Energy Policy Meets Federal Land

A recent article called Turning Pristine Public Lands Into Solar Farms in Bloomberg Businessweek highlighted the Obama administrations’ policy of opening federal lands maintained by the Bureau of Land Management and the Department of the Interior to renewable energy projects.  The executive powers that Obama is using are similar to the ones that the Bush administration used to bypass Congress and push for oil and gas drilling on those same lands in 2001.  Using Ken Salazar, the Secretary of the Interior, Obama has approved more than 37 renewable energy projects on federal lands that will power more than 3.8 million homes.

Brownfields WindSince taking office, Obama has issued an average of 1,000 fewer drilling leases per year to oil and gas interests.  Instead, the administration has green lighted more than 18 other utility-scale solar plant, 7 wind farms, and 9 geothermal facilities.

However, certain projects have angered environmentalist groups such as the Sierra Club and the NRDC who feel that some of the projects would be better sited on 80,000 – 285,000 abandoned mine sites on federal lands instead of pristine desert space near treasured national parks such as Joshua Tree in southern California.  A coalition called the Western Lands Project is suing the Dept. of the Interior in federal court hoping to have the projects moved to those less desirable, degraded lands.

While I am generally skeptical of politicians bypassing Congress to achieve a political goal, I do favor building renewable energy plants on federal lands.  I also agree with the Western Lands Project that the Interior should look for better locations for these projects that redevelop sites that have already been ruined by mining operations.  Reusing depleted lands and brownfield development would be ideal for PV installation because the land does not have to be cleaned up beforehand and solar PV requires very little maintenance and can be seated on top of the land, not disturbing the contamination.  The EPA announced a brownfield redevelopment project called Brightfields that aims to achieve exactly that.  As with any major project, land use should be a major factor.  This is especially true when using public lands for private development.  By identifying sustainable sites that promote redevelopment of tarnished lands, the government can achieve a double victory of renewable energy and brownfield remediation.

The below image shows a refurnished open pit mine in Germany that is now one of the world’s largest PV plants at 166MW.  This site would have otherwise been left uninhabitable for any purpose.

Brownfield Solar

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Haiti and the Dominican Republic

The last post showing the world at night really sparked an interest for me on economic development and sustainability.  I remember seeing a photo in National Geographic several years ago showing the borderlands between Haiti and the DR and stark contrast between the two countries. Haiti on left Haiti is the poorest country in the Western Hemisphere and relies on the land for basic survival.  Rampant over-logging to make charcoal combined with other unsustainable agricultural and irrigation practices created a humanitarian crisis in the country. 

Last year the United Nations Development Program launched a project to teach local authorities and farmers about sustainable practices in order to restore the waterways and forests along the border region that is home to 150,000 people. 

Obviously it will take many years to bring the land back to its natural state, but the lessons learned can be repeated in other areas to prevent the suffering caused by unsustainable resource exploitation.

US Energy by Source

I just found a cool graph on the EIA’s website that lays out the sources of the USA’s electricity generation.  The one downfall is that it does not take into account the 2 billion kilowatt hours of small-scale solar like residential rooftops.  Quite honestly, it wouldn’t alter the chart all that much considering the whole green section of this chart represents roughly 200 billion kWh.  Let me know what you think – are you surprised? do you want to learn more?  Hit me back.

The Balance of Power

Few things effect international relations more than the balance of power.  Whether it be water or oil, the first societies to harness the potential of these commodities enjoy the creation of wealth and goods such as cropland in the case of water and industry in the case of oil.  Eventually each sector is going to grow and the demand for the input will outgrow the supply, leading to price hikes that make that commodity even more desired.  Problems exist when the source of these commodities are located outside of that nations borders.  The balance of power is then transferred from the first-mover user to the upstream producer of that commodity.  This is where it gets interesting.  The choice then becomes whether to use soft power (such as diplomacy, aid, or economic development) to gain influence over the producer or hard power (military action, sanctions) to force them to act.  Only by reducing demand for the commodity in question can the consumer nation wrestle back control from the producer nation.  This could include finding a substitute, developing new technology, or learning to use that resource more efficiently.  In the case of water, there is no substitute.  Downstream nations must learn to make the most out of every drop that they have.  This includes studying what crops to plant domestically and supplementing others through trade.  New technology such as desalination plants could also help secure access to clean water, but it will take an economic toll.  In the case of oil, there are several substitutes such as biofuel, natural gas, and plug-in hybrid cars, but while we further explore these technologies, squeezing the most out of every drop seems to make the most financial sense.

