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RMI - Rocky Mountain Institute

It’s the IRA’s First Birthday. Here Are Five Areas Where Progress Is Piling Up.

The Inflation Reduction Act promised an unprecedented wave of clean energy investment. One year in, here’s where we’re seeing progress.

Originally published on August 16, 2023 at RMI.org: https://rmi.org/its-the-iras-first-birthday-here-are-five-areas-where-progress-is-piling-up/

By  Hannah Perkins,  Adam Aston,  Vindhya Tripathi

“Unprecedented.”  “A landmark.” “The Super Bowl of clean energy.”

Those are just a few of the superlatives that hit the headlines when the Inflation Reduction Act (IRA) was signed into law on August 16, 2022.

The act’s passage came as a surprise both politically — emphasizing lower energy costs helped the bill clear years of oppositional brinksmanship — and for its unprecedented scale. Toward the goal of shifting the US grid to 80 percent clean electricity and cutting climate pollution by 40 percent by 2030, the act mobilized an estimated $370 billion in federal incentives.

A year in, the early fanfare has resolved into unprecedented progress. Twelve months after passage, the IRA’s impact — in industrial investment, new jobs, and other economic activity — already exceeds early estimates. To date, we have seen:

  • $278 billion announced in new private clean energy investments.
  • Projects announced accounting for 170,000 new jobs.
  • The availability of $70 billion was announced in grants, rebates, and other non-loan funding.

And while politics could yet alter its trajectory, the impact to date has been weighted towards traditionally Republican-leaning regions, a bias which may ensure its longevity in years to come. Given the rapid uptake, Goldman Sachs earlier this year upped their estimate of public IRA investment over the next decade to more than $1 trillion, with private sector spending potentially a multiple of that.

By design, incentives are drawing this investment widely across the United States, with a focus on disadvantaged, low-income, and energy communities. RMI estimates that, if they take full advantage of the IRA and adopt clean energy at the pace and scale needed to meet national climate targets, by 2030, each state could see:

  • Cumulative investment of from $1 billion (for smaller states) up to $130 billion (for the largest beneficiaries).
  • Per capita new investment of $1,500 to $12,000.
  • The creation of 2,000 to 100,000 new jobs.
  • Lower healthcare costs and impacts by avoiding 4,000 to 300,000 negative health outcomes avoided.

On the ground, IRA incentives have already translated into a rush of announcements and projects spanning regions and industries, including both legacy and cleantech sectors. On the advent of the IRA’s first birthday, here’s a rundown highlighting the breadth of this progress.

Manufacturing boom

Nourished by the IRA, manufacturing announcements have mushroomed across the country. While heavy on electric vehicles (EVs) and batteries, the greenfield factories and upgrades also include wind and solar sites, along with semiconductors, electronics, and others. The new capacity promises to boost US energy security and independence by reshoring key supply chains and strengthening US competitiveness as global leader in clean energy technologies. To date, 272 new clean energy projects have been announced, including:

  • 91 new battery manufacturing sites.
  • 65 new or expanded EV manufacturing facilities.
  • 84 wind and solar manufacturing announcements.
Electrifying transportation

Globally, sales of internal combustion vehicles peaked in 2017, and are now in long-term decline, according to Bloomberg NEF. As older cars and trucks are retired, the world’s combustion vehicle fleet will start to shrink after 2025. In the United States, the IRA is supercharging this shift, with incentives that span from electric school buses to battery factories and new charging infrastructure:

  • For consumers, the IRA offers rebates on new and used electric vehicles, peaking at $7,500. Juiced by this incentive, US sales of new EV passenger cars are expected to surge by 50 percent in 2023 to over 1.5 million, the White House estimates. The incentives will help heavier vehicle classes electrify more quickly too. By 2032, RMI estimates that the share of EV sales using IRA credits will be close to 100 percent for Class 1–3 commercial fleets, and 84 percent for medium- and heavy-duty trucks.
  • To supply incentive-amped demand, global automakers such as GM and Ford and their battery partners are leveraging the act’s $45-per-kilowatt battery production tax credit to turbocharge construction of new plants across a “battery belt,” stretching from Michigan to Georgia (see map, in above section). Increased output of US-made batteries is, in turn, helping carmakers boost output of popular EVs, such as Ford’s F-150 Lighting electric pickup (image, top of page).
  • IRA also provides funding for the federal government to lead by example. The US Postal Service(USPS) received $3 billion for clean vehicles. And starting in 2026 the post office will buy only EVs.
  • RMI analysis shows IRA credits will help electric passenger cars and light-duty trucks achieve total cost of ownership (TCO) parity with ICE vehicles between 2023 and 2025. Without the IRA credits, EVs would have reached TCO parity with ICE vehicles between 2024 and 2027.
Total Cost of Ownership parity for EVs and ICE passenger cars chart
Greening buildings

Buildings account for around a third of US emissions, making it one of our largest, most complex sectors to decarbonize given the age, diversity, and costs to retrofit America’s stock of millions of buildings. The IRA is tackling this challenge on multiple fronts:

  • Guidance on funding for the Home Energy Rebate programs is being rolled out and has generous carve-outs for low-income households. States are currently designing programs based on this guidance to help consumers save money and live more comfortably. The first state programs could be rolled out as early as the end of this year.
  • Appliance efficiency standard programs like CEE and ENERGY STAR, which some IRA incentive programs rely upon, continue to align with decarbonization efforts that ensure the most efficient HVAC systems and appliances are installed in homes across the country.
  • New HUD programs prioritize healthy, efficient, electrified retrofits for affordable housing HVAC and appliances; more than $800 million is available and funding from these programs can’t go towards in-unit fossil fuel appliances.
  • The General Services Administration (GSA) — which oversees the federal government’s vast portfolio of buildings and properties — is using $1 billion of IRA funding to shift federal facilities towards electrification, with near-term plans to electrify over 100 buildings, including one of their largest, the Ronald Reagan Building in DC.
Decarbonizing electricity

Clean electricity is essential to decarbonize the wider US economy, whether to charge EVs and power greening buildings (see above), or to decarbonize industry (below). The shift is advancing steadily. In the first five months of 2023, wind and solar produced more power than coal, a first for the US. The IRA is continuing this shift:

  • Commercial solar is on pace to grow by 12 percent in 2023, and over the next seven years, we expect twice as much wind, solar, and battery deployment as there would have been absent the IRA.
  • The IRA-linked credits reinforce renewable powers’ long-standing price edge over gas- and coal-fired generation, an advantage which endures despite some demand-led inflation in the price for new solar and wind.
  • With IRA funding, USDA is making the largest investment in rural electrification since the New Deal — nearly $11 billion for rural electric co-ops. In particular, the Empowering Rural America (New ERA) program gives rural electric cooperatives an unprecedented opportunity to modernize aging grid infrastructure to maintain reliability, lowering costs for members and reduce emissions.
  • Michigan’s largest investor-owned utility, DTE, filed the first resource plan in the country that attempts to demonstrate the IRA’s intended changes to the economics of clean energy, projecting $500 million in savings for customers over 20 years. The proposal includes building 15 gigawatts (GW) of new solar and wind, improving DTE’s exploration of battery pilots, and moving up the retirement of the Monroe Power Plant – the fourth largest coal plant in the US.
  • Energy Infrastructure Reinvestment announced funding for solar and storage in Puerto Rico, replacing a retired coal power plant.
Transforming industry

