Selected tag(s): Solar

Net Metering And Rooftop Solar For The Utility Of The Future

John FinniganLike the tide washing upon the shore, new technologies are gradually eroding electric utility revenues.  These new products enable consumers to use cleaner energy and use it more efficiently.  Electric utilities worry this trend will ravage their industry just as wireless technology convulsed the telecommunications industry.  The utility industry urges its members to stem the tide by, among other things, increasing consumers’ net metering costs.

Net metering makes small-scale renewable energy, such as rooftop solar panels, more affordable by crediting the “distributed generation” owners for the excess energy they produce.  The electric meter measures how much electricity flows back to the grid from the distributed generation unit.  A corresponding credit is applied to the consumer’s monthly energy bill.  The Energy Policy Act of 2005 requires public utilities to offer net metering to all consumers upon request.

Why the new focus on net metering?  The cost for rooftop solar panels has fallen 80% since 2008, including 20% in 2012 alone.  Installed rooftop solar energy has increased by 900% between 2000 and 2011.  As consumers install more rooftop solar panels and net meter them, utility revenues will decrease. Read More »

Posted in Renewable Energy, Utility Business Models| Also tagged , | Comments are closed

Combining Solar And PACE In Connecticut: A Potential Game Changer For Commercial Properties

In my last post about Connecticut’s clean energy finance efforts, I alluded to an important innovation in their Property Assessed Clean Energy (“PACE”) financing program for commercial properties.  PACE programs have been in place for several years, and the basic concept is that property owners are able to pay back clean energy financing through their property tax bill over time.  Rates tend to be low because property taxes are almost always paid back and the PACE assessment will survive foreclosures.

To date, PACE transactions have generally been structured as a set of fixed payments to finance retrofits managed by the property owner.  Functionally, these transactions have been quite similar to loans.  In the solar industry, however, the vast majority of financings have been structured as leases or power purchase agreements (PPAs) in order to fully capture the tax benefits associated with solar investments.  This has generally resulted in fairly low use of PACE by solar installers and limited installations of solar on commercial properties.  (Most commercial properties have large mortgages and are not good candidates for additional financing unless PACE or On-Bill Repayment (OBR) can be used to improve credit quality.  The exceptions are buildings that are owned or occupied by very high quality credits, such as a large corporation or city.)

Connecticut is breaking new ground by allowing leases and PPAs to participate.  The lease or PPA payments would simply become part of the property tax bill.  If necessary, true-up mechanisms could be used to adjust payments and ensure that customers are not overbilled.  Additionally, we understand that this flexibility will likely be available for innovative energy efficiency financing for commercial properties.  EDF has long advocated for this type of flexibility (and we see this as a major benefit of OBR), but – to date – PACE programs have not incorporated this feature.

Hats off to Connecticut for once again showing us how to get things done!

Posted in On-bill repayment, Utility Business Models| Also tagged , , | Read 1 Response

Financing Clean Energy: Innovations From The Nutmeg State

Connecticut’s Clean Energy Finance and Investment Authority (“CEFIA”) was created in 2011 to help the state increase public and private investment in clean energy solutions that are cheaper and more reliable than traditional solutions.  I had the chance last week to catch up with Bryan Garcia, CEFIA’s CEO, and his impressive team.  I found three of their initiatives to be particularly innovative and impactful.

  • Commercial PACE (C-PACE) – Property Assessed Clean Energy (PACE) is an innovative, market-based approach that helps alleviate the steep, upfront costs that property owners generally incur for energy improvements by using loans that are seamlessly repaid through an additional charge on their property tax bills. While many jurisdictions have implemented PACE programs, CEFIA has had a particularly hands-on approach of working with property owners, contractors, lenders and mortgage holders to reach agreement on transactions that meet the needs of each party.  This strategy appears to be paying off as CEFIA has received 190 applications since the program was launched in April 2013.  Additionally, the Connecticut program appears to be the first PACE program that supports commercial solar installations with the lowest-cost financing structures such as leases and power purchase agreements.  I believe this could be a game changer for installing solar projects and plan to write about this in greater detail in a blog post coming soon. Read More »
Posted in Energy Efficiency, On-bill repayment| Also tagged , , , | Read 7 Responses

