The Economist ran a story this morning about how increases in lighting efficiency have actually led to increased energy usage over time as people have been more willing to overutilize these technologies.
While this is perfectly rational and somewhat to be expected, it is nevertheless a profound facepalm moment for me, and speaks to the entire notion of energy efficiency and renewable energy by extension; while my aim is to reduce the amount of fossil fuel energy used and its corresponding environmental and social impacts, the realities of the situation is that these advances in many cases simply provide an opportunity for people to just consume more.
(This is an uncomfortable parallel with the Marxist ideal of machines as multipliers of labor that would simply lead to more leisure and self-actualization time for the workers; in reality, the economy just sped up to expect more productivity from workers armed with such technology and no attendant reduction in demands placed upon labor was observed.)
Monday, August 30, 2010
Friday, August 27, 2010
Renewable energy market analysis - Oregon
Given that the state of the renewable energy market has finally caught up with me on a personal and professional level, I figured that this was a good time to talk about it here.
Typically, renewable energy systems do not provide a net financial benefit to hosts / owners in and of themselves; given how cheap electricity is (for the moment), the up-front costs of installing a system still outweigh its lifetime benefits from a NPV perspective. To make up that gap, state and federal incentives are available; the feds offer 30% of the eligible system costs as a tax credit in the first year after the system is completed, while state incentives fall largely into two categories- tax credits and Feed-in Tariffs.
Oregon has historically had a tax credit, the Business Energy Tax Credit, or BETC (pronounced Betsy) that offered a very attractive payback period for businesses that had the tax liability to offset. However, this program has run afoul of some political turbulence over the last few years and appears to be on its way out.
To replace it, the new incentive program is a Feed-in Tarriff (FiT). This essentially consists of a fixed duration net metering agreement with a particular power provider to sell the energy from a renewable energy system to them at a substantial markup, which assists utilities in meeting their renewable portfolio standard goals; the utility is, in turn, subsidized by the state. Oregon's model is somewhat more complicated, but that's the gist.
The problem is that, from an accounting perspective, the FiT is not nearly as attractive an option as the BETC. For one, it stretches out the payback period immensely- while a BETC-funded project will break even after ~7 years in many cases, FiT projects can take twice as long to turn around. In addition, it exposes the investor to the risk that the system will underproduce and thereby yield less, leading to an even more protracted payback period. So while it helps to open the field to businesses with lower tax appetites, it makes third party funding- a requirement for most of the large commercial installations that take place- for these projects considerably more difficult to orchestrate.
Regardless of the incentive program, however, these systems require two things in order to function: A state government with the money and will to fund them, and businesses in the state making enough money to be attracted to the tax breaks offered by these investment. Unfortunately, at present Oregon has neither of these, and if economic projections are to be believed any further than augury by the reading of entrails or bird migrations, that looks to be the case for the foreseeable future.
So, what would need to happen for the renewable energy industry to be resuscitated?
1) A stable economy. Like it or not, alternative energy is still viewed as a luxury, not a necessity, and luxury goods by and large gather dust during economic hardship.
2) Political will. It's very tempting when your state is running a $350M budget deficit to avoid looking with hungry eyes at taxes that could be realized by cutting these incentive programs, and doing so will provoke considerably less widespread furor than many other potential cuts (health, education, infrastructure, and the like). Oregon has a lot of representatives who are passionate supporters of renewables, and a lot of increasingly hungry people who will happily see them eviscerated for it.
3) Perhaps most importantly... Energy just needs to cost more. Oregon has incredibly low rates for electricity, and while it is politically unpopular on both sides of the aisle to suggest boosting them substantially, it is going to need to happen for renewable energy to stand a ghost of a chance of remaining viable in this state.
Typically, renewable energy systems do not provide a net financial benefit to hosts / owners in and of themselves; given how cheap electricity is (for the moment), the up-front costs of installing a system still outweigh its lifetime benefits from a NPV perspective. To make up that gap, state and federal incentives are available; the feds offer 30% of the eligible system costs as a tax credit in the first year after the system is completed, while state incentives fall largely into two categories- tax credits and Feed-in Tariffs.
Oregon has historically had a tax credit, the Business Energy Tax Credit, or BETC (pronounced Betsy) that offered a very attractive payback period for businesses that had the tax liability to offset. However, this program has run afoul of some political turbulence over the last few years and appears to be on its way out.
