tag:blogger.com,1999:blog-19727989138288849542024-02-18T17:54:36.172-08:00Green Apple BlogEconomics of entropy and energy retrofits. Engineering and economic constraints for increasing property values, and minimizing environmental impact. Planning for value-add from sustainability.RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.comBlogger75125tag:blogger.com,1999:blog-1972798913828884954.post-66767789433955610042017-06-25T10:44:00.000-07:002017-10-03T16:05:40.217-07:00In Memoriam Fern Bernadette JonesYesterday, on Saturday June 24th, 2017, I attended a memorial service for Fern B. Jones, who sadly was <a href="https://www.dnainfo.com/new-york/20170731/greenpoint/private-carting-dsny-garbage-commercial-waste-vision-zero-dump-truck?_ga=2.152544177.986413458.1501509641-1982685340.1443795266" target="_blank">killed by a garbage truck recently</a>, <a href="http://thevillager.com/2017/05/25/woman-killed-by-truck-was-longtime-8th-st-resident-financial-wiz/" target="_blank">close to her NYC apartment</a>, at the start of a trip to her family home in North Carolina. As one of her family members humorously reminisced: "It took a Mack truck to kill her, a lesser car would have been totaled!" That observation was symbolically a very accurate description of who Fern was. She was a rock to family and friends alike. Here is a <a href="http://www.croataninstitute.org/fern-jones" target="_blank">professional in memoriam</a> from the Croatan Institute.<br />
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<br />
To me she was a professional friend, dating back to when I found her an accountant some ten years ago at a time she needed help sorting out some business challenges. We stayed in touch ever since. Her background being linguistics (Yale) and Management (MIT), was often very complementary with mine, linguistics (Leyden, unfinished), and Economics (Fairfield U). She understood like no other the important role finance could play in the green agenda, and how in practice finance all to often played a perverse role, often inadvertently achieving quite the opposite of the purported goals. She grasped the analytics of green finance like few people I ever met.<br />
<br />
Besides our professional involvement over the years, we became good friends, almost like brother and sister, able to support each other emotionally through thick and thin with all of the various challenges that life brings. At times we could play each other the ball in business, thanks to our complementary "domains." Years ago, she hit it off right away with my girlfriend, who in many ways was a mirror image of her, being the "go-to" person and an anchor for her own family. Periodically, Fern also attended my classes on <i>A Course in Miracles</i> when I was teaching at the Theosophical Society on 53rd Street, and we discovered a deep shared interest in spirituality, including my deep appreciation for the Quaker tradition where she felt most at home.<br />
<br />
At the memorial service I was able to share about the many-faceted relationship I had with Fern, and how sincerely I felt she was like a sister to me. The theme that I was asked to speak to was "trailblazer," which Fern certainly was, and as we all know, being a trailblazer is not always easy. I took the opportunity to reminisce about a recent experience along those lines which Fern and I had.<br />
<br />
At the inception of the NY Green Bank, we gave them a presentation, proposing a underwriting policy and program, which would support NY State's stated goal of, at that time, 50% GHG-reduction by 2030 and 80% by 2050. The point we made was that, if the bank financed any retrofits that achieved less than 50%, or ideally 80%, GHG-reduction, they were in fact insuring with mathematical certainty that the state would fail in its objective, something which is now pretty much a fact as the sate has scaled back its goals to 40% GHG-reduction by 2030 and 80% by 2050, without ever having addressed the fact of why their actual policies, including the all important role of the Green Bank practically ensure failure. The Green Bank bank was not receptive to our proposal a few years ago. However, in a recent meeting with NYCEEC, which is effectively the NYC Green Bank, we found out that at NYCEEC they were now having regular meetings about this exact point. The reality of course is that both banks, at the NY State level and at the NYC level, in actual fact financed mostly projects at the level of 20-30% GHG-reduction, and therefore are counter productive to the larger state mission. In short, a few years after we offered the solution, these institutions were starting to recognize the problem. <br />
<br />
Fern had a keen sense about how finance could play a perverse role, if, like in these cases, people do not bring the correct analysis to bear. It is all finance 101 stuff, except most people forget about it. Not Fern. I called her the Minister of Finance, but maybe I should have been more specific and called her the Minister of Green Finance. She always laughed when I quoted Brealy and Myers again, when exposing yet another green finance scam, for she remembered what most people forgot. She knew when it was time to go back to the drawing board.<br />
<br />
Fern's spirit will be with me forever, and her steadfastness will remain my inspiration. In honor of the deep spiritual foundation of her life, I ended my talk with a poem from Helen Schucman, scribe of <i>A Course in Miracles</i>, from the bundle <i>The Gifts of God</i>:<br />
<blockquote class="tr_bq">
A JESUS PRAYER<br />
-----------------------------<br />
A Child, a Man and then a Spirit, come<br />
In all Your Loveliness. Unless you shine<br />
Upon my life, it is a loss to You,<br />
And what is loss to You is also mine.<br />
<br />
I cannot calculate why I am here<br />
Except for this: I know that I have come<br />
To seek You here and find You. In Your life<br />
You show the way to my eternal home.<br />
<br />
A child, a man and then a spirit. So<br />
I follow in the way You show to me<br />
That I may come at last to be like You.<br />
What but Your likeness would I want to be?<br />
<br />
There is a silence where you speak to me<br />
And give me words of love to say for You<br />
To those You send to me. And I am blessed<br />
Because in them I see You shining through.<br />
<br />
There is no gratitude that I can give<br />
For such a gift. The light around Your head<br />
Must speak for me, for I am dumb beside<br />
Your gentle hand with which my soul is led.<br />
<br />
I take Your gift in holy hands, for You<br />
Have blessed them with Your own. Come, brothers, see<br />
How like to Christ am I, and I to you<br />
Whom He has blessed and holds as one with me.<br />
<br />
A perfect picture of what I can be<br />
You show to me, that I might help renew<br />
Your brother's failing sight. As they look up<br />
Let them not look on me, but only You.</blockquote>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-41676352843679388072016-12-09T09:45:00.001-08:002016-12-09T09:47:49.574-08:00NYSERDA Conference on On-Site Power GenerationI just spent two days at a NYSERDA conference about On-site power generation, which brought together solar PV, CHP and storage, in an attempt to inquire what could be done to achieve better integration and coordination among these market actors. The conference also at least acknowledged that there were many other technologies that could have been drawn in, but they just simply wanted to start somewhere. Still, we are in the Northeast, where 70% of building energy loads are thermal, and it remains amazing that solar thermal and heat pump solutions were not included in such a conference and trade show. We swam in between all the participants representing some dramatic efficiency measures, and the finance and economics to make projects better - we're making friends with all parties, because we shorten the paybacks of all On-Site Generation retrofit projects.<br />
<br />
During the conference it hit me with even more force than usual how the entire energy retrofit business is a shambles that in large part is caused by the structure of incentives and regulation at both the federal, state, and local levels. At the same time, I am sincerely impressed with the REV process in NY State, which at least attempts to create a structure for energy solutions for the future, based on a clear awareness that the legacy regulatory structure is holding us back in the face of technology change.<br />
Interestingly, this conference took place against the backdrop of all the uncertainty about the new administration and its energy policy, about which we know too little for now, as Bloomberg just reported in a <a href="https://www.bloomberg.com/news/articles/2016-12-09/trump-team-s-memo-hints-at-broad-shake-up-of-u-s-energy-policy" target="_blank">major article that points towards a major shake-up.</a> The good news was that I heard comments even from equipment vendors attempting overcome this confusion and take a longer view, such as one CHP vendor who pointed to the fact that they were at least discussing their solutions with clients in terms of long-term building values, which is of course the only valid perspective to have.<br />
<br />
I got some welcome take-up for one of my own pet-peeves, that <b>accountants should not be desinging energy systems.</b> I advanced as an example of dysfunction how incentives and Energy Star ratings had promoted the use of tankless water heaters, but that in practice this was often a bad decision if a property owner found themselves a few years hence looking at either a heat pump solution or a solar thermal solution where DHW (Domestic Hot Water) storage provides the cheapest way to harvest energy. <b>The premature decision to adopt tankless water heaters in that case amounts to throwing out the batteries with the bathwater.</b> This is a typical example of how the 'energy efficiency' regulations themselves and the incentives cause capital destruction, in which property owners make decisions like so many chickens with their heads cut off. Sure, tankless water heaters may very well be very efficient by themselves, but that fails to take the overall building systems into account. The answer is that the only thing that will work in the long run is a carbon tax or similar solution, and not device-level incentives, so that the focus shifts to results, not how you get there. Politicians and accountants should not micromanage the design of systems, and make successful outcomes harder, not easier. Focusing on the results is the only way where engineers and economists can design the optimal solution that creates building value, and leave accountants and component-level tax-incentives out of it. From that standpoint, it would be fine by me if the new administration just wiped out all incentives across the board, and let the markets sort it out - people would have to start thinking for themselves again.<br />
<h2>
Dysfunctions resulting from the incentive structure</h2>
<div>
The examples I have seen are many and varied, and anyone who has been around this industry for a while has seen the ridiculous results when tax- and other incentives and regulations dictate energy system design ahead of engineering and economics. My list includes:</div>
<div>
<ul>
<li>Tankless water heaters, even though they have valid application as backup in a renewable design.</li>
<li>Condensing boilers in a back-up role where the heat-exchangers rot out if these don't run flat-out, yet the rules specify Energy Star boilers, which all come with heat-recovery. In short, in a backup role in a renewable design, </li>
<li>In general the incentives at the device level push over-use of certain devices, and this is often compounded by vendor greed, because they make more money over-specifying devices, instead of doing what's good for the customer. This can be seen in oversizing boilers or CHP or solar systems, all of which are commonly done. These equipment vendors sometimes take no interest in optimal outcomes for customers that can be realized through efficiency measures because they reduce the size of the systems they sell, even though they would sell more systems if they produced better economic outcomes for their customers. </li>
<li>Solar PV is the single most prominent example of a technology that thrives only because of incentives, but in practice it is a negative-NPV decision for most property owners in the Northeast, except for in specific design scenarios, particularly where it's combined with a heat-pump solution which by itself would increase electrical demand, but in combination could be very well an optimal solution in many cases. But the tariff structures and incentives are becoming an increasingly thorny issue here, particularly if grids are not designed for two-way traffic.</li>
</ul>
</div>
<h2>
More Political Dysfunction ahead</h2>
<div>
The pendulum swings of politics are about to really upset the apple-cart of energy policy, as summarized in the Bloomberg article cited above, but there are limits even there, as summarized recently in a <a href="http://www.forbes.com/sites/brianpotts/2016/12/07/trump-and-his-new-epa-chief-cant-support-all-fossil-fuels-theyll-have-to-choose/#6bf1e4ec2c63" target="_blank">Forbes article by attorney Brian J. Potts</a>: the new administration will have to pick favorites, for there are many clear examples of conflicting interests even among the fossil-fuel options. Another aspect that is a major unknown is what international response will be. Evidently, foreign investment in the US may suffer, and even US investors who are committed to a climate change vision may shift their investments outside the US as a result of regressive policies. Growing the US economy and dialing back energy policy may well prove to be incompatible. </div>
<div>
Needless to say the last word about our energy future has not been said, and for the real estate industry in particular, the fact remains that <b>buildings will outlive the swings of politics</b>, and smart decision making would focus on retrofits that make economic sense, and fortunately many renewable technologies are extremely valuable because they in fact eliminate major energy costs. Heat pumps with efficiency ranging from 200-250% for air source to 400-500% for ground source remain an attractive choice, and the applications for solar thermal, offering 4-5 times the energy output of Solar PV, are multiple. Solar PV without a subsidy regime to prop it up is not going to be very attractive in many cases, though it will be worthwhile in niche applications.</div>
<div>
What will be interesting to see is how the states will respond, for increasing dysfunction at the federal level will shift the burden to the states. Will the Northwest reinforce its regional climate change efforts with Canada? Will California secede, or at least grow its climate leadership role? Will New York and New England orient themselves to Canada more, where a serious climate change agenda is now a fact? We cannot ignore the fact that energy is the single largest industry in our industrialized society, and is key to our long-term welfare. </div>
<div>
The upshot is the major imponderables are the roles the states will play in energy policy, and the role the international community will play, the role that investors will play by voting with their dollars, and at the end of the day there is the fact that the Trump administration in no way has a mandate that would support the sweeping change it seems to be contemplating. So, the politico-economic outlook is definitely cloudy, and property owners must make their own long-term decisions, in which the only sane argument is to look 30-50 years out and ignore these short term swings. What remains is the fact that properties outlive political swings.</div>
<div>
<br /></div>
<h2>
Creating Long-term Value</h2>
The simple must be, as always, that property owners must discipline themselves to look at energy retrofits as capital decisions, even though traditionally energy is treated as O&M (Operating and Maintenance) by most property owners. The reality is that the availability of many technology paths produce clear alternative scenarios for buildings, that must be evaluated as such as a long-term capital decision.<br />
<br />
Site-Derived Renewable Energy (SDRE) is an alternative to the typical legacy energy plan that depends on buying energy from the grid (or oil, or propane deliveries, etc.), so the consideration of SDRE is a make-or-buy decision, but even within that, there are usually multiple scenarios which most often are mutually exclusive and have very different economic/financial outcomes. The unfortunate effect of the legacy incentive regime is that it is completely counterproductive to looking at long term capital decisions, for it tends to place the emphasis on short term payback at the equipment level, which can arguably be improved by incentives, but undermines the necessary discipline for long-term capital decisions. The prospect of dismantling various levels of incentives therefore shifts the focus from the short-sighted decision making that tends to create capital destruction, towards the long term decision making that helps property values and capital formation.<br />
<h2>
Hybrid systems are the future</h2>
<div>
At the convention I found myself happily technology agnostic, and plugging the idea that with some simple efficiency measures, we are able to take 20-30% of the energy demand out of buildings and shorten the payback of deep retrofits that include on-site generation by 20-50%. Needless to say we also have interesting financing partnerships developing, for shorter paybacks make financing easier. Most vendors welcome that conversation, but there are always a couple of regressive thinkers, who put the short term ahead of the long term, and their own commission check ahead of the customer's welfare, never realizing that happy customers will create referrals and more business. It drives home the point that property owners need to have the intelligence and advice on their side and look at the long term energy outlook for their buildings, at a holistic level, with at least a 30-year capital budget for energy provisioning.</div>
<div>
Already, hybrid solar thermal cum fossil fuel heating systems are becoming the norm in places like Germany, and new solar thermal systems in this country are rapidly increasing the options, such as <a href="http://www.zonbak.com/" target="_blank">Zonbak</a>, which is starting to ship in mid 2017. The future will be hybrid solutions in which the traditional silos will increasingly break down. You A/C does not have to be electric, it can be thermal, and your heating does not have to involve combustion, it can be largely or wholly thermal, with a little bit of electricity to keep it running.</div>
<div>
<br /></div>
<div>
In practice, some efficiency measures may be independent from structural retrofits, such as on-site generation, but in many cases it is not, and examples include both solar, and battery charging, and therefore BEV implementations. The fact is that harmonic noise is cumulative in a facility because of the shared neutral bus, and LEDs and solar inverters and battery chargers all inject harmonics into the electrical system, adding the load and therefore potentially increase the overall harmonic load, making harmonic filters every more critical. Are there other solutions? Yes, but they are more expensive, and on a facilities basis, the harmonic filters intercept the problem closest to the source, preventing deterioration of the whole circuit.</div>
<div>
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<div class="separator" style="clear: both; text-align: center;">
The benefits of harmonic filters: </div>
10-30% reduced electrical bills,<br />
20-50% shorter paybacks for retrofits.<br />
<div>
<br /></div>
<h2>
Holistic Solutions Put Property Values Central</h2>
<div>
