Insider's Guide to Energy
The Energy Industry is uniquely evolving as traders are under increasing pressure to manage costs, cash, limits, and risks. The Insider’s Guide to Energy Podcast addresses current and emerging challenges business executives face daily through stories shared from peers and industry experts while covering topics such as innovation, disruptive technologies, and emerging trends.
Insider's Guide to Energy
188- Unlocking Clean Energy Funding: Insights from Andrew Kessler, President of NY Green Bank
In this episode of the Insider's Guide to Energy Podcast, we dive deep into the world of green finance with Andrew Kessler, President of the NY Green Bank. As the largest and one of the oldest green banks in the United States, the NY Green Bank has played a pivotal role in advancing clean energy initiatives across the state. Andrew shares insights on how the bank has effectively utilized its $1 billion capital to fund over $7 billion worth of sustainable infrastructure projects, while maintaining self-sustainability.
Andrew discusses the challenges and opportunities in financing the energy transition, debunking common myths about green banks and explaining the critical role they play in animating private sector capital. He also highlights specific projects funded by the NY Green Bank, such as community solar, energy storage, and building decarbonization, and the significant impact these initiatives have had on New York’s journey toward a greener future. Whether you’re a financial professional, an energy enthusiast, or simply curious about the inner workings of green finance, this episode offers valuable insights.
Finally, Andrew emphasizes the importance of public service and its intersection with private sector expertise in driving impactful change. He shares his personal journey from the private sector to leading a state-sponsored investment fund and offers advice for those looking to make a meaningful impact in the world of sustainable finance. Tune in to learn how the NY Green Bank is leading the charge in clean energy funding and how you can be part of this transformative movement.
We were pleased to host: https://www.linkedin.com/in/andrewckessler/
Visit our website: https://insidersguidetoenergy.com/
Transcript
00:00:00 Andrew Kessler
We're in our 11th year of operations now we're the largest green bank in the nation.
00:00:06 Andrew Kessler
The capital from this important source of funding is going to have huge, huge benefits across the country, including New York State.
00:00:16 Chris Sass
Your trusted source for information on the energy transition. This is the Insider’s Guide to Energy podcast.
00:00:29 Chris and Jeff
Welcome to another edition of the Insider’s Guide Energy. I'm your host Chris Sasson. With me is my co-host Jeff McCauley. Jeff, what do we have happening today? We are thrilled to be joined by Andrew Kessler, the President of the New York Green Bank. And for those of you who don't know, the New York Green Bank is one of the.
00:00:46 Jeff McAulay
Oldest green banks in the country. It's been around for over a decade and has deployed over $2 billion into clean energy assets. Andrew, welcome to the show. Tell us a little bit about the founding mission.
00:01:00 Jeff McAulay
Of the New York Green Bank.
00:01:02 Andrew Kessler
Sure. Thanks, Jeff. Well, I'll, I'll answer that in a SEC. But let me just say this is a great opportunity to talk about something that I think.
00:01:12 Andrew Kessler
Has been in the press a lot. There's a a very important element in the Inflation Reduction Act, $27 billion greenhouse gas reduction fund. And so I think this is a very timely discussion to have because I think a lot of folks are asking themselves what is a green bank? How do I think about it?
00:01:32 Andrew Kessler
What does this mean to my state? And you know, how could this help achieve, you know, various clean energy objectives?
00:01:41 Andrew Kessler
And we're the we're, as you mentioned, the oldest green bank and not quite the oldest green bank. But one of the oldest green banks, and certainly the largest. And so this funding, this $27 billion of greenhouse gas reduction funding, which we're gonna get a piece of and we can talk further about that is going to be a very significant.
00:02:01 Andrew Kessler
Gotten the arm for New York State and other states to advance their clean energy goals.
00:02:06 Andrew Kessler
Now let me tell you a little bit about us. Look, we're all different that every green bag is going to be set up slightly different to achieve. Obviously you know certain priorities that make sense for their their their location, their geography, their mission. But we all have a very common theme which is market animation. You know we're all set up to.
00:02:27 Andrew Kessler
To really animate private sector capital to fund, you know our various geographic geographic areas of of responsibility to to fund that energy transition, we're a billion dollar state sponsored investment fund. We're the largest in the nation as I mentioned.
00:02:46 Andrew Kessler
And we've been very active.
00:02:48 Andrew Kessler
And we're really proud of that. We've done $2.3 billion of transactions with our billion dollars. So we've recycled our capital once already.
