Quote of the week: “To be climate neutral, you have to retire your RECs from the market.”
Eighty-five percent of Libyan oil flows to Europe. Italy and France are Libya's first and second largest customers, China is third. Libya is the world’s seventeenth largest oil producer, with the ninth largest reserve of 41 – 46 billion barrels. Most of this is in the Sirte Basin.
In gross figures, Libya has been pumping 1.8 million barrels a day (mbd), consuming 0.2 mbd, and exporting about 1.6 mbd. Oil has provided for 95% of Libya’s export earnings. The country also has 55 trillion cubic feet of natural gas reserves.
So far, Libya’s oil production has been cut by two-thirds, to about 500,000 barrels per day, with sanctions wiping out exports, and fighting between government forces and rebels. Many oil companies like BP, Royal Dutch Shell, Marathon, and Wintershall, have pulled their workers out of danger and the country. Offshore production in the Al Jurf oil field in the Mediterranean has been shut down.
Libya’s oil production is typically 2% of global production. Experts agree that other countries, notably Saudi Arabia with 12.5 mbd in capacity and only using 8 mbd, can readily increase its production by that amount. At the time of this writing, and after the highest oil prices in two and a half years triggered by “the $10/barrel fear factor” for regional instability, Kuwait, United Arab Emirates, and Nigeria “will assist” Saudi Arabia in fulfilling this OPEC shortfall.
The Rally in the Desert: PACE SOLUTIONS
articipants were energized; it turned out to be just the rally in the desert that we had envisioned. The PACE Solutions conference sponsored by the City of Palm Desert, and managed by EcoMotion, was by all accounts highly informative, uplifting, and action-oriented.
Over 125 strong came from coast-to-coast with representatives from Vermont, Ohio, Missouri, Michigan, DC, Texas, and New York. Californians came from all major metro and from small, determined communities. Those in attendance want solutions. They want concerted action now.
Legal action is well underway; participants were briefed on the eight law suits facing FHFA. Speakers and participants focused on Washington, and the White House, and Joe Biden, who had so vociferously pledged the merits of PACE before the FHFA reversal, and the legislature.
Clearly, legislative efforts need coordinated assistance and PACE Solutions participants are ready to provide it, agreeing with the principles set forth in the Palm Desert Accord. They will continue to advocate and if need be to fight for states’ rights in the definition of public interest, and to use the “well-oiled” assessment mechanism.
Jim Ferguson, the man who made AB 811 happen, was the conference chairman. The conference was his idea, he shaped it in his opening keynote, and then provided substantive direction to the gathering. We’d need a significant campaign to turn this around. His experience in Washington provided great insight: A significant legislative and executive push is required to bring back PACE residential. Fellow keynote speaker, CPUC President Mike Peevey, said that PACE "...was being undermined by unsubstantiated facts and willful ignorance" on the part of the FHFA. Peevey recently got a NARUC resolution approved supporting PACE.
Sonoma is the implementation star of AB 811 and PACE. With over 1,250 retrofits and $42 million in assessments, this program – still wide open to home owners – is proving the PACE concept, and that delinquencies and foreclosure rates are less than homes without assessments. To relieve residential mortgages of the liens, and thanks to higher appraised values of homes with PACE improvements – assessments are being paid off as properties are bought and sold. The Sonoma program is clearly a win-win for home owners, the real estate business, and mortgage lenders.
A short video collage prepared by Versatile Productions highlighted an interesting PACE program in the Town of Babylon, New York. There, the resolve of Town Supervisor Steve Bellone and his crafty and articulate Energy Director, Dorian Dale, have proven a model for financing the weatherization of homes and that provides a savings to investment ratio of 2.
About half the participants at PACE Solutions were focused on PACE Commercial, unimpeded by FHFA. The Clinton Initiative presented its model, as did Ygrene Energy and the U.S. Business Council for Sustainable Development. Many believe that PACE Commercial can cut the path, clearing the same underwriting issues that face residential to prove the PACE concept. The “money panel” brought together experts from public finance – from Stone and Youngberg to Wells Fargo Bank, and a professor from Maryland with specific solutions for subordination. Even a special end-of-the-day session on underwriting was attended by 23 strong.
There was considerable discussion of messaging, and rallying behind PACE Now to make clear the benefits of PACE to legislators on both sides of the aisle. Jobs and economic development were featured; identified as the common denominator and immediate benefit in the PACE Solutions movement. Renova Energy Corporation, a local Palm Desert solar/efficiency installer, now hires 18 thanks to Palm Desert’s Energy Independence Program.
A video greeting by U.S. Representative Mike Thompson provided great optimism that there are level minds on the Hill in Washington on this issue. Thompson pledged to introduce legislation in the next two months to clear the way for PACE to thrive in the residential sector. Representative Mary Bono Mack’s greeting was similarly pointed. She vowed to work for bipartisan support of legislation as well.
The closing panel built on the solutions theme. Participants agreed to work together to overcome the roadblock in Washington. The conference did indeed focus on finding mutually beneficial solutions, ones that will enhance mortgage lenders’ positions while providing jobs, cost savings, and carbon benefits in communities across the country. Now is the time for action.
As for “my buddy” Al Pollard: He was indeed a "no show" on two levels. FHFA’s lawyer’s came to PACE Solutions and said nothing.
Pollard was gracious on the phone, assured me that he is a believer in home energy efficiency retrofits, but provided no justification for his position. He’d be travelling to Mumbai during our conference.
I’d asked him verbally and formally for a representative or statement. At the last minute, and after I’d pestered him considerably, he called and said that he would not do so. “But stay in touch please.”
