Finance

Archived Posts from this Category

July 19, 2010

California Sues Federal Government! BerkeleyFirst and GreenFinanceSF In Jeopardy

Posted by Steve Sacks under Energy, Finance, Finance / Mortgages, Government, Green Economy, Incentives and Rebates, Just Plain Wrong, Law, Legislation, and Policy, Mortgages, Risk Transfer | Tags: , , , , , , , , , , , , , , , |
Leave a Comment 

The local California programs that allow homeowners to pay for green renovations through an added assessment on their property taxes is in jeopardy.  The BerkeleyFirst program – the first Property Assessed Clean Energy (PACE) program in the nation, is still up and running, but San Francisco suspended the GreenFinanceSF program, and Sonoma County now sends warning letters out with every application.  Mind you, 22 states now have PACE programs (enabled in California by AB 811), and President Obama wants to allocate $150 million in federal funds for these programs.  Someone in his office better call the Federal Housing Finance Agency (FHFA), because they don’t like the programs one bit.

The issues started when Fannie Mae and Freddie Mac sent out a letter in the beginning of May that scared some investors and homeowners because it stated, “an energy-related lien [i.e. PACE loan] may not be senior to any mortgage delivered to Freddie Mac.”  Then, at the beginning of this month, the FHFA (who oversee Fannie and Freddy) stated that the PACE loans pose a risk to lenders, and called for the programs to be stopped.  Last week, California shot back and sued the Federal Government to have the FHFA back PACE programs.

FHFA’s concern is that if a property goes into foreclosure, property taxes are the first debts paid off.  Since the PACE loans are an assessment included in property taxes, the PACE loans would be paid off first in a foreclosure.  Almost universally, a primary mortgage is paid off before any subsequent loans taken on a property.  The PACE loans throw that fundamental rule out the window.  This allegedly adds risk to the primary mortgage, and since Fannie and Freddie are the largest purchasers of mortgages in the nation, they object.

To make matters worse, a New York Times article reports that Fannie and Freddy might not accept mortgages with PACE loans.  Fannie and Freddy turning down mortgages is huge.  The two entities own nearly 50% of the mortgages in the nation, and banks rely on the ability to sell mortgages in bulk to Fannie and Freddie.  If PACE loans make mortgages less valuable in the mortgage market (the banking market that bundles groups of mortgages and sells them wholesale between banks and investors . . .e.g. “mortgage-backed securities”), that will essentially end the programs.

I understand the FHFA point of view, but I think their concerns are overblown. The improvements to the property add value, and the PACE payments are generally very small. A $25,000 loan at 6.5% over 20 years comes to about $185 / month.  If you consider the savings to the owner’s energy bill, are we really talking about a debt obligation that will jeopardize someone’s mortgage payment?  Indeed, what if the local government just increased taxes outright?

The PACE programs are gaining tremendous momentum, creating jobs, and leading us toward energy independence.  Throwing a wrench in the system over something quite small is not only counter-productive, its subversion.  We’ll track this issue closely, and let you know of further developments.

More on the lawsuit from Sustainable Business here

More on the lawsuit from the San Francisco Chronicle here

The CGBB first post on BerkeleyFirst is here

 

July 14, 2010

California Suspends Solar Incentive Program!

Posted by Steve Sacks under Energy, Finance, Government, Green Economy, Incentives and Rebates, Law, Legislation, and Policy, Photovoltaic, Solar | Tags: , , , , , , , , , , |
Leave a Comment 

The California Public Utilities Commission instituted a three month suspension of rebates under the California Solar Initiative.  This Solar Initiative is the vehicle whereby the state government provides tax-funded incentives to install solar arrays.   To read the ruling, click here.

What is so unfortunate about this ruling is that the suspension is directed at non-profits and schools – the very entities that can not make up for lost incentives through tax breaks.  (The Federal government offers tax breaks for solar installations, and California offers tax incentives for solar installations under Section 73 of the California Revenue and Taxation Code, amended by AB 1451 in 2008.)  The suspension is also directed to projects that are 30kw or greater, an obvious attempt to control the cost of the program by pausing incentives to the biggest beneficiaries.

