This commentary originally appeared on EDF's California Dream 2.0 blog.
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.
Source: Winning Communities
Around 20% of the US population lives in an area that is classified as “rural.” The US Census Bureau defines an urban area as a territory with a population of at least 50,000, or a cluster of 2,500 to 50,000 people. Rural is then defined as anything outside of that definition. Rural areas face particular challenges when it comes to energy and water use. For example, utilities are met with higher costs and often find it harder to implement new clean technologies to modernize their energy infrastructure because of the great distances between customers and an irregular patchwork of reliable resources. Besides, many system planners and thought leaders for innovative energy technologies live in urban or suburban areas and may find it harder to relate to the specific challenges of rural settings.
It’s likely that climate change will impact rural communities in different ways than it will urban areas, due to a number of factors including the types of common occupations, poverty levels and demography. Of particular concern is the “climate gap”, which refers to the lower economic and physical adaptability of rural communities. It will vary based on region, but research indicates that rural communities in the Southeast and Southwest could face particularly dire circumstances due to changes in electricity prices and water scarcity.
Environmental Defense Fund and the North Carolina Sustainable Energy Association recently joined the North Carolina Utilities Commission Public Staff and environmental colleagues in reaching an agreement with Duke Energy on its new incentive mechanism for energy efficiency investments.
The NC Utilities Commission is expected to issue a ruling on the agreement by the end of November 2013. If approved, the agreement will motivate Duke to implement energy efficiency measures as broadly and cost-effectively as possible. Duke’s efforts, in turn, can help ensure a robust market for providers of energy efficiency goods and services.
The agreement would replace Duke's avoided cost energy efficiency program, “Save-a-Watt,” with a business model known as “shared savings.” Save-a-Watt, which expires at the end of 2013, was successful in motivating Duke to make investments in energy efficiency. In fact, the company exceeded its energy savings targets, but the program was overly complex for energy regulators and stakeholders.
In contrast, the shared savings approach will split the anticipated dollar savings between Duke and its customers and set a single, flat rate of return. By sharing the savings, the model properly balances the interests of the utility and customers, and it will motivate Duke to make energy efficiency investments that save customers money. The shared savings model is the most commonly used energy efficiency utility incentive mechanism in the United States.
Last week, the Hurricane Sandy Rebuilding Task Force released a Rebuilding Strategy, which aims to rebuild communities affected by Hurricane Sandy in ways that are “better able to withstand future storms and other risks posed by climate change.” From an energy perspective, the main goal of these recommendations is to make the electrical grid smarter and more flexible. This effort would minimize power outages and fuel shortages in the event of similar emergency situations in the future.
The Task Force is led by President Obama and chaired by Housing and Urban Development (HUD) Secretary Shaun Donovan. The recommendations put forth in the report were developed with Governor Cuomo, Governor Christie, and a number of federal agencies and officials from across New York and New Jersey, representing an unusual opportunity to make changes that will help communities weather future crises.
This key idea – smarter, flexible energy – is central to resilience, safety and quick recovery in a storm, as well as reducing the harmful pollution linked to climate change in the first place. This has been a key theme of EDF’s efforts to help the Northeast region respond to Sandy.
When the power grid went down on most of New York City following Hurricane Sandy, a number of buildings were able to keep their lights on thanks to existing microgrids and on-site, renewable energy sources. The Task Force report lays out a path forward for taking these isolated success stories to scale and making these clean technologies available to everyone.
This commentary originally appeared on EDF's California Dream 2.0 blog.
For a window into two vastly different visions of our state’s future, take a look at the comments filed last week as part of the AB 32 Scoping Plan update process. The 2008 Scoping Plan lays out the approach that California will take to achieve its goal of reducing emissions to 1990 levels by 2020, and this is the first 5 year update.
EDF’s comments reflect what most Californians have already asked for – a laser focus on expanding emission reductions and providing ample clean energy opportunities for businesses throughout the state.
- Increasing emission reductions from vehicles, goods movement and the agriculture sector;
- Developing diversified low-carbon fuels that yield cost reductions;
- Integrating clean energy and energy efficiency through programs like “time-of-use” pricing and On-Bill Repayment;
- And, extending the cap-and-trade program and low carbon fuel standard beyond 2020;
All of the opportunities outlined by EDF aim to fulfill the Scoping Plan’s mission: achieving the maximum technologically feasible reductions in greenhouse gas pollution in a cost-effective way.
As we’ve highlighted in previous posts, water and energy regulators often make decisions in silos, despite the inherent connection between these two sectors. Texas is no exception.
Two very important and intertwined events are happening in Texas right now.
First, the state is in the midst of an energy crunch brought on by a dysfunctional electricity market, drought, population growth and extreme summer temperatures. An energy crunch signifies that the available supply of power barely exceeds the projected need (or demand) for electricity. Texas’ insufficient power supply makes the whole electricity system vulnerable to extreme weather events. An especially hot day (with thousands of air conditioning units running at full blast) could push the state over the edge and force the Electric Reliability Council of Texas (ERCOT), the institution charged with ensuring grid reliability, to issue rolling blackouts.
Second, Texas is still in the midst of a severe, multi-year drought, forcing state agencies to impose strict water restrictions throughout the state. The drought has already had a devastating impact on surface water and many communities are facing critical water shortages.
