Category Archives: Clean Energy

On-Bill Repayment Approved by California Public Utilities Commission

Last week the California Public Utilities Commission (CPUC) approved energy efficiency programs and budgets that include an innovative On-Bill Repayment (OBR) program.  The OBR program will allow commercial property owners to finance energy efficiency or renewable generation upgrades for their buildings and repay the obligation through the utility bill.  The program is ‘open-source’ and is designed to allow a wide variety of contractors, solar installers, and energy efficiency project developers to work with a range of financial institutions to design offerings that best meet the needs of their customers.

The CPUC approval was highlighted today in the New York Times.

In the decision, the CPUC reiterated their intention to have the OBR program operational by March 2013.  We understand that some of the utilities have expressed concern that this timeline is aggressive, but were pleased that the CPUC decision noted that the utilities have been aware of this timeline since the original CPUC decision last May. 

A predictable timeline for OBR implementation is critical as EDF is working closely with multiple market participants to create a pipeline of projects that can be executed as soon as the program is operational.  A successful launch will allow us to demonstrate to other states that OBR can create private investment and new jobs at no cost to ratepayers or taxpayers.  We believe that this is a message that will resonate across the political spectrum.

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Top 4 things to know about California's first ever carbon auction

While millions of Americans recover from the Sandy-Nor’easter extreme weather event combo, and even as President Obama’s remarks about action against a “warming planet” linger, all eyes will be on California this coming Wednesday. This is when the next big event in the climate change conversation will take place.

Between 10am and 1pm pacific time on November 14th, California will conduct the state’s first ever cap-and-trade auction for climate change pollution.  This landmark event will kick off the second largest carbon market in the world, the European Union being the first. Entities covered in the program include utilities, oil refineries, oil producers, and large manufactures, though other individuals and organizations can also participate to buy carbon allowances if they meet the state’s rigorous requirements.  A practice run was held back in August, and all systems are ready to go. More information about the nuts and bolts of the auction can be read here.

In anticipation of this historic occasion, here are four things to keep in mind:

1.  This is the best designed cap-and-trade program in the world
California has the good fortune of learning from predecessor cap-and-trade programs like the European Union Emissions Trading Platform, the Regional Greenhouse Gas Initiative, and the Acid Rain Program, just to name a few. Key elements of California’s program include giving free allowances to industry in the beginning years to help with transition; letting entities bank allowances for future use; and establishing an allowance reserve in case prices exceed a certain value. All help keep carbon prices more stable and make for a well-functioning market.

2.  A price will be established for carbon, but that will vary as the program evolves
The California program will include auctions four times a year through 2020 – 32 more times after November 2012.  As such, the number of participants, the settlement price and other results of the first auction may not necessarily predict the activity of future auctions. Over time, the market will change and both prices and participation will fluctuate as the cap reduces and businesses decide how best to participate.

3. Money from the auctions will be used to invest in California’s clean energy future
Proceeds from the auction must be invested in ways that further the goals of the law – the Global Warming Solutions Act of 2006 (AB 32).  Though these investments are scheduled to start in the next fiscal year, a specific investment plan is still underway and is being guided by two bills passed at the end of California’s legislative session. Likely project categories include renewable energy, energy efficiency, advanced vehicles, and natural resource conservation. In addition, 25% of proceeds must be used in ways that benefit disadvantaged communities. These investments will boost clean tech in California, improve air quality, and create jobs.

4. California’s leadership will serve as a launch pad for other programs
California is the ninth largest economy on the planet, and the world is watching. No state or country can stop climate change alone, but California’s environmental policies have a history of success and replication, including clean car, clean fuel and energy efficiency standards that have saved consumers across the US hundreds of billions of dollars in avoided energy purchases.  If the past is any indicator, California’s rich history of leading the nation on responses to critical environmental problems, while delivering wide ranging benefits, means the US is on the brink of something special.

A public notice of the auction results will be released on Monday, November 19, 2012 and will be posted to both the Air Resources Board and auction website.

