Cities Enticed by Pay-if-You-Save Energy Deals

October 23, 2012

By JIM WITKIN

NY Times

WHEN the city of Brea, Calif., about 25 miles southeast of Los Angeles, set out to reduce its carbon emissions and save money on energy costs, the challenge was the same faced by many other cities nationwide: allocating the funds to pay for the program.

Finding projects to make city buildings more energy efficient was far easier. So the city turned to a form of financing that has become common among government agencies at all levels: an energy-savings performance contract that requires no upfront costs and allows the city to pay for the project over time using the savings on utility bills.

“There is no other way we could have undertaken this scope of project in this efficient a manner or time frame,” said Charlie View, Brea’s director of public works. The project included installing high-efficiency lighting systems in 14 city buildings and 4,000 street lamps, updating heating and cooling systems at six buildings and installing 1.8 megawatts of solar panels at three sites.

An energy service company, Chevron Energy Solutions, a unit of the Chevron Corporation, performed all the work and provided all the new equipment. The company’s contract with the city guarantees the project will deliver a certain level of savings on energy costs. If the project fails to perform to the guarantee, the energy service company is on the hook to make up the difference. If savings exceed the guarantee, the city keeps the excess.

The project, completed in 2011, is expected to save the city 40 percent on energy costs and $13 million over the next 25 years. Performance shows the project is exceeding these estimates by about 10 percent, said Mr. View. From the savings, the city will pay off two bonds issued to finance the project; the payback period is about 20 years, which is common for these types of projects.

The business model and performance-based contracting offered by energy service companies are not new; the market began to form in the early 1980s after the energy crises of the previous decade, which saw prices rise drastically. Today, about 35 large energy service companies offering contracts with guaranteed savings as their core business model dominate the market, according to the National Association of Energy Service Companies, a trade association.

What has changed is the growing appeal of the model among public entities. Now, 80 to 90 percent of energy service company revenues come from projects with municipalities, public universities and schools, hospitals and federal government agencies.

“Most public facilities in most parts of the country are starved for any kind of investment for improvements,” said Don Gilligan, the trade association president. Many of these aging buildings are wasting 25 to 35 percent of what they pay on their energy bills, he estimated.

“A performance contract allows them to redirect the money they currently spend on wasted energy to pay for the capital cost of an improvement with no tax increases,” he said. “That is a very big payment stream and a very attractive driver for public institutions.”

At the federal level, since 1998, 25 agencies have used performance contracts on about 580 projects, saving $13.4 billion and enough energy to power a city of 900,000 residents for a year, according to the Federal Energy Management Program.

Wide use of performance-based contracts has also required a reworking of purchasing policies for public agencies. Long-term agreements with vendors were outside the bounds of traditional procurement rules, so legislation authorizing the use of performance contracts for federal agencies was enacted as part of the Energy Policy Act of 1992. Now almost all states have passed similar legislation.

Unlike some aspects of energy policy, the legislation has generally received bipartisan support, said Charles H. Goldman, a senior scientist at Lawrence Berkeley National Laboratory in Berkeley, Calif., who has studied the market since 2000. The energy service company market “is an example of a successful private sector industry that is relatively self-sustaining and doesn’t rely on a lot of incentives or subsidies outside the basic economics of these projects,” he said.

Today, energy service companies account for 10 to 15 percent of the jobs created among companies that provide energy efficiency improvements, and many of these jobs are local, Mr. Goldman said, because there “are often provisions in the contracts that strongly encourage the use of local small businesses as subcontractors.”

Still, performance-based contracts are not suitable for every market, every project or every type of building, said Brittany Gibson, an analyst with Pike Research, an energy research and consulting company — notably for residential or private commercial property owners, for a variety of reasons.

In the commercial sector, the hurdle is often the so-called split-incentive problem, she said. Renters in commercial buildings typically pay their own energy bills. This reduces the incentive for building owners to commit to long-term contracts to pay for energy-efficiency improvements because the owners do not benefit from the savings.

Yet in the public sector, opportunity abounds, she said. Based on a study completed this year, Pike Research is expecting the energy services market to grow annually by 11 to 14 percent through the end of the decade, reaching an estimated $13 billion to $16.5 billion by 2020.

