Energy Exchange

On-Bill Repayment: A Way To Eliminate The Upfront Costs For Energy Efficiency Projects

By Kate Zerrenner / Published: December 3, 2012

When a state is facing electric resource shortages, like Texas is, it’s just common sense to explore all the ways to make our electric use more efficient. We know efficiency makes sense – in terms of grid reliability, lower emissions, and reduced costs to ratepayers. But there is a barrier to some ratepayers in implementing more energy efficiency: upfront costs. Several options currently exist to finance efficiency, such as home equity loans and incentive programs through utilities. But what about creating a market to allow private investors to invest in the market by offering lower rates for utility customers by ensuring some security through repayment on the utility bill? That’s what on-bill repayment aims to do.

On-bill repayment (OBR) offers an opportunity for home and building owners to finance energy efficiency and renewable electricity generation projects through cost-saving loans from third-party investors. The loans are repaid through customer’s utility bills. The money comes from private sector lenders at no cost to ratepayers or taxpayers. OBR also allows for longer term loans with lower interest rates.

The general concept of OBR is not new. Several utilities around the country have instituted on-bill finance programs. However, there is a key difference. On-bill finance programs use utility money to finance the program, thus creating an additional cost for the ratepayers. On-bill repayment would use new money from third parties, such as banks, to create a new market that is secure, cost effective, and enables more bang for the buck in terms of what the ratepayer receives.

OBR is a flexible program that works for a wide variety of properties and vendor business models. In some programs, contractors are told what solutions can be offered to each customer. OBR, on the other hand, allows each contractor or vendor significant latitude to design solutions that meet the needs for their customers. This could include everything from insulation upgrades for residential customers or lighting upgrades for restaurants all the way to deep retrofits of commercial or industrial properties. All of these would be delivered by the private sector and would be completely voluntary to each property owner.

Benefits of OBR include:

Job growth: We estimate that it could generate 100,000 new jobs to install energy efficiency and renewable electricity.
New market creation: We estimate that OBR could generate $13.5 billion over a decade in private sector investments in energy efficiency, renewable generation, and demand response projects.
Ratepayer and state savings: OBR would promote energy efficiency and distributed energy resources that avoid the cost of expensive new power plants and other high-cost generation—saving ratepayers $4.8 billion in energy bills.
Flexibility for contractors and vendors: Program participants would have considerable discretion to design product offerings and go-to-market strategies to meet their customers’ needs.

In a state like Texas that prides itself on making its economy attractive to investors and creating markets, especially in the energy sector, OBR could be an effective tool to opening up the state to a private sector solution that can ameliorate our Texas energy crunch. Efficiency is an investment that makes sense for Texas. As utilities face increasing demands on their energy resources, and fewer dollars to spend on efficiency for their customers, giving them another tool, energized by funds from the private market, will benefit the entire state.

Posted in Energy Efficiency, On-bill repayment, Texas / Read 1 Response

ALEC & Heartland: Freedom Fighters?

By Marita Mirzatuny / Published: November 30, 2012

As we approach a new Congress, and a new Legislative Session here in Texas, the Heartland Institute and their pal the American Legislative Exchange Council (ALEC) are gearing up to reverse state renewable energy mandates across the country.

This comes as no surprise as ALEC has a reputation for supporting unpopular agendas, like current legislation it is pushing around the country that would mandate the teaching of climate change denial in public school systems. So while many Americans from differing political affiliations support an increase in renewables – a nearly unanimous 92% of voters, including 84% of Republicans – it seems fitting that ALEC would be on the opposing side.

While the American Wind Energy Association (AWEA) and the Solar Energy Industry Association (SEIA) are both members of ALEC, I wonder if they will join the ranks of Proctor & Gamble, Coca-Cola, Kraft Foods and a whole host of companies who have since parted ways with the “shadowy right-wing front group.”

And it’s not just ALEC that runs off its members. As we wrote back in April, GM announced they were pulling their funding from the Heartland Institute, citing Heartland’s climate change denial. Of course, weeks later Heartland doubled down on their denial with a series of billboards comparing climate change admitters to the likes of Ted Kaczynski, Charles Manson and Osama bin Laden.