The PUC suspension also appears counter-intuitive from an ROI perspective.  Tax-funded rebates to schools are far more likely to pay for themselves because school utility bills  are also paid with tax dollars.  The school utility bills will decrease after solar arrays are operational – a direct return on tax-payer investment!

The California Solar Initiative is wildly successful, and it has always been the intention of the program to gradually reduce the allocations as the cost of installing solar systems decreases.  (Environment California has a great report and chart (albiet two years old) that shows how the projected reduction in incentives is tied to the projected reduction in the cost of installations).  This is smart tax policy, but to suspend the Solar Initiative for the entities that provide the tax-payer with the greatest ROI, just does not make sense. 

The PUC is receiving comments on the California Solar Initiative over the next three months while the suspension is in effect.  

The California PUC recently issued its Annual Program Assessment to the Legislature regarding the California Solar Initiative.  Click here for a summary and access to the full report.

The Oakland Tribune has a great article on the suspension: Click here to read that article.

 

 

June 16, 2010

Mayor’s Task Force Report On Existing Commercial Buildings – Part 4

Posted by Steve Sacks under Building and Design, Carbon, Energy, Finance, Finance / Mortgages, Government, Green Economy, Incentives and Rebates, Just Plain Cool, Law, Legislation, and Policy | Tags: , , , , , , , , , , |
Leave a Comment 

The Mayor’s Task Force Report On Existing Commercial Buildings divided their recommendations into four themes.   In this final post of our series, we address the final theme, “Lead By Example.”

The theme speaks for itself.  The task force essentially states that the city must institute change in municipal buildings before it can insist on changes in the private sector.   I emphatically agree, if for no other reason than the government needs to understand how the systems work before enforcing their use.  San Francisco, under Chapter 7 of the Environment Code leads by example, and there are other examples.  The recently launched GreenFinanceSF, a Green Finance program from the SFPUC, is a direct answer to the task force report.  Admittedly, we missed it in our last post on the topic, but we’ve updated the post, and we will discuss the program in the future.  Please check out the program, it looks great.

Some argue that the private sector is more adept to implement change.  The belief that the private sector will lead the way, however, is misguided.  The private sector has had years to renovate existing buildings, but the implementation is only on the fringe.  Below, please find a quick timeline as to why this is.

The 1960’s and ‘70’s saw a huge surge in societal awareness of sustainability.  This was due to hippies, the oil embargo, and in my case, Ranger Rick, Woodsy Owl, the Tearful Native American, and John Denver (among others).  Even then, these advocates addressed pollution and environment.  Sustainability in construction was considered a fringe movement for those who could afford it.  Then, sustainability lost momentum when the price of oil tanked in the 1980’s.

Even when oil prices rose in the ‘00’s, and analysts touted life-cycle cost savings, private developers were unwilling to pay a “green premium” (the cost difference between a green building and a standard building).  But in 2001, citing life-cycle costs, energy independence, and social consciousness, California and Oregon required that all new municipal buildings meet high environmental and energy efficiency standards.  Other states including Washington, and New York followed, and in 2003, the GSA mandated that all new federal buildings meet LEED Silver standards.   Other states including Pennsylvania, Massachusetts, and Florida joined the green movement.

With such huge markets mandating green, economies of scale took over.  To answer the large orders from state and the federal government, manufacturers produced higher volumes of green products thus reducing the price. The municipal contracts created a new green economy, and materials such as denim insulation (pun intended) emerged as viable products.  New companies formed and new technologies were invented to answer the call for green supplies.  Large contractors altered their methodologies and trained their workforce for the green future.

Legislating incentives to encourage green building helped too.  The government, with the help of the taxpayer, led all of this.  Let’s be clear.  If it were not for government, the green building movement would still be for the eccentric fringe. Period.