Selecting the right energy technology plan for your property with a life-cycle outlook and taking all the relevant efficiency measures into consideration at the same time, is the only valid way forward. The best advice amid the whole confused scenario is to keep your eyes on the ball, and that means to maximize long-term property values, and it's up to the political will to provide incentives to minimize environmental impacts. Both economizing water usages and minimizing GHG-emissions are part of the long term value picture, regardless if one administration or another changes the incentive regime. Don't let the vendor of solar panels, or CHP, or anything else be your only source of information, for at least some of them will sell you and oversized system. Don't put the incentives first. Good financing (including incentives) can make a good project better, but it can never make a bad project good. </div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-61075174171418106272016-12-04T07:43:00.001-08:002016-12-04T07:43:30.456-08:0050 Ways to Kick the Energy Efficiency Habit<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
<a data-mce-href="http://en.wikipedia.org/wiki/Efficient_energy_use" href="http://en.wikipedia.org/wiki/Efficient_energy_use" style="color: #24890d; text-decoration: none;" target="_blank" title="Wikipedia on Energy Efficiency">Energy Efficiency</a> sounds good, but it makes lousy policy, because of the simple financial fact that as a strategy it produces <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYSERDA MPP and Diminishing Returns">diminishing returns</a>. So, with the thought of Paul Simon's 50 <a data-mce-href="http://www.youtube.com/watch?v=298nld4Yfds" href="http://www.youtube.com/watch?v=298nld4Yfds" style="color: #24890d; text-decoration: none;" target="_blank" title="Paul Simon - 50 Ways to Leave Your Lover">Ways to Leave your Lover</a> in mind, here are some thoughts on how to free ourselves from this collective insanity which is holding up the transition to increasing deployment of renewable energy and progress towards energy independence, not to mention building property values.<br />
<br />
The motto for this list is the famous statement:<br />
<blockquote class="tr_bq">
<b>Premature optimization is the root of all evil.</b> (<a href="http://wiki.c2.com/?PrematureOptimization" target="_blank">Donald Knuth</a>)</blockquote>
This comment from one of the world's most famous computer scientists is exactly to the point, for unless you do the capital budget and a long-term plan first, and you can see a clear timeline on what energy future you want for your property, you are operating without a plan, and capital destruction is sure to follow, as night follows day. All the "energy efficiency retrofits" suck asset values out of properties and transfer them to the financiers, instead of improving property values.</div>
<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
<h2>
<span data-mce-style="font-size: 10px; letter-spacing: 0.1em; line-height: 2.6em; text-transform: uppercase;" style="font-size: 10px; letter-spacing: 0.1em; line-height: 2.6em; text-transform: uppercase;">50 WAYS TO KICK THE ENERGY EFFICIENCY HABIT</span></h2>
</div>
<ol style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin: 0px 0px 24px 20px; padding-left: 0px;">
<li><span data-mce-style="line-height: 15px;" style="line-height: 15px;">Hop on the bus, Gus, but by all means do proper financial planning, and see for yourself. <b>Failing to plan is planning to fail</b> and you'll fall prey to incentives and be stripped of your asset appreciation.</span></li>
<li>Be honest about how much you've spent on energy efficiency. Shouldn't<div class="mceTemp">
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<dt class="wp-caption-dt" style="-webkit-user-drag: none; font-weight: bold; margin: 0px;"><a data-mce-href="http://www.vliscony.com/wp-content/uploads/2013/06/man_and_guitar.png" href="http://www.vliscony.com/wp-content/uploads/2013/06/man_and_guitar.png" style="-webkit-user-drag: none; color: #24890d; text-decoration: none;"><img alt="Leave Energy Efficiency behind" class="size-full wp-image-2290" data-mce-src="http://www.vliscony.com/wp-content/uploads/2013/06/man_and_guitar.png" height="77" src="https://www.vliscony.com/wp-content/uploads/2013/06/man_and_guitar.png" style="-webkit-user-drag: none; border: 0px none; height: auto; margin: 0px; max-width: 474px; padding: 0px; vertical-align: middle;" width="100" /></a></dt>
<dd class="wp-caption-dd" style="-webkit-user-drag: none; box-sizing: border-box; font-size: 12px; font-style: italic; line-height: 1.5; margin: 9px 0px; padding: 0px;">To the tune of: 50 ways to leave your lover</dd></dl>
</div>
<div style="margin-bottom: 24px;">
your bills be negative already? If in doubt go back to point #1</div>
</li>
<li>You can't save yourself rich, not with money, not with energy.</li>
<li>Successive Energy Efficiency investments exhibit diminishing returns,</li>
<li>Therefore Energy Efficiency literally does not add up - it is NOT additive.</li>
<li>The reason you can't save yourself rich is diminishing returns.</li>
<li>Not only does Energy Efficiency not add up, it is not additive towards sustainability, instead it is a sure prevention of sustainability - again because of diminishing returns.</li>
<li>Energy Efficiency is not interchangeable with renewable energy in achieving sustainability, <i>it is of value only</i> if it is complementary to site-derived renewable energy (SDRE).</li>
<li>Energy Efficiency in a fossil fuel system, is like lipstick on a pig and it is mutually exclusive with renewable energy.</li>
<li>Premature Energy Efficiency is the best prophylactic the carbon economy has to offer against renewable energy.</li>
<li>In a proper capital budget for energy, it will be seen that 30 years of no (or very small) energy bills versus 20-30% energy savings with various energy efficiency programs often easily justifies the far larger CapEx for SDRE, but intelligent use of passive measures and efficiency will reduce the ICap (Installed capacity) for SDRE.</li>
<li>The corollary to this is that any would-be analytical models which emphasize energy efficiency and utilize payback analysis automatically move renewables out of range.</li>
<li>Every step into renewable energy increases building resilience, yet we offer subsidized programs to quickly convert buildings to natural gas, before anybody gets the idea of going renewable (NYC Clean Heat). OTG Conversions are public enemy number one from the point of resilience and sustainability.</li>
<li>If you count in the cost of the consultants on NYC Clean Heat, and various building resiliency studies, we could have converted half those 10,000 buildings to renewables already.</li>
<li>Energy Efficiency makes the problem bigger not smaller, and makes it dollar for dollar less likely we'll ever switch to renewables.</li>
<li>With gratitude to Steve Hallett & <i>The Efficiency Trap</i> - energy efficiency is much ado about nothing. This book is the behavioral corollary to the financial problem of diminishing returns, providing yet another reason energy efficiency does not add up.</li>
<li>Kudos to Steve Hallett & <i>The Efficiency Trap</i> again, energy efficiency expands demand. The mission is to build the alternative.</li>
<li>With every dime you spend prematurely on increasing efficiency of your fossil fuel system, you are postponing the transition to a renewable system. This is capital destruction.</li>
<li>Successive steps of a well engineered renewable energy transition in a property will show interdependencies, which demonstrate an engineering reason why energy efficiency and renewable energy are mutually exclusive, on top of the financial reasons, unless they are properly planned and leverage each other so as to produce profound synergies.</li>
<li>Many if not most NYSERDA programs are for the benefit of your favorite utility company, and/or manufacturers of equipment, at the expense of optimal asset value for property owners. You want to do your own financial model first before you use their programs to see what subsidies you could qualify for. The old adage applies: great financing can make a good project better, but it can never make a bad project good. Happy shiny sales people of energy solutions violate this rule all the time, such as when they ask you if you would like to see if you qualify for "free solar panels." Hold on to your wallet.</li>
<li>Most NYSERDA programs as well as direct utility incentives bribe property owners to do what's good for the shareholders of the utility, and necessarily not what's in the best interest of the owners of the property.</li>
<li>Most NYSERDA programs, ConEdison's Greenteam, and other similar programs with other utilities, are customer retention programs for the utility and have little or nothing to contribute to property values, nor are they green if they only target energy efficiency.</li>
<li>Tax incentives, and financing requirements based on Energy Star ratings of equipment, tempt property owners to specify the wrong equipment for the sake of short term gain, and they make good design harder, not easier. These incentives need to be restated on the basis of GHG emissions, and/or water use reductions.</li>
<li>Energy efficiency and Energy Star requirements for buildings are counter productive, GHG reductions should be used instead for law makers, and regulators, while property owners should maximize NPV based on a 30 year energy plan.</li>
<li>Green financing is falling into the efficiency trap and makes the capital blunder of financing short term measures with long term money. It will lead to instability, and it is another underwriting crisis in the making.</li>
<li>PACE bonds have become nearly irrelevant by embracing energy efficiency instead of renewable energy.</li>
<li>Green Finance including PACE bonds could ensure above market rate appreciation of the underlying assets ONLY by mandating renewable infrastructure, never by energy efficiency requirements.</li>
<li>All energy efficiency programs are a greenwash, because they achieve the opposite of what they set out to do, both environmentally, as well as financially.</li>
<li>Energy efficiency programs are a rationalization for the good feeling of sacrificing something for the common good.</li>
<li>Energy efficiency programs are another demonstration that logic and reason are the horse the emotions ride in on. The only satisfaction is emotional, nothing is being accomplished.</li>
<li>The use of marginal analysis in the form of payback on equipment justified by energy savings is irrelevant to property owners, and only of interest to the sellers of that equipment. Caveat emptor applies here, for most retrofits have engineering interdependencies that may lock you out of other options, and you need to understand the holistic view of a long-term plan for your property first.</li>
<li>Net zero is not necessarily the sole objective, but a direction. Again: energy independence of your property and even partial independence from the grid, ensures you won't be left stranded.</li>
<li>Selling back to the grid can be avoided by implementing heat pumps, particularly high efficiency GSHP (ground source heat pumps - 500% efficient!), but also ASHP (air source heat pumps - 250% efficient).</li>
<li>In renewable energy design, energy efficiency comes back in play and should be used to optimize installed capacity (ICap) requirements. Notice that if your energy is free, you can pick your capital tradeoff, if it is cheaper to install more capacity or insulate more. The bottom line is that in deep retrofits there is no payback period for efficiency alone, but the right use of passive measures and efficiency will reduce the overall payback of a project and make it easier to finance.</li>
<li>Implementing renewables (SDRE), means shifting energy from liability to asset.</li>
<li>Implementing renewables also means focusing on production, not reducing consumption as the predominant strategy.</li>
<li>The renewable strategy means playing offense, not defense with energy.</li>
<li>Net-zero and <a data-mce-href="http://www.forbes.com/sites/justingerdes/2012/02/28/net-zero-energy-buildings-are-coming-what-about-the-buildings-already-standing/" href="http://www.forbes.com/sites/justingerdes/2012/02/28/net-zero-energy-buildings-are-coming-what-about-the-buildings-already-standing/" style="color: #24890d; text-decoration: none;" target="_blank" title="Forbes on the growth in Net-Zero building">green construction</a> is growing like mad in new project development, so existing homes are eventually headed for demolition and abandonment if they cannot come up with a renewable strategy. Search for net-zero and energy efficient homes, and you'll see what I mean.</li>
<li>Energy efficiency is a bottomless pit that will keep you in the poor house if you fall into it. Stop now, and make a financial plan to switch to renewables wherever possible.</li>
<li>Energy Efficiency is the addiction that covers up our energy addiction, so again it makes the problem bigger, not smaller. Energy is like methadone for heroin addicts: it makes the addiction manageable, but it is harder to kick.</li>
<li>If you are a renter, Energy Star appliances and other Energy Efficient Products are your best friend. For renters marginal payback of the equipment from energy savings is appropriate.</li>
<li>Whenever renewable energy is treated as a building block in energy efficiency, it will be undervalued and implemented incorrectly.</li>
<li>Avoid net metering whenever you can, except in emergencies. Plan your design to capture and use as much energy as possible in your property.</li>
<li>The 90by50 report from the Green building council is full of good ideas, but once again gets lost in the weeds of energy efficiency.</li>
<li>Manhattan is a heat sink, but renewables will mean the outer boroughs can become far more attractive places to live, while Manhattan will become the energy slum, with a small number of exceptions to prove the rule.</li>
<li>When buying a coop or a condo find out the energy plans, it will make at least a 10-20% difference in building values within 10 years.</li>
<li>It is time for tenants associations to work with landlords, even to the point of mixed ownership of energy plant if nothing else will work. Community solar is such an idea. It is high time to get rid of the split incentive. There is room for innovation here.</li>
<li>Write to your politicians to support the principles of the DaBx Renewable Energy Retrofit Portfolio Standard, and focus on subsidies for achieving reductions in GHG emissions, and try to get exemptions from all rules that stand in your way. Many well intended rules hold up the show because they are counter productive on a building level.</li>
<li>Evaluate all technology options that are suitable for your property, not just one. Solar thermal DHW and/or HVAC as well as heat pumps should top your list. They are mature technologies, wind energy is often superior if you have the right location. Solar PV comes last unless you have space to waste. Don't forget green roofs, and other passive energy strategies either.</li>
<li>The reason they are giving away solar PV, is because it is your worst option, unless it fits your overall design and you have the space for it - which most residential owners don't. Solar PPAs are usually a really bad deal for almost all consumers. They are only better than doing nothing. Solar thermal yields up to 7 times the amount of energy per square foot.</li>
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Conclusion: renewable energy adds value</h3>
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50 ways to leave energy efficiency behind, because it is a financial dead-end, the corollary to which is the phenomenon of <i>The Efficiency Trap</i>. Only renewable energy will offer rising property values, as well as dampen any loss of value in downturns, as was widely acknowledged by institutional investors during the downturn of 2008. Net-zero or near-zero properties are one of the best asset classes ever to own.</div>
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RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-43576622335400241612016-12-01T06:47:00.001-08:002016-12-03T21:52:58.602-08:00What's Wrong With the Energy Retrofit Model and What To Do About ItEnergy retrofitting will be a big business for the next few decades, for the simple reason that there are more old buildings than new. Granted, some buildings will be scrapped if they can't make it in the new net-zero and near-zero age, but many buildings are eminently capable of material overhauls that can eliminate 70-80% of GHG-emissions.<br />
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Premature Energy Efficiency: <br />The Best Prophylactic against Deep Energy Retrofits</h2>
The unfortunate fact is that the structure of various incentive programs as well as typical financing approaches have prevented deep retrofits and favored shallow programs that achieve just 20-30% GHG-reductions. A typical example was a deal sheet I recently saw from <a href="http://nyceec.com/" target="_blank">NYCEEC</a>, effectively the New York City Green Bank: easily 80% of their projects were in the 20-30% GHG-reduction category, and just a few projects here and there were in the 70-80% GHG-reduction bracket. On their website, they focus almost entirely on marginal improvements in "energy efficiency," complete with their "Energiensee(tm)" calculator of energy savings potentential - therefore, the focus is on O&M, not on capital improvements. Yet, purely mathematically, in a state that has an objective of 50% GHG-reductions by 2030 and 80% GHG-reduction by 2050, clearly anything less than 50% GHG-reductions guarantees failure of the state's objectives, and the idea of providing incentives, including subsidized finance to do such deals is absurd on the face of it.<br />
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If you understand the economics of energy retrofits in buildings, it is clear that what is going on here is the clash between O&M (Operating and Maintenance), which tends to be on annual budgets, and Capital Budgeting. The structure of the real estate industry is that energy tends to be looked at through the lens of O&M, but there are now so many alternatives that represent structural change of building energy infrastructure, that these decisions need to be looked at as capital cases, and the investors/owners need to be involved. Long term building values are at stake. Capital improvement should be the driver for energy retrofits, and if you can't do them, you should probably get rid of the building, it's going to be scrapped.<br />
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Capital destruction results from an incremental O&M approach</h3>
<i>Many, many, "upgrades" should not be done at all once you look at them through the lens of long term capital appreciation. </i>That list includes:<br />
<ul>
<li><b>Tankless Water heaters.</b> They are mostly a mistake, for DHW (Domestic Hot Water) storage is immensely valuable for e.g. Solar thermal, or Heat Pumps, but sometimes even for Solar PV. There are some valid uses of these, as backup in renewable retrofits.</li>
<li><b>OTG (Oil-To-Gas) conversions</b>, sure, you may save on your energy spending, but again, looked at from a capital budgeting standpoint, on a 30-50 year lifecycle timeline, these kinds of marginal improvements are usually pure capital destruction in the face of better alternatives such as hybrid solar thermal or heat pump solutions.</li>
<li><b>Condensing boilers</b> are a liability if there is solar thermal or heat pumps in your future, because if the boilers become the backup the heat recovery systems rot out in record time due to condensation under intermittent use. In other words, incremental decision making creates massive sunk costs that undermine building values in the long run.</li>
<li><b>Solar PV</b>. Especially at Northern latitudes solar PV retrofits are pure capital destruction in many if not most buildings when evaluated from a capital budgeting standpoint under a 30-50 year lifecycle assessment. Solar PV should be relegated to whatever space remains at the end of a retrofit process. It is too inefficient.</li>
