qualify for EIT
loans
22

23. The Energy Investment Trust should have zero
appropriations score
Invest in low-risk solutions
Deposit from Treasury ($10 billion)
•Ten year payback at a market rate
Direct Loans to Private Sector-led Projects
Energy
Investment
Voluntary Contributions from Utilities
Trust Loans to State Green Banks (CEFIs)
(EIT)
Loan guarantees for capital equipment
Private Sector Matching Grant ($500
purchases
million) (Covers default subsidy)
*Some other examples of similar corporations: The American Red Cross, Daughters of the American Revolution, Boy Scouts of America, Girl Scouts of America, Veterans of Foreign Wars of the United States, the
American Legion, the Board for Fundamental Education, the Foundation of the Federal Bar Association and the National Fund for Medical Education.
23

24. Clean Energy Deployment Administration to invest in
higher-risk, initial deployment of clean energy solutions
 CEDA is designed to foster initial commercial deployment of
breakthrough technologies
 CEDA, within the Department of Energy, extends government
research and development closer to market entry
 CEDA passed the Senate Energy and Natural Resources
Committee in June 2009 on a bi-partisan basis
24

25. EIT follows and complements CEDA
 EIT is a privately run financing support entity
 CEDA is managed by the Department of  EIT supports widespread deployment of
Energy proven, commercially-ready clean energy
 CEDA supports breakthrough technologies technologies, including energy efficiency and
CEDA-backed projects
 CEDA extends appropriated money and
recycles it  EIT will provide financing support to
complement and encourage, but not replace,
 CEDA provides indirect and direct support
private sector financing
to clean energy
ARPA-E CEDA EIT
Year 3
Year 1 Year 5
(First
Valley (Second
of Valley of
Death) Death) CEDA and EIT are needed to combat the trend illustrated above by
the ITIF and Breakthrough Institute’s Energy Innovation Tracker
25

26. EIT should loan to State Green Banks
 State Green Banks and EIT would form a coordinated network to finance
clean energy projects
 The Coalition for Green Capital has developed a financing model for state-
level capital deployment, as either a revolving loan fund under the State
Treasury, or as an independent, non-profit corporation
 See the proposal at www.coalitionforgreencapital.com/downloads.html
 States have numerous potential sources of funding from existing sources (see
next slide on a potential California Green Bank)
26

27. California has at least five ways to create a State Green
Bank
 The California Alternative Energy and Advanced Transportation Financing
Authority (Tax credits, tax-exempt bonds, and tax offsets)
 Auction proceeds for certain GHG allowances– appropriations of proceeds from
sale of advance auction-designated and AB-32 statutory objectives-directed
allowances as deposited into CA Air Pollution Control Fund
 California Clean Energy Fund- A $30m non-profit venture capital fund
 Utility surcharges
 California Solar Initiative-- $2.17b over ten years from a variety of utility and public
sources, directed towards installation rebates
27

28. Copy this: In 1995, new Congress reformed
telecommunications, causing $850 billion of private
capital to drive innovation and job growth
This investment produced high employment and a budget surplus by 2000. It also positioned the United States to be the
leading country in the global ICT market, creating American success stories from Cisco to Google to Facebook.
Figures in Millions 1997-2007
$000s, 1997-2007
14,612
18,359 16,065
10,624
25,961
10,722
5,611 14,532
6,810 11,368 13,233
14,485 9,509
13,484 10,243 9,043
Cable 95,126 22,880
25,977
26,436 25,272
73,569 71,776 19,916 22,482
Wireless
48,447
43,285
Wireline 34,594
29,363 28,188
26,260 24,588 26,619
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
* 2007
*
* * * * * *
Source: CIBC; SG Cowen; Kagan; CTIA
28

29. Appendix
29

30. The United States should sponsor a Global Investment
Trust for Clean Energy (GITCE)
Objective:
 Affordable, abundant, sustainable energy
 Cheap enough for any country
 Profitable to generate and deliver
 Sustainable platform
 Utilizing research and development advances as they occur
30

31. GITCE should lower cost of clean energy solutions in
developing world
 Obstacles:
 Low purchasing power
 Inadequate infrastructure
 High commodity costs
 Advantages:
 High demand
 Developed country commitments from Copenhagen
 Solution:
 Create GITCE, drawing capital from developed countries and investing
profitably in developing world
31

32. GITCE: Relationship to existing financing sources
Private Foreign
IFC GITCE Investment Direct
Banks Investment
Low-cost Loans
and Loan
Guarantees
Clean Energy
Focus, including all
technologies
Impact
Investing
Long-term Project
Investment
Private sector
clients, non-
sovereign govts,
PPP
32

33. Pillars of GITCE
 Focus on electricity as specific sector
 Specifically target developing nations that have not been major beneficiaries
of CDM
 Would allocate funds directly to projects in countries where there is the
greatest need for financing and development
 Financing that complements existing funding sources
 Does not replace or displace multilateral development banks or trust funds
 Helps overcome existing fragmentation in climate finance channels
 Catalyzes private sector financing – does not displace or replace it
 Would have governance and operational structure that allows flexible and quick
response to demand and market conditions
33

34. Cutting the Gordian Knot: The case for GITCE
 Low-cost sustainable development in developing nations through private sector
investment
 Increasing electricity consumption does not have to contribute to global carbon
emissions
 As private, non-profit institution, GITCE would complement governmental initiatives
with single goal of providing clean electricity for the bottom four billion of the global
population at very low prices
 Institutional independence to focus on this set of investment objectives and the
flexibility to work with all parties
 Leverage analytical work, co-financing opportunities and cooperation with
development strategies of multilateral development banks
 Complementary investments and information sharing with existing climate funds
 Providing incentives and financing for private sector participants
 Ability to engage and dialogue with all stakeholders, particularly host countries and
international organizations focused on the climate change agenda
 Ability to receive funding from wide range of public and private sector sources
34