Archive for the ‘Clean Energy grants’ Category

Section 1603 – Is the Grant party over?

Monday, August 30th, 2010

Labor Day typically marks the time when our year-end project installation schedule becomes more clear.  Our corporate customers, often operating on a fiscal-calendar year for budgeting, also exhibit end-of-year psychology and “get it done by year end” becomes a priority.  Normal product lead times, procurement contracts, permits, and even potential interruptions from winter weather means by Labor Day our construction year is pretty much set.

This year many cleantech project developers have even more tension leading up to their 2011 New Year’s party planning.  With Section 1603, the US Federal program for renewable Grants in Lieu of an Investment Tax Credit (ITC), set to expire at the end of 2010, projects which are not at least 5% underway by year end will miss the proverbial party.

Both customers and developers, recognizing the benefit of the grant (ie. money in your pocket) over the ITC (ie. delayed gratification until you have earnings and taxes or trade the credit to someone who can use them) are racing to finalize any projects which have good reason for moving forward.  They only have until year end 2010 to capitalize on an incentive program that was announced in 2009.

Or do they?

Once again, customers and the cleantech industry are forced to speculate on Congress acting vs not acting to extend the Section 1603 program.  As we pointed out at the end of last year, the most significant negative impact from this uncertainty is its future effect on customer psychology.

Will there be a better incentive program around the corner?  Or will there be no program for several years?  Or worse, there is current speculation that if the bill does get extended it may now include non-profits as eligible for the grant where today they are not.   For a university about to sign a 20 year power purchase agreement because they can’t get the tax benefit how can they make the best decision?

Which is not good for anyone.  Let’s hope that this is the last time a short term incentive program, originally meant to stimulate the market, has a positive effect for the first year, and then works against itself for the last one.

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SolarTech Conference – coupling Solar PV and Energy Efficiency?

Wednesday, April 21st, 2010

Today I’m attending and speaking at the SolarTech Conference in San Ramon, CA.

The  conference format broke the day into working sessions covering all major areas relating to Solar PV:  permitting, finance, installation, interconnection, and a new one for the market – energy efficiency (which I’ll come back to later).  At the end of the day, the entire audience voted on the key initiatives for each of working session and these rankings become the basis for 2010 SolarTech working agenda.  Makes great sense.

During her keynote Jeanne Clinton of California PUC’s Energy Division detailed how far CA has come in reaching over 500MW of total installed PV in 2010.  Most interesting was her description of “medium sized” PV programs being implemented by the big three CA investor owned utilities (PG&E, SoCal, SDGE) for locations such as large commercial rooftops.

These medium sized PV projects range from 1MW to 20MW in size. Wow.

Only a few years ago Google’s 1.6MW PV array made national headlines and Nellis Air Force Base went live with a 14MW installation – both now are considered ho-hum.   Edwards Air Force is now developing a 550MW installation (the same as today’s entire PV installed base in CA) and there are already worldwide projects targeting over 1GW installations.   Clearly the solar industry is capitalizing on utility, state and government interest in making politically correct green investments on a large scale!

On the demand side Jeanne talked about how both PV and energy efficiency need to be considered during any building retrofit and how the CA/PUC is pushing PG&E, SoCal and SDGE to scale their whole building assessment offerings to address this.

Later discussions noted that as PACE funding models continue to rollout across the country, they’re including similar requirements that participants must have implemented energy efficiency retrofits prior to adding solar PV – this issue clearly had everyone’s attention at the conference.

For the solar industry this seems unfair – their point is that energy efficiency retrofits (such as new windows) often have longer investment returns than adding solar PV, yet these projects would be required first.

For the energy efficiency industry this seems fair – counterpoint being the financial return of solar is only achieved through much larger relative tax and financial incentives, and hence the real social investment return still favors energy efficiency investments.

Which points yet again to the challenge faced in designing energy related incentive programs.  When offering their rebates, Utilities, States and the Federal Government need to be absolutely certain on what behavior they’re really trying to incent – it seems most logical that whole building assessments should be agnostic about renewable vs. energy efficiency and more prescriptive on just making buildings more sustainable.

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Attention policy makers – Cleantech Grants and Utility Rebates need to be predictable and continuous

Monday, November 23rd, 2009

In my former life as a early stage venture capitalist I learned a traditional VC bias against investing in start ups where government subsidies were necessary to make the technology’s economic case work.  Year’s later I’m scratching my head at how the VC market has thrown out this bias in cleantech investing, an example being their heavy investment in solar PV technology.

While one can’t dispute that the worldwide PV markets are getting larger, anyone who has run PVwatt knows that without significant subsidies the technology doesn’t work as an alternative to kWh from the grid.  An incremental improvement in PV’s performance will not change this situation.  In the US, the math says that without a relatively high kWh cost AND a belief that kWh cost will inflate at 5-10%/year AND a large State renewable grant AND a 30% Federal grant or ITC, PV just doesn’t pass a reasonable economic test.

Which means that when Federal or State policy makers contemplate any potential change to renewable grant levels, the market gets really bumpy.  We experienced this at the end of 2008 when the Federal ITC extension was in question.  We’re currently experiencing this again in Massachusetts where the PV incentive program is temporarily suspended as the State transitions to a REC model “sometime in 2010.“  Kind of makes it difficult on a small local solar installer while it’s customer prospects wait for new incentives….here, an absense of policy has slowed one of the fastest developing PV markets in the US.

Like State renewable grants, utility energy efficiency rebates are watched closely for the signaling effect of change.  Earlier this year we saw one utility’s energy efficiency program introduce “accelerated” rebates, only to abruptly cancel the program four months later due to over-subscription.  Customers who didn’t participate are left to wonder whether they should wait on the sidelines until another accelerated program comes back to the market.  Here, the utility’s haphazard policy has stunted market growth.

As the US moves towards more incentives for both broader renewable and energy efficiency upgrades, Federal, State and utility policy makers need to better coordinate the management, introduction and changes to these programs.  They should recognize the dual edged sword they hold – whenever they change the incentives, or worse, suggest they might change the incentives, the market adoption rate is slowed.

Just as the stock market rewards companies which produce predictable financial results with higher multiple stock prices, policy makers need to signal the market as they grow incentive programs, making them predictable and long term.  The incentive programs need to reward action today, including grandfather clauses for those who would otherwise sit on the sidelines while new policies are being developed.  Without this approach, human nature “wait and see” will rule the day.

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