Driving this growth, said Ms. Gibson, are federal and state policies that set aggressive energy conservation goals for their buildings. At the same time, she said she expected capital budgets for such projects to remain tight.

In 2007, for example, Congress passed a law requiring all federal agencies to improve the energy efficiency of their buildings 30 percent by 2015. And in December 2011, President Obama directed agencies to spend $2 billion on energy efficiency projects through the end of 2013, specifically using performance-based contracts. Suitable projects should be easy to find; federal agencies occupy nearly half a million buildings.

This article has been revised to reflect the following correction:

Correction: October 29, 2012

An article on Wednesday, about the popularity of energy efficiency programs guaranteed by utility companies, misstated the origin of a mandate on energy use in buildings that house federal agencies and described the mandate itself incorrectly. The mandate requires a 30 percent increase in energy efficiency by 2015, not a 30 percent reduction in energy consumption by that time, and it resulted from a law passed by Congress in 2007, not an executive order signed by President Obama in 2009.

http://www.nytimes.com/2012/10/24/business/energy-environment/energy-service-contracts-a-boon-for-public-agencies.html?_r=0

Can Energy-consumption Data Change Consumer Behavior?

By Knowledge@WhartonNov. 16, 2012

Time magazine

Do you know how much energy you consume every 15 minutes? Most would say that’s a hard — if not impossible — question to answer, but San Francisco-based utility provider Pacific Gas and Electric (PG&E) now has access to that information for 30,000 of its residential customers, thanks to its “SmartMeter” program. PG&E’s SmartMeters are its prime vehicle to fulfill its mandate from the state of California to get people to use less energy.

For 36 months (January 1, 2009, through December 31, 2011), PG&E has used SmartMeters to collect consumer energy-use data in Northern California. The devices measure residential customers’ electricity and gas usage at daily, hourly and 15-minute intervals. The goal of the program, according to PG&E, is to help customers better understand their energy usage and find ways to save on their energy bills. According to the PG&E website, customers who participate in the program have the ability to be notified by email, text message or phone when their utility use “is moving toward a higher-cost tier.”

The energy consumption data will supplement existing information on customers’ demographics, billings and payments, call center reports and utility pricing, among other variables. The company states that by studying all of this information, it hopes to gain insights into how its SmartMeter platform might be used “to engage customers, reduce energy consumption and offer customers appealing alternative pricing schemes.”

But with so much data to sort through, that’s a tall order. PG&E has partnered with the Wharton Customer Analytics Initiative (WCAI) to lead the effort, which will help identify academic research groups across the world to study the data. Peter Fader, Wharton marketing professor and WCAI co-director, notes that the PG&E project has wider implications for businesses that increasingly use data analytics to extract business intelligence, by offering a model on how to determine the volume and quality of information they need to track in order “to change behavior in meaningful ways.”

“This is a unique data set, and we don’t know of any other that has this level of granular data,” noted WCAI research director Ben Adams during a webinar announcing the research project earlier this month. In addition to energy usage data, researchers will get information about PG&E’s energy efficiency rebates, demand response programs and special rate plans that were available to the customers covered in the data. PG&E will safeguard customer privacy and sign nondisclosure agreements with researchers, company executives said at the webinar.

Studying data collected by the meters will help the company figure out “which message to send to which household at which time in order to get them to conserve energy,” says Fader. “Our job is to find the right academics out there who will help them answer [these] questions.” Those who are selected will receive PG&E’s data sets, and are expected to spend a year studying them before they file their findings and recommendations.

http://business.time.com/2012/11/16/can-energy-consumption-data-change-consumer-behavior/#ixzz2CgwrzJfl

Will crowdfunding solar projects work?

Sylvie Barak

10/3/2012 6:41 PM EDT

It’s an Indian summer here in San Francisco, so what better time for some good news about solar energy?

Mosaic, an online marketplace connecting investors to solar projects, announced it has come up with funding for its 6th large solar project in rather unusual fashion… by crowdsourcing it, Kickstarter style.

Mosaic’s latest project, a 47 kW solar installation on the roof of the Youth Employment Partnership (YEP) in Oakland was funded in less than a week by members of the general public donating micro amounts through the click of a mouse button.