So this ALEC-Heartland partnership is truly a match made in…well…

Adding to ALEC’s list of anti-environmental goals – including promoting legislation to kill climate policies and providing the framework for legislation that would prevent the Environmental Protection Agency from regulating toxic coal ash – it now has its sights set on the 29 states that have renewable portfolio standards (RPS) and mandates in place.

And in typical Orwellian fashion this fight is dubbed the “Electricity Freedom Act,” as they deem state standards requiring utilities to get a portion of their electricity from renewable power “essentially a tax on consumers of electricity.” James Taylor, the Heartland Institute’s senior fellow for environmental policy, said he was able to persuade most of ALEC’s state legislators and corporate members to push for a repeal of laws requiring more solar and wind power use on the basis of economics, claiming that, “renewable power mandates are very costly to consumers throughout the 50 states, and that alternative energy, renewable energy, is more expensive than conventional energy.”

But whose freedom are they really protecting and whose freedom are they hindering?

Read More »

Posted in Climate, Washington, DC / Tagged ALEC, Heartland | Read 2 Responses

EDF Energy Innovation Series Feature #15: Building Efficiency Financing Model From SCIenergy

By Jim Marston / Published: November 29, 2012

Throughout 2012, EDF’s Energy Innovation Series will highlight around 20 innovations across a broad range of energy categories, including smart grid and renewable energy technologies, energy efficiency financing, and progressive utilities, to name a few. This series will demonstrate that cost-effective, clean energy solutions are available now and imperative to lowering our dependence on fossil fuels.

For more information on this featured innovation, please view this video on SCIenergy’s Managed Energy Services Agreement here.

In our feature on Honest Buildings, we noted that the building sector is responsible for nearly half of CO2 emissions (transportation is a third) and that 75 percent of the electricity produced in the U.S. is used to operate buildings. However, the economics of making buildings more efficient can be tricky. Improvements often require significant capital, and since the tenants – not the building owners – pay the energy bills and reap the savings from efficiency upgrades, building owners often lack the incentive to invest in energy-saving measures.

Enter Managed Energy Services Agreement (MESA), the innovative financing structure from Dallas-based SCIenergy, which provides building owners and managers a way to cut their energy usage without incurring high up-front costs. It does so by allowing an investor to agree to provide energy to a building at a price based on the building’s historical costs. The investor pays for energy efficiency upgrades and then uses the savings to provide a return on their investment.

“We think about intelligence as a source of energy, just like we think of coal, nuclear, oil, and renewables as sources of energy,” said Woolsey McKernon, managing director of SCIenergy. “Building operators are leaving billions of kilowatt-hours, and therefore millions of dollars, on the table because the expense is short-term and the payoff is long-term. We flip that model.”

Credit: SCIenergy

Tackling the energy challenge from the economic side of things is tough, because in many cases, saving energy dollars long-term requires up-front capital. Services like SCIenergy’s MESA remove that cost barrier and allow customers to reduce their energy use and cost.

Making this approach work requires a unique business model. Customers agree to purchase their electricity and gas from SCIenergy at a monthly cost based on their historical usage. SCIenergy then makes investments in system automation, energy management tools and other building improvements that are expected to save energy. SCIenergy uses the savings to finance their upfront investment at no cost to the property owner. If the savings are less than expected, SCIenergy absorbs the risk.

One SCIenergy customer, Corporate Office Properties Trust, is a real estate investment trust (REIT) that owns more than 20 million square feet of rentable office space, primarily in the Washington, D.C. area. SCIenergy applied its services and made $16 million in improvements to 26 office buildings, resulting in a 25 percent reduction in annual energy costs and more than an 11,000-ton reduction in energy-related CO2 emissions. In addition, there was an added benefit to tenants as well: the number of calls to building managers complaining about an office being too hot or too cold dropped 95 percent.

Posted in Energy Efficiency, Energy Innovation / Comments are closed

Wind Makes Up 26% Of ERCOT Load In November, New Record

By Marita Mirzatuny / Published: November 26, 2012

Source: Environmental Law Institute

Despite having escaped this summer without rolling blackouts and the kind of heat we experienced last year, Texas is still dealing with the energy crunch issue. Luckily, our state is home to the nation’s largest wind power industry and it contains about a fifth of the country’s wind turbines. The Electric Reliability Grid of Texas (ERCOT), the Texas grid operator, announced that earlier this month wind throughout the state contributed 26 percent of the load on the grid, setting a new record. On November 10, a total of 8, 521 MW was produced, beating the previous July 19 record. For the first eight months of this year, wind accounted for 8.7 percent of the grid’s energy.

