Energy Exchange

Clean Energy Market Poised For Rapid Growth In California

Environmentalists and other policy makers have long touted the economic benefits of investing in energy efficiency and renewable projects.  For California, that vision is on course to being realized.

Yesterday, EDF, Citi and Wilson Sonsini held Innovations in Energy Efficiency Finance II, a sequel to the successful conference we hosted in 2011.  That year, we discussed several interesting ideas about how we might finance projects.  Yesterday we heard from sector leaders on how those ideas are being implemented in California and beyond.

Citi and EDF conceived of this event as an opportunity to bring the energy efficiency and renewable industries together to discuss these opportunities and to build momentum for increased transaction flow.  Judging by the makeup of the audience, I think we succeeded.  I attend quite a few conferences to discuss energy efficiency and most of them are dominated by fellow public policy types.  Yesterday, however, was a different story.  Of the 185 attendees, over 2/3 were representing private sector companies in the clean energy or financing business.

As former Governor of Colorado, Bill Ritter noted, “California continues to take bold steps toward clean energy and provide the private sector with clear opportunities to invest in energy efficiency and renewables, critical components of our nation’s economic growth. A key part of achieving our clean energy potential, and creating jobs in America, is ensuring access to quality financing for homes and businesses that want to participate in the new energy economy.”

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Also posted in California, Energy Efficiency, On-bill repayment / Tagged | Read 2 Responses

President’s Vision Encompasses A Next-Generation Energy System

Tuesday’s State of the Union (SOTU) speech included much that was music to environmentalists’ ears.  The headline, of course, is the commitment to take serious action to address the most significant challenge our generation faces – climate change.  And, with it, the extreme weather and public health burdens that are already making life harder for vulnerable regions and people nationwide, and that stand to become so much worse as the root cause remains unaddressed. 

But some of the most exciting aspects of the SOTU message are the nuts and bolts that underlie the top-line goal.  Specifically, the President’s speech recognizes that Americans have an opportunity to achieve many of the carbon reductions we need through actions that create new business opportunities, increase national security and drive economic growth.  In fact, we already are.  As the President noted, the past four years have seen the beginnings of a revolution in American energy production and use – technological innovations have put us on track to energy independence and renewable resources constitute a growing share of electric generation capacity. 

The President’s vision, as outlined in the SOTU, encompasses a next-generation energy system – one where the system that was revolutionary in Thomas Edison’s time is finally supplanted by a system that meets the needs of our time.  Technological change can bring full-scale transformation, and government can play a role by accelerating technological development.  A future where cars and trucks no longer depend on oil can finally be imagined – and government efforts can help bring that future into the present more quickly.

Carbon-free wind and solar energy represent a growing share of our resource mix, and  they can grow to serve a larger and larger share of load.   And energy waste in buildings can be cut substantially – but doing so requires innovations in energy retrofits, building operations and finance, which government can also help to foster.

Finally, President Obama referred to fostering a ‘self-healing power grid,’ which is extremely important. Modernizing our outdated, aging electric grid and how it is operated (as well as customer-side technology and practices) will help minimize problems that arise from extreme weather events and other disruptions, while also allowing for greater shares of electric demand to be served by resources whose output depends (literally) on something as fickle as the weather.

Also posted in Energy Efficiency, Grid Modernization, On-bill repayment, Washington, DC / Tagged , | Comments are closed

El Paso Electric Inks Solar Deal That Is Cheaper Than Coal

On the heels of our blog post last week, showing how competitive wind and solar power have become in recent years, is news of possibly the cheapest solar deal yet in the U.S. (that we know of publicly, at least).  Even more interesting is the fact that the deal was made between Texas-based El Paso Electric and First Solar, an Arizona-based solar manufacturer.  While it’s a little sad that a Texas-based company has to go to New Mexico to build solar, it’s at least heartening that they could partner with a U.S. company to get the project done.  First Solar has been one of the leading solar manufacturers for several years, and last year their suite of projects made them the #2 solar panel supplier in the world (up from #4.) 

Marty Howell, the City of El Paso’s Director of Economic Development and Sustainability, said that “El Paso Electric’s recent solar contract with First Solar is another example of our great partnership with El Paso Electric and how El Pasoans are working together to make our community more sustainable.”

This new 50 megawatt (MW) project in New Mexico comes in at 5.79¢/kilowatt hour (kWh), which is almost half the cost of a new “advanced” coal power plant (12-14¢/kWh), according to the Energy Information Administration.  It is helpful to note that the deal did benefit from subsidies, as detailed in an article by Renewable Energy World, including the Investment Tax Credit (ITC) – which provides renewable energy projects with a tax credit equal to roughly 30 percent of a project’s costs.  If we were to remove that credit and the benefit of local incentives, the project would come in right around the cost of a new advanced coal plant, even if the coal plant lacks carbon capture and storage technology.

