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.

As we dig in, studying interval data from their utility bills and correlating usage with their operations, we typically discover that large loads (ventilation, chillers, machinery) can be time shifted an hour or two with limited impact to the overall business.  Depending on the size of the load, time of day and the utility’s demand charge rate, this can have huge dollar savings impact.

Sitting down with management to review our findings is even more revealing – the simple question, “could we change this process without an effect?” often renders an “of course, we’ve just always run it that way.”  In which case the team leaves our meeting feeling pretty positive (which of course we like a lot.)

So to capture these demand charge reduction savings there are two basic approaches:

1.  make the process modification today and begin periodic analysis of your demand charge going forward (no cost)

2.  install a control system which provides demand control scheduling (low cost)

Obviously some situations are more complex than others, but either way there are $ savings to be had and most times this comes without huge pain.  If you’re interested, here is a more detailed write up to study.

Our analysis considered their contract cost for kWh and natural gas, the system’s energy production in kWh and therms, its full installation and annual maintenance cost and their UK tax benefits, including a reduced carbon tax from the UK’s Carbon Reduction Commitment.  All in, the capital investment had a simple payback of 2.3 years.

When we built the system’s 10 year PPA model there was one big question – what escalation rate for kWh and gas should we use?

Pre-2008 solar PPA providers were actually able to convince some green minded tax-exempt customers to sign 20 year contracts with annual escalators as high as 5 %.  At the time they referenced a 7-10%  inflation rate for the cost of electricity during the preceding decade.  Today these contracts look pretty upside down.

Post-2008 the world’s slowdown has Groom Energy engineers now considering a declining cost of power in our multi-year models.  One recent PV analysis utilized our customer’s previously contracted electricity cost of $0.14 kWh in 2010, $0.13 in 2011 and $0.12 in 2012.  Unlike residential tiered pricing, corporates with predictable large usage have the capacity to buy these flat rate and now declining kWh contracts.  Our friends at World Energy can probably confirm that this is a trend, not an isolated event.

Pre-RGGI being replaced by a more toothless US Federal Climate Bill (which includes a limited carbon tax), the controversial Cape Wind project recently signed a 15 year PPA with National Grid which included a 3.5% annual escalator.

A corporate’s view on its future cost of energy has a dramatic effect on the lifetime value of any green investment.  So in a world where corporates need to make rational investment decisions today and balance them with a longer term view, what’s a “safe” escalation rate?

While there’s a solid fact based argument for both higher and lower rates, I bet for the time being we’ll see neither – 0% is the only safe choice.

While Lightfair 2009 was a coming out party for LED’s, this year EVERY possible lighting application, from 2 watt dimmable candelabras to 200 watt street lighting, was on display.  LED chip performance has increased another 30% since last year and manufacturers have seen the proverbial light.  UL’s engineering teams are now overwhelmed with the volume of pending new applications they need to review.

Even the big lighting guys are now embracing LEDs.  Where only Philips was showing a wide variety of LED products a few years ago, now Acuity, Cooper and GE are all LED centric in their marketing.  Other large consumer electronics companies, with no history in the US lighting market, are in the game too.  Toshiba is going after the whole sector with chips and fixtures, while Sanyo is offerings LED components.  Micron and other similar players will shortly be entering the market as well.  And don’t forget the 150 start ups going after each LED fixture sub-category.

That’s not to say everyone is happy.  The DOE Solid State Lab (DOESSL) is pretty exasperated.  They’re doing their best to get ahead of the craze by establishing referenceable standards for LED fixture design and performance, but the market is moving too fast.  The DOESSL wants to avoid problems like in the early 1990’s, when the first and the worst CFL’s came with flickering, weird color quality and slow starts.  And with limited technical review for commercial lighting products, the EPA’s Energy Star program (which they took over from the DOE six months ago) will not solve this problem.

DOESSL’s standards, such as LM79 for fixture photometrics, LM80 for the LED chip performance and L70 for in situation lifetime testing have all been introduced. But these won’t inhibit manufacturers’ temptation from massaging their DOESSL performance reporting while pursuing their first mover market advantage.  Unlike simply inserting a lamp and a ballast into fixture, an LED fixture requires a system design.  Bad system design will take some time to play out.  But for now the DOE is losing the war, as designers and customers are making their own decisions in the rush to adopt LEDs.

