New thinking in EERE projects

Energy Efficiency, Renewable Energy ( EERE ) seems to be a puzzle that the current banking professionals seem to be attempting to solve with the same old tools ... term financing structures composed of principal and interest, fully amortizing over the useful life of the equipment (5-10 years).  This is equipment finance traditionally constrained by capital equipment used in the everyday operations of going concern businesses. 
The gap comes in our uncertainty regarding the production capacity of this equipment, or retrofit system solution.  What happens if the spring turns out to be colder and darker that we would otherwise expect.  The equipment generates less power and that power generation translates into reduced income to service debt.
Government subsidies defined by the PUC compound the issue.  For example, the current Feed In Tariff  (FIT) was calculated so as to pay for the cost of solar PV systems over 15 years.  Within that calculation, the PUC included the cost of financing, but did so assuming a fixed rate, 15 year, fully amortizing loan facility.
Again., the gap is that this particular loan facility is seldom used, and when it is used, banks tend to add a loan pricing premium as a hedge to rising cost of funds and a generally escalating interest rate environment.
We need to think about renewable energy in a new light.  I would like to throw out an idea that I think holds water as supporting vehicles for a growing EERE market.
First - when financing solar PV in concert with the FIT program, a reasonable structure for loan service would be monthly interest payments with an annual leveling payment.  What I mean by this is for banks to take assignment of the FIT revenue stemming from energy production of a Solar PV system and apply that revenue to the interest portion of the loan on a monthly basis.  During the winter months, the loan, consisting of an interest account and a principal account, would self service the interest portion of the debt, but would likely not reduce the principal balance of the loan.  This "issue" would self correct over the Summer and fall months when the sun shines longer and the days are longer.  I would expect that the interest portion of the loan would self correct over the summer months and the principal portion of the loan would be reduced.  In the event that the production of the system exceeded projections, the loan would amortize faster than expected ... a good situation for the bank and for the system owner.  In the event that the system failed to generate a minimum production capacity over the year's time, a leveling payment would be required by the system owner.  This leveling payment could come from a pre-determined cash reserve account required by the bank at loan inception.  This type of approach would mitigate payment and amortization risk to the bank and keep the investment of the system owner at a minimal level, thereby preserving the owner liquidity.
Wind systems could be addressed in a similar way ... monthly interest payment with scheduled principal balance reductions in order to keep the loan performing to the expectations of the bank or financing entity.
With some creative thinking and a willing finance community, EERE projects can be a profitable and predictable market sector. 

Holding on

What do we hold on to? Family, friends, old loves, hurts, success, failure, money, notoriety, our self and how we want to be, are, were? In these times of constant change, attachments are weak at best, how things have always been, and how they are in the moment, often have little in common. So what do we do? What can we do to live and thrive in the world as it is - constantly changing, fluid, and uncertain?
I find myself observing more and more. To be aware of the ever changing landscape of my life and the business community is more than a full time job. Within the observing, there are seams of opportunity - like eddies within a strong current. My ability to create lies in how easily I slip into those seams and use its gentle flow to move in the direction of where I want to go. It is in that un-resistant environment that I create.
Incremental progress towards the larger good ... that is where opportunity lies. And so, I let go of my desire to make broad leaps and bold moves, and I recognize that in the lesser effort of letting go and moving in concert with that fleeting eb, against the heavy current of skepticism and doubt, I can change little aspects of life. And in so doing change in concert with it.

Ecological Banking

Ecology is the study of the natural environment. It goes to reason then that Eco-banking should be banking that takes into consideration the natural environment in how financial services are offered to businesses and individuals who operate within the natural environment.
So how would a bank change the products and services it offers in order to benefit the local ecology? That is a good question. The reason that is a good question is because as bankers we have always looked to improve and increase the ROI / ROE value to our shareholders and our depositors first. By doing this, we preserve the integrity of the bank and provide a safe place to store funds while preserving the financial soundness of the institution. Seems to be the way to do business now and into the future.
Eco-banking asks us to consider additional criteria in our business dealings. How do the services we provide help to preserve and grow the communities in which we are entrusted with our customer's hard earned money? Can we do this any better than we are now? I think we can. Communities are similar to farms. They require fertile soil, attention to the weather, discerning seed activities, and careful nurturing of the resulting growth. Banking services and bankers take on a complimentary role to the farmer - they are the tools in which these activities can be accomplished more efficiently.
There are various methods - each with intrinsic strengths and weaknesses. Some would say that the best banks are those that nurture the mature plantings - they deal with existing businesses and support the continued growth and expansion of those businesses. In my opinion, and ecology oriented bank considers the entire system in its dealings; from start-ups and home-based endeavors to soundly established going concerns.
Each stage in the cycle requires specific care and attention. Attention to soil conditions prompts us to consider public policy and how we might influence our local representatives to take action which promote growth in our communities.
Seed activities involve micro-lending and the growth of the venture capital sector, while also promoting skills development and education of the local single-person service provider to help them avoid common business pitfalls and to accomplish controlled growth and sound fiscal management. As those seedling businesses begin their growth, banks can provide continued education in best business practices, and counsel regarding the broader economy and pending storms and opportunities. Small business lending and treasury services can provide both useful tools and objective oversight of trends and ratios within the growing seedling business. As established businesses expand - providing seed opportunities to the broader Eco-system, while supporting supplier businesses with capital needed to grow as well - Mutuality becomes increasingly important. Finally, at the end of the business life-cycle, an Eco-banker can help with succession planning and help to insure the continuance of the business, thereby promoting the growth of the larger community.
We live in dependent systems and rely on the health and success of the broader business, personal, and natural environments in order to remain resilient and vital. I believe all of us benefit from a vital and growing local and regional economy - no to mention the grander vision of the nation and world. If we can always look outside our small piece of the larger picture, and recognize the numerous ways we can help to create a healthier system, we all benefit from the small efforts of each one of us. Eco-banking, the notion of looking to the greater ecological landscapes around us and endeavoring to promote, sustain and grow that environment, provides a way to accomplish this very noble goal.

