Energy Exchange

Hawaii Making Waves In Financing Clean Energy

By / Published: February 5, 2013

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:

bill neutrality (project savings exceed financing payment obligations)
tariff-based obligation
tariff is tied to the utility meter and therefore transferable
standard collection procedures, including disconnection for non-payment of OBR obligation
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.

Posted in Energy Efficiency, On-bill repayment, Renewable Energy / Tagged Hawaii PUC, OBR, On Bill Finance, On Bill Repayment | Read 3 Responses

Learn More About How YOU Have ‘Power Over Energy’

By EDF Blogs / Published: January 30, 2013

Did you know that 40% of the electricity used to power home electronics is consumed while they are turned off? And did you know the electricity it takes to power a single 100-watt light bulb for one year is generated by 713 pounds of coal?

With electricity outlets in every building and gas stations on every street corner, our dependency on energy is undeniable. Still, very few consumers are aware of effective ways to prevent waste and use energy efficiently. To educate consumers, several leading energy and environmental groups have united to create PowerOverEnergy.org, a warehouse of information about energy generation, consumption, impact and conservation.

The site aims to educate, empower and motivate consumers to use energy more wisely and to play an active role in our electric grid’s modernization. America’s outdated energy system is wasteful, expensive and a huge source of pollution. Over the next two decades, utilities will have to invest up to $2 trillion to modernize our electricity grid, most of which is past the age of retirement. A more resilient, smart “green” grid will pay for itself by saving the United States around $20.4 annually by increasing efficiency by five percent, and another $49 billion each year by reducing the cost of power outages.

Environmental Defense Fund, Silver Spring Networks, Sustainable Silicon Valley, Smart Grid Consumer Collaborative, Edison Foundation’s Institute for Electric Efficiency, Global Green USA, GrideWise Alliance and Silicon Valley Leadership Group believe that knowledgeable consumers are necessary, and we’ve joined the Power Over Energy Coalition to arm people with the information they need to join the push toward a smarter, more resilient grid. Empower yourself and those around you by checking out the site and becoming an informed participant in the movement.

Posted in Grid Modernization / Comments are closed

Do We Need Breakthroughs Or A Simple “Carbon Diet?”

By Jackie Roberts / Published: January 29, 2013

Over the weekend, The New Republic published an interview with President Obama, where he noted the following: “On climate change, it’s a daunting task. But we know what releases carbon into the atmosphere, and we have tools right now that would start scaling that back, although we’d still need some big technological breakthrough.” How accurate is the call for breakthroughs and what do we really need?

First, let’s look at where we don’t need breakthroughs, but instead more deployment – energy efficiency, of course, being Exhibit A. Creative financing, such as on-bill repayment (OBR), at scale can speed up deployment here. Similarly, unlocking clean energy to reduce carbon emissions from the electricity sector hinges on affordability. Wind energy is already competitive with fossil fuels, in large part because the cost of wind energy has come down around 65 percent in the last 20 years, according to the National Renewable Energy Laboratory (yes, declining natural gas prices provide new competition, but EIA projects that natural gas prices will begin to increase in 2018, and wind power purchase agreements are signed for around 20 years at a fixed price). Residential solar is verging on the tipping point for “grid parity,” or the point at which a source of power becomes cost competitive with other sources. Bell Labs first introduced solar cells in the 1950s. Environment California’s Research & Policy Center recently reported that they expect solar to reach grid parity in mid-2014 to 2016 at the outset.

Of course, progress in lowering costs and increasing efficiency comes on the heels of many smaller innovations. For example, innovations in materials science underlie many of the most promising technology evolutions, such as the role of carbon fiber as a basic raw material for wind turbine blades or the use of Gallium Arsenide wafers to reduce manufacturing costs for solar cells. But, nonetheless, given our country’s strength in materials science (think of our leadership with companies like Dow, Dupont and 3M), such innovations seem imminently feasible and in my mind don’t require a major “breakthrough.”

We’ve also delivered numerous hardware and software innovations to transform our electric grid into a more resilient, smart, “green” grid. Even carbon capture and storage, to some a high stakes technology bet, is actually just a new configuration or application of engineering equipment we have installed and used for decades, such as heat exchangers, chillers, absorbers, pumps and compressors.

Where would I wave a wand for a breakthrough? A cheap, reliable and efficient energy storage system wouldn’t hurt, one that replaces the clunky compressed air systems or the size limitations of batteries. But, overall, the declining cost curves for clean energy solutions, due to innovations large and small, tell us an important story: solving the climate crises is not unaffordable or necessarily a drag on our recovering economy as many fear. It is certainly not infeasible nor hinging on that one great technological breakthrough.

We need non-technological breakthroughs. Like the new head of the World Bank, Dr. Jim Kim, who in Davos described wanting to make “everything the Bank does aligned with the effort to slow down climate change.” And it is certainly cheaper than repeating the $50 billion recovery price tags that we might face time and again as Superstorm Sandy becomes the new normal.

Americans love the quick technical fix. But, today we have affordable answers right in front of us, it’s the willpower we may be lacking. So, just as most of us believe that rather than wait for a dieting breakthrough, the best answer to weight loss is reduced consumption and more exercise – we need to go on a carbon diet. Our economic and environmental health depend on it.

