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Distorting Costs and Benefits in Climate Legislation

2009-06-25T19:50:36Z

While I am always interested in Jim Manzi's perspective, I feel his most recent post ("Dear Member of Congress: Why You Should Vote Against Waxman-Markey") gets things dead wrong. Although much of his piece is open to debate, I wanted to focus on his analysis of costs vs. benefits in the Waxman-Markey climate bill, otherwise known as the American Clean Energy and Security Act (ACES). It's useful to understand the context of the various "numbers" getting tossed about, and vital to focus on the benefits of ACES as well as associated costs.

Manzi's piece outlines a number of reasons why ACES is "contrary to the public interest", beginning with his thoughts on the lack of value it provides:

[ACES] would be a terrible deal for American taxpayers. According to the Environmental Protection Agency, it is projected to impose annual costs of about $1,100 per household (a little less than 1% of total consumption) by 2050. The benefits we will get in return? If the law works precisely as intended, in about one hundred years we should expect surface temperatures to be a about one-tenth of one degree Celsius lower than they otherwise would be.

First, this distorts the EPA analysis, which actually demonstrated that the cost of ACES would be very low on a household basis. The annual cost estimate that Manzi uses ("$1,100 per household by 2050") is inaccurate as it ignores the need to discount this amount to arrive at its value in today's dollars. If one uses the appropriate net present value estimate (which is what the EPA calculated and reported) the average annual cost to households is $80 - $111 per year...less than 10% of $1,100 quoted. Secondly, and more broadly, the EPA analysis is a cost-effectiveness analysis, not a cost-benefit analysis. As such, the benefits of reducing GHG emissions were not measured in this analysis and accordingly do not filter through to any discussion on household consumption decrease. Finally, Titles I, II and IV in ACES were not modeled in this EPA scenario, meaning ACES's myriad renewable energy and efficiency measures were not taken into account. These provisions are designed (among other things) to drive investment towards energy efficiency and renewable energy which will mitigate future impacts from a carbon price, and ultimately reduce the total costs of transforming to a low-carbon economy.

More importantly, the benefits of ACES are much more significant than the narrow frame of one temperature statistic cited by Manzi (which was arrived at by modeling what would occur if the U.S. was the only country ever to pass climate legislation and assumes no other global action whatsoever).

In fact, there is considerable economic value associated with ACES. Noted economists such as Larry Summers and Sir Nicholas Stern, and Nobel Prize winner Joseph Stiglitz have argued for the long-term benefits of energy and climate policies (h/t Laurie Johnson). The various clean energy provisions included in ACES will redirect trillions of dollars of investment with benefits for American industry and workers. ACEEE, for example, just released an analysis indicating that the energy efficiency provisions in ACES would save households $1,050 by 2020 and $4,400 by 2030. Two new studies demonstrate the potential for 1.7 million new jobs most of which could be accessed by low-income workers.

And of course - there is perhaps the most important benefit in addressing climate change: reducing the risk of the potentially catastrophic economic, environmental and social costs of climate change. The Congressional Budget Office recently released a study that portrayed devastating environmental and social damage to the U.S. from runaway climate change, and perhaps more germane to this blog, estimated a 3% loss in real adjusted GDP by 2100.

Finally, Manzi also argues that we need to stop focusing on capping carbon, and more on government funding of research into clean energy. In the comments section of his piece, Manzi states:

If there is a real, though unquantifiably small, possibility of catastrophic climate change, and if we would ideally want some technological hedges as insurance against this unlikely scenario, and if raising the price of carbon to induce private economic actors to develop the technologies would be an enormously more expensive means of accomplishing this than would be advisable, then what, if anything, should we do about the danger? One obvious approach is to have the government fund technology research directly.

In fact, there are several provisions within ACES where the government is funding (or driving allocations) towards cleantech RDD&D (research, development, demonstration and deployment). Subtitle D in Title I of ACES provides 10% for State Energy and Environment Development (SEED) funds which will drive anywhere from $5-10 billion in each of the next 10-15 years for investment in energy efficiency and renewable energy by states. There are the allocations given to transportation (1%-3%), energy efficiency (4.5% to 9.5%), and CCS (2%-5%). Additionally, long-term innovative research initiative ARPA-E will now receive a full 1% of allowances (with another 0.5% going towards other clean energy innovation programs). This means additional billions provided for high-risk, high-reward, transformational clean techresearch.

Bottom line - there are extensive economic and environmental benefits encouraged by the American Clean Energy and Security Act, which is one of the many reasons why this bill should be supported.

PV Stats from California

2009-06-17T15:24:00Z

Came across some PV data on the CEC (California Energy Commission) website that I thought worth sharing.

Forecasting based solely on historical growth rates typically leads to overaggressive and mostly inaccurate results absent learning rates, annual and cum capacity limits and other constraining assumptions (especially in light of current market conditions for renewable energy), but a quick look at a couple of CAGRs from this data is still interesting.

Cumulative capacity growth rates for PV solar in CA:

1998-2008 – 53% CAGR
2003-2008 – 50% CAGR

Annual Growth Rate:

2000-2008 - 78% CAGR

If cum capacity growth rates were to maintain their CAGR of the past 10 years, California would have 3.7 GW installed by 2013, and 30.7 GW installed by 2018. If annual growth rates were to maintain CAGR of past 8 years, California would have 6.6 GW installed by 2013, and 115 GW installed by 2018.

Of course, maintaining this kind of growth rate is extremely difficult past a certain cum installed capacity (ask any maturing industry), and highly unlikely. I put together a quick chart on growth rates in various technologies a few months back that demonstrates this (breakdown of years into categories is of course highly arbitrary):

Still, the CAGRs in California demonstrate the the incredible PV solar growth being seen there …as well as the fact that we’re approaching a large enough installed base to where even partially maintaining these kinds of growth rates would result in very significant solar deployment.

Climate Change and Clean Energy in the President's New Budget

2009-02-26T22:27:27Z

Today, President Obama’s new budget was officially released. Those interested only in the energy provisions can skip here, although a look at the actual draft budget is extremely informative.

As usual, more industrious and well-connected sorts have beaten me to the punch: the Washington Post discusses expected auction revenues from cap and trade, and more generally covers the entire budget, while the Journal focuses on the tax hit to oil companies in print and online, and Gristmill has typically excellent coverage.

Before starting, it’s important to keep in mind that this budget is just an outline, and a more specific budget will be presented to Congress in Spring. Therefore, any details are sketchy and should be interpreted as such.

