Green Economy


A new program in San Francisco, Solar@Work, offers discounts, and in some cases free installation, on solar arrays for commercial building owners and lease holders.  Almost any size business can qualify for the program that will lower energy costs for participants.  For businesses proactively addressing San Francisco’s required energy audits, this program requires a closer look. (For full analysis of San Francisco’s commercial building energy audit program, click here)

Solar@Work groups commercial building owners and/or lease holders together to reduce costs through economies of scale.  Participants generate the greatest savings on energy costs through the purchase of a solar array.  The cost of purchasing and installing a system can be prohibitive, so Solar@Work creates a discount on installation and financing through volume pricing.  A “traditional” solar lease is also available with no up front cost, but the savings on energy bills are markedly less significant.

The Collaborative Solar Procurement model created by the World Resources Institute allows the Solar@Work program to offer four financing options.  Owners can purchase systems at a discount, secure a solar lease, secure a capital loan, or finance through other options including power purchase agreements.

The goal is to collect enough businesses in the program to collectively generate 2 megawatts of power or more.  Applications are being accepted until October 31, 2011, and an informational conference call is scheduled for October 21, 2011.

The ideal applicants are owner/occupiers or long-term leasers whose available space on a roof or parking area is 5,000 square feet or more.

Solar City is the exclusive vendor for the program created by the World Resources Institute, the City and County of San Francisco’s Department of the Environment (SF Environment), in collaboration with the National Renewable Energy Laboratory (NREL), and Optony.

Solar City was selected through a competitive process to provide the installation services for the program.  The company anticipates hiring 400 new workers in the second half of 2011 including 100 in the Bay Area, partly due to Solar@Work.

Congratulations to WRI, San Francisco, and the other contributors to this program.  Solar@Work promises to be another great example of how sustainable development will lead a growth in the economy through reducing energy costs and increasing employment.

As you will recall, the Property Assessed Clean Energy program allows residents to pay for solar installations through a tax assessment on their property.  Last year, the Federal Housing Finance Agency (FHFA) essentially stopped the program with a letter advising mortgage lenders that Fannie Mae and Freddie Mac would not purchase mortgages on homes that also have PACE financing.  California and eight other parties sued the FHFA to rescind its letter and change its policy.

The PACE lawsuit (Case Nos. 10-cv-03084 CW, 10-cv-03270, CW, 10-cv-03317 CW, 10-cv-04482 CW) continues with a possible end some time in the summer of 2012.  A trial date is set for April 30, 2012.  (click here for the Case Management Order).  Some of my previous coverage of the lawsuit can be found by clicking here. In the beginning of this year, the court asked the Attorney General of the United States to submit a Statement Of Interest offering its position regarding the PACE lawsuit.

Although the executive branch previously endorsed the PACE program, and the creative financing mechanism that is the cornerstone, the Statement of Interest evades the issue at hand (the subrogation of primary mortgages).  Instead, the DOJ argues simply that the the FHFA has authority to bring and defend its own lawsuits and the DOJ does not see a need or mandate to interfere with FHFA’s handling of the matter.  The DOJ then states its only area of concern is that the plaintiffs lack standing to bring the suit.  While plaintiffs may lack standing (I doubt it), the DOJ could have also offered analysis of the legitimacy of the program’s structure.

The parties are now heading to the discovery stage of litigation, but frankly there is nothing to discover.  As far as I can tell, there are really no material facts in dispute.  Either the FHFA is going to allow for PACE programs to move forward, follow the Department of Energy guidelines (Full Guidelines Here), and acknowledge the minimal risks involved.  Or, the FHFA will undermine one of the best modern approaches to nurturing mainstream adoption of sustainable development.

Unless Congress passes a law supporting PACE financing, the lawsuit will move forward, and frankly the prospects don’t look good for plaintiffs.  That means PACE programs will essentially become a great idea undermined by the inflexibility of bureaucracy.

Invariably, those in sustainable development acknowledge the greatest impact in reducing green house gasses (GHGs) will come from improvements to existing buildings. The new commercial building energy performance ordinance that we recently spent a great deal of time covering is an example of that focus.  That is not to say that intelligent new building codes are ineffective. It’s just that refurbishing the existing building stock will have a far greater impact. Just how drastic is the difference in impact, you ask? How about seven times greater for residential retrofits and two times greater for commercial?!

