Energy Exchange

A Tale Of Two IPOs

By Brad Copithorne / Published: December 13, 2012

This morning two energy initial public offerings (IPOs) made their debut. One of them was green and one of them was brown. Unfortunately, the mainstream media missed the boat by characterizing the brown company as successful and the green one as a miss. We don’t see it that way.

The brown company is PBF Energy, a Blackstone-backed rollup of three refiners that were divested by Valero and Sunoco. The company, like many refiners, is having its day in the sun as refining margins are currently wide due to technical market issues relating to the relative prices of Brent and WTI crudes. The bottom line, however, is that demand for gasoline and diesel is unlikely to grow as CAFE fuel economy standards continue to tighten.

The second company, SolarCity, has been posting over 100% annual growth in solar installations since 2009. Additionally, the company has been a leader in residential energy efficiency and EV charging stations, and has even begun to roll out a residential energy storage solution.

Unfortunately, SolarCity’s business model requires some complex accounting that ultimately hurt their valuation. The vast majority of their solar photovoltaic (PV) installations are executed as leases or similar structures to take advantage of various tax incentives. This reduces the accountants’ formulation of revenue, and also makes the business unprofitable. As an example, imagine a solar company can construct a solar system for $16k and sell it for $20k, with $3k of overhead. They would result in $20k of revenue, $4k of gross profit and $1k of net income. Do that enough times and you have a pretty good business.

As a lease, however, they only recognize revenue as it is received through annual lease payments, which might be around $1500. Assuming the $3k of overhead remains, then the company would post a loss of $1500 in year one. Economically, this might be the same or better business, but through the eyes of an accountant, this is a harder pill to swallow as the profits must be realized over the long term of the lease.

SolarCity is a new concept for the public market: it is essentially the first high-growth cleantech company that relies on an equipment leasing model. Despite projected revenue growth, the solar IPO struggled to generate demand due to this complex accounting and priced well below the expected range. On the other hand, PBF priced at the middle of its range, and sold more shares than originally expected. Longer term, however, my money would be on the company with the meteoric growth rate. So far today, the market seems to agree. SolarCity is up 48% from its pricing while PBF Energy has gained less than 1%.

Posted in General / Comments are closed

EDF Energy Innovation Series Feature #17: Electric Vehicle Charging From Evatran

By Jim Marston / Published: December 13, 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.

Find more information on this featured innovation here.

In the last few years, the first wave of electric vehicles (EVs) has been introduced in the U.S., marking the most significant technology shift in the auto industry’s 100-plus year history. The Chevy Volt and Nissan Leaf have received the most attention, but Ford and Toyota also have models on the market and nearly every major auto manufacturer has at least one partial- or all-electric model in the works. In other words, EVs have arrived.

Source: Evatran

All EVs can plug directly into a regular 120-volt outlet. But for faster charges, a crop of 240-volt (240v) charging stations are available at Lowe’s, Home Depot and other retailers. Some companies, like Virginia-based Evatran, are taking charging to a whole new level, introducing technologies pioneered in the consumer electronic industry into the garage. The company’s Plugless Power EV charging system takes the plug out of EVs, making the “refueling” process as easy as parking your car.

“Our philosophy is based on ease and simplicity,” said Kevin Beck, vice president of business development and sales at Evatran. “EVs are very simple to own and maintain. Developing the plugging habit is one of the only hassles, and wireless charging is a game changing technology that will make the EV transition even easier.”

The Plugless Power system consists of two parts: a floor sensor connected to a wall-mounted 240v charger and hardware installed under the EV. When the car parks over the sensor, the system uses inductive charging to refuel the car battery – no plugs necessary. The charging time varies by car model, but the Plugless Power system will provide a full charge in the same amount of time as plugging it in.

Wireless, or inductive, charging is already available for some consumer electronic products. Several companies make smart phone cases that allow users to simply place their phones on a “charging mat” instead of searching for a charging cable. EV batteries are a lot bigger, but the technology for Plugless Power is similar.

Inductive charging has its tradeoffs. The process isn’t as efficient as wired charging, meaning that not all the energy that makes it to the wall charger makes it into the car battery. Evatran executives acknowledge that the process isn’t perfect, but the company has already made significant improvements in efficiency and has made it a focal point of their research and development.

EVs provide a remarkable carbon benefit over gasoline. Even an inefficient charging system using 100 percent coal-fired electricity is better for the environment than an inefficient gasoline engine.

Currently, the Plugless Power system will be installed after market by local and certified service centers, but true to its mission of simplicity, Evatran is working with EV manufacturers to provide the feature as an option when customers buy the car, like a navigation system, leather seats or tinted windows. “The goal is to install our system into EVs before customers drive them off the lot.”