Much of what’s been written about this budget has so far focused on the inclusion of carbon credit auction revenues beginning in 2012. Essentially, under the model proposed by the President, 100% of carbon permits would be auctioned off to carbon emitters, and the revenue generated by these auctions (approximately $79 billion in 2012) would be annually allocated by the Federal government towards a combination of “dividends” back to consumers, and clean energy investment.

In this specific budget, $15 billion would be allocated annually towards clean energy investment, while the rest of the auction revenue (starting around $64 billion) would be refunded back to consumers to offset higher costs brought on by establishing a price on carbon emissions. Gristmill (and earlier) and TNR go into great detail on the pertinent aspects of this inclusion, namely that this is a fairly low aggregate figure for emission value, and assumes a low carbon price, and that the emissions reductions targets are fairly weak and will not reduce emissions as quickly as needed.

On the bright side, the inclusion of carbon auction value in the budget, with a carve out for clean energy spending, is a big step forward in federal climate policy. In addition, beginning with a 100% permit auction is an excellent starting point for negotiations with carbon emitting industries.

NRDC has embarked on a comprehensive, multi-program study of cap-and-trade, which we refer to as “Cap 2.0 – Cap and Invest”, and I invite you to read our proposed policies here (policy briefs located here), which go deep into the weeds on spending allocations, carbon trading and other intricate aspects of cap and trade policy.

Beyond the issue of auction value however, other details of the proposed budget are extremely interesting.

Limited Additional Funding for Renewable Energy Deployment

At first glance, it seems that a lot of the heavy lifting for immediate renewable energy funding has already occurred via the Stimulus bill. While the President's budget outlines $150 billion in clean energy investment over 10 years, this funding isn’t slated to begin until 2012. In addition, this assumes that cap-and-trade legislation can be passed in a manner which provides this level of funding, and that it can be passed this year, in order to meet the 2012 deadline.

As it is currently presented, outside of $50 million for renewable energy investment on Federal lands via DOI and a mention of new loan guarantees, no real specifics are provided in terms of funding or programs. Further, DOE funding is elevated by a one-time $7.5 billion bump for the auto bailout this year. Excluding the Detroit bailout package, 2009 DOE funding is projected to increase by 9.5% and then actually slightly decrease in 2010.

That said, many times in the budget, the President promises to “build on” what was provided in Stimulus Act, and references providing support for technologies such as CCS, smart grid, energy storage, biofuels, energy efficiency and renewable energy. And as I referenced in a previous blog, the Stimulus was an exceedingly strong bill for the renewable energy industry. Still, while the President’s budget includes very positive language about clean energy, I'm curious to see what the actual quantification of further federal spending on clean energy will be this year and next.

Innovation Gets a Big Boost

Funding for innovation continues to increase, which is a welcome, and important, development. (you could also read more about my thoughts on innovation funding through cap and trade here.) The Stimulus already provided new funding for domestic research and development, and the President’s budget continues that investment:

Making the R&D business tax credit permanent – this has long been an ask of entrepreneurs and early stage technology investors. According to research, private sector spending on R&D matches increases in the tax credit 1 to 1. While this type of credit can’t (nor should) be directed towards specific technologies, it will offer companies more security and stability to plan for longer-term R&D.
Increase in funding for NSF – In addition to increase from the Stimulus, an additional 16% bump is planned for NSF. The NSF spreads its Federal funding across science and engineering fields on small, basic science projects, looking to encourage transformational and multi-disciplinary fundamental research. NSF is well-regarded and plays a vital role in backing basic research that receives little private investment, funding 20% of federally-funded research at American universities and colleges. It also helps develop the next generation of scientists and researchers. This is a welcome increase in innovation funding.
Increasing funding for DOE Office of Science – Via the Stimulus and this budget, basic energy science research at DOE Office of Science is expected to double over 10 years. Office of Science funding is almost exclusively allocated to the national labs which represent one of the largest scientific research systems in the world. This is similarly a very important request, and will be key in helping to move basic clean energy research into more commercialized realms.

Eliminating Oil Subsidies

Finally – the President’s budget seeks to eliminate several oil and gas tax breaks, along with a deepwater R&D program. In addition to this article, the WSJ’s blog has a good overview of what this all means. For those interested in a wonkier route, I recommend Doug Koplow’s Earth Track website for a deep dive into energy subsidies. According to the two Journal articles, the repeal of these subsidies is expected to raise over $30 billion in revenue. However, I would argue that by removing unfair subsidies from mature energy technologies such as oil and natural gas, this levels the playing field for emerging renewable energy technologies. While plenty of subsidies still exist for mature positive fossil fuel technologies, this too is a positive first step.

It is still early days for future climate and energy legislation. And while this budget is just a rough outline, it provides an interesting look into one possible future that is exceedingly bright and shiny for U.S. based clean energy.

Renewable Energy Provisions in the new Stimulus Package

2009-02-17T21:54:52Z

Given that President Obama signed the Stimulus bill in Colorado yesterday (after touring a solar facility), I thought it might be useful to discuss some of the major renewable energy provisions within the Stimulus package, and provide some detail as to their impact and potential usefulness.

A helpful summary can be found at the House Appropriations Committee site, while two detailed summaries of the compromise appropriations and tax measures are also available. Other perspectives on various aspects can be found here, here, here, here and here (last one subs. required). This post will only focus on the renewable energy provisions in the Stimulus bill that I worked on. My colleagues are commenting on other energy relevant sections here.

The bottom line: this is an excellent bill for the renewable energy industry, and would be considered momentous were it not for the immense economic challenges we face. Major barriers were addressed and funding was increased dramatically for several important technologies. While no policy is perfect, considering the alternatives, and the recent past, this is a big step forward into a new clean energy future.

Grants in lieu of renewable energy tax credits: (see here for my previous post on this topic) This provision allows project developers (or associated parties) to receive a upfront grant (equal to the 30% ITC) in place of current production or investment tax credits. With the tax equity market for renewable tax credits essentially frozen, and an increasing number of developers and funders pulling out of projects, the renewable energy industry was desperate for a short-term approach that kept capital flowing (or at least drifting). By expanding the potential investor pool, and providing a mechanism to bypass the tax equity freeze, this should free up capital for some of the shovel-ready projects sitting on the sidelines.

