The Cost of Saving Electricity

Antares has worked extensively with utility and state energy efficiency incentive programs in New York State.  We have seen many commercial and industrial customers through the process of applying for incentives, evaluating energy and cost savings, and determining an appropriate incentive for the project.  That’s why we were pleased to see this press release about the cost of energy savings produced by energy efficiency programs in 20 US states.  It shows how much of the cost is borne by the consumer versus the incentive program, and the variations in cost from state to state.  (Massachusetts projects seem to cost over twice as much per kWh as New Mexico projects – to the customer, too, not just the incentive program!)

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Source: LBNL (as cited by press release)

There is a lot going on in this fun data set.  Here are a few of our thoughts:

  • Reports like this are all about the accounting.  It costs nearly the same amount to replace light fixture A with light fixture B whether you’re in Oregon or Alabama, but a program in one place may count the project cost and energy savings differently.  For example, one may look at the project on an incremental basis – how much more you spent to upgrade to the really high efficiency fixture instead of replacing with a basic fixture.  The other may not.  Do labor costs count toward the project?  A company’s internal labor costs?
  • How long an energy efficiency program has been in existence has a lot to do with the kind of projects it gets and the money it spends.  Over time, the “low hanging fruit” energy projects are done and the next best projects are a little more expensive and a little less appealing.  Call it the law of diminishing returns for energy efficiency.
  • Geography has a lot to do with the kinds of energy projects that programs fund.  These data include residential incentives, which focus on in many cases not just on appliances but also building envelope and HVAC projects.  For example, insulation projects may be common in a cold northern state with an elderly housing stock, while air conditioner replacements may dominate in a warmer southwestern state with a relatively new, efficient housing stock.

We do have to wonder what, say, Maine and Massachusetts are doing differently.  But we are happy to see proof that energy efficiency is still a lot cheaper than many energy generation projects.

President Obama Sets New Federal Government Sustainability Goals to Reduce GHG Emissions

On March 19th, President Obama signed a new Executive Order that increases Federal requirements for reducing Greenhouse Gas Emissions (GHG) and increasing renewable energy usage.  As stated in the Order:

Through a combination of more efficient Federal operations […] we have the opportunity to reduce agency direct greenhouse gas emissions by at least 40 percent over the next decade while at the same time fostering innovation, reducing spending, and strengthening the communities in which our Federal facilities operate.

Since the Federal government is the single largest consumer of energy in the Nation, actions like this can have a significant impact on the country’s GHG emissions profile.

carbonchart_1200x600

Image from Energy.Gov

Specifically, the Executive Order sets the following key targets for Federal agencies (where life-cycle cost effective).  They extend and expand upon previous Federal government sustainability goals:

  • Ensure that at least 25% of total building energy (electric and thermal) is clean energy by 2025 (interim targets start at 10% by 2016). Clean energy includes renewable energy technologies as well as combined heat and power, fuel cell energy systems, new small modular nuclear reactors, projects with active carbon capture and storage, and other alternative energy approaches.
  • Ensure that 30% of building electric energy is renewable by 2025 (interim targets start at 10% in 2016).
  • Reduce energy intensity in Federal buildings by 2.5% per year from 2015 through 2025.
  • Reduce water usage by 2% per year through 2025 (potable water and water for industrial, landscaping, and agricultural uses).
  • Reduce per-mile GHG emissions for agency fleets by 30 percent by the end of 2025 (relative to 2014 levels), and increase the percentage of zero emission vehicles or plug-in hybrid vehicles.

In related news, the IEA recently announced that global carbon emissions were flat in 2014, following four decades of steady rises. At the same time, the global economy grew by 3 percent. This is just one more indication that economic growth and use of lower carbon energy sources can be compatible goals.

2014 Farm Bill to Implement Energy Efficiency Systems for Small Businesses and Agriculture Operations

Secretary of Agriculture Tom Vilsack recently announced resources for farmers and small business owners to install energy efficiency and renewable energy systems as part of their business strategy.  These provisions are part of the 2014 Farm Bill and could provide economic opportunities for many in rural America, especially through the Rural Energy for America Program (REAP).

These resources are available either through direct project funding or loan guarantees, which will help reduce our dependence on fossil fuels while improving the economic viability of rural families and businesses.