The concept may sound novel, but it is not new.

Crowdfunding site Kickstarter launched in April, 2009,  revolutionizing investment, turning the internet into an online hub for raising money in small increments from the general public in support of a cause, product or project. Suddenly, backing startups wasn’t just for VCs, it was for everyman (and woman).

Kickstarter’s business grew rapidly from inception. In 2010 the website had 3,910 successful projects, $27,638,318 pledged, and a project success rate of 43 percent. In 2011, the corresponding figures were 11,836, $99,344,381 and 46 percent. The success spawned a string of copycats, the latest of which is Mosaic with its mass funded solar projects.

The success of opening the investment up to the online masses surprised even Mosaic itself.

“The speed at which we were able raise the $40k to fully fund the YEP project gives us hope that our new model will grow into a significant source of solar financing while offering great returns for investors,” said Mosaic’s President Billy Parish.

During Mosaic's first phase, hundreds of people invested more than $350,000 at zero-interest to finance five rooftop solar power plants in California and Arizona.

All of the first five projects went online and Mosaic said some investors had already received back the full amount they put in.



The beneficiaries of these early projects included People’s Grocery, a food justice organization in Oakland, CA and 18,000 homes without electricity on the Navajo Reservation in Arizona.

The solar installations are predicted to save community organizations over $600,000 on utility bills, which is nothing to sniff at.



To make its effort more long term, Mosaic has also submitted an application to the Securities and Exchange Commission (SEC) to offer Solar Power Notes to the public, with those proceeds going to fund other solar projects.

The firm said thousands of people have signed up to be notified when that initiative launches.

Currently, around 25 percent of the price of solar installations comes down to financing and customer acquisition costs, or soft costs. By crowdfunding a project, Mosaic says it can reduce these soft costs while enabling millions of Americans to own a piece of the clean energy economy.

“Our mission is to create shared prosperity through clean energy” said Mosaic’s CEO Dan Rosen. “We see a huge opportunity in transitioning our world to clean energy, and we want to make it possible for people and communities to prosper and be a part of this massive transformation.”

Combined, Mosaic’s first five projects are said to have created 73kW of solar energy and produced over 2,700 job hours for local laborers.

The firm was also recently awarded $2M from the U.S. Department of Energy and raised another $3.4M from venture capitalists to bring its clean energy marketplace to scale.

http://www.eetimes.com/electronics-blogs/other/4397804/Will-crowdfunding-solar-projects-work--

A dirty plan for San Francisco

Steven B. Falk

Sunday, September 9, 2012

SFGate

This November, San Francisco residents and businesses will be asked to tax themselves to pay for education, housing, parks, economic development, and other programs and services the city and state no longer have the financial ability to fully support. Yet at the same time our city leaders are asking us to make these important investments, they are quietly moving forward with a $13.5 million public power plan.

The city plans to contract with Shell Energy to bring what it is falsely labeling as "100 percent renewable energy" to a subset of city households for less than five years. By any standard, this is a dirty plan for San Francisco.

The CleanPowerSF program will increase costs on customers by 77 percent just to break even. This amounts to $216 per year for the average customer, according to a city controller's report. City agencies will also have to pay more for power, potentially resulting in even further cuts to programs and services.

The true cost of starting the program will be even higher. The state of California requires customers leaving an existing utility to pay a portion of long-term energy contracts. This "power choice indifference" payment is nearly another penny on every kilowatt-hour used, or about $36 per year, in addition to the $216 increase customers will already be paying. The city's public power plan will cause money to flow out of our local economy and cost jobs.

Because Shell Energy does not produce electricity within San Francisco, increased electric payments made to the company - to the tune of $13.2 million - will leave San Francisco's economy. Overall, the city controller estimates the program will result in the loss of nearly 100 local jobs.

Perhaps the dirtiest secret of the CleanPowerSF program is that absolutely no new green power would be created in San Francisco or even in California. In fact, the contract stipulates that no new green generation is required anywhere. The 100 percent renewable energy promised in the plan will come from a combination of green energy bundled with other sources - many potentially nonrenewable - and renewable energy credits purchased from existing out-of-state supplies.

