Energy Exchange

Jobs For Today AND Tomorrow

By Jackie Roberts / Published: September 13, 2011

The President’s response to the call for jobs now is necessarily focused on short-term triggers. But, we must simultaneously seed the jobs for the next two to five years, or we will just keep putting ourselves back into the same hole. These so-called “medium term jobs” must come from growth sectors in the global economy where the U.S. has skills and ideas to offer. To me, the most promising of those sectors are health care and clean energy & resource management.

Source: Veterans News Now

It is in the latter area that the U.S. needs to, as David Brooks recently described, “set the table” with policies that create customers for the many small to large businesses that are striving to participate in this new sector. In our survey of clean energy businesses, 73% are small businesses with less than 50 employees. Of these, according to market research by Frost & Sullivan, one third believed that the failure to pass clean energy legislation last year had an effect on their business and 7 out of 10 thought their sales would increase if the U.S. passed new policies to reduce greenhouse gases.

When business of all sizes know that they are going to have customers – not just today from a short term stimulus or other plan, but customers derived from a long term commitment by our country to move to clean energy and less air pollution – they can hire permanent employees. In California, where the state has been slowly but steadily setting the table with rules for cleaner vehicles, a renewable portfolio standard, the Global Warming Solutions Act and energy efficient building codes, the clean energy sector is a growing source of jobs. For example, according to Next 10 report from May 2011, jobs in manufacturing of clean energy and resource management activities grew 19% between 1995 and 2008 while total manufacturing employment in the state dropped 9%.

Without creating customers, “clean energy jobs” workforce training programs become a bridge to nowhere, the promise of clean energy jobs falters and businesses remain faced with lots of uncertainty and a natural reluctance to permanently hire new people. The National Infrastructure Bank and rebuilding schools will hopefully create customers for some of these firms. But what businesses really need to hire people is the prospect of customers over the medium-term. We need Presidential leadership on federal clean energy policies to help deliver a steady-stream of customers and seed the jobs of tomorrow.

Also posted in Grid Modernization, Jobs, Renewable Energy, Washington, DC / Read 2 Responses

Using Financial Innovation To Break Down Barriers To Energy Efficiency Upgrades – Part 1: Commercial Buildings

By Brad Copithorne / Published: September 12, 2011

Energy Efficiency Financing Blog Series

By: Brad Copithorne, EDF’s Energy & Financial Policy Specialist

Energy efficiency is the fastest, most cost-effective way to reduce greenhouse gas (GHG) emissions in the United States. In many cases, energy efficiency (“EE”) projects can provide extremely attractive financial returns. Using data from a 2009 McKinsey study, EDF estimates that there are at least $40 billion of investment opportunities for EE projects in commercial buildings that will provide annual returns in excess of 20%. Despite this attractive potential, few of these EE projects are being funded in commercial buildings.

Over the past 12 months, EDF has engaged in an extensive dialogue with dozens of key industry participants to determine the barriers that are preventing development of this market. We spoke with leading owners of real estate, lenders, institutional investors, EE project developers, academics and other nonprofits. Based on this work, EDF has identified three primary market barriers that are preventing investment in EE projects for commercial buildings (for further details, see our recent white paper Show Me The Money: How Energy Efficiency Financing Makes Dollars And Sense):

1) Lack of debt capacity – Most commercial buildings cannot borrow additional funds and/or have a first mortgage that includes a limitation on additional indebtedness that prevents incremental borrowing.

2) Split incentives – Under the terms of most commercial leases, tenants pay for many operating expenses including energy costs. Landlords, however, must absorb most capital expenses. For an EE project this may mean that the landlord pays for the project but tenants capture the bulk of the savings.

3) Lack of confidence in projected energy savings – Many building owners and lenders are skeptical that EE projects will achieve projected energy savings.

Energy Services Agreement – Part of the Solution

EDF has been working closely with several entrepreneurs to develop and promote a financing structure that may solve the debt capacity, split incentive and projection of savings barriers. The structure, known as an Energy Services Agreement (“ESA”), allows an investor to agree to provide energy to a building at a price based on the building’s historical costs. The investor pays for EE upgrades and then uses the savings to provide a return on investment.

For example, imagine a building that currently pays $100,000 per month for electricity and an investor that spends $2MM to reduce the monthly expense to $60,000. The investor collects the $40,000 in monthly savings for 6 years in order to generate a return on invested capital. From the building owner’s perspective, all payments are operating expense so they can be passed directly to tenants (solves split incentive) and the building incurs no additional debt. The investor takes the risk that the project may not generate expected savings.

We have been working closely with several companies in this space, including Transcend Equity, Metrus Energy, Green Campus Partners, Serious Energy, Abundant Power, Sustainable Development Capital and GEAR Energy. Each of them has a slightly different structure and/or target market, but EDF is optimistic that these companies, among others, will be able to change how energy efficiency retrofits are financed for commercial buildings.