Posted in Electric Vehicles, Energy Innovation / Comments are closed

A Red Flag On Disclosure Of Hydraulic Fracturing Chemicals

By Scott Anderson / Published: December 12, 2012

It’s not often that a new regulatory idea becomes so popular that one or more states per month climb on the bandwagon. But that is precisely what has happened with the push to disclose which chemicals are pumped into the ground to stimulate oil and natural gas production during the process known as hydraulic fracturing, or “fracking.”

A year ago, only three states (Arkansas, Montana and Wyoming) required oil and gas producers to tell the public what chemicals they were using. Two other states (Colorado and Texas) were actively developing such rules. Today, just twelve months later, statutes or regulations mandating “frack” chemical disclosure are on the books in no fewer than 18 states, and proposals are pending or under consideration in several others.

FracFocus, an online registry that compiles information on hydraulic fracturing chemicals both for states where disclosure is voluntary and required, has been up and running for just 20 months, but already it houses approximately 800,000 records that include ingredients data. As of December 5, 2012, this data represented 33,606 wells. The amount of information on the site continues to grow rapidly.

It is impressive that so much information has been made available in such a short time. Still, people have begun to wonder whether the disclosure rules are accomplishing what was intended. The question is important because rules that aren’t working need to be changed. A good regulatory system is based on a process of continual improvement, not a naive idea that the rulebook can be written in a way that will never need changing.

Unfortunately, judging from early press reports, there are quite a few bugs in the system. To be fair, the reporting requirements are quite new and still being implemented — and analysis of the data has barely begun. But problems are emerging. The issue receiving the most media attention is the sheer number of trade secret claims. Read More »

Posted in General, Natural Gas, Texas / Read 5 Responses

Pecan Street Inc. Researchers’ Report Receives Outstanding Paper Award

By / Published: December 11, 2012

Source: Pecan Street Inc.

With 1.8 gigawatts (GW) of solar power installed in 2011 and an expected 2.8 GW in 2012, it is safe to say that solar energy has solidified its role as an important part of our nation’s energy portfolio. Affordability, competitive financing and reduced greenhouse gases are just a few of the reasons why the number of solar installations has skyrocketed in the past several years.

Now, new research from Dr. Alexis Kwasinski, Dr. Fabian Uriarte, and Amir Toliyat, engineers from the University of Texas at Austin, sheds some light on how rapidly growing solar installations can work with the current electric grid. For their groundbreaking findings in “Effects of high penetration levels of residential photovoltaic generation,” they were recently awarded an Outstanding Paper Award at the International Conference on Renewable Energy Research and Applications (ICRERA) in November for their in-depth research and innovative solutions.

Jump started by a $10.4 million grant from the Department of Energy, Pecan Street Inc. is a “community-wide collaboration to fully reinvent the energy delivery system” based in Austin, Texas. This living ‘smart grid laboratory’ provided a perfect data collection site for the researchers. Pecan Street’s leadership focuses on developing new technologies that reinvent the way we create and use energy, so that residents drive electric vehicles, invest in cutting-edge technology and, of course, use solar panels.

The massive amount of data gathered from Pecan Street’s efforts provided researchers the opportunity to analyze solar energy’s effect on the three key characteristics of “power quality” (voltage level, voltage unbalance and power factor). The researchers found that energy inflections (voltage levels and voltage unbalance) did not create any major concerns with the power grid, despite unfounded claims to the contrary by some solar critics.

Digging further into the data, the researchers unexpectedly found that power factor could become a real issue if solar installers don’t use modern equipment that provides for power factor support. While the issue could become very real at higher levels of solar penetration, the solution is simple, cheap and currently available; it simply means installers should begin using newer models of solar panel “inverters,” which convert solar power into electricity that can be fed into your grid and home.

Inverters simply convert raw DC power to AC power (i.e. the type of electricity we need to use everyday household items). Maximizing the amount of electricity that is converted into usable power makes solar energy more competitive, ensuring that it will remain an important and growing part of our nation’s energy mix.

It’s exciting to see that these researchers are receiving accolades for their groundbreaking work, and international acclaim is always an excellent motivator for this kind of work, but it’s nice to be appreciated where you hang your hat too. Fortunately that doesn’t seem to be a problem, since earlier this year Austinites voted in the Best of Austin 2012 award by the Austin Chronicle for Best Way to Turn Some Green Even Greener. Their choice: Pecan Street Inc.