00:02:56 Andrew Kessler
We've done over 130 transactions and our core mission is to identify and address funding gaps. As I mentioned before, and that's our key mission. There's no question that public sector capital alone isn't going to fund the energy transition anywhere, including New York State. So that's critical for us to crowd in.
00:03:17 Andrew Kessler
The private sector capital necessary to do that and we do that with our very flexible capital and we'll hopefully talk a little bit more about what that.
00:03:25 Andrew Kessler
And we work very hard and closely with our colleagues at Nyserda. We're a division of nyserda.
00:03:32 Andrew Kessler
And we are hand in hand, working to advance the goals of the the climate leadership and Community Protection Act, which was passed in New York State in 2019.
00:03:42 Jeff McAulay
Just to give us some examples, you mentioned 130 transactions over $2 billion. Where might somebody have seen a project that you finance or benefited from 1:00 if they're traveling through New York State?
00:03:55 Andrew Kessler
Well, we're going to see examples of that, you know, throughout the state as you drive through the thoroughfare, we will have done community solar projects as you drive through, you know, Buffalo, NY City, you will have seen buildings that have gone through investment from New York, Green Bank that have achieved energy efficiency and and building.
00:04:15 Andrew Kessler
Electrification goals you will have, you will see and hopefully more so overtime. Examples of energy storage assets that are being built to ensure that we have the flexible capacity for this renewable energy that we're all bringing on.
00:04:31 Andrew Kessler
So there are various examples and it's really fun as as we travel through the state visiting with different borrowers and and meeting with different stakeholders, take the time to, you know, peel off the side of the road and go see something we did. So we probably we've been talking about this and and maybe we probably should at some point but you know.
00:04:51 Andrew Kessler
Put signs up, you know, funded by to really show showcase the, you know, the achievements that we're making.
00:05:01 Chris Sass
We we dove right into the topic here. You started talking about a billion dollars, you 130 projects. Let's back up a little bit and start for everybody to make sure we all know what a green bank actually is. I know that you're the.
00:05:13 Chris Sass
Oldest, but what?
00:05:15 Chris Sass
Exactly. Is it just like the name sounds or is there?
00:05:17 Chris Sass
More to this.
00:05:19 Andrew Kessler
Ohh this is great because maybe I'll do a little myth busting here today. There's there's a lot of misperceptions about what a green bank is, and again, as it's coming up in the press more and more, this is a great opportunity to maybe.
00:05:33 Andrew Kessler
Clarifies some of that. So one myth is that we're a bank and we're not.
00:05:37 Andrew Kessler
A bank.
00:05:39 Andrew Kessler
And you know the the name Green Bank really originated from the first Green Bank in the world, which was the UK Green Bank.
00:05:48 Andrew Kessler
And the name kind of stuck. We're actually an investment fund. We're a state sponsored investment fund. You can't come in here and open a deposit account. We don't take deposits. You can't start a checking.
00:06:00 Andrew Kessler
Account. We're not going to give you a toaster if you come in and and and and and and bank with us. You know, we're we're an investment fund. We're typically focused on institutional type lending anywhere in the five to $100 million per transaction range. We've done smaller and we'll do bigger.
00:06:21 Andrew Kessler
It's all about whether that that animation, whether that intervention leads to market animation.
00:06:28 Andrew Kessler
So that's one important myth, you know. Another one is that, well, you all compete with the private sector, don't you?
00:06:38 Andrew Kessler
No, no, we do not. In fact, we're explicitly set up to avoid that and that's really takes a little retraining. You know, all of us here at New York Green Bank come from the private sector and we all like, you know, historically we, we thrive on competing and coming here and understanding the difference in the mission.
00:06:59 Andrew Kessler
Which is in fact, to crowd in private sector capital and not compete against.
00:07:05 Andrew Kessler
Their interest is it is a different way of transacting. It takes some getting used to, you know, back in my private sector days it would not feel good when as we call it, a deal would get done away from you. You know, that was a source of great disappointment.
00:07:25 Andrew Kessler
To say the least here it's it's a it's a, it's a victory.
00:07:29 Andrew Kessler
We celebrate that we can use our scarce capital and scarce resources to apply them where they better belong in areas where there are true funding gaps where the private market for whatever reason, and there are various reasons is just not stepping in to fund.
00:07:48 Andrew Kessler
Another interesting misperception you hear sometimes kind of two sides of the same coin is on the one hand, whether green banks only do subsidized capital.