Steel, cement, petrochemicals, and other hard-to-abate heavy industries pose a special challenge to decarbonize. For now, many rely on raw materials and/or high temperatures that only fossil fuels can affordably deliver at scale. The IRA aims to scale up affordable alternatives — such as hydrogen which, if implemented cleanly, offers a clean alternative — along with greener raw materials and recycling options:

  • Incentives for industry and hydrogen have had a big impact on economic analyses. Many projects have been announced, focused on advancing US global competitiveness. Policies are meant to drive applications and interest in first-of-a-kind projects and hubs demonstrating industrial decarbonization opportunities.
  • From the IRA and Bipartisan Infrastructure Law, the Office of Clean Energy Demonstrations (OCED) has been allocated $6.3 billion for Industrial Demo Grants. OCED funds will de-risk technologies that are not yet demonstrated on a commercial scale.
  • A range of tax credits is being clarified that will spark investment. For hydrogen, guidance on the Hydrogen Production Tax Credit (45V) is forthcoming. And the  Advanced Manufacturing Production Credit (45X) will unlock a major buildout of the lithium-ion battery supply chain, stationary storage manufacturing, and solar and wind supply chains.
  • Likewise, guidance has been released and the first round of applications reviewed for the Advanced Energy Project Credit (48C), which offers $4 billion for projects that expand clean energy manufacturing and recycling, expand critical minerals refining, processing, and recycling, and reduce emissions at industrial facilities. The U.S. Energy Department’s roster of funding opportunities, among other things, prioritizes heat pump manufacturing, signaling a clear shift towards supporting beneficial electrification.
Finance

The act has also unlocked financing via the reform of tax credits and innovative financing that prioritizes climate-friendly investment in historically disadvantaged communities:

  • For the first time, the IRA widens access to investment and production tax credits (ITCs and PTCs) for non-taxable entities, such as states, local governments, coops, and non-profits that in the past had little or no way to use the credits to finance new renewables. Historically, constrained demand for tax credits has limited the scale of ITC and PTC financing. For instance, RMI analysis of 2019 financial disclosures found that US investor-owned utilities had aggregate tax liabilities sufficient to build less than 4 GW of new solar and storage per year, barely enough capacity to replace one or two coal plants. Later this year, Treasury will release final guidance for organizations to tap into these direct pay and transferability options.
  • The Notices of Funding Opportunity (NOFOR) for the Greenhouse Gas Reduction Fund’s three grant competitions are now live, with deadlines in September and October. These grants will be disbursed in 2024, capitalizing a national network of clean energy financiers who will be focused on mobilizing private capital at scale to fund emissions-reducing projects, especially in low-income and historically disadvantaged communities.
Looking ahead

The IRA is not only the most ambitious climate bill in US history. It is one of the most ambitious and complex efforts at economic and industrial reinvestment ever. By these standards, the progress the act has already made is enormous, but years of work — and meaningful obstacles — remain to fully deploy the IRA at the pace and scale needed to reach climate targets.

Chief among these obstacles is permitting. As project timelines stretch into the years — whether to connect renewables projects onto the grid, or site new critical mining and industrial facilities — streamlining the thicket of overlapping regulatory and administrative approvals is emerging as a make-or-break challenge for the US energy transition.

Despite challenges in implementation, the hundreds of announced projects and hundreds of billions of dollars in investment show the energy transition is out of the starting gate and gaining speed.

The challenge is increasingly shifting to subnational players — such as states and cities as well as businesses and non-profits — to mobilize the funding the IRA has unlocked. Ultimately, the IRA’s full potential will be limited only by our own ambition to realize a clean energy future.

GreenBiz

Why wholesale POWER markets matter SO MUCH to big ENERGY buyers | GreenBiz

When a big brand such as Google, General Motors or Walmart unveils an eye-popping commitment to use more renewable energy, the news usually gets attention. And as these pledges have multiplied in number and scale, corporate energy buyers are having impacts beyond the headlines. They’re reshaping larger U.S. power trends by pulling investment into renewables.

Already, roughly half of the Fortune 500 have climate and clean energy goals; over 250 large companies have committed to using 100 percent renewable energy. Corporate buyers have collectively deployed over 23 gigawatts (GW) of new renewable energy over the past five years, according to the Renewable Energy Buyers Alliance (REBA). Over the next decade, renewable energy demand from Fortune 1000 companies could add 85 GW.

To speed progress, REBA and its membership of 200-plus energy buyers and sellers have launched a set of guiding principles to standardize wholesale electricity markets across the U.S. 

By making it easier for big power buyers to synchronize terms with utilities and project developers, the principles should stimulate investment, drive down renewable energy prices and, the alliance hopes, boost market competition while growing supply. REBA’s goal is to catalyze 60 GW of new renewable energy projects over the next five years.

Wholesale power markets already serve most U.S. consumers. The largest of these — such as the middle-Atlantic’s PJM or MISO, which spans Louisiana to Minnesota — straddle multiple states and coordinate the intricate flow of power from thousands of power plants, across millions of miles of wires, to tens of millions of customers. Today, roughly 80 percent of corporate power purchase agreements take place within existing wholesale energy markets, according to REBA. 

The principles are significant because American businesses are making wholesale market design a central priority not just to meet their own clean energy goals but also to shape the market structures …

Yet large swaths of the economy remain outside these regions. So standardizing rules for all the participants and extending wholesale markets across the entire country could enable even more deals. 

In a document released during a breakout session at last week’s VERGE 20 event, REBA laid out key principles to organize extant and new wholesale markets. According to this roadmap, well-functioning wholesale energy markets are defined by three core principles which should:

  • Unlock wholesale market competition to catalyze clean energy by ensuring a level playing field, large energy buyer participation, and services that provide actual value for energy customers.
  • Safeguard market integrity through independent and responsive governance structures, transparency and broad stakeholder engagement and representation.
  • Design to scale to the future by ensuring operational scale, customer-oriented options to meet decarbonization goals, alignment with federal and state public policy and predictable investment decisions.

Improving wholesale markets

“The principles are significant because American businesses are making wholesale market design a central priority not just to meet their own clean energy goals but also to shape the market structures that are critical to help decarbonize the entire power most affordably, for everyone,” said Bryn Baker, director of policy innovation at REBA.

Operators should ensure customers have pathways to engage in decision-making, which is not always the case today, Baker explained. “Energy buyers can and want to have a seat at the table. It’s going to be really important that a broad cross-section of customer voices are present in these markets.” 

From the perspective of a big buyer such as GM, an effective wholesale market can capture supply from a larger geographical area. This can help optimize for price, by buying wind one day in one region and switching to solar in another area on another day. 

Diversity of sources reinforces grid resiliency, said Rob Threlkeld, GM’s global manager of sustainable energy, supply and reliability. In one region, solar power may be surging, while in another wind output is waning.