Innovations in Energy Efficiency Finance Conference

Citi and EDF are co-hosting a daylong conference on energy efficiency finance on September 20, 2011 to examine innovative financing solutions for energy efficiency projects in the commercial, residential and public sectors. Stay tuned.

Posted in Energy Efficiency / Comments are closed

Is Government Getting Out Of The Clean Energy Business?

By Andy Darrell / Published: August 5, 2011

Source: Front Page Magazine

Tuesday’s debt deal makes one thing clear: whatever it is that you may want government to spend money on, there will likely be less money to go around in the future. That said, I think it’s time to rethink government’s role in the clean energy marketplace. Whether or not it has money to spend, governments at all levels can do a lot to build a robust American market for clean energy. Here are some suggested ways forward:

First, engage the private sector. Our government is highly skilled and effective when it comes to enabling clean energy research, which in turn leads to high-risk investments in emerging clean technologies, but it cannot pay for everything. This is not the era of the New Deal, and we’re not China. We are, however, a nation of innovators with the ability to mobilize private capital second to none. So let’s get innovators, entrepreneurs and regulators in a room together and begin to work on projects that establish what economists have been telling us for years: clean energy and efficiency will make and save money. In some places, government can be a convener – for example, cities across the country (and the world) could work with their real estate and banking communities to aggregate efficiency upgrades at a scale large enough to attract major investment from institutional investors and other sources of capital. Government could basically be a source of data and the initial step in drawing parties together to help broker deals

Second, lead by example and cut waste. From energy needed to fuel our troops on the front lines to the air conditioning used for government officials in Washington and state and local capitols – there’s a huge amount of money to be saved and strategic advantage to be won by running our government’s own energy use more effectively. In fact, EDF’s Climate Corps Public Sector is currently engaging in this type of exercise in its efforts to reduce the New York City Housing Authority’s (NYCHA) energy use by more than 45 percent. These types of energy efficiency efforts should appeal to all sides of the political aisle: government will do more with less; we’ll send less money overseas for imported oil; we’ll pioneer new technologies through smart energy applications; and Americans will be put to work upgrading government buildings with less wasteful technology. If there’s a role for money here, it’s to finance upfront costs that get replenished out of energy savings – possibly a mix of private and public capital.

Finally, open the energy marketplace to truly fair competition. America’s utilities are governed by an arcane mix of rules that get in the way of innovation and tend to favor traditional fossil fuels. Our grid is a long way from a smart grid. Don’t even get me started on subsidies for oil and coal companies. Rules that shape the energy market and grid are set at the federal, regional and state levels. It’s time for a national effort to make it easier for households and businesses to use renewable sources of energy like solar and wind, as well as enable drivers to plug in their electric cars. Homes and businesses should be able to sell extra solar electricity into the grid easily and without limit. There should be a simple way to aggregate the benefits of efficiency; for example, consumers should be able to sell saved energy to compete with new power plants and this cleaner energy should be valued by regulators on par with new supply. Consumers should be able to charge electric cars at off-peak times, which could end up costing as little as about three cents a mile to operate. We can have all this – if we get the rules right at Public Utility Commissions (PUCs) across the country.

The role of government would change. It would become a source of data, culled from public sources like demographics and building department filings. It would help ensure that information is disclosed, like the SEC requires disclosure of information to investors on the stock market. It would change the rules to remove barriers to clean-energy investment inherent in our current electric grids and markets. It would use its bully pulpit not to harangue, but to create the negotiating table around which unlikely partners come together. It would enforce rules clearly and consistently to protect health and environment. It would use its own buildings, agencies, vehicles and supply chain to test and develop technologies – to be out front and demonstrate what works. And where possible, it could be a source of grants or loans, but that role would be overshadowed by the value of the vibrant private energy market that it would support by doing all of these other described duties.

If the government commits to moving ahead in this way, America will leap ahead in the clean energy sector – and we’ll be moving so fast that its citizens will barely have time to lament the relatively smaller amount of government spending.

Also posted in Grid Modernization, Renewable Energy, Washington, DC / Read 1 Response

New Report: Commercial Building Energy Efficiency = Jobs

By EDF Blogs / Published: June 13, 2011

Source: Architecture 2030

Blog Post By: Jackie Roberts, EDF’s Director of Sustainable Technologies, National Climate Campaign

The President’s Better Buildings Initiative proposes to make American businesses more energy efficient through a series of new initiatives including newly designed tax incentives for building efficiency, better financing opportunities for commercial retrofits, a “Race to Green” for state and municipal governments that streamline regulations and attract private investment for retrofit projects, a “Better Buildings Challenge” to CEOs and University Presidents, and, finally, new training for commercial building technology workers. An analysis released today, conducted by the Political Economy Research Institute (PERI) of the University of Massachusetts at Amherst, showed that more than 114,000 new jobs, many of which would come from the hard-hit construction industry, would be created through the Better Buildings Initiative.