00:08:04 Andrew Kessler
Or sometimes you hear the opposite. You know, green banks only do market based lending.
00:08:11 Andrew Kessler
It's funny, you hear both. You know, two sort of extremes and and we hear that a lot, you know.
00:08:18 Andrew Kessler
The truth is.
00:08:19 Andrew Kessler
The green banks do both.
00:08:21 Andrew Kessler
And it really just, it's about market animation. There are use cases.
00:08:27 Andrew Kessler
Where the financing environment for that use case, it has historically been supported by subsidized capital by what we call concessionary capital. So of course, well, we're going into those situations, you know we're going to utilize a subsidy like approach to help crowd in.
00:08:47 Andrew Kessler
Some of that, some of those subsidies in market based lending, we're going to apply market based and pricing and structures crowd in the private traditional private sector lending.
00:09:01 Chris Sass
Now the different capital, you said said you've already had your capital put back to work. Are these kind of the same kind of performance that we're seeing from private equity in terms of term term and performance? Are you gap funding these projects in order to get your capital back or what kind of projects excite you so that your capital isn't all tied up in?
00:09:21 Chris Sass
From one or two large projects.
00:09:24 Andrew Kessler
Well, it's a great question, Chris, and that goes to flexibility. So we're not looking to maximize profits. We're looking to animate capital. And so we will price accordingly. But you know, one of our key.
00:09:37 Andrew Kessler
Missions is to ensure that we are self-sustaining.
00:09:41 Andrew Kessler
And that's the beauty of this program. You know the, the, the, the principle that we charge for our capital over time has well cleared our cost structure. We became self-sustaining in 2017 and so we were.
00:10:01 Andrew Kessler
We're really looking to, as I mentioned before, animate private capital by, well, how do you do that? Well, if you're closing into transactions in.
00:10:11 Andrew Kessler
Cases that can support market based lending and your and your lending at subsidies, subsidized rates. What are you doing? You're competing against the private market.
00:10:22 Andrew Kessler
You're taking what they otherwise could have done or should have done, or or may have been quite willing to do, and you undercut them.
00:10:32 Andrew Kessler
And so we look for pricing and structuring at what we consider to be.
00:10:37 Andrew Kessler
Mark it and demonstrate those precedents, show them talk about them, knowledge share with, with with the the developer community in New York State and the lender community in New York State and and elsewhere to demonstrate. You know, a path towards doing more of that, that replication, adoption and scale.
00:10:58 Andrew Kessler
On the subsidized side, look, we have a very large portion of our balance sheet focused on extremely concessionary pricing, 1 1/2 percent.
00:11:10 Andrew Kessler
$250 million community decarbonization fund.
00:11:15 Andrew Kessler
I mean, you know, you you can see where you know the the the treasuries are now. So that is highly concessionary capital. Why do we do it it's highly market animating what we're doing with that capital is we're providing community lenders like cfis and and others.
00:11:35 Andrew Kessler
Credit unions and opportunity.
00:11:38 Andrew Kessler
To either expand their green lending practice or in many cases start one from scratch. So we're greening community lenders through this concessionary capital, getting that ball rolling so that over time they're building a profitable practice that that they can then fund themselves through their traditional needs.
00:11:59 Andrew Kessler
But that $250 million that we put out and anywhere from.
00:12:03 Andrew Kessler
Two or three to $25 billion allocations in New York State to community lenders. And by the way, specifically for benefiting disadvantaged communities is one of the most highly market animating and catalytic things that that we do. But yet it's it's entirely concessionary in nature.
00:12:26 Jeff McAulay
Andrew, you mentioned two really interesting pieces of information. One that you are self-sustaining as an organization and two that you're actually providing a significant amount of concessional lending, sub treasury basically right now.
00:12:42 Jeff McAulay
How are those two things the case?
00:12:46 Andrew Kessler
Well, yeah, that's that's really the kind of the genius of of this program, you know, with a billion dollars, right, that we were initially capitalized by, we've been able to recycle an entire turn of that capital.
00:13:00 Andrew Kessler
And and and I mentioned $2.3 billion that we've done.
00:13:06 Andrew Kessler
That $2.3 billion funded 7 over $7 billion worth of sustainable infrastructure in New York State. There's a a portion of that DEF that was done on market based terms and I and.
00:13:21 Andrew Kessler
Market is market. Depending on the risk profile, some of our loans are in the high single digits.
00:13:28 Andrew Kessler
We've been involved in transactions that are priced in the low double digits.
