Competing Clean Credit Claims

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

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

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

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

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

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...