“A wholesale market allows you to really match that generation with the load at the lowest cost possible,” Threlkeld said.A wholesale market allows you to really match that generation with the load at the lowest cost possible.

“As we think about the wholesale markets, we want to drive toward a clean and lean grid,” Threlkeld added. “We’re moving from big, centralized plants to more decentralized operations … It allows us to optimize the grid itself, matching generation with load.”

GM has accelerated its commitment to renewable energy, aiming to power 100 percent of U.S. facilities by 2030 and global operations by 2040. Wholesale markets can help, Threlkeld said, by hastening the deployment and procurement of cost-effective clean energy. 

Energy consumers take the lead

REBA’s efforts reflect wider trends in the energy industry, where households and big businesses alike are pushing energy companies to respond to their needs. “The conversation is shifting from a production focus to one where consumers are driving the next wave. It’s about what customers want and how they’re consuming power,” said Miranda Ballantine, REBA’s chief executive. 

Localization of renewable energy is also guiding REBA’s agenda. In the past, companies had little choice but to contract renewable capacity from far-off markets. Today, more are seeking to procure renewable energy near their facilities on the same grid they operate. “More companies are saying that they want to time match those renewable electrons with their consumption,” Ballantine said. 

Google recently unveiled plans that highlight the challenges corporate energy buyers face in upgrading their renewables sourcing from such a first-generation approach, where they may still use local fossil-generated energy but net that out against purchases elsewhere. In April, the internet goliath unveiled complex software-based plans to dynamically match its actual minute-by-minute consumption with low-carbon electricity supplies by region, a technical challenge no other large company has yet solved.

For other companies, simply accessing regional grids with sufficient low-carbon energy remains a challenge. Somewhere between 30 and 40 percent of corporate assets are not in the kinds of regional transmission organizations (RTOs) that can draw and balance power from a wider region, Ballentine said. 

“Those customers have very little opportunity in those markets to actually make choices to drive zero-carbon electrons to power their facilities,” Ballantine added. Absent organized wholesale markets, companies can’t really use their demand signals to drive change in the type of electricity they’re consuming. 

—

Originally published at Greenbiz.com.

Global CCS Institute

Looking Ahead: CCS’ Prospects Under Ernest Moniz, Energy Secretary Nominee | Global CCS Institute

Ernest Moniz, President Obama’s newly nominated Energy Secretary, shares much with his predecessor, Steven Chu, outgoing head of the Department of Energy (DOE) and who is returning to an academic chair at Stanford University. Both men are prominent academic physicists, with long track records of advancing energy technology.

Chu proved to be a vocal advocate for clean energy technologies, especially in the realms of renewables and transportation, funneling billions in stimulus dollars into early stage R&D through DARPA-e and buoying mid-stage companies such as Tesla with federal loans. Under Chu’s watch, carbon capture and storage (CCS) remained a priority, with efforts to press ahead with FutureGen 2.0, but lacked the urgency that many stakeholders wanted to see.

Assuming a quick Senate approval—Moniz is widely regarded to face a relatively easy confirmation—so what’s in store for CCS under a Moniz-led DOE? On the downside, Moniz takes charge in a period of ever-tightening fiscal policy, so will all but certainly have less public money to deploy than did Chu.

If the conditions of the recent sequester hold, the budget for the DOE’s Fossil R&D program—under which FutureGen and other carbon capture programs are funded—will be cut by 5 per cent, or US$25 million.

On the upside, Moniz enters his new post with far more experience in rough-and-tumble Beltway tactics than did Chu. Moniz served in the second term of President Clinton’s cabinet, first as Under Secretary of Energy, and later as Associate Director for Science in the Office of Science and Technology. Moniz has frequently testified before Congress, as well.

In terms of CCS, if past is precedent, there’s reason to be hopeful, maybe even a little optimistic.

I spent some time conducting some research to map out Moniz’ work and statements on CCS. Here’s what I found. If you have other examples, please comment and add more in the comments.

As Tamar Hallerman notes at GHG Monitor, Moniz has co-authored several high-profile works on energy technology and policy in which carbon is a central issue. In The Future of Coal (2007, MIT Energy Initiative) CCS is addressed front and center, vital to extending coal’s tenure in an environmentally tolerable way. The report formally recommends both a carbon price and that the Energy Dept. alter practices in its Fossil R&D regime to accelerate the development of CCS. Retrofitting of Coal-Fired Power Plants for CO2 Emissions Reductions (2009, MIT Energy Initiative) offers far more detail on these issues. In the Summary for Policy Makers section which Moniz co-authored, he makes a detailed case for increased federal emphasis on CCS. A few quotes (emphasis added):

“The US Government must move expeditiously to large-scale, properly instrumented, sustained demonstration of CO2 sequestration, with the goal of providing a stable regulatory framework for commercial operation.”

“Real world” retrofit decisions will be taken only after evaluation of numerous site-specific factors.

CO2 capture cost reduction is important.

A robust US post-combustion capture/oxy-combustion/ultra-supercritical plant R&D effort requires about US$1 [billion per] year for the next decade.

The Federal Government should dramatically expand the scale and scope for utility-scale commercial viability demonstration of advanced coal conversion plants with CO2 capture.

The program should specifically include demonstration of retrofit and rebuild options for existing coal power plants. New government management approaches with greater flexibility and new government funding approaches with greater certainty are a prerequisite for an effective program.

Time is of the essence.

About a year ago, Moniz sat down with The Energy Switch Project to document his views across the full range of conventional and renewable energies, and related technologies. I’ve pasted below two out-takes, where he comments on coal, CCS and carbon pricing.

In the video above, Moniz makes the following statements (abridged transcript):“Coal of course is a very widely used fuel, particularly for the power sector, with the US China and India combined using about 60 per cent of the world’s coal. So if we’re going forward particularly with carbon control in the future, we simply have to figure out a way to employ coal.

The answer has to be then for a serious solution: the ability to capture CO2 and sequester it underground. The problem right now is cost. Today we would probably be adding six, seven, eight cents per kilowatt-hour to electricity produced by coal… For a brand new coal plant, we’re probably talking that’s on top of six to seven cents. So let’s call it a doubling of the cost at the plant of the production of electricity.

We might or might not be willing to pay that in the United States, but it is very difficult to understand China and India being willing to pay this kind of a premium.

Do I believe today we can start safely injecting billions of tons into an appropriate reservoir? Absolutely. That’s a different statement however to do with 30, 40, or 50 years, however, and I think those things will work out as we do it.

The other near-term issue is that we really have very little idea as to how to regulate, how to assign liability [for CCS]. The EPA is in fact working on this, but certainly it cannot be based on the old types of regulatory structures put in place for water injection.”

From the same interview, he also comments on carbon pricing, saying:

“Certainly it will never be cheaper to capture and store CO2 than it is to release it into the atmosphere so the reason we’re doing it in fact is because carbon will have a price and ultimately it has to be cheaper to capture and store it than to release it and pay a price.

If we start really squeezing down on carbon dioxide over the next two decades, that [price] could double, it could eventually triple.