00:13:34 Andrew Kessler
And of course, you know that activity provides us with the income necessary.
00:13:40 Andrew Kessler
To afford to.
00:13:41 Andrew Kessler
2.
00:13:42 Andrew Kessler
Tremendous things, you know, within use cases that cannot support market based lending as much as as I mentioned, 1/4 of our fund, $250 million of our fund dedicated.
00:13:57 Andrew Kessler
To to servicing disadvantaged community through a wholesale funding pathway to these community lenders. At 1 1/2 percent. So it's really that's the brilliance. And when by the way.
00:14:10
You know.
00:14:11 Andrew Kessler
Like any scarce resource, you eventually run out of a resource.
00:14:15 Andrew Kessler
And you know, we've put money to work overtime and have found ourselves liquidity constrained.
00:14:23 Andrew Kessler
So back in for example, in 2021.
00:14:26 Andrew Kessler
We took a portion of our portfolio and we monetized it.
00:14:31 Andrew Kessler
We raised cash that way $314 million, the largest green bank monetization in the world.
00:14:39 Andrew Kessler
Freeing up capital to allow us to continue the program, never once asking for New York State for more capital.
00:14:46 Andrew Kessler
So that's really the genius of this of this program in that, you know it is set up to be self-sustaining. And just once you fund it pay dividends you know for obviously for for as long as we need to and maybe eventually we don't need to. That's the goal at some point we hope funding gaps don't exist in clean energy.
00:15:06 Andrew Kessler
Markets in New York State, and we can bring this capital back for other uses, but for now there's a tremendous demand for what we're doing.
00:15:14 Chris Sass
Where are the users of this capital that are they solely in New York State, or is there enough to drive a billion dollar investment in the state? Or are you amplifying through other states?
00:15:25 Andrew Kessler
All of our capital is used to advance New York State sustainable infrastructure. So you know, and it really varies, Chris. It varies by size that that goes back to flexibility when you're in the gap filling business, you have got to have flexibility.
00:15:43 Andrew Kessler
We can be anywhere in the capital stack virtually. You know, the only restriction is just, you know, our sense of mission and prioritization you.
00:15:51 Andrew Kessler
Know we're we're.
00:15:53 Andrew Kessler
Grateful to have the flexibility from the Public Service Commission to be able to deploy our capital in ways that we think makes the most sense for the use case, we can be subordinated, we can or senior. We can be at a holding company level. We've even done preferred investments.
00:16:10 Andrew Kessler
In relation to size, our smallest transaction has been, you know, something in the neighborhood of $600,000, our largest as large as $100 million.
00:16:22 Andrew Kessler
In terms of different technologies, you know we are focused on prioritizing the goals of the Climate Act.
00:16:31 Andrew Kessler
So naturally that is a North star for us, but we've been involved in solar, in wind, in energy storage, clean transportation and of course building electrification. And in all cases.
00:16:46 Andrew Kessler
We're focused on ensuring that our capital.
00:16:49 Andrew Kessler
Is equitably benefiting all New Yorkers. That is just critical to to our mission and and at the heart of the Climate Act, we're mandated to ensure that at least 35% of our capital with the goal of 40% benefits disadvantaged communities as measured between 2020 and 2025. And we are at this point.
00:17:09 Andrew Kessler
At 34% with a clear line of sight to achieving our minimum later this year.
00:17:16 Jeff McAulay
This is wonderful and I just want to keep going back to this point.
00:17:20 Jeff McAulay
There's no taxpayer dollars. It's not like somebody listening to this in New York. And why are you using my tax dollars and what you're saying is you've already been capitalized your break even slash positive and those profits, that excess cash that you return gets recycled into more lending on a market rate?
00:17:40 Jeff McAulay
Or concessional rate lending. So this is not an ongoing tax burden in the state of New York, it's self-sustaining.
00:17:49 Andrew Kessler
That's exactly right. And that's what's so exciting about the $27 billion of GRF greenhouse Gas Reduction fund that's going to hopefully make its way across the, the US, the, the, there's three portions of that. There's the, the one portion, the NCIF portion is a $14 billion pathway meant to capitalize 3.
00:18:09 Andrew Kessler
National green banks, but also meant to capitalize new and emerging green banks, as well as obviously provide New York Green Bank with additional capital to to fund our mission. So it's really exciting. This has been this GRF process has been a great opportunity to bring the community.
00:18:28 Andrew Kessler
Together.