Finally, the program is not entirely voluntary. Residents will be enrolled automatically in the program and, if they don't remember to "opt out," they could be charged exit fees. This feels a lot more like "pulling a fast one" on city residents than providing options to reduce our carbon footprint.

As San Franciscans are being asked to pony up more for critical public services, this hardly seems like the time to nearly double the cost of our energy without any guarantee of a greener future. It's time to pull the plug on the city's dirty public power program.

Steven B. Falk is the president and CEO of the San Francisco Chamber of Commerce. To read the controller's report, go to sfg.ly/NR4Tca.

Read more: http://www.sfgate.com/opinion/openforum/article/A-dirty-plan-for-San-Francisco-3851974.php#ixzz2678JMJTI

California's solar energy passes a milestone

Friday, Sep. 7, 2012 - 12:00 am | Page 6B

Sacramento Bee

California surpassed a major milestone during a recent heat wave, hitting more than 1,000 megawatts of solar power generation. That's equal to the production of two large gas-firedpower plants.

The threshold was surpassed several times, according to the Folsom-based California Independent System Operator Corp., which operates the state's wholesale transmission grid.

California energy officials celebrated the solar-generation milestone this week at ISO's annual Stakeholder Symposium at the Sacramento Convention Center.

ISO officials were joined by representatives of the California Energy Commission and California Public Utilities Commission.

Steve Berberich, president and CEO of California ISO, said ISO currently has an installed solar capacity of 1,160 megawatts.

Bob Foster, ISO board chairman, said ISO's board of governors has approved enough new transmission investment to enable California utilities to reach a state goal of a 33 percent renewable power mix by 2020.

http://www.sacbee.com/2012/09/07/4796127/californias-solar-energy-passes.html

Read more here: http://www.sacbee.com/2012/09/07/4796127/californias-solar-energy-passes.html#storylink=cpy

This Summer, Electric Cars Are Merging Into California’s Traffic

By JOSIE GARTHWAITE

New York Times
SAN FRANCISCO

IT doesn’t sound as sexy as the 1967 Summer of Love, but for Californians with a passion for plug-ins, the warm months of 2012 are turning into the season of the electric car.

Some four years after the $100,000-plus Tesla Roadster became the nation’s only new electric vehicle capable of highway speeds, a wave of more affordable plug-in cars are coming to market. And California, the state with the nation’s largest auto market, the worst air quality and the most stringent emissions rules, is the first to catch the tide.

By summer’s end, nearly a dozen plug-in cars and crossovers may be traveling the state’s highways, including five or so that are arriving before the end of August. The latest models are from upstarts like Tesla and Coda Automotive as well as from global giants like Ford and Toyota.

Aside from the state’s longtime role as a trend incubator, other factors have combined to make this a test bed for what proponents hope will be a new age in personal transportation. The state’s policy makers have set tough emissions rules mandating a rising number of zero-emission vehicles, and they’ve offered tax incentives for buyers. As a hotbed of high technology and entertainment, California has plenty of influential early adopters with ready cash. An expanded charging infrastructure is being developed and, perhaps most important, battery-powered cars grant access to the coveted car-pool lanes on congested freeways.

Among the most anticipated electric models of the summer is the Tesla Model S luxury sedan, with base prices of $58,570 to $78,570, depending on the size of the battery pack and, consequently, the driving range on a charge. While the car was under development, Tesla collected more than 10,000 reservations without so much as a test drive. Once promised for delivery in 2009, the S — Tesla’s second model — at last reached customers on June 22.

“The people who buy this car are the movers and shakers — leaders in arts, entertainment, business,” said Paul Scott, a co-founder of the advocacy group Plug In America who now sells electric Leafs at a Nissan dealership in downtown Los Angeles.

“I sold a Leaf to Danny DeVito,” Mr. Scott said. “He’s that kind of guy. But you’ve got a lot of people who just will not put themselves into a small car.” On the other hand, he said, celebrities who live large are the ones who “will drive the market” if they embrace upscale electric cars like the Tesla, influencing purchases by regular Janes and Joes.

Following the Model S’s introduction last weekend, Tesla is providing thousands of test drives for reservation holders, starting in Fremont and Los Angeles before moving on to a dozen cities across North America.

