National Governors Association 2012 Winter Meeting

1. National Governors Association2012 Winter Meeting Washington, DC February 27, 2012 Reed Hundt, CEO Coalition for Green Capital 202-494-4111 REhundt@gmail.com Kenneth Berlin, Senior V.P. Policy & Planning and GC Coalition for Green Capital 202-371-7350 http://www.coalitionforgreencapital.com

2. Coalition for Green Capital: Here to helpA non-profit providing expert advice on energy legislation and regulation to states • Participated in the major overhaul of energy legislation and governance in Connecticut under Governor Malloy and Commissioner Esty in 2011. (Passed state senate unanimously; near unanimity in Assembly) • Created a “Green Bank” called the Clean Energy Financing and Investment Authority • Consolidated utility regulation into the Department of Energy and Environmental Protection • Discussing green bank ideas with state officials or clean energy advocates in ten states: California, Washington, New York, Pennsylvania, Ohio, Michigan, Oregon, Wisconsin, Illinois, Vermont • Publishing next month with the Brookings Institution a comprehensive paper on how to establish state green banks • Developing a green bank “think tank” with University of California, Berkeley • We are here to help!

3. The Bright New Future of EnergyCheaper, Cleaner, More Reliable • Every state can deliver cheaper, cleaner and more reliable energy and transportation services to its citizens • For the next decade, cleaner electricity can be produced primarily by natural gas and secondarily by wind and sun. • Motor vehicles can operate with increasingly efficient engines • Commercial and government transportation can begin to shift to non-petroleum powered vehicles • Building consumption of electricity can become more efficient (energy intensity should fall) • Coal can be phased out because its environmental costs are high and natural gas is cheaper • In the long run the world must be powered primarily by sun and wind • Free sun & wind eventually will beat any fuel that has to be purchased • With deadlock in Washington, it is up to each state, hopefully acting in concert, to lead by example

4. An Investment Boom is PossibleWe are at an inflection point in the deployment of clean energy • For energy, this is an inflection point – a moment of 10x change – as big as the internet was for communications, and that led to more than two million net new jobs • New ideas for financing clean energy – like the CGC’s green bank – are needed to ensure the needed investment in clean energy and to unlock private capital • States should reform taxation, permitting regulation to bring the new energy future into the present • Every state and the whole country needs a complete overhaul of its energy plan going forward • Given the inability of Congress to pass a comprehensive and modern energy bill, states can lead by example • If we reform the rules governing exploration, exploitation and delivery of shale gas, we may see a huge investment boom – in the hundreds of billions of dollars

5. There is a Right Way to Exploit Our Shale Gas ReservesRegulations will protect states and lead to more production • Federal Government and State needs to cooperate in regulating hydraulic fracturing (fracking) for gas extraction • Fracking needs to be done with best practices or environmental costs will be staggering… and states will end up paying • To achieve this, regulations should require that: • Full disclosure is made of chemicals used in fracking • Fracking does not lead to fugitive emissions of methane • Life cycle emissions of GHG from a gas-fired generation plant do not exceed 50% of the GHG emissions of a similarly sized coal-fired plant • Water used in fracking is captured and filtered • States and the federal government should support greater domestic use of natural gas for transportation • States and the federal government should support research into minimizing GHG emissions from production and use of natural gas (e.g., CCS of natural gas used for power generation)

6. There Will Be a Boom in Renewables AlsoRenewables are being widely deployed • As of the end Of 2010, “Clean energy investments were responsible for nearly a quarter of the 1 million public investment jobs – or 224,500 clean energy jobs.” • As of August 2011, 100,237 Americans were employed in the solar industry • Solar job growth over the next 12 months is anticipated to be almost 24%, representing approximately 24,000 additional new jobs • 35% percent of all new power generation built in the United States since 2005 has come from wind, more than new gas and coal plants combined • To ensure the right mix between natural gas and renewables, states should support a renewable portfolio standard (RPS) of 25% renewable by 2025 and the Michigan RPS ballot initiative • States should support other incentives for renewables including financing incentives

7. Energy Efficiency Can be Brought to ScaleFinancing is needed to expand retrofits • EE retrofit programs need to overcome consumer indifference and financing difficulties to reach scale • Can be overcome by: • Innovative financing which provides 100% of the cost of the EE retrofit and limits repayment roughly to the amount of the energy savings • On-bill financing with the financing obligation running with the meter • Commercial PACE programs • Programs to inform consumers and increase demand for EE • Emphasis on MUSH facilities • Entities like green banks that are willing to make large scale EE loans

8. We Can Significantly Reduce GHG EmissionsA price may not be put on carbon for many years, butmuch can be done in the interim • GHG emissions can be reduced by: • Lowering the cost of clean energy through low cost financing, tax incentives and similar measures • Removing regulatory, infrastructure and market barriers to the deployment of renewable energy • Bringing energy efficiency to scale • Closing coal plants and replacing them with gas and renewable energy plants • Selectively using regulations • Reducing short-lived pollutants that contribute to climate change (black carbon, methane and hydrofluorocarbons) • Transitioning to a cleaner vehicle fleet • See the CGC’s Plan 2011 and forthcoming Plan 2013

9. States Can Do More with Less for Their CitizensThe new reality of budget austerity meets favorable opportunities in energy finance and regulation • Provide for longer term and lower cost finance for private capital investments in energy efficiency and generation • Replace direct public grants with loans backed by public private partnerships like green banks can create 10x increases in investment • Provide longer term and lower cost financing for efficiency projects • Limit electricity price increases by allowing electric utilities to capture gains from downsizing and to move to lower cost supply alternatives • Combine broadband and natural gas distribution construction into “single dig” projects • Reform taxation to reward new energy investments • Collaborate on regional planning to lower costs

10. Everyone Needs a Financing PlaybookAs states and regulators learn, best practices are put in our common playbook • State financing support for cleaner energy should be provided by quasi-private entities that operate like community banks (using “double bottom line” accounting) • States that have existing public finance authorities can use them for green bank financing • Organizational practices can be common across states • State green banks should be open to private capital investment • State financing support through green banks can protect taxpayers, reduce burden on ratepayers, attract new business (like Solar City entering Connecticut to do rooftop solar) • States can help small businesses address the intricacies of federal and state tax law • CGC can provide the playbook as a non-profit consultancy (takes 6 to 12 months to implement first phase, including legislation if necessary)

11. The Approach of the CGCMaking scarce state dollars go further Work with state leaders to review all state incentives for financing clean energy Identify programs that are grant based or otherwise don’t create revolving funds are not fully allocating their funds are not leveraging their funds are not being integrated with economic development programs

12. The Approach of the CGCEstablishing state green banks Determine whether some of these funds can be repurposed so they are used more effectively Decide which structures, including green bank structures, can make the best use of these funds Distinguish between low and high risk loans and develop structures that fully protect against different levels of risk Seek private entities to invest in the funds Develop political support Draft needed legislation

13. Contact UsVisit Our Website:www.coalitionforgreencapital.com • Reed Hundt, CEO REhundt@gmail.com • Ken Berlin, Senior VP Kenneth.Berlin@Skadden.com and General Counsel • Sophia Wolman, Chief of Staff Sophia.Wolman@gmail.com