00:18:29 Andrew Kessler
You know, we have a lot. We have a lot to share and we're always trying to make time for folks to be able to put a program that makes sense for them. Not everything we've done here makes sense for everybody, but certainly we have been through a lot that we think you know we can help folks create.
00:18:49 Andrew Kessler
That uniquely self-sustaining government program, Jeff, that you that that you're asking about because again you're absolutely right, the initial billion.
00:19:01 Andrew Kessler
You know, has we happen to ask for more and we haven't needed more. We've monetized when necessary to create additional liquidity and of course, we're delighted to complement state dollars with these federal dollars to enhance the the mission.
00:19:18 Jeff McAulay
This is really fantastic. So going back to the the crowding in or you say animating markets, how do you know this? This is always a counterfactual question, right? Do you have to go out and ask five banks? And they all declined the deal in order for you to justify. But what's the easy test to know that you're not displacing private?
00:19:37 Jeff McAulay
Capital.
00:19:39 Andrew Kessler
Yeah, it's a great question. It's not an easy test. There's not a rubric that you just sort of, you know, we have an AI do it. Yet, you know, there's no, there's no, there's no framework that it that exists where you can just sort of punch in some information. And it says you're done. We look at a lot of factors.
00:20:00 Andrew Kessler
We look at, you know, the the level of activity within the space. So we're seeing what else is getting done.
00:20:10 Andrew Kessler
In a particular technology in a particular sector and even within the sector in a particular part of the finance value chain.
00:20:20 Andrew Kessler
Let me give you an example. You know, community solar.
00:20:23 Andrew Kessler
Well, you know, you have a certain segment of the of the community solar development market that is truly developed.
00:20:32 Andrew Kessler
Achieving site control, getting permitting, you know, getting in the utility queue, you know preparing the asset for construction, what we call you know NTP and you know that requires capital and there's a whole business model associated with just doing that and selling it then to an operator.
00:20:53 Andrew Kessler
That is going to construct and operate.
00:20:56 Andrew Kessler
That is an.
00:20:56 Andrew Kessler
Ecosystem that needs funding. Of course, you have the construction that needs funding and then the construction is typically taken out by permanent term capital.
00:21:06 Andrew Kessler
So, you know, even within a segment.
00:21:10 Andrew Kessler
You know.
00:21:11 Andrew Kessler
You could have funding gaps in various particular areas, and so, you know, we look at that very carefully. We look at pricing.
00:21:20 Andrew Kessler
I mean, there's no better way to determine whether there's competitive tension when you start seeing spreads start to compress.
00:21:28 Andrew Kessler
So we we look at proposals that come in.
00:21:32 Andrew Kessler
Maybe we can talk about that. I think is in terms of you know some of the myths. How do I, how do I access this? Yeah.
00:21:38 Jeff McAulay
Yeah. Where's the door? Right? Because it sounds great. And then also you do decline deals, right? You're not just taking everything. You don't have to. Your mandate is not to do a bad deal, so.
00:21:44 Andrew Kessler
Weak decline deals all the time.
00:21:48 Andrew Kessler
We.
00:21:48 Jeff McAulay
Yeah.
00:21:50 Jeff McAulay
Who? Who should? Who should?
00:21:51 Andrew Kessler
Yeah, we do.
00:21:52 Jeff McAulay
Approach The New York Green Bank.
00:21:53 Jeff McAulay
Where's the door? What should they be? Somebody's listening to this. Say, I've got a funding gap. Fund me. Where should they go to find if if near green banks?
00:22:01 Andrew Kessler
Sure.
00:22:02 Andrew Kessler
A fit. Sure. Sure. I'm just gonna finish the last point real quick. And that's the most important point, which is stakeholder engagement.
00:22:11 Andrew Kessler
Full on, you know, we do round tables where you participate in conferences. We talk to the market all the time. And so you know, having our ear to the ground, you know, gives us the and some of the other elements I've talked talked about gives us a totality, a perspective on whether we're making progress.
00:22:31 Andrew Kessler
A funding gap.
00:22:32 Andrew Kessler
Or whether we've actually closed it and we can declare victory and move on to something else back.
00:22:38 Andrew Kessler
How do you unlock this?
00:22:39 Andrew Kessler
Capital.
00:22:40 Andrew Kessler
There is. There is a. There is a misconception that it's overly complicated. It's it must be bureaucratic. It's a state program it, you know, how does.
00:22:47 Andrew Kessler
It.