There are a few points worth expanding on here. This grants program should reduce the cost of development somewhat as the monetization of tax credits required a high rate of return, whereas monetizing grants among a much larger pool of investors should theoretically reduce those rates. However, there may be a learning curve required in reaching new investors, and in devising new capital structures to take advantage of these grants – which could limit the near term impact of this bill. Interestingly, management of this program switched from the Department of Energy (which has been criticized for its management of the Loan Guarantee program) to the Treasury Department, which it would appear is much more familiar with quickly pushing money out the door. Of course, crafting the guidelines for this new program, staffing up and then administering the grants could be extremely challenging – especially given the 60 day time limit from receipt of an application of a grant to its processing.

Another interesting modification involves the timing. The Conference version of the Stimulus bill changed the timing of this program from the requirement that the project had to be “in service” by the end of 2010, to “construction must begin” by the end of 2010, and “be completed” by end of 2012 (wind) and 2013 (for section 45 technologies) and 2016 (for section 48 technologies). This timing delay had been pushed as a necessary requirement for projects with longer lead times (e.g. concentrating solar power), but it seems to open the door for a much longer program than expected or perhaps required. Also, a lot of projects may start construction to position to take advantage of this program, but may find it difficult to actually reach completion.

Extension of Production Tax Credit for 3 or 4 years: There had been a prominent push by the wind industry (which receives 97% of the total PTC allocation) to extend the PTC for several years. The PTC has provided a valuable production incentive in the past decade, but historically, fights over its extension had muted its year-to-year impact. With over 8 gigawatts of wind capacity added last year alone, maintaining momentum was important. Although, the PTC isn’t effective in today’s economic climate, providing things turn around, the extended PTC will give investors security, and continue to drive extensive development. The PTC will now be available for wind through the end of 2012, while other Section 45 technologies (e.g. biomass, geothermal, landfill gas, waste-to-energy, and marine renewable) can utilize the PTC through 2013. This provision is expected to be cost $13 billion over the next 10 years.

Temporary election to claim ITC in lieu of PTC: This allows developers to claim an ITC instead of a PTC and was an additional measure passed to help boost short-term funding availability for the renewable energy industry. The argument was that some tax equity investors might be more willing to utilize an upfront investment tax credit, instead of a long-term production tax credit. While this is to some extent true, most investors I’ve spoken with were cautious as to this provision’s impact. The investment tax credit market has tended to require a higher rate of return, and has also been experiencing some of the same conditions as in the PTC market. Further, the ITC market has fewer, smaller investors than the PTC market, and may at first not efficiently manage the influx of tax credits from new developers of other projects. Additionally, for more mature technologies or large-scale projects, an upfront ITC can be less economical than a 10 year PTC. Therefore, while we can expect some benefits from this provision, the grants provision remains much more important to future renewable funding.

Removal of caps in residential ITC for qualified technologies: dollar caps for tax credits on residential installations of small wind, solar water heating, and geothermal heat pump technologies were removed. These technologies now join solar electricity as qualifying for a 30% residential credit without dollar caps. Previously these dollar caps were $4000, $2000 and $2000 for wind, solar heating and geothermal respectively. To date, these technologies have seen mostly limited growth, due to cost, resource availability and limited consumer interest. Coupled with other incentives, the removal of caps may kickstart demand for these technologies.

A separate provision in the Stimulus bill eliminates the cap on small wind for the 10% business energy credit, and eliminates a rule that reduced the value of the business ITC credit if the project was developed with subsidized financing.

Additional $1.6 billion in CREBs funding: Public utilities, munis and co-ops can finance Section 45 renewable projects through special bonds (Clean Renewable Energy Bonds) that are subsidized by the government to provide tax credits in lieu of interest. The bill authorizes an additional $1.6 billion of new clean renewable energy bonds to finance new renewable facilities, which would triple the amount of available CREBs funding. Historically, applications for CREBs have been heavily oversubscribed, so this increase is welcome, although given the current challenges in locating tax equity investors, investor response to take advantage of this additional funding may be delayed.

$6 billion for renewable energy project loan guarantees: In addition to removing the $50 billion in loan guarantees for clean energy projects that could have been utilized by mature technologies such as nuclear, the conference version of the Stimulus bill also provides $6 billion for renewable, biofuels and electricity transmission projects. As aforementioned, the existing DOE loan guarantee has been criticized for not distributing funds quickly. This new provision could face similar challenges. Further, to be most effective, it will be important to ensure that early-stage, higher-risk projects can access this funding. Providing subsidizing financing to maturing technologies that have already demonstrated their value and risk profile to the investment community is not an effective use of funds.

30% tax credit for manufacturing advanced energy property: A new 30% tax credit has been established that will assist facilities seeking to manufacture “advanced energy property” (which includes renewable energy, energy storage, energy conservation, renewable fuels, efficient electricity transmission and distribution, and CCS. $2.3 billion was allocated for this program. It is hoped that this allows manufacturers, facing difficult economic headwinds, to supply new clean technologies for growing U.S. demand. This would preserve American manufacturing jobs, leverage American ingenuity and innovation, ensure domestic access to new technologies, and take advantage of global trends towards clean energy.

Billions for new R&D investment: Among our Cap 2.0 policies, NRDC has advocated for significant new federal investment in energy RD&D. It is exciting to see that a number of the measures we call for in our policy brief have occurred in this stimulus, including increased funding for EERE across several technologies, for DOE Office of Science, for NSF and for ARPA-E. Basic science research (via the Office of Science and ARPA-E) received $2 billion, while EERE received $2.5 billion (with special focus on geothermal and biomass). DOE Office of Fossil Energy received $3.2 billion, which was mostly allocated for CCS innovation.

In addition to the above, tens of billions of dollars were provided for efficiency measures and greening buildings, batteries, vehicles, transit and other transportation-related technologies, smart grids and transmission, and various state energy programs. Again, my colleagues are commenting on these provisions here.

The new Stimulus bill represents a sizable down payment in a clean energy future. While not perfect, it offers enough incentivizes, provided the economy cooperates, to encourage an abundance of clean energy innovation and deployment.

Restoring the Effectiveness of Clean Energy Tax Incentives through the Economic Recovery Bill

2009-02-11T13:48:55Z

One can be forgiven for fearing the demise of our clean energy industry. Recent headlines spell out the rather dour mood in the clean energy sector: “Will Green Energy Wilt from Lack of Funds?” asks BusinessWeek while the NY Times predicts “Dark Days for Green Energy”. But a solution may be at hand if the House and Senate can both agree to include a House “grants” provision in the final stimulus bill. NRDC’s factsheet on this critical proposal can be found here. Read below for more detail

The main constraint to current development (aptly spelled out in the articles above, but also elaborated on in much wonkier detail in two excellent interviews here, and in this Hudson Clean Energy presentation) is that much of the funding for renewable energy has dried up, which is causing renewable energy development to plummet, and already leading to layoffs in the sector.