</ul>
<h2>
The Height of Folly: Tesla/SolarCity</h2>
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Recently, I have been writing about Tesla and their SolarCity merger, which is the height of capital destruction. SolarCity never figured out the economic value they could provide for their retail customers, and their business model was driven by the demand of tax-equity finance and the Wall Street appetite for ABS-notes. It was clear that recent financings, starting at least from the John Hancock transaction earlier this year, meant that SolarCity was under water under those terms compared to the discounted cash flow model they sold to investors as being the "retained value" of the company, so they slipped from arguable "value creation" into "value destruction:" the installations were a loss leader for a fallacious "retained value" that is increasingly not working out, because it's only feasible by assuming lower discount rates on an equity basis than what they are actually paying on their recent deals, so that both the front end and the back end of their transactions is now under water.<br />
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This development was bad news for SolarCity shareholders, but the whole business model was bad for retail customers, for SolarCity sales people have an incentive to sell you the most solar panels they can fit on your roof, and NOT to add the most value to your property. And because their whole sales model is wrong, they are destroyers of asset values for their retail residential clients. This is the reason why they are not a Solar energy company, but a Solar panel financier (and not particularly good at it). <i>SolarCity's unique contribution has been that they figured out a way to sell sub-prime financing to prime customers, for their sales proposal to clients rested on a foundation of stretching the payments long enough to be nominally "cash-flow positive" based on the projected energy savings, and the sales mottos were "free solar panels" and "sell'em on the payments!"</i></div>
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The easy test was the study from Arizona State University, and the conclusion was that:</div>
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<span style="background-color: #fafafa; color: #333333; font-family: "arial" , sans-serif; font-size: 14.4444px;">Solar panels owned by a home seller add 4 to 6 percent to the value of a home sale, often less than the cost of the panels, according to an analysis of local home sales and reports from real-estate agents. Houses with leased solar panels actually sold for less than those with no solar. (see <a href="http://www.azcentral.com/story/money/real-estate/2015/07/17/solar-raise-home-values-system/30296123" target="_blank">story on AZCentral</a>)</span></blockquote>
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However, Solar panels installed with a lease or PPA might deduct 3-8% of the value of the property at the time of sale, for it places the seller between a rock and a hard place, namely, they either have to pay off the lease, or they have to get the buyer to assume it, at which point the buyer can negotiate a discount on the property.<br />
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And again, there are deeper issues here as well, and the value of the SPV install might not be optimal if other parts of retrofitting are ignored. Typical experiences in existing homes suggest that you should most often only require 50% of the SPV capacity that sellers like SolarCity will offer, if you implement the optimal mix of passive measures, ranging from insulation, radiant heat barriers on windows, and power quality solutions. The decisions are easier if your home is all electric, but usually the payback can be 20-50% shorter if you pursue the optimal balance of passive (insulation, etc.) and active (generation).<br />
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I recapped a lot of these issues in two articles on Seeking Alpha, about the Tesla mess, here:<br />
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<ul>
<li> <a href="http://seekingalpha.com/article/4021123-solar-roof-coming-tesla" target="_blank">The Solar Roof is Coming Off at Tesla</a></li>
<li><a href="http://seekingalpha.com/article/4021123-solar-roof-coming-tesla" target="_blank">'Teslaverse:' of the Epitome of Failure of Energy Policy</a></li>
</ul>
<h2>
Energy Efficiency Versus Energy Retrofitting: <br />History Lessons</h2>
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For good historical reasons, originally it all started with energy efficiency, squeezing more energy from systems, but gradually, structurally different solutions came into being, which enabled different financial decisions, for once you enter into retrofitting, there are lots of interdependencies within a given building, and you have to make a clear decision about what your upgrade path is going to be since many of the technology choices are mutually exclusive with other possible solutions. Here's how it has worked:</div>
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<ol>
<li>Phase one was pure O&M, lowering your bills year over year, which works initially, but in the end, you cannot save yourself rich, and this approach runs out of steam because of diminishing returns. The answer should have been capital budgeting, but instead financial slight of hand was used to "justify" further retrofits.</li>
<li>Stretching the financing became the way to make bigger and bigger retrofit projects happen, and as a result, financiers were effectively stripping value out of buildings, and building owners did not know any better. The financiers win and property owners lose. Just watch for buildings in the Northeast with Solar PV: they were sold a bill of goods, as per the analysis above.</li>
<li>We are now entering the capital budgeting phase, for the number of retrofit options have grown so much that a growing number of owners find out the hard way that incremental decision making produces capital destruction, and that a decision made one year ends up being undone a few years later. Typically failing to plan means planning to fail and in depth energy audits and thirty-year capital budgets must become the new normal.</li>
</ol>
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The transition to the capital budgeting model will increasingly be precipitated by the emergence of more and more net-zero or near-zero buildings that go up right next door to older buildings so that economic competition will force the older buildings to either upgrade or be scrapped. </div>
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<h2>
The Key to Deep Retrofitting:<br />Holistic Approach and Value Creation </h2>
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Meanwhile, with my company, we are hard at work with the marketing of harmonic power filters that get rid of harmonic noise in power circuits, and while the payback is great, especially here in NY, where it's usually months, not years in most commercial applications, the real message is that in a deep energy retrofit, this technology alone can reduce the overall project payback by 20-50%. In other words, incremental "efficiency" retrofits should not be squandered by implementing them in isolation, but be viewed as part of the overall energy model, and enable building owners to undertake the retrofits that create true long-term property value. <i>The magic is to add a sub one year payback to a project with a seven year payback, and create a project with a four year payback that's easy to finance.</i></div>
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<br />RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-39571351470483852972015-12-27T08:39:00.002-08:002016-03-11T20:20:10.686-08:00The economics of climate change, sustainablity, veganism, health and then some<blockquote class="tr_bq">
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif; font-size: 12.8px;">"There is, however, a moral basis for the vegetarian diet for which the indeterminate value of an animal’s life takes on irrelevance. And that moral basis is a concern for the environment, a value as absolute as the value we all place on human life, since humanity will not long survive on a poisoned planet. To be an environmentalist who happens to eat meat is like being a philanthropist who doesn’t happen to give to charity." </span><span style="background-color: white; color: #222222; font-family: "arial" , sans-serif; font-size: 12.8px;"> (</span><span style="background-color: white; color: #222222; font-family: "arial" , sans-serif; font-size: 12.8px;">Mad Cowboy: Plain Truth from the Cattle Rancher Who Won't Eat Meat" by Howard F. Lyman, Glen Merzer")</span></blockquote>
Rational capital allocation is not our forte as a society. Indulging human foibles is more like it. The dialog about climate change is a case in point. If 51% of GHG-emissions is due to animal husbandry and the self-destructive habit of eating meat, and moreover the our nastiest health problems (heart disease, osteoporosis, cancer, CJD, antibiotic resistant bacteria et al.) are partially or wholly attributable to the same self-destructive habit, then why is it not on the agenda for serious discussion?<br />
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For me, there is a personal side to the story, I was raised vegetarian, as in lacto-vegetarian, and though I realized a long time ago that milk was for baby cows and not for human consumption, I loved cheese. From my late teens to my early twenties I became more of an omnivore, but after age forty, I simply noticed a tendency to vegetarianism, ever so slowly, but without any particularly strong commitment. I simply drifted towards a more vegetarian lifestyle. In the last ten years health issues made me gradually more and more interested, and I got briefly interested in the Esselstyn diet that was made famous when former President Bill Clinton switched from Mickey D's to veganism. The first time I read the Esselstyn book, I was half-hearted about it. An old friend and I were both experimenting with this diet for a while, and kept some ideas from it, without necessarily going through with it, but the drift continued, aided by the growing realization that even if I did not have any symptoms of hearth disease, why wait till I did? In the last two years all dairy was permanently phased out. For Christmas a giant apple-pie came along, and while I enjoyed it, I also informed Santa Claus that this would be my last apple-pie until after my funeral. Who needs all that white flour and sugar? Most importantly the last year especially, I found myself enjoying food more as I discovered more and more vegan recipes that I really liked.<br />
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Meanwhile I am into planning the energy economics for some real-estate developments, and looking into vertical agriculture options in an urban setting, while at the same time I am listening to feedback from my community, Community Board #9 in the Bronx, where a young mother of two stated0 in a recent planning session that she did not want another fast food restaurant in our district, and a young man in the same session was polling people on the idea of establishing a food co-op in our area. But a local supermarket just lost their lease, and that neighborhood is screaming for a half-way decent supermarket to fill the vacuum.<br />
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Against that personal backdrop, I have been reading Howard Lyman's Mad Cowboy book, and watching some documentaries on YouTube, including:<br />
<ul>
<li><a href="http://www.cowspiracy.com/" target="_blank">Cowspiracy</a>, a brilliant documentary of our collective economical and environmental and nutritional insanity from 2014, which included an appearance by Howard Lyman, the Mad Cowboy.</li>
<li>Then came <a href="http://www.nationearth.com/earthlings-1/" target="_blank">Earthlings</a>, another brilliant piece on the gruesome realities of the animal husbandry system.</li>
<li>Next was Gary Yourovsky, who verbalizes it all brilliantly, <a href="https://youtu.be/xYP1GGdRMYo" target="_blank">here</a>, including the most viewed speech in Israeli history <a href="https://www.youtube.com/watch?v=_K36Zu0pA4U" target="_blank">here</a>.</li>
<li>And finally, I had to revisit the whole Howard Lyman story, which I was only vaguely aware of when Oprah and he got sued in 1996, but now it was time to refresh that experience, and this documentary about the <a href="https://youtu.be/Mron0MTinFk" target="_blank">Mad Cowboy</a> just his the spot.</li>
<li>Since I first wrote this post, it got even better, see the story of the <a href="http://rowdygirlsanctuary.com/" target="_blank">Rowdy Girl Sanctuary</a>, yet another rancher to vegan story.</li>
</ul>
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And at the final end it is the economist in me who basically realizes that economics will prevail in the end, and we are well on our way to veganism. It will take a few generations, but choices are multiplying now, with more and more vegan food choices, and now even fast food restaurants, it is clear that change is on the agenda. The group of people who turn vegan and get off their meds is growing - the perfect answer to our out of control healthcare system, so not only can the planet not afford animal husbandry, we cannot afford the health consequences of eating all that meat and dairy. I had a home visit from a nurse practitioner from my health insurance provider, and the guy fell of his chair, for just the week before the doctor had taken me off all meds, or rather confirmed that I was doing great without them - not that I was taking that many but still... On top of that, I know I feel more stamina at the gym.</div>
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One of the big things I am realizing about net-zero development is that moving combustion out of residential spaces is one of the biggest things we can do for <i>indoor</i> air quality, and this in turn adds to real estate values. Insights like that are pretty potent if you live in the asthma capital of the world, the Bronx. So there is a straightforward connection between economics, environment and health. </div>
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The same goes for vertical agriculture: it is now economical to grow fresh vegetables in an urban setting, and eliminate chemical agriculture, and thousands of miles of transportation, to get better, fresher, healthier vegetables, as you can see in this little <a href="http://www.terraspheresystems.com/two-seeds-two-stories" target="_blank">video from Terrashpere</a>. </div>
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And the transition to more and more vegan living will eliminate the most obvious food safety problems, a vast array of health problems, as well as unsustainable agriculture in the service of animal husbandry. Again, economics, environment and health all go hand in hand. And the forces that drives us towards a more sustainable economy are absolutely inexorable. Veganism is a new idea today, or so it seems to many, but it is unavoidable economically. We are literally at the point of realizing that we are feeding the pigs at the expense of human beings, and wiping out the rain forests to raise cattle, which is the most insane misuse of land that ever was. It is that inexorable force of economics and sustainability, that is driving us towards a more sustainable, and therefore increasingly vegan, lifestyle.</div>
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Since I originally wrote this post, I have also started a blog on <a href="http://starlingavevegan.blogspot.com/" target="_blank">vegan living in my hood</a>.RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-66702370221183724312015-03-07T15:31:00.000-08:002015-06-11T15:33:10.140-07:00Solar PV and the Metastasis of GHG-emissions<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
Today, solar PV is all the rage. We're at it again, jumping on a technology before we have figured out the right way to use it. Wall street is loving it, but we are getting way ahead of ourselves... just remind me, how do we spell bubble again? As a society, it seems we keep looking for a silver bullet to fix our problem, and this is not realistic.</div>
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It does not matter that solar PV is "cheaper" in terms of component pricing. Solar thermal produces about five times the amount of energy for the same square area, so unless the cost of real estate is zero, solar thermal should be the winner in that battle. Granted, solar PV tends to be easier to integrate, but there is an obvious issue here, particularly in areas large urban areas, where you don't have one square inch to waste.</div>
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To use an analogy, if one year our government provides a tax incentive to sell more two-seater vehicles, and a father of five comes home with a two-seater instead of a family car, arguing that it was so cheap, most of us would side with the wife, if she divorced him. The five kids would have to take the bus from then on. Evidently, this would be a case of false economy, for it cannot solve your problem. How come we understand the fallacy of this proposition, <strong>yet in solar PV marketing, this is what is routinely done - selling people a solution that does not fit because it is "cheap."</strong> If in doubt, refer to the tax incentives.</div>
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Just like the two-seater cannot solve the transportation problem of a family of seven, solar PV panels cannot solve the energy problems of most homes and buildings in northern climes. In the south, it may work fine if your home is all electric, and you have enough roof space to economically generate adequate electricity, but in the north your energy bills are likely to be 70% oil and 30% electric, and yet the solar companies want you to jump up and down because they can save you 10% on your electric bills. That's the assumption anyway. It does not amount to the proverbial hill of beans, because 10% of your electric bill is 3% of your overall energy bills.</div>
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It actually gets worse, because the implicit assumption is that your roof space is valueless, which is likely not the case. If nothing else, that same roof space could be used for solar thermal equipment, which produces 4 to 5 times as much energy per square foot as does solar PV. Alternatively, one or more wind-turbines might be possible, and in all of these situations, it is one or the other, so you have to figure out what gives you the most bang for the buck.</div>
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<strong>Entropy and Climate Change</strong></h1>
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One of the first few things to realize about the whole climate change conundrum is that it is not solvable. The best we may be able to do is produce less entropy, and decelerate the decline of our physical universe. But in the end it's a lost cause, or, as Keynes would have it: "In the long run, we're all dead." The case in point is the Toyota Prius, which has a <a data-mce-href="http://grist.org/article/the-prius-snob-strikes-back/" href="http://grist.org/article/the-prius-snob-strikes-back/" style="color: #24890d; text-decoration: none;" target="_blank" title="Prius consumes more energy in lifetime than Cherokee">lifecycle environemental</a> impact that is worse than a Hummer. So dream on.</div>