I think inevitably if we squeeze down on carbon, we squeeze up on the cost, it brings along with it a push towards efficiency, it brings along with a push towards clean technologies in a conventional pollution sense. It brings along with it a push towards security. After all, the security issues revolve around carbon-bearing fuels.

Now, I think it is very important that any funds associated with that be recycled efficiently to productive uses and to address distributional questions because some of the poor may bet hit harder. There’s a lot of work to do, but in the end, if you take one simple thing, that’s the direction I think we need to go in.”

You can check out a continuous stream of Moniz’ full 22-minute interview on Vimeo, or pick and choose Moniz’ comments on a single topic, in short 1-2 minute segments, the interview is conveniently split into shorts by topic.

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Check out the original post here:

http://www.globalccsinstitute.com/insights/authors/adamaston/2013/03/19/ccs%E2%80%99-prospects-under-energy-secretary-nominee-ernest-moniz

GreenBiz

Despite naysayers, green energy keeps growing | GreenBiz

Despite naysayers, green energy keeps growing Clean-energy programs find themselves squarely in the cross hairs of the GOP this election season. After pillorying the White House over Solyndra’s collapse, the House has been griping about everything from military spending on renewables to Obama’s failure to lower gasoline prices. So it may not be the best of times to crow about green energy success.

Or maybe it is. After all, while the past year may be remembered for cleantech’s struggles, green-energy companies turned in another banner year in the humdrum businesses of generating renewable electric power and biofuels.

All together, solar PV, wind and biofuel markets expanded by 31 percent last year to $246 billion globally, according to Clean Edge’s 11th annual edition of Clean Energy Trends 2011, a wrapup of key green-energy indicators. The expansion caps a five-year run during which these markets have grown by roughly a third each year.

To be sure, the market issues facing solar PV manufacturers, wind turbine makers and biofuel producers are very different, so I want to be cautious about generalizing. But the three share similarities. All are gaining sales in established markets dominated by fossil fuels. All have matured beyond startup stages and are, accordingly, seeing the emergence of sophisticated, large-scale players.

And, of course, all three have faced souring public support in the past year. Solar subsidies retreated in Europe. And in the U.S., tax benefits were eliminated for corn ethanol, while the wind industry is once again fighting for the renewal of its production tax credits.

Last year, “the industry became a modern-day whipping boy,” Ron Pernick, Clean Edge co-founder and managing director, said in a press statement. “The attacks… overlooked the fact that many clean-energy technologies are becoming increasingly cost-competitive, central to the expansion of energy markets in places like China, Japan and Germany, and a critical hedge against more volatile forms of traditional energy.”

Despite these headwinds, Clean Edge expects the markets to grow steadily — albeit more slowly — in the decade to come. It projects the clean-energy market will expand by 4.6% per year (compounded) to $385 billion by 2021. In all three technologies, falling prices will spur further growth.

Solar photovoltaic: Sales of PV panels globally surged to $91.6 billion in 2011 from $71.2 billion in 2010. The surge is all the more remarkable because it comes amid fast falling unit prices for solar panels. Put another way, dollar sales rose by 29 percent, while the volume of watts installed soared by 69 percent to more than 26 gigawatts worldwide last year from 15.6 gigawatts in 2010. Clean Edge projects that the cost to install solar PV systems will fall from an average of $3.47 per watt globally last year to $1.28 per watt in the next decade. The falling price will make solar PV cheaper than the grid average price in about a dozen U.S. states in that period.

Wind power: The volume of new turbines coming on line also hit a record last year, with 41.6 GW of wind capacity installed. Assuming, as a rule of thumb, that windmills produce about a third of their rated capacity, that’s the equivalent of more than a dozen nuclear reactors. The total spent to build that new capacity hit a record: $71.5 billion, up 18 percent from $60.5 billion in 2010.

Biofuels markets also established a new high in 2011, with $83 billion in global sales, up from $56.4 billion the prior year. Unlike the markets for solar and wind technology — where falling prices were the rule – per-gallon prices for ethanol and biodiesel rose through the year, reflecting the higher costs of feedstocks such as corn and plant oils, as well as higher fossil-fuel prices.

Venture capital. U.S.-based venture-capital investments in cleantech grew by 30 percent to $6.6 billion in 2011, from $5.1 billion in 2010, according to data provided by Cleantech Group. Clean Edge analysis found that cleantech deals accounted for a record 23 percent of the total U.S. venture-capital investments last year.

Just in time for GreenBiz’s VERGE meeting in Washington, Clean Edge’s report also focuses on several key trends highlighting the way that energy technologies, efficiency and infotech are converging to transform business and government practices. These include the potential for “deep” retrofits in commercial buildings; the growth of waste-to-resource business plays; the promise of energy storage on the grid; the U.S. military’s growing emphasis on clean technology and efficiency; and Japan moving into its post-nuclear future.

Check out the Clean Edge’s full report at http://cleanedge.com/reports/charts-and-tables-from-clean-energy-trends-2012 (click on “Download full report” on the left).

Photo courtesy of Vaclav Volrab  via Shutterstock.

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View the original article here: http://www.greenbiz.com/blog/2012/03/14/despite-naysayers-green-energy-keeps-growing

Global CCS Institute

Lessons form California’s daunting carbon challenge | Global CCS Institute

Among US states, California is leading the race to explore and implement ways to lower its greenhouse gas output. Its goal: to cut emissions to one-fifth of 1990 levels by mid century. As such, other states and nations are closely watching the Golden State’s practices for inspiration and technical guidance.

What then, if a deep, hard look at California’s ambitious plans to lower its greenhouse gas emissions revealed that – even by pursuing an all-out, no-holds-barred mix of today’s technologies and aggressive efficiency measures – the state was only likely to get about halfway towards its goal?

That, roughly, is the conclusion that Jane C. S. Long comes to in a commentary published in the journal Nature last October. Titled Piecemeal cuts won’t add up to radical reductions, her note maps out, with remarkable clarity, the mountainous challenge ahead for California to achieve its climate goal. The bracing conclusion: California can’t just spend or deploy its way to an 80 per cent reduction or beyond – and neither can anywhere else.

Jane’s expertise stems from her role as co-leader of a team of energy analysts who wrote California’s Energy Future: The View to 2050 published in May 2011. By day, she’s principal associate director at Lawrence Livermore National Laboratory, a global leader in research on energy technologies and policy.

One of the important implications that surfaces in Jane’s broader analysis is the central role of carbon capture and sequestration (CCS). This is somewhat surprising given that California’s grid is all but coal-free.

California is different from most states, she observes, with 40 per cent of total energy used for transportation, versus 25 per cent nationally. Thus CCS must come into play less so for grid power than to help generate low-carbon vehicle fuels and other applications where neither electricity nor biofuels can substitute for existing fossil fuels.

The model Jane and her team developed strives to avoid what she calls ‘sleights of hand’ where it can be difficult to fully account for the secondary or tertiary impacts induced by switching to new energy forms. For example, rather than simply count solar panels as clean generation, Jane’s model more fully enumerates the impact of electric power generation at night and other times when solar panels are off line.