Which is why it’s no surprise that this year’s event boasted both record attendance and number of exhibitors.  Of the 450+ vendors showing their wares at least 250 of them were showing LED based products.  If you passed by an exhibit without LED’s you couldn’t help feeling sorry for that vendor – and imagining they might not be back for the party at LEDfair 2011.

Beginning last year we conducted a series of DL test trials with our customers.  Recently we exhibited at the IARW show as a “coming out” party, showing both the now shipping DL system and a short video from our first large installation at a yet-to-be-announced freezer cold storage facility.

Prior to our DL tests we had learned that operating managers had three general concerns about LED high wattage applications – (1) light level performance, (2) cost and (3) glare.

Digging into each….

Light level performance:   Some companies had previously conducted experiments with LED fixtures and found that they way underperformed versus their existing lighting systems.  Two things worked in our favor during our tests:   (1) DL’s system design and (2) LED’s love the cold.  The foot-candle performance we measured was way above our customer’s current systems, this coming from DL’s integrated system design using the latest high performance LED chips and the fact that these environments run at below zero degrees, where solid state chips thrive.

Cost:  LED fixtures are expensive – still true.  But unlike traditional freezer storage high wattage HID and HIF lighting (which don’t turn off because they’ll literally freeze) the DL system does something really complicated – it turns off when no one is there.  Then it turns right on when someone arrives.  Then it turns off 30 seconds after they leave.  $ee the Light?  Since occupancy rates in these balmy environments are typically low (less than 10%) DL’s embedded data logging capability confirmed that lighting kWh is reduced to a stunningly low number – from 8760 hours a year to less than 800.   Plus every watt removed reduced the cooling cost for the facility.  Which makes the economic return that much more attractive.  Oh, and there are utility rebates too.

Glare:  Brighter, point source LED’s in high wattage can generate perceived glare, impacting operators and workers.  Some people affectionately call them glare bombs.  Here the DL system uniquely offers beam shaping, which allows us to use the LED directionality to our advantage, shining light where we need it and pointing it away from the operator’s eyes.   This is very impactful – no other LED system we’ve found (and we’ve studied them all) has ANY variability on it’s light pattern – meaning these designs assume all environments are identical in where they need the light?  You get the picture.  So the DL beam shaping lets us adapt on the fly to the specific site and its operators.

All of this is best captured through a video clip from our installation – take a look here.

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.

One powerful concept he described was “full cost” sustainability accounting whereby companies are required to include their external environmental costs (ie. things like pollution or resource consumption) into their corporate earnings.

A quick test said that if coal power producers included the full costs for their CO2 emissions it would wipe out all their earnings instantaneously.  More broadly, he cited California’s $300 million healthcare cost for non-insured Wal-Mart employees as an example of external costs not currently included in Wal-Mart’s corporate profit analysis.

While Jeffrey acknowledged the challenge with getting this accounting system implemented, his thesis remains that only full cost accounting will enable greener products to be priced at an advantage to less green products.   And this pricing advantage would spur adoption and corporate response to design more of them.

As with our previous seminars our target audience remains corporate energy and sustainability managers who wish to hear and discuss best practices, case study based observations.

Last year our first two seminars had a direct focus on the emerging market for Enterprise Carbon Accounting (ECA), a market we had identified and about which we published research.  Our February 25th Boston ECA event featured Mindy Lubber from Ceres who likened climate impact to an off balance sheet risk which should be disclosed by public companies.  Our follow-on May 14th San Francisco ECA event was highlighted by a practical case study panel with presentations from Applied Materials, HP, Intuit and Sony.

Then in September 2009, we  delivered a broader sustainability oriented seminar  including a special Wal-Mart Supplier Workshop followed by our Greening The Supply Chain event the next day.  This featured a keynote speech by CE-Yo Gary Hirshberg, who described Stonyfield Farms’ long standing commitment to reducing all aspects of their climate impact, which began way before being green was cool…

Our April 15th agenda has the broadest agenda yet.  Over the last year, as we’ve dug deeper with our customers and seminar attendees, we’ve found that many  corporate sustainability managers now have cross-functional responsibilities.  These managers may move from one meeting on green product design to a review of their energy usage or to a session focused on engaging their own employees for their own green efforts.