Just think of it from this starting point: “72% of California’s 13 million residential buildings and over 5 billion square feet of commercial structures were built before the implementation of California’s energy efficiency building code (Title 24) in the early 1980’s. This means that 3 out of 4 homes in California have never had to comply with any energy efficiency requirements whatsoever.” (Citation: http://bleer.lbl.gov/?p=635)

AB 758, sponsored by Assembly Member Nancy Skinner, was signed into law in October 2009 to addresses this underserved area.  Now, the program has created a need for hiring at the California Energy Commission to implement the provisions. Jobs, people. Jobs!  (Click here to see the job postings from the California Energy Commission).   I won’t get into it, but for the critics who will gripe about government jobs we can not afford, I argue, we can not afford to waste energy across our great state.  When companies waste money on energy, they don’t hire.  Further, jobs are created to fix the inefficient structures that are identified.

Now, let’s examine what the bill requires.  In summary (and using a great deal of the direct language from the bill) the bill mandates three main initiatives

First, the Energy Commission is required to establish a regulatory proceeding to develop a comprehensive program to achieve greater energy savings in the state’s existing residential and non-residential building stock.  A brief but thorough report on their progress is available here. The CEC created the Home Energy Rating System (HERS Phase II). Next is a complimentary program for commercial buildings. Further, the Energy Commission is required to report on the status of the program in the integrated energy policy report.

(If you’re reading on our home page, click “more” to read on and get links to a power point presentation from Assembly Member Skinner that has tons of great concise information.) (more…)

As mentioned on Friday, the Land Use and Development Committee for the City and County of San Francisco is holding a hearing on Monday, January 24, 2011 to discuss the proposed Existing Commercial Buildings Energy Performance Ordinance.  I encourage you to attend if possible.

The proposed ordinance would require certain commercial buildings to produce two reports, (1) an energy and performance audit every five years and (2) an Annual Energy Benchmark Summary (AEBS).   Save for any confidential information, the audit and the AEBS would be made available to the public.  The ordinance makes sense, but may place a cost on building owners that will inevitably be passed on to renters.  The upside is that renters usually pay for utilities, so energy savings may offset the cost of the audit…something to think about in a green lease, that’s for sure.

Here’s a short summary:

The proposed ordinance will require two reports.  The first report is the AEBS, and that will use the Energy Star Portfolio Manager Energy Performance Rating as a basis.  This report will likely not cost too much money as it is based on the Portfolio Manager software that is freely available, and the data is generated from the local utility (in the case of San Francisco, PG&E).

The second report is a building-wide audit (as defined by ASHRAE Procedures for Commercial Building Energy Audits) conducted by a third-party vendor.  As such, I am guessing the audit likely carries a higher price tag.  Full disclosure, I have never hired someone to do an energy audit for a commercial building, so I am only guessing that the fees are more than nominal.

After the initial three-year staggered start period (which will also be used for the AEBS), the required energy audit would be required once every five years.  As proposed, the audit requirement is as follows:  Level I audits (as defined by ASHRAE) are essentially “walk-through” audits.  These are required for buildings between 10,000 to 49,999 sq ft (smaller buildings).  Level II audits (as defined by ASHRAE) are comprehensive surveys and analyses, and they are required for all buildings 50,000 sq ft and above. (larger buildings).

If owners do not comply with the requirements they may face fines.  The fines are $100/day (for larger buildings) or $50/day (for smaller buildings) for every day of non-compliance up to 25 days per 12 month period.  In other words, the maximum fine per year is $2,500 for a large building and $1,250 for a small building.

In general I like the ordinance but there are some issues that should be addressed… (more…)

Last week Mayor Gavin Newsom  and Recurrent Energy announced the completion of the Sunset Reservoir Solar Project.  We mentioned the story back when it started, and we’re glad to see it finished quickly! A year and a half is pretty good to install 24,000 solar panels (imagine 12 football fields) generating 5 megawatts of power (with some sources stating as high as 7 megawatts).  The energy generated can power 1,500 homes, but will be used instead by the city to power public transportation and city buildings.

The project is the result of a public-private partnership (P3) with Recurrent.  As a result, San Francisco owns the property, but leases the rights to operate the plant and sell the energy.  Under the current contract, Recurrent will sell energy to the city at $0.235 /kWh.  That price will allegedly save roughly $1 million per year in energy costs.  Through the P3 procurement method, San Francisco saves the up-front costs of implementing the system, and reaps the rewards of low cost sustainable energy.

And, let’s not forget.  The money paid to Recurrent stays right here in California.  The corporation was founded in California, pays taxes in California, and employs people in California.  71 general labor jobs – in a decimated construction industry – were created from this project.  30 percent of those jobs were for individuals from disadvantaged communities (Though they had to fight to keep those jobs).

