Energy Exchange

Solar Market Needs New Investors To Continue Growth

By Brad Copithorne / Published: April 2, 2013

The recent headlines for solar power have been encouraging. According to the Solar Energy Industries Association (SEIA), the cost to install solar is declining as panel prices fell by 41% in the fourth quarter of 2012 versus the previous year. This helped US solar installations to grow by around 75% in 2012, from 1,855 megawatts (MW) in 2011 to 3,300 MW. (For comparison, the average coal plant in the US has a capacity of about 650 MW). Even better, they forecast that installations will continue to climb to an estimated 9,000 MW in 2016.

Unfortunately, lack of investment capital may be a barrier to realizing this vision. If we do not have enough funding, these projects will never be built. Bloomberg New Energy Finance forecasts that the industry will need $3.1 billion of equity investment in 2013, compared to $1.8 billion in 2012. Environmental Defense Fund (EDF) is committed to helping expand the roster of investors in solar projects, as investing in these projects is often not only highly profitable but also a major contribution to the sustainability of our planet.

Large investors have developed two strategies to invest in solar projects. The traditional method is to make investments in large, utility scale projects. More recently, residential solar developers have created funds for investors to take stakes in a large number of residential and small commercial projects. The latter strategy has made ‘no-money down’ solar available for homeowners who do not have the upfront capital to purchase solar systems, which can cost up to $15,000 or more.

Unfortunately, these investment strategies can be quite complex and are generally attractive only for corporations and certain wealthy individuals. To understand why, we need to explore the tax incentives for solar investors. The federal government provides tax breaks for solar investors to accelerate deals, develop a robust market that is expected to lower costs over time and allow investors to capture part of the societal benefit of avoiding development of more fossil fuel power plants. EDF believes that this is a very good idea. Read More »

The Texas Energy Crunch Report: Looking Back And Looking Forward

By / Published: April 1, 2013

We have been blogging about the ‘Texas Energy Crunch’ for over a year now, and the issue has attracted attention from the media, the Texas Legislature and even international groups. During all of that time, the Texas Public Utilities Commission (PUC), Electric Reliability Council of Texas (ERCOT) and stakeholders have continued to try to develop new markets and programs that will help ensure the state of Texas can keep the lights on this summer and into the future. This seems like as good a time as any to step back and take stock of how far we have come and how far we have left to go. To that end, EDF released this report: “The State of the Energy Crunch in Texas.”

The Energy Crunch is not a fleeting issue that will go away in the near future. It’s critical that we take action now to preserve our electric grid, the engine of the Texas economy, over the long-term as we face a shrinking water supply, a growing population and rising summer temperatures. The ongoing drought puts Texas’ power plants at risk, threatening a return of the rolling blackouts caused by extreme winter conditions we experienced in 2011. State Climatologist and Governor Rick Perry appointee, John Nielsen-Gammon states, “Statistically, we are more likely to see a third year of drought.” In recent testimony, Nielsen-Gammon reaffirmed that if the drought continued through this year, this drought is likely to be the second worst episode of drought in Texas’ history.

The solutions are out there in the form of customer, or demand-side resources, like energy saving demand response (DR) initiatives (which allow customers to voluntarily reduce peak electricity use and received a payment for doing so in response to a signal from their utilities), energy efficiency programs and increasing renewable energy sources like solar and wind power, all of which consume almost no water and can be built faster than gas and coal plants. This report provides an overview of these issues and concludes with legislative recommendations that will help meet future energy needs while providing direct benefits to customers and reducing water usage.

As economic growth continues to surge in Texas, state leadership must ensure a stable and secure supply of electrical power to businesses large and small, homeowners, hospitals and schools, among others. This challenge is critical in the face of a worsening drought, population growth and the failure by the PUC to take meaningful action after almost two years of deliberation. In the final months of the 83rd Legislative Session, lawmakers have an opportunity to directly address the Energy Crunch through several pieces of legislation that would help reduce customer energy bills, lower water consumption and increase business opportunities in Texas, while also reducing peak electric demand throughout the state.

Several of these opportunities have been identified by the PUC, but a lack of clear direction from Commissioners has left businesses hesitant to engage directly in the Texas market without a good understanding of the long-term outlook. By providing the PUC with strong guidance on issues like demand response, innovative clean energy financing mechanisms and fair payment for locally generated electricity, the Legislature can help reduce the threat of extremely costly rolling blackouts across the state.