The analysis reveals that to achieve a 60 per cent reduction – well short of the 80 per cent goal California and many nations are looking to – would require all manner of tough-to-imagine steps:

[The state would have to] replace or retrofit every building to very high efficiency standards. Electricity would have to replace natural gas for home and commercial heating. All buses and trains, virtually all cars, and some trucks would be electric or hybrid. And the state’s entire electricity-generation capacity would have to be doubled, while simultaneously being replaced with emissions-free generation. Low-emissions fuels would have to be made from California’s waste biomass plus some fuel crops grown on marginal lands without irrigation or fertilizer.

Given that California represents a best-case scenario for the rest of the US, Long’s assessment is a compelling case to accelerate the speed and scope of carbon-reduction efforts.

I’ll refrain from diving into the broader implications of her report here – better to check it out in whole. Instead, for the Global CCS Institute’s community, I wrote to Jane to tease out a bit more of her vision of CCS in California’s future. An edited version of our exchange follows.

Adam: You’ve said that CCS has a critical role in helping California achieve its goal of cutting emissions to 20 per cent of their 1990 levels by mid century. How so?

Jane: I would guess that CCS will not play much of a role in meeting the AB32 goals of 20 per cent reductions, but it may play an important role in meeting the longer-term goal of 80 per cent reductions by 2050. Natural gas generation is a large part of California’s electricity portfolio. If this is to continue and meet the emission reductions, CCS would have to be used whether or not that generation was within state or say, by wire from Wyoming.

In the long term, CCS may play a critical role in solving the fuel problem. We are unlikely to have enough biofuel to meet all of our demands for fuel even if we are successful in cutting demand in half through efficiency measures and electrifying everything we can. CCS could be part of a hydrogen scenario where we get hydrogen from methane and sequester the CO2 generated in this process. Or we might use biomass to make electricity and sequester the emissions to create a negative emission credit to counter the continued use of fossil fuels.

Adam: Yet CCS technologies remain immature and under-commercialized. Starting in what years would CCS need to begin entering into California’s energy mix to play this kind of role? And are we already behind that pace?

Jane: If we start now with demonstration projects, it could be possible to have all new fossil generation be using CCS within a few decades. We need that amount of time to be sure the demonstrations are working.

Adam: What lessons does California’s CCS case have for the transportation challenge in other countries?

Jane: The transportation problem in the developing world is really interesting because it’s not clear that countries like India, for example, should electrify automobiles as a first strategy. If their electricity is made with coal without CCS, electrification is not a clear benefit. If they move to de-carbonize electricity, then electrification of transportation and heat makes much more sense.

Adam: I’ve assumed that developing countries such as China and India ought to leapfrog to electric fleets ahead, and skip the oil-burning stage, to whatever degree possible. You’re suggesting that might not be the best bet for the climate?

Jane: The distance countries like China and India have to go to provide enough electricity at low emissions is huge. If having to run cars on electricity means they add twice as much coal-fired electricity without CCS it would be a disaster. As well, the biomass for biofuel problem is likely to be more acute in these countries as they face serious challenges with food supplies. In the same 2050 period that we are looking to more than double energy supply, we are looking to double food supply. As it takes some time to roll over the fleet of automobiles to electric vehicles, it probably makes sense to move forward with electric transportation at some level as this is what we need in the long term, recognizing it will make the need to decarbonize electricity even more acute.

Adam: Writing for the Institute, the Natural Resource Defense Council’s CCS expert, George Peridas, recently summarized California’s progress as “not a whole lot of progress on the CCS front to showcase since last year, but developments are expected soon”. How could the state reorder its CCS priorities to pick up the pace of technology development?

Jane: The state could get behind a demonstration project for a combined cycle gas plant. There are a lot of people skeptical about CCS. We need to have a concrete example that it works. A big issue in CCS is integrating all the complex industrial processes: electricity generation, capture, and storage. We need experience in actually doing what we theoretically ‘know’ how to do.

For an exploration of the broader report, along with further details on the technicalities of the model used in Jane’s analysis, check out Andy Revkin’s interview with Jane at his Dot Earth blog at the New York Times.

GreenBiz

Clean Energy Makes Big Strides, but Just How Sustainable is the Growth? | GreenBiz

Clean Energy Makes Big Strides, but Just How Sustainable is the Growth?

Global investment in clean energy capacity expanded by 5 percent in 2011 to $260 billion. The growth comes despite the considerable drag from economic crisis in Europe and weak growth in the U.S.

The new research, compiled by Bloomberg New Energy Finance, was announced yesterday in New York at United Nations headquarters building, site of the Investor Summit on Climate Risk & Energy Solutions.

Up from $247 billion in 2010, last year’s rise in spending on clean energy capacity offered reasons for optimism along with rising cause for concern. Note that this data includes spending on renewable energy technologies, but not advanced coal, nuclear or conventional big hydro.

The good news: Spending has quintupled in the past seven years, with outlays for solar power leading the expansion — soaring by 36 percent to $137.5 billion during 2011.

And in the global horse race for green energy leadership, the U.S. regained its lead over China for the first time since 2008. U.S. spending hit a record, at $55.4 billion, up 35 percent, as investment in China rose by just one percent to $48.9 billion.

“The performance of solar is even more remarkable when you consider that the price of photovoltaic modules fell by close to 50 percent during 2011, and now stands 75 percent lower than three years ago, in mid-2008,” Michael Liebreich, chief executive of Bloomberg New Energy Finance, said in a statement.

But lurking behind those big numbers are worries that U.S.’ resurgence in 2011 may turn out to be the lunge that precedes a stumble. Spending in the U.S. was buoyed by a big surge of stimulus funds, originally set aside in the 2008 stimulus bill, that will taper off sharply in the year ahead.

“The U.S. jumped back into the lead in clean energy investment last year,” Liebreich added. “However before anyone in Washington celebrates too much, the U.S. figure was achieved thanks in large part to support initiatives which have now expired.”

As those incentives shrink, the global wind and solar industries are set to consolidate. Supply in both the wind and solar markets exceeds demand significantly, leading to bankruptcies and pullbacks. In the solar space, Solyndra is the most visible, but one of a growing number of startups that crashed under pressure from falling solar cell prices.

Dominated by mature conglomerates such as GE and Siemens, the outlook for wind is dimmer than for solar: Global investment fell by 17 percent to $74.9 billion. To try to compete with lower-cost Chinese manufacturers Vestas, the world’s largest producer of turbines, yesterday announced it was shuttering a factory, and cutting 2,335 jobs, or about 10 percent of its staff.

Of course, oversupply means lower-cost energy systems for buyers. And even as subsidies are declining in the wealthy West, non-financial policy support remains resilient. In the U.S., renewable portfolio standards in 29 U.S. states represent a $400 billion investment opportunity, as other states finalize similar commitments.

Meanwhile, stepped up subsidies in emerging markets — especially Brazil and India — are upgrading energy services to virgin markets. Spending in these areas will replace some of the investment that is retreating in North America and Europe, said Ethan Zindler, Head of Policy Analysis at Bloomberg New Energy Finance.