Insights into which firms will benefit, and where those jobs may be located, can be found in Duke University’s value chain analyses of three energy efficiency strategies for buildings: high efficiency windows and glass, smart grid, and LED lighting. If HOME STAR legislation is also passed, the firms involved in residential re-insulation and electric heat pump hot water heaters will also benefit.

Job creation is no mystery for the business world: it begins and ends with new customers. Every policy initiative that pushes more customers to U.S. firms identified in these value chain studies is critical. Hopefully, the Better Building Initiative is followed by a commitment to broader policy that puts us on a path to a low carbon economy. Broad policy creates customers for the many firms involved in the value chains for hundreds of climate solutions – whether renewables, energy efficiency, transportation, agricultural, industrial or other innovations. And, at the end of the day, customers = jobs.

Also posted in Jobs, Washington, DC / Read 1 Response

The Bottom Line: Information Is Powerful & Can Be Used For Good

By EDF Blogs / Published: May 23, 2011

By: Matt Davis, EDF Research Fellow and Author of EDF Behavior and Energy Savings Study

I’m excited to announce the results of a new EDF study that analyzes the potential to reduce energy use and our environmental impact using one of the cheapest inputs in the world: information. At EDF, we’ve always believed that the right set of consumer-facing energy efficiency tools and technology could allow families to take charge of their energy usage, cut down on their monthly bills, and shrink their carbon footprint – and now we have proof.

Source: Opower

We collaborated with an innovative start-up called Opower to look at the potential for simple graphs and data to drive energy savings. We analyzed 22 million electricity bills, spread across 11 utilities, to see how households react to energy-savings tips and – most importantly, and originally – a graphic that shows them how their usage stacks up against their neighbors’.

Our findings, in a nutshell: information pays. The 771,000 households who received Home Energy Reports (Reports) reduced their electricity usage by 1.8% on average. While we can only speculate about what would happen in other settings, that number jumped out at us, and for good reason. If every home in America reduced their electricity usage by that much, we would all see the following benefits:

$3 billion in savings on energy bills;
26,000 gigawatt-hours of reduced electricity-demand – enough to power the homes of 5.6 million Americans; and
8.9 million metric tons of reduced carbon emissions, which is equivalent to the annual emissions from three 500 MW coal-fired power plants.

We also looked at how different types of households respond to the Reports and found some interesting results. For instance, in most of the utilities we looked at, the “energy hogs” are the most likely to roll back their energy usage. If you were to use that fact to target reports at “high-potential” households, you could boost the average reduction to 6.8% – more than three times the sample-wide average.

Energy efficiency is widely considered one of the greatest untapped energy resources. This study confirms that simple behavioral changes generate consistent savings across a wide range of utilities and demographics. The message is clear: customers empowered with information on energy usage are more likely to save energy and money, all while reducing their carbon footprint.

We hope that simple, innovative tools like this one will spread far and wide.

Posted in Energy Efficiency / Read 3 Responses

Put My Tax Dollars Into A Growth Market, Please

By EDF Blogs / Published: May 23, 2011

Guest Blog Post By: Jackie Roberts, EDF’s Director of Sustainable Technologies, National Climate Campaign

Two efforts to repeal tax breaks for oil and gas companies – Senate Bill S.940 and the Administration’s budget proposals to eliminate subsidies in FY 2010, FY 2011, and FY 2012 budgets – should receive bipartisan support for no other reason than re-directing those subsidies can be an engine of job creation. University of Massachusetts at Amherst economic researchers developed employment estimates for various energy sources, including energy efficiency strategies. Their data show that investments in energy efficiency creates 2.5 to four times more jobs than that for oil and gas development and renewables create 2.5 to three times more jobs than that for oil and gas development.

These jobs are dispersed throughout the U.S. as shown with our LessCarbonMoreJobs mapping, and bring particular benefits to the hard hit Midwest manufacturing regions.

Large government subsidies might, just might, be justified if “Big Oil” was using profits to invest record amounts in transitioning to clean energy. But, that is far from the case. A Center for American Progress analysis of Big Oil investments reveals that the big five oil companies invested just four percent of their total 2008 profits in renewable and alternative energy ventures. There are no signs that this level of investment has increased at all in the past several years.

Clean energy will be a major new market – by some estimates the market for renewables alone will range from $1.7 trillion per year to $2.3 trillion by 2020, depending on different government policy scenarios. Having already slipped from first to third in terms of investments in this sector, the U.S. needs to play catch up. Government dollars should be used to help the U.S. transition to clean energy and to do so in a way that we have significant market share in as many clean energy solutions as possible. First mover advantages are critical with new markets and worth every penny we can devote to creating strong clean energy innovation and manufacturing here in the U.S. Such investments will also translate into cheap, homegrown energy sources in the medium- to long-term – the supposed purpose of the oil and gas subsidies. Put my tax dollars into a growth market, please.

Also posted in Renewable Energy, Washington, DC / Comments are closed