This is in addition to wind helping Texas avoid blackouts in February of last year, when a cold front proved too much for many traditional power plants. On February 2, 2011, wind energy played a critical role in limiting the severity of the blackouts, providing enough electricity to keep the power on for about three million typical households. ERCOT confirmed that wind provided between 3,500 and 4,000 MW of electricity (about seven percent of ERCOT demand at that time), roughly what it was forecasted and scheduled to provide. Texas wind provided this electricity during the critical 5 to 7 a.m. window when the grid needed power the most.

As an E&E ClimateWire article points out, wind farms in west Texas contributed about 7,000 MW to the system on Nov. 10 when the record was hit. Coastal towers and turbines, which were key to avoiding power shortages last year, contributed about 1,100 MW of supply. Texas holds more than 10,000 MW of wind power capacity overall.

This is all welcomed news for an industry holding its breath as Congress debates the renewal of the expiring Production Tax Credit (PTC) for renewables, which provides a 2.2 cent per kilowatt-hour tax credit for the first ten years of electricity production from utility-scale turbines.

With Texas being a major manufacturer of wind equipment in addition to relying on it for power, many jobs hang in the balance. According to a Sierra Club report, “a typical new 250 megawatt wind farm will create 1,079 jobs – manufacturing jobs, construction jobs, engineering jobs and management jobs.” Another report by NRDC estimates that from a 250 MW project, “non-construction businesses would account for 557 jobs — 432 in manufacturing, 80 in planning and development, 18 in sales and distribution and 27 in operations and maintenance. Construction would check in with another 522 jobs, doing things like buildings roads and foundations, installing turbines and wiring and connecting the power plant to the grid.”

In Texas, the expiration of the PTC could not only mean stunting job growth but would also likely create layoffs. According to Walt Hornaday, president of Cielo Wind Power, an Austin-based wind farm developer, “We haven’t had the industry come to a stop like this before in a long, long time.” His company is pursuing work in other countries, but otherwise, he said, “we would definitely be looking at very large layoffs.” Even Governors Perry’s own report cites a Mitchell Foundation analysis that the expanding wind and solar energy industries are projected to add 6,000 jobs in Texas per year through 2020 and, as of last year, over 1,300 Texas companies employ nearly 100,000 workers in industries directly and indirectly related to renewable energy.

And for those that now claim energy subsidies must end, despite being proponents for fossil fuel dollars, let us not forget what it has taken and continues to take to support the fossil fuel industry. First, the largest subsidies to fossil fuels were written into the U.S. Tax Code as permanent provisions. Furthermore, the largest break, the Foreign Tax Credit, provides around $2.2 billion annually and applies to the overseas production of oil through an obscure provision of the Tax Code, which allows energy companies to claim a tax credit for payments that would normally receive less-beneficial tax treatment. In an analysis conducted from 2002 to 2008, by the Environmental Law Institute, fossil fuel subsidies accounted for $72 billion over that span of seven years. On the renewable side, over half of the $29 billion subsidy amount supports corn ethanol. For traditional renewables like wind and solar, the total amount received was $12.2 billion, amounting to $1.74 billion annually.

Given Texas’ resource adequacy problems, it makes no sense to divest from a clean resource that provides up to 26 percent of our power while growing the economy.

As we mentioned in August, please contact your elected officials and ask them to renew the PTC before the end of the year. It’s good for Texas, the nation, and the environment.

Posted in Texas / Read 1 Response

California Cap-and-Trade Auction Success

By Tim O'Connor / Published: November 19, 2012

The results of California’s first ever auction for greenhouse gas (GHG) emissions allowances are public, marking the start of a new era for stimulating innovative solutions to combat climate change. Coincidentally, earlier today new atmospheric data was released by NOAA showing that 2012 is on pace to be the warmest year, eclipsing the mark set only two years ago.

By establishing a hard cap on emissions and creating a carbon price through a trading mechanism, California’s comprehensive GHG program complements, and is fine-tuned based on experiences from the world’s other climate change cap-and-trade mitigation programs. For example, lessons learned from the world’s largest cap and trade program in the European Union have shown that emissions of GHGs can actually decrease while the economy grows. Similarly, as shown by the Analysis Group’s report of the cap-and-trade program in the Northeastern United States, in addition to creating a strong signal for innovation, money generated through an auction can be invested in ways to cut GHGs even further.

