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Competing Clean Credit Claims

By Taylor Leyden, Fall 2016 Fellow  Pt. 1: The Context The electrical grid is like an ocean where electrons flow in from all generating sources, and once they’re in, they’re indistinguishable from one another, whether they were generated by an old, coal-fired power plant or a distributed solar project. The nature of electricity makes it very difficult to stake ownership over “clean energy” or reliably claim that one’s operations are powered by renewables. For this reason, there are contractual mechanisms that define and govern who may claim the “environmental attribute” of renewable generation: renewable energy credits (RECs). A REC represents 1 Megawatt-hour of renewable generation. There are compliance REC markets that fulfill state Renewable Portfolio Standards, where RECs are bought and retired by load-serving entities (LSEs) to uphold their obligations to provide renewable energy. Generally, the RECs in these markets are tracked by generation attribute tracking systems (like GATS and NEPOOL). There are also voluntary REC markets, where RECs can be certified by third parties to avoid double counting of the environmental attributes. Pt. 2: The Conundrum When it comes to building new renewable generation, the high upfront capital expenditure often leads to the need for third-party financing. In order to value a project, investors look at contracted and uncontracted cash flows, tax benefits, and the operating expenses that arise from system maintenance. For a typical distributed generation solar project, the main cash flows come from the contracted power purchase agreement (PPA), as well as the SRECs in applicable markets. If you take the Maryland market for example, given the present state of the SREC market, about 90% of...

A Hedge You Can’t Get on Wall Street: Using Renewable Energy to De-Risk Your Electricity Spending

  By Jaafar Rizvi, Fall 2016  Electricity price risk too often does not get the same thoughtful treatment as other business risks, such as those involving foreign currency or interest rate exposure. In fact, because most organizations don’t address the risk of rising electricity prices in the long-term, they are gambling that prices will go down over time – and this implicit position can cost them. There are new developments in hedging long-term electricity price risk for 10 to 25 years, going well beyond protection against short-term volatility.  Organizations should rethink their status quo position and consider a strategy that Google has been using for years and that Amazon, MIT, Lockheed Martin, and others have recently adopted.   Typically, a sophisticated organization will counter short-term spikes in electricity prices with a financial product such as an option, or a fixed-price one to three year-contract set at a premium above the market price. But these hedges have to be renegotiated at the end of the contract period and therefore don’t insulate against long-term rising prices. Enter the Power Purchase Agreement (PPA). There are several types of PPAs, but most have a common feature where an organization contracts to buy renewable power, sourced from a wind or solar energy field, at a fixed price and sell it back into the grid at the market price. The key characteristic for generating a hedge with a PPA is having a high correlation (typically 90-99%) between where an organization is consuming electricity and where the wind or solar project is located. This correlation is typically achieved by signing a PPA with a project on...

African Energy Development: Paving the way to the world’s inevitable clean energy future

By Mary Beliveau, Fall 2016 Fellow The global economy is transitioning to the use of clean, renewable, sustainable energy sources, which are forecasted by the US Energy Information Administration to be the fastest-growing power sources for the next quarter-century. For this transition to occur, renewable projects need to attract investors to fund capital-intensive projects without the use of government subsidies. One area of the world that is beginning this shift towards renewables is Sub-Saharan Africa, where the majority of people are not connected to a traditional energy grid. Companies operating in areas without grid infrastructure are developing innovative technology to supply the huge demand for energy. These companies have combined local production with novel technology to attract investors and scale operations. Their approach differs vastly from the status-quo wholesale distribution system used in developed countries today. Implementing methods adopted in Sub-Saharan African may be the key to scaling renewable energy projects in the United States. The original incentive for renewable energy implementation was the need to reduce carbon emissions to mitigate the impact of global climate change. However, micro grids have recently become popular in Sub-Saharan Africa, where this incentive is secondary to the need to provide electricity to individuals not connected to the grid. Micro grids are an excellent alternative to grid development because of comparatively low upfront costs. Costs remain low because micro grids are able to eliminate the need for costly distribution: communities, or even individual houses, can fulfill the function of a traditional utility by producing and supplying their own energy. African systems can benefit from decentralized implementation, which increases energy access without the upfront...