If you are a small business or a farmer check out our extensive experience in solar PV, wind, anaerobic digesters, geothermal and biomass systems.  You can take advantage of the knowledge and skill sets we offer our clients to implement energy savings systems in a smart way.

WRI’s New GHG Protocol Scope 2 Guidance – Why Should I Care?

If your company has GHG reduction goals, you should care. The GHG Protocol Corporate Standard is the most widely used standard for corporate GHG accounting in the world. If your company supplies or buys renewable energy, this update addresses one of the most complex and contentious issues in GHG accounting: the treatment of renewable energy transactions. You can click on Figure 1 now and jump right to the 120 pages of new guidance, but I hope you will read on for observations and insights from someone who worked on the Technical Working Group that helped WRI and WBCSD put it together.

GHG Protocol Scope 2 Guidance

Exhibit 1: WRI’s Amendment to the GHG Protocol Corporate Standard (click on picture to access WRI’s corporate standard web page)

World Resources Institute (WRI) released the new GHG Protocol Scope 2 Guidance: An Amendment to the GHG Protocol Corporate Standard, in January 2015. It has significant implications for how instruments like renewable energy certificates (RECs) in the US should be included in GHG emission accounting for corporations. The treatment of RECs in accounting was by far the most contentious issue and it still splits participants between those willing to accept them as a tracking device for market-based ownership of renewable attributes and those that oppose them because of valid questions about how much purchasing RECs actually accomplishes in reducing GHG emissions. I think the current protocol does the best it can in the face of an irresolvable disagreement by making the source of GHC emission claims clear so that a third party can judge for themselves the sources of a company’s GHG emissions and the quality of a company’s market-based actions to change its emissions. The protocol is good practice; following it will make GHG claims about using renewable energy both more credible and more likely to avoid false or misleading claims that can turn into bad publicity or legal action if claims violate statutes or Federal agency directions like those found in FTC’s Green Guides for Environmentally Friendly Products.

What Changed?

The most visible change is that corporate inventories must now include information from two accounting methods to comply with the Corporate Standard. The location-based method is just what it sounds like. It uses emission factors for electricity based on the location of a facility and the available electricity supply and applies them to all the electricity the reporting organization uses. The second is a market-based method, which reflects an organization’s emissions based on contractual agreements the organization uses to acquire electricity that is different from the mix of generation available in a given location (think RECs) – while accounting for the emissions associated with the remainder of the electricity provided by local supplies.

Location Based Method

For the location-based method the new guidance provides extensive information and recommendations on how to identify and use a quality emission factor and the limitations and issues an organization is likely to encounter in using emission factors. For example, emission factors are often outdated relative to the GHG reporting period in which they are used, sometimes by years. Another problems is reconciling where the electricity a customer buys is really being generated. Suppliers and distributors often exchange generation with each other to satisfy demand on an instantaneous basis. Emission factors also often fail to properly reflect the “residual mix” of generation after taking account of renewable energy directly purchased by individual customers. This fact must be taken into account. The new guidance discusses these issues and their context, and offers practical advice on how to proceed if the “perfect” emission factors are not available. This illustrates one of the most useful aspects of the entire document:  it recognizes and explains key issues, which points the way for improving GHG emission inventories and tools, while still making practical recommendations on how to proceed in the absence of perfect data.

Market Based Method

For the market-based method, the guidance accommodates the very wide range of instruments for conveying renewable energy that exist around the world while still maintaining key principles. One of the most important is that in scope 2 accounting, only one entity can own and make claims about using a specific unit of renewable energy (megawatt hours embodied in a REC, for example) to avoid double counting between consumers. At its most basic level, the market-based method illuminates what an organization has done with its purchasing to change the GHG intensity of the power it uses. There is extensive information and advice on how a market-based estimate should be done and the issues involved (“null power” will have to be the subject of another posting), but two key issues deserve special attention. First, emissions associated with renewable energy purchases should only show their actual emissions, not an estimate of emissions avoided or impacts on other generation. Second, and related, this new guidance makes it clear that in this accounting framework measures like purchasing renewable energy represent what the reporting organization is consuming, not necessarily what that consumption means for overall GHG emissions. In practice, one organization’s purchase of renewable energy may just make other customers use more fossil fuels with no impact on overall emissions in the short-term. The type of emission calculation needed to claim actual reductions in GHG emissions is difficult to make, can change over time, and involves assumptions about what would have happened absent the renewable energy project. These issues are better addressed in the GHG Project Protocol, where additionality and other complex issues are explored in more depth. An organization is free to purchase formal carbon offsets or contractual instruments it believes will have more impact in supporting new renewable energy use and include that information in disclosures, but additionality is not a requirement for renewable energy reported under the market-based method in scope 2.

