October 11, 2011

Solar@Work Offers Huge Discounts To Commercial Building Owners And Lease Holders

Posted by Steve Sacks under Building Operations, Energy, Finance, Free, Government, Green Economy, Incentives and Rebates, Make Money, Marketing Ideas, Photovoltaic, Save Money, Solar | Tags: , , , , , , , , , , , , |
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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.

 

August 4, 2010

No Bids Necessary on Public Contracts For Energy

Posted by Steve Sacks under Energy, Government, Green Economy, Law, Legislation, and Policy, Solar | Tags: , , , , , , , , |
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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

 

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: , , , , , , , , , , , , , , , |
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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: , , , , , , , , , , |
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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: , , , , , , , , , , |
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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: , , , , , , , , , , , , , , , |
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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…

 

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: , , , |
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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/

 

August 28, 2009

Inefficient, But Green…Is That Good?

Posted by Steve Sacks under Carbon, Energy, Finance, Government, Green Economy, Water, Wind | Tags: , , , , , , , , , |
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Some power generation facilities store energy during peak hours to later use during off peak hours (and vice versa).  The best example of this is battery storage of energy from wind and solar generators.  Wind and sun generate most of their power during the day, and in the case of solar, there is no energy generated in the evening.  An example of how this process works both ways is in the case of hydroelectric power generation when water is pumped to higher elevations during off-peak hours.  During peak hours the water pumped up is released, and extra power is available.  This method is called “pumped storage.”

These processes result in some energy loss, but proponents say the cost to generate the electricity is minimal, so why not?  For a small hit in efficiency, you get clean, carbon neutral power around the clock.  For the most part, I agree.  Wind, sun and water are in high abundance for power generation, and not an ounce of carbon is produced (though the added wear and tear on equipment eventually leads to shorter life spans, higher maintenance costs, etc…)  This leads to more manufacturing and likely more carbon emissions. Regardless, these methods are all far better than popping up a new coal plant.

Now, add a “new” tool to the tool box.  Compressed Air Energy Storage (“CAES”).  I guess it’s been around for a while in Germany and Alabama, so it’s not so “new.” But it is possibly new to California!   An article from the San Francisco Chronicle on August 27, 2009 details how PG&E is seeking a federal grant of $25 Million to design a facility in Kern County, CA using CAES.  Kern County is about half-way between LA and San Francisco.  The facility would use power generated by solar and wind to pump air into porous rock reservoirs.

Then, at night when the sun’s gone, or on a day when the wind won’t blow, the compressed air is released and generates electricity.  The plant PG&E would like to see would provide 300 MW for 10 hours…that’s enough to power 750 homes.

The total cost of the facility would be about $300 Million over five years.  That may seem like a lot, but when you realize that once it’s up and running there are no added costs for fuel, it starts to make sense.

By 2010, PG&E needs to generate 20% of it’s power from renewables.  They’re not going to make it, but with efforts like this and the recent deal with BrightSource Energy (full disclaimer, BrightSource is a client of Bell, Rosenberg & Hughes, the workplace for the authors of this blog), no one can say PG&E isn’t trying.  According to a recent article in the Sacramento Business Journal, Peter Darbee, CEO and Chairman of PG&E stated PG&E has contracts that will allow the utility to deliver up to 24 percent of its energy from renewable sources by 2013.

CAES doesn’t sound ideal, but creativity like this can only lead to better things.  Also, with a carbon credit market likely around the corner, facilities like this may generate unforeseen dividends.

For the San Francisco Chronicle article that includes a great illustration of CAES, click here

For the Sacramento Business Times Article, click here

 

May 12, 2009

Tax Incentives For The Tax Exempt – AKA What To Do When Tax Incentives Don’t Apply

Posted by Steve Sacks under Finance, Government, Green Economy, Incentives and Rebates, Law, Legislation, and Policy | Tags: , , , , , |
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Tax incentives are the biggest tool for governments to encourage green building, but what do you do when you don’t pay taxes?  There is a long list of groups that don’t pay taxes and thus miss out on any tax credit incentive.  Generally, these are groups that have the least amount of capital to invest in the up front cost of building green (schools, non-profit organiations, religious institutions, and yes, municipalities).   Also, let’s not forget businesses that aren’t making a taxable profit . . . there are a few of those around these days . . .

The state of Oregon seems to have a good solution.  Oregon allows the tax-exempt entity to pass through tax credits to their contractor or other vendor.   They even allow taxable entities to use the pass through program.  Tax credits are based on the cost of the project.  Arguably, the pass through program encourages construction that would otherwise not get started – that means jobs, and that means a stronger economy resulting in more tax revenue.  The Oregon Department of Energy states,

“The Pass-through Option allows a project owner to transfer their Business Energy Tax Credit project eligibility to a pass-through partner for a lump-sum cash payment. A project owner may be a public entity or non-profit organization with no tax liability or a business with tax liability that chooses to use the Pass-through Option.”

 

Click here to read more about Oregon’s Tax Credit Pass-Through Program.

 

January 8, 2009

Energy Efficient Mortgages Are A Big Win For Developers, Contractors, And Homeowners!

Posted by Steve Sacks under Energy, Finance, Incentives and Rebates, Make Money, Marketing Ideas, Mortgages, Save Money | Tags: , , , , , |
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Energy Efficient Mortgagaes (EEMs) or Energy Improvement Mortgages (EIMs)are special mortgages that give home purchasers or  home owners the option of purchasing a more expensive home with green features or installing energy efficient technology in a current home.  Lenders allow borrowers to borrow more money than they would otherwise permit because the savings in energy costs can be used to pay the added amount due on a note.

Some EEMs or EIMs have lower interest rates and lower down payment requirements.

The US Dept. of Housing and Urban Development has a great page explaining the logic.  (Click Here).  This is the basic analysis provided on their web page:

                                    Older                Same Home with
                                    existing home     energy improvements

Home price                        $ 150,000             $ 154,816
(90% mortgage, 8% interest)

Loan amount                      $ 135,000             $ 139,334

Monthly payment*               $      991            $     1,023

Energy bills                      + $      186        +  $         93

The true monthly

cost of home ownership        $   1,177               $   1,116

Monthly savings                                       -    $        61

Developers can use EEMs as a marketing tool to show how purchasers can actually SAVE money on their mortgage payment if they buy a more expensive home!  Contractors can make the same argument for home improvement projects.

California has helpful information on their “Flex Your Power” website (Click Here).

The Residential Energy Services Network also has lots of excellent information for home owners including information about EEMs and EIMs (Click Here).

 

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