Scientists will make the best advocates for climate during the next four years

By Katie Breen, Fall 2016 Fellow Accusations of climate change as a Chinese hoax , National Aeronautics and Space Association (NASA) and National Science Foundation (NSF) budget cuts, and outright climate change deniers in cabinet positions are among the changes under the upcoming Trump administration that climate scientists must overcome to do their research.  With such obstacles, the results of climate studies might be ignored, if climate research even gets funded at all. The anti-science world that Donald Trump is motivating prompts the question, are scientists irrelevant for the next administration? I argue that scientists will be important as some of the most well-suited climate advocates to generate change during the Trump presidency. Scientists have long been leaders in climate advocacy. There are scientist-advocate standouts, such as James Hansen, former head of NASA’s Goddard Institute for Space Studies, who quit his full-time science position to do more frequent and impactful climate advocacy; Katherine Hayhoe, an atmospheric scientist who sits on the board for the Citizens Climate Lobby, a non-profit that calls for a carbon tax; and scientist and television star Bill Nye who uses his media platform to criticize Trump’s pick for the head of the Environmental Protection Agency and general climate skepticism. Typical advocates are ones that care about communicating a cause. But as Hansen, Hayhoe, and Nye effectively demonstrate, scientists have added qualities that make them opportune advocates for climate awareness. Here are 5 reasons that scientist-advocates will be among the best voices to influence policymakers in the next four years: They readily speak with authority on topics in their fields.  They don’t just quote others as...

DOE Revolution Now – the state of clean energy technology

By Jennee Kuang, Fall 2016 Fellow When I was in high school, two representatives from a solar company knocked on the door of my parent’s California home, telling us that we had a beautiful southern-facing roof – perfect for solar panels. Three years ago, I worked for an energy efficiency program and started introducing communities to LED light bulbs at farmers markets and local festivals. In May 2015, I drove by a remarkable field of hundreds upon hundreds of wind turbines dotting an otherwise bare, hilly landscape. In the past several months, I have seen many Washington, D.C. taxis proudly displaying green electric vehicle decals. A clean energy revolution is occurring, and these technologies have become a familiar part of our daily lives. But what does this all mean? Just how much of our power is now generated by wind and solar, how widely adopted are LED lights, how many electric vehicles are on the road, and more importantly, why does any of this matter? The U.S. Department of Energy’s (DOE) Office of Energy Efficiency and Renewable Energy produces an annual Revolution Now report that answers those questions. The latest update, released in September 2016, discusses both established and emerging technologies. Revolution Now The report highlights the technological innovation that has made clean energy become familiar in our daily lives. These include wind energy technology, solar panels, LEDs, and electric vehicles. Wind According to the National Renewable Energy Laboratory (NREL), wind turbines are mounted on a tower to capture wind energy with propeller-like blades. For utility-scale energy generation, a large number of wind turbines are typically built in close proximity...

The renewables industry must reject existing structure of corporate influence in politics

By Rachel Goldstein, Fall 2016 Fellow This piece was originally posted in The Hill.  Corporate money in politics influences energy policy and can stifle renewable growth and climate solutions. It is time the renewable energy industry address this problem. The Citizens United Supreme Court decision means that efforts to displace the fossil fuel industry with renewable energy face an uphill battle. As renewable energy growth and development continues, clean energy advocates must think about how such influences implicitly play into the Unites State’s ability to grow a nascent yet burgeoning infrastructure sector. As a politically diverse democracy – one that requires laws be ratified through the legislature and make their ways through partisan gridlock – it is uniquely difficult for the United States to commit to global efforts needed for drastic action and coordinated decision-making in the face of climate change. Structurally, the current state of the U.S. political system is also destined to help the country fall short of its climate commitments; the dominance of corporate interests in politics does not allow for the bold actions needed to steer the world from climate disruption. Although the renewables sector looks to businesses and corporate entities for partnership as more companies purchase wind and solar energy, and there have been great successes in the industry in the past few years, renewables are not ramping up nearly as fast as they must to effectively battle climate change. Policies set up the architecture to maintain a status quo in the energy market, which discourages innovations that exist precisely with the intent of disrupting business-as-usual, as renewable energy does for fossil fuels. Oversteps...

Ocean Spatial Planning: a crucial tool in offshore wind development

 By Maggie Ferrato, Fall 2016 Fellow As environmentalists know all too well, the election of Donald Trump threatens much of the progress made in the last eight years.  Of particular concern is the fate of programs and policies recently established by executive order, such as the National Ocean Policy, which provides for the development of regional marine spatial plans.[1]  To understand the importance of ocean spatial planning, why it came about, and what is at stake, it is helpful to look to Rhode Island, the site of the nation’s first and only offshore wind farm. Rhode Island’s Wind Farm Rhode Islanders are a proud bunch, made prouder still by the state’s newest claim to fame: the nation’s first offshore wind farm.  The 30 MW Block Island Wind Farm, located 3 miles off the coast of Block Island, will come on-line later this year.  Though the project is comparatively small—perhaps fitting for the smallest state—news outlets have been touting the Block Island Wind Farm as precedent-setting.  However, more important than the wind farm itself is how it came about.  What made this project viable where others failed? More than a decade ago, the state quietly began its push toward renewable energy, setting its sights on offshore wind.[2]  Despite their optimism, officials acknowledged a dearth of information on how the ocean was used and where an offshore wind farm should be built.  The state of Rhode Island and Deepwater Wind, the wind farm’s developer, ultimately took active leadership roles in addressing these questions, demonstrating foresight and a strong commitment to stakeholder engagement.  Much of what followed is a story of collaboration...

