State-Based Solutions: The New Minnesota Green Bank

Minnesota is about to become a test case for the ability of green banks to continue supporting the clean energy transition in the United States, even as the Trump administration pulls back on federal efforts. The state’s newly authorized green bank, called the Minnesota Climate Innovation Finance Authority, is up and running with the aim of lending $25 million annually to support clean energy projects in underserved markets.

New green bank to fill clean energy market gaps

With the Climate Innovation Finance Authority, Minnesota joins a growing number of U.S. states where green banks are already established or under active consideration.

The green bank concept is similar to economic development legislation of the 1930’s, which brought electricity to rural communities unserved by private utility companies. Nine in 10 rural households had no electricity at that time. The member-owned rural electric cooperatives authorized under that legislation are still in operation, covering 56 percent of U.S. land mass.

Similarly, green banks support energy transition markets where private sector financing lags behind need, opportunity or both. “Green banks make it easier to finance projects in new markets, geographies and technologies that otherwise couldn’t be built,” according to the green bank advocacy organization Coalition for Green Capital. “Consumers save money, developers and investors get to build more projects, and dirty, polluting energy sources get replaced.”

Minnesota state legislators approved the Climate Innovation Finance Authority in 2023, three years after the Coalition for Green Capital issued a report identifying underserved clean energy markets in the state. Though the legislation that enabled the green bank passed at a time when the Biden administration was centering sustainability and environmental justice, market gaps in Minnesota continued to persist into the administration’s final months.

In December of 2024, the Minnesota Climate Innovation Finance Authority released a strategic plan for the next two years focused on more than areas in need of support. It includes community solar gardens and other projects that serve environmental justice communities, multifamily and single-family housing, rural areas and small communities, Tribal Nations, and publicly owned projects like schools and higher education institutions. 

Also among the areas of focus are projects that result in more affordable utility bills, help decarbonize existing industries, and accelerate the replacement of outdated HVAC systems and appliances. Additionally, the plan supports new manufacturing ventures that serve the energy transition.

Next steps for the Minnesota Climate Innovation Finance Authority

State-based support for the clean energy transition is all the more important, considering the chaotic torrent of attacks on federal energy programs and other federal resources by the Trump administration.

Private sector funding will be a vital contributor to the Minnesota Climate Innovation Finance Authority's momentum moving forward, Kari Groth Swan, the green bank's executive director, said in an interview with Canary Media. The authority was set up to be a lending partner, not the primary lender on a project. Accordingly, the first wave of loan applications came into the green bank's pipeline with significant funding already in hand. Now, Swan is gearing up to advocate for follow-on applicants.

​“I will be out talking to the traditional lenders, saying, ​‘Here’s an example of a project and here’s what the capital stack looks like. Will you partner with us?’” Swan told Canary Media.

“Swan thinks federal investment tax credits for clean energy will survive under Trump, adding that unwinding them quickly will be challenging because they’re part of the tax code,” Canary Media reporter Frank Jossi wrote. “But the Trump administration has already signaled a willingness to usurp Congress’ constitutional spending authority when it comes to clean energy, which could mean a greater need for money but also fewer projects ready to fund in Minnesota.”

Bright spots of clean energy pierce the gloom

Uncertainty over federal spending aside, the Minnesota green bank has already proven adept at tapping into local clean energy resources. To date, it has approved funding for two geothermal projects and a solar-enabled microgrid with energy storage.

Minnesota also illustrates how progress can continue as the clean energy industry embraces new business activity. One emerging area to watch is the field of ecovoltaics, in which specialized landscaping firms work with solar developers to establish native plants and pollinator habitats within solar arrays. Ecovoltaics is a branch of another new development, the agrivoltaic movement. Combining farm work with solar power, agrivoltiaic arrays provide new revenue for farmers while fostering growth in bee keeping, sheep herding and other local businesses.

Rural electric cooperatives can also continue to be powerful movers in the clean energy transition. In Minnesota, for example, the cooperative Great River Energy partnered with the startup Form Energy to demonstrate a potentially game-changing energy storage solution for wind and solar power. Last spring, a 1.5-megawatt Form Energy iron-air battery was installed in Cambridge, Minnesota, and Great River plans to evaluate its performance over the coming years.