This project looks like a win for proponents of sustainable energy, public-private partnerships, and green job promotion (The CGBB fits into that category).  It also looks to be a win for San Franciscans who will instantly see savings in energy costs to public services.

In the meantime, congratulations to Recurrent Energy and San Francisco.  The Sunset Reservoir Solar Project is currently the largest municipal solar installation in the state.  We hope more of these projects are built immediately all around California and the nation!

San Francisco Press Release Here

(For those of you wondering, “FTW” stands for “For The Win”)

The feud between Fannie Mae, Freddie Mac, and the PACE program is heating up.  I’m going to play devil’s advocate (for a moment), so let me quickly set the stage.  As you will recall, Fannie Mae, Freddie Mac, and their parent entity (following the financial crisis of 2008) the Federal Housing Finance Agency (for convenience, collectively “FHFA”) single-handedly torpedoed the Property Assessed Clean Energy program (PACE), one of the best publicly and privately-funded tools for gaining energy independence.  California immediately sued to stop FHFA from interfering with the programs. (United States District Court For The Northern District Of California, Case 4:10-cv-03270-CW)  According to pacedata.org, five other parties have separately sued the FHFA.  Just last week, the FHFA filed a motion to dismiss the California lawsuit. I am not willing to join FHFA’s motion, but I am also willing to say we can’t just scapegoat FHFA. They are just doing their job.  Perhaps a compromise is in order?

For a copy of California’s lawsuit against the FHFA, click here.

For a copy of FHFA’s recently filed Motion To Dismiss, click here.

FHFA is in charge of protecting the integrity of the housing finance industry, and they have taken on PACE financing because it undermines the integrity of primary mortgages. They have a point, and they can’t just look the other way (as much as it appears they are looking straight into the pockets of big banks).

(See our previous posts on AB 811 backed PACE financing programs such as BerkelyFirst or SFGreenFinance by clicking here).

PACE debt is classified by municipalities as an assessment, and in case of non-payment the PACE debt becomes a tax lien against a home. The issue FHFA have is that in case of foreclosure, tax liens are paid first. That puts the PACE payout in front of a primary mortgage, and that undermines the integrity of the primary mortgage market.  If PACE programs explode in popularity across the nation (as they were prior to the FHFA advisory letter), that’s a big problem for FHFA.  The PACE debt is likely small, but if it is nationwide it is definitely an issue. If FHFA are going to be true to their mission they have to stand up to this (especially since Fannie Mae and Freddie Mac didn’t show sound judgment leading up to the mortgage-backed securities financial crisis).

The sticking point is proponents of PACE financing aren’t interested in making the PACE debt secondary to a primary mortgage.  Recently, California Representative Mike Thompson (and many others) proposed a bill that’s a pretty good compromise, but still asks the FHFA to look the other way on PACE financing.  The devil’s advocate is not sure this is appropriate in situations where private entities finance PACE debt.

HR 5766 requires that:

“the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation [Fannie Mae and Freddie Mac] shall adopt underwriting standards that are consistent with the Guidelines for Pilot PACE Financing Programs issued on May 7, 2010, by the Department of Energy.”

The DOE guidelines referred to in HR 5766 state:

“In states where non-acceleration of the lien is standard for other special assessments, it should also be standard for PACE assessments. After a foreclosure, the successor owners are responsible for future assessment payments. Non-acceleration is an important mortgage holder protection because liability for the assessment in foreclosure is limited to any amount in arrears at the time; the total outstanding assessed amount is not due in full.” (Full Guidelines Here)

The DOE guideline quoted above states that under a PACE program in a state where under foreclosure proceedings a primary mortgage holder can demand payment for the full amount of the debt, PACE assessments can only ask for the debt that was owed up to the time of the foreclosure.  This is an important distinction.  The problem is that the PACE lien still supersedes the primary mortgage to some degree.

I doubt this would be such a problem if municipalities provided all of the financing for PACE programs. Municipalities will always have the power to impose assessments.  The problem is that often PACE financing is provided by private enterprise.  Further, with the municipal budgets in pieces, the likelihood of private finance for PACE programs only increases.  I am all for PACE programs, but allowing a private entity to supersede a primary mortgage without asking the primary lender seems a little, shall we say, inconsistent (even if the motives are pure).

For my return from the devil’s side of the argument, and some suggestions for solutions, click the “more” link here:  (more…)

A class action lawsuit against the USGBC has just been filed in Federal Court for the Southern District of New York (Gifford v. U.S. Green Building Council, docket number 10 CIV 7747).  Stephen Del Percio who does a great job publishing the Green Real Estate Law Journal and Green Buildings NYC broke this story (at least to me), and it’s going to have reverberations throughout the sustainable development community.

