On October 25, 2012, the world watched as Hurricane Sandy swept up the east coast. Over these past few years, we have seen storm after storm leave our homes battered, our possessions ruined, and our towns and cities without power for weeks on end. Most of us in the renewable energy world take it for granted that man-made climate change contributes to the increased intensity of these major weather events, and that renewable energy will reduce the already adverse effects of climate change. But the recent barrage of natural disasters has also revealed something else: the utility company model – based on the centralized delivery of a commodity product – leaves something to be desired, and solar power can help there, too.

The fact is that energy is a service, no matter how it’s provided (whether through gas-fired generation, nuclear plants, or one’s own roof). Rather than trying to sell capital improvements to risk-averse and cash-strapped customers, the clean energy industry needs to be in the business of offering a cleaner, cheaper, and more reliable energy service.

Few customers want to make a major cash outlay for the mere possibility of procuring their home or business’ kilowatt-hours a few cents more cheaply. But tell the customer a story about “islanding” the solar PV system you’re selling so that she knows her power will stay on when the grid goes down, and she’s listening. Then, tell her you’ve got a financing option that uses her energy savings to make her cash-flow positive, as well, and she’s asking for documents to sign. Our industry’s business models can’t be driven by technology-prescriptive government policy any longer. With no guarantee on what state and federal incentives will look like in the next few years, we can’t stick to the same old script of selling a specific product because it happens to be subsidized at that moment: instead, we need to deliver a service that brings real and lasting value to our customers.

The “green bank” model that Connecticut recently launched, and that New York announced on January 9, helps foment exactly this kind of transformation in market thinking by taking a holistic, long-term view of industry support. Green banks are public institutions with below-market return requirements that aim to create replicable financial structures in order to encourage private investment into the clean energy industry, so as to deliver sustained industry development and lower cost per unit of clean energy delivered.

For instance, in 2008, as a precursor to Connecticut’s green bank (the Clean Energy Finance and Investment Authority, or CEFIA), the state launched a public-private solar lease program to assist small developers in accessing federal ITC and accelerated depreciation incentives and enabling them to offer a competitive product. The program, an investment partnership between the state and U.S. Bank, brought $22M of private solar investment into Connecticut and resulted in 6.2MW of new solar capacity. It contributed to scale and industry transformation in the state: residential installed costs per watt fell by 40% (from $8.19 to $4.85), despite a simultaneous 55% drop in incentive per watt from 2008-2012. With the state’s market now more mature, a new CT Solar Lease will roll out this year, broadened to include more private capital in the structure, and opened to the solar hot water and commercial solar industries in Connecticut, as well.

The CT Solar Lease is but one example of what’s needed. To reach the scale required by ambitious policy goals in Washington and state capitals across the country, we must attract significant private investment at low rates into a sector that has traditionally required public subsidies to compensate for expensive capital. Green banks, through low-cost subordinated debt, equity, or a variety of credit enhancements, can use their funds to make deals attractive to capital providers who are unfamiliar with renewable energy or energy efficiency. With such financial support, and with knowledgeable green bank staff helping guide the way, private entities experienced in providing low-cost debt at scale (i.e. car loans or small business lines of credit) can gain exposure to financing energy products that will ultimately drive down the cost of their capital.

Over the long-term, then, in combination with the declining costs of clean energy technology itself, the availability of this low-cost capital will allow clean energy developers to stop chasing subsidies, and instead compete more directly in the market. The market will truly transform when customers can make their energy decision inclusive of both quality of service and price. And Green Banks like CEFIA are going to help us get there.

Bert Hunter is Chief Investment Officer at Clean Energy Finance and Investment Authority based in CT. He will be speaking in a panel discussion entitled 2013 & Beyond: Which States and Policies Will Drive Market Opportunities set to take place during Solar Power-Gen in San Diego in February. Click here for more information about the show.

Benjamin Healey and Alexandra Lieberman of CEFIA contributed to this editorial.

Lead image: Coins and plant via Shutterstock