I’ve said many times that political parties are a liability to progress.  There is no room for partisanship in promoting sustainability and green building.  Energy independence is a matter of national security, and as the gulf oil spew shows, clean energy is a matter of protecting our domestic economy (e.g. keeping fisheries open, generating new construction, or creating auto jobs building electric vehicles at the NUMMI plant).   There is nothing wrong with government leading the way in green building and energy efficiency.  To the contrary, it must be one of their highest priorities.  Government involvement in sustainable development creates jobs, and makes us a stronger, more secure nation.

The task force report is very good, but now the hard part begins.  It has been six months since the report was issued, and I have not seen any new legislation passed or proposed.  GreenFinanceSF is a great program, but that was in the works long before the task force report was issued.  According to the San Francisco Examiner, the Mayor was going to propose new legislation, but I haven’t heard about it since.  I’m happy to help if that’s what it takes, but let’s keep up the momentum.

 

June 2, 2010

Mayor’s Task Force Report On Existing Commercial Buildings – Part 3

Posted by Steve Sacks under Building Operations, Energy, Finance, Finance / Mortgages, Government, Green Economy, Incentives and Rebates, Law, Legislation, and Policy, Solar, Sustainable Community, Wind | Tags: , , , , , , , , , , , , , , , |
Leave a Comment 

Parts One and Two of our analysis of the Final Report and Recommendations from the Mayor’s Task Force on Existing Commercial Buildings discussed mandatory energy audits, the risks associated with allowing unilateral submetering, and the welcome drive to increase transparency in energy use reporting under an expanded implementation of AB 1103.  In Part Three of this post, we look at the task force’s proposal to “attract game-changing capital.”

First, it should be noted that the task force’s interest in attracting game-changing capital comes from not only prudence, but also awareness of the acute financial restraints facing our society.  The task force offers low-cost solutions such as the Green Tenant Toolkit, and looks to engage the private sector in these and other initiatives.

There are two possibly expensive financial initiatives proposed by the task force that we will address at length.  The first is a Financial Optimization Tool (FOT) – a fantastic idea.  The proposed FOT is software that organizes and amalgamates all incentives and rebates available to building developers, managers, and tenants.  Currently, the best place to find such information is through the Database of State Incentives and Renewable Energy (www.dsireusa.org) (a website that is the anchor on our Tax Incentives and Rebates page).  The problem with DSIRE, and other resources such as the Flex Your Power website or the US Department of Energy Efficiency & Renewable Energy Newsletter, is the fluctuating information is difficult to organize.

DSIRE addresses this problem by simply listing every incentive available, and weekly (if not daily) updating that list.   This approach is thorough, however it creates a mountain of information to sift.   The FOT is a great alternative because it allows owners to use all incentives to design an energy efficiency program specifically tailored to their financial circumstances and their building’s design and condition.

To address the need for constant updates, the task force suggests a public-private partnership (P3).  The inclusion of a private partner could be effective.  But, as with so many other opportunities that are offered to private industry, this represents an early sale of future assets.  Further, including private industry may undermine the intent of the FOT

P3s have an essential place in our society, however, for this situation P3s are not an effective solution.  To have the greatest impact, all parties should have access to the FOT.  Use could eventually be required as a standard of care for the building management industry or as part of energy audits.  But, if a P3 private company is involved there needs to be a profit angle. Due to its niche market, the FOT will not produce sufficient advertising revenue.  And without advertising, the only profit angle is through subscriptions.

A subscription-based FOT will fail because it will deter a majority of potential users including other municipalities.  Further, if the FOT is privatized, anti-trust issues arise if use of the FOT is required

The best approach to implement the FOT is a “top down” approach that I will discuss in Part Four of our analysis.  The federal government, working with state and local agencies, must come up with this tool, so that it is accessible to all interested parties.  Perhaps federal leadership is too much for a locally convened task force to suggest, and perhaps this tool needs to start at the state level with contributions from our state universities.  What the FOT does not need is a private partner seeking profit.