Letting go

Been approaching life a bit different lately ... letting go of expectations and desires for specific outcomes and finding much more joy in the present. A co-worker asked me today what my preference would be for the department of one that I currently head up. After thinking about the question, I responded that the best outcome, in my opinion for the bank would be for the department to be absorbed as part of the corporate culture - meaning there would be a consideration of environmental issues in all that we do as a bank. But that would mean that my position would no longer be necessary - unless they kept me on as a content expert or knowledge officer... which at this bank would be unlikely.
The best outcome for me professionally would be to grow a division around environmental lending initiatives. But then that would turn me into a manager, limiting my public contact and making my focus more on reports than on business development or outreach. I don't have much interest in reports.
So, in total, the preferred outcome would be for me to become expendable ... the follow on question was, "so, are you okay with that?" My response ... sure ... I am not overly tied to either outcome ... just enjoying what I am doing today and working on growing the philosophy and approach within the bank and out into the community. The experience and visibility are both good for me from a resume perspective. My hope is that I will be able to leverage this time into international travel. I think I am starting to get it ... Buddhists call this compassionate objectivity ... feeling without taking possession. I like that message.

Down time

It has been a while since I wrote ... hope all is well with you.

There must by cycles that we are all subject to ... or maybe I am bipolar. Whichever the case, today was a day that I chose to hide more than seek. I don't know why these changes come or from where. Some days, I can talk to anyone about anything - it seems. Today was a day to step away from all of that. I am not particularly impressed with that decision. I don't know exactly why either.
I had lunch with a friend, bought some flowers for a couple others - just random acts of kindness to let them know I am thinking of them and that I appreciate them. And I am fine with all of that ... I just feel a little out of balance.
Tried singing Willy Wonka ... "if you want to see paradise, simply look around and view it ... you can change the world, there's nothing to it." That helped a bit. Writing helps a bit.
Walked into a social situation with tons of people - all connected to green building, design, or project management ... and felt like I needed to get out of there. Like social anxiety ... and I am not particularly like that. I am a little tired ... have been digging up the past a bit - accepting it as it comes into view - but wondering how it all fits together.
The fact that the universe is a perfect machine does not always translate into knowing where I am at any given moment. Maybe it is a lack of landmarks - that this is all new terrain. There is uncertainty in that picture - but it does not need to be uncomfortable ... it can be wondrous and exciting and interesting and mind expanding. It should be - it is. Let it go ... accept what is and enjoy it. Buy it some flowers.
I feel a little better now.

Careful words

I have a book in me ... I just know it. :)

Tuesday brought my son home at 2:30 am. The good news, he came home in his own car - I didn't have to pick him up at juvenile detention. The other good news ... I don't sleep when he is out late and so the night was a short one. The tertiary good news ... I was moderating a panel discussion at 7am that morning. So on 3 hours sleep, and under the influence of significant amounts of B12 and caffeine, I began my day.
The panel discussion was addressing the gap between building a great building - energy efficient, healthy, lots of sunlight - and finding a banker who recognizes something other than the financial performance of the building. Daily Journal of Commerce was there taking notes. The conversation went really well ... conclusions all pointing towards taking the extra time and effort to consider how the "healthy" aspects of a project translate into better financial returns for a variety of reasons ... then it happened. The B12 and caffeine wore off. Out of my mouth comes the following, "As a banker, I don't care about how clean the air is or how many people show up to work each day ... what matters to me is how your cool LEED Silver, Gold, Platinum, Living Building performs differently than a traditional building built to code. Show me how your building performs better - lower expenses, lower maintenance costs - and how that generates higher Net Operating Income." :-)
The fact of the matter is that I do care, but I was being intellectually lazy in making my point - The human aspects of the sustainability movement are the drivers of change - In order to support the benefits intrinsic in LEED projects, we need to carefully define and defend how the characteristics of a LEED building contribute to behavioral change in the occupants and therefore add value. I know this ... Creating a healthy environment benefits all parties in various ways. Triple bottom line - People, Place, Profit. I didn't make that point in my statement - but it was a great sound bite ... and so was quoted in the DJC and attributed to me. Dan Weldon, Vice President, Eco-banking Manager, LEED AP, Traditional Asshole Banker. Oh man :)... (laughing at self and at life generally). This is what keeps life fun. Maybe I will have the opportunity to clarify ... maybe not. It is out there in the ether now. And I move on. This message needs to be clear - it takes a community of dedicated, intelligent people to solve complex problems. Linguistics - the translation of one language to another - gets a bit convoluted at times. We need to find alternative paths that are not presently there - life is like that.
I enjoy the opportunity to learn this in so many different and vital ways. It all adds to the richness of the journey. I am building new and unique pathways of reasoning in my brain. Making connections that were not there previously. Through those connections, I will see things which were previously hidden from me. That is the beauty of life and learning. I so enjoy being a student.