(If you want more on PACE, the EcoMotion website has videos, a copy of the Accord, and articles to download.) .
Right Hand Forever
The logic of right hand turns is so obvious, that I get less and less excited about this article. Solid waste collection companies have been doing it for years. Does everyone know that it makes sense to turn right as much as possible in life? Some say that your driving life and pocketbook will be better off with three right hand turns over a single left hand turn. And you will be safer and quicker. Some say that the logic prevails only for certain times of day.
Few companies drive 2.5 billion miles a year. In 2005 United Parcel Service scrapped its drivers’ 3*5 route cards and began to implement a $600 million route optimization system. It’s based on a low-tech secret. Every night, it maps out routes for each of its 56,000 drivers. Last year, UPS saved 3 million gallons of gas thanks to this route optimization, featuring right turns and 28.5 million miles saved.
So just what does the right hand turn get you? Less idling at left turns waiting for the light to turn, and increased safety through less turning in front of ongoing traffic. The notion of superhighways which eliminate left turns has been around for 20 years, with a proven documentation of safety.
The TV show Mythbusters got this one: True or false about right turns? Its producers set up a test in San Francisco between a right-hand predominated route and a “logical” route based on store locations in the city. The right-route was 6.8 miles long compared to the logical 5.2 mile route, but consumed only 4 gallons versus the 6.8. Big gas savings: $2.08 versus $3.54 (at $3.12 per gallon). But more time? Yes, 17% more, which valued at prevailing delivery truck driver rates, cost $4.20 more for the right route. Got it?
The U.S. Navy and Green Fuels
The U.S. Navy has announced that it will launch a green aircraft carrier group in 2016 of up to six ships. They will run on green fuel, an algae blend for the ships and mustard seed oil for the aircraft. Navy Secretary Mabus has given the Navy two years to prove the concept, and four years to build the fleet.
According to a Navy spokesman, it has witnessed first-hand the shift from sails to coal, coal to oil, oil to nuclear-powered. It views green fuels as a national security issue. So far, a 50% algae fuel blend has been tested in small, “fast boats,” at the Norfolk Naval Station in Virginia. Navy tests of the mustard seed blend were successful in an F/A-18 Super Hornet jet and MH-60 Seahawk helicopter.
Leading this effort is Assistant Secretary for the Navy for Installations and the Environment, Jacqueline Pfannenstiel, former chair of the California Energy Commission until appointed by President Obama.
TRECS and Additionality
A REC is a unit of renewable energy, typically 1 megawatt hour. TRECs are tradable RECs. To some they are vouchers for polluters, to others they have been proven to be a very useful market tool.
We tend to think of power and renewable energy as being a “bundled product,” its power content and green power label together. But no longer. The TREC is a separate commodity. Imagine a wind turbine on a hill. Its output is used to power up the nearby home. To offset the initial costs of the system, its renewable energy credits are being sold.
The buyer is a major utility far away, claiming credit for “your” renewable power. The utility does to meet a renewable portfolio standard that it otherwise cannot. The TREC is effectively being used to rationalize the emissions of a current power plant. To some they are indulgences, or vouchers to pollute and maintain the status quo.
For a homeowner, selling the REC may allow for a bigger system. After installing his system in Durango, Colorado, my classmate was approached and offered ~$12,000 by his utility in exchange for his RECs. I believe he swallowed his environmental altruism, its conceptual complexity shrouding the decision, and with my encouragement bought more panels! What’s that about gift horses?
This underscores “additionality.” If the sale of RECs means a larger system is installed, there is a clear societal benefit. If instead, a utility or polluter is let off the hook, that’s a different policy story and analysis. Duke Energy is buying SRECs from homeowners there. If it stimulates the market, one can argue that its additionality is jobs and economic development, ultimately energy and dollar savings.
There’s lots of action in the TREC market. Pasadena Water and Power is buying “extra” RECs from its next door neighbor, Glendale Water and Power, a company that tallies its RPS and has excess green power certificates worth $5 million a year. Exel Energy, based in Denver, is selling $35 million/year of extra RECs to California utilities.
Solar advocates in New Jersey will report that SRECs (solar RECs) are driving a market and creating savings and jobs. Utilities purchase SRECs to stimulate distributed generation, much like California offers Performance Based Incentives. One of EcoMotion’s clients has installed 1.8 MW of solar in the past 18 months thanks to the SREC market there. An EcoMotion team project bid realized a four-year payback.
Green tags is another name for RECs. You can pay a premium for whatever type of power you like, be it solar, wind, biomass. Native watts offers Remooable Power. Potterhill Homes in North Carolina uses green tag sales to subsidize its geothermal and cooling heating systems. Stay tuned for “white tags,” tradable energy efficiency certificates.
California's RPS Results
Many states across the nation have renewable portfolio standards, and a national RPS has been presented several times. California’s RPS calls for the state’s utilities to get 20% of their power from renewable power sources by 2010, last year! Legislation is pending that will ratchet up the level to 33% by 2020.
California Public Utilities Commission reports provide valuable insights: First, the utilities came close to their targets but fell short. Southern California Edison was best with 19.4%; Pacific Gas and Electric reported 17.4%. San Diego Gas and Electric Company came in with 11.9%. They can still comply by overshooting their goals in the coming years. Second, California’s utilities have had to spend $6 billion in extra costs for this green complement to the standard generating portfolio. Since 2002, 59% of the RPS contracts signed are with costs greater than the levelized prices of natural gas-fired generation. .