Innovation

Inn-o-vate good times! Come on! Yes, it’s a terrible play on Kool & The Gang but it has an underlying theme – adapt to new conditions or miss the party. Just as Kool’s 70’s funk beats stayed the same, our music tastes changed and The Gang was left behind. The same can be said of companies. As many business know by now, if you can not adapt, you fail. Plain and simple. Look no further than GM or Chrysler – they failed to take notice of the changing tates of Americans as well as the threat from overseas competition and bam!, bankruptcy. Business is a simple game of evolution – use your skills to adapt to the ever changing environment, or die. Every animal and species out there today is a result of several others who didn’t have the necessary skills to stay competitive and were thus gobbled up by something smarter, faster, or more innovative. Why should our companies be any different? Now is adaptation time for energy companies, utilities, manufacturers and America alike. This message goes out to the utilities – America wants clean power. We love our televisions, the ability to read at night, power tools in the garage and streetlights on our block. But we like breathing without an inhaler better. We are just plain “sick” of breathing contaminated air. We depend on you to keep our houses lit, so tell us how can we solve this problem together? We want you to be part of the solution, because we like you. You were there when Lucy met Desi, when Neil walked on the moon, when the Berlin wall came down. You lit our front steps when dad came home from work, when mom put herself through night school and would do homework on the kitchen table, and our living room every Thanksgiving when generations of family would gather for a meal. So, lets figure this problem out together – we need power, you need innovation. What is going to power our nation for the next 100 years and beyond? I only ask because fossil fuels are literally killing us. Instead of spending ridiculous amounts of money fighting regulation upon regulation, how about you invest a little scratch into clean energy R&D? A simple innovation in clean power could pay off exponentially for you with the predicted increase in demand. Or partner with the Department of Education and work with them on how future students can be better prepared to tackle the problems of the 21st century. If you dont, someone else will . . . and they are going to send you the way of the Dodo bird.

Primer on US Solar Industry

The following is an excerpt from a white paper I wrote this summer regarding the US solar industry.  I hope you enjoy!