The reason for the sudden disappearance of capital investment is complicated, but a direct result of our recessionary economy. Essentially:

Prior to our current economic crisis, federal tax credits were the key drivers of renewable energy development, by providing cost-reductions through either upfront investment credits or long-term production credits (depending upon the technology).
In order to get projects built, renewable developers would monetize these tax credits by exchanging them for upfront funding from tax equity investors. In turn, they used this funding (and various debt/equity structures) to build their projects.
Unfortunately, in the current economic climate, mounting business losses, especially among traditional tax equity investors such as financial institutions, have eliminated current tax liabilities. This, in turn, has greatly reduced the appetite for clean energy tax credits.

According to the Hudson Clean Energy presentation referenced above, from $5.4 billion in transaction volume in 2007 among 20 investors, the current tax equity universe now has only a few investors and has shrunk dramatically. Without the ability to monetize those tax credits, most renewable energy developments simply won’t get built.

The timing is unfortunate, to say the least. After decades of underachievement, renewable electricity was falling in cost and coming on-line in ever larger amounts. Last year, the wind industry installed over 8,000 megawatts, accounting for 42% of all new installed capacity last year, while adding 35,000 jobs. PV solar, while smaller in aggregate than wind, had increased installed capacity at an over 50% annual growth rate for several years running. Meanwhile, geothermal energy has around 4,000 MW and CSP up to 6,000 MW in various stages of development.

To try to overcome these new capital constraints, the renewable industry had until recently been pushing Congress to make these energy tax credits refundable in the short-term, which would avoid the need for tax equity investors entirely. Concerns over precedent, and inappropriate use of the tax code scuttled that proposal, but a solid and rather ingenious compromise had seemed close at hand. In its version of the stimulus bill, the House had proposed a renewable energy grants program which would provide grants to renewable energy projects put in service in 2009 or 2010, in place of the authorized tax credits.

However, the Senate stimulus bill does not contain this renewable energy grants program, but instead relies on other proposals already in the House bill, such as extending the production tax credit, investment tax credit electability and an increase in funding for CREBs (subsidized renewable energy bonds). While each of the latter proposals is good policy, none will provide the necessary kickstart in funding that the renewable energy industry so desperately needs.

This leaves the renewable energy industry is a difficult position, as the fate of this grants program depends entirely upon what comes out of the final stimulus bill (currently being negotiated by the House and Senate).

I’ve co-authored a fact sheet that lays out in much greater detail our argument for the grants program. In short – grants could expand the potential investor pool, and provide immediate results by freeing up capital for many shovel-ready projects currently on the sidelines. Moreover, the cost of the grant program is actually minimal because the cost of the tax credits has already been incorporated into the federal budget.

Given the recent success of the renewable energy industries, after decades of struggle and investment, it would be a grossly inefficient waste to allow this industry to succumb to current economic pressures. The House grant program builds on our existing tax-based financing mechanisms, and will go far in maintaining the health and future growth prospects of our clean energy economy.

Solar Investment Patterns Show Several Regional Differences

2009-01-12T15:51:14Z

Those interested in investing the solar industry may want to check out a recent NREL report on the topic: “A Historical Analysis of Investment in Solar Energy Technologies”.

The report analyzes global investment growth patterns in order to shed light on how the solar industry is developing, and offer a hint of future developments over the next few years. It’s an information-packed read. I will try to summarize some of its conclusions and tease out a few additional thoughts below, although I recommend a full read of the report for those interested.

Global Solar Investment

It may not be news to anyone following this space, but the numbers in this report provide ample evidence. Over the past 8 years, growth in solar capital investments (VC, PE, debt, public equity and M&A) has been astounding, rising from $66 million in 2000 to $12.4 billion in 2007.

[all charts taken from NREL report linked above]

The period from 2004 to 2007 saw almost 20-fold growth alone. Per the report, 2 main drivers have caused this explosion in growth – increasing demand for all things solar and a readily available supply. First, projected cost reductions of solar technologies have been increasingly accepted by a growing mainstream of investors, entrepreneurs and policymakers. These cost reductions point to a form of grid parity in the near future (on at least a retail basis, given location specific planning) and thus, the possibility of an extremely large market for solar. This conclusion has drawn extensive interest from all types of investors. Second, 30 years of solar R&D has provided (finally) sufficient availability of market-ready solar technologies.

As seen above, most of this global investment increase has been through public and private equity and VC. U.S. investments (chart not shown) demonstrate a similar pattern, with 2007 investment now at $3.2 billion. U.S. government solar R&D spending, which had represented 50% of total investment in the U.S. solar sector from 2000-2004, now accounts for less than 4% of total investment. Given this surfeit of private investment in solar (with accompanying innovation potential) it is important that we be as targeted and strategic as possible about where government solar R&D spending occurs.

Venture Capital Investments

An review of recent global VC investment in solar offers additional insights. First, solar continues to receive the majority of cleantech VC, which points to a potentially large pipeline of future solar innovation.

However, given the longer timelines of traditional VC investment (exits not expected for up to 8-10 years), the results of this solar investment may not hit the market for another several years.

Investment by Region

Regional differences in investment could have far reaching consequences for the development of the solar industry. As seen below, most VC investment is occurring in the U.S., while Europe and Asia are seeing mainly private equity capital. In other words, Europe and Asian investments in solar are being made with an eye towards the now, while U.S. investments are happening with an eye towards the future.

Private equity investment has been especially concentrated in Europe. This has been used to build a solid solar manufacturing base in order to respond to increasing European demand for solar (brought on by generous incentives and high electricity prices). Asia has similarly concentrated on manufacturing. By comparison, most U.S. investment has been through venture capital.

This could have significant ramifications in the next 10 years. While the next generation of solar technologies has a greater likelihood of emanating from the U.S., we will be at somewhat of a disadvantage in bringing these technologies to scale relative to the Europeans and Asians. Given the “green jobs” goals of current proposed legislation (stimulus, climate and energy) in the U.S., this may be something to watch.