Time will tell whether this deal is an exception or the new rule, but growing signs of price parity for solar power, and the continued growth of competitive wind energy, consistently point to a critical shift in our energy infrastructure.  With continued declines expected in both wind and solar prices, this First Solar project seems more likely to become the norm than not.  The only question is whether utilities and regulators are ready for such rapid growth in wind and solar power. 

In New Mexico, they certainly seem to be ready.  However, in many other states, including El Paso Electric’s home state of Texas, that’s still an open question.

Posted in Renewable Energy / Comments are closed

Hawaii Making Waves In Financing Clean Energy

Public Utility Commission orders on-bill program to finance clean energy

Last Friday evening, February 1, the Hawaii Public Utilities Commission (PUC) issued a landmark decision and order to create an on-bill program, very much in line with EDF’s recommendations for on-bill repayment (OBR), that will provide access to low-cost financing for solar and energy efficiency projects for homeowners and small businesses.  This decision comes 18 months after the State passed legislation directing the PUC to investigate an on-bill program and authorized the Commission to implement the program (by decision and order or by rules) if the on-bill program was found to be viable.

The PUC decision determined that a statewide on-bill program is viable, and specified program design criteria that the Commission deems necessary to achieve viability.  EDF has been working to shape the proposal with key stakeholders including environmental groups, lenders and the Hawaii State Energy Office.

The specified criteria include the following components that EDF believes are critical for achieving both success and scale:

  1. bill neutrality (project savings exceed financing payment obligations)
  2. tariff-based obligation
  3. tariff is tied to the utility meter and therefore transferable
  4. standard collection procedures, including disconnection for non-payment of OBR obligation
  5. pro-rata allocation of partial payments

Since the terminology can be confusing, it is worth noting that this is not a typical ratepayer-funded on-bill finance program, despite having the same designation. The Hawaii program leverages private capital, and the PUC supports participation by multiple sources of capital rather than a single financing entity.  EDF believes both of these elements are critical to scaling the program and meeting the needs of a diverse set of property owners.

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New ERCOT Report Shows That Texas Wind And Solar Are Highly Competitive With Natural Gas

An interesting fact seemed to go unnoticed in all the press around the Electric Reliability Council of Texas’s (ERCOT) Long Term System Assessment, a biennial report submitted to the Texas Legislature on “the need for increased transmission and generation capacity throughout the state of Texas.” ERCOT found that if you use updated wind and solar power characteristics like cost and actual output to reflect real world conditions, rather than the previously used 2006 assumed characteristics, wind and solar are more competitive than natural gas over the next 20 years.  This might seem a bit strange since we’ve been told for years by renewable energy skeptics that wind and solar power can’t compete with low natural gas prices. Let me back up a second and explain what’s going on here, and what it means for both the energy crunch and Texas’ ongoing drought.

Every two years since 2005, ERCOT has used a series of complex energy system models to model and estimate future conditions on the Texas electric grid.  This serves a critical function for legislators, utilities and regulators and others who need to prepare for changes as our electric use continues to expand and evolve.  As with any model of this kind, the assumptions are critical: everything from the price of natural gas, to the cost to build power plants and transmission lines. Facing an acute energy crunch and given that solar and wind costs have come down a great deal since the first study in 2006, ERCOT dug a little deeper into their historical assumptions and developed a version of the model that used current, real-world cost and performance data for wind and solar power.

What they found was astounding: without these real-world data points, ERCOT found that 20,000 MW of natural gas will be built over the next 20 years, along with a little bit of demand response and nothing else.  Once they updated their assumptions to reflect a real-world scenario (which they call “BAU with Updated Wind Shapes”) ERCOT found that about 17,000 MWs of wind units, along with 10,000 MW of solar power, will be built in future years.

In addition to demonstrating the economic viability of renewable energy, these results show two drastically different futures: one in which we rely overwhelmingly on natural gas for our electricity, and one in which we have a diverse portfolio of comparable amounts of renewable energy (which does not use water) and natural gas.  All of this is crucial to keep in mind as the Legislature, the Public Utility Commission and ERCOT evaluate proposals to address resource adequacy concerns and the impacts of a continuing drought on our state’s energy supply.

Finally, one ERCOT statement in particular stands out from this analysis, in direct contradiction to renewable energy opponents who say that renewable energy is too expensive: “the added renewable generation in this sensitivity results in lower market prices in many hours [of the year].”  This means that when real-world assumptions are used for our various sources of power, wind and solar are highly competitive with natural gas. In turn, that competition from renewables results in lower power prices and lower water use for Texas.

As state leaders look for ways to encourage new capacity in the midst of a drought, it’s important to realize that renewable energy is now competitive over the long term with conventional resources.  The fact that renewable energy resources can reduce our water dependency while hedging against higher long-term prices means that however state leaders decide to address the energy crunch, renewables need to be part of the plan.