The United States has until recently lagged behind Europe in terms of embracing solar energy.  However, over the past few years there has been a steady increase in federal and state incentive policies that make solar energy more beneficial to producers and consumers alike.  Due to the lack of a clear federal mandates, there are many policies and incentives offered through the federal government, state governments, local governments, utilities, and private companies.  These incentives can be mandates to acquire a certain amount of energy from renewable sources, cash grants, tax credits, tax exemptions, performance based incentives such as feed-in tariffs, accelerated depreciation of equipment as well as many other measures.
Renewable Portfolio Standards
Renewable Portfolio Standards (RPS) are state policies that require energy suppliers or utilities to purchase a certain amount of energy from renewable sources such as solar, wind, and geothermal.  For example, Arizona can say that 2% of its energy must be generated from renewable sources.  This also creates a market for renewable energy credits (REC’s) that can be purchased, sold, or traded by the utility to comply with RPS policies.  Currently, 29 states and the District of Columbia have enacted RPS policies.  Together these states account for almost 40% of the US electricity load.  In addition to requiring a certain percentage of the electricity mix come from renewable sources, states can create “carve outs” or “set asides” that specifically target a certain type of renewable energy.  One example of this is New Jersey’s solar carve-out that requires 5,316 GWh of solar power by 2026.  There is no federal RPS yet although the Obama administration has advocated for 25% of America’s electricity come from renewable sources by the year 2025.
Financial Incentives 
Financial incentives can include grant programs that usually target larger commercial or industrial projects and offer direct cash payments to defray the cost of eligible systems or equipment.  A rebate is another financial incentive that is offered to the purchaser after a system has been installed in order to make the cost of the system more competitive compared to conventional energy systems.  These direct financial incentives lower the initial cost of the technology and lead to an increase in production, thereby decreasing the price further.  The goal is to have producers ramp up the production cycle to reduce costs to the point that a subsidy is no longer necessary.  Performance based incentives are cash payments resulting from the actual energy output of a solar system on a dollar per kilowatt-hour ($/kWh) basis.  These incentives are generally reserved for large scale solar facilities, however, there is a new interest in feed-in tariffs based on their success in Europe that can be used on a smaller scale and even residential properties through the use of net metering.
Net Metering
Net metering allows the owner of a solar system to sell back energy to the grid via a contract with the utility at a determined rate per kilowatt-hour.  Basically, electricity flows both ways through the meter – using power when it needs it and selling power back to the grid when the solar system is producing more energy that the facility is using.  Net metering is the cornerstone of distributed generation, and distributed generation lends itself to solar photovoltaic installation on residential and commercial properties.  Distributed generation not only allows a PV user to power their property, but it also rounds out the peak electricity loads that utilities face in the afternoon when power comes from the dirtiest sources.   There is no federal net metering policy yet, but 43 states have adopted policies to allow it.
Two of the most common financial incentives are direct cash incentives that provide money to lower the upfront costs associated with solar projects and tax incentives that reduce the tax liability of the individual, company, or organization that installed the solar energy system.
Federal Grant Program
Currently, the federal government is offering direct cash incentives for solar energy through the Federal Grant Program, but more than 30 states and 130 utilities throughout the US offer anywhere between a few hundred dollars up to a million in cash for solar PV projects.  In 2009, as part of the American Recovery and Reinvestment Act (ARRA) the federal government passed the Section 1603 Treasury Grant Program that offers a renewable energy grant worth 30% of the value of qualified renewable energy projects including solar, wind, and geothermal.  This grant includes commercial, industrial, or agricultural solar projects started before 12/31/2011 and completed by 12/31/2016.  As of May 5, 2011 the 1603 program has awarded 2,044 grants for solar electric technology totaling $936 million for more than 6,300 individual solar projects in 45 states and has supported over $3.1 billion in investment. The largest problem with direct cash incentives is that they have to be budgeted for and are not politically feasible in difficult economic times.  This leads to volatility in the solar industry and discourages long-term investment and stability.
Federal Tax Credits
Tax incentives including credits, deductions, and exemption are other financial incentives that the federal and state governments are using in order to expand solar energy production.  An investment tax credit reduces the taxpayer’s liability for a portion of the cost of buying and installing a solar energy system.  Investment tax credits are fairly straightforward and usually limit the dollar amount that the taxpayer can claim.  Policy makers favor tax credits because the amount of the incentive generally does not have to be appropriated or withdrawn from a budget.  By encouraging development through tax credits, policy makers hope to grow the industry and eventually create jobs in solar and related industries and thus increase the tax base in that district.  The 2009 American Recovery and Reinvestment Act (ARRA) also extended the investment tax credit through 12/31/2016 for residential solar electric installations.  The credit is equal to 30% of expenditures with no limit to the maximum amount.  The ARRA allows taxpayers eligible for the federal renewable electricity production tax credit (PTC) to take the federal business energy investment tax credit or to receive the grant from the US Treasury Department instead of taking the PTC for new installations.  Currently, twenty-one states and Puerto Rico offer personal and/or corporate investment tax credits to help offset the expense of purchasing and installing solar energy equipment.  Tax credits range from 10% to 50% of project costs, with maximum credit limits ranging form $500 to $12,500 for residential systems and from $25,000 to $10 million for commercial systems.  However, a major drawback of the investment tax credit is the policy discourages institutions with a low tax liability from reaping the benefits.  Recently, some states and municipalities have attempted to remedy this problem by creating provisions that would allow a “pass-through” option whereby the tax credit can be claimed by a third party who does have a tax liability.  This could include a partner of a non-profit as well as homebuilders who integrate solar systems into new construction.  In either case it encourages solar power systems to organizations that would not normally be afforded the tax benefit.