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The Nuts and Bolts of California’s First Greenhouse Gas Auction

By: Jonathan Camuzeaux, EDF Research Analyst

Following today’s California Air Resources Board’s (CARB) board meeting, the next major milestone in California’s efforts to reduce greenhouse gas (GHG) emissions is on November 14th, when California will hold the first auction of carbon allowances for the Global Warming Solutions Act (AB 32) cap-and-trade program. EDF has closely followed the steps CARB has taken to prepare, including participating in their successful “practice auction” this past August.  In order to shed some light on the nuts and bolts of how these auctions will work and the process going forward, we’ve put together an Auction FAQ factsheet to help answer some basic questions.

Why is CARB Auctioning CO2 Allowances?

In terms of allowance distribution, the AB32 program includes a combination of free allocation and auctioned allowances.  While it is the cap that ensures that the targeted quantity of emission reductions are achieved – regardless of the choice of type of allowance distribution – there are important differences between auctioning and free allocation relating to issues such as transaction costs, market power, price certainty, and distribution of allowance value.

Perhaps most importantly, auctioning allowances creates proceeds that can be invested in a variety of ways to further the goals of AB32 – for example, financing emission reduction projects in either capped or uncapped sectors, keeping energy prices down, or preparing for the impacts of global warming.  In addition, twenty-five percent of proceeds are actually required to be used in ways that benefit disadvantaged communities.

Another advantage of auctioning CO2 allowances is that it guarantees that all regulated entities have access to allowances on an equal footing. By holding an auction, California ensures that both large and small companies have access to allowances under the same terms, thus reducing the risk that the market becomes dominated by a few big players.

How the Auction Works

The California auction will be using a single-round, sealed-bid, uniform-price format. Under this format, companies submit confidential bids for a specific amount of allowances at specific prices (also called a bid schedule). The highest bidder is allocated their requested quantity of allowances first, then the second highest bidder, etc., until there are no more allowances.  Winning bidders receive the quantity of allowances they bid for at the uniform settlement price, which is determined as the value of the lowest winning bid – or more simply, the price at which the market clears. Regardless of their original bids, all winning bidders pay the same price. This auction format creates a clear market price, which is crucial for investors.

Using Auction Revenue to Further Emissions Reductions

There are abundant opportunities to invest the auction proceeds into sectors that deliver greenhouse gas reductions in California – from clean energy to clean transportation, energy storage and clean tech finance and investment. Not only do these investments further California’s greenhouse gas reduction goals, they can also provide considerable economic benefits, as well as substantial health co-benefits, while helping set California’s path towards sustainable economic growth. To learn more about investing AB32 auction proceeds to grow California’s clean economy, read the EDF Invest to Grow report.

Auctions will play an important role in California’s cap-and-trade program; they encourage a more stable market and create proceeds that can be used to make California’s efforts to cut climate change pollution even more effective. For more details about how the auctions are designed, how the bidding process works and what to expect on November 14th, see EDF’s Auction FAQ factsheet and the California Air Resources Board’s website (here).

Jonathan Camuzeaux is a Research Analyst in the Office of Economic Policy and Analysis at EDF. He provides economic analysis to support the development of market-based solutions to environmental issues with a focus on climate and energy economics.

 

 

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California’s record gas prices shows AB 32 will help both your wallet and your health

Fuel prices in California hit historic highs this week, an unexpected price spike that has put the state’s dependence on oil and natural gas into sharp focus.  Like many of the state’s former fuel price shocks caused by demonstrable events (i.e. foreign and domestic supply disruptions), oil companies are once again saying that refinery problems and pipeline issues were the root cause.  However, most reports on the current price swing aren’t pinpointing the true reason – drivers en masse are too reliant on the current mix of gas and diesel, an energy source that pollutes our environment every time it is used.

The true cause of California’s fuel price spikes must be seen for what it is –an unhealthy dependence on fossil fuel (primarily imported), and lack of diversity in our transportation system.  Furthermore, since over 50 percent of the oil used in the state is obtained from foreign sources, California consumers aren’t exactly benefitting the state’s economy as we send billions of dollars out-of-state but release combustion byproducts here – polluting our air and water.  Over time, the impact of buying and burning all of that gas is going to get even worse: an increasing population and declining in-state oil production means we are going to import, and burn, more.