00:22:48 Andrew Kessler
Work. We try to make it as straightforward as possible. Again, we all come from the private sector.
00:22:54 Andrew Kessler
And we're trying to animate private capital.
00:22:58 Andrew Kessler
So we're trying to mimic what a private investor investment fund you know could do.
00:23:06 Andrew Kessler
And so we've got a simple portal where we ask folks to submit a proposal into anyone can do it. You don't need to know anyone at New York, Green Bank. You don't have to have a special relationship. It's open to everybody. We score it once a week.
00:23:23 Andrew Kessler
And you're going to know whether we're going to it's past eligibility or not. And eligibility is straightforward. It's not diligence. We will get to that if it passes eligibility, does it have the ability to reduce greenhouse gases and?
00:23:37 Andrew Kessler
Or does it have elements that would enable us to remain self-sustaining?
00:23:46 Andrew Kessler
Right. And and is you.
00:23:48 Andrew Kessler
Know.
00:23:49 Andrew Kessler
What we've been talking about, I think thematically throughout this talk, you know, does it have a significant potential to animate private capital?
00:23:58 Andrew Kessler
And if we pass all three of those criteria now, you're well on your way to getting a deal team, and then you're off to the races in a very straightforward manner. We'll set up a a data room and it's a simple two step approval process. Look, I think we we've closed transactions as quickly as you know, 8 weeks.
00:24:17 Andrew Kessler
Quite often it takes a lot longer and that is often because we're dealing with people that are coming to us.
00:24:25 Andrew Kessler
Because, you know, they have a project that's hard.
00:24:28 Andrew Kessler
That's why there's a funding gap there.
00:24:31 Andrew Kessler
And so either they're challenging to get things.
00:24:35 Andrew Kessler
Transaction ready.
00:24:37 Andrew Kessler
Or we're doing a lot of diligence or there's some other factor, you know, going on there. So we roll up our sleeves, we take the time to get this right. But ultimately, Chris, you know, accessing us is pretty straightforward. I'm going to give us a little info@greenbankdot.ny.gov. We do check that daily.
00:24:58 Andrew Kessler
And we will get back to you. So we're not hard to unlock, just reach out to us and please come ready to transact, cause we're, we'll, we'll, we'll take the time and effort to engage with you.
00:25:09 Chris Sass
Let's assume that that we qualified and we get past your data room and you you give us the money. What kind of investor are you? Are you a hands on investor or are you going to be in my company or are you loaning me money and sitting on the sidelines? What what? What model does your organization have?
00:25:26 Andrew Kessler
Yeah, it's a great question, so.
00:25:30 Andrew Kessler
What kind of a capital really are we? Are we equity where we're in on your board telling you what to do? Are we more lenders, a typical capital stack in a clean energy transaction, it can be anywhere from 10 to 20%.
00:25:46 Andrew Kessler
Equity. And then maybe there's, you know, another whatever 30 to or so percent that could be tax equity oriented in certain cases where tax equity is relevant and then the balance is debt.
00:26:00 Andrew Kessler
And when there's no tax equity it, you know, obviously the the capital stack is highly.
00:26:06 Andrew Kessler
That heavy and and debt leverage, this is very important to making the equity returns work for the equity investors. And so when we think about how we use our scarce billion dollars, sounds like a lot of money, but in, in the scheme of things to try to achieve the energy transition in New York State, it isn't.
00:26:25 Andrew Kessler
That's why we have to be very strategic about how we use our capital. We typically, Chris, tend to utilize our capital to animate the heavy lifter of the capital stat, debt finance.
00:26:36 Andrew Kessler
So when you get capital from us, very likely it is going to be in the form of a traditional project project financing.
00:26:45 Andrew Kessler
Where we're a lender into the project.
00:26:48 Andrew Kessler
Rarely are we a lender to you as a company. We're looking to make sure things get built.
00:26:55 Andrew Kessler
So we're going to take a create a special purpose vehicle to house a project that you're trying to build.
00:27:02 Andrew Kessler
And we're going to fund that project and get out of your way.
00:27:09 Jeff McAulay
Yeah.
00:27:11 Jeff McAulay
And this is this is fantastic. I I'm curious also where you see the market gaps going. So if you could give us an example of a gap that you feel like you've been doing this for over a decade?
00:27:23 Jeff McAulay
What's a gap that's been closed where you were an early leader, you were in there. You're funded and now New York Green Bank is no longer needed. And then what's a hot up and coming area where there is a lot of gaps that you're seeing a lot of excitement and a market that needs animation?