With all this in mind we’ve designed an agenda that touches on as many of these areas as possible – all wrapped into one day.  We’re looking forward to seeing everyone there!

These early LED systems, designed by traditional HIF/HID lighting engineers, were burdened with bad design DNA.  Their designers literally shape reflective metal around lamps and ballasts from GE, Philips and Sylvania, not layout circuit boards for a solid state lighting systems.  Even the most basic HIF/HID control features need to come from third party companies.

High performance, intelligent LED systems require an interdisciplinary design team who can optimize the entire system, simultaneously considering  optics, thermal, mechanics, power and control.  It’s more like designing a computer than metal bending.  No team like that existed.

So in 2007 Groom Energy set out to do this ourselves.

We recruited a small world class team into a separate company, initially calling it GroomLED, co-locating the team in our Salem office (later we renamed it Digital Lumens.)  Our goal was to develop LED based lighting systems for high wattage applications in our customer’s commercial and industrial environments.  We took the DL team on the road with our customers, confirming product requirements with each of them.

Our friends at Flybridge Capital took the risk with us, providing the initial seed venture capital in order to test the company idea.  Since then the press has unconfirmed reports noting two follow-on DL venture capital fundings, one with Flybridge and Stata Ventures in May 2009 and a second with Black Coral Capital in December 2009.

Although DL continues to operate in stealth mode, we were excited this past week when DL was awarded a prize at a Next Generation Luminaires Solid State Lighting Design Competition, jointly sponsored by the Department of Energy SLL Lab , IESNA and IALD.

Stay tuned – there will be more DL announcements over the coming months, but at this point we wanted to give props to DL and answer the inbound questions we’ve been receiving…

The basis for our research report started back in 2006.  At that time, as Groom Energy engineers were working with a F500 customer to build a GHG reduction budget, it occured to us that GHG tracking and reporting would eventually represent a fundamentally new process within every large company.  Even by then, staying on top of reporting for the EPA’s Climate Leaders was requiring more and more time for our customers.  It was no surprise that spreadsheet tools were not going to scale – but it was the collaboration necessary to even gather and manage the data where the gap was most obvious.

What most people don’t know is that we even made a concerted effort to start our own Groom Energy spin-out GHG software company.  We had surveyed the market through our customers, found only a few third party software packages, and thought we saw a path to a new class of enterprise software, calling it “enterprise carbon accounting” or ECA for short.    (all new markets need a name, right?)

Within a few months we had detailed the basic software functionality and even recruited a software team to start building it.  After several initial meetings with traditional software VC’s in Boston (most of whom couldn’t spell G-H-G, but all of whom understood enterprise software) we sensed it was going to be a long slog to get early stage funding based on our powerpoint-ware.  Either we had bad breath, couldn’t convey the opportunity correctly or needed to live on Sand Hill Road…

Within a few months of our effort we starting uncovering more new ECA vendors, some established EHS vendors with GHG extensions, some VC funded pure start ups, some larger software companies who added GHG modules.  It seemed each week we were adding a new entrant to our wiki list, which was more and more daunting.  At 10 known players we were concerned.  At 20, we knew were were too late and abandoned our effort.  At 30, we knew that our customers were just as overwhelmed trying to understand the offerings, all while building their own strategies internally.

And hence the idea for our ECA research report was born.  We saw that the best way to leverage our effort was to help our customers with a more concrete deliverable – customer based research which could be regularly updated as the market developed.  Not as profound as an entirely new company, but worthwhile nonetheless.  The good news is that market response has been a bit overwhelming…

Check out the latest report and, if you’re an entrepreneur considering your own ECA software start up, study the vendor list carefully – its up to 60 and still going….

So over roughly the last seven years, new market categories within Cleantech have come into vogue with similar, layman speak descriptions – insert your favorite – “there is a great future in….” batteries – biofuels – carbon software – demand response – green building materials – LED’s – smart grid – solar PV – wind, and even water.