The complaint is brought on behalf of Henry Gifford, Gifford Fuel Saving, Inc., and others similarly situated.  In a nutshell, the plaintiffs allege the USGBC has engaged in deceptive trade practices, false advertising and anti-trust (among other things) by promoting the LEED system.  Plaintiffs further allege that because the LEED system does not live up to predicted and advertised energy savings, the USGBC defrauded municipalities and private entities.

The basis for the class action has been mentioned more than a few times in this blog and many others (including Mr. Del Percio’s).  Essentially, many green buildings are not performing as touted.  In some situations they are performing WORSE than buildings built to code.  The plaintiffs allege that because of these performance shortcomings, the USGBC commits anti-trust violations when it convinces municipalities to align their building codes to the USGBC’s LEED system.

While some LEED buildings are underperforming, the lawsuit is no slam-dunk for the Plaintiffs.  From a personal perspective, I find plaintiff’s complaint is a bit overly dramatic.  An effective complaint acknowledges and then refutes the defense’s potential arguments.  Here the plaintiffs’ complaint seems almost melodramatic in its representation of big bad USGBC.  In my opinion they lose some credibility there.

One of the biggest issues plaintiff will face is that occupants are often the primary reason green buildings underperform.  Many occupants don’t understand the new technology used in green buildings.  However, occupant “sabotage” is not the exclusive reason green buildings underperform.  Often it is also because the technology itself doesn’t work.  The USGBC is working on this issue, and Post-Occupancy Performance is a cornerstone of LEED 3.0.

No doubt there is a valid lawsuit here, and I anticipate this lawsuit will grow if more members of plaintiffs’ class sign on.   We’ll keep you updated as the lawsuit progresses.

Click here for a copy of the complaint.

After reading a slew of books on sustainability (some of them reviewed here), I was ready to take a break.  Then, a colleague handed me Physics for Furture Presidents, The Science Behind The Headlines, and asked me for my opinion.  I’m glad I read the book, but I can’t endorse it with the same enthusiasm I have for the others reviewed on CGBB.  Physics for Future Presidents was written in 2008 by Dr. Richard A. Muller, a Professor of physics at the University of California at Berkeley.  The book is based on Dr. Muller’s wildly successful lectures that are popular on the Cal campus, and online.  Think of it as physics for people who don’t know about math.

Dr. Muller’s writing style is fine (not great), but I found the consistent reference to “Mr. President” created disconnect.  I will take an idea from the review on the back jacket, and state that the book should have addressed “fellow citizens” (or residents), not Presidents.

Regardless, the book contains more than a few biased interpretations and cherry-picked facts focused on creating shock-value, and support for Dr. Muller’s opinions.  In this regard, it fails as a memorandum to the President of the United States, let alone a nationwide primer in physics.  Whatever value can be rendered from the fascinating facts recited by Muller, is overshadowed by a question of doubt about the validity of the statements or the balance provided to the opposing opinion.

The book is worth a read only if you are well versed in the subject matter or you’re willing to do some fact-checking regarding some of Muller’s statements.  Unfortunately, you can’t take the book at face value, and that was supposedly the whole reason for the book in the first place.

I stewed for a long time on how to respectfully refute some of Muller’s statements.  After all, he is a MacArthur Fellow, and I’m . . . well, I’m not a nuclear physicist, that’s for sure.  If you want to read more of my analysis, click the “more” button at the end of this post.  If you want to read some quick science-based reviews by Earl Killian that dispute Dr. Muller, click here for part 1 and here for part 2.

(more…)

Last week the San Francisco Board of Supervisors passed a measure approving the plan and EIR for the redevelopment of the Bayview Hunters Point neighborhood.  The measure was championed by City Supervisor Sophie Maxwell, and passed with an 8-3 margin.

The project, encompassing 720-acres along the Southeast waterfront of San Francisco, adds 10,500 residential units, nearly a third of which would be priced for low-income residents.  The plan also calls for 320 acres of parkland and open space; retail and commercial space – including a new stadium if the 49ers show some loyalty (they won’t) – and new transportation.

Predictably, there are more than a few immediate issues with the project.  At the top of the list….Lennar needs funding, the stadium has no tenant, the shipyard at the site is highly toxic, and a proposed bridge appears to unnecessarily impact sensitive wetlands. Lets just gloss over those for a minute and imagine what this current symbol of blight might look like if these initial issues are solved and the plan moves forward.