Financial innovation remains a weak spot, however, especially in the U.S., where clever capital solutions could help fill the gap left by shrinking federal subsidies. Given the multi-billion dollar scale of many clean-energy investment projects, there’s been a dearth of the sorts of high-efficiency financial instruments that can bundle up batches of projects, and finance them at low cost in public markets, Zindler added.

There have been some promising precedents — such as PACE loans and solar lease-to-own programs. But nothing has yet emerged to substitute for large-scale, multi-billion federal subsidy programs. Proposals such as green bonds or a national infrastructure bank are stuck in the starting gate, said Zindler.

Institutional investors, meanwhile, are hungry for more diversified ways to put money into greener projects. “Investors need diversified, sustainable strategies that maximize risk-adjusted returns in a volatile investment environment,” said Ceres head Mindy Lubber, which directs the Investor Network on Climate Risk, a network of 100 institutional investors with collective assets totaling about $10 trillion.

The retreat of subsidies may enhance the competitiveness of products and strategies already honed to deliver higher efficiency and energy savings, said Marc Vachon, vice president of ecomagination at GE. He added that GE’s ecomagination product line is growing at twice the rate of the rest of the company, having already generated $85 billion in revenues to date.

The event saw the release of two other reports of note for folks following investment trends in green business and clean tech:

• Global investment consultant Mercer issued a new report showing how leading global investors, including the nation’s largest public pension fund, CalPERS, are integrating climate change considerations into investment risk management and asset allocations. The report, “Through the Looking Glass: How Investors are Applying Results of the Climate Change Scenarios Study” comes on the heels of a Mercer report last year showing that climate change could contribute as much as 10 percent to portfolio risk over the next 20 years.

• Deutsche Asset Management also released a new report, “2011: The Good, The Bad, and the Ugly,” describing generally mixed results on climate investments and policy in 2011 but projecting long-term growth in cleaner energy markets to continue. Positive trends included China and Germany’s continued low-carbon leadership, the U.S. Environmental Protection Agency’s issuance of new rules on hazardous air pollutants, Australia’s new carbon legislation, and Japan’s commitment to supporting the deployment of more renewable energy.

The report also highlights negative trends such as the weak performance of cleantech public equity stocks in 2011 and the expiration of several U.S. federal renewable energy incentive programs, including the “highly successful” Treasury Grant Program that expired Dec. 31, 2011. The report noted that the TGP program, in 2 1/2 years, leveraged nearly $23 billion in private sector investment for 22,000 projects in every state across a dozen clean energy industries.

Last but not least, a plug. If you, like me, have concluded that the “end of coal” is all but inevitable to prevent catastrophic climate change, check out this remarkable presentation — which ended with a standing ovation — by Richard Trumka, President of the AFL-CIO at yesterday’s summit.

Trumka, a former miner, spoke with passion about how the “end of coal” message is landing on the ground in blue-collar coal country, even as he acknowledged the dire need to address climate risks and build a low-carbon economy.

His message is cause to reflect on how labor’s interests are often misunderstood and under-represented in climate policy discussions. Where coal miners see their jobs, housing values, and culture imperiled, it’s no surprise that the politics of climate change become hard to swallow — no matter how chaotic the climate change signals may be. The same labor issues vex the proposed XL Pipeline, about which Trumka says labor remains divided, and natural gas fracking as well.

Read the transcript here or watch his talk below, starting just before the 14-minute mark. It’s well worth the 15-minute running time. If the embedded player isn’t working, point your browser here: http://www.unmultimedia.org/tv/webcast/2012/01/2012-investor-summit-on-climate-risk-and-energy-solutions-2.html:

Wind turbine photo CC-licensed by Samuel Stocker.

GreenBiz

How SolarReserve Navigates Darkening Prospects for Big Solar in the US | GreenBiz

How SolarReserve Navigates Bleak Predictions for Solar in the US

On the sun-baked plains outside Tonopah, Nevada, a huge white pillar is inching upwards, as concrete piles up towards an ultimate height of some 60 stories. The slender structure is evidence of the tangible progress — and rising risks — facing a dwindling number of developers of large-scale power plants in the deserts of the western U.S. slated to make electricity by converting the sun’s heat into power.

I recently caught up with Kevin Smith, the Chief Executive Officer of SolarReserve. The Santa Monica, Calif. company is building the tower that will sit at the heart of its $900 million Crescent Dunes Solar Energy Project. Smith emphasized that while the tower attracts a lot of attention, it may be that the project’s ability to store the sun’s energy will become its most competitive virtue, particularly at a time when as the solar market is being rocked by plummeting prices for photovoltaic panels, a competing technology.

Topping out at over 600 feet, the Crescent Dunes solar tower will rank among the tallest structures in Nevada. It has to be that tall to absorb the reflected light from some 10,000 billboard-sized mirrors that will be installed in concentric half circles around its base. Once complete, the pillar will be capped with a collector, at which all those mirrors will point, focusing the sun’s rays. Where the reflected rays converge, temperatures will hit over 1,000 degrees Fahrenheit.

To make electric power, this thermal energy can be used immediately to generate steam in a turbine. Or the heat can be stored, absorbed in molten salts kept in insulated containers. This trick solves the intermittency problem that bedevils most renewables. Drawing on this stored heat, the facility can control when and how much electricity to make, and command a higher price from utilities by supplying power when demand is highest.

This ability to deliver power on demand makes the Tonopah project different from all but a very few large-scale renewable energy installation in the U.S. Windmills and other kinds of solar farms can store energy only by using costly battery banks, or pumped air storage or pumped hydro, both of which require relatively rare sighting conditions. Tonopah’s design is the largest of its kind, building on precedents set by a pair of smaller solar towers that have been operating in Spain and Arizona.

Since construction started in Tonopah last August, Smith would seem to have plenty to celebrate. Once the tower is complete, laying out the field of reflecting mirrors will follow. Come December 2013, the project is slated to begin feeding up to 110 megawatts of power into the western grid. What’s more, Tonopah is just one of a backlog of some 3,000 megawatts of energy projects SolarReserve has in its pipeline, including contracts to build two other solar towers in Spain and California.

But, when asked there would expect to see more projects in the U.S. further out, Smith was pessimistic. While financing for current projects is locked in, the Dec. 31 expiry of the so-called 1603 Treasury grant program — which offers a 30 percent federal cash grant to qualified renewable energy projects — threatens to stall the development of future large-scale solar plants.

The grant, along with many other renewable energy subsidies has been drawn into the toxic politics stemming from the failure of Solyndra, which was granted $535 million federal loan guarantee to commercialize a novel design for tube-based solar panels. Critics have gone on the warpath, questioning practically all renewable-energy projects that have received federal funds. SolarReserve was offered a $737 million loan guarantee by the DOE last May to help build the Tonopah project.

The hostile partisanship, together with shrinking federal funding, is souring a hot market here. “Unfortunately, U.S. policy is going in the opposite direction of much of the world,” Smith told me. “We’d love to have our home market continue to develop, but it looks like the next 12 months will be pretty flat.” In response to this uncertainty, SolarReserve has been expanding its development efforts overseas.