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For those who want to get into the final nitty-gritty of the issues, there is no better introduction that Alex Marchand's new book, <a data-mce-href="http://smile.amazon.com/Universe-Virtual-Consciousness-Reincarnation-Forgiveness-ebook/dp/B00TXC52NQ/ref=sr_1_1?ie=UTF8&qid=1425668969&sr=8-1&keywords=alex+marchand" href="http://smile.amazon.com/Universe-Virtual-Consciousness-Reincarnation-Forgiveness-ebook/dp/B00TXC52NQ/ref=sr_1_1?ie=UTF8&qid=1425668969&sr=8-1&keywords=alex+marchand" style="color: #24890d; text-decoration: none;" target="_blank" title="The Universe is Virtual"><em>The Universe is Virtual</em></a>. Unless and until someone comes up with a better alternative to the second law of thermodynamics, the choices are limited, but right at the moment, the process is outright irrational, and we may be able to do better than we are. Again, the only thing we can do on the physical level, is to moderate the impact we are having, the problem is not solvable in any meaningful way as long as the laws of physics hold. If you want to stick to lighter fare, Jeremy Rifkin's, <a data-mce-href="http://www.amazon.com/gp/product/0586085084/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0586085084&linkCode=as2&tag=rogsblo-20&linkId=L6ZLG6TS4YEQCUX6" href="http://www.amazon.com/gp/product/0586085084/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0586085084&linkCode=as2&tag=rogsblo-20&linkId=L6ZLG6TS4YEQCUX6" style="color: #24890d; text-decoration: none;" target="_blank" title="Entropy">Entropy</a>, is still always a fun read, although a bit dated.</div>
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<strong>The solar PV fallacy, oh to be green and foolish</strong></h2>
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These days <a data-mce-href="https://www.ftc.gov/news-events/press-releases/2012/10/ftc-issues-revised-green-guides" href="https://www.ftc.gov/news-events/press-releases/2012/10/ftc-issues-revised-green-guides" style="color: #24890d; text-decoration: none;" target="_blank" title="FTC Issues Revised Green Guides">the FTC has taken on greenwashing</a>, and hopefully may be curbing some of the most egregious abuses, but if they got serious, very little of environmental business or products would be left standing, and certainly solar PV in its current form would have to be heavily restricted for the deceptive claims it makes.</div>
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What needs to be understood is that if we define the problem haphazardly, we are unlikely to solve the problem that we are presumably seeking to solve, in this case, reducing green house gases (GHG-emissions). To the promoters of solar PV, the problems is how much money can we make on selling solar PV installations (very little), or on <a data-mce-href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" style="color: #24890d; text-decoration: none;" target="_blank" title="Look Ma, We’ve Got a Solar PPA!">financing solar PV</a> (maybe something more), time will tell if it can be done profitably, but the current model of solar PPAs, solar leases, or even innovative lending like SolarCity's new MyPower program, will likely <a data-mce-href="http://seekingalpha.com/article/2569195-solarcity-new-loan-product-parasite-morphs-dna" href="http://seekingalpha.com/article/2569195-solarcity-new-loan-product-parasite-morphs-dna" style="color: #24890d; text-decoration: none;" target="_blank" title="SolarCity New Loan Product: Parasite Morphs DNA">not be enough to make solar PV really viabl</a>e in the long run.</div>
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<strong>At single family scale - Solar PV disappoints</strong></h3>
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The exception is if you live down south and you have enough roof real estate to generate close to all the electricity you really want, perhaps solar PV makes sense. But up north the problem remains that electricity is 20-30% of the energy budget, and tying up all your money and roof real estate for a project that saves you a few percentage points on your overall energy bills, and locks you out of solving the whole problem categorically is not a smart decision.</div>
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The current <a data-mce-href="http://seekingalpha.com/article/2882596-solarcity-makes-nikola-tesla-roll-over-in-his-grave" href="http://seekingalpha.com/article/2882596-solarcity-makes-nikola-tesla-roll-over-in-his-grave" style="color: #24890d; text-decoration: none;" target="_blank" title="Solar City Makes Nikola Tesla Roll Over In His Grave">sales paradigm for solar PV</a> mistakes a marginal cost savings for the basis of a capital improvement to the property, and a permanent alteration of its energy infrastructure. The result is an impairment of the physical asset (property) and the balance sheet (liability), and the simple most obvious problem is that if the next buyer does not want to assume the remaining liability, it can depress the value of a property, <a data-mce-href="http://www.bloomberg.com/news/articles/2014-06-23/rooftop-solar-leases-scaring-buyers-when-homeowners-sell" href="http://www.bloomberg.com/news/articles/2014-06-23/rooftop-solar-leases-scaring-buyers-when-homeowners-sell" style="color: #24890d; text-decoration: none;" target="_blank" title="Rooftop Solar Leases Scaring Buyers When Homeowners Sell">as reported by Bloomberg here</a>. Typically the risks include:</div>
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<li>The lease or PPA may be under water at the time of the sale.</li>
<li>Newer solar technology may be more efficient.</li>
<li>Other technological alternatives offer superior economics.</li>
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If you are still in doubt, look at alternatives that are about to hit the market, like the <a data-mce-href="http://dearchimedes.com" href="http://dearchimedes.com/" style="color: #24890d; text-decoration: none;" target="_blank" title="the Archimedes">Archimedes wind-turbin</a>e, and the <a data-mce-href="http://www.zonbak.com" href="http://www.zonbak.com/" style="color: #24890d; text-decoration: none;" target="_blank" title="Zonbak Solar Thermal">Zonbak solar thermal solution</a>, as well as a long-since proven solution of <a data-mce-href="http://energy.gov/energysaver/articles/geothermal-heat-pumps" href="http://energy.gov/energysaver/articles/geothermal-heat-pumps" style="color: #24890d; text-decoration: none;" target="_blank" title="Geothermal Heat Pumps">Geothermal Heat Pumps</a>, which allows you to do complete central HVAC, heat your pool, and put a snowmelt in your driveway, while eliminating your oil bills.</div>
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One of the issues is that solar PV is still early in its developments, while Solar Thermal (85-95% efficiency), and geothermal (3-600% efficiency) are much higher, and mature, and wind turbines, in the right locations produce more energy per square area than solar PV does. Solar PV is now going from 15-18% efficiency and jumping by about 30% to 21-24% efficincies, while new technologies in the 30% and 40% efficiency ranges are in the pipeline for commercialization in the future.</div>
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Worse yet, as net-zero construction is growing and consistently profitable already for decades, just imagine selling your home 7 years from now when there is a new development of net-zero homes going up nearby. If those new homes offer $0 energy bills, and you are saving 3 or 5, or even 10% off your 2015 bill, what do you think that will do for the value of your property? The correct answer is: it will sell at a discount. Your investment in PV under those conditions is likely to produce a liability. You will be looking for ways to take those panels down in order not to depress the price of the house, and then you have a waste disposal problem on your hands.</div>
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<strong>At societal scale - Solar PV disappoints agai</strong>n</h3>
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New York State has an <a data-mce-href="http://www.vliscony.com/2014/04/08/ny-2014-energy-plan-ghg-reductions/" href="http://www.vliscony.com/2014/04/08/ny-2014-energy-plan-ghg-reductions/" style="color: #24890d; text-decoration: none;" target="_blank" title="New York’s 2014 Energy Plan – GHG-reductions ahead">ambitious energy plan</a>, but it sadly lacks realism. The top-line goals are 50% reductions in GHG-emissions by 2030, and 80% by 2050, but there is very little detail on how to get there. Too many line items in the plan achieve 15-25% reductions in GHG-emissions, and are financially burdensome like solar PV. To tie up a lot of capital, and assume unnecessary 20-30 year liabilities to save 3% on your energy bills, and lock yourself permanently out of better alternatives is counter productive. We are throwing good money after bad, and mostly it is consumers who are on the hook, deceived by government incentive programs.</div>
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This first round of Solar PV-madness will prove to be regressive for climate change in the long run, because it locks properties into 25% reduction of GHG-emissions, instead of pursuing the 75%, which would make a difference. So, not only are these owners locking themselves out of the real solution, the collective effect is that we are averaging down, and ensuring we will never achieve anything like 50% GHG-reductions by 2030 or 80% by 2050.</div>
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With the current approach GHG emission reduction will be limited to something in the 20-30% range with solar PV and some energy efficiency, and GHG-emissions will metastasize into an unsolvable problem, so present programs guarantee we will never make those glorious goals of 50by30 and 80by50. It sounded good while it lasted.</div>
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It's not those batteries either - thermal batteries are free</h3>
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Remember the jokes about the <a data-mce-href="http://www.scientificamerican.com/article/fact-or-fiction-nasa-spen/" href="http://www.scientificamerican.com/article/fact-or-fiction-nasa-spen/" style="color: #24890d; text-decoration: none;" target="_blank" title="Fact or Fiction?: NASA Spent Millions to Develop a Pen that Would Write in Space, whereas the Soviet Cosmonauts used a Pencil.">Fisher ballpoint that could write upside down</a>, and cost a million dollars to develop? Presumably the Russians used pencils instead. The truth is the Russians switched to Space-pens also. The point is clear however. We humans have a terrible tendency to reinvent the wheel.</div>
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In energy solutions for buildings, thermal solutions come in the form of passive design as well as active generating technologies such as solar thermal and geothermal. Batteries are cheap: it is also known as Domestic Hot Water, or depending on the application you can have some high temperature water storage. Overall, this is far cheaper and safer than the chemical batteries that are the norm for Solar PV.</div>
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Conclusion: time for method over myth</h3>
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We have had the Internet bubble, and the subprime mortgage bubble, but now we have the budding distributed solar PV bubble. Some of the same people are promoting it, for the securitization machine was looking for work after the bust of subprime. Once rational analysis gains the upper hand--which may take a long time--this bubble of solar subprime will also burst, and it won't be pretty.</div>
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Having said that, there are plenty of good applications for Solar PV, but the mass market that is currently forecast will dry up sooner than later. Serious GHG emission reduction will have to wait until the Solar PV-mania gives way to a more methodical approach using Solar thermal, and other solutions, providing a whole-house solution, not a 3% savings on your bills.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-54191499837018890102014-12-09T15:28:00.000-08:002015-06-11T15:30:38.398-07:00Energy Efficiency Exposed<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
Blissfully, even the New York Times is starting to let some light in on one of the biggest consumer frauds in history, energy efficiency. With an opinion piece, <a data-mce-href="http://http://www.nytimes.com/2014/10/09/opinion/the-problem-with-energy-efficiency.html?module=Search&mabReward=relbias%3As&_r=0" href="http://http//www.nytimes.com/2014/10/09/opinion/the-problem-with-energy-efficiency.html?module=Search&mabReward=relbias%3As&_r=0" style="color: #24890d; text-decoration: none;" target="_blank" title="The Problem with Energy Efficiency">The Problem With Energy Efficiency</a>, by <span class="byline"><span class="byline-author" data-byline-name="MICHAEL SHELLENBERGER">Michael Shellenberger </span>and </span><span class="byline">Ted Nordhaus of <a data-mce-href="http://http://thebreakthrough.org/voices/michael-shellenberger-and-ted-nordhaus" href="http://http//thebreakthrough.org/voices/michael-shellenberger-and-ted-nordhaus" style="color: #24890d; text-decoration: none;" target="_blank" title="www.breakthrough.org">Breakthrough</a>, the prospect of addressing this fundamental flaw of energy policy is coming closer. The authors point out on the occasion of a Nobel prize for LED research, that LEDs will not save us, but lead to increased uses of lighting and thus energy. It is doing so already.</span></div>
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<a data-mce-href="http://www.vliscony.com/2014/05/20/energy-efficiency-renewable-energy/" href="http://www.vliscony.com/2014/05/20/energy-efficiency-renewable-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="What Energy Efficiency Said to Renewable Energy">Energy Efficiency</a> as it is promoted today, is a consumer fraud, it is a way of selling energy efficient products without the guilt. The Energy Star program is the cheerleader for this misdirection, for it encourages incremental fixes, not radical solutions. There is not really any perpetrator other than the collective public delusion that energy efficiency will somehow magically bail us out, but the short-term beneficiaries are the utility industry, and the manufacturers of energy efficiency technologies, and property owners are paying the economic penalty for failing to do the economics of their energy decisions properly. The presumed benefit of energy efficiency is an unexamined assumption that seems sensible, but does not work in practice. Yet there is mathematical certainty that it cannot, because it is a limit function, which MUST produce <a data-mce-href="http://www.vliscony.com/2014/05/20/energy-efficiency-renewable-energy/" href="http://www.vliscony.com/2014/05/20/energy-efficiency-renewable-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="What Energy Efficiency Said to Renewable Energy">diminishing returns</a>, as I have extensively documented on this blog.</div>
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The fundamental deceit which underlies the mistake is the labeling of energy efficiency as "green," and conflating it with renewable energy, and further to train clueless property owners to pursue energy efficiency on an incremental basis, as though it were additive, which it is not, because of the problem of diminishing returns, so it becomes a permanent money drain. This energy efficiency-driven approach amounts to a greenwash of carbon energy, and keeps us hooked. The result has been a massive market failure, and significant capital destruction. To this day, government is encouraging this pattern of helter-skelter spending on efficiency, which diverts resources from potentially productive investment in worthwhile projects that build value for investors. The beneficiaries of this confused guidance have been the utilities and energy companies. Current government programs are very successful if the goal were to save energy companies and utilities.</div>
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Environmental and Economical Fraud: Energy Efficiency</h1>
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Fortunately, there are a growing number of critical voices who have taken to uncovering the misleading claims of energy efficiency, and hopefully to put us on the track to productive investment.</div>
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<li> First there is Steve Hallet's excellent book, <a data-mce-href="http://amzn.to/1IwbvoY" href="http://amzn.to/1IwbvoY" style="color: #24890d; text-decoration: none;" target="_blank" title="The ffficiency Trap"><em>The Efficiency Trap</em></a>, which argues the case on a parallel to over specialization in nature. Clearly if the problem is over-dependence on carbon-based energy systems, it is not merely like the Jevons paradox, that there is blowback, in the sense that increased efficiency reduces the cost of energy and thus raises demand. There is a deeper effect of throwing good money after bad, which is ridiculous at a time when renewable technologies are becoming easily cost competitive on the margin.</li>
<li>Then there is David Owen's <a data-mce-href="http://amzn.to/164dWjK" href="http://amzn.to/164dWjK" style="color: #24890d; text-decoration: none;" target="_blank" title="The Conundrum"><em>The Conundrum</em></a>, which deconstructs all our thinking about energy, and debunking solutions which make the problems worse. It exposes the fallacies of energy efficiency and alternative energy on a deeper level.</li>
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These two books here are eye-opening, and will make sure that you never look at energy efficiency or even some of the renewable energy discussions the same way. This is the place to start to sort out the chaff from the wheat and learn to think for yourself about energy solutions.</div>
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Energy Investment, not Energy Savings</h1>
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My focus continues to be on the viewpoint of the individual property owner, in terms of how to create maximum value from renewable energy retrofits. The only meaningful way to evaluate the issue is to look at your property value, and how you can increase it by going renewable. There are people who want to live net zero out of social responsibility, or religious conviction, but that is not interesting to me. It is interesting to me only when it is done on the basis of sound economics.</div>
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The trap we are falling into as a society is that typical programs we now have benefit either the utilities, the energy companies, or the manufacturers of e.g. solar panels. No program is looking at it from the standpoint of the economics of the property owner, and that is the only possibly meaningful way of approaching the issue. And, in many cases you will find that, with the right analysis, there is a hell of a lot that can be done, for energy is a big part of your running cost in a house.</div>
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Energy Efficiency done right</h3>
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The right energy efficiency definition would make it clear that you first need to decide what your energy system should be, or you risk throwing good money after bad, and making your bad system more efficient, which is what happens a lot today. In other words, if it is done right, you would first implement renewable energy wherever it is economical and make the whole system as efficient as possible.</div>
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If you're spending $1,000/mo on energy, and you can eliminate 75% of that bill with a renewable energy retrofit that is $9,000 annualy in cash available to finance your conversion. And when you do make the changeover, you now have a permanent hedge against energy price increases, and mostly renewable technology has lower maintenance costs than fossil fuel burning equipment does. Most importantly, as part of your life-cycle planning for your property, you would consider ALL renewable energy technologies and prioritize them according to the highest yield, which today looks approximately as follows:</div>