It is also informative to see which technologies current investment is being targeted towards:

Here, the regional focus is even more striking. Note that Asian investment is primarily for manufacturers of crystalline silicon PV, while Europeans have focused exclusively on c-Si PV and polysilicon production. The U.S., especially in the past 2 years, has invested in a broad range of mostly next generation solar technologies. Again, this seems further evidence of the conclusion presented above – that Europeans and Asians are on the whole investing for the now, while the U.S. is focused on the future. Of course, this does not preclude Europe or Asia from future investment in solar innovation. But it does indicate that demand for solar must remain high in the foreseeable future for these U.S. investments to bear fruit.

Solar Millionaires?

Finally, it is worth looking at the extreme differences in public equity valuations for photovoltaic solar stocks compared to other clean energy companies.

The chart above compares a PV solar index (PPVX) with a broader clean energy index (NEX) and the S&P 500. Unfortunately, current valuations are not available in this report, but it is definitely worth considering that with each index set at 100 in 2004, investment in solar would have provided a 20X return, compared to 3X for a collection of clean energy stocks and 1.3X for the S&P 500. Whether this is a good or bad sign (ie demonstrating the tremendous opportunity of solar, or a huge bubble), I leave to the experts.

Recent solar and smart grid news

2008-08-25T23:59:06Z

Just some quick thoughts on news that has been piling up over the last couple weeks.

San Francisco Solar Map Lets You Spy on Your Neighbor: Treehugger informs us of the truly epic SF solar map, an example of an important and technologically-savvy step in addressing the multi-faceted information barriers limiting the installation of solar. Using Google Mapping technology, you can explore PV systems installed to date in San Francisco, or determine the potential capacity and cost of installing solar on your own roof.

Giant Retailers Look to Sun for Energy Savings: covers the efforts of Wal-Mart, Kohl and others utilize their massive roof space for solar panels. The potential expiration of the solar tax credit at the end of this year is apparently speeding up project timelines, but some interesting quotes and numbers from the specific retailers. Also worth noting new installations at General Motors (1.2MW), Atlantic City Convention Center (2.36MW),

Shopping for cleantech at Ikea: Ikea plans to invest 50 million Euros in various clean technologies, all under the guise of increasing the availability of these technologies to Ikea customers. That said, each technology investment category appears to have very specific green building applications.

Federal Lab Breaks Efficiency Record With 'Mismatched' Solar Cell: NREL efforts to increase efficiency point to the value of public sector R&D investment. Within the article is the note that the Department of Energy plans to spend an additional $24 million developing “breakthrough” solar products. For what it’s worth, this compares to the $700 million that venture capital firms invested in solar in the first half of 2008.

IBM to prime pump for smart-grid start-ups: IBM has long been interested in smart grid technology and the power of networked electricity infrastructure, for obvious competitive reasons. This article references IBM’s efforts to create a common platform for smart grid technologies (with the hope of essentially simplifying communication and integration protocols between utilities and smart grid tech). Within this interview, the co-founder of an IBM venture capital initiative provides additional context for IBM’s smart grid strategy.

New Energy Finance Predicts 43% Solar Silicon Price Drop: the numbers range depending on the source from 20% by some investment bank analysts, to 30% by experts I’ve spoken with, and now 43% from NEF. Bottom line, the price for silicon used in solar panels is expected to drop dramatically in the next 6 months to a year (especially if Spain follows through with its 300MW cap, and the US solar ITC isn’t extended). While this will have far-reaching ramifications on the nascent (but fast-growing) solar industry, the overall solar PV value chain is fairly long, and it could take a while for the drop in prices to filter through to the end price of a solar system.

Good and bad news in recent WSJ/NBC energy survey

2008-08-21T19:32:19Z

Here are some interesting highlights from this WSJ/NBC poll on energy, which also points to some of the frustrations ahead in developing and communicating policy solutions.

72% of the respondents said developing alternative energy sources could "accomplish a great deal."

Regarding the question, “which step that should receive the most emphasis from policy makers”

61% of respondents chose "developing alternative energy sources"
25% responded that "exploring and drilling for oil" in the U.S. should get the most emphasis
12% picked "having Americans conserve and use less oil."
When asked whether expanding areas for drilling for oil off coastal states was a step in the right direction:
63% said yes, with 44% saying it would accomplish "a great deal."
27% said that allowing more drilling off coastal states was a step in "the wrong direction."
Asked about building more nuclear plants:
53% said it was a step in the right direction
31% said it was a step "in the wrong direction

Unfortunately, this poll is as much a measurement of the limits of consumer awareness and knowledge about energy as it is a measurement of voter support for specific policies. While there is some good news concerning the strong support for developing “alternative energy” sources, as this was the top priority for most respondents, the overall tone of responses points to the challenges ahead.

Improving energy efficiency in buildings should be leading any conversation on energy policy, given the scale of possibilities to reduce energy demand found in energy efficiency. Data from the Energy Information Administration (EIA), show that electricity consumption by U.S. buildings (residential, commercial and industrial) accounts for 71% of all U.S. electricity consumption and 36% of all greenhouse gas (GHG) emissions.

Improving energy efficiency in our homes and workplaces (changing lighting, weatherizing, buying energy efficient appliances and electronics devices, reducing vampire power) is widely acknowledged as one of the best ways to reduce overall electricity usage (and in fact oneof the cheapest). The recent McKinsey study “How Much at What Cost” found that improving energy efficiency could reduce U.S. power generation needs by 24% off of projected levels and reduce greenhouse gas emissions by 710-870 megatons – about 20% of the overall GHG reductions needed by 2030.

Yet, outside of a question on conservation, reducing energy demand in buildings is nowhere in this poll, and most likely not top of mind among average voters.

This poll is also a measure of the success of various interest groups in swaying public opinion and belief. 63% voters in this poll support expanding offshore drilling and another third believe opening the Arctic to exploration would accomplish "a great deal".

Yet two recent government studies completely contradict the argument that drilling offshore or in the Arctic would impact energy prices and domestic oil supply

A recent EIA study of the impact of Arctic drilling on the price of oil determined that oil production couldn’t even begin for another 10 years, and that the impact on pricing would reduce the price of a barrel of oil only $0.41 to $1.44 (depending on the oil output scenario), a reduction of 1% off today’s prices.

A separate EIA report on offshore drilling found that “access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030” and produce only 200,000 incremental new barrels of oil per day (bpd) in 2030. As my colleague Andy Stevenson pointed out, drilling offshore would achieve one quarter of the 800,000 bpd reduction in demand that we have seen simply from American drivers driving less this year due to higher gas prices. And yet still, the idea persists that we can somehow drill our way out of this problem.