Although Texas has always had to deal with extreme weather events, we can anticipate even more intense weather as climate change advances. The new climate ‘normal’ makes extreme heat waves, like the historic 2011 Texas summer, 20 times more likely to occur. These extreme weather events heighten the urgency of the energy-water nexus. Read More
Also posted in clean energy, Climate, Demand Response, Renewable Energy, Texas, Texas Energy Crunch, Utilities, Water
Tagged Demand Response, energy, Energy Efficiency, Energy-Water Nexus, Texas Energy Crunch, Water
By: Matt Golden, Senior Energy Finance Consultant, Environmental Defense Fund
This week, the U.S. Department of Energy (DOE) released a new report that will serve as a data analysis tool for the energy performance of commercial and residential buildings. By providing a standardized approach for the evaluation of energy data, the Building Energy Data Exchange Specification (BEDES) will help optimize energy efficiency efforts.
BEDES provides a common language for key data elements to help a range of stakeholders communicate more effectively. The use of established formats, terms and definitions will allow for smoother interaction between contractors, software vendors, finance companies, utilities, and Public Utility Commissions. As a result, information can be shared and aggregated without laborious scrubbing and translation, which will help more rapidly answer the key questions related to energy savings and financial performance that remain barriers to energy efficiency adoption at scale.
We are pleased that the Investor Confidence Project (ICP) was highlighted as one of five key projects aligned with BEDES goals, and prioritized for collaboration as the project moves forward. The Executive Summary (page 4) of the report clearly expresses some of the key data issues and potential solutions that this ambitious project will attempt to solve.
We’ve discussed the potentially grave impacts of the Texas Energy Crunch in a number of our previous blog posts. Time and time again, we repeat that the cheapest, cleanest and most reliable energy resource is the energy we save through energy efficiency. But our energy efficiency programs in Texas are still modest compared to other states. Beyond politics, there is another key issue limiting our state’s energy savings: Texas does not treat energy efficiency as a ‘resource.’
Traditionally, energy efficiency is left ‘invisible’ to utilities and grid planners—so they lose count of its many benefits. Treating energy efficiency as a resource, instead, puts it on a level playing field with other energy resources, such as power plants. This allows utilities to realize the unique benefits energy efficiency has over other energy sources.
Energy efficiency can reduce harmful greenhouse gases, save people money and create jobs – and it is extremely competitive with other energy resources. When the energy saved through efficiency is weighed against new energy resources, efficiency upgrades to buildings and homes generally weigh in at just one-third of the cost of building a new fossil-fuel power plant. On top of that, energy efficiency upgrades can eliminate the need to install or replace other expensive electric grid equipment. This cost-savings is one of the many benefits generally overlooked by utilities and electric grid planners.
Part of what prevents electric grid planners from counting efficiency as a resource in Texas is the way that the energy market is structured. When Texas deregulated its energy market in 1999, the aim was to increase options for customers and lower prices. Efficiency programs were not included in the new market structure. Instead, they were left for transmission and distribution utilities (TDUs), the “wires” companies that deliver electricity from power plants to customers, to manage. With efficiency left out of the restructured energy market, the Public Utility Commission of Texas (PUC) and other state leaders tend to view efficiency programs as subsidies that exist outside of the market. Read More
Also posted in clean energy, Demand Response, Smart Grid, Texas, Texas Energy Crunch, Utilities
Tagged Capabilities Market, Capacity Market, Energy Efficiency, ERCOT, Resource, Resource Adequacy, Texas Energy Crunch
This week the Texas Legislature convened for its third Special Session in a row, yet the state’s electricity market still sits at a crossroads. The Public Utility Commission of Texas (PUC), Texas’ governing body for electricity, has been at a stalemate since Commissioner Rolando Pablos stepped down in February. The two remaining commissioners, Chairman Donna Nelson and Ken Anderson, seem to be waiting on a third deciding member to step up and address the looming Texas Energy Crunch. With the PUC divided and the legislature nearly adjourned, the state looks to Governor Perry to appoint a third commissioner to the PUC—breaking the longstanding stalemate on Texas’ power supply.
When appointed, the new commissioner will be in unique position to champion innovative, common-sense solutions to solve the Texas Energy Crunch. One of the most expedient and cost-effective ways to bolster the state’s electricity supply is to reduce the amount of energy needed to fuel our commercial buildings and homes through energy efficiency upgrades. In an upcoming post, I’ll discuss innovative ways to weigh the benefits of energy efficiency upgrades versus new fossil-fueled power plants. For now, though, let’s review where energy efficiency stands in Texas today.
By: Matt Golden, Senior Energy Finance Consultant, Environmental Defense Fund
New Energy and Loan Performance Data Project Uses Latest in Data Science to Help Capital Markets Engage in Efficiency Lending
Environmental Defense Fund’s Investor Confidence Project (ICP) and the Clean Energy Finance Center (CEFC), in partnership with state and local lending programs, financial organizations and a range of additional stakeholders, are collecting, aggregating and analyzing loan performance and energy savings data from energy efficiency upgrades in residential and commercial buildings.
The Energy and Loan Performance Data Project represents the first concerted effort to combine data from some of the largest US energy efficiency programs in an attempt to develop an actuarially significant dataset to help engage the capital markets.
Nearly 40% of US energy is consumed by both residential and commercial buildings. Realizing all of the available cost-effective energy efficiency savings would require roughly $279 billion of investment, resulting in more than $1 trillion in energy savings over ten years. However, currently, only 1% of all US investments are made in energy efficiency projects. Our goal for this project is to help lay the foundation that will enable organizations to tap into this vast potential market.