Green Blogs.
I believe strongly in the development of alternative energy sources, for both personal and business reasons. So this caught me eye over at Wired – a 100% solar blog!
Businesses are really starting to wake up that green building and green/clean energy can actually save them money. And, it doesn’t have to be high tech to be effective. Wal-Mart – not particularly known for its fuzzy, wussy, caring thinking – puts skylights in its stores, not because the natural lighting is more pleasing to customers and employees (which it is ) but because “daylighting” significantly reduces electricity costs. (During the 2001 California energy crisis, the company said 600 of its stores had skylight systems that reduced their combined energy consumption by 250 million kilowatts annually – enough to power 23,000 homes.)
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Mary:
Since legislation creating the amendment to the Federal Power Act (PURPA) was upheld by the Supreme Court in 1981, there has been a proliferation of clean energy systems in the US and around the world. Most of it has been good. Occasionally the technologies utilized for solar and wind systems were not fully mature when installed in the field. But for the most part, despite misteps and mistakes, the progress for improvements in clean energy technology has generally moved forward. We have learned much. Reliability has increased as technologies have matured. Adjusting in the operatiion of systems in the field and improving manufacturing techniques, has dramitically improved the economics for solar and wind projects.
There is no question that the proliferation of clean energy systems is something that people want. There is a wide-spread popular opinion that government energy policies and utility business practices must support renewable energy. Whether it takes 10 years or 50 years, most people believe that renewable energy will play a significant role in the fight against global warming, and for US to begin to reduce its increasing addiction to foreign fossil fuels.
The key unknown is how much, how fast?
Although, it has the largest budget and a wealth of natural resources, the US has developed renewable energy systems much more slowly, with much less government support than other countries, (e.g., Germany, Denmark, Japan). Unlike Denmark, (20% of all energy is renewable) Germany, (15% of all energy is renewable) the US is far behind in its production of renewable energy. Not counting large hydro, the renewable energy component is less than 2% of total US energy output.
One of the key principals in new technolgy economics is that volume will reduce costs. More product on the assembly line and in the field provides more data for R&D specialists to increase efficiency in the field, and iimprove cost economics in manufacturing. As Japanese and German companies wll testify, government support, in subsidies, tax benefits and the like are extremely critical in “priming the pump” to drive the cost of clean energy systems down and the efficiency up.
Wind systems work best as a central plant paradigm, with rows of large megawatt turbines providing the output equivalent to a coal or gas plant. Wind, as of ten years ago had reached parity with the cost of nuclear power. It is today one of the least expensive forms of new generation and the quickest for utilities to bring online (i.e. a wind project may take 6-12 months to be fully operational).
Solar, on the other hand is a different paradigm. Most solar systems built in 2004 in the US were SINGLE distributed generation systems sized between 3kW-100kW. Solar operates best as a host-dedicated system, close to the load. Even counting the handful of 1-2 Megawatt systems built in the last 5 years in the US, a solar project is typically a small distributed generation power plant, designed to serve one customer.
Unlike the larger wind projects which offer good ROI to investors
solar, as a small single customer system offers very little profit to attrack commercial capital resources. Certain States have enacted favorable legislation that offer subsidies and tax benefits, to induce homeowners and small business to install solar. But solar, in part because of its smaller size is much more expensive when compared to wind. The much smaller solar projects hold little ROI. Accordingly, at this time there is very little financial services infrastructure available to offer homeowners and businesses solar financing at commercial rates.
My firm Power Factors is a professional services company that works with clean energy technology companies and energy projects. We also have a non-profit group that provides services to start-up entrepreneurs or municipalities that propose to reduce energy cost and reduce emissions while creating permanent jobs. One of our most exciting projects is a municipal financing for a clean energy fund. Our non-profit group has been working for several months with the cities of Oakland and Berkeley to design a municipal financing structure that will create a public/private fund. The Clean Energy Fund will operate similarly to a community development bank except that its customers can only use the proceeds for projects that reduce energy cost. The CEF will use its funds to provide local businesses the advanced capital to build clean energy systems at their sites.
I think we can agree that everyone loves solar energy and believes that it is good for the environment. But the hard truth is that most solar projects on houses or on warehouses are paid for out-of pocket, or with the proceeds from a second mortgage. In California, there is simply no financial services infrastructure for small solar and clean energy projects because these projects are too small to afford any ROI.
The financing design for the Clean Energy Fund is entirely different from the San Francisco municipal solar bond passed by referendum in November of 2002. The Clean Energy Fund is a public/private fund that works to combine municipal financing with private equity. The municipal bond portion reduces debt service costs and the equity investors utilize the tax credits that a charter city simply cannot use. This model can work for all charter cities or “public utility districts� that have bonding capacity. It will save millions of dollars for local businesses, reduce emissions, and boost the local economy. Most importantly, these renewable projects will create permanent jobs.
We believe that the Clean Energy Fund as a type of commercial financing for solar customers is the the break through that the solar industry needs. Other than installation cost, capital cost is one of the largest components of solar installation. If through aggregation, we can lower the capital costs for solar systems, solar systems will be easier for and less expensive for small businesses and homeowners to install. We believe that the Clean Energy Fund’s financial structure is imminently repeatable elsewhere in California and also in other Southwestern States where the sun shines most days of the year. New Mexico is a good example. Just recently the State legislature of New Mexico under the administration of Dan Richardson has enacted legislation for the issuance of municipal solar bonds that could help provide the capital for solar and other energy efficiency installations. The problem with the New Mexico legislation is that the solar bonds are only to be used for solar projects on the few government buildings in Sante Fe and Albuquerque. This greatly reduces the size of the project. Also, as the issuer of the bonds, New Mexico will not be able to garner the valuable tax benefits that will greatly reduce the costs of the solar projects. Should New Mexico’s municipal solar financing expand its scope to also include solar systems owned by private business, the Clean Energy Fund model will work, inducing private equity investors to contribute capital to the total Fund.
D.C. Kuhns