Were SolarReserve to de-emphasize U.S. projects, it would be another in a series of setbacks for U.S. solar technology and developers. Beyond the partisan backlash and broader economic recession, a key cause for these woes has been the plummeting cost of conventional photovoltaic panels, which have collapsed by roughly half over past two years.

The downward price spiral was the key culprit and Solyndra’s crash, and others have followed suit. U.S. players Evergreen Solar and SpectraWatt have likewise gone under. Just before Christmas, energy giant BP, once famous for a commitment “Beyond Petroleum”, fully exited the solar business, saying it “can’t make money” selling panels. Analysts agree that this brutal shakeout will continue, jeopardizing mature and startup solar players alike.

Plummeting PV prices are affecting SolarReserve’s competitors too. Indeed, its progress in Tonapah is all the more notable given the attrition rate of other efforts to build very large concentrated solar thermal (CST) projects. Once regarded as a low-cost way to capture the sun’s energy, many CST facilities have been done in by the tumbling price of conventional solar panels. To date, solar farms totaling 3,000 megawatts of capacity have switched from CST to conventional panels. That SolarReserve has avoided having to make such a switch is partly due to the edge offered by its ability to store energy.

Complicating any discussion on the future of solar is that, for all the harm ultra-cheap PV panels have done to some U.S. manufacturers, they have provided windfall savings for many panel buyers and many project developers. In the U.S., the industry is closing out its biggest ever year, with upwards of 1,700 megawatts worth of solar brought on-line, nearly double the 887 megawatts installed in 2010. Blue-chip investors continue to pile into new projects, too. Last week, Google laid out $94 million to fund four new solar power farms near Sacramento, Calif.

Come 2013, when SolarReserve’s solar tower starts to glow, the sight will surely attract tourists, press and industry attention. Here’s hoping the tall tower won’t mark the nadir of home-grown U.S. solar technology, as well.

GreenBiz

Despite Boom in Renewables, Risks Could Hurt Further Growth | GreenBiz

“Alternative” energy is officially not so alternative anymore. Last year, for the first time ever, spending on projects to generate electricity from renewable sources eclipsed the amount spent to build conventional fossil fuel plants.

In 2010, renewable projects drew $187 billion in investment, 19 percent more than the $157 billion spent to build or augment conventional generating plants, fuelled by natural gas, oil and coal, according to analysis released by Bloomberg New Energy Finance for the Durban climate talks.

As the clean energy sector comes of age it must now reckon with the challenges of more mature industries. Namely, managing the risk posed by larger, more complex projects. According to “Managing the Risk in Renewable Energy,” a report released this week by the Economist Intelligence Unit and Swiss Re, minimizing financial risk is one of the most “acute” challenges facing the sector in the near term.

The renewable energy sector will face an even more uncertain future if it fails to manage the growing risks associated with larger, more complex projects, EIU found. The study was based on survey of 284 senior-level renewable energy executives.

The survey found that renewables have moved to center stage. Power companies increasingly view renewable energy as central to their business strategies, and are developing larger and more complex renewable energy projects. Billion dollar projects, once rare, have become regular.

Worry is rising among renewable energy investors that some of the other 100 or so governments supporting clean energy will cut public subsidies as part of austerity measures, the report found. Fiscal crisis in Europe and economic malaise in the U.S. suggest public support for renewable energy is more likely to shrink than grow in the near term. For example, solar feed-in tariffs are being slashed across Europe: lowered by 15 percent in Germany and up to 70 percent in the U.K.

As public funds dry up, the appetite for renewables remains strong, siginaling a shift to more private funding. “Risk management measures such as insurance will be key to encourage further private sector investment,” said Agostino Galvagni, Chief Executive Officer Swiss Re Corporate Solutions in a statement. “Additional investments into renewable energy are needed to achieve the transition to a low-carbon economy,” he added.

A major issue in renewable energy projects is their high up front costs. Projects are typically capital-intensive and highly leveraged, with up to up to three quarters financed through debt. As companies seek to scale up investments, overcoming financial risks is one of the biggest challenges, according to 76 percent of the survey respondents.

Among plant investors, owners and operators surveyed, other significant concerns included political and regulatory risk (62 percent) while weather-related volume risk comes in third for wind power producers (66 percent). These risks increase further as projects grow in scale and complexity.

The report revealed that while companies are sophisticated in using insurance elsewhere in their businesses, the dearth of risk-management tools in the renewables space has limited their use. About two-thirds of respondents already use insurance to transfer risks. But only half of respondents said they are currently transferring risk successfully, for example through insurance to hedge against the risk of weather-related reductions in output of a solar park or wind farm. Instead, because of the limited availability of suitable risk-transfer mechanism, many retain the risks related to renewable energy assets on their balance sheets due to.

The use of solutions such as weather-based financial derivatives is slowly picking up, even though only 4 percent of wind power producers apply them to their projects. Many solutions on the market today are unsuitable for small-scale projects. In the survey, executives say they would transfer more risk if suitable risk-transfer products become more widely available in the future, particularly more standardized and cost-effective products.

With the next round of global climate talks expected to founder in Durban, the need to develop more efficient private sector investment tools for technologies that mitigate climate change, such as renewables, is only growing. The toll for climate related damage is expected to continue to rise in coming years. In 2011, the U.S. eclipsed the prior worst-year record for extreme weather events, with 14 such events doing more than $1 billion in damage. In 2008, the prior record year, the tally was nine such events.

“New technologies and innovation in renewable energy will be the only possibilities left should a global policy regime to reduce carbon emission not materialize,” says Andreas Spiegel, Swiss Re’s Senior Climate Change Adviser in a statement.

As the reports sponsor, Swiss Re is eager to “better understand how insurance can mobilize financing for renewable energy projects and identify the most cost-effective ways to reduce risks,” Spiegel added. Insurance can help lower construction and operational risks, by covering losses in the case of accident or delay.

For deeper dive into the survey’s findings, check out the EIU’s summary analysis here [PDF]. Cribbed from that analysis, here are the reports key findings, as well, according to Aviva Freudmann, Research Director at EIU.

1. Renewable energy is growing in strategic significance in the power industry, and is the focus of ever-larger investments.2. As renewable energy projects grow in number, scale and complexity, the industry faces a growing range of risks — as well as significant challenges in managing them.

3. Plant financiers and operators consider financial risks the most significant, particularly in early project stages.

4. Industry players are becoming more cautious, taking a variety of measures to reduce their exposures and transfer the remaining ones. One emerging way to manage certain risks is to diversify by geography and by technology.

5. By a wide margin, the industry chooses insurance to transfer financial risks to third parties, followed by capital-market instruments such as catastrophe bonds.

6. For operational risks, industry players seem unsure whether to continue using current risk transfer mechanisms, which focus on insurance and capital-market instruments. Many transfer operational risks to hardware suppliers.

7. Confusion abounds on how best to manage weather-related volume risks. The industry calls for a broader range of risk transfer products to cover such risks.

Solar farm photo via Shutterstock.