Growing fuel use and declining in-state production puts California on a path to spend between $112 and $182 billion per year by 2020 on imported energy, which translates to roughly $8,000 to $13,000 per household.   Even worse, the American Lung Association, using EPA data, has included 9 cities and 16 counties in California on their list of most polluted areas in the country; more fuel burning will only exacerbate these problems, worsening air pollution and sickening people – leading to poorer public health, higher healthcare costs, and more missed work and school days.

California’s fuel and energy policies , if implemented as planned, have the ability to protect the economy and help lessen air pollution and human health impacts.  By setting a cap on emissions and requiring a diversification of energy sources away from an over-reliance on fossil fuels, AB 32 will result in decreased dependence on foreign imports and will make California consumers less vulnerable to price shocks.  Low carbon solutions such as advanced biofuels, ultra-efficient vehicles, and improved community planning are all part of the AB 32 solutions package, and all are aimed at breaking the grip that traditional fossil fuel companies have on our economy. Add to that the obvious environmental and health benefits from reducing fossil fuel use, and it is clear that the California Air Resources Board’s vision for AB 32 policies is the right choice for California.

For more information on how AB 32 saves California’s money during fuel price swings, see two articles co-authored by EDF economist Jamie Fine — Shockproofing Society: How California’s Global Warming Solutions Act (AB 32) Reduces the Economic Pain of Energy Price Shocks and The Upside Hedge Value of California’s Global Warming Policy Given Uncertain Future Oil Prices.

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Latino Support Surges for the Environment

California lawmakers take notice: Latino voters want a strong economy AND a clean environment, two things they believe are not mutually exclusive.

A new poll released by the California League of Conservation Voters finds that an overwhelming 90 percent of Latino voters believe that the state can “protect the environment and create jobs at the same time.”  This number mirrors national trends among Latino voters, including a recent national poll by the National Council of La Raza (NCLR) and the Sierra Club, which found that 90 percent of surveyed voters believe that protecting land and water resources is “critical to the economy.”

Here are three major takeaways:

  1.  Latinos are the fastest growing electoral body in the country, and in California they account for 38 percent of the state’s population and 25 percent of the electorate in 2010. There are over 2 million eligible but unregistered Latino voters in the state and almost 2.4 million legal permanent residents who are eligible to become citizens and vote.  With the most recent redistricting process in California, 19 out of 53 congressional districts now have a Latino majority, the largest number of such districts in the country.  In the state legislature, nearly 40 percent of both the Assembly and State Senate are Latino-majority districts.
  2. Latinos can see the direct impact of pollution in their daily lives: 85 percent of those polled have “serious concerns” about toxic pollution affecting the health and wellbeing of their families.  Their concerns are well-founded – California is home to the top 5 most polluted cities in the country according to the American Lung Association, and Latinos make up more than half of all residents in these polluted cities, with populations in the Central Valley reaching a whopping 60 percent.
  3. Latinos want clean energy, and they are willing to pay extra for it.  Latino voters show overwhelming support (83 percent) for the state’s Renewable Portfolio Standard (RPS), one of the main components of the state’s landmark legislation AB 32, which requires one third of the state’s electricity to come from renewable energy sources by 2020 – compare this to 51 percent of Latino voters in the state who oppose drilling off the coast, or a meager 44 percent who favor coal as an energy source.  Most surprisingly, support for the RPS remains strong even when voters are told their energy rates may increase.

On this last point, I’ve written before that the clean economy is an economic opportunity for U.S. Latinos, and the NCLR/Sierra poll confirms that Latinos would rather work in the clean energy sector, with 83 percent calling coal plants and oil refineries “a thing of the past.”  National polls also indicate that Latino voters largely reject the notion that clean energy and environmental protections are “job-killers” or bad for the economy.

While jobs and the economy are still the number one issue on Latino voter’s minds, it is clear that they believe economic growth at the expense of public health or environmental protection is a no-go for California.