There are areas where a P3 will work, and one surprising area the Task Force misses is an opportunity to suggest a partnership in finance.  The report suggests following the BerkeleyFirst distributed power program that utilizes AB 811.  As we previously discussed on the CGBB, the BerkeleyFirst program is not only innovative in attaching the debt obligations of a solar installation to property taxes, it is also innovative in allowing a private company to underwrite the financing for the installations.  This powerful P3 model epitomizes P3 success.  The private partner provides funding, and earns a fair return on investment.  The municipality reaps the reward of infrastructure development at a fraction of the cost.   Perhaps the task force was wary of opening the proverbial floodgates to private enterprise, or perhaps the task force did not want to single out Renewable Funding LLC, the underwriter in the BerkeleyFirst program.

Nonetheless, San Francisco launched GreenFinanceSF, and the city called on Renewable Funding LLC to finance the project.  BerkeleyFirst deserves a great amount of credit as the first program of this type in California, but GreenFinanceSF looks to be a broader initiative that has a longer list of eligible projects.  Unlike BerkeleyFirst which funds solar residential solar installations, GreenFinanceSF finances a long list of energy and water retrofit projects.  The California Green Building Blog will offer further analysis of the GreenFinanceSF program in the future.

The next and final installation of our analysis of the task force report will discuss a topic near and dear to my heart – the suggestion by the task force that government “lead by example.”  I am a firm believer in this approach.  This is not about government intervention, this is about leadership.  No matter where your political loyalties fall, you’ll want to read next week…

 

March 4, 2010

AB 510 Signed By Governor Schwarzenegger! (Part 2)

Posted by Steve Sacks under Building Operations, Building and Design, Energy, Finance, Government, Green Economy, Incentives and Rebates, Law, Legislation, and Policy, Make Money, Marketing Ideas, Photovoltaic, Solar, Wind | Tags: , , , , , , , , , , , , , , , |
[2] Comments 

Governor Schwarzenegger signed AB 510 on February 26, 2010 (Click here for full text of AB 510) (Click here for press release and video). We covered the basic elements of the new law in Part 1 of our coverage last week (click here for that post). Now, we turn to some other elements of the law… some of the fine print, if you will…

The law balances the interests of utilities, customer-generators, and non-participating customers. (This balance, and the fact that there is no discernable impact to the General Fund, are likely the reasons the bill passed the Senate by a nearly unanimous vote.)    In addition to lowering the proposed cap from 10% to 5%, an example of concessions to utilities is found in Section (3)(l).  That section requires that customer-generators pay the Department of Water Resources for all charges that would otherwise be imposed on the customer had they not entered the net-metering arrangement.

Another significant concession is found in Section (5)(B).  Under that section, the utilities can use the energy provided through net-metering arrangements toward the Renewable Portfolio Requirements (outlined in Public Utilities Code Section 399.15 and 387).  Under previous net-metering law, utilities were not permitted to count net-metering toward these obligations.  Now, utilities have a chance to meet the aggressive target of generating 33% of their energy from renewables by 2020.  (The utilities are far from reaching the Renewable Portfolio Requirements of 20% of energy from renewables by 2010).  If California residents and businesses continue to install solar and wind power generation, the utilities have a chance to meet the portfolio requirements, but the current 5% cap will have to rise again.

On the consumer side, there are very reasonable concerns that net-metering raises the energy bill for non-metering customers.  To assuage those concerns, the bill establishes a rate-setting commission that will set net-metering compensation rates and provide a report detailing 1) the market effects of net-metering and co-energy metering, and 2) how the authority’s rate schedule ensures consumers who don’t enter net metering arrangements pay the same for power that customer-generators pay.

AB 510 reflects a state leading the way in establishing energy independence.  It is great legislation now because it doesn’t tap into the General Fund, and it encourages private businesses (e.g. Solar City or Renewable Funding, LLC).  The law is another step forward that keeps California as a leader in United States renewable energy generation.

 

March 1, 2010

Clean Tech Event – San Francisco March 17

Posted by Steve Sacks under Carbon, Conferences / Conventions / Events, Energy, Finance, Government, Green Economy, Innovators, Law, Legislation, and Policy, Make Money, Marketing Ideas, People, Research, Sustainable Community | Tags: , , , , , , , , , , , , , , |
Leave a Comment 

My friends over at the Kellogg Alumni Club are at it again with another great clean tech event. On Wednesday, March 17 the group will host a panel discussion on two emerging clean industries: transportation and energy – including nuclear power. Can that, too, be clean?