What’s stunning is how many of these now visible companies only received their Series A funding in the last few years.  Companies like Hara (Series A in 5/2009), Silver Spring (Series A in 4/2008), Solyndra (Series A in 4/2007), Solar Power Partners (Series A in 9/2007) and SunRun (Series A in 6/2008) are all perceived leaders in big market categories, yet they’ve only been in existence for a few years.

Which makes it that much more fun to speculate on the next favorite hot markets.   My votes for three new Cleantech categories which will become more visible (ie. early stage funded) in 2010 are:  1.  nuclear power, 2.  magnetics and 3.  waste heat recapture systems.

Nuclear power, because it makes so much sense.  In a market where there has been so little new R&D, one can only imagine what could be developed if entrepreneurs were given capital and support.  The fun thing about this one is how real green advocates have a conundrum with the benefits and risks.  A relevant company would be NuScale, but there are others as well.

Magnetics, because with so many spinning parts in both existing and newer energy systems the math favors reducing friction (ie. operating more efficiently) and lower lifetime maintenance costs.  A relevant company might be Synchrony which recently introduced a computer controlled bearing.

And Waste Heat Recovery, because energy efficiency is in vogue and waste heat is becoming a more known, literally, as a waste of energy.  Also we can expect, like cogen and fuel cells, these systems will be supported even more heavily with utility incentives going forward.

Oh, and if you want to follow the professionals who write on this stuff look at GreentechMedia with their top 2009 investment list.  Or Jeffries Investment bank who speculates how much more $ will flow into Cleantech.

1.  PACE rollout across the US – this emerging energy tech financing program, which started in Berkeley, CA as a residential solar PV financing program, has now grown into a much more powerful concept.  PACE (or Property Assessed Clean Energy) financing has broadened, becoming the poster child for enabling both residential and commercial property owners to invest more easily in renewable and energy efficiency upgrades.   Legislation for PACE like programs has now been “enabled” in 17 states, but the devil will be in the details as to how each rolls out their own version, delivering low cost tax exempt debt to property owners.  Regardless, in a market where commercial lending has ground to a standstill, PACE programs have the chance to catalyze lots of projects, providing significant energy and carbon savings – it remains to be seen how fast these programs can be rolled out in a scalable way.

2.  The continued fragmentation of state level PV incentives - While for the past few years CA, NJ, MA and CT have led the nation with developed PV incentive programs, each state has had their formulas for distributing these incentives, and each has experienced intermittent funding for their programs, both for policy and economic reasons.  2010 will bring another level of complication, as incentive programs in several new states will become available.  In these newer programs, confirming incentive formulas will part of the story – continued funding for these programs is a new risk to assess.  As the economics for PV breaks without heavy state incentives, incentive commitment letters for these “approved” projects will be critical.

3.  Carbon Cap’nTrade – Post Copenhagen it’s pretty clear we won’t see 2010 US Federal policy that has immediate economic consequences for Corporate America.  What we’ll be watching is whether Federal policy institutes a “grandfather” clause which encourages action while the policy debate continues in the Senate and the House.  (This grandfather concept was implemented successfully within the energy efficiency code in the EPAct2005).  So in 2010, it could be that state policy overrides lack of Federal policy and defines carbon pricing with vehicles such as RGGI for pricing, although CA will likely not see their program live until 2012.  Guidance for emitters at below the 25MW power plant level might also be forthcoming…

4.  Utility and Trust sponsored Energy Efficiency rebate programs:  While New England and CA have had consistent energy efficiency programs for a number of years, new states and utilities are rolling out more programs in 2010.  Considering we’re still in the Great Recession, free money supporting fast returning energy efficiency investments is clearly worth studying on a state by state level.

So there you have it – maybe next year we can look back on this post and give ourselves a report card on our predictions

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.

With pending climate legislation, challenging economic times, a higher motivation for becoming energy efficient and a recognition that energy efficiency is lower cost than renewable energy, all the stars seem to be aligned.  The consensus here is that over the next few years this industry could experience tremendous growth, heading from $5 billion to $15-30 billion depending on who you’re talking to….or maybe not.