Posted in Grid Modernization, Texas / Tagged Pecan Street | Read 1 Response

On-Bill Repayment Bill Introduced In California

By Brad Copithorne / Published: December 7, 2012

This commentary was originally posted on the EDF California Dream 2.0 Blog.

Yesterday, California Senator Kevin de León introduced a bill, SB 37, which would create the first On-Bill Repayment (OBR) program entirely financed by private capital. OBR allows property owners to finance energy efficiency and renewable generation upgrades and repay the obligations through their utility bills.

Senator De León said that “every Californian should be able to participate in the clean energy economy, and OBR helps us achieve this goal.” He believes that “OBR will lower utility bills, reduce pollution from dirty energy, and put thousands of Californians back to work. I am proud to be working with a broad coalition dedicated to moving this bill forward.”

This bill will authorize the California Public Utilities Commission (CPUC) to extend their groundbreaking commercial OBR program to residential properties. (The commercial program is expected to be effective by the end of March and was recently profiled in the New York Times.) We expect the residential program to provide retrofit capital to consumers that might not otherwise have access to low-cost funding for retrofits. These retrofits are expected to save money for consumers after financing costs and in many cases allow for more comfortable, healthier homes.

EDF is committed to working with consumer groups to make sure that this bill includes appropriate consumer protections. We will also be working to expand a coalition of supporters from the environmental, labor, business and financial communities.

Posted in California, Energy Efficiency, On-bill repayment / Comments are closed

More To Come On Methane…

By Steven Hamburg / Published: December 6, 2012

Concerns around the impacts of methane emissions have reemerged in headlines, with the release of a methane leakage study about Boston. Published in the journal of Environmental Pollution a couple weeks ago, researchers from Boston University and Duke University measured atmospheric methane concentrations leaking from natural gas pipelines in Boston many of which are over a hundred years old. Another report issued last week by researchers at the Massachusetts Institute of Technology (published in Environmental Research Letters) looked at the impact of shale gas production on greenhouse gas emissions.

When talking about harmful greenhouse gases, carbon dioxide (CO2) usually gets most of the attention. Yet methane, the main ingredient in natural gas, is a short-lived greenhouse gas many times more potent than CO2 – or around 72 times more potent over a 20-year time frame. Stakes are high for the scientific community to fully understand the implications of methane leakage rates. These reports help elevate the issue that methane leakage matters to the climate and air quality, but this is only part of the story.

Methane is potentially leaking from the entire natural gas supply chain — from wells, pipelines and storage facilities — and no one knows precisely how much is leaking and where the leaks are stemming from. Some reports estimate the total methane leakage rate occurring during natural gas production, transmission and distribution to range anywhere from 1 to 7.9 percent. At the same time, the data that the Environmental Protection Agency (EPA) and everyone else rely on were collected 20 or more years ago.

A challenge for understanding the distribution of methane concentration data in Boston is that no one knows how to interpret the data yet. Maps of methane concentrations in the urban environment can be spurious. They may look scary, but are they? This and many other tough scientific questions still need to be answered, we are very early in the process of understanding how much methane is leaking and from where. The scientific community at large, including EDF and the authors of the Boston study, are committed to collecting the data necessary to addressing these concerns and to understanding the true climate impact of methane emissions.

EDF is working with leading academic researchers and industry leaders to conduct scientifically rigorous measurements of quantitative emissions across the natural gas supply chain from well to the end user. We are developing the methodologies where necessary to move past a ‘he said, she said’ conversation to one focused on data characterizing leak rates. The critical next step for us in using the increasingly robust data gathered from new innovative technologies is to precipitate a clear enough understanding of where the leaks are in the supply chain to catalyze a constructive conversation about what new policies and industry practices will be required to minimize methane leakage.

The first EDF fugitive methane report, focused on field measurements made at natural gas production sites, will be completed early next year under the leadership of the University of Texas Austin. EDF and our partners are using a diverse array of measurement techniques to characterize leak rates. We are also working to make basin-wide measurements within areas of natural gas production. Over the course of 2013 and early 2014, studies of emissions at other key components in the supply chain, including the local distribution system, will be completed and the data and conclusions released to the public.

EDF is actively campaigning to ensure that fugitive methane emissions from the natural gas industry are less than 1 percent of production in order to ensure that the climate benefits of natural gas are maximized. We see development of innovative, cost effective and accurate methane detection technologies and procedures as a necessary part of minimizing leak rates. Our view is that minimizing methane leakage is an important enough issue that we need to take the time to establish a scientific understanding of the underlying issues and by doing so defining effective well-targeted actions.

Posted in Climate, Methane, Natural Gas / Read 1 Response