Based on today’s results, California’s program is performing according to the expectations of economic experts and policy makers. The market price ($10.09) for credits that can be used in 2013 was slightly above the floor price of $10 dollars. Also, there were more bids for 2013 credits than credits sold, with 97% of allowances going to covered entities. Put simply, regulated businesses are taking this market seriously and believe they can cut greenhouse gas emissions even more cheaply than anticipated. This is a very good thing for California.

At the same time as the California carbon auction sold 23 million allowances for use starting in 2013, the market also sold 5.5 million allowances for use in 2015 and beyond. This is a clear signal that investors see this as a lasting program, and provides an important signal that the 9 billion plus dollars of clean tech investment made in California since 2006 has strong backing.

A California carbon price opens the door for cleaner energy and clean air, as we finally have an “official” cost of pollution. We are marching more resolutely than ever into an economically and environmentally sustainable future.

Posted in General / Comments are closed

EDF Energy Innovation Series Feature #14: Home Energy Management From Consert

By Jim Marston / Published: November 15, 2012

Find more information on this featured innovation here.

If innovation is where expertise and opportunity intersect, then San Antonio-based Consert Inc.(Consert) is a perfect case study.

Founded in 2008 by veterans of the telecom industry, Consert’s Virtual Peak Plant^TM provides an energy management solution that gives consumers control of the highest energy-consuming electrical devices in their home or business and provides utilities with a low-cost way to tap into an unused energy source during key peak demand periods.

“We find the key is to offer a simple solution to consumers that also benefits utilities,” said Jeff Ebihara, vice president of Consert. “Our goal at Consert has always been to facilitate a mutually beneficial relationship between the consumer and their electric provider.”

The result is cutting-edge technology that connects, monitors and controls high energy-consuming devices including air conditioners, water heaters and pool pumps, which can represent over half of the total load for electric utilities during times of peak demand. The devices in a “Consert-enabled house” are linked using the wireless technology “ZigBee,” creating a Home Area Network (HAN) that can either be controlled remotely or configured to make decisions based on user preferences or outside weather conditions. Utilities may call upon this load during peak hours to reduce stress on the grid, with the consumer never losing comfort or control.

According to Consert, its home automation system can save consumers 15-20 percent on their energy use. When consolidated, these homes add up to a considerable amount of unused energy that utilities do not have to buy, sell or deliver.

Credit: Consert Inc.

This “negawatt” concept isn’t new – a megawatt of energy that is NOT used through demand response is just as helpful for a stable energy supply as a megawatt of new generation. However, the consumer appeal of Consert’s products is more personal and customizable than traditional load control measures. Customers can control their energy consumption 24/7 from any web-enabled device, such as laptop, tablet or smartphone, but most configure the system to work automatically.

The development of a consumer-friendly service that helps save money – and provides some “coolness” while requiring no sacrifice in comfort or convenience – is an important achievement as we look for new ways to reduce energy consumption and increase efficiency. Reducing electricity demand and making more efficient use of electricity is very important both environmentally and for electric grid operators. But beyond the appeal of doing the “right thing,” or the novelty of controlling appliances, there had previously been little to no incentive for consumers to make it a priority. Cutting their energy bill, Ebihara said, has proven a strong incentive.

“Of course there is a small segment of the market that wants to control every last part their energy use,” Ebihara said. “And we are happy to provide that level of control. But we are finding that most people want to “set it and forget it.” They want to save on their energy bill and they might like the convenience of remotely accessing their programs, but they don’t want to have to think about it all the time and they certainly don’t want it to be a hassle.”

Appealing to a broad market has been one of the challenges of HAN products. The industry is young, and products are either complicated or expensive. It may be obvious that Consert wants its product to be ubiquitous, but such products will have to be deployed in large numbers to make a meaningful contribution to peak demand management.

Consert’s systems are available through utility companies, most of which offer the equipment free when customers participate in conservation measures. Others sell the equipment at a deeply-subsidized price. In San Antonio, CPS Energy will deploy Consert systems in 140,000 homes at no charge to the customer, reducing peak demand by 250 megawatts.

Posted in Energy Efficiency, Energy Innovation / Comments are closed