In general, the ESCO industry provides turn-key energy efficiency upgrades for tax exempt customers such as states, cities, municipals, schools and hospitals.  The ESCO identifies the savings through an investment grade energy audit, installs the energy efficiency upgrades, provides a financial guarantee that the energy savings will be achieved, and the customer pays the ESCO with proceeds from their issuance of tax exempt bonds.

With the introduction of the American Recovery and Reinvestment Act (ARRA), these same customer prospects are now the potential recipients of lots of grant $$$$$$.  This additional “free” money means they should be doing even a greater number of projects, right?

Today there remains a lot of confusion about how exactly they can spend these grants if they receive them.  Maybe they should use the ARRA money just to buy these upgrades instead of borrowing to pay for them?  Can they co-mingle the ARRA grants with State grants through the EECBG program?  Can they buy down part of the project cost and issue less debt? And, by the way, the reporting and administration hooks that come with any of these grants are even more confusing.  All of which has contributed to the slowing of decision making….

Which leaves the ESCO’s thinking maybe this wasn’t such a good thing after all.

Not surprisingly, at the time they signed up most institutions didn’t focus of the financial costs for going carbon neutral -  now a few years later it’s becoming more clear that the big issue (beyond behavior change) is where is the money to make this possible?

Today, getting an entire institution close to carbon neutral can only be achieved by purchasing REC’s or offsets.  This is probably a reason why Harvard and Yale have yet to sign the PCC, as they would be perceived as buying their way to neutrality with their now smaller, but still large endowments.

The good news is that the PCC goals are LONG TERM – when you’re an institution with plans to be around for the next 100 years, you can talk about the year 2050 in academic terms.  However, each year that passes after making a PCC announcement it will become more clear how unprepared these institutions are to make significant progress, except through buying REC’s and offsets.  There’s no silver bullet for Mr. University (or anyone else) to pay for new solar arrays, CHP systems or all new EV fleet.  An extra green student fee won’t do it.  Most have already attacked the “low hanging fruit” early on – so their respective annual report cards will be pretty hollow without some serious investment.

Which is why I’m a bit skeptical about the chance of success for the PCC.

Compare the PCC to the EPA’s Climate Leader (CL) program.  CL has had similar signup momentum with over 250 large companies committing to reduce their climate impact over a multi-year period.  Where the PCC talks about Carbon Neutrality in the next 20-40 years, the Climate Leaders’ goals are typically for 10-15% reductions over a 3-5 year period.  Where the PCC members chose to require a profound multi-decade goal, CL members chose Kyoto-like targets.  The CL annual reduction targets are being tracked and several corporations are now preparing their next targets, having achieved their initial targets in the last year.

The climate problem isn’t going away in a few years.  While both goal systems can work, only CL can be measured and reported in a way that allows for learning, revising and setting new direction in an iterative fashion.  Even grand challenge goals need to give folks a more likely chance of success in reasonable timeframes…

So we spent our time in the panel talking about lifecycle costs, energy performance contracts, taxable vs tax-free capital and power purchase agreements.  My expectation is the the university/college market will come quickly to the right decision – the only way to make a near term dent in their GHG emissions is to finance there way there.

Since our Wal-Mart Supplier Readiness Seminar a few weeks ago the broad impact of this program is clear – we’ve seen multiple suppliers rushing to learn how to respond to the Wal-Mart Sustainability Index (WSI) and how to boost their performance once they’ve completed the initial fifteen question survey.

As with any new Wal-Mart initiative, even companies not in it’s retail supply chain are studying the WSI’s relevance to their own business and industry.  These companies are left wondering whether the WSI is a precursor to their own industry’s environmental report card or whether this is just another Wal-Mart false start RFID project.

While the US considers its climate position going into Copenhagen, the SEC ponders whether to force climate reporting on financial statements, and CDP offers an emerging standard for voluntary corporate reporting, the WSI has already become today’s most important mandated environmental reporting trend for US corporations.  Unlike these other programs, this reporting has near term and real business consequences.