California drivers are also getting a chance to get behind the wheel of the $38,145 electric sedan from Coda, based in Los Angeles, at test-drive events through the summer in Southern California and the San Francisco Bay Area. The car will initially be sold through four dealerships in the state.

What’s markedly different about the plug-in vehicle market this summer is the growing presence of some of the world’s largest carmakers. Ford began slowly delivering its $40,000 Focus Electric to dealers in May (a month in which just six units were sold) and was expecting to ship 350 cars to dealerships in California, New Jersey and New York by the end of June.

Honda plans to start leasing its Fit EV for $389 a month in California and Oregon on July 20, with a move into six East Coast markets next year.

Certainly, electric vehicles are still in their tentative early days. “There will be model launches, but each one will be a few hundred or a few thousand,” Michael Omotoso, a senior manager of LMC Automotive, a research firm, said in a telephone interview last week. "We don’t expect an E.V. to be a big seller like the Toyota Prius anytime soon. But we also don’t expect any of these cars to be a big disaster.”

LMC’s forecast for 2012 puts sales of all-electric vehicles at only one-tenth of 1 percent of the nation’s light-vehicle market, or about 12,000 vehicles. And plug-in hybrids, which have a gasoline engine as well as an electric drive system that can be charged with a cord, are projected to claim three-tenths of a percent, or about 40,000 units.

For automakers, Mr. Omotoso said, “the significance is to show that you can produce an electric vehicle at a price that maybe not the average consumer can afford, but a lot of consumers can afford.” He added, “It’s a first step toward having a significant number of electric vehicles in the next 10 to 20 years."

As for Tesla, the Model S release is but one of its milestones this summer. In addition to opening five new stores, Tesla will provide the battery pack and powertrain for the $50,000 Toyota RAV4 EV, which goes on sale late this summer in San Diego, Los Angeles, Sacramento and the Bay Area. This electric crossover follows the rollout, in March, of a plug-in version of the Prius hybrid. Through May, Toyota sold 3,631 Prius Plug-ins, the majority of them in California.

Smaller players are adding to the bubbling E.V. activity in California, too. An electric motorcycle company, Brammo, plans to ship its long-promised Empulse R model this summer. By early August, a start-up called Scoot Networks will offer more than 50 electric scooters to members through a scooter-sharing program in San Francisco. Also over the summer, a Bay Area nonprofit, City CarShare, plans to make a big push for members to rent plug-in models it is adding to its fleet.

All of these summer arrivals join earlier releases including the Leaf and the Chevrolet Volt, the Fisker Karma plug-in hybrid and the egg-shaped battery-powered Mitsubishi “i,” a $30,000 electric car that is to arrive at dealers this month. And while Tesla has ended sales of its first model, the Roadster sports car, many of the 2,500 sold went to Californians.

Sales of the 2013 Volt, which is said to have slightly more electric range than before, are to start in August.

The relatively high concentration of new electric offerings in a few regions of California could help raise awareness and add momentum to the nascent market. Cars from companies as varied as Ford, Honda and Tesla “will help Californians to feel like there is a real commitment across the industry,” John Gartner, an electric vehicle analyst with Pike Research, said in an interview. He noted that the state’s gas prices were among the highest in the 48 contiguous states, adding to consumer interest in alternative-power vehicles.

On the other hand, Mr. Omotoso said that if gas prices fell below $3 a gallon nationally, as some analysts expect, “we’re going to see more people buying trucks again, and fewer people being interested in hybrid and electric vehicles.”

He added that if the Republicans won the White House, “there will be less enthusiasm to keep this $7,500 tax credit,” which the federal government has provided for electric vehicle purchases since 2010. California currently offers state tax rebates of up to $2,500 for battery electric cars and up to $1,500 for plug-in hybrids.

Tesla says it expects to deliver 5,300 Model S sedans in 2012, and another 20,000 next year. But Mr. Omotoso said he expected the company to achieve less than half its 2013 sales goal. “People who like technology and like to be different will buy the Model S,” he said. “But a lot of luxury buyers are more traditionalists. They’ll stick with what they know.”