GreenBiz

GE Invests $600M to Build Largest US Solar Plant | GreenBiz

GE Invests $600M to Build Largest US Solar Plant

Looking back it’s easy to pinpoint the moment the U.S. wind industry came of age: April 12, 2002, when General Electric won Enron Wind Corp.’s wind assets in a bankruptcy auction.

The conglomerate’s $358 million bid has since mushroomed into a $6 billion dollar business and the fastest-growing electricity generation technology in the U.S.

Now GE is hoping to repeat that trick in solar energy. GE announced yesterday a $600 million investment to start manufacturing solar panels in a new factory slated to be the largest in the U.S.

The move is likely to shake up an industry locked in a near-permanent price war. GE is adapting — and says it has bettered — the same technology as the world’s current high-volume, low-cost manufacturer, FirstSolar, based in Tempe, Ariz.

Rather than produce solar systems based on silicon, a technology which dominates in the panels found on most household and commercial building roofs, GE’s is turning to thin-film materials.

In thin film panels, instead of building the solar cells on silicon wafers, sheets of glass are used to sandwich minuscule layers of active material, including a key ingredient, cadmium telluride (CdTe), which gives the panel their name.

GE says its approach produces the most efficient CdTe panels to date, citing an evaluation by the U.S. National Renewable Energy Lab. NREL found that GE’s thin film panels convert 12.8 percent of light into electricity, surpassing all previous measurements for CdTe panels.

While only about three-quarters as efficient of conventional silicon panels, the lower manufacturing costs of CdTe thin film panels make them cheaper, measured by per watt of capacity, than any currently viable commercial technology.

Declining to reveal any pricing details, Vic Abate, GE’s vice president of renewable energy, affirmed the company aims to be a price leader.

As part of the announcement, GE completed the acquisition of PrimeStar, Inc., a thin film pioneer that GE first took a minority stake in three years ago. In earlier news, GE has also bid $3.2 billion for Converteam, a maker of advanced electronics used to manage and produce renewable energy…

Continue reading here: http://www.greenbiz.com/blog/2011/04/08/ge-invests-600M-build-largest-US-sola…

BusinessWeek

Will Green Energy Wilt from Lack of Funds? | BusinessWeek

http://images.businessweek.com/story/09/600/005_solarpanels.jpg
The financial specialists that convert tax credits into capital to build new windmills and solar farms have all but disappeared

After years of fighting for stronger, more consistent state and federal support, the renewable-energy industry couldn’t have asked for a better 2008. Although supplying just a sliver—barely 3%—of the nation’s electricity, nonpolluting renewables such as wind, solar, and geothermal are the fastest-growing type of power being added to the grid. New installations of solar and wind power both hit record levels last year in the U.S.

In a year when the overall outlook for green businesses was mixed, renewables proved to be standout, says Joel Makower, executive editor of GreenBiz.com. Growth of renewable energy seems slow “because [of] the relative small size of the renewable energy sector, compared with the existing power generation industry,” Makower points out in GreenBiz.com’s just-released State of Green Business 2009 report. “But a closer look at the sub-sectors reveals impressive strides.”

Slide show

This year was shaping up to be even better. As part of the Emergency Economic Stabilization Act, signed into law last October, Washington granted unprecedented extensions of tax credits vital to the financing of solar and wind power projects. Then, in the first days of his Presidency, Barack Obama declared a goal to triple the share of the nation’s electricity from renewables, to roughly 10%, by 2012. What’s more, after years of production constraints keeping prices high, investments in new manufacturing capacity in both solar and wind have begun to produce more gear, lowering equipment prices.

THE MONEY DRIES UPJust when things were looking up for the green energy sector, there’s a new wrench in the works. The financial specialists that convert tax credits into capital that developers use to build new windmills and solar farms have all but disappeared—just when they’re most needed. “For all the good news, the lack of project finance and capital means there’s a real risk it won’t be possible to hit Obama’s goals,” says Christopher O’Brien, head of North American market development for Oerlikon, a Swiss supplier of solar technology.

Here’s the problem: To fund a renewable project, developers must convert tax credits into money they can use to pay for new photovoltaics and wind turbines. In recent years, a network of financiers has emerged to serve this market. Typically, small and midsize renewable project developers sell millions of dollars worth of tax credits to large, sophisticated financial entities that can use those tax credits to offset their own tax obligations or those of their clients.

As result of the capital crash, however, the pool of so-called “tax equity investors” has dwindled to around a half-dozen, from more than 20 in 2007. Key players such as Merrill Lynch and Lehman Brothers no longer exist. Others, including the likes of John Deere (DE) and Prudential (PRU), have backed out of the market, if only temporarily, according to research by Hudson Clean Energy, a private equity firm specializing in green energy. “This will be a constraining factor because the population of sophisticated buyers for these credits is too small,” says Oerlikon’s O’Brien.

While obscure, tax credits are a make-or-break ingredient for new renewable projects. They can comprise the bulk of the upfront funding used to build renewable energy projects. In a big wind development, for example, production tax credits can account for more than half of the capital structure. In a solar venture, tax equity accounts for 85% of the capital structure, according to Hudson Clean Energy data. Developer equity and debt typically make up the balance.

BUYERS NEEDEDTax credits are also important in the long term. Once renewable assets start generating income—from a combination of electricity sales, depreciation benefits, and tax benefits—the tax component can be the largest source of return for investors. For wind projects, the value of tax credits makes up about 21% of the long-term value of the project for investors. In solar farms, the value of the investment tax credit—at 30%—can be on par with the value of the electricity the panels will generate in their lifetime. Sophisticated investors like the tax credits because they typically trade at a slight discount to face value, and offer a cheaper way to pay down big tax bills.

The shortage of buyers couldn’t have come at a worse time. To hit Obama’s goals for new renewable energy, the industry will have to mobilize far more capital than it has had to before. This year, the tax equity market is expected to hit $11.1 billion and would have to rise to around $43 billion in 2012 to build all the capacity being called for. Yet in 2007, when the market had more than 20 buyers, investors bought up $5.4 billion in tax equity. Last year, just eight investors handled about $5.5 billion in 2008. “Between now and 2012, [tax equity] markets would have to grow four- or fivefold,” says Arno Harris, CEO of Recurrent Energy, a renewables developer in San Francisco.

The industry has a solution, but it’s not clear if the Senate and House will find common ground to make it work. Renewables players are lobbying for a change in rules that would temporarily convert tax credits directly into cash payments from the federal government. The bill would also temporarily extend the credits’ lifespan. Today, credits are good only for the year they’re granted. The new bill calls for them potentially to be used against past and future profits.

With the Senate now negotiating its version of the stimulus bill behind closed doors, it’s impossible to predict how renewables will be treated. The starting version of the Senate bill lacked any funding to cash out renewable tax credits. According to Environment & Energy Daily, Senator Jeff Bingaman (D-N.M.) was open to the program but wanted assurance that taxpayers would be reimbursed from the gains of any successful projects. If Washington can’t come up with a fix, the go-go growth of renewable energy could black out.

Aston is Energy & Environment editor for BusinessWeek in New York.

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