The Air Up There . . .

I read an interesting article this weekend in The Economist called Air-Quality Regulations: Don’t Hold your Breath. At issue is the EPA’s Cross-State Air Pollution Rule or CSAPR for short. CSAPR is set to take effect January 1st, 2012 and would require that power plants in 28 states (mostly east of the Mississippi with the exception of the Northeast) reduce their emission of sulphur-dioxide and nitrogen-oxide by 27% and 46% below their 2005 levels respectively. As you can imagine by the political bickering in Congress the past few years, this rule is bitterly opposed by at least 36 entities who have petitioned the US Court of Appeals for the DC Circuit to stop the EPA from implementing CSAPR.

So what is the dispute about and what does it mean for our economy? Those against the rule say that forcing power plants to meet these requirements would cost the consumer more in higher electricity bills as well as cut jobs at a time of 9% national unemployment because the utilities could idle some of their less efficient coal burning plants, costing jobs to plant technicians not to mention related industries such as mining. Others oppose the regulation simply because they see the federal government as interfering on state issues. Supporters of states rights argue that the government should outline a pollution reduction target and leave states to their own authority to meet the limits. The EPA claims that CSAPR will prevent 13,000-34,000 pollution-related premature deaths, and yield between $120 billion and $280 billion in health and environmental benefits annually.

Here is the way I see it. If the states wanted to create their own regulations, they would have done so by now. Why is the Northeast immune from this new law? Because those 9 states(ME, NH, VT, MA, RI, CT, NY, DE and MD) created a club called the Regional Greenhouse Gas Initiative (RGGI) that tackles the emission problem head on. By being proactive about this problem, these states now have wiggle room in terms of the decisions they can make. In addition, RGGI states show that not only are the emissions reductions working, but jobs are being created and $3 to $4 of benefits are being created by every $1 invested in the program.

In response to shutting down the old coal fired plant at the cost of jobs: do it! Shut that dinosaur down. And while you are shutting it down, start hiring Americans to build a new natural gas, wind, solar, geothermal or nuclear plant (or read my related post on distributed generation). This will create even more jobs as well as provide us with energy than doesn’t burn our eyes and harm our lungs. Side note: Don’t site a nuclear power plant on a fault line or frack under a watershed supplying drinking water to 19 million people – that is just stupid!

Climate change is one of the major problems facing our country, but another big one is health care costs. Any small business or large corporation will give you the same answer when it comes down to costs of employment – health care costs are absolutely prohibitive and are only expected to increase. Allergies, asthma, chronic obstructive pulmonary disease, and lung cancer are all results of air pollution. I see a trade off here – either face the cost now and comply with the new regulations, or keep the status quo and face higher health care costs later on.

If I can think of one inelastic product out there, it is electricity. When the price of gas rises, people drive less. They still get up and go to work each day, but they do drive less. If the price of electricity increases, you can be sure people will still turn on their coffee makers each morning and televisions at night. But hopefully the increase will make people think about turning the lights off when they leave a room. After all, if using electricity more sparingly prevents little Johnny from a visit to the emergency room, maybe he can stay in school long enough to graduate and earn a decent paycheck at the new clean energy plant instead of the old coal-fired one that almost killed him.

***UPDATE***: The American Economic Review just released a study on the air-pollution damages for several industries in the United States.  Its findings suggest that the economic loss from poor health due to pollution from coal fired plants is 0.8 to 5.6 times the market value of the power itself.  It doesn’t require an advanced degree to figure this one out.  A copy of the report is attached.