It is hardly by chance that this wave of electric vehicle activity is landing in California. “It’s kind of the birthplace of the modern electric car,” said Mr. Scott, the Leaf salesman. “This is where the powerful stuff comes from, the really coolest stuff” — the motors, controllers and battery-management systems that defy old notions of electric cars as glorified golf carts.

Mr. Omotoso cited the state’s environmental awareness, its technological savvy, the long urban commutes and the pockets of wealth in Silicon Valley and Hollywood as factors that have enhanced Californians’ affinity for plug-in vehicles.

Public policy has also contributed. The state’s 1990 Zero Emission Vehicle mandate decreed that in 1998 through 2000, zero-emission vehicles must make up at least 2 percent of sales in the state by the six largest carmakers. The state set the bar at 5 percent of new vehicles for 2001 and 2002, and at 10 percent for 2003 and beyond.

Under pressure from the auto industry, California changed the law, and automakers crushed many of the 4,000-plus battery-electric vehicles deployed from 1996 to 2003 — but not before some 1,000 charging stations were in place.

“Several thousand fairly aware, high-tech, wealthy people got these cars and said, ‘Whoa, this is good,’ ” Mr. Scott said. “We had this large group of people who were cognizant of the electric car, and we talked loudly. So that’s why California is where a lot of this stuff is happening. We know about electric cars, and we don’t shut up about it.”

The state’s latest clean car rules, passed in January by the California Air Resources Board, or CARB, establish higher quotas for more automakers in 2018-2025. The current rules apply to six automakers — the three Detroit-based companies and Honda, Nissan and Toyota. In 2012-14, about 2 percent of the cars they sell in the state are required to be zero-emission vehicles.

Also, beginning with 2018 models, BMW, Daimler, Hyundai, Kia, Mazda, Volkswagen and others who sell more than 20,000 vehicles a year in California will be required for the first time to sell models with very low, or no, tailpipe emissions.

Based on the new mandates, CARB projects there will be 1.4 million zero-emission vehicles on the road by 2025, making up 15.4 percent of overall sales in California. The target for each individual manufacturer shifts depending on its market share and annual sales.

Toyota’s low production plans for the RAV4 EV (just 2,600 over three years) and Honda’s intent to provide just 1,100 Fit EVs over two years — only under a lease with no option to buy — have prompted some plug-in proponents to deride the models as “compliance cars” offered just to meet quotas.

“For years we were just fighting to get the carmakers to build the cars,” Mr. Scott said. “Now they’re building the cars, and it’s just so slow.”

From a business perspective, however, the bare-minimum strategy makes sense. "If you’re losing money on each one you make, you want to make as few of them as possible," said Mr. Omotoso. "If we get to a point where carmakers can at least break even, or make a little bit of a profit — which may not be for 10 years or more — we can see them producing more plug-ins."

A Toyota spokeswoman, Jana Hartline, said the zero-emissions mandate was “really a moot point.” In an e-mail, she called the mandate “a fact of life for over 20 years,” and said the company was committed to meeting California’s requirements through a combination of plug-in hybrid, battery-electric and hydrogen fuel-cell vehicles. .

What good is a new E.V. if you have nowhere to charge it? Wheels have been set in motion for $100 million in new charging infrastructure throughout California, under a recent settlement between a New Jersey-based power company, NRG Energy, and the California Public Utilities Commission. The deal is meant to close the book on offenses committed by Dynegy (the assets of which are now owned by NRG) during the Enron scandal and the state’s 2001 energy shortages.

“It’s a solution to the chicken-and-egg problem,” Frank Lindh, general counsel for the public utilities commission, said in a telephone interview. “People won’t buy electric vehicles unless they’re confident there’s a place to charge up. And companies don’t want to invest in charging infrastructure unless people are buying electric vehicles.”

A competing provider of charging systems, ECOtality, has filed a lawsuit over the deal, calling it an “illegal giveaway” that would give NRG a monopoly in the California E.V. charging market. But if the settlement is approved by the Federal Energy Regulatory Commission and goes through as planned, it could give places like San Francisco, San Diego and Los Angeles the densest E.V. charging networks in the world. Mr. Lindh said he expected the settlement to win federal approval “definitely this summer” and perhaps before July.

http://www.nytimes.com/2012/07/01/automobiles/evs-are-merging-into-californias-traffic.html?hpw