National Security Threat #1 – Long-term Energy Policy

By Nick Esch, Fall 2016 Fellow  The word Energy may be just 6 characters long, but it’s constant availability and security is essential to preserving the modern way of life many Americans have come to take for granted. To date, the United States lacks a comprehensive long-term national energy plan that ensures the security of our energy future. This failure represents the single greatest national security threat this country faces today. Infrequent + Conflicting + Narrow = US Energy Policy Over the past few decades there have been merely three major energy policy acts signed into law. Each piece of legislation addresses only a few facets of the nation’s energy policy, which are typically passed on reactionary terms. Today an energy bill is being discussed in congress, almost 9 years since the last act was singed into law, with a diminishing hope of passing. The three acts, passed in 1992, 2005, and 2007, have accomplished significant feats such as defining fuel and electricity conservation measures, creating wholesale electricity markets, establishing net metering, and establishing tax incentives for renewables. However, these acts actions have been narrowly focused and have, at times, established conflicting energy policies. In the electricity sector incentives are given to both nascent and established sources of generating resources, creating uneven and complicated playing fields where these different resources compete. In the transportation sector, the gasoline tax, which funds the Highway Trust Fund, has been stagnant since 1993. At the same time vehicles are federally mandated to be increasingly fuel efficient by the CAFE standards. As a result, the Highway Trust Fund has received multiple infusions from the...

How can utilities leapfrog to a low carbon future in developing economies?

By Maxine Chikumbo, Fall 2016 Fellow As the race to develop sustainable energy pathways to a low carbon future continues, opportunities have arisen for developing and emerging nations to move towards and even outpace developed countries. Commonly referred to as ‘leapfrogging’, the underlying concept is that less industrialized countries can skip over decades of progress and fossil-fuel driven dependence, as a shortcut to a clean energy economy. For this to occur at a large-scale, a fundamental two-step process is required involving the re-evaluation of utility models and restructuring of electricity markets. To ensure greater renewable penetration and more distributed generation to meet demand, many of these countries will have to simultaneously deregulate and introduce competition. This was recognized at COP 22 as a big picture strategy necessary for LDCs to achieve their climate goals. What has worked with energy competition in developed economies?  Case 1 – United States Competition through privatization in the electricity sector has boasted multiple benefits for the United States, which the 1978 Public Utility Regulatory Policies Act set the tone for: Lower costs. Competition within the electricity market means different entities are competing with one another to sell electricity to consumers, who will be looking for the best price. Although it has been argued that deregulated markets do not always equate to lower rates, this is still a viable incentive. Increased efficiency and reliability. If IPPs and distributors are competing, efficiency and advanced technology become critical in the pursuit of market share. This drives production costs down, which can translate to lower rates and reliability. With more entities generating power and pooling resources to back up...

How Maintaining Saudi Arabia’s Oil Dominance May Depend on Going Solar

By Katherine Weingartner, Fall 2016 Fellow “We have nothing to complain about,” assured Abdullah al-Sahli, head of the local government office in Saudi Arabia. With billions of dollars flooding the pockets of Saudis following the 2015 rise of the new monarch, King Salman, it might be hard to disagree. The country has acquired massive wealth as the largest petroleum exporter in the world, and holds 18 percent of global proven petroleum reserves.3 However, the oil-rich, export-ruling Saudi Arabia that al-Sahli sees is a false one. Out-of-control domestic oil consumption is threatening Saudi dominance as an oil exporter and its future as a country. In order to continue to lead in oil abroad, Saudi Arabia should lead in solar at home. Out of Control Domestic Consumption At the current rate of domestic oil consumption, some predict that Saudi Arabia could become a net oil importer by 2030. High government oil subsidies put gasoline at $0.50/gallon and electricity as low as $0.01/kWh, astonishingly low compared to the U.S. averages of $2.2/gallon and $0.11/kWh. These rates offer little incentive for Saudis to curb their consumption. In fact, though Saudi Arabia has produced more oil than ever before in recent years, the amount of crude oil being domestically consumed is almost twice what it was ten years ago. The problem of increased usage is compounded by a highly inefficient energy production infrastructure, an outdated energy generation strategy that involves burning oil directly, and a rapidly growing population that will put further strain on domestic oil consumption as demand at home rises. Every barrel of oil consumed at home is a barrel that cannot be exported, and...