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<li>Solar Thermal energy 85-95% efficiency.</li>
<li>Geothermal 400% efficiency (it consumes electricity to run, but you might be able to generate your own.)</li>
<li>Wind energy gives more bang for the buck in the right location than does solar PV, certainly when considering the footprint, so per square foot of space the yield is much greater than Solar PV.</li>
<li>Solar PV, with efficiencies currently going from the high teens to the low 20s.</li>
<li>Various passive thermal measures, insulation, glazing, thermal storage, and so on will complement the picture.</li>
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The currently prevailing paradigm is one of incremental "energy savings," and as a result people never treat these decisions as investments, but they serially fritter away the money, and the more 'efficient' they get, the more the power company is ensured of retaining their business. This is one good reason why power companies are happy to finance these efficiency programs.</div>
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We need to shift our focus to investing in energy, not merely saving energy, and for that we need always to have a 30 year energy plan, which includes life-cycle planning for all major componentry, such as boilers, and a/c plant. We need to realize that thermal technologies, both active and passive, are often not as easy on a retrofit basis, but if you can do it, they give the most bang for the buck.</div>
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Under the incremental approach, people buy e.g. solar panels and they save 10% on 30% of their energy usage, so they lowered their bills by 3%. The same amount of roof space, if it were used for a solar thermal system, could eliminate 70, 80, or even 90% of the energy bills, particularly if it is combined with passive thermal solutions.</div>
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Conclusion</h1>
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Energy Efficiency and energy savings sounds good but they are the wrong approach for long term asset values, especially when they are done on an incremental basis, and without a plan. They are a greenwash of carbon-energy.<br />Investment in permanent energy infrastructure to improve asset values is focused on creating the maximal increase in your property value with a renewable energy retrofit and energy efficiency, instead of a greenwash of carbon-energy with energy efficiency alone.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-67887391530616247582014-07-26T15:27:00.000-07:002015-06-11T15:28:27.965-07:00EPA Energy Star Home Energy Yardstick: a dangerous toy<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
Recently I explored the <a data-mce-href="https://www.energystar.gov/index.cfm?fuseaction=home_energy_yardstick.showgetstarted" href="https://www.energystar.gov/index.cfm?fuseaction=home_energy_yardstick.showgetstarted" style="color: #24890d; text-decoration: none;" title="EPA Energy Star Home Energy Yardstick">EPA's Energy Star Home Energy Yardstick</a> to see if it could help some people get a handle on their home energy problems, and the conclusion is it offers a few useful features, but <em>mostly it is detrimental to your financial health</em>. In some ways it really is worse than useless, for financially it will with certainty steer people completely wrong.</div>
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Home Energy Yardstick will give you some useful information, by showing you where your home is on a relative scale of energy efficiency, and therefore the potential for improvement. It might give you some ideas of what to look for, but it does nothing to help you sort through the economic priorities of how to create an optimal energy retrofit for your property. That failure sets people up to go about upgrading their property in totally helter-skelter fashion, and lose tons of money in the process.</div>
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One of the periodic criticisms of the Energy Star® program has been that it's being abused by vendors, by misreporting the performance of products in order to get the qualification. That is bad enough, but the Home Energy Yardstick program systematically steers people the wrong way, and lacks critically important features that could make it useful, specifically:</div>
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<li>It focuses on <a data-mce-href="http://www.vliscony.com/2014/05/20/energy-efficiency-renewable-energy/" href="http://www.vliscony.com/2014/05/20/energy-efficiency-renewable-energy/" style="color: #24890d; text-decoration: none;" title="What Energy Efficiency Said to Renewable Energy">energy efficiency</a>, which tends to lead to a decision path of least cost incremental energy savings, which produces diminishing returns and is a financial death trap.</li>
<li>It focuses on widgets, not on plans, and it focuses on costs, not value.</li>
<li>It does not capture the holistic, "systems" view of the problem and the potential solutions. The problem and the solution are 4-dimensional, not three. It should be mandatory first to create a 30 year NPV calculation to analyze the value of various energy improvements from an investment standpoint.</li>
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<em><strong>The unintended consequence of the model that this program effectively fosters an unwitting collusion of equipment vendors, energy companies and finance companies, all using this information against property owners, and in the process they are stripping equity from property owners, by ensuring completely suboptimal outcomes from an energy and environmental standpoint. If guaranteed failure were the mission, this would be the way to do it.</strong></em></div>
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Energy Star is a sort of "Good Housekeeping" seal of approval for a sales program of any number of energy efficiency products and services that provide partial "solutions" but never add up to a solution for the real problem, except they'll keep the property owner paying forever, and allow politicians to always claim progress, while they can rest comfortably in the knowledge that we'll never get there, so next year they can still claim the same thing, ad infinitum, while consumer spend themselves silly on "Energy Star" products. <strong>Energy efficiency is one of those feel good ideas that is accepted without further examination, but falls apart if you ever take a serious look at it, for it makes the problem worse, not better.</strong></div>
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Widgets over systems</h1>
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By focusing on widgets over systems and plans, the illusion is created that you can just "buy" energy efficiency on an incremental basis, as an add-on, without any plan. You give daddy an Energy Star rated shaver for Xmas, and ma gets an energy star rated hair dryer, and soon all will be well, except it does not work that way.</div>
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As in any crime, you look for means, opportunity and motive, and in this case, various vendors of energy efficiency related products and services need a gullible public that keeps on buying their bunkum. Energy companies use incentives to retain customers in order to serve their shareholders well. Finance companies live from commissions on the loans they write, so more sales is better, never mind if it makes financial sense for the property owners. Meanwhile, mathematically energy efficiency is a death trap because of <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" title="NYSERDA MPP and Diminishing Returns">diminishing returns</a>.</div>
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The only thing that makes sense from an investment point of view, and needs to have priority in any retrofit plan is maximal Site Derived Renewable Energy (SDRE). <strong>SDRE alone materially reduces GHG-emissions, and adds value if it can be financed from energy savings well within its economic life, so that the property owner (investor) enjoys the benefit of a long tail of no energy bills.</strong></div>
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Your Energy Star credit card</h2>
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Various supposedly "green" finance programs make things worse. They propose typically "self-liquidating" financing, preferably with "no money down," to lure you in. The vendors of efficiency equipment have refined their marketing pitches to a fine art, to focus on sales that are easy and frictionless, and can be justified by "energy savings,"<br />so they pick high value projects first. "Self-liquidating" and "zero money down," are the catch phrases, which should warn you of incoming torpedoes.</div>
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PACE financing is still in some sort of limbo, and it should be as long as it is abused for the purpose of financing energy efficiency, if far more valuable SDRE projects are available.</div>
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Your energy company to the rescue</h2>
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It is in the nature of energy companies that they make money by selling more energy, To them "energy efficiency" is something that helps them retain customers, moreover our society seems to tolerate a "greenwash," as if "energy efficiency" of a fossil fuel system is "green," even though the opposite is true. Where is the FTC when you need them? Many if not most energy companies have programs to help their customers become more energy-efficient, and energy providers are happy to offer you financial incentives, in order to retain you as a customer longer.</div>
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One of the more hopeful initiatives is the enabling of co-investments of energy companies with customers, which could help with SDRE projects. When done wisely, energy companies can make a return two ways: in financial terms, and in improved utilization of their assets. In NY the public service commission is now looking into this under the REV initiative. That double payoff should facilitate a reasonable deal being offered to consumers.</div>
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<strong>Where's the plan?</strong></h1>
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A building, a home, any property is a system, and moreover it is a four-dimensional system - it lives for decades. It contains mechanical systems that may need replacing at several points during its life span. Roofs may need to be replaced, windows added, and siding replaced, insulation added, etc.</div>
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<em>Only renewable energy (SDRE) will materially reduce GHG-emissions, but it will also replace energy bills... it will move energy from liabilities to assets</em>, and in many, many cases you will end up with a capital improvement that is paid for in under 10 years, but eliminates a big portion of your energy bills for 30 years (or more).</div>
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Thus there are two dimensions to an energy plan for a property:</div>
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<li>one is about the source of the energy, which is a make or buy decision, i.e. generate your own energy with SDRE, or buy your energy (electric, gas, oil).</li>
<li>the second part is about passive measures, and energy efficiency. It should be noted that many decisions in this area will be different if you use more SDRE vs. fossil fuels. The fossil fuel path and the SDRE path are not interchangeable, which makes it imperative to plan ahead, lest you design yourself into a corner.</li>
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In short, a long-term energy plan is needed for two reasons, one because there are engineering interdependencies, that will impact on your decisions, and two is to truly understand the economic value you are creating on a life-cycle basis. These decisions have an effect for sometimes 20-30 years, and ultimately the life of the property. That tankless hot water heater may be a great idea if your only option is heating with oil, but if you can do geothermal or solar thermal, you need a domestic hot water store to harvest energy, and that same tankless hot water heater would be a horrible waste of money.</div>
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The emperor's new clothes, energy efficiency?</h2>
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The pursuit of "energy efficiency" means that you do not think about the long-term energy strategy for your property, but you plunge in and start making what you already have more efficient, which means you may be throwing good money after bad, if in fact there were economical options of switching a good part of your energy requirements to renewable on-site generation.</div>
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In principle, if this approach were valid, you would proceed in the way of least cost/most benefit, and simply do the highest return projects first. This fails because of diminishing returns, and it fails again, because you may be designing yourself into a corner if you lock yourself out of some of the most valuable projects, but don't realize it, because you started from the wrong premise and without a plan.</div>
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Whole house, holistic energy planning</h2>
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When you start looking at your property as a system, and start looking at the long-term issue of energy, your first stop should be a financial model of the situation, for the default model should be that you want to switch to renewables as much as possible, while financing it with the energy costs you displace, and helped with any applicable incentives, tax abatements, etc.</div>
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A good energy audit will give you your options, and the Home Energy Yard Stick may give you a hint for where to look. However, you don't want to fall prey to the vendors who will all pitch you on their systems, and never do you want to get yourself locked in to any vendor just because they do a "free" energy audit.</div>
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The basic framework becomes how to add the most value to your property. This is very different from the lowest cost approach of energy efficiency. The long-term value of your property should guide your decisions.</div>
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Conclusion: SDRE should come first</h3>
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Energy Efficiency does not exist in isolation, but only in the context of the chosen generating technology: fossil fuels or on-site renewable energy, and the Home Energy Yardstick does not help sorting this out, which can lead to costly mistakes.</div>
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SDRE is first priority when we pursue property value adding strategies, energy efficiency is only complementary, and the Energy Star rating system detract the attention to components instead of the whole property.</div>
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RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-50371751475568976942014-05-20T15:25:00.000-07:002015-06-11T15:26:37.626-07:00What Energy Efficiency Said to Renewable Energy<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
The tortoise of <a data-mce-href="http://en.wikipedia.org/wiki/What_the_Tortoise_Said_to_Achilles" href="http://en.wikipedia.org/wiki/What_the_Tortoise_Said_to_Achilles" style="color: #24890d; text-decoration: none;" target="_blank" title="Wikipedia on Lewis Carrol's "What the Tortoise said to Achilles."">energy efficiency</a> (EE) always makes sure that we never get more than half-way there, and tries to convince Achilles that by the time he catches up, the tortoise will be ahead again, and he'll never win, when in fact the reverse is the case. <a data-mce-href="http://www.vliscony.com/2014/03/01/renewable-energy-star-show/" href="http://www.vliscony.com/2014/03/01/renewable-energy-star-show/" style="color: #24890d; text-decoration: none;" target="_blank" title="Renewable Energy, the Star of the Show">Renewable energy</a> (RE) in the broadest sense is Achilles, who only by fallacious logic could fail to outrun the tortoise of energy efficiency. The truth is, only renewable energy can reduce GHG-emissions in a permanent way, EE creates at best a temporary reduction, at the cost of extending the use, thereby ensuring an overall increase, wherever renewable energy would have been an option. Notice how politicians like to claim we're half-way there towards some climate change objective, and at the same time they endorse policies (energy efficiency), which positively guarantee that "half-way there" is as far as we will ever get.</div>
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As noted in my <a data-mce-href="http://www.vliscony.com/2014/04/08/ny-2014-energy-plan-ghg-reductions/" href="http://www.vliscony.com/2014/04/08/ny-2014-energy-plan-ghg-reductions/" style="color: #24890d; text-decoration: none;" target="_blank" title="New York’s 2014 Energy Plan – GHG-reductions ahead">comments on the Draft 2014 NYS energy plan</a>, if we want to achieve 50% GHG-reductions by 2030, let alone 80% reductions by 2050, we cannot afford to do a single project that does not at least get us a 50% GHG reduction. To continue doing "energy efficiency" projects will allow the tortoise of energy efficiency to waste Achilles' time with his logical conundrums. Projects that reduce GHGs by 15-25% are the norm in energy efficiency land and won't cut it. Every single project has to produce over 50% GHG-reduction, and that means that aside from the analytical problems of energy efficiency as an end in itself, we are now entering a time when we simply cannot afford to bother with it anymore, and serious investment in renewable energy should begin.</div>
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<strong>Lewis Carroll and Energy Efficiency</strong></h2>
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In short, it's very much like Lewis Carroll's story, <a data-mce-href="http://en.wikipedia.org/wiki/What_the_Tortoise_Said_to_Achilles" href="http://en.wikipedia.org/wiki/What_the_Tortoise_Said_to_Achilles" style="color: #24890d; text-decoration: none;" target="_blank" title="What the Tortoise Said to Achilles - Wikipedia">What the Tortoise said to Achilles</a>, the only way for the tortoise to win against Achilles is by keeping him wrapped around the axle with philosophical paradoxes, going all the way back to Zeno's paradox. The tortoise argues Achilles can never catch up. The same logic drives the adoption of energy efficiency as policy. It makes no sense, but everyone believes we'll always be halfway there before renewable energy catches up. Except we'll never get beyond halfway there.</div>
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<strong>George Orwell and Energy Efficiency</strong></h2>
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It gets truly Orwellian when we get to newspeak like "the Fifth Fuel" (Amory Lovins), and "Negawatts," and to top it all off the energy efficiency "Ministry of Truth" is the EDF's "<a data-mce-href="http://www.eeperformance.org" href="http://www.eeperformance.org/" style="color: #24890d; text-decoration: none;" target="_blank" title="Investor Confidence Project">Investor Confidence Project</a>." Their masthead says: "Enabling Markets for Energy Efficiency Investment," and a little further on they claim they want to deliver "investor ready energy efficiency projects," a complete non-sequitur. Like any other confidence man, it all starts with some variation of: "I'll be very honest with you." And nobody seems to notice that the only reason for all these extra assurances about proper "energy efficiency" projects, is the fact that it is not at all an investable asset, for the simple reason of diminishing returns. So never mind how many bells and whistles you add in order to provide "investor confidence," anyone who understands the basic financial/economic reasons for diminishing returns on investments in "energy efficiency" would run for the hills.</div>
