Category Archives: Energy Efficiency

Demand Response: People, not New Power Plants, are Driving the Clean Energy Future

Clean energy resources, like wind, solar, and energy efficiency, have certain key advantages over traditional, fossil fuel-based resources: they don’t require expensive, polluting fuels or large capital investment, consume little to no water, generate negligible carbon emissions, and are easily scalable. To take full advantage of low-carbon, renewable energy sources, we need a power grid with enough flexibility to harness clean energy when it is available and abundant. That’s where demand response, a people-driven solution, comes in.

On a hot summer day, for example, electricity use rapidly increases as people turn on air conditioners to avoid the heat of the late afternoon. A decade ago, the grid operator’s only option is to turn on another fossil fuel power plant to meet the increased need for electricity. But, at any given time, there are thousands of light switches left on, idle water heaters, cycling swimming pool pumps, and forgotten thermostats that people could temporarily turn off or down, if only they were offered the right incentive. If asked, people can adjust their power usage in exchange for a financial reward. We call this “demand response,” and it is increasingly helping to balance the flow of electricity with our energy needs at a given moment.

Demand response diverts money that would generally go to a fossil fuel power plant to homeowners and businesses instead. In this scenario, a utility or demand response provider sends a message for participants to reduce electricity use at key times in exchange for a credit or rebate on their utility bill, in addition to the cost savings they will earn through conservation. Of course, participants always have the option to opt-out with the tap of a button on their smart phone or thermostat. Read More »

Also posted in Clean Energy, Smart Grid | 1 Response

The Link Between Water and Energy in California – And Why It Matters

KHK pictureTomorrow is World Water Day and this year’s theme is the “energy-water nexus,” the critical, interdependent relationship between water and energy. The generation and delivery of almost all types of energy requires water and, conversely, treating and transporting clean water requires energy. In fact, water-related activities, such as treatment and distribution, account for almost 20 percent of California’s total electricity use. A disruption in access to one of these precious resources can have a detrimental effect on access to the other, creating a vicious cycle that unsettles our way of life.

The Challenges

Unfortunately, California is learning the hard way about the inextricable link between water and energy. The Golden State is having major water shortage problems and despite some much needed rain a few weeks ago, the state still remains in a severe drought. In fact, this past winter in California was one of the driest on record.

The drought has had perceptible effects on California’s energy production, substantially decreasing hydroelectricity levels, compared to 2011. Due to the decrease in hydroelectricity in the state, which usually makes up about 10% of California’s fuel mix, the state has been forced to increasingly rely on dirty, unsustainable fossil fuels, and energy costs have increased. Energy generation from traditional forms of power, such as natural gas, nuclear power, and coal, are not without their own water demands as well. Read More »

Also posted in Clean Energy, Climate | Comments closed

CPUC Singing the Right Tune on SONGS, But Southern California Still Needs to Harmonize to Achieve a Clean Energy Future

rp_Navarro_Lauren.jpgLast week, the California Public Utility Commission (CPUC) finalized an important decision for Southern California’s energy supply following the closure of the San Onofre Nuclear Generating Station (SONGS). The plan emphasizes increased reliance on clean energy in this part of the state – an important step towards a fully realized low-carbon future.

The decision authorized San Diego Gas and Electric and Southern California Edison to procure at least 550 megawatts (MW) of ‘preferred resources,’ which include renewable energy, demand response (a tool that’s used by utilities to reward people who use less electricity during times of “critical,” peak electricity demand), energy efficiency, at least 50 MW of energy storage, and up to 1,000 MW of these resources altogether.

That’s a major step forward, as utilities across the country traditionally rely on large fossil fuel plants to meet regional demand.

However, the CPUC also authorized the procurement of 1,000 MW of power from natural gas generation, demonstrating that Southern California still has a ways to go to reach its clean energy potential.

Read More »

Also posted in Clean Energy, Smart Grid | Comments closed

Funding the Future with a California Green Bank

rp_Brad-Copithorne-Photo-200x3001.jpgTwo weeks ago, State Senator Kevin de León introduced a bill to establish the first “Green Bank” in California, a bold proposal that would unleash low-cost financing opportunities for clean energy projects throughout the Golden State.

I recently had the opportunity to testify at a hearing on the bill to discuss the best practices for green banks across the country and how the program would work in California.

First, a bit more on Green Banks:

At its core, the program is a clean energy finance bank set up by the state, designed to enable increased investment in clean energy projects and companies by working closely with the private sector to remove financial or structural barriers.   The goal is simple: increase the amount of clean energy at a low-cost and encourage private investment by reducing the overall risk of clean energy projects.