Posted in Climate, Demand Response, Energy Efficiency, Grid Modernization, On-bill repayment, Washington, DC / Comments are closed

Ruling gives bright green light for investment in pollution reduction projects in California

By Tim O'Connor / Published: January 28, 2013

California’s landmark clean energy bill AB 32 received a big boost today from the San Francisco California Superior Court in the case Citizen’s Climate Lobby et. al., v. California Air Resources Board.

The Court’s decision offered unequivocal support for the legality of the offsets portion of AB 32’s cap-and-trade program, a huge shot in the arm for momentum going into the second greenhouse gas allowance auction on February 19th. Similarly, by finding that the state’s offset program is in alignment with AB 32, a bright green light has been given for further investment in projects aimed to reduce pollution both in California and outside our borders.

In this suit, EDF joined as an official party to assist the State of California’s defense. Also joining in the defense was a collection of entities including The Nature Conservancy, the Climate Action Reserve and a collection of business interests. This broad spectrum of support for AB 32 shows that offset investments can deliver on multiple levels for the state.

First, offsets create new opportunities to fund upgrades and pollution reduction in sectors, including agriculture, forestry and industrial gases, that may not otherwise be covered under mandatory emissions limits. Pollution reduction in these sectors enables a greater overall response to climate change, which means positive impacts on the climate and human health.

Second, allowing high quality offsets ensures that a diversity of cost-effective pollution reduction projects can qualify for cap-and-trade compliance. This reduces overall program costs while maintaining the environmental integrity of the program.

As more projects and ideas develop under the AB 32 offsets program, California will be better able to transition to a low-carbon economy. In short, the decision of the Superior Court has authorized the continuation of a program that will be an integral part of California’s climate change goals, spur investment in a clean economy, and maintain California’s position as a leader in the fight to combat climate change.

Posted in General / Comments are closed

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

By / Published: January 28, 2013

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.

Posted in Demand Response, Natural Gas, Renewable Energy, Texas / Read 5 Responses

Nature: The Rebound Effect Is Overplayed

By Gernot Wagner / Published: January 24, 2013

This commentary was originally posted on EDF’s Market Forces blog.

Trying to put the rebound effect for energy efficiency in its rightful place is like playing a game of wack-a-mole. Predictably every couple of years, someone new discovers the counter-intuitive appeal of showing how more efficient energy policies may lead to more energy use. Wham! Told you there’s something wrong with those clean-car standards. Well, not so fast.

Yes, the rebound effect is real. But it’s also small. And what’s there is actually positive! Why shouldn’t people who can now afford to due to more efficient energy technologies be able to improve their lives?

Together with three co-authors (Ken Gillingham at Yale, Dave Rapson at University of California, Davis, and Matt Kotchen, currently on leave from Yale to serve as Deputy Assistant Secretary for Environment and Energy at the U.S. Treasury), I surveyed a bajillion+1 energy efficiency rebound studies. Nature then made us cut down those references to 6. We settled at 9.

We couldn’t find a single study that has the rebound be above 100% or anything close to it, what’s necessary to nix energy efficiency savings. The maximum number you can get is 60%, and that’s already quite a stretch. Think 30% as the upper bound for actual behavioral responses. Yes, we are more efficient today than we were a hundred years ago, and we also use more energy today. But that’s far from talking about the rebound effect. It’s simply economic growth.

Establishing a causal link between efficiency and energy use isn’t quite as simple. In the end, the rebound effect comes in four forms. Buy a more fuel-efficient car, and driving that next mile just became cheaper. The result: a bit more driving, to the tune of 5 to a maximum of 30%, although most likely much closer to 5-10% of the initial fuel savings. Then there’s the indirect effect: Drivers may now use some of the savings to buy other products that consume energy.

You can already see that we can’t just add these two effects. If you spend some of the gas money on driving more, you have less to spend on that plane ticket, and vice versa.

Then there are two macroeconomic effects: one via the price and one via technological advances. They are the trickiest to pin down and could, in theory, be the largest. But theory lends a helping hand in getting an upper bound: the basic demand-and-supply relationship tells us that the macroeconomic price effect can’t be more than 100%.

And once again, all these effects aren’t anywhere near that threshold. 60% is as high as it gets for the combined effect, and only in rare circumstances. For the most part, it’s much closer to 5 to perhaps 30%.

So where does that leave us?

When designing energy efficiency policies like clean-car standards, consider the rebound effect, much like the government already does. The Department of Energy’s model uses a highly appropriate 10% rebound figure for the car standards. And that’s about it. Not much else to see here.

If you did want to take it a step further — full disclosure: a step I couldn’t convince my three co-authors to take in the Nature piece itself — everything else equal, the existence of the rebound effect may prompt us to use even stricter energy efficiency standards. If you have an overall target in mind, and the rebound effect shaves off a bit, you ought to consider using a slightly stricter target to get back to where you wanted to be.

For more, check out the full Nature piece. Well worth the $32 to put the rebound effect in its rightful place once and for all.

Posted in Energy Efficiency / Tagged Nature | Comments are closed