Several times, the Journal article analyzing the poll makes direct reference to “voters wanting everything”. I see it differently. Voters want solutions, but unfortunately, in trying to decide between solutions, voters have a very limited knowledge base to work off. Worsening matters, voters are being bombarded with misinformation campaigns and partisan bickering which isn’t giving them enough information to go on and isn’t moving the national conversation forward.

In one chapter of “Energy and American Society: Thirteen Myths” (a book I highly recommend), Rosalyn McKeown quotes a variety of surveys and polls to detail how consumers are consistently and deeply uninformed about their energy consumption, the sources of electricity and the negatives inherent in traditional energy production. This in turn can lead them to make poor decisions, and resist new technologies due to a variety of social and other non-price barriers.

Our current national conversation is doing little to change this fact, leaving voters with one choice – “give us everything so we don’t have to choose and surely one of them will have to work.”

Unfortunately, this could be the most expensive, least efficient energy policy we could pursue, at a time when we can least afford to be either.

Wrap-up of Yesterday’s National Clean Energy Summit

2008-08-20T20:42:17Z

Yesterday, I attended the well-publicized National Clean Energy Summit in Las Vegas. Launched by Sen. Harry Reid, the Summit was held to focus attention on the importance of developing clean energy solutions that can positively impact our economy and energy security and help combat climate change. The lineup of speakers featured a host of experts, politicians, environmentalists and clean energy enthusiasts, including the aforementioned senator, the governors of Utah, Arizona and Colorado, Congresswoman Solis, and NYC Mayor Bloomberg, along with prominent clean energy advocates such as T. Boone Pickens, Bob Rubin of Citigroup, and Dan Reicher of Google. A good wrap-up of the summit can be found here. My opinions follow below.

The core message: a new clean energy economy promises a virtuous triumvirate – job growth, climate change benefits and improved energy security. And with 25 separate speakers, it was a message repeated again and again (and again…and again). Still, it was a strong and powerful framing device, especially given our current economic, environmental and energy challenges.

Other themes mentioned consistently by most speakers:

We need to pass a long-term, comprehensive national clean energy policy immediately, but this will require much more political will and leadership than we’re currently seeing.
Eliminating our dependency on oil is imperative, but extremely challenging
Increasing energy efficiency and reducing energy demand is a top priority, followed by accelerating large-scale, long-term build-out of clean energy supply
Five national policy prescriptions that must occur (the uniformity of these recommendations across almost all presentations was notable):

Extend renewable energy tax credits
Pass a renewable energy standard and energy efficiency standard
Pass cap-and-trade legislation
Significantly improve and invest in transmission grid
Boost spending on R&D

Lots of good moments, but some frustrating as well:

Highlights:

T. Boone Pickens: gave a strong presentation focusing on his highly-publicized plan to reduce our reliance on foreign oil by replacing gasoline-powered cars with natural gas autos, and installing enough wind and solar power to make up for the natural gas reductions. Under this plan, we could reduce oil imports by 38%, while wind would provide one fifth of our national electricity needs. His presentation was clear, concise and funny (even if it grossly oversimplifies certain issues) and extremely well-received by the audience. A few more thoughts from T. Boone:

Focusing on electric cars as a short-term solution is unrealistic (hence the need for natural gas as a “bridge” fuel to the next generation of cars), but in the long-term, he expects hydrogen or electric cars to supplant gasoline cars.

Developing natural gas-based infrastructure for transportation isn’t as difficult as perceived, if one starts with our national trucking fleet, which has high turnover and represents 30% of transportation.

The media budget for this campaign is $58 million (funded entirely by T. Boone), and the primary focus right now is on elevating U.S. energy conservation and educating customers

Tone of nonpartisanship and bipartisanship: in an event sponsored by the Democratic Senate Majority Leader, and the Center for American Progress, the event had very few partisan moments. Many Republicans had prominent speaking slots (T. Boone Pickens, Gov. Huntsman of Utah, Mayor Bloomberg) and if anything, expressions of frustration over a lack of national leadership were decidedly bi-partisan. As the development of climate change and clean energy policy solutions will require considerable bipartisan support, it was encouraging to see that tone set in this conference.

Achievements of individual states: presentations by state leaders from Nevada, Arizona, Colorado and Utah demonstrated how much a motivated state government can achieve in terms of boosting clean energy and reducing energy demand. Nevada is installing a number of ground-breaking solar, wind and geothermal facilities and employing innovative public-private sector partnerships. In Arizona, all new government buildings must be LEED certified, and, similar to Nevada, a combination of RPS and incentives is boosting clean energy installation rates dramatically. One innovative Arizona program trains inmates in solar installation, by converting prisons to solar power. Utah and Colorado demonstrated similar efforts as well.

Emphasis on Federal government leadership with complementary state-based efforts: many presenters lamented the lack of Federal leadership on the issue of clean energy, while focusing on the specific and unique areas where state government efforts can be powerful. What this mounting frustration accomplishes remains to be seen, but it is important that the future national conversation blends both of these concepts – the importance of strong Federal support and the value of targeted and achievable state policies.

Strong presentations from Dan Reicher, Van Jones, Mayor Bloomberg: Each of these presenters added something significant and unique to the conference – Reicher provided Google’s cachet and strategy and announcing sizable EGS (geothermal) technology grants; Mayor Bloomberg gave a scathing indictment on federal efforts (as well as the two presidential candidates), and proposed a study of renewable energy options for New York City (which has the local media in a relative frenzy), and Van Jones gave an amazingly inspirational speech on the power of a green economy to help the poor. Definite personal highlights (along with T. Boone of course)

Uniformity of policy recommendations and outcomes: as described above, with few exceptions, presenters followed a very similar script when it came to policy prescriptions and outcomes from capital redirection into a new clean energy economy (the most notable exception being Mayor Bloomberg’s call for a carbon tax instead of cap-and-trade). This gives the appearance of a bi-partisan and unified front on policies that could be valuable when communicating to the American consumer and voter. In addition, focusing on the “big three” of jobs, environment, energy security that a national clean energy policy can provide is a helpful and concise message in support of clean supply.

Cool Facts: Nellis Air Force Base gets 25% of its power from photovoltaic solar panels…the MGM Grand saved 2.6 million kWh annually (enough to power about 200 homes) just by installing CFLs in their parking garage…developing 2% of the potential geothermal capacity in Nevada via “enhanced geothermal systems” could produce the equivalent of one third of U.S. electricity generating capacity.