While the concept is new to California, Green Banks have already taken root in other states. Connecticut established the first program in 2012, New York’s version launched a few weeks ago, and Hawaii is expected to come online this summer. Read More »

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Record-Setting ‘PACE’ for Commercial Buildings in California

Los Angeles Mayor Eric Garcetti and Hilton Hotel executives were all smiles last week, and for good reason: they had just cut the ribbon on the completion of a $7 million energy efficiency upgrade to the Universal City Hilton - the largest project of its kind in the U.S.

LA’s record-setting project is the third in a string of major commercial building retrofits in California in just the past two years, all thanks to Property Assessed Clean Energy (PACE), a program that allows customers to finance clean energy upgrades and pay them back, over time, on their property tax bills.

What’s made PACE so successful is that it allows customers to avoid the sizeable up-front costs of major building upgrades, while saving energy and money.

Case in point: the Universal Hilton projects close to $1 million of savings per year from these energy efficiency upgrades.

The promise of large-scale, commercial PACE was first demonstrated in 2012, when the ProLogis Pier 1 Building in San Francisco received the first-of-its kind financing for $1.4 million of energy efficiency upgrades. This project kicked off what has become one of the most successful clean energy financing programs in the nation.

In July 2013, an EDF Climate Corps Fellow at Sacramento Mayor Kevin Johnson’s office helped set a new commercial PACE record when the Metro Center Corporate Park closed a $3.16 million deal through the Clean Energy Sacramento program.

But these records don’t last long; each of these new projects received more than double the financing of the previous project, a positive sign for the future of commercial PACE programs in California.

In fact, there are currently 25 active commercial PACE Programs in 10 U.S. states, proof that the trend is growing beyond the Golden State’s borders.

Last year, Connecticut launched their own PACE program, finalizing nearly $20 million of transactions for commercial properties. Similarly, Toledo, Ohio executed $18 million of commercial PACE transactions in 2013.

While the commercial PACE market continues to evolve, California continues to raise the bar, providing energy efficiency financing opportunities – and future ribbon cutting ceremonies – that benefit building owners and protect the environment.

 

Learn more about PACE in California:

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PACE 2.0: California Leading the Next Evolution in Clean Energy Finance

Brad Copithorne_jpgProperty Assessed Clean Energy (PACE) is an innovative financing technique for clean energy retrofits that was first developed in Berkeley in 2008, giving energy efficiency projects a huge boost throughout the U.S.

Here’s how it works: Property owners agree to a long-term tax assessment on their home or building in exchange for the upfront funding to pay for a retrofit. What’s great about the program is its ability to essentially eliminate one of the biggest barriers to energy efficiency retrofits: up-front costs.

And, just as with any other property tax assessment, the obligation transfers to the new owner upon a sale of the property.  This transferability allows property owners to consider projects with longer payback periods as the obligation does not become immediately due upon sale.

From a lender’s perspective, because this obligation is part of a property tax bill it has a very high likelihood of being repaid, even under a foreclosure.

Successful PACE programs have the potential to net great results from reducing greenhouse gas emissions and improving energy efficiency to reducing total energy costs for both residents and businesses.

Unfortunately, in July 2010, the Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, threatened to take action against homeowners and municipalities that participated in PACE programs for residential properties.  FHFA’s pronouncement has effectively curtailed most residential PACE programs, with the exception of Sonoma and Riverside counties in California.

Sonoma and Riverside counties have clearly demonstrated that there is significant consumer demand for clean energy retrofits that improve comfort and save money.  To date Sonoma has financed $52.8 million of PACE retrofits.  Renovate America, which provides funding for the Riverside program, has funded $134 million of projects in that program and a recently launched similar program in San Bernardino County.

California Governor Jerry Brown has long supported residential PACE programs as a strategy to create jobs, save homeowners money, and improve the environment.  The governor’s office has been working diligently for the past three years to come up with a solution that will satisfy FHFA and reinvigorate PACE across California.

Last week, California announced preliminary regulations that would provide funding intended to make Fannie and Freddie whole if they foreclosed on a property with an unpaid PACE obligation.  The program is closely modeled after a Vermont PACE program that was able to get a waiver from FHFA.

In December, Mel Watt was approved as the new Director of the FHFA.  EDF urges Mr. Watt to quickly provide California with a waiver so that we can put Californians to work on clean energy retrofits across the state and establish a model for residential PACE 2.0 that can be used across the country.