We cannot solve this problem with the same thinking that got us here. Technology has changed our lives and the energy industry over the past few years alone, creating new opportunities for innovation. Now the state needs to be smarter about the way energy is used, and it starts with using technology to better manage our electric grid. This includes taking advantage of market-based solutions such as demand response (DR), energy efficiency programs and the continued growth of renewable energy into a smart grid.

In our report, EDF details legislation that is currently being considered by several Texas House and Senate Committees to help meet future energy needs while providing direct benefits to customers and reducing water usage. The list includes bills that allow all customer classes to participate in electric markets, provide innovative clean energy financing mechanisms and offer fair compensation for customers who provide power back to the electric grid by generating excess electricity from renewables or conserving energy using demand response initiatives. The Energy Crunch hasn’t ended by a long shot. Forecasts continue to show that we won’t have the level of reserves needed this summer to ensure reliability –particularly if the summer looks anything like 2011. Similarly, EDF will continue to engage in the issue both on our Texas Energy Crunch website and through the discussions going on at ERCOT, the PUC and the Texas Legislature.

Stayed tuned as we continue to develop innovative, market-based environmental and economic approaches that seek to keep the lights on and benefit customers.

Posted in Demand Response, Energy Efficiency, Renewable Energy, Texas / Read 1 Response

Industry And Environmentalists Make Progress On Fracking

By Mark Brownstein / Published: March 29, 2013

This commentary was originally posted on our EDF Voices blog.

Source: danielfoster437/Flickr

Worthy public policy initiatives get announced every day of the week, and reporters mostly greet them with a shrug. But last week’s announcement of a new center designed to set standards for shale gas development in the Appalachian Basin triggered a wave of media attention.

The Washington Post called the Center for Sustainable Shale Development (CSSD), “a heartening breakthrough in the war over fracking.” And the Associated Press wrote: “Some of the nation’s biggest oil and gas companies have made peace with environmentalists, agreeing to a voluntary set of tough new standards for fracking in the Northeast….”

I agree that this is a big deal, and not just because EDF played an important role in the two years of negotiation that led to the formation of this group. It’s a rare to see environmentalists and some of the nation’s biggest energy companies working together to improve the safety of natural gas operations. This coalition is a step in the right direction to better protect the quality of life for people living among the gas fields.

But, I also need to make a few points clear.

First, the standards put forth by CSSD are no substitute for strong regulation and enforcement. Voluntary efforts by industry leaders help distinguish the best from the rest and raise the bar for all, but the only path to full protection of our air, water, and health is regulation and enforcement that apply to all. Read More »

Posted in Natural Gas / Tagged Center for Sustainable Shale Development, CSSD, Methane | Comments are closed

New Thinking Is Critical To Better Manage Water And Electricity Resources In Texas

By Kate Zerrenner / Published: March 28, 2013

Central Texas Workshop Discusses Opportunities For Resiliency During Extreme Weather Events

This commentary was originally posted on our Texas Clean Air Matters blog.

Last week, I attended a regional workshop that focused on adapting to extreme events, sponsored by the U.S. Environmental Protection Agency (EPA), the National Oceanic and Atmospheric Administration, the Water Environment Research Foundation, the Water Research Foundation, Concurrent Technologies Corporation, and Nobilis. This workshop was the sixth in a series organized around the country to determine what is needed to increase the resilience of water utilities and communities in the face of extreme weather events. While the focus was on water, time and again, electricity was brought into the conversation—the two are closely linked, and in Texas, a state facing shortages of both water and power, this will require some creative thinking on our part.

This workshop focused on Central Texas, in particular our drought. But as the two-day workshop went on, it became clear to the organizers when local water utilities and other stakeholders spoke, that drought was only one extreme event that Texas has had to deal with…and continues to deal with. We are a state of extremes—weather, politics, personalities—and we not only have drought to handle, but also hurricanes, floods, tornadoes, wildfires, and just generally scorching heat. One of the first speakers was John Nielson-Gammon, the State Climatologist based out of Texas A&M University. He confirmed that while these natural phenomena are not new to Texas, we are experiencing more intense weather events. Last year was one of the hottest in Texas since we started recording temperatures, and we are heading into the third year of a pretty gruesome drought. Not being prepared for extreme events to get worse seems pretty foolhardy.

During the workshop, we heard from a variety of speakers from around the Central Texas region, including from the Barton Springs/Edwards Aquifer Conservation District, the Lower Colorado River Authority, rice growers, the University of Texas, the high tech industry, and individuals from Austin, San Antonio, and Bastrop. These people are dealing first hand with the impacts of the extreme events we’ve had in the past few years. They are simultaneously trying to manage the current situation while planning for what the changing climate means in the coming years. It’s a difficult balancing act.