The event is open to the public, and it will be a great way to learn and network with leaders. Ideas will definitely be flowing. The top-shelf presenters and panelists include:

Rod Diridon - Clean Tech Rail Pioneer, Executive, Political Leader, and High-Speed Rail Authority Board Member
Bob Garzee - Clean Tech Automotive Transportation Pioneer and Entrepreneur
Jeff Hamel - Energy Researcher and Clean Tech Advocate

Networking, passed hors d’oeuvres and a cash bar start at 6pm, and the presentations and discussion will go from about 7 – 8:30 pm. You couldn’t ask for a better setting: the beautiful McCormick and Kuleto’s – right on the water. See you there!

Click Here For More Information And For Reservations.

Also, remember Kellogg’s San Jose clean tech event with different panelists, Thursday, April 1. Click here for more information on that!

 

February 23, 2010

AB 510 On The Way To Governor’s Signature! (Part 1)

Posted by Steve Sacks under Building Operations, Building and Design, Energy, Finance, Government, Green Economy, Incentives and Rebates, Law, Legislation, and Policy, Make Money, Marketing Ideas, Photovoltaic, Solar, Wind | Tags: , , , , , , , , , , , , |
[2] Comments 

AB 510 (full text here) passed both the Senate and Assembly, and Governor Schwarzenegger says he will sign the bill into law.  The bill raises the cap set on the number of homes and businesses that can take advantage of net energy metering.  Yes, there’s a cap!  The utilities don’t want “customer-generators” producing power without limit, and the government appears concerned the customers will somehow tip the “balance of power” between customer-generators and utilities (yes, that’s an energy pun).

At its core, the bill states utilities are not required to issue permits and enter agreements with “customer-generators” (residential and commercial solar and wind power producers) beyond 5% of the utilities’ aggregate customer peak power demand.  The previous cap was 2.5%.

The legislation also addresses co-energy metering.  Co-energy metering is an arrangement between publicly owned utilities and customer-generators who produce between 10kw (50kw for wind) and 1MW.  These generators are compensated based on the time of energy use and generation.

On the other hand, standard net-metering arrangements are for customer-generators who produce 3 -10kw.  The rate at which net-metering customers are compensated is either a “time of use” model such as that with the co-energy metering producers, or a “baseline” model.

A ratemaking authority (also described in the bill) sets the rates for compensating customer-generators who have an energy surplus at the end of the year and follow the baseline model. The primary goal for the rate-making authority is to set a price that ensures non-participating customers pay the same for energy they would have otherwise paid had no net-metering been used.

To its credit, the bill allows the ratemaking authority to compensate net energy producers for the value of the electricity itself, AND the value of the renewable attributes of the electricity.  This little nod allows net energy producers to receive a bonus if the renewable attributes of the energy production add indefinite or unforeseen benefits (Cap and Trade anyone?)

Congratulations (I hope not premature) to AB 510 sponsor, Assembly Member Nancy Skinner (14th District).  The bill was proposed last year as AB 560 (click here for more of that story), but it died in committee.  We’re glad to see it is on its way to the finish line this time!

Editor’s Note: Stay tuned for Part 2 of this post that will discuss other requirements and considerations in the bill. UPDATE: Click Here For Part 2

 

February 16, 2010

Clean Tech Event In San Jose

Posted by Steve Sacks under Carbon, Conferences / Conventions / Events, Energy, Finance, Green Economy, Innovators, Make Money, People | Tags: , , , |
Leave a Comment 

Some friends of mine are putting on a great event in San Jose, CA April 1 with a panel of speakers discussing innovations in sustainability.  The subject-matter looks to focus on energy, so it’s not exclusivly green building.  Nonetheless, energy and building are inextricably linked (especially with the funding of smart grid and distributed power technologies).  It will be a fun event filled with new ideas and lots of networking.