Keeping Things Consistent

Although doing two emissions calculations sounds complex, most organizations tracking their GHG emissions are already collecting the information needed for both the location-based and market-based accounting. This guidance simply makes the information more transparent and easier to review by defining what to include, how to make calculations, and how the information should be presented. Transparency and consistency in accounting makes it possible for an organization itself or an outside reviewer to understand more about how an organization is pursuing its GHG targets. Changes in consumption from year to year are reflected in both the location- and market-based methods. More information is needed to determine whether those changes in consumption reflect changes in weather, greater efficiency, or a change in operations, but at least the general source of change is readily apparent. Similarly, changes in emission factors from year to year in the location-based method expose what portion of an organization’s change in GHG emissions comes from changes in the electricity it buys from its local supplier. Finally, the emission and consumption information on the renewable energy an organization has purchased and included in its market-based accounting makes it clear what actions an organization has taken beyond using less energy or choosing a business location where electricity suppliers have lower GHG emissions. The guidance’s eight scope 2 quality criteria, shown in Figure 2, assure that the instruments used for market-based accounting meet minimum requirements.

At 120 pages including 3 pages of references and 4 pages of recognitions for the people and organizations from around the globe who helped develop the document, I can’t claim this is light reading. But it is very well-organized, illustrated, and referenced for practical use. It took four years to produce this significant update to the GHG Protocol Corporate Standard and I think it will be widely adopted and used since it is an evolutionary change over the prior version.

Scope 2 Quality Criteria, WRI GHG Protocol Scope 2 Guidance Amendment, Table 7.3, page 60

Exhibit 2: Scope 2 Quality Criteria, WRI GHG Protocol Scope 2 Guidance Amendment, Table 7.3, page 60

 

Renewable Energy Tax Incentives – 2015 Update

The start of a new year always generates lots of questions on the current state of renewable energy tax incentives. This is particularly true for the Tax Increase Prevention Act, which was signed into to law on December 19, 2014. In a move that has become all too familiar to anyone working in this industry, the Tax increase Prevention Act took many of the biofuel and renewable energy tax credits that had previously expired at the end of 2013 and retroactively extended them through the end of 2014. It is important to note that as of January 1, 2015, these affected incentives have expired once again, and that their ongoing status for the 2015 year has not yet been addressed. This post will review what was changed by this legislation, and highlight the gist of some important incentives that are still available.

Biofuels

Some of the biofuels tax credits that were affected include the Second Generation Biofuel Producer Tax Credit and the Alternative Fuel and Alternative Fuel Mixture Excise Tax Credit, among others, which were retroactively extended through 2014, but not otherwise modified. The full list of extensions is rather long, and can be found at the Alternative Fuels Data Center.

Production Tax Credit (PTC)

The Section 45 Production Tax Credit (PTC) was also retroactively extended through the end of 2014. This is excellent news for the 4,859 MW of wind generating capacity that was installed in the US in 2014. This is four times as much wind as was installed in 2013, although far short of the record 12,000 MW of capacity installed in 2012. For more discussion on the PTC, background information, and the terms of its expiration, please see my post from January 2014.

Investment Tax Credit (ITC)

No legislative changes have been made to the Section 48 Investment Tax Credit (ITC) since the last update I posted. In summary, it is still available through the end of 2016 for the following technologies:

  • Solar, fuel cells, and small wind turbine are entitled to a credit equal to 30% of expenditures.
  • Geothermal heat pumps, microturbines, and CHP are entitled to a credit equal to 10% of expenditures.
  • At the end of 2016, the credit for solar will reduce to 10%, the credit for geothermal electricity production will remain at 10%, and the credit for all other technologies will expire.