Lowlights:

Uniformity of policy recommendations: While there is certainly value in presenting consistent policy recommendations, it would have been nice to hear about some of the most innovative thinking happening in this space. Certainly the five policy efforts described above (tax credits, RES/EES, cap-and-trade, grid build-out and R&D) are imperative to future climate and energy efforts. There was an overwhelming consensus on these five, although Bob Ruben, Dr. David Overskei of Decision Factors, and Jon Wellinghoff of FERC among a few others, tried with some success to inject a little debate on additional options.

However, this reminds me of the famous Henry Ford quote: “If I'd asked people what they wanted, they would have asked for a better horse.” Other countries (e.g. Germany, Japan, Spain, Sweden) have installed far greater amounts of renewable energy than have the U.S., through policy measures ranging from feed-in-tariffs to conservation measures and yet there was no discussion of their successes. The political nature of this event may have played a role in this decision, but I believe it quite possible to plan for the present political reality while discussing new and unique policies for the future, no matter how politically unfeasible they may seem currently.

Lack of California presence: similar to the above, but notable enough to warrant separate mention. Even given the potential politics involved, the most successful state in the nation in terms of renewable energy had no presence at this conference (save one presentation from a California Congresswoman, focusing on national green jobs). There is no better clean energy testing ground than California right now, and it would have been useful to gain insights and learnings from the state.

Unfunny Las Vegas metaphors: “what happens in Vegas…stays in Vegas”. Seven speakers. The same joke told seven different ways. And each time…just…not…funny.

California Utility Explores Large-scale PV Technology

2008-08-19T06:12:31Z

Pacific Gas & Electric, a California based utility, has agreed to purchase 800 MW in solar power from 2 solar companies – OptiSolar and SunPower. This is exciting news for the solar industry, and advocates of clean energy, as it provides some industry-based validation for the potential of solar to serve as utility-scale power. (More on this story here, here and here). A few additional thoughts below:

The two projects represent two different technological approaches – OptiSolar uses thin-film technology, which uses much less silicon per PV panel, reducing cost, but also efficiency (and thus power output) of the system. SunPower utilizes the more traditional crystalline-silicon technology (c-Si), which conversely increases the amount of costly silicon in its panels, but results in much higher efficiency. (Quick overview of the different technologies here). To date, over 80% of solar installations rely on crystalline-silicon technology, but the most prominent U.S. solar companies (e.g. First Solar, OptiSolar) have been focused on thin-film. There are economic and technical reasons underlying the use of either, and PG&E may be hedging its bets by employing both.

Of interest also is the actual solar output from these plants. Solar capacity is typically listed in terms of peak capacity – i.e. the amount of maximum potential power generated from a solar panel at optimal conditions. Solar capacity factors have tended to range in the 17.5%-20% range, meaning that it would take from 5-5.7 MW of solar capacity to provide 1 MW of electricity. From the PG&E press release (and the OptiSolar website), the 550 MW OptiSolar site promises 1,100,000 MWh of power - a 22.8% capacity factor. The capacity factor for the c-Si SunPower site is 25.1% (550,000 MWh from 250MW panels).

In addition, most utility-scale solar power agreements have typically involved concentrated solar power – a different technology that has some storage capacity and increased economies of scale, but requires considerable land use and has been mostly located in remote regions far from where its electricity can be utilized. As reported, this is one of the first large-scale photovoltaic solar deals entered into by utilities, and it could serve as an important stepping stone towards similar deals for utility-scale PV solar. It also represents a dramatic jump in the size of past large-scale PV solar installations, which have come in well under 100MW.

Finally, and perhaps most importantly, these deals come with one large caveat. In the press release, PG&E states:

Both projects are contingent upon the extension of the federal investment tax credit for renewable energy and processes to expedite transmission needs.

Given the current situation in Washington, where the federal ITC for solar is set to expire in December despite numerous attempts at extending it, and build-out of renewable transmission infrastructure has been contentious, this is worth exploration. First, despite industry fears, it seems some solar deals may still get done in this uncertain environment, under the assumption of the ITC eventually being renewed and infrastructure being built. Second, this may unfortunately be increasing the cost of these projects, due to the added risk of this contract provision (and its impact on the cost of debt, insurance and other project costs). Given the need to reduce the cost of the projects to ensure their competitiveness with other generating sources, this is unfortunate. Third, deals of this nature and magnitude will hopefully add to the pressure on Washington to finally reach agreement on both of these issues.

The Line Between Green Business and Common-Sense Business

2008-08-05T15:06:28Z

An article in Sunday’s New York Times describes in intricate detail the impact that increased shipping costs are having on one key aspect of globalization – global supply chains:

Cheap oil, the lubricant of quick, inexpensive transportation links across the world, may not return anytime soon, upsetting the logic of diffuse global supply chains that treat geography as a footnote in the pursuit of lower wages.

Until recently, low fuel prices had allowed companies to ignore shipping costs in favor of reducing labor costs, meaning that wood from the United States could be shipped to China to make furniture, and then shipped back to the U.S. for sale. The fuel and environmental costs of this practice can be considerable. However, in the new era of high oil prices (and other demand-driven inflationary issues), it seems companies are beginning to consider new strategies in the sourcing, manufacture and distribution of goods:

Instead of seeking supplies wherever they can be bought most cheaply, regardless of location, and outsourcing the assembly of products all over the world, manufacturers would instead concentrate on performing those activities as close to home as possible.

The article itself is a complex and informative take on this issue, and well worth a read. However, this article brought to mind another concern I’ve been experiencing, around the growing association of all business initiatives remotely connected to the environment as being “green”. There are a number of environmental benefits to be found in the short-term development (and perhaps long-term trend) of high shipping costs limiting our utilization of global supply chains. But these types of market transformations shouldn’t necessarily be associated with the burgeoning “green business” trend. To wit, near the end of the article:

Global companies like General Electric, DuPont, Alcoa and Procter & Gamble are beginning to respond to the simultaneous increases in shipping and environmental costs with green policies meant to reduce both fuel consumption and carbon emissions. That pressure is likely to increase as both manufacturers and retailers seek ways to tighten the global supply chain.
“Being green is in their best interests not so much in making money as saving money,” said Gary Yohe, an environmental economist at Wesleyan University. “Green companies are likely to be a permanent trend, as these vulnerabilities continue, but it’s going to take a long time for all this to settle down.”