Also posted in Demand Response, Natural Gas, Texas / Read 5 Responses

Weathering The Storm Next Time: Gov. Cuomo’s NYS 2100 Panel Offers Smart Plan To Keep The Lights On, Emissions Down

Extreme weather and aging infrastructure came together with a vengeance in Sandy, showing the fragility of the basic systems that sustain this vibrant city and region. Like so many others, my family lost power, heat and water during Superstorm Sandy, and I watched out my window as a giant flash marked the moment that waters crested a 12-foot retaining wall at the 14th Street ConEd plant.

New Yorkers are all too familiar with the devastation that followed, and the disruption that spread far beyond the water’s reach. As the immediate crises are resolved, our attention is now on the complex challenge of long-term resilience.

One big step: The NYS 2100 Commission, a panel of experts assembled by New York Gov. Andrew Cuomo back in November, just two weeks after the storm. EDF President Fred Krupp served on the commission, and our energy team prepared extensive recommendations on how to make our energy system more robust, resilient and adaptable. In yesterday’s State of the State address, he talked about the results.

As it turns out, some important solutions were right under our noses.

For example, amid the darkness and devastation, there were dozens of homes, businesses, even whole communities that kept their lights on and the water because they were designed to isolate breakdowns, heal quicker, and work with natural systems rather than against them.

Success stories were located across our region: 

  • Lights stayed on for sixty thousand residents of Co-op City in the Bronx thanks to a combined heat and power plant that can operate independent of the grid. Ditto the office tower at One Penn Plaza, an apartment building at 11 Fifth Avenue, and large parts of the campuses at Princeton and NYU. 
  • In Bayonne, NJ, the Midtown Community School used a combination of solar panels and a generator to offer a safe, warm place to stay for over 50 residents during the storm. 
  • On Long Island, the Villani family kept their lights on thanks to a 4.8 kw solar array that happens to have a battery bank. “We had friends and neighbors coming over to charge phones and batteries,” Stephanie Villani said. 
  • In lower Manhattan, the community group Solar one used solar panels to offer residents of Stuyvesant Town, the sprawling 35-building apartment complex, a place to charge their phones and computers.

Exceptions like these should be the rule next time. Unfortunately, today’s utility grid is set up to discourage more of these success stories – which are also cleaner and more efficient.

Source: Reuters

In fact, many buildings outfitted with fresh new solar arrays stayed dark thanks to cumbersome, outdated rules and regulations. Ironically, the solar panels were not making electricity when the grid was down, precisely because they were permanently connected to the grid and had to be shut down, rather than simply unhook when the larger system failed. So instead of sunshine, they were running on diesel power – if they were running at all.

Building a smarter grid, and encouraging clean, efficient ‘microgrids’ that provide islands of heat and light means fewer outages and faster recovery. A smarter grid would also have the intelligence needed to pinpoint outages, cordon off damage, and reroute power.

Clearing out the legal cobwebs and requiring utilities to unlock their grids more easily would make their systems stronger and more resilient in a crisis, and open the door for more efficient, renewable energy solutions. It would also open up opportunities for new ways to finance the upgrades needed to take full advantage of efficiency and renewables in today’s buildings.

(You can read EDF’s blueprint for a smarter, more robust grid here.)

Climate change means that higher sea levels and more extreme storms are the new normal. Unfortunately, some of this is already locked in. But we still have an opportunity to prevent the worst, most costly consequences by working together to reduce heat-trapping pollution. Superstorm Sandy reminded us of the need to prepare for a more challenging future. We need to make sure the steps not only protect against the impacts we can’t avoid, but also help prevent those we can.

Yes, we will have to fortify our buildings and infrastructure, change building codes and keep generators on hand in the face of extreme weather. But a lot of the steps we can take to keep the lights on during a crisis are also steps we can take to cut the pollution that is linked to climate change and extreme weather in the first place.

As we invest federal emergency dollars to rebuild, as we get ready for the next time – let’s make sure we’re taking every step that solves for both safety and less pollution at the same time. Efficiency, a smart grid, transparent information, renewables. Unlocking multiple benefits like these can help us rebuild better, faster and stronger. And lead the way for the world’s great cities, many of which are on the coast and in harm’s way just like New York.

My kids and I were lucky to weather the storm with just inconvenience. But as I think about how might live in a future New York City, I’d like to be sure that we’re doing everything we can now to run this town on safe, clean energy. The Cuomo commission report takes a big step in that direction: let’s join the Governor and the members of this commission in making its recommendations a reality. This is an opportunity that business, political and community leaders must not miss.

Also posted in Demand Response, Energy Efficiency, Grid Modernization, New York / Tagged , | Read 1 Response