00:27:42
Well.
00:27:42 Andrew Kessler
It's yeah, thanks for asking that.
00:27:46 Andrew Kessler
I would say generally solar as an area that we feel has been well addressed. There are still funding gaps within certain components of solar.
00:27:58 Andrew Kessler
But when we started back in 2013 and you looked at our portfolio up to around 2020 and by the way, all of our information like that is public publicly available, but it's probably the most transparent investment funds out there in terms of you know data that we provide exactly how we're using this capital, but.
00:28:17 Andrew Kessler
We were highly concentrated.
00:28:20 Andrew Kessler
In solar, both residential as well.
00:28:23 Andrew Kessler
Community solar overtime that you know sort of Fast forward to now and that diversification is you know a completely different picture solar is you know around 40% total of our portfolio instead of you know approaching 8085% and.
00:28:41 Andrew Kessler
And why is that? Because we recognize that the solar gaps that we had been seeing, we're starting to close and shifted our focuses into other technologies, other use cases in the residential solar market, a lot of the the resi, solar.
00:28:59 Andrew Kessler
Companies are now big public companies.
00:29:03 Andrew Kessler
Public.
00:29:03 Andrew Kessler
Companies.
00:29:05 Andrew Kessler
So you know these these aren't these are folks with sophisticated teams publicly, you know, public company management able to access equity able to access and unlock different different portions of the financing market.
00:29:26 Andrew Kessler
On the community solar side, that was.
00:29:28 Andrew Kessler
A brand new.
00:29:29 Andrew Kessler
Model in 2015 in New York State.
00:29:32 Andrew Kessler
And it was a head scratcher.
00:29:35 Andrew Kessler
You know, a lot of the the the banks didn't really know what to make of it. The traditional solar, you know lending model was you had a a contract PA and offtake, you know with one or more off takers. You diligence that you say well, how long is that contract and are they money good and?
00:29:55 Andrew Kessler
Either the ounce and you know, OK, maybe I can lend to that. This is a subscription based model that was also supported by a new program called Vetter that was launched by Nyserda.
00:30:07 Andrew Kessler
You know, today it's not that complicated. In fact, we have the most robust community solar market in the country, even though New York State isn't, you know, the number one resource solar resource. We're not Nevada. We're not, you know, Florida. But what we've done through these.
00:30:22 Andrew Kessler
Through the Vetter program and through our intervention is we've created a very easy to work in model for developers and financiers. But it wasn't, it wasn't. So in 2015, we put out the first transactions back in 2015.
00:30:38 Andrew Kessler
We share them entirely transparently with the market.
00:30:42 Andrew Kessler
We pulled in other lenders into our other in our third and 4th deal. We pulled in others so they could sort of teach them to fish and, you know, help them understand how to think about this. And it's not that they they can't figure it out themselves. They have. They have a big market opportunity. They have the entire US. We have to convince them to spend the time to understand what better means.
00:31:04 Andrew Kessler
And how to model it and how to stop?
00:31:07 Andrew Kessler
We have to help them understand how the subscription model works with the Community solar, and once they did, they understood that the opportunity made sense to finance. And as I said, we can see the results, but that's one where I would consider, you know, mission accomplished. Generally speaking, we still support community solar.
00:31:26 Andrew Kessler
In relation to interconnection depot.
00:31:29 Andrew Kessler
Is it lending which has historically been equity finance and we'd like to see that scarce equity be deployed in better uses and we think that that's a debt financeable funding use case.
00:31:41 Chris Sass
I think we have time for maybe one more question and then we'll go into your personal journey. When you're talking about the trend you you talked about community solar as an example of something is kind of ridden at cycle. That probably means that on the forefront you see other technology whether it be offshore wind, whether it be EV charging stations.
00:32:00 Chris Sass
What trends are you seeing in New York State coming? What what should we be expecting and what's hard to get done in New York that needs some help from someone like a green bank?
00:32:09 Andrew Kessler
Yeah, sure. I mean, look, our priority areas today.
00:32:13 Andrew Kessler
Include building decarbonization. We have got to decarbonize New York State building stock.
00:32:20 Andrew Kessler
We gotta do it, you know, for the residents. But we have to do it, you know, for our climate goals and and that's a huge focus of ours. We have two specific targets on that. We have $100 million building decarbonization focused on disadvantaged communities, goal of which we're about halfway done. We have $150 million.