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Obviously, if you own the plant or the building, you want to run it as efficiently as possible, regardless if it runs on fossil fuels or on renewable energy, but that is an operational savings, not a capital investment, unless it is part of the original installation. Energy efficiency, in spite of popular myth and various rationalizations, does not generate electricity, and it is not--in its own right--an investable asset, in spite of all rationalizations to the contrary. Yet a whole industry has grown up around this fallacy. This is the sub-prime sector of the environmental business.</div>
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Incrementalism and energy efficiency</h2>
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Along with the thinking of "energy savings" comes the financial fallacy of the payback period of the equipment based on marginal energy savings, which is a meaningless approach since the only thing that matters is how the equipment adds value to your building, which may be quite a different issue if you take all factors into account. This whole mistaken logic is reinforced by programs like Energy Star, and widget-level incentives.</div>
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The incremental approach of energy efficiency and "energy savings" is a paradise for the sellers of widgets, for property owners end up spending money like drunken sailors and the model guarantees they'll never get there. This is not investment, this is squandering money on a losing proposition in the strictest mathematical sense: diminishing returns. Energy efficiency spending always starts out with some window caulking, and some screwy light bulbs, and progresses to bigger and bigger projects, until finally it culminates in the latest absurdity, the <a data-mce-href="http://www.vliscony.com/2013/10/28/solar-ppas-impair-property-appreciation/" href="http://www.vliscony.com/2013/10/28/solar-ppas-impair-property-appreciation/" style="color: #24890d; text-decoration: none;" target="_blank" title="Solar PPAs Impair Property Appreciation">solar PPA</a>.</div>
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In the end, the energy efficiency approach leads to a dead-end and then property owners become desperate enough to try some solar PV and "save" a bit on electricity. It seems to be the lowest cost renewable option. Here in the North East, the proportions of electricity to heat & hot water might be in the range of 30% versus 70%, and property owners are now backed into a corner where saving 10% on those 30%, which is their electrical bill, seems like a good deal. In short, they will pay good money to lower their energy bills by 3%. If they do get a PPA, they'll be paying for it for 20 years, and not only that they will give up most of their usable roof space, without realizing that if they had done a proper plan, they might have gotten a solar thermal installation instead, which could have wiped out most of their heating/cooling and hot water, and reduced their electrical bills at the same time. Solar thermal gives you 5 to 8 times more energy per square area than solar PV.</div>
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"Green Finance," wolf in sheep's clothing</h2>
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If the business of finance is: Who has equity that we can steal today? Then "green finance" is a winner. It delivers extortionate finance solutions under the beneficent guise of being "green." Currently, what goes for "green" finance is Asset Backed Lending on the basis of marginal energy savings, and therefore it drives least cost quick payback equipment sales. The commercial pressure is for solutions that can be offered on this basis as "self-liquidating" propositions.</div>
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The net result of this is cherry picking of the clean energy retrofit potential of a property. If you were to look at a whole property, the process of converting to renewable energy is only profitable if it is undertaken as a comprehensive retrofit plan. If the property has been cannibalized by various partial "energy efficiency" solutions, this will undermine a renewable energy retrofit in several ways. It will undermine liquidity, and financial carrying capacity of the property, and from an engineering point of view, ill-conceived partial solutions are likely to get in the way of a more profound clean energy retrofit. Write-offs will result, and this is how the tortoise would win against Achilles. The incrementalism of energy efficiency derails the real solutions of renewable energy.</div>
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<strong>Profitable Renewable Energy Retrofits</strong></h1>
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Once you look at properties as an energy investment, it is immediately clear that on-site clean energy generation moves energy from liabilities to assets. Furthermore, if you can integrate multiple technologies in a property, very often legitimate synergies can be accomplished which offer compound returns. In terms of payback, it may mean that two components which by themselves have 7 and 8 year paybacks, suddenly combine to offer a 6 year payback. For example, geothermal heat pumps offer 400% efficiency because they extract free BTUs from the subsoil by heat exchange, but they require some electricity to run. But if you can generate your own electricity with wind, sun or water, you suddenly have a virtuous circle, including storage in the form of pre-heated hot water. These compound returns with renewable energy make it a proper investment, as opposed to the diminishing returns of energy efficiency.</div>
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Regressive non-profits in renewable energy</h3>
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Sadly, the non-profit sector which should be leading the way, is mostly regressive, with NRDC and EDF completely buying into the usurpation of the green objectives by energy efficiency, and oblivious to the fact that they have made themselves into a customer retention program for the fossil fuel industry. The Sierra club is only marginally better, hawking solar leases or PPAs, which are soon to be the sub-prime scandal of the green business.</div>
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And then there's always Property Assessed Clean Energy (PACE), which is a smart way to finance the big capital bulge of renewable energy conversions, but the movement has been completely hi-jacked by the energy efficiency cult. This results in the classical problem of financing short term fixes with long term money, but it gets worse, because in its confrontation with the <a data-mce-href="http://seekingalpha.com/article/2203913-fnma-fmcc-you-cant-go-home-again" href="http://seekingalpha.com/article/2203913-fnma-fmcc-you-cant-go-home-again" style="color: #24890d; text-decoration: none;" target="_blank" title="Fannie and Freddie: you can't go home again">GSEs</a> the PACE camp, barely snatched defeat from the jaws of victory, by hitching their case to energy efficiency, which misses the central point of PACE, namely that with an on-site clean energy retrofit, you are moving energy from liabilities to assets, and therefore this type of an investment permanently raises property values. And of course you'll do it as efficiently as possible, but that's entirely secondary. The decision is always between fossil fuels and renewables.</div>
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Renewable energy retrofits and Green Underwriting 2.0</h2>
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Only renewable energy can permanently displace fossil fuels, and energy efficiency is a stalling tactic. For evident reasons, we must shift towards more renewable energy retrofits. That's where the great GHG-reductions are, and that's also where asset appreciation is, thus the economic justification, and the legitimate finance opportunity in which the asset appreciation accrues to its owners, instead of being ripped off by the financiers, as in the case of energy efficiency "investments," which benefits widget manufacturers and energy companies, not property owners. Green finance needs to grow up.</div>
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What will tie it all together is a proper green underwriting standard, which incorporates a target of at least 50% GHG-reduction, along with the correct economic analysis of a whole property from the standpoint of make-or-buy (energy), and focused on asset appreciation by generating as much onsite renewable energy as possible, energy efficiency should bring up the rear.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-57072533112761283942014-05-03T15:18:00.000-07:002015-06-11T15:20:17.744-07:00Improving Real Estate Value with Clean Energy<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
<a data-mce-href="http://www.vliscony.com/2013/06/16/real-estate-valuation-age-renewable-energy/" href="http://www.vliscony.com/2013/06/16/real-estate-valuation-age-renewable-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="Property Values in the Age of Renewable Energy">Real estate value</a> can be enhanced with clean energy, while <em>improving</em> building resiliency at the same time. Prioritizing energy savings tends to <em>reduce</em> resiliency: you are investing more money in being increasingly dependent on the given energy source. The economic magic lies in the fact that energy generated on-site with <a data-mce-href="https://en.wikipedia.org/wiki/Clean_energy" href="https://en.wikipedia.org/wiki/Clean_energy" style="color: #24890d; text-decoration: none;" target="_blank" title="Wikipedia on Clean Energy">clean energy</a> technology moves energy from liabilities to assets permanently, and creates a degree of independence from the grid. After that installation is paid for... no more bills for at least that amount of energy. Even partial energy independence can save you a lot of hassles in the next storm or the next blackout.</div>
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Recently, I had a chance to listen to some presentations about infrastructure projects, in the context of the <a data-mce-href="http://www.rebuildbydesign.org" href="http://www.rebuildbydesign.org/" style="color: #24890d; text-decoration: none;" target="_blank" title="Rebuild by Design">Rebuild by Design</a> competition, focused on resilient rebuilding in the aftermath of Hurricane Sandy, which reinforced how value creation is central to problem solving in this area. This observation has a parallel in energy policy. <strong>We are entering a paradigm shift from cost containment in the form of energy savings, to productive investment in the form of renewable energy.</strong></div>
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Value, not cost</h1>
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One of the speakers at the event mentioned above, Marcel Ham, of <a data-mce-href="http://www.imgrebel.com" href="http://www.imgrebel.com/" style="color: #24890d; text-decoration: none;" target="_blank" title="IMG/Rebel">IMG/Rebel</a>, speaking about the financing of such projects, emphasized that <em>nothing gets resolved</em> as long as people are focused on cost. <strong>What makes financing solutions possible is focusing on value. </strong>This is a core concept, and not only for infrastructure projects and large public/private partnerships, for it explains the failings of a few decades of energy policy, when everyone is talking about energy savings, and nobody seems to realize that you can't save yourself rich.</div>
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When you focus on cost reduction, you negotiate yourself into a corner every time, because energy savings, cost containment, is a game of diminishing returns. In other words, <strong>focusing on cost reinforces the problem, while focusing on value allows solutions to emerge.</strong> The best I can figure it, the problem started with oil crises of the last century, when the discussion centered very much on the notion that a dollar spent on reducing demand gave us more bang for the buck than a dollar spent on increasing supply (building another power plant). Then brilliant rationalizations emerged, like Amory Lovins with his "fifth fuel," and later the introduction of the concept of "negawatt." All of these were attempted rationalizations to make "investment" in energy efficiency palatable, and no-one appreciated that it simply extended the time horizon, and made the problem more intractable. Certainly, now that the environmental (climate change) aspect is ever more important, it is increasingly clear that the only thing that will do is reducing our carbon footprint, and that involves switching to renewable energy. The money spent making it more economical to continue CO2 emissions, is a write-off if it has not paid for itself already.</div>
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The bottomless pit of energy savings</h3>
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From my experience as a home owner (19 years), I learned in retrospect how costly it is to serially make decisions about "energy efficiency," and "energy savings." Despite popular mythology to the contrary, "energy efficiency" is not an asset class, and not an investment proposition in itself. It is an operational savings. <strong>Energy savings is also a <em>secondary</em> objective, not a primary one, </strong>as is readily evident from the fact that if you compare a fossil fuel system with a clean energy system, energy efficiency is present in both solutions. However, while some of the "energy savings" measures may be the same in both solutions, some of them will be significantly different, therefore, if you start on the fossil fuel track, it is not easy to switch over to clean energy. Conversely, you need to think ahead about where you want to end up, and that includes deciding the timing for replacing major infrastructure, typically boilers, A/C, water heaters, and the like, along with elements of the building envelope etc. The value-destruction trap of energy savings is to the benefit of energy providers (customer retention) and the sellers of various gadgets and products that can "save" energy, not the buyers of them. Simply put, "savings" is a limit function, which is technology dependent, but at any given state of technology, there is a limit, and, in the case of burning fossil fuels, you can never do better than extract 100% of the energy value of your fuel. Very likely it is uneconomical to achieve that much, and you will be faced with rapidly climbing cost, and rapidly diminishing returns for subsequent investments. One of my favorite examples in NY is always the <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" title="NYSERDA MPP and Diminishing Returns">NYSERDA MPP program</a>, which sets a band of incentives that can be achieved above a certain level of "savings." This method forces building owners to bundle multiple energy savings strategies, whereas some would seem uneconomical if undertaken serially, and in practice it results in massive capital destruction, and ensures suboptimal and even regressive outcomes. Owners are simply gaming the system, and try to score the maximum incentives for the least amount of investment, and in the process commit their property to the path of diminishing returns that is "energy efficiency." There are armies of would be "energy efficiency" consultants to help them do this.</div>
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Successful transitions to Clean Energy are holistic</h1>
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Simply put, the owner of a property has a financial interest in maximizing the value of that property over time. As a society, we have an interest in minimizing green house gas emissions. Unfortunately, various government programs and incentives have a tendency of being counterproductive and regressive, but the market is inexorably moving towards a time when net-zero construction becomes the norm. Therefore, <strong>the job of the property owner is to maximize building value by minimizing fossil fuel use, and to pay for the conversion largely from energy savings</strong>, so as to end up as close to net-zero as they can. Ideally the first step in a conversion should make the property 50% or better energy independent. The closer you can come to net-zero (i.e "near" zero), the better the assurance of retaining the value of the property. The more energy bills buildings have, the more their values will be depressed as net-zero becomes increasingly normative. I would venture to guess that buildings that do not generate at least 50% of their own energy will see their values deeply depressed 10 or 20 years from now. And, if your building cannot make that conversion, you might as well start of selling it now. The principal mechanism of why the transition to clean energy is constructive towards building values, is because <strong>on site clean energy generation moves energy from liabilities to assets</strong>.</div>
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Resiliency, clean energy and real estate values</h2>
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As an important side issue, building resiliency goes up with every implementation of on-site clean energy generation. This is the principal reason New York City's "NYC Clean Heat" program has been so extremely regressive, and has produced massive capital destruction. By diverting the attention to fuel switching, just at a time when the transition to clean energy was indicated, capital was diverted to unproductive purposes, and the resilience of the city as a whole was disastrously imperiled as a result of becoming over dependent on a single fuel, when the opportunity existed to diversify energy sources with renewable energy.</div>
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Debunking "the fifth fuel," "negawatts"</h1>
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These popular terms, starting from Amory Lovins' coining of the phrase "the fifth fuel," meaning energy savings, and <a data-mce-href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" style="color: #24890d; text-decoration: none;" title="Energy Efficiency – Killing Us Softly">energy efficiency</a>, and later enriched by the hilarious concept of "negawatts," have created an analytical distortion that has permeated policy making at all levels, not to mention world-wide, but which lacks any solid theoretical foundation. In fact it is a pre-determined financial and environmental disaster, and it entrenches the problem more, and certainly does nothing to solve it. Delaying the sinking of the Titanic by five minutes is hardly a worthwhile investment.</div>
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<strong>"Energy Efficiency" loans, along with solar PV PPAs/leases are likely the subprime scandals of green finance.</strong> They extract value, but they don't add value, because they are typically justified on a least cost for marginal energy savings selection by payback period, and produce suboptimal decisions for the property and society at large. This is especially painful in the case of PACE finance, which was designed for marshalling the capital investments needed to switch to clean energy (hence the name: Property Assessed Clean Energy), but instead it is squandered on same-old, same-old "energy savings" projects that add no real value.</div>