Gary Yohe has been studying climate change for a decade, and this post in no way is meant to call him out. But I believe his comment, and the line above, are relevant to the point I’m making here. One of the challenges facing us in the environmental community, may be learning to distinguish between “green business” (a nebulous and at this stage clichéd phrase) and common sense business strategy that is made with no thought towards environmental impact. While I welcome operational changes that reduce fuel consumption (and associated carbon emissions), and increase local sourcing, do we in the environmental community face some risks in labeling all things that can be construed as having an environmental angle as “green policies”?

For example, in the face of higher shipping costs, a large multi-national company may pursue a number of fuel saving measures. But if those measures are not undertaken with an eye towards reducing carbon emissions, limited environmental impact and improving overall environmental performance, any return to the low fuel prices of the 80’s and 90’s could entail a subsequent re-emergence of those same fuel-intensive practices.

Further, it opens our community up to continued charges of fostering green-washing. A company that brands bottom-line decisions as “green” may not be considering the complexities associated with a long-term sustainability strategy. Thus the follow-on effects of this seemingly environmentally-focused decision could in reality cause significant ancillary environmental damage (think the palm-oil biodiesel push in Europe that increased deforestation in Indonesia in the quest for palm oil). It also clutters the marketplace, pushing out the message and marketing of companies that have incorporated “green business” as a core element of their operating approach, and detracts from what we consider truly environmentally sustainable business practices.

No doubt, we are entering a period of potentially massive economic transformation, where the promise of cheap energy (both for transportation and electricity) and a changing climate force great change in how we conduct business and how we consume goods and services. The private sector will need to manage this new world accordingly, and may in doing so, adopt risk-mitigating practices that also meet the environmental community’s goals. For the reasons outlined above, I believe it is important that we not paint each of these developments with a green brush, but rather save our praise for the truly innovative and environmentally sustainable.

Interest in solar power continues to grow

2008-07-28T21:00:18Z

The rapidity of change in the solar sector (both distributed and concentrated photovoltaic) can perhaps best be measured from the first sentence of the “Introductory Note” found in a July 2008 National Renewable Energy Laboratory report on the concentrated photovoltaic power industry:

“From the time this study was started to the time the report was completed, some of the details were already out of date”

Breathless headlines in just the last couple of days bear this out (all worthwhile reading by the way):

Building-integrated Solar Market Ready to Explode
Solar PV Builds Momentum Across Europe
U.S. Solar Could Surpass German Market by 2011
Tech giants rush to solar power

Over the next few months, as part of NRDC’s Center for Market Innovation, I plan to blog consistently on the far-reaching and ever-changing developments taking place in the solar industry. The structure of posts will evolve over time, but I expect to highlight the most important news items, while drilling down into several core challenges, among them financing, pricing, policy and supply. Unsurprisingly, these issues tend to be related.And so with that, I’ll briefly cover a couple items that I’ve come across recently:

Senate may take another shot on tax extenders (subs. required)

Much attention has been paid on the U.S. side towards extending important solar and wind tax credits (the production tax credit for wind and the investment tax credit for solar) that are set to expire at the end of this year. In the past, the expiration and delayed extension of these credits has resulted in distressing boom/bust cycles in these sectors, and given the resurgence of global interest in these technologies, the U.S. would do well not to fall further behind (in terms of installations, investment and technology development).

In general the PTC (at 1.8 cents/kwh) has been useful in boosting onshore wind development, and the ITC (30% credit on cost of system) has been helpful in increasing some forms of solar installations. Commercial PV installations have benefited most, as they face no cap under the ITC, and commercial entities can typically find a way to take advantage of all the tax credits. Unfortunately, the residential portion of the ITC is capped at $2000. This is too low for all but the smallest PV solar systems. Capping the ITC at $2000 further ensures additional incentive mechanisms (e.g. rebates, additional tax incentives) are necessary for the time being.

Regarding the article above (subs. required):

Senate Democrats are poised to make yet another attempt to move a renewable energy tax package next week, as Senate Finance Chairman Max Baucus (D-Mont.) last night unveiled a new version of the legislation with several sweeteners designed to pull over GOP votes.
The modified version of the $123 billion bill makes no substantial changes to the energy provisions of the tax package, with most of the changes involving the inclusion of a series of items that are generally popular with lawmakers
….
…the bill extends for one year the renewable production tax credit for wind facilities and for three years for facilities such as biomass, hydropower, geothermal and others. The legislation caps the tax credit that can be earned at those facilities at 35 percent of the facility's cost.
The legislation also extends for eight years the 30 percent investment tax credit for solar power and the 10 percent investment tax credit for combined heat and power systems. And the bill extends for eight years the credit for residential solar property and increases the annual cap to $4,000.

The American Council on Renewable Energy has created a useful site collecting various supporting documents in favor of extending the tax credits. GE (which has strong positive exposure to wind) has put together an analysis of the net-positive federal tax value inherent in wind, while Navigant has the counter job/investment loss argument if tax credits are not extended. Both studies are accessible at this site.

There have been a number of attempts this year to pass some version of tax credit extensions, but partisan back-and-forth has scuttled previous efforts. One key challenge in the House has also been finding revenue to pay for the extensions (as the House operates under “pay-go” budget rules). The new version finds offsetting revenue by changing the tax treatment for hedge fund managers and multi-national corporations (more here). Passing this bill in the House, and a version in the Senate remains challenging.

Solar Fact Finding Mission to Germany for Utility Decision Makers Summary Report:

I recently came across this interesting read - highly recommended. The Solar Electric Power Association (SEPA) and World Future Council organized a trip allowing 20+ U.S. utility executives to visit a variety of German utilities, installations, companies, etc., to learn more about the German PV solar and Feed-in-Tariff (FIT) experience. The learnings are summarized in this document, although if you’re pressed for time, the executive summary (pg. 2-4) is still worth your time.

It provides a good overview of the on-the-ground situation in Germany, including their cost of their FIT and the nature of their utility renewables initiatives. Especially interesting was the fact that grid integration has not been an issue for German utilities. Among those utilities with a relatively high solar presence (2%-3% generally, ranging up to 20% on sunny days), utilities reported that this level of solar caused no grid problems.

Also, the report provides a number of interesting facts and numbers on the German FIT strategy. It seems, as perhaps would be expected, that the FIT encourages specific patterns of renewables deployment – namely smaller projects, increased local and community engagement in projects, and multiple investors on individual projects. Overall costs for the FIT remain contained, amounting to anywhere from 2%-6% of a customer’s average electricity bill, while the FIT itself has engendered a strong renewable manufacturing base in Germany and growing amounts of renewably-generated electricity being supplied to the grid (up to 14%)

As always in this space, much, much more to come…