00:32:40 Andrew Kessler
Goal for green affordable housing investing of which we're about to.
00:32:44 Andrew Kessler
Are we done the second big category is in energy storage.
00:32:51 Andrew Kessler
You know, we have got to make sure that we have the flexibility in the grid to be able to manage the the additions that's coming from the offshore wind and and and some of the onshore resources. And so we're very focused on that and that's just starting to really you know.
00:33:11 Andrew Kessler
Developed level of maturity that you know is debt is debt financeable there's been a lot of it's a highly variable cash flow model and it's been a challenge for many lenders to to be able to finance and then the third big category that we're focused on is clean transportation both on the vehicle.
00:33:31 Andrew Kessler
Side as well as on the charging infrastructure because they're kind of a chicken and egg.
00:33:36 Andrew Kessler
Right. We gotta tackle them, you know, together. And you know, it's a very complicated and you know, marketplace you, you know, you've got the commercial fleet side, you got the residential side, you've got school buses, you've got transit, you've got airport stuff.
00:33:53 Andrew Kessler
There's a lot.
00:33:54 Andrew Kessler
To do in that sector. So we're looking carefully at how to prioritize and make it.
00:33:58 Andrew Kessler
You know, make progress there.
00:34:00 Andrew Kessler
New York State through nicer, this leadership has issued a clean transportation road map that is available for folks to see to help folks understand our prioritization, where we think the low hanging fruit is and how we're going to achieve our, you know, our our our longer term goals in that sector. But we've got a lot of effort.
00:34:20 Andrew Kessler
Time effort focused in on animating that space and then beyond that obviously our you know even newer technologies that could be really.
00:34:30 Andrew Kessler
Hydrogen. You know, as an example. So clean hydrogen of course. So there's a lot going on that you know that that I think is going to keep us very busy, which is why having access to some of the greenhouse gas reduction fund.
00:34:50 Andrew Kessler
Capital is going to be, as I mentioned earlier, it's just a huge shot in the arm to be able to continue to do. Now what we need to do in some of these newer areas.
00:34:59 Jeff McAulay
And and Andrew, maybe last question is a different kind of capital which is the the human capital. So you mentioned that folks on your team, you personally have had a background in the private sector with the influx of new funds into green banks, there's gonna be a lot of hiring out there based on your personal journey and the the teams that you've mentored.
00:35:18 Jeff McAulay
What advice do you have to listeners out there who are maybe earlier in their career and looking for a way to get involved, deploying impact capital?
00:35:28 Andrew Kessler
Look.
00:35:31 Andrew Kessler
There's trade off. Everything has a trade off, there's life is just full of trade-offs. You wake up and there's a trade off. This is public service. You know what we get what you get out of this is it's just some incredibly rewarding.
00:35:47 Andrew Kessler
Sense of impact that you're making with this. With this capital, you know it it's an opportunity to do first of its kind stuff. You know, we think of our about ourselves like a financial innovation.
00:36:00 Andrew Kessler
Tab.
00:36:01 Andrew Kessler
We're developing new recipes. They don't all you know, you know, lead to you know.
00:36:11 Andrew Kessler
The demand we'd, we'd hope, but many do, and. And so it's very innovative. It's very exciting. It's very cutting edge and it's very impactful, but you're not going to, you know, achieve the same compensation levels in this business that you would in the private sector.
00:36:31 Andrew Kessler
That being said, in the private sector, you'll maybe you'll you'll certainly achieve higher compensation levels and maybe not have the impact that you wanna have with your career, but you don't have to choose one or the other. You have hopefully a long career consider public service for some time. It's a great compliment to your private sector work.
00:36:51 Andrew Kessler
It'll pay dividends when you go back. If you go back, and in the meantime, you know you've you've obviously added.
00:36:58 Andrew Kessler
Your skill set to your your experience set and hopefully you know you come home feeling pretty good about what you've been able to do with the finance back.
00:37:06 Chris Sass
Andrew, this this has been a fascinating conversation. I understand a bit about New York Green Bank quite a bit more than I did at the beginning of the conversation. I appreciate that. I enjoy seeing the capital at work and all the things that you're working on and and some of the vision you come with and your call for public service and getting people engaged. I want to thank you so much for coming on insiders guide to energy. It's been a pleasure.
00:37:26 Chris Sass
Having you on our get our show today.
00:37:29 Andrew Kessler
Thanks so much for the interest Chris and Jeff. It's it's really great to talk to you all. Thanks again.
00:37:35 Chris Sass
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