Also posted in Clean Energy, General | 3 Responses, comments now closed

13 for 13: The Stories that Defined California Environmental Leadership

There is never a dull moment on the California environmental policy scene, and 2013 was particularly action-packed.  Everywhere you turn there seems to be a new innovative solution or a fresh example of a company, city, organization, or individual making a profound difference in putting the Golden State on the path to a clean energy future.  Environmental Defense Fund (EDF) has the privilege of being in the middle of many of these groundbreaking developments, and in the past 12 months, California has taken a number of exciting steps forward.

What follows is our “13 for (20)13” recap of the most consequential stories in the California climate change and energy policy world, in our own words.  From celebrating the one-year anniversary of a successful carbon market to forging partnerships with other states and countries to marking continued innovations and opportunities in clean energy and fuels, it has been quite a year.  Here’s to an even better 2014.

 

1. California’s Carbon Market Caps off Successful First Year of Auctions:

The results of California's fifth carbon auction were released today, marking an important environmental milestone for the state – one year since the debut of its cap-and-trade system.

2. California’s LCFS Ruling is a Win for Consumers and Alternative Fuels Companies:

Last week, we saw a big win for California's Low Carbon Fuel Standard (LCFS) – a regulation to diversify the state’s fuel mix with lower carbon sources of energy.  After almost a year of deliberation, the United States 9th Circuit Court of Appeals filed a decision in the case Rocky Mountain Farmers Union, et al. v. Corey, in favor of California.

3. LASER: Turning the climate threat into a story of opportunity for Los Angeles:

I’m an L.A. guy, so I like to think about things in epic story lines. And with today's launch of EDF and UCLA’s Luskin Center for Innovation new "LASER" maps (Los Angeles Solar & Efficiency Report), I think we’ve got a real blockbuster on our hands.

4. A Blueprint for Advancing California’s Strong Leadership on Global Climate Change:

A key reason California has become a global leader on climate change is its ability to successfully adopt the Global Warming Solutions Act, the state’s climate law that uses market-based tools to significantly reduce the state’s greenhouse gas emission levels. A group of tropical forest experts has now presented a blueprint for how California can secure significantly more reductions in global warming pollution than the law requires, while keeping pollution control costs down and helping stop the catastrophe of tropical deforestation.

5. Scoping Plan 2.0: Taking Action Today for a Clean Energy Future:

Today, the California Air Resources Board (CARB) released its draft 2013 Scoping Plan, the blueprint outlining how the State will address climate change over the next five years, reach its goal of reducing greenhouse gas emissions to 1990 levels by 2020, and create a path for even deeper reductions beyond 2020.

6. Seeing Green: Emission Reducing Fuel Policies Help Lower Gas Prices:

Californians struggling with high gas prices should feel optimistic about the future.  A new memo [PDF] by economists from EDF and Chuck Mason, a prominent economist at the University of Wyoming, demonstrates that policies established to reduce emissions and help the state reach its climate change goals also help to arm consumers at the pump

7. At a Key Moment for Energy, California Should Seize Demand Response:

Traditionally, if an area’s population grows — or it loses a power plant — it needs more energy. But California and some other states can approach it differently and reduce the use of fossil fuels. Instead of asking, How can we add more energy?” the real question becomes “How can we reduce demand?”

8. Offset Market Alive and Well in California:

Congratulations to the California Air Resources Board (CARB) as they announced plans to issue the first CARB Offset Credits or ARBOCs.  These 600,000 metric tons of offsets helps the state move closer towards our emissions reductions goals.  Compliance entities, such as utility and oil and gas companies, can use these offsets to meet up to 8% of their compliance obligation

9. Environment: California didn't do so badly this year:

Despite some particularly unexplainable losses if you care about protecting the environment, the California Legislature made progress in 2013. The range of bills on the governor's desk awaiting his signature confirms that California remains the stalwart energy and climate leader in the country.

10. Historic Agreement Demonstrates Broad Commitment to Build Clean Energy Economy:

With the stroke of a pen, North American efforts to combat climate change and promote clean energy reached a new level today.

11. Hopeful signs for U.S. and Chinese Cooperation on Climate Change:

The past week has offered a thrilling glimpse into the future for the millions of people around the U.S. and across the world who are yearning for real solutions to climate change.  On June 18, Shenzhen, an economically-vibrant city of 15 million on the South China Sea, launched the first of seven Chinese regional pilot carbon market systems slated to begin by the end of 2014.