Posted in Energy Efficiency, Energy-Water Nexus, Texas / Comments are closed

Should America Get Behind The Fuels Of The Future Or The Past?

By Jim Marston / Published: March 22, 2013

One of Yogi Berra’s famed quotes is about to apply to America’s energy policy: “When you come to a fork in the road, take it.”

The truth is, America’s been staring at a fork in the road for a few decades. Every president since Nixon has talked about freeing the country from its dependence on foreign oil. And each recent administration has understood that our energy policy affects more than the price of a gallon of gas or a kilowatt of electricity. It affects job growth, technological innovation and environmental progress (or decline).

The last few months of the budget and debt debate gives us a good picture of the paths America could take.

One path, embraced for years by both parties, entails government investments in new, clean, efficient and affordable energy. It harnesses the creative talents of our top scientists, engineers, businesspeople and research centers.

The other, most recently articulated in Representative Paul Ryan’s budget, is driven only by a doctrinaire obsession with cutting government – no matter what we sacrifice in doing so. According to that view, the government need not invest, because the private sector has it all figured out. That’s a stunning philosophy given that some of the most important breakthroughs – the Internet, our space program, wind and solar energy development – have happened because government and industry worked hand-in-hand.

The President recently called for a $2 billion Clean Energy Trust that would fund energy research and development. That’s exactly the kind of thing we need in order to continue the clean energy technology revolution that will make it possible to reduce imports of foreign oil and weaken the threat of rising greenhouse gas emissions. The budget is tight, so how do we find the money for it? By using money collected from oil companies when they drill for oil and gas on federal lands. Put another way, we can use some of the proceeds from the fossil fuel industry to help accelerate the transition to a clean, low-carbon energy economy. Read More »

Posted in Renewable Energy, Washington, DC / Comments are closed

Chasing Green: Going Solar By Paying Your Utility Bill

By Brad Copithorne / Published: March 22, 2013

This commentary was originally posted on our EDF Voices blog.

Source: SolarPowerForYou/Flickr

So far, my experience is that environmentalists and business executives often speak different languages. Take the basic idea of sustainability. To an environmentalist, sustainability, as applied to a business, refers to the amount of environmental damage it will cause over time. To a business person, the term refers to the ability of the business to generate profits and so sustain itself.

In other words, there is a profound difference between the “green” that environmentalists are focused on and the “green” that businesses must generate to survive.

At EDF, I am trying to bring those two camps together. Broadly defined, my work involves creating opportunities for companies to make profits by selling products that benefit the environment, usually by reducing carbon emissions. My belief is that, with the right incentives and market structures, the profit motive can be a powerful force for change. Green companies that hire workers also create new advocates for environmental policy.

A study by McKinsey, the big consulting outfit, has shown that there are potentially hundreds of billions of dollars in energy efficiency investments that could yield annual returns of 7% to 20%. At a time of historically low yields on fixed income investments, like bonds, those are pretty good numbers.

Mostly, I focus on increasing investment in energy efficiency and renewable generation projects for homes, offices and other commercial properties. In many cases we can lower a building’s utility bills, including financing costs, while also reducing carbon emissions.

Take investments in solar technologies. I am lucky enough to have pretty good credit and was able to get a solar installer to finance a rooftop installation that provided my wife and I with immediate savings. Unfortunately, many homeowners do not currently qualify for financing. So EDF is working to decrease financing costs and increase availability of capital for such projects through a program called On-Bill Repayment (“OBR”).

OBR can help a building owner finance, say, a rooftop solar array, with money put up by an third part investor, and then repay that loan through his or her monthly utility bill. The costs of the loan are reduced because the loan is part of the legally binding rate tariff for the property, and will remain in place even after a foreclosure.

Once we have OBR in place, far more homeowners should be able to finance the upfront cost of installing energy efficiency or solar projects that lower their bills. This creates jobs, saves money and is good for the planet. What’s not to like?

Take California. The state is expected to initiate an OBR program for commercial properties in about 4-6 months. EDF’s economists estimate that this program over the next 12 years will lead to about $7 billion in third-party clean energy investment, create 50,000 job-years that cannot be exported. Over the same period, OBR will the cut carbon emissions by 10.3 million tons, the equivalent to replacing 180,000 gasoline cars for 12 years with solar-powered electric vehicles. And the environmental benefit will continue to grow as we add residential customers and expand to other states.

OBR is just one way in which business and the environment can coexist. In future blog posts, I will look at other ways to achieve the same end.

Posted in Energy Efficiency, On-bill repayment / Tagged OBR, Solar Energy | Comments are closed