The title of the event is “The Clean Tech Gold Rush: Where to place your bets in your Investments and in your Career.” The event will be held at Club Auto Sport in San Jose (gorgeous venue).  The organizers have already confirmed Andrew Friendly from Advanced Technology Ventures (his portfolio companies are Solar Junction, AltaRock Energy, Rive Technology, Wakonda Technologies), Kelsey Lynn from Firelake Capital Management, Bob Garzee (Founder and CEO of ETDC), and Eric Wesoff from Green Tech Media (Chief Analyst).

The event is open to the public, and ”early bird” $15 tickets are available until February 21.  If you’re interested in learning more about the speakers and the event, click on this link: http://cleantechgoldrush.eventbrite.com/

 

February 9, 2010

The Grass Is Green And So Is The Stadium

Posted by Steve Sacks under Building Operations, Building and Design, Finance, Green Economy, Law, Legislation, and Policy, USGBC / LEED | Tags: , , , , , , , |
[2] Comments 

Stadiums.  They’re large, and they’re empty for large amounts of time.  Because of this strange dichotomy, stadiums are incredibly expensive to operate and maintain.  They are also expensive to build.  Construction of the new Yankee stadium cost $1.5 billion.  All that money and a dearth of environmental considerations. Why?!

A few new stadiums are showing better judgment.  The Washington Nationals started the trend a few years ago with the first LEED Silver professional stadium, (more info here).  The Florida Marlins are joining that club with a LEED Silver stadium of their own.  Other venues are showing a commitment to the environment.   The Phoenix Suns, NY Giants and Jets (VIDEO!), NY Mets, San Francisco Giants, and New England Patriots either have or plan environmental efforts or LEED qualifying measures for their stadiums.  The EPA is even helping some of the projects (More info here)

Let’s not forget these efforts are not always smooth.  Remember the labor controversy around the green roof at the Target Center in Minneapolis? (I’m still looking to see how that was resolved – stay tuned).

But, more to the point, public money is regularly required to build these new structures, so implementing green measures should be a required part of the package.  Generally, states are moving to require green municipal buildings, and the federal government already requires it.  How did the new Yankee stadium get city dollars and federal tax breaks and still end up a relic of inefficiency?  It’s disappointing and short-sighted.  The Federal government and many states have long required that large structures for the public must include sustainable measures.  It’s time all publicly financed stadiums get included.  I’m not saying every stadium needs to meet LEED standards, but at 1.5 billion, I’m guessing they could have found some room in the budget for waterless urinals or solar panels. C’mon Yankees, you lead in everything else!

Congratulations to the New Orleans Saints!!  Pitchers and catchers, report in seven days…

 

January 11, 2010

eSolar Inks Deal For Solar Thermal Plants In China

Posted by Steve Sacks under Carbon, Energy, Finance, Government, Green Economy, Solar, Thermal | Tags: , , , , , , , , |
Leave a Comment 

ESolar, based out of Pasadena, CA, just announced a deal to help build a series of solar thermal power plants (AKA concentrating solar power or CSP) in China capable of generating 2 gigawatts (2,000 megawatts).  Under the arrangement, eSolar will provide Shandong Penglai Electric Power Equipment Manufacturing with the technology and information to build a $5 billion series of CSP power plants.

China has set a goal for 15% of the nation’s energy to come from renewable resources by 2020. The Associated Press reported on Saturday that due to market pressures, and recent success in generating renewable energy the Chinese government may increase that goal to 20%. Further, Chinese law requires that energy companies buy all energy available through renewable sources (such as wind, solar, and geothermal) before they can use energy from non-renewable sources such as coal.

This deal not only shows China’s interest in generating power from renewable sources, it also shows China’s interest in acquiring knowledge about alternative fuel technologies.  Though China is not allowed to export any technology acquired under the deal, all of the manufacturing for the plants will occur in China.  With that kind of expertise, it will be tough to keep Chinese industry from using the knowledge to build similar plants in China.

ESolar counts Idealab, Google, and Oak Investment Partners as some of its investors.  The New York Times also ran an interesting story about the eSolar deal and some of China’s apprehension about CSP.

 

Next Page »