To replace it, the new incentive program is a Feed-in Tarriff (FiT). This essentially consists of a fixed duration net metering agreement with a particular power provider to sell the energy from a renewable energy system to them at a substantial markup, which assists utilities in meeting their renewable portfolio standard goals; the utility is, in turn, subsidized by the state. Oregon's model is somewhat more complicated, but that's the gist.
The problem is that, from an accounting perspective, the FiT is not nearly as attractive an option as the BETC. For one, it stretches out the payback period immensely- while a BETC-funded project will break even after ~7 years in many cases, FiT projects can take twice as long to turn around. In addition, it exposes the investor to the risk that the system will underproduce and thereby yield less, leading to an even more protracted payback period. So while it helps to open the field to businesses with lower tax appetites, it makes third party funding- a requirement for most of the large commercial installations that take place- for these projects considerably more difficult to orchestrate.
Regardless of the incentive program, however, these systems require two things in order to function: A state government with the money and will to fund them, and businesses in the state making enough money to be attracted to the tax breaks offered by these investment. Unfortunately, at present Oregon has neither of these, and if economic projections are to be believed any further than augury by the reading of entrails or bird migrations, that looks to be the case for the foreseeable future.
So, what would need to happen for the renewable energy industry to be resuscitated?
1) A stable economy. Like it or not, alternative energy is still viewed as a luxury, not a necessity, and luxury goods by and large gather dust during economic hardship.
2) Political will. It's very tempting when your state is running a $350M budget deficit to avoid looking with hungry eyes at taxes that could be realized by cutting these incentive programs, and doing so will provoke considerably less widespread furor than many other potential cuts (health, education, infrastructure, and the like). Oregon has a lot of representatives who are passionate supporters of renewables, and a lot of increasingly hungry people who will happily see them eviscerated for it.
3) Perhaps most importantly... Energy just needs to cost more. Oregon has incredibly low rates for electricity, and while it is politically unpopular on both sides of the aisle to suggest boosting them substantially, it is going to need to happen for renewable energy to stand a ghost of a chance of remaining viable in this state.
Monday, June 28, 2010
Look first to the log in your own...
So, as a part of my new job (employed again in the renewable energy industry at last!) I went to a conference on Friday focused on energy efficiency and sustainability more generally. While it was more or less a bust on a professional level, I did emerge from it with one anecdote to share.
A full 2/3 of the audience at this conference was composed of independent "sustainability consultants," a job description and market that I think is so thoroughly over-saturated at this point that it is of extremely limited usefulness. (No offense to those of you pursuing that path, and best of luck.) It was no real surprise, then, that when we broke for lunch I was seated in a group of four people, two of which were consultants of this type.
One of them, a somewhat conservative, middle aged man, announced that his particular area of focus was on paperless offices and reducing paper use. He had all manner of statistics, facts, and figures on the topic- Iron Mountain alone has X million cubic feet of paper in storage, the US uses Y million c.f. of paper per year, which is the equivalent of completely filling Z Nimitz class aircraft carriers and stacking them end-to-end. Paper milling is the third most polluting industry in the U.S., etc.
Now, by and large I agree with these points, don't get me wrong- as much as I appreciate the sensual experience of picking up a book, I've moved my own library as much as possible to an electronic format, and think that transmission of electrons makes a lot more sense than cutting down and flattening trees. (Though there are definitely arguments to be made about the embodied energy and pollution cost associated with microprocessors as well...) So I am totally onboard with his core message.
What had me shaking my head in disbelief, though was watching after we'd completed our meals as this evangelist of paperless offices, this man with such an incredible battery of criticism against paper use, proceeded to carefully put the corn-based plastic fork from his lunch, the unused napkins, the plastic wrap, the cardboard box, the brown paper bag, and, yes, even the aluminum can from the soda he had with it all, directly into the trashcan. This, despite the fact that there was a) a compost bin directly adjacent to the trash cans and b) a recycle bin about 30' away on the opposite wall. And he looked at me as he did it, announcing bitterly that "*this* is the problem with paper!"
Now, it took me all of about 30 seconds while sitting and chatting with these folks to separate out the detritus from lunch, which wound up being entirely compostable but for the bit of plastic wrap my sandwich came in and the aluminum can from my own soda.
This sort of thing gives sustainability a bad name, people. If you aren't willing to spend half a minute out of your day taking care of the inefficiencies and waste involved in your *own* life, please get off the stump. To invoke a proverb, before commenting on the twig in your neighbor's eye, look first to the log in your own.
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