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Making money a renewable resource

How Peter Liu, a former oil industry engineer, stopped designing petrochemical plants and started the first green bank in U.S. David Bank.

The city of Berkeley, California, for example, said last year it would become the first urban center in the country to finance the upfront cost of solar installations for homeowners who agree to pay back loans over 20 years through assessments on their property tax bills. The key to this entire program is to find a bank willing to provide the financing anticipated by the program, city staff members wrote in a report.

Likewise, Milwaukee and the Center on Wisconsin Strategy (COWS) are developing a plan to retrofit the citys building stock, an ambitious effort called Milwaukee Energy Efficiency, or Me2. Under the plan, $500 million in private financing would be repaid by building owners through monthly bills for the retrofit work, guaranteed to be below the cost of current energy bills.

I have not found finance to be a problem, per se, says Joel Rogers, the director of COWS and a law professor at the University of Wisconsin-Madison, who hopes to launch a pilot program in January of 2009. What the banks want to see is a demonstration of this working. They dont want to fund an experiment. What they have all said is, If you can guarantee payments, by getting this on a utility bill, with a penalty for non-payment, then Ill get you a very low cost of capital, below market rate. And I believe them.

Liu says New Resource is committed to breaking down barriers and taking on such leadership. The banks solar-financing program packages government rebates, tax incentives and low-cost capital into 25-year loans. Real estate developers who come in for financing can choose between two loans, one for conventional buildings and one for green construction, with a one-eighth percent discount and lower fees. For a $5 million loan, that could mean a savings of more than $60,000 over 10 years.

With the financial crisis exposing the perils of business as usual, Liu is looking for unconventional opportunities. The hurt for just doing the conventional things is getting greater and greater, he says. As the markets revive, Green should be associated with better performance.

Thats in line with the advice Peter Blom of Triodos offered Liu in their meetings. You really need to be the crazy guy when others say, This is green enough, he told Liu. You have to go the extra mile. Liu has already taken New Resource Bank that extra mile, and now hes going further.

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