We are interested in green building here at the CGBB, so let’s look at this statement from the project website:

“Hunters Point Shipyard will be the first neighborhood in San Francisco powered entirely by clean, reliable public power. In the new “Green Public Power Community,” the San Francisco Public Utilities Commission will deliver reliable, 100 percent renewable and cost-competitive power to new residents and businesses of the current and future developments through its extensive hydropower, solar and other renewable energy generation projects.”

What? 100% from renewable sources?  Until someone really proves they can pull this off, I’m going to say this looks like greenwash. Where’s the co-gen plant?  Where’s the solar array?  There is not much on their website about how efficient the structures will be, so just stating they will pull 100% of renewable energy from the PUC sounds like Lennar is setting up a patsy if the plan falls short, and the PUC will still get paid. Lennar’s plan relies on the development of new energy production technology, and the cost reduction of existing technology.  That, in and of itself, is risky. One can not rely on new technologies.  For example, as we discussed last month, the California Solar Initiative is reducing the state (taxpayer) funded incentives and rebates for solar installations.

But, before I just cynically dismiss this lofty and worthy project, let’s look at Lennar’s track record.  Lennar is experienced in green development, and has the ability to scale the implementation of sustainable technologies.  According to a June 15, 2010 press release, Lennar is the largest producer of solar residential homes in the nation.  In the press release, Lennar discussed the success of its “SunPower Access” partnership with SunPower Corporation to provide a “no-money-down” leaseback program for residential photovoltaic solar installations.  (I am not familiar with the program, but I imagine it follows a Solar City model).  Additionally, Lennar, through its PowerSmart program, offers a pre-designed green home in about a dozen cities in four states (including California).  The PowerSmart program offers homes that are 15% more efficient than California’s current Title 24 requirements.

Whether PowerSmart homes are more efficient than the CalGreen codes that are mandatory starting in 2011 is another story. And, it will take more than green building to make Bayview Hunters Point stick to its 100% renewable energy promise.  Stay tuned for more on this project.

For more information visit the community group by clicking here, or Lennar’s website by clicking here.

An article written recently for the Contra Costa Times and Oakland Tribune discusses a dated law that permits no-bid award of public contracts for energy.  The law, passsed in 1983, is Government Code 4217.12, and it states,

(a) Notwithstanding any other provision of law, a public agency may enter into an energy service contract and any necessarily related facility ground lease on terms that its governing body determines are in the best interests of the public agency if the determination is made at a regularly scheduled public hearing, public notice of which is given at least two weeks in advance, and if the governing body finds:

(1) That the anticipated cost to the public agency for thermal or electrical energy or conservation services provided by the energy conservation facility under the contract will be less than the anticipated marginal cost to the public agency of thermal, electrical or other energy that would have been consumed by the public agency in the absence of those purchases.
(2) That the difference, if any, between the fair rental value for the real property subject to the facility ground lease and the agreed rent, is anticipated to be offset by below-market energy purchases or other benefits provided under the energy service contract.

While the sponsor of the bill does not specifically recall the legislative intent, it appears to reflect an early effort to award government contracts to clean energy companies that were not competitive compared to energy producers using traditional fuels. Now, as a recent contract for a solar installation awarded by the Peralta Community College District proves, this law appears to unintentionally undermine competition among sustainable energy producers.  The district, even in the face of a last minute proposal from SunPower that could have saved the district $1 million, awarded the contract to Chevron Energy Solutions.

Not so long ago, in an effort to get the best deal for taxpayers, local, state, and federal governments were required to accept the lowest bid on proposals for contracts.   Low-bid requirements, however, backfired often resulting in cheap, error-prone government construction. Deficient construction led to change orders, modifications, and/or repairs resulting in eventual contract prices far above initial bids.  Due to these shortfalls in the bidding process, governments have turned to ”best value” bidding and procurement such as “design-build,” that affords more flexibility to the award of government contracts.

Government Code 4217.12, however, predates best-value procurement, and appears obsolete. Flexibility was the impetus behind Gov. Code 4217.12, but procurement methods now provide sufficient flexibility without the no-bid option afforded by 4217.12.  The federal government procurement process is defined and regulated in Title 48 of the Code of Federal Regulation (CFR). In California, the procurement process is generally defined in the Government Code, but can be found in other areas of state law depending on the project.

As California works to expand its energy sources, and energy production takes on diverse forms, competitive bidding must return to the procurement process.  Best-value bidding, while open to abuses of its own, is better than no bid process at all.

For more on the contract recently awarded to Chevron Energy Solutions by the Peralta Community College District, read the article by  Matt Krupnick by clicking here

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