Renewable energy prospectors plying the vast deserts and windswept plains along the U.S.-Mexico border have found an influential financial ally with a top credit rating.
The North American Development Bank, founded nearly 20 years ago under the North American Free Trade Agreement with an infusion of capital from the U.S. and Mexican governments, has traditionally focused on drinking water and sewage systems.
But renewable energy projects, like solar and wind farms, also fit under the bank’s broad umbrella for infrastructure projects that improve human health, promote sustainable development and enhance the quality of life in the border region.
Last year, nearly three-quarters of the bank’s new financing was devoted to renewable energy development.
The transition to clean-energy lending has taken place in just over three years at the San Antonio-based bank, building on strong support by administrations in Mexico and the United States for expanding alternatives to fossil-fuel-based power. The bank’s board includes officials from the U.S. Environmental Protection Agency and its Mexican counterpart, best known as SEMARNAT.
“The border happens to have good conditions for wind and photovoltaic energy production,” said Gerónimo Gutiérrez, managing director at the bank. “Mexico is very interested in making that push toward renewable energy. The United States is the same.”
The “North American” part of the bank’s name is something of a misnomer: Its lending authority hews to the curves of the 1,951-mile border, extending up to 62 miles north of the border and 186 miles south.
The bank’s $3 billion capitalization is dwarfed by divisions of the anti-poverty World Bank, or the Washington-based Inter-American Development Bank that funds prosperity causes across Latin America and the Caribbean.
The bank fills a significant development niche, however, by luring commercial lenders into long-term commitments, said Jeremy Martin, director of the San Diego-based Institute of the Americas’ Energy Program.
“If not for their participation, commercial banks would either not do it or the terms would be so long that it wouldn’t work,” he said.
The majority of the bank’s green-energy loans have been awarded to projects on U.S. soil – in Texas, Arizona and California, including several utility-scale solar projects in San Diego County and the neighboring Imperial Valley.
Those efforts have tied the bank to diverse business interests drawn to generous federal and state incentives for renewable energy. Associated investors include major investment banks anchored on Wall Street and in Europe and Asia. Green energy prospectors seeking out loans include California-based renewable concerns like Pattern Energy, energy multinational Chevron, and U.S. utility majors Duke Energy and NRG.
The ultimate guarantor of the loans are utility customers of investor-owned utilities like San Diego Gas & Electric and customer-owned electricity retailers like the Imperial Irrigation District.
Gutiérrez, the managing director, said the goal is to attract other funding sources, not squeeze them out.
“Our role up until now has been much more than just the financing,” he said. “We help them structure the project, we help them look at permitting issues, we help them look at public comment processes. That, I think, has been very much valued, especially in Mexico, where the market is just starting to develop.”
The bank’s first major renewable energy loan in Mexico is for a 30-turbine wind farm on communal farm land southwest of the border cities of Reynosa and McAllen, Texas.
The wind farm’s electricity is being purchased by Mexican retailer Soriana, to be credited against stores nationwide that compete with the likes of Walmart. Mexico is encouraging investment in renewable energy through artificially low transmission prices, or “wheeling tariffs,” and a system of bankable renewable energy credits that can be withdrawn long after the actual power is generated.
Environmental benefits are verified by the bank’s sister institution, the Border Environment Cooperation Commission.
“In the case of energy, we look at the reduction of the criteria pollutants, which is CO2, and the SOx and NOx,” said María Elena Giner, general manager of the commission, referring to carbon dioxide linked to climate change and sulfur and nitrogen oxides tied to acid rain and respiratory ailments.
Despite those clean-air objectives, border bank-backed projects have prompted concerns about the industrialization of remote desert landscapes and wildlife habitat.
A large-scale wind farm that nearly encircles the town of Ocotillo, 90 miles east of San Diego, sparked an emotionally charged standoff between conservation-minded desert dwellers and those who welcomed the related construction jobs, local tax receipts and charitable donations. The North American Development Bank lent $110 million to the project.
San Diego-based Sempra Energy is seeking financing from the bank as it courts potential investors in its Sierra Juarez wind plant in Baja California, which would supply electricity to San Diego customers via a cross-border transmission line.
The Ensenada-based environmental group Terra Peninsular has filed a lawsuit in Mexico challenging environmental approval of the project by SEMARNAT. Sempra contends the lawsuit is without merit.
Giner said a loan from the North American Development Bank can help ensure adherence to environmental commitments with government agencies. Mitigation measures, designed to shielding wildlife in some instances, are written into loan certification documents.
“We haven’t seen entities that have violated those mitigations,” she said, “because these are entities that are going to be doing projects in other states and other cities” in the region.
The development bank and environment commission continue to oversee grants for public drinking water and wastewater treatment infrastructure funded by the EPA, Mexico’s federal water agency, and the bank’s own earnings.
But the emphasis has shifted from new construction of sewage treatment infrastructure to shoring up existing systems, with a new eye on water recycling in anticipation of an increasingly arid climate.
Where only one in five residents of the border region had access to wastewater treatment in 1995, nearly 90 percent now have links to sanitation infrastructure, according to estimates from the Border Environment Cooperation Commission.
Looking back, Gutiérrez sees the bank as a pioneer in the rise of banks with a mission of environmental sustainability.
“We were the first green bank,” he said. “Back then renewable energy was not as hot, climate change was not as worrisome. … After 20 years, I think the bank is taking a leading role.”
|Wind Watch relies entirely
on User Funding