Section 1603 Grant

The Section 1603 Grant, which was created by the American Reinvestment and Recovery act of 2009, is a close relative of the PTC and ITC.  Many people do not realize that although the deadline for submitting new applications for the Section 1603 Grant was October 1, 2012, the “placed in service” deadline associated with this grant is not until January 1, 2017, for several renewable energy technologies. Projects that applied for the Section 1603 Grant must be placed in service before the credit termination date, located in the table below by technology, and in the Treasury Guidance Document.

Section 1603 Grant summary

Renewable Energy Tax Incentive Summary Table

As always, DSIREUSA.org is a great place to seek out basic information on local, state, and federal incentives. If you have more complex questions, please give ANTARES a call. We have helped a variety of clients evaluate their opportunities for bringing alternative funding to their projects, including tax credits.

Happy New Year!

As this is the first blog posted by ANTARES in 2015, I would like first to wish all of our blog subscribers a Happy New Year. The start of a new year is a time of reflection in any industry, but as a sector filled with projections, this is especially true for energy. While there is much left to do to secure a fully realized sustainable energy future, considerable progress has been made in recent years. Specifically, I am very happy to note that in 2014 renewable sources accounted for nearly half of all new electrical generation. It is somewhat surreal to recognize that wind and solar now represent a meaningful part of the U.S. energy supply (follow this link for a playful treatment of these facts). There are many reasons for this, but renewable energy sources are now penetrating into markets that are well beyond “ideal” southwestern resource locations. Massachusetts, for example, installed more than 350 MW of solar power in 2014 according to a recent report produced by GTM Research and SEIA.

Perhaps even more important, many of these gains are being made despite the very low price of natural gas-a tough competitor under any circumstances. I don’t know what future gas supplies and prices will bring and with the likely reduction of the Investment Tax Credit (ITC) starting in 2017, there is a lot of room for speculation on where the market will be in the coming years. However, the momentum gained in the past few years by solar and wind are a good sign that a balanced, sustainable energy future which is built on the back of renewable energy is more than a “side case” in those energy projections.

For the staff at ANTARES, 2014 was an exciting year filled with helping clients develop solar energy projects, reducing industrial energy use, supporting government agencies meeting ever tightening mandates and surging interest in large-scale bioenergy projects.  We hope for more of the same in 2015 and the continued success of those working hard to make renewable energy projects happen

The Production Tax Credit – What Now?

The federal Production Tax Credit for renewable energy expired on January 1st, 2014. This credit allowed renewable energy technologies including wind, open and closed-loop biomass, geothermal, municipal solid waste, incremental hydropower, and marine renewables to claim a tax credit* for every kilowatt-hour of electricity generated during the first ten years of the project’s life. In addition, legislation passed in February 2009 (The American Recovery and Reinvestment Act of 2009 (pdf), or ARRA) allowed projects that were eligible to claim the PTC to instead claim a 30% Investment Tax Credit (pdf), or ITC. With the PTC expiration, so goes their eligibility for the ITC.** [Read more…]

The VA Continues to Pursue Renewable Energy Projects

The US Department of Veterans Affairs (VA) continues to support solar project development at their facilities, as shown by 2.1 MW PV array on top of a landfill at the Salem VA Medical Center in Virginia, scheduled to be completed by mid-November.

[Read more…]

Recent Changes to the PTC and Their Implications

Heralded by some, despised by others, whether you like it or not Congress recently passed an extension of production tax credits (PTCs) for renewable energy projects. Title IV, section 407 of the American Taxpayer Relief Act of 2012 included some modifications to the existing Section 45 Production Tax Credit and the Section 48 Investment Tax Credit (ITC). I’ve prepared a summary of the changes below; for more detailed history of the credits and a breakdown of eligible technologies, DSIREUSA.org is a great place to start (PTCITC).

Section 45 PTC: [Read more…]

Want to Build a Renewable Energy Project? You’re Going to Need Willpower

I am currently involved in the development and construction of a biomass-based combined heat and power project in the Northeast. The project recently broke ground and such events are excellent opportunities to reflect on what it takes to get a project from concept to construction. In thinking about this project and others I came to one inescapable conclusion-the most important ingredients are probably sheer force of will and a healthy dose of courage. [Read more…]