12. Major California Refineries Logging Big Pollution Reductions Under AB 32:

It is well-documented that petroleum refineries release large amount of pollutants that are harmful to the environment and make people sick.  In California, these refineries are among the largest sources of carbon dioxide, accounting for 7 of the top 10 sources for climate pollution. According to data from the U.S. Environmental Protection Agency, refineries can also emit large amount of toxic compounds, including carcinogens and respiratory irritants.

13. Ruling gives bright green light for investment in pollution reduction projects in California:

California’s landmark clean energy bill AB 32 received a big boost today from the San Francisco California Superior Court in the case Citizen’s Climate Lobby et. al., v. California Air Resources Board.

Also posted in Cap and trade, Clean Energy, Engaging Latinos, Global Warming Solutions Act: AB 32, Linkage, Low Carbon Fuel Standard, Offsets | 1 Response, comments now closed

Is SONGS haunting energy's past, present, and future?

Larissa KoehlerEarlier this year, Southern California Edison (SCE) permanently retired the San Onofre Nuclear Generating Station (SONGS) after forty years of operation in San Diego County, appearing to put the large-scale power plant firmly in the past. However, much like Ebenezer Scrooge, California is grappling with the specter of SONGS’ past – which may haunt our present and future.

The story of SONGS is not unique to California. As of the end of 2012, 28 nuclear power plants were shut down in the United States – and many more will face the same fate in the near future, as they reach the end of their design life. Thus, a transition to renewables and incentivizing reduced demand – and a refusal to be tied to fossil fuels – is an issue of national importance.

The closure of SONGS has left California at an important crossroads: Continue to lean on fossil fuel energy and build additional combustion power plants – like Marley’s ghost chained to the past – or start shaping the future by using the clean solutions that are available today.

In a brief filed in a California Public Utilities Commission proceeding, EDF explained that California has time to develop environmentally superior resources, which California has dubbed “preferred resources,” and should do so before investing more resources in highly polluting fossil fuels:

  • Demand Response

Demand response (DR) and time-of-use (TOU) rate programs offer incentives to customers who reduce their energy usage when there is a high system-wide demand, which requires the use of more expensive and inefficient peaking power plants.

These programs have a tremendous potential to impact necessary demand: If 50% of SCE’s customers participated, energy demand would be reduced by two-thirds of the capacity SONGS provided.  As a bonus, those customers would also collectively see cost savings of $357 million, a 15% decrease.

Peter Lee /flickr

  • Energy Efficiency

Energy efficiency measures result in huge energy and cost savings.  For example, in 2010 and 2011 CPUC energy efficiency programs saw energy savings that were enough to power more than 600,000 households and offset 1,069 megawatts (MW) of electric capacity – equal to the output of 3 large power plants.

  • Renewables

California currently has 10,700 MW of wind and solar power connected to the CAISO grid, with plans to add 8,000 more MW by 2020. For reference, consider that SONGS had the capacity to produce 2,200 MW of electricity.

  • Storage

The CPUC is already starting to put increased focus on energy storage, to good effect.  Continuing to emphasize the importance of storage could transition California from needing to rely on traditional energy sources at any time of the day.

In a talk on December 2, Commissioner Andrew McAllister of the California Energy Commission stated that the closure of SONGS “is an opportunity to see what’s possible.” We agree: rather than be haunted by the specter of SONGS, California should take this opportunity to innovate and work to fill any gap in production with preferred resources first.

In this way, the state can serve as a template for how other parts of the country could use current, clean resources to create jobs, lower prices for consumers, and improve air quality through reduced emissions. Additional combustion power plants? Bah, humbug!

Also posted in Clean Energy, Energy | 2 Responses, comments now closed

Setting the PACE on Clean Energy Finance

I spend most of my time working to establish On-Bill Repayment programs that allow property owners to use their utility bill to repay loans for cost-saving energy efficiency or renewable energy upgrades.  Many of my colleagues work on a similar program known as Property Assessed Clean Energy (“PACE”), which uses the property tax bill for repayment.  Since both utility and property tax bills are usually paid, both PACE and OBR are expected to lower the cost and increase the availability of financing for clean energy projects.

Last week, I was invited to attend a meeting of the leading PACE program administrators, property owners and other market participants in the country — and was pleasantly surprised to learn how much progress is being made.

Connecticut launched their program in January and is expected to close $20 million of PACE transactions for commercial properties by year end.  The Toledo, Ohio area expects to have executed $18 million of commercial transactions by the end of 2013.  Sonoma County, with a population of less than 500,000, has already completed $64 million of financings for residential and commercial properties.  In late 2012, CaliforniaFIRST launched a PACE program for commercial properties that has already received 130 applications.