Like with the CDP, large companies are already set up to respond to something like the WSI.  However, mid-sized and smaller companies are struggling to figure out how fast they need to gear up for their own industry’s version of the WSI.   Most of these companies care a lot more about their current cost of energy than their carbon emissions, much less their sustainability costs.  But Wal-Mart is a leading indicator they cannot dismiss….

Three years from now we may look back at the WSI as having initiated regular sustainability reporting for Wal-Mart’s entire supplier base.  More profoundly, WSI’s bigger legacy might be having jump started industries outside of retail to develop their own sustainability reporting indices.  And, if that reporting leads to  more proactive management of environmental impact, our friends at Wal-Mart will deserve a lot of the credit.

Here we are a year later and the world looks quite a bit different.  The economy has cracked, but fuel prices, which started coming down heading into the September 2008 Lehman bankruptcy, were not the principal culprit.

However, there is a lot to be learned from the period in 2008 when our gas prices briefly stayed above $4 per gallon.  At this price level something very logical occured.  Behavior changed.  People started driving less.  Visible energy pundits like Thomas Friedman encouraged us to study this accomplishment.

So now in 2009, with the economy struggling and the US debate on carbon cap-n-trade in full swing, the same economists are debating the potential impact of this carbon utility tax on the price of electricity.

It’s interesting to consider what would happen if the cost of electricity suddenly accelerated.  Like gas, electricity in the US costs significantly less than other developed countries and we have historically taken its availability and low cost for granted.  So, if kWh prices were to accelerate, do you think we might see the same logical result – ie. behavior change?

A few years ago we performed site visits for adding solar thermal to a series of  multi-unit homes.  We had gathered data on their historical fuel costs, the type and efficiency of their existing boilers, had a design for the pipe runs connecting the panels and heat exchanger, had determined the optimal orientation of the panels relative to tree shading and had run our energy models with all this data.

In the end their 10 year old EPDM roof made the whole project hard to pull together.  At 10 years their roof was too new to require a replacement but too old to support an additional 25 year life span for a solar thermal installation.  The project would be burdened with the new roof cost but there would be no financial return for this upgrade.  These days we’re a little more sophisticated before we get in a truck for a site visit!

Recently we’ve seen solar technologies which can have an added financial incentive addressing this roof issue.  With commercial thin film solar, because a new roof membrane comes with the installation, a portion of the system cost can be included in the Federal Investment Tax Credit – effectively a tax incentive for a new roof.  This can also be the case with technologies like Solyndra, which require a white roof for the system to operate effectively and hence take this pro-rata tax benefit when calculating their financial return.  Of course, you must be careful to confirm with your (or your financier’s) accountants on their interpretation for your installation.

So perhaps going forward there will be a better opportunity to apply this value in the corporate financial analysis for adding solar.  In addition to solar PV systems serving as a (1) a long term energy price hedge, (2) a greening corporate statement and (3) a potential mechanism for carbon tax savings, perhaps our corporate customers will soon begin to look at this opportunity principally as a cheaper way to replace their aging roofs?

“Mini” CHP, the type we install at a commercial facility level, is showing signs as having an equally attractive financial and environmental impact.   Like utility systems these smaller systems (75kW to 1 MW) produce electricity and heat, typically all consumed at the site, with the heat being applied to domestic hot water or process hot water/steam production.

The basic efficiencies are pretty striking – take a 30% efficient process of burning fuel to generate electricity and make it 85% efficient by capturing  and using the waste heat.  Our typical economic analysis revolves around the initial system cost, net of incentives, and it’s cost to operate (principally fuel) vs. our customer’s cost of utility delivered electricity and their cost of heat.

Like any asset, the math is best when the CHP system is fully utilized, meaning a facility has a constant use for both the electricity AND the heat.  Regardless of whether the system is based on a natural gas powered engine, fuel cell, micro turbine or today’s more green and sexy biomass CHP system, the challenge with these systems remains sizing the system to the largest possible heat load that can be consumed year round at that facility.  Economies of scale are the issue here.

Not surprisingly, there are certain types of commercial facilities where this can work extremely well -  apartments, hospitals, hotels, manufacturing, nursing homes and universities.  So when studying CHP, just remember, if you can use the heat, you might have a good opportunity….