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Clean Energy, paid for by energy savings, enhances real estate value</h2>
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<strong>If we know the problem is GHG-emissions, and clean energy reduces or eliminates GHG-emissions, while energy savings reduces emissions nominally but lowers the cost of continuing emissions, so that it aggravates the problem in the long run... clearly the only rational priority is figuring out how we can upgrade our buildings to the maximum extent to clean energy.</strong> Interestingly, clean energy investments because they are an enhancement to the fixed building stock, move energy from liabilities to assets, and should be evaluated properly based on a thirty year capital budgeting analysis of the property as an energy asset. Once we use this methodology all investment priorities change, because three decades of no energy bills provide powerful financing ability for the required capital investment up front. The appropriate finance tools are increasingly available, such as PACE financing, even if <a data-mce-href="http://www.vliscony.com/2014/03/31/selfdestruction-pace-finance/" href="http://www.vliscony.com/2014/03/31/selfdestruction-pace-finance/" style="color: #24890d; text-decoration: none;" title="The Self-destruction of PACE finance">PACE</a> is often times misused to finance energy efficiency projects. <strong>Minimizing GHG-emissions, by maximizing on site clean energy generation, while paying for it from energy savings, should be the new policy goal. </strong>Property owners ignore this at their own risk, because on the margin, in new construction, net-zero is becoming the norm.</div>
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Conclusion</h1>
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In conclusion, there are two problems that are holding up the show for the transition to a clean energy economy:</div>
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<li>Prioritizing energy savings when only on-site clean energy generation will make a difference in GHG reductions (as well as create greater resiliency in buildings).</li>
<li>Making decisions based on marginal energy savings and payback of the equipment, instead of based on a 30 capital budget for energy for the property, which would immediately reveal the asset-enhancing value of clean energy by moving energy from liabilities to assets.</li>
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The clean energy future will forever be put off, if we continue to prioritize energy savings, but on site clean energy generation will reduce GHG-emissions and enhance real estate values.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-19540292556846604752014-04-08T15:11:00.000-07:002015-06-11T15:13:19.566-07:00New York's 2014 Energy Plan - GHG-reductions ahead<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
<a data-mce-href="http://www.gfmag.com/archives/29/86-green-finance.html#axzz2yJOUzFCG" href="http://www.gfmag.com/archives/29/86-green-finance.html#axzz2yJOUzFCG" style="color: #24890d; text-decoration: none;" target="_blank" title="Story on Green Finance in Global Finance">Green Finance</a> reform should be the central focus of our climate change efforts, for under proper analysis reducing Greenhouse gas (GHG) emissions goes hand in hand with improving property values. The <a data-mce-href="http://energyplan.ny.gov/Plans/2014.aspx" href="http://energyplan.ny.gov/Plans/2014.aspx" style="color: #24890d; text-decoration: none;" title="New York State 2014 Draft Energy Plan">2014 New York State Draft Energy Plan</a> indicates a paradigm shift. The stated benchmark objectives are:</div>
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<li>50% GHG emissions reduction by 2030</li>
<li>80% GHG emissions reduction by 2050</li>
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There is only one way to get anywhere close to that, and that is with massive adoption of renewable energy (RE), and in particular <a data-mce-href="http://www.vliscony.com/2013/05/26/compound-returns-renewable-energy/" href="http://www.vliscony.com/2013/05/26/compound-returns-renewable-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="Compound Returns from Renewable Energy">Site Derived Renewable Energy (SDRE)</a>, and green finance needs to catch up. Typical energy efficiency (EE) projects have been all the rage, tend to be in the range of 15-25% improvement. We will now need to focus on projects of 50% <a data-mce-href="http://www.epa.gov/climatechange/ghgemissions/" href="http://www.epa.gov/climatechange/ghgemissions/" style="color: #24890d; text-decoration: none;" target="_blank" title="EPA on GHG-emissions">GHG emissions</a> reduction and higher, otherwise we are dragging down the numbers. It also means we should focus on the demand side, for you can only go so far on the supply side, and green power generation is not an overwhelming case yet, but on the demand side, the economics are very powerful. It will just take time to develop the right opportunities. The draft 2014 NY State Energy Plan is an auspicious beginning for this paradigm change.</div>
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GHG reductions goals can only lead to more SDRE</h3>
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I published my comments to the draft energy proposal on Scribd, here:<br /><a data-mce-href="http://www.scribd.com/doc/217064925/DaBx-Comments-on-NY-State-2014-Draft-Energy-Plan?secret_password=2c6xkgueglupvas3s10j" href="http://www.scribd.com/doc/217064925/DaBx-Comments-on-NY-State-2014-Draft-Energy-Plan?secret_password=2c6xkgueglupvas3s10j" style="color: #24890d; text-decoration: none;" target="_blank" title="DaBx Comments to NYS 2014 Draft Energy Plan">http://www.scribd.com/doc/217064925/DaBx-Comments-on-NY-State-2014-Draft-Energy-Plan</a></div>
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The good news is that the commitment to these GHG emissions reduction goals forces a radical change towards renewable energy.</div>
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50+% GHG emissions reduction: change happens on the margin</h2>
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<li>Change happens on the margin</li>
<li>We have limited means. (Think bringing $10 or $20 billion to a trillion dollar problem).</li>
<li>Therefore on the margin projects with better than 50% reductions in GHG emissions compete against projects with 15-25% "energy savings" and nominally GHG reductions in the same range. We should ignore the fallacy that natural gas reduces GHG emissions. Therefore we should furthermore only entertain SDRE projects with over 50% GHG-reductions.</li>
<li>Once we model a retrofit on the basis of a 30 Year cash flow model, it will be clear that there are plenty of SDRE projects that can achieve the 50+% GHG reductions target, and there is tremendous potential for sound projects that will be financially superior to EE projects. EE investment projects have been typically evaluated on component-level payback from marginal energy savings, sometimes in a bundled approach like NYSERDA's MPP. However, under a proper cash flow analysis, the long tail of 30 years of no energy bills will in many cases overcome the initial capital hurdle. Proper finance can do the rest.</li>
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Again, if we want to make progress towards these New York State energy goals, we cannot afford EE projects, but only SDRE retrofits. And, we cannot do it without reforming what now goes for green finance, and develop a more robust green finance 2.0.</div>
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The case for <a data-mce-href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" style="color: #24890d; text-decoration: none;" title="Energy Efficiency – Killing Us Softly">energy efficiency</a> as a goal in its own right has been thoroughly discredited, and we'll be in the business of teaching old dogs new tricks. Building owners and many "consultants" in energy efficiency have been trained to look for opportunities for marginal energy savings. The approach has been helter-skelter, and a seemingly more systematic approach like <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" title="NYSERDA MPP and Diminishing Returns">NYSERDA's MPP</a> just hides the problem and makes it worse. Many savvy building owners have always known that energy efficiency does not add up. It does not - simply because of diminishing returns. No matter how much you spend, you never get "there," and nobody knows where "there" is anyway. <strong>The new paradigm is: Green finance achieves GHG reductions with SDRE investments paid for by energy savings.</strong></div>
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There is an unstated assumption in the current policies that focus on energy efficiency. That assumption is that you can always switch tracks later, and implement renewable solutions. This is not true, because in any given property, you will have often designed yourself into a corner you cannot get out of without writing off a good part of the work you have done in the name of EE. So the switch often becomes prohibitive if you did not plan ahead. Hence the need for proper planning first, and that means a 30 year technology plan for SDRE for any property.</div>
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From components to whole building projects</h2>
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The other major change must be to always look at whole buildings, or even blocks, districts, communities, regions, etc. A holistic approach is a must, and overall GHG reductions are the goal. For the time being this is made harder because incentives are still at the component level, not at the building level. Component level incentives cause accountants to engineer energy systems, with disastrous results. The Baucus tax proposal has the right idea of one single incentive, based on GHG reductions, but, as drafted, it leaves out the demand side, which is the most important part. The idea is right but should be extended to the demand side.</div>
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Green Finance reform</h2>
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Green finance in one part is the financing of major capital projects, and that is proceeding apace. What today goes for "green finance" for energy retrofits is completely compromised by the over emphasis on Energy Efficiency, and in most cases just a rebranded form of ABL (Asset-Backed Lending), against energy savings, all of which goes back to Amory Lovins' idea of the "fifth fuel," and the subsequent mythological creation of the "negawatt," leading us to think that "energy savings" is an investable asset. This approach is like painting lipstick on a pig, and in the extreme it takes forms like <a data-mce-href="http://www.eeperformance.org" href="http://www.eeperformance.org/" style="color: #24890d; text-decoration: none;" target="_blank" title="EDF Investor Confidence Project">EDF's "Investor Confidence Project,"</a> which encapsulates these easily falsifiable, and unfounded assumptions that EE is somehow additive towards the solution into a seemingly impressive framework that unfortunately rests on a false assumption.</div>
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<a data-mce-href="http://www.vliscony.com/2014/03/31/selfdestruction-pace-finance/" href="http://www.vliscony.com/2014/03/31/selfdestruction-pace-finance/" style="color: #24890d; text-decoration: none;" target="_blank" title="The Self-destruction of PACE finance">PACE financing</a> compounds the problem even further by misusing the beautiful investor protections it provides on EE projects, and thereby undermining its own long term relevance. And PACE will become irrelevant if it does not refocus to over 50% GHG-reductions, and that means SDRE projects. The name PACE means Property Assessed Clean Energy, and its potential is now being wasted on EE projects, which merely serve to prolong the agony.</div>
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The over-emphasis on <a data-mce-href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" style="color: #24890d; text-decoration: none;" target="_blank" title="Energy Efficiency – Killing Us Softly">energy efficiency is completely self-destructive</a>, and analytically unsound, it lacks a basis in fact, both economically, financially, and environmentally. It is already being falsified in the market place by net zero construction, but for retrofits, as soon as there are significant securitizations of 50% and above GHG reduction financings, the EE investment craze will come to an ignominious end. The typical 15-25% "energy savings" from EE projects, which come with diminishing returns, i.e. no follow-on strategy, will inevitably make way for the 50+% GHG reduction projects which will offer compound returns, and an ever improving follow-on strategy, not to mention asset appreciation of the underlying property with every energy price hike.</div>
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The time has come for green energy finance reform. Once the analytics of Energy Efficiency are properly understood, the nomenclature "green finance" should be limited to SDRE projects with over 50% GHG reduction, and never for EE projects which are a financial and environmental dead end, and in effect an indirect subsidy to the carbon fuel industry. This shift automatically entails a new focus on maximizing asset values for building owners.</div>
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Education</h2>
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Along with all of this, there is a massive need for education, and objective and independent information. While I was finishing up this blog, my partner, Bruce Lorentzen, EE, wrote to me as follows:</div>
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Last week I was a judge of faculty and student research projects at Univ. of Bridgeport. I was amazed that a professor with a PHD was presenting a study on microgrids and he was a proponent of PV. This was alarming in that he had within his research, heat storage. I challenged him on why he was wasting precious land and rooftops and only being 15% efficient. He then admitted that perhaps solar thermal was better. I then offered that with 400% efficient heat pumps, he had the opportunity to reduce pollution by at least 75% whereas PV only reduces by 15%. We must educate the educators!!</div>
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Conclusion</h2>
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Energy Efficiency is not a proxy for GHG reductions, and should not be a policy goal. It is an indirect subsidy to carbon fuel, and achieves the opposite of what we want. The new paradigm for green finance is <strong>achieving GHG reductions with SDRE investments paid for by energy savings.</strong></div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-19823557636336245482014-03-31T15:05:00.000-07:002015-06-11T15:07:07.475-07:00The Self-destruction of PACE finance<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
The PACE idea is powerful: Property Assessed Clean Energy. It was recognized that the switch to clean energy for existing buildings was going to be capital-intensive, and PACE financing was designed to enable projects with longer paybacks, by providing longer term financing. Lenders were given the assurance of low risk because collection was done through property taxes. For the property owner, there was the advantage that the building could be sold with the existing PACE finance being assumed by the new owners - it did not need to be refinanced. But then the energy efficiency lobby kicked in by co-opting the moniker "clean energy." I am not sure of the exact historical circumstances, but the fossil fuel business has a vested interest in selling energy efficiency as a functional equivalent to "clean energy," and calling themselves "green." It is not, but PACE organizations bought into this fallacious argument.</div>
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GSE Trouble</h2>
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Fannie and Freddie did not like PACE one bit, because it would get seniority over existing mortgages. In the end, a compromise was reached, limiting PACE financing to 10% of the assessed value. The PACE team could only barely show some positive impact of Energy Efficiency on home value, but they produced a study that seemed to confirm the relationship. Apparently unbeknownst to them (believe it or not), energy efficiency and clean energy are not the same thing. <a data-mce-href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" style="color: #24890d; text-decoration: none;" title="Energy Efficiency – Killing Us Softly">Energy Efficiency is pointless</a> as a primary objective, from financial, economic and environmental points of view, not to mention it is pointless with respect to building property values, for it produces diminishing returns. Only renewable energy will reduce GHG-emissions, and only renewable energy is an investment, because it moves energy from liabilities to assets.</div>
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The choice is between fossil fuels or renewable energy, and whatever system you choose, you want to make it as efficient as is economically feasible. The choice is not, not ever, between energy efficiency and renewable energy. If the PACE folks had focused on Clean Energy as the name implies they would have convinced Fannie and Freddie hands down to not only allow PACE (with restrictions), but to promote renewable energy retrofits with PACE finance as constructive to asset values. The only thing holding it back was the absence of an effective underwriting policy. With our (see www.dabxdemandsidesolutions.com) Green Underwriting 2.0 initiative, we have proposed an alternative that focuses on projects with in excess of 50% GHG-reduction, which would help building values, increase resilience, and could only be done with various types of <a data-mce-href="http://www.vliscony.com/2013/05/26/compound-returns-renewable-energy/" href="http://www.vliscony.com/2013/05/26/compound-returns-renewable-energy/" style="color: #24890d; text-decoration: none;" title="Compound Returns from Renewable Energy">renewable energy</a> solutions, because they offer compound returns, particularly if more than one type can be implemented.</div>
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Energy Efficiency: the lightbulb moment</h2>
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<a data-mce-href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" href="http://www.vliscony.com/2014/03/18/energy-efficiency-killing-softly/" style="color: #24890d; text-decoration: none;" title="Energy Efficiency – Killing Us Softly">Energy Efficiency</a> is the prevailing religion, but it is financially disastrous and environmentally regressive. It buys short-term gains with long-term financing, and creates a temporary lift which masks the fact that the underlying problem gets worse. If our problem is emitting green house gases (GHGs), then the solution cannot be to make it cheaper to burn more GHGs, and thereby expand the market, and encourage people to keep on emitting them for longer periods of time. Doing so, the problem becomes more entrenched. The solution must be to switch to renewable energy as fast as possible. And the way you do that in a capitalist system is focusing on the low hanging fruit, meaning the most profitable projects, not with <a data-mce-href="http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/" href="http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/" style="color: #24890d; text-decoration: none;" title="Renewable Energy Policy in the Soviet Republic of New York">soviet-style 20 year plans</a> that never work. Energy efficiency is pointless, and causes capital destruction because of diminishing returns.</div>