 

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California Utilities Announce Innovative Financing For Energy Efficiency Retrofits

On-Bill Repayment

Yesterday, the California investor-owned utilities (Sempra, SoCalEd and PG&E) announced several financing programs including the first On-Bill Repayment (OBR) program using third-party capital to finance energy efficiency retrofits in commercial properties. Property owners would be able to access low-cost capital to finance upgrades and repay the investment through their utility bill.  The OBR program will contain three design elements that EDF believes are critical to success: 

  1.  The obligation will ‘run with the meter’ upon change in ownership or occupancy including via foreclosure.  This both improves the credit quality of the obligation and allows investment in longer-payback retrofits.
  2. Partial payments will be allocated pro rata between energy and financing obligations.  The utilities will also use all standard collection procedures for unpaid obligations.  These features insure that the obligation will be treated similarly to existing utility bills.
  3. The program will provide flexibility for vendors, contractors, project developers, lenders and other investors to design retrofit solutions, go-to-market strategies and financing products that meet the needs of their customers.

Over the next 10 years, EDF estimates that OBR could generate $6 billion of private sector investment in commercial energy efficiency investment.  During the next few years, EDF hopes to expand this initial program to additional states, and to cover residential properties.

EDF has been assuming that the California OBR program would only cover energy efficiency retrofits.  In a sidebar conversation with a senior California Public Utilities Commission (CPUC) staff member, yesterday, I learned that it may be possible to extend OBR to renewable and demand response projects.  We expect to be working closely with relevant stakeholders and the CPUC to make this a reality.

OBR is expected to be operational in California by the end of March 2013.  EDF will be working closely with energy efficiency project developers, energy services companies, lenders and other investors to develop a robust pipeline of OBR projects that can be executed soon after program initiation.

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San Diego's New "Smart Energy Community"

San Diego Gas & Electric Co. (SDG&E) and Sudberry Properties have announced plans to incorporate breakthrough smart grid technology in the construction of Civita, the new master-planned development in Mission Valley, California. With a focus on sustainability and energy-efficiency, the “smart energy community“ will be home to vehicle charging stations, solar and fuel cell electricity, battery storage and energy management tools for residents.

"The Civita project is consistent with what we are trying to achieve here in San Diego," said Mayor Jerry Sanders.  "By integrating solar power, clean transportation and energy efficiency into the very foundations of our homes and businesses, we can help preserve the environment while strengthening our community overall."

With plans to build nearly 5,000 homes and around a million square feet of office properties, apartment living, public parks, and a civic center over a once 230 acre gravel quarry, Civita could become one of the first communities in the nation to be “fully upgraded with smart grid technology and stand at the forefront of the broader transformation of the electric grid the community.” Civita aims to surpass current California energy efficiency standards by at least 15 percent by using energy star appliances, highly efficient residential lighting and onsite power sources, and by allowing some buildings and areas within community to operate independently of the grid.

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Commercial On-Bill Repayment Program In California Expected To Be Announced On October 2

Next week, the California investor-owned utilities – Sempra, Southern California Edison and Pacific Gas & Electric – will be hosting a workshop to announce their proposals for energy efficiency financing programs as mandated by the California Public Utilities Commission (“CPUC”) in their May decision.  The proposals are being developed by Harcourt, Brown and Carey (“HBC”) and are expected to include an On-Bill Repayment (OBR) program for commercial and other non-residential properties. 

As I’ve mentioned before, OBR programs allow property owners to finance energy efficiency and/or renewable energy projects with third-party banks or other investors. Property owners repay their loan via their utility bill and that obligation stays linked to the meter upon a sale of the property. 

Based on conversations with HBC and other stakeholders, EDF is optimistic that the program will be the first on-bill program in the country that funds energy efficiency retrofit projects entirely with private capital at no cost to ratepayers or taxpayers.  The program will be flexible enough to accommodate a wide variety of property types, retrofit measures, financing structures and customer acquisition models. 

The workshop will be open to the public and held from 9:00am-5:00pm on Tuesday, October 2nd in the Auditorium at the California Public Utilities Commission (505 Van Ness Avenue, San Francisco, CA).

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The Clean Economy is an Opportunity for US Latinos

(Excerpt from original post on Fox News Latino on 9/13/12)

Economy and jobs are the top issue on Latino voters' minds, according to the 2012 “Latino Decisions Poll,” a theme that will be featured prominently in this week’s Hispanic Heritage events in DC.

It's all the more reason to discuss a powerful engine of opportunity in this country called the clean “green” economy – it is here, it is real, and it is one of the few bright spots in an economy desperate for a comeback.

In 2010, I wrote “Green Can Grow Latino Business,” arguing that the clean economy will create new demand for goods and services, new supply chains and niche markets, and opportunities to create new business models and reinvent old ones.