If you’re interested, we’re going to be presenting some of the basics issues around CHP and the latest trends we’re seeing during our upcoming webinar with GreentechMedia.

It is called the CRC (Carbon Reduction Committment) and it’s goal is to extend the EU cap and trade scheme to the next tier of UK polluters, below the utilities and other large emitters (metals, cement, etc).   This will likely affect 5000 new organizations, including corporates, and it kicks off in April 2010.  Under the current program, your performance in reducing emissions gets ranked in what are called “league” tables.  These rankings impact your next year’s tax calculation.  The fund recycles the contributions to the payors, with better performers getting 110% of their initial tax payment returned and the lower performers getting 90% back.  In the following years the percentage for winners goes up (say to 120%) and the losers goes down (say 80%).

The cap works because the UK government will successively rachet down the number of available credits at auction.  It is complex, to say the least, and it has already kicked off a new consulting industry for many UK based environmental consulting shops – if you want to buy a report on this for @ $1k just check this out

Like any new carbon tax program there is stll a lot of debate about how these initial rules have been written.   One example I heard from James Murray at the BusinessGreen.com:  Under the CRC’s current form, British Telecom, who has been planning to build a significant wind farm and use it’s clean electricity for their operations, would NOT be given any credit against their CRC tax calculation.  The thinking being that as they had already received UK federal tax incentives on this project they would be “double dipping.”

There are a number of other incentives in the marketplace beyond the utility rebates, which we help our customers uncover. Where rebates are not available, energy efficiency projects can earn ODR (Other Demand Resources) and or White Tags. In many cases, depending on the area, these incentives can be significant, but in large measure are ignored by most clients. Our experience is these incentives can/should be considered when designing multi-site projects in order to fully understand the true financial opportunity. One opportunity for a warehouse in Massachusetts where rebates were not available yielded $18,000 in ODR payments. That same facility will garner an additional $15,000/year in Demand Response payments from the New England ISO. The customer did not originally apply for these incentives merely because they were unaware of their existence, and thought that because the were dealing with a municipal energy provider, there were no other incentive opportunities.

Joining me in the presentation were Mark McClear from CREE and Jeff McCullough from PNNL. The session was very well attended, far better than we had anticipated. Mark gave a good historical view of where LED light sources have come from, where they are now and where he (and CREE) anticipates them to be in the short term.   I presented a synopsis of Groom’s observations of the commercial and industrial marketplace from our customer’s perspective. The requirements and challenges they face and the many questions they pose to us.  I reveiwed 4 specific case studies which hit specific different types of applications, Indoor, Roadway, Parking, and Tunnel, and the results/benefits of these installs. Jeff gave an excellent overview and detailed the effort to provide standards around the myriad of claims in the market regarding LED light sources and fixtures.

What is apparent is that there is tremendous interest in LEDs as a hugely efficient light source for the future. Along with that come a ton of questions and the need to provide expert guidance. The comments from the session seem to be positive so far, and we continue to try and provide guidance and leadership to our customers in this area. Stay tuned for more!

The webinar is currently archived on the Greentechmedia site so you’ll just need to register here in order to view it anytime for the next 6 months.

The ECA idea stems from the belief that as GHG emissions will ultimately have economic consequences  (ie. cap-n-trade or tax), a company’s GHG accounting system needs to be financial grade.   In the extreme, Mindy Lubber, CEO of Ceres, likened using this new metric for corporate performance to the need for understanding off balance sheet risk.  Hence, GHG reporting both now and in the future needs to be transparent and auditable.  Early voluntary corporate reporting through programs like Carbon Disclosure Project shows that these organizations understand the emerging problem and are proactively dealing with it.

However, in listening to Pankaj Bhatia from World Resource Institute and case studies from companies like Allied Materials, Autodesk, HP, Intuit and Symantec, it became clear how very early we are in this journey.  Each of these companies has needed to develop a new process for building their GHG inventory and their comments highlighted how much subjectivity remains in their interpretation of the boundaries for their emissions.   This is especially challenging around Scope 3 reporting.

The speakers also offered commentary about the Waxman/Markey bill and speculation about whether the US would or would not have a strong GHG regulation position going into Copenhagen in December of this year.  Speculation was high that cap and trade will prevail as the vehicle whenever policy gets enacted.