Guest Blog: The Devil In The Design – Energy And Climate Policy Design Matters More Than You Might Think

By: Guest Blogger Joe Indvik, ICF International

Policy design matters. But all too often, this notion is ignored by political pundits and belittled by policymakers in favor of flashy claims about the morality of a policy type. Like the latest sports car, a policy is usually touted as either a gem or a dud based on its superficial image, with only marginal public interest in looking at what’s actually under the hood. On the contrary, data-driven analysis of the inner workings of policy design will be the key to smart solutions on the road ahead for climate and energy policy the U.S.

The Waxman-Markey cap-and-trade bill of 2009 is a prime example. Claims about this former centerpiece of the American climate policy debate ran the gamut of dramatic generalization. They ranged from accusations of a job-killing socialist scheme that “would hurt families, business and farmers—basically anyone who drives a car and flips a light switch” to claims from hopeful environmentalists that any cap would be better than nothing.  Discussion on the actual design of the bill was all but absent from the limelight.  Energy policy discourse is often dominated by these combative back-and-forths, which focus on oversimplified notions of whether a policy would be good for the country while glossing over the practical nuances that make all the difference.

The Data Tells a Different Story

Some of my recent research provides ammunition for those who insist the devil is in the details.  I recently teamed up with two colleagues from Harvard University and the German Institute for Economic Research to examine the effectiveness of feed-in tariffs (FIT), a policy widely adopted by European countries.  A FIT is a type of renewable electricity subsidy that values renewable energy higher than fossil fuels, increasing the price received by energy producers when they sell electricity back to the grid.  We wanted to know:  Have feed-in tariffs actually increased renewable electricity generation in Europe, as intended? Armed with this simple premise and some statistical models, we set out to do the first rigorous analysis of whether this popular but controversial policy has really worked at the macro level. We emerged with some surprising insights that may prove crucial as the U.S. develops its climate and energy policy in the coming years.

Our first analysis revealed a startling conclusion. Countries with a FIT install more wind power each year, as expected, but countries with a FIT for solar photovoltaics do not appear to install more solar capacity at all. In other words, this result implies that European FIT policies for solar power have been an abject failure on the whole. But it occurred to us that there was a massive problem with this approach: It treats all FIT policies as equal. In reality, tariffs can (and do) have drastically different structures and operate in diverse markets. This creates very different incentives for renewable energy deployment in different times and places. Ultimately, it throws our first analysis out the window.

So we took a step back. Instead of looking at the issue from the pundit perspective, we put ourselves in the shoes of the real drivers of renewable energy deployment: investors. Investors are concerned with policy only to the extent that it improves the business case for renewables—i.e. increases their return on investment (ROI). So we created a new variable to represent the ROI provided by each tariff and ran one final test. The results were, again, striking. Whereas countries with a FIT for solar do not necessarily install more solar capacity, countries with a FIT that significantly increases the ROI on solar investments install much more solar capacity. In other words, simply having a FIT means nothing; designing a FIT that intelligently works with existing market conditions to produce a favorable investment environment means everything.

Time for a Tune-Up

What does this imply for the climate and energy policy debate in the U.S.? It shows that not all policies are created equal, and that the differences between policies are actually more important than the presence of a policy in the first place. It also teaches us we have much to learn.

The next few years will be a dynamic and challenging time for energy policy in the U.S. Though only a few U.S. states currently have a FIT, many are considering following Europe’s lead. Also, a national climate bill or set of bills is likely to emerge as a new battleground for debate over the proper response to climate change. Rather than descend into ideological gridlock, we can use data-driven analysis of existing policies as a powerful tool to customize and optimize our approach in the U.S. How large must a FIT be set to be effective? At what size does a tariff become overkill, wasting taxpayer money? Do producers prefer large tariffs that last only a few years or smaller tariffs that support generation for decades? More importantly, is a FIT even the best choice for a given state, or would the populace’s goals be better served by a renewable portfolio standard or tax break instead?  How does the best policy choice change in regions with different production costs, electricity prices, and market structures?  We can make progress toward answering these questions by stepping back from the political melee, using quantitative analysis to take a look under the hood of a policy type, and examining what really makes it tick.