This is a boon for all would-be entrepreneurs, including Latinos — the nation’s fastest growing demographic. Further, new business creates jobs, and jobs create more demand for goods and services, and the virtuous cycle continues.

The results?  Despite the persistence of a national recession, the clean energy sector grew at double the rate of national economy from 2003-2010, attracting record-level investment and venture capital last year, and boasting twice the export value of traditional sectors.  In total, “Green Goods and Services” as defined by the U.S. Department of Labor accounts for 3.1 million U.S. jobs, with more than one-third of those jobs in the struggling construction and manufacturing industries.

In my home state of California, where Latinos make up 38 percent of the state’s population, the numbers are even more striking:

  • California leads the country in clean economy jobs and solar power generation, and wind power has doubled since 2002.
  • The state accounts for 13 percent of all “environmental goods” exported by the U.S., the majority in renewable or efficiency products.
  • From 2002 to 2011 the state produced 9 percent of worldwide clean energy patents,
  • Since 2006, $9 billion in venture capital has flowed to California clean technology firms.

Jobs in the clean economy are diverse, across a wide range of education-level and skills.  On average, clean economy jobs offer a higher median wage and career advancement opportunities, and almost half of all jobs in the clean economy don’t require a college degree, according to the Brookings Institution.

An analysis of clean energy jobs in Southern California by Philip Romero, the former Dean of CSU Los Angeles College of Business and Economics, finds that “workers command wages with a 50-to-100 percent premium over the average job,” and estimates that the overall clean economy will grow “by at least 60-to-100 percent”  by the late 2030’s.

If we want to compare this to fossil fuels, we find that the overall clean economy employs “more than ten times as many workers in the LA region as does petroleum and coal products production,” according to Romero — and analysis of the oil industry’s own job estimates finds that more than half of all the state’s “direct jobs” are gasoline station attendants making minimum wage.

If we want to have a serious discussion about economic opportunity – for all communities – we need look no further than the clean “green” economy.

It is an economic engine that is creating new demand, new investments, well-paid jobs, and new business opportunities, all in spite of the worst economic downturn since the Great Depression.

And, by the way, it is creating economic growth without harming the planet and poisoning communities with toxic pollution.  If we want America to continue being the land of opportunity, then let green grow!

 

Jorge Madrid is a Fellow with the Environmental Defense Fund. He is also a member of the Board of Directors of Voces Verdes, and a former Graduate Fellow with the Congressional Hispanic Caucus Institute, and the California Latino Caucus Institute.  He can be reached at jmadrid@edf.org 

See original post at: http://latino.foxnews.com/latino/politics/2012/09/13/jorge-madrid-clean-economy-is-opportunity-for-us-latinos/#ixzz26SmlEJOy

 

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On-Bill Repayment In California

Moving Forward with OBR for Commercial Properties

Earlier this year, the California Public Utilities Commission (“CPUC”) issued a decision requiring the state’s investor-owned utilities to establish several financing programs, including an On-Bill Repayment (“OBR”) program for commercial properties. OBR programs allow property owners to finance energy efficiency and/or renewable energy projects with third-party banks or other investors. Property owners repay their loan via their utility bill and that obligation stays linked to the meter upon a sale of the property.

EDF has been working closely with the utilities, environmental groups, financial institutions, project developers and other key stakeholders to craft a program that provides low-cost financing for retrofits, does not require ratepayer subsidies and has maximum flexibility to allow vendors and investors to decide how best to serve their customers’ needs.  We are cautiously optimistic that the utility proposal will meet these objectives when it is released to the public on October 1, 2012.

The CPUC, however, believes that they currently do not have the regulatory authority to extend the OBR program to residential properties.  EDF has been pursuing legislation to grant this authority to the CPUC, but, at this time, we do not expect that it will pass in the 2012 legislative session.  EDF plans to re-introduce the residential-focused legislation in 2013 with a broad range of supporters, including several key members of the legislature. 

EDF has also begun work to establish OBR programs in Ohio, North Carolina and Texas.  So far, the reception has been quite positive in each state and we are hopeful that OBR may be a market-based, clean energy solution that has appeal across the political spectrum.

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