We also heard from the head of Keep PACE in Texas who recently sponsored legislation to enable PACE in the state.  PACE, like OBR, uses private funding to allow property owners to voluntarily retrofit their properties.  This makes the program popular with many conservatives and the legislation was able to pass with a unanimous vote from the Texas House of Representatives in May.

Historically, most of the PACE transactions have gone toward financing energy efficiency improvements.  As I wrote in May, Connecticut has set up their PACE program to include financing solar projects as well – using financing structures (leases and power purchase agreements) that tend to provide the lowest-cost solutions for building owners.  Last week, I learned that CaliforniaFIRST and other California-based PACE programs may now be able to offer the same solution for commercial property owners across the state.  This could dramatically increase the availability of financing for solar projects in commercial properties.

Most solar deals are financed over 20 years.  For properties with good credit, this works well as solar photovoltaic (PV) panels have a long lifespan and solar generation can be predicted accurately.  Most government buildings tend to have good credit and can usually finance solar with no money down.  Unfortunately, unless a commercial property is owned or leased by a highly-rated company, the property does not normally qualify for financing.

PACE programs can put an obligation onto the property tax bill that survives all changes in ownership and allows most properties to qualify for credit.  I am hopeful that PACE will be a game changer for solar installations for commercial properties in California. Ultimately, these improvements will save property owners money by reducing their energy consumption, put Californians to work and lower harmful pollution in the process.

Also posted in Clean Energy, On-Bill Repayment, Smart Grid | 2 Responses, comments now closed

Aloha for Clean Energy Finance: A Tale of Two States

For over two years, EDF has been working to establish an On-Bill Repayment program in California that would allow property owners to finance energy efficiency or renewable generation projects and repay the obligation through their utility bill.  Since utility bills tend to get paid and the obligation could ‘run with the meter’, defaults are expected to be low, which will improve the availability and reduce the cost of financing.  In May 2012, the California Public Utilities Commission (“CPUC”) agreed with our position and ordered the large utilities in California to develop a program for commercial properties.  EDF estimates that this program could generate $5B of investment over 12 years which is expected to support 36,000 jobs

Unfortunately, we are still waiting for the nonresidential OBR pilot in California to be implemented, and if the utilities get their way, we may be waiting for close to another full year.  The California utilities appear to be fearful of change, distributed generation, and the impact of reduced demand.  They have employed aggressive tactics with teams of lawyers arguing and re-arguing every potential issue, even after the issues have presumably been settled by the CPUC.

This stands in sharp contrast to what is happening in Hawaii.  On March 25, the Hawaii Public Utilities Commission (“HPUC”) ordered the primary Hawaii utility, Hawaiian Electric Company, (“HECO”) to establish an OBR program for residential and commercial customers.  I just returned from 3 days in Honolulu and it appears that they are working cooperatively to get the program running in the first quarter of 2014.  This timetable of 12 months from HPUC order to implementation is less than half of what we seem to need in California, despite the fact that the Hawaii program covers a much broader range of property types and relies on public as well as private sources of financing

The difference in timelines seems to be driven by the attitudes of the utilities.  While HECO is working to solve problems, the California utilities are looking to create roadblocks.  I saw this in action last week in Hawaii.

One of the key design elements of an OBR program is a method to allocate the money when a customer pays only part of the bill.  As you would imagine, the utilities generally want to be paid first.  Unfortunately, we have heard from both prospective lenders and rating agencies that this would make an OBR program largely unattractive.  Their concern is that a utility that is getting paid in full might lack incentive to aggressively collect any money still owed to the bank.  EDF has advocated that partial payments be allocated proportional to the amount owed to each party.  That seems fair to us and last May the CPUC agreed and ordered the program be established that way.  Unfortunately, that has not been the end of the story.  The utilities have complained that this was expensive to do (evidently their billing systems are run with an abacus), that this would somehow increase their credit losses (OBR actually has the banks sharing utility credit losses that the utilities would otherwise incur) and, most improbably, that proportional allocation is somehow illegal.

Last week, I braced myself when a HECO representative started talking about how expensive it would be to implement proportional payments.  Besides, since it does not happen very often, why do the banks care so much?  I replied with an explanation of why it mattered and finished with a challenge.  “If partial payments don’t happen very often, why not let the banks get paid first?”

Much to my delight, his reply was, “We have been discussing that option and may very well go that direction.”

HECO is clearly a utility that wants to help their customers reduce utility bills and looks to solve problems.  I only wish our California utilities could develop that kind of can-do attitude to get an OBR program running by early next year.

Also posted in Clean Energy, Energy, On-Bill Repayment | Comments closed