As we move forward, it is exciting to think that lawmakers can glean insights from policy successes (and failures) around the world in increasingly sophisticated ways. Though researchers have only scratched the surface of this potential, we would do well keep in mind the lessons already learned from our analysis and others like it.  Policy design matters—and in some cases, it is the only thing that matters.

Author:  Joe Indvik is consultant in the Energy, Environment, and Transportation group at ICF International in Washington, DC.  He holds a degree in Economics and Environmental Studies from Dartmouth College.  His academic research is focused on using the tools of quantitative analysis to make climate and energy policies smarter.

Posted in Climate, Renewable Energy| Also tagged , , , , , , | Read 4 Responses

The Solyndra Panic

Source: Solyndra / BusinessWire

Bad news from Solyndra has set off a bit of a panic around everything from the future of solar in the U.S., the role of government in supporting innovative technologies, and prospects for clean energy jobs.  Caution is advised and perspective is needed lest we walk away from a pivotal new global market.  Let’s start with the big picture on solar.  I believe it is critical that we focus on the full value chain for energy and environmental solutions to better understand the economic growth inherent in the clean energy market.  In the case of solar, an analysis released last month by GTM Research examined the entire value chain – from raw material inputs and capital equipment needs to panel assembly and installation and maintenance.  The results show that the U.S. has a trade SURPLUS with rest of the world AND with China in the solar sector defined across the entire value.

Let me highlight some of the key findings: 

  • The U.S. was a significant net exporter of solar energy products with total net exports of $1.9 billion in 2010.
  • The U.S. solar industry had a positive trade balance with China with net exports of $247 million – $540 million.
  • The largest solar energy export product is polysilicon, the feedstock for crystalline silicon photovoltaics, of which the U.S. exported $2.5 billion in 2010.
  • 2010 U.S. solar energy installations created a combined $6.0 billion in direct value, of which $4.4 billion (75%) accrued to the U.S.

This is a good news story, and not surprisingly to me as over the past several years we’ve heard positive stories from companies like Komax Solar, an equipment supplier.  Six years ago, Komax took a risk and transitioned itself from medical technology and electronic machines to supplying the equipment needed in the assembly plants for solar panels.  Komax is exporting, has tripled its workforce, and has leveraged its expertise in precision machining to move into new solar markets.

What role the government played in the larger solar story is hard to pinpoint, but many solar companies had real and critical capital needs during the recession that the American Recovery & Reinvestment Act of 2009 (ARRA) filled.  Project Sunburst, a Maryland Energy Administration (MEA) initiative that benefitted greatly from the ARRA funding, created demand for solar panels installation on public buildings and triggered $36 million private investment.  In addition, while the primary goal was making it easier for public entities to go solar, “It had an additional goal or larger goal to encourage the growth of solar energy generation in the state as a resource,” MEA spokesperson Ian Hines said. The investment helped give the industry the extra push that put it over the tipping point as a maturing industry in Maryland.

This leads me to believe that ARRA has indeed been an important ingredient.  The government has also taken a portfolio approach that includes companies like Nanosolar, which received almost $44 million as a 48C tax credit (one of the ARRA programs) and is currently hiring.  This is a company whose prospects excite me.   

At the end of the day, experience shows that the private sector is better at picking winners and losers, and the government is much better at “setting the table” – for example, investing in core, enabling innovations such as developing a well-designed, open-platform smart grid that enables new entrants such as solar power to compete with old electricity providers (the value chain for smart grid solutions, by the way, is extremely promising for US firms and job creation).  And, equally as important, the government must put into place energy policies that provide a level playing field and ensure that the full costs to society of energy products and services are accounted for, policies that ultimately put a price on carbon.

Posted in Grid Modernization, Renewable Energy, Washington, DC| Also tagged , | Read 1 Response
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