The side story is that cap and trade will work principally for political reasons.  It would be the only program that would allow US policy makers from states who have each different consequences from GHG regulation (coal vs gas power, mfg vs farms, etc) to satisfy their constituents by shifting the battle to “how many GHG credits do I get?”   One can imagine it won’t be as simple as the DOE’s stimulus financed Energy Efficiency and Conservation Block Grant program which has been allocated on a $ per capita basis to unsuspecting cities and towns throughout the US, regardless of need.

A great opportunity to learn about trends and observations regarding LED applications in the Commercial and Industrial marketplace. We will review LED pricing trends, key fixture performance criteria, DOE and Energy Star perspective, along with several case studies.

The venue:  As you walk into Javits you cannot help but reach for  your sunglasses – and start the mental calculations of the amount of KWH this place is consuming during the three day exhibit hall event!  Everything is lit to the max.

Induction lighting:  Two years ago we were curious to see whether Induction lamps were going to be highlighted by the large manufacturers, especially Philips with their QL lamp – turns out that they weren’t and we found only one or two vendors showing off an induction lamp based fixture.  The same was true last year.  This year we did find a few more vendors, all of whom had their own retrofit variation for a traditional lighting fixture – but since induction lamp volumes are still not coming, the writing is on the wall for these long lasting high priced lamps as alternatives to the traditional HIF lamps because LED’s HAVE ARRIVED!!!!!

LED’s – then:  At Lightfair 2007 LED’s were, as a friend calls them,  still “blinky blinky” – handful’s of vendors were showing off their fun, colored architectural enhancements for electric signage and discoteque walls.   Leading innovators like Color Kinetics were displaying one of their first white light general illumination products – an undercabinet light.  Lightfair 2008 was a coming out party for LED’s, with a bunch more new white light LED only start up vendors and Chinatown (the regular sub section of the exhibit hall with tons of small manufacturers who can make anything quickly and cheaply) showing blinky blinky in volume. No traditional large fixture vendors like Cooper or Acuity had LED’s highlighted in their booths.

LED’s – 2009: Wow, how the world changed in two years.  White light LED applications were everywhere this year – from downlights to 2 x 2 office to wall packs to parking garage to cobra heads – everyone had their own adaptation of a white light LED fixture.  Consolidation has already begun, with Philips having acquired and integrated Color Kinetics since 2007, CREE acquiring LLF in 2008 and more recently Cooper acquiring IMS just a few months ago.  The new products on display are seriously constrained by the price performance challenge – as a consequence, these new fixtures are designed to produce LESS light than the fixtures they would be replacing – manufacturers either do not admit this or they describe their modular designs which will grow into the LED performance curve.

We also had the chance to catch up over breakfast with Mark McClear of CREE and test his observations about the expected price/performance curve over the coming months.  If, as he suggests, next year’s show will have LED based fixtures using 135 lumens/watt with a 10% decrease in price for the same chip, get ready for REAL acceleration of adoption.  These products will be able to produce sufficient light output with a reasonable cost and will show faster return on investment for C&I managers  looking to cut their wattage consumption.

The C&I lighting fixture world has clearly been divided into two types of players – believers, who are hiring, building, learning with the first designs for these “computer” lights based on integrating LED’s, extruded metal heat sinks, complex optics and solid state power supplies and non-believers, who are betting that their businesses, which relies on creative metal shapes wrapped around standard lamps and ballasts from Sylvania, Philips and GE will survive the new entrant LED challenge.

We’ll be capturing more of these thoughts in our upcoming LED webinar on May 21st as well…

https://event.on24.com/eventRegistration/EventLobbyServlet?target=registration.jsp&eventid=145608&sessionid=1&key=F724C277D9121A1833DD319948698A38&sourcepage=register

It’s been crazy, fun and scary, like all start-ups – and only now are we lifting our heads up a bit and realizing how much we’ve been learning along the way….

The idea for this blog is to capture some of these learnings and observations in a more real-time fashion, both for our now extended Groom Energy team, the customers with whom we stay pretty connected and other GES friends who might find this to be interesting to their own business.