Although electrofinance may have a good deal of appeal to varying constituencies, without the proactive efforts of many players it will remain just a concept with some potential to change investment patterns in renewable energy. For any in-depth impact, a number of actions must be taken to lay an infrastructure in which electrofinance can operate. Each player has a role in this.
The insurance industry needs to do a better job of what they already do well—earn money for themselves and their clients. They need to become more pragmatic by ensuring a client's total financial security as an integrated set of functions rather than a piecemeal activity. This requires that they develop new products, new approaches, and new ways of thinking rather than continuing with a "business as usual" approach. They must alert regulators to the impending retirement crisis and use this as a justification for being allowed to bundle their traditional services with new ones. They should venture into the nontraditional role of advocating electric restructuring reforms in states that have not enacted them, and form alliances with environmentalists and renewable energy advocates to ensure strong environmental provisions.
The renewable energy community must advocate electric deregulation in their states, with strong environmental provisions that include a systems benefits charge for energy efficiency and renewable energy programs. They must also continue to reach out to insurers to find areas of common ground and mutual support. A recent example of this is the Green Power Finance Initiative between the U.S. Department of Energy, the Renewable Energy Alliance, the private insurance industry, and the states.75 This would provide insurance for green power premium rates for renewable energy developers so they might be eligible for favorable loan rates.
Environmental NGOs must continue to advocate carbon emission reductions while keeping an open mind on market-driven, "no regrets" strategies that build alliances with the financial community. Although the stick of command-and-control regulations is always available in the wings, the institution of a reward system for pollution prevention may gain more adherents as new products such as electrofinance evolve.
Foundations that support nongovernmental groups working on energy efficiency and renewables must begin to fund new ways of thinking about the multiple problems our society faces and how groups can better leverage their own resources. Too often, foundations have supported mostly intervention-oriented command-and-control activities rather than cutting edge and innovative models that could truly bring market transformation by allying with large industry sectors that may see other benefits to the same ends, even if they do not share exactly the same goals.
Electric industry regulators at the state level should be encouraged to move toward a restructured electric market that not only encourages lower rates but also includes provisions for energy efficiency and renewable energy as well as other innovative product offerings.
Insurance industry regulators at the state level should be encouraged to allow convergence of insurance with not only other financial products such as banking but with utility and other energy-related products that have been shown to mitigate property casualty losses. In addition, state legislators who oversee these regulators should ensure that adequate positive incentives are in place to move insurers in this direction. For instance, it might be possible to encourage insurers by providing a tax credit for their investments into mitigation loss activities. Investigative work showing that moneys invested in such activities provides a positive benefit-cost ratio would be useful in making this point, since all too often federal and state dollars must be used to reimburse certain losses.
While one major appeal of electrofinance has been its market-driven aspects, conceivably there are compelling reasons and places for the federal government to leverage it even further.
Federal legislation could be passed that allows the convergence of financial institutions such as banks and insurers through repeal of the Banking Holding Company Act of 1933. Such a law should include strong consumer protection language that safeguards privacy rights as well as obligations the institutions must undertake, such as community reinvestment.
In return, they would be allowed to extend the activities they are involved in. Electrofinance might be one such activity, although power marketers might be opposed to this extension of insurers into what they see as their realm. Should insurers actively support such an extension, it might provide an interesting alliance with environmental and renewable energy advocates that could lead to further joint action.
This country has constantly displayed poor judgment when it comes to planning for critical events, as shown by our lack of action on potential Y2K problems until the eleventh hour. In a similar vein, the potential effects of climate change are unclear, but the retirement of 76 million baby boomers is certain, and it carries the makings of another national crisis if action is not initiated in the short term. Since this generation will be in the unenviable position of having more people than the subsequent one that must pay their benefits, intergenerational equity issues will rock the foundation of American civil society. Recognition of the problem must be followed by a number of proactive measures, including incentives that encourage people to save for retirement on their own. This provides a compelling reason to support electrofinance; similar programs, perhaps in the transportation realm, would also be appropriate.
In addition, the government could use a portion of any budget surpluses to match only the energy savings portions of an electrofinance plan, as a cost-sharing incentive for individuals. This would maximize not only retirement savings but also energy and carbon emissions savings. A model for this that has widespread congressional support already exists for low-income people who receive up to $300 a year as matching funds if they deposit money in a bank and learn about basic economics. Money for this is made available through special tax credits that are given to banks and is driven by encouraging people to set up savings accounts.76 This recommendation is in accordance with the parting words of Robert Rubin, Secretary of the Treasury and economic architect of the Clinton administration, who recommended that budget surpluses be used to promote savings rates.77
Beyond the basic plan described in the body of this paper, entrepreneurial insurers could maximize profits for their clients and themselves through these, among other, approaches:
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