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A simple lightbulb can demonstrate the point:</div>
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<li>We used to use a 60 Watt bulb that cost $1</li>
<li>We then switched to a 14 Watt CFL that cost $2 (actually a four pack at Home Depot today has them as low as $1.25). This savings was 46 Watts or 77%. At $0.35 per kWh, we saved $0.0161 per hour, and paid for it in 62 hours.</li>
<li>Now we are considering a switch to LEDs, which in the same range go for $15 at the moment. The incremental savings is 6 Watt, or 43% against the CFL, but only an incremental 10% against the original incandescent. At the same electrical rate we save $0.021 per hour, and pay for it in 3095 hours (8.5 years at 2 hrs a day).</li>
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In short, the first "energy-saving step" books impressive results for a small incremental marginal expenditure, and it makes obvious sense. The next step is financially absurd, because of the math of diminishing returns. Our further incremental investment buys us only a 10% savings off the original base consumption of 60 Watts. In dollars, it cost us $1 to save 46 Watts in step one, or $0.02 per watt saved. But in step two the price is $2.17 per watt saved. This is typical in energy efficiency spending, the first step or steps look good, but there is no economically viable follow-on. Many, if not most, government programs incentivize the first few steps of energy efficiency (my preferred example in NY is the NYSERDA MPP program), and leave the property owner stranded in a cul-de-sac, with no alternative but some day writing off most of what they did.</div>
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PACE finance for EE: Painting lipstick on a pig</h2>
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Renewable energy (Solar, Wind, Geothermal, Hydro, etc.) moves energy from liability to asset, and moreover if we can combine multiple technologies, or appropriate energy efficiencies, we can produce compound returns. Energy efficiency reduces, but does not eliminate a liability, but it can be made irrelevant easily, among others by the following:</div>
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<li>Growth in net-zero and near zero properties in the market, making the typical 15-25% efficiency "savings" all but irrelevant.</li>
<li>A few energy price hikes, or even if energy prices were to stay stable, the delivery cost of the grid may continue to increase (in NYC ca 65% of the bill).</li>
<li>Growing numbers of similar properties go the renewable route, and achieve 50-90% GHG-reductions, making the 15-25% reductions look paltry.</li>
<li>Any form of carbon taxation in the future. (Note e.g. that adaptation of the Baucus energy tax reform if it includes the demand side, like well it should, would indirectly have the same effect)</li>
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Energy efficiency is a limit function, and environmentally it is dubious, it produces a short-term gain, but a long-term increase in CO2 emissions. The problem becomes more entrenched, instead of coming closer to a solution. Financially, Energy Efficiency is a secondary issue, and operational savings, not a capital decision. The real choice is fossil fuels or renewable energy. And all the elements that make PACE financing attractive to investors are wasted, if they are used to dress-up energy efficiency loans. It's like putting lipstick on a pig.</div>
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<strong>PACE and EE: mismatched maturities</strong></h3>
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From a pure financial standpoint, the four points listed above, of how and why an "energy efficiency" investment can go sour very easily, all are variations on the theme that the financial value of the "investment" could evaporate easily, meaning that the effective ability to pay may be threatened over time. And thus it's the mismatch of short-term investments with long-term maturities which is the most pressing issue here.</div>
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PACE, as it was clearly intended and as its name implies, was meant to finance permanent capital improvements with long-term money, so that energy retrofits with longish paybacks could get done. Mostly the asset backed approach for the equipment does not tend to out too far. If PACE financing is wasted on energy efficiency projects, it will self-destruct sooner rather than later. PACE should be limited to projects with a principal focus on renewable energy, that clearly move energy from liability to asset, and therefore improve the underlying value of the property. That will ensure the viability of the project, if it is otherwise designed right. Typical projects should achieve 50% or better GHG-reductions. If this is not done, <strong>PACE finance has every potential of becoming the next sub-prime scandal, right along with <a data-mce-href="http://www.vliscony.com/2013/10/28/solar-ppas-impair-property-appreciation/" href="http://www.vliscony.com/2013/10/28/solar-ppas-impair-property-appreciation/" style="color: #24890d; text-decoration: none;" title="Solar PPAs Impair Property Appreciation">solar PPAs</a>.</strong></div>
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Conclusion</h2>
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PACE finance is a brilliant solution that is being misapplied by purposing it for short-term energy efficiency projects rather than long-term renewable energy projects.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-22998786524117989822014-03-18T15:01:00.000-07:002016-12-03T07:24:51.113-08:00Energy Efficiency, Killing Us Softly<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
St. Patrick's day reminded me that it is high time we learn to tell the real green from the fake stuff, beginning with energy efficiency, which has been unjustly conflated with sustainability, when in fact it does the opposite: it increases carbon emissions over time, except at a slower rate. It's high time the FTC should start taking on green washing, beginning with such seriously misleading names as the <a data-mce-href="http://www.coned.com/energyefficiency/" href="http://www.coned.com/energyefficiency/" style="color: #24890d; text-decoration: none;" target="_blank" title="ConEdison Greenteam">ConEdison Greenteam</a>. The fact is that, when energy efficiency is pursued without further qualification, and it is applied to systems that are 95% driven by fossil fuels, we are shooting ourselves in the foot with a bazooka. Making a bad system better will solve nothing, except making fossil fuels viable longer, instead of finding a real solution. The fact is, <strong>efficiency applies equally to fossil fuel-based systems or renewable energy systems, but only renewable energy systems can reduce GHG-emissions</strong>. So we are reminded once again, that it does not pay to major in a minor, or, in the words of the incomparable computer scientist Donald Knuth:</div>
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Premature optimization is the root of all evil.</blockquote>
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<span style="font-family: Verdana, sans-serif;">Here is the quote from Donald Knuth, discussed in an article, the <a href="http://ubiquity.acm.org/article.cfm?id=1513451" target="_blank">Fallacy of Premature Optimization</a>. The energy equivalent to this proposition is that:</span><br />
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<span style="font-family: Verdana, sans-serif;"><b style="background-color: yellow; font-style: italic;">Premature Energy Efficiency is the best prophylactic against deep energy retrofits. </b><span style="background-color: yellow;">Or, to but it more simply, if you pursue energy efficiency first, without regard to the long term energy plan for a facility, you will incur sunk costs, if nothing else because of diminishing returns.</span></span><br />
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Let me count the ways</h1>
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In no particular order, but with some attempt at logical grouping, here come all the reasons, with some links to other posts on this site or other sites where appropriate. A completely logical and progressive ordering is not feasible due to the interdependence of many of the items listed here.</div>
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<li>The obvious issue is that <strong>energy efficiency makes economic sense (to the extent that it is optimal) whether fossil fuel or renewable energy is used</strong>. <strong>Therefore, it is a secondary objective in an optimal design, not a primary one.</strong> The payback for efficiency comes from reduced energy bills in the future in the case of fossil fuels, or reduced capital expenditures in the present in the case of renewable energy (less installed capacity needed). Another way to state this is that energy efficiency does not <em>generate</em> energy: it is not an alternative method to generate energy.</li>
<li>Historically, the conflation of energy efficiency with "green" energy or sustainability, goes back to the energy crises of the 1970's. It was then thought, probably correctly, that the marginal dollar spent on reducing demand was more effective than investing it in increasing supply. The concept was enshrined by the thinking of Amory Lovins, who made the confusion complete by treating <a data-mce-href="http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCoQFjAA&url=http%3A%2F%2Fwww.forbes.com%2F2008%2F07%2F03%2Fenergy-efficiency-biz-energy_cx_db_0707efficiency_lander.html&ei=wlonU8_vLKGR0AHW7YDwCg&usg=AFQjCNG_s0ELp3byGtf5-54DASewdJnCkA&sig2=XD89USb0KLwgQeJONh3JUA&bvm=bv.62922401,d.dmQ" href="http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCoQFjAA&url=http%3A%2F%2Fwww.forbes.com%2F2008%2F07%2F03%2Fenergy-efficiency-biz-energy_cx_db_0707efficiency_lander.html&ei=wlonU8_vLKGR0AHW7YDwCg&usg=AFQjCNG_s0ELp3byGtf5-54DASewdJnCkA&sig2=XD89USb0KLwgQeJONh3JUA&bvm=bv.62922401,d.dmQ" style="color: #24890d; text-decoration: none;" target="_blank" title="Amory Lovins, The Fifth Fuel">energy efficiency</a> as the "fifth fuel." This type of thinking resulted in policy making that treats energy efficiency and renewable energy as interchangeable and complementary, or even additive, which most often is not the case, because <strong>different decisions would be made about energy efficiency in a fossil fuel infrastructure than in a renewable energy system</strong>. In truth, <strong>energy efficiency is not even an investment, it's a mere operational savings</strong>, and financially it should be treated accordingly. Renewable energy is truly an investment, a make versus buy decision, a permanent price hedge, and it improves building resilience, and adds value to the asset.</li>
<li>Then there is the famous <a data-mce-href="http://en.wikipedia.org/wiki/Jevons_paradox" href="http://en.wikipedia.org/wiki/Jevons_paradox" style="color: #24890d; text-decoration: none;" target="_blank" title="Jevons Paradox">Jevons paradox</a>, which in effect states that <strong>increased efficiency increases demand, and therefore does no such thing as conserving energy</strong>. Jevons was speaking about coal, and by and large his predictions came true, and are equally relevant today about oil and gas.</li>
<li>It gets better (or worse, depending on your point of view). Steve Hallett, in <em><a data-mce-href="http://www.amazon.com/gp/product/1616147253/ref=as_li_tf_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1616147253&linkCode=as2&tag=rogsblo-20" href="http://www.amazon.com/gp/product/1616147253/ref=as_li_tf_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1616147253&linkCode=as2&tag=rogsblo-20" style="color: #24890d; text-decoration: none;" target="_blank" title="Steve Hallett, The Efficiency Trap">The Efficiency </a><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">Trap</span>,</em> takes his perspective from biological/systems thinking, and notes not only that greater efficiency lowers the cost of the energy input and stimulates demand, but there are often knock-on effects. For example not only did we fly more as flying became more efficient, but we also built more airports, etc. The end result is that <strong>energy efficiency "improvements" make the problem worse, not better, </strong>and we have plenty of historical examples to show this. At the other end, exploration costs are going up all the time, so that the massive carbon deposits we theoretically still have are becoming less and less economical to exploit (even aside from the GHG-emissions question). In short, <strong>energy efficiency keeps carbon energy more economical for a longer period of time, and therefore increases GHG-emissions over time, which is the opposite of what we want</strong>. Hallett's conclusion is simply that the road to hell is paved with efficiency. In his words: "Efficiency promises to conserve, but actually consumes. Efficiency is a trap."</li>
<li>The Jevons paradox and the efficiency trap are bad enough on a macro level, but on an individual project basis we see that if we do our economics right you cannot save yourself rich: <strong><a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYSERDA MPP and Diminishing Returns">energy efficiency yields diminishing returns</a> whereas renewable energy generated on-site can bring compound returns</strong>. The truth quickly becomes evident if proper capital budgeting is done for the energy infrastructure of a building (home). Thus, within a given building retrofit, <strong>energy efficiency (of the fossil fuel-based infrastructure) competes against renewable energy. As long as payback of the equipment from marginal savings is used for decisions, energy efficiency will initially always seem to outperform renewable energy, but when 30-year cash flow analysis is used, renewable options often prove more attractive. Compound returns can be achieved from engineering synergies by integrating several technologies</strong>.</li>
<li>On the margin it is already clear that <strong>net-zero building is the healthiest construction sector</strong>, and has been so for several decades, regardless of economic cycles, and in downturns these buildings have kept their value better than other buildings. Since in the larger economic sense the rate of change at the margin drives valuation, it should be clear that <a data-mce-href="http://www.vliscony.com/green-finance-property-value/" href="http://www.vliscony.com/green-finance-property-value/" style="color: #24890d; text-decoration: none;" target="_blank" title="Green Finance and Property Value">fossil fuel buildings are going to continue to lose value</a> at an accelerating rate.</li>
<li>Therefore, any older buildings worth preserving should switch to renewable energy and attempt to become net-zero or near-zero, and<strong> buildings that cannot make the switch to renewable energy will be the slums of the future</strong>, and ultimately headed for demolition. Along those lines the current fashion (think NYC Clean Heat) of switching fuels mostly from coal and heavy fuel to natural gas, amounts to <a data-mce-href="http://www.vliscony.com/2013/08/20/nyc-clean-heat-capital-destruction/" href="http://www.vliscony.com/2013/08/20/nyc-clean-heat-capital-destruction/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYC Clean Heat Amounts to Capital Destruction">capital destruction</a>. The same applies for energy efficiency initiatives such as New York's Local Law 84/87/88: these measures constitute majoring in a minor, and therefore guarantee failure in the form of strongly suboptimal outcomes, including, at the extremes, the preservation of some buildings that should be demolished, and the failure to convert other buildings to renewable energy when they have the potential.</li>
<li>A systems approach is needed, and almost all policies and incentives have been targeted at the technology (widgets) level, not the system level. The smallest system, the economic atom of real estate is a single property (house, building), and above that are neighborhoods, towns, cities, regions, states, countries, and eventually the whole world. In some cases regional planning can be very effective, but we should engage everyone from the smallest economic unit of a single property on up. Incentivizing specific technologies leads to market distortions and bad engineering. <a data-mce-href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" style="color: #24890d; text-decoration: none;" target="_blank" title="Look Ma, We’ve Got a Solar PPA!">Solar PPA</a>'s are a case in point. At 17% efficiency, Solar PV should be the last choice, as solar thermal is 98% efficient (or arguably more, because process heat is easy to store for intra-day usage, which gives you higher returns than selling your kWh's back to the grid or using expensive chemical batteries).<br /><strong>Incentives for individual widgets reinforce a bad financial habit of evaluating options based on the payback of the equipment from energy savings, which flies in the face of optimal design on the level of the property as a whole</strong>. The <a data-mce-href="http://www.vliscony.com/2014/01/05/energy-tax-reform-ghg-emissions/" href="http://www.vliscony.com/2014/01/05/energy-tax-reform-ghg-emissions/" style="color: #24890d; text-decoration: none;" target="_blank" title="Baucus Energy Tax Reform Misses with GHG-emissions Reduction">Baucus energy tax proposal</a> focuses on overall GHG-reductions, but so far addresses only the supply side of the grid. Clearly, the demand side should be included due to the huge potential for generating energy on-site with renewable energy.</li>
<li>Green finance, so-called, has been a mixed bag of various flavors of asset backed lending, justified by the fact that it is theoretically "low risk" because it offers what are deemed to be largely self-liquidating propositions, based on energy savings. This is a complete fallacy, and energy efficiency loans and solar PPAs may be the subprime loan scandal of future years. In many cases it is the ease of finance, ease of installation (solar PV!), and Wall Street greed, fueled by misplaced incentives, which are fleecing property owners of their equity, locking them into a suboptimal solution. They waste their roof space, and borrowing capacity when with the same space, using solar thermal (98% efficient), they could have easily provided complete HVAC, reduced GHG-emissions by over 50% while homes and buildings become much more valuable in the process.</li>
<li><a data-mce-href="http://www.vliscony.com/2013/07/05/fallacies-energy-efficiency-loans/" href="http://www.vliscony.com/2013/07/05/fallacies-energy-efficiency-loans/" style="color: #24890d; text-decoration: none;" target="_blank" title="The Fallacies of Energy Efficiency Loan Securitization">Securitization of energy efficiency loan portfolios</a> has already encountered some headwinds, and these issues will only become more evident as analysts learn to understand the absence of a sound economic foundation. The typical 15-25% "energy savings," is easily wiped out by both energy price hikes (the winter of 2014 gave us a taste of that!), and by comparable buildings going the renewable route and eliminating 50-90% of their energy bills, and GHG-emissions. (See #6 above).</li>
<li>The combination of technology-level incentives (such as tax incentives based on Energy Star ratings), and decision making based on marginal payback of equipment, and partial solutions, lead to either the wrong decisions from a whole building level, in some cases such that they lock buildings out of other, superior solutions, or else they risk "cherry picking" a whole building solution - which benefits the financiers who want to write "easy loans," but rob the building owners of the potential to add value.</li>
<li>Policies which limp on the dueling concepts of Energy Efficiency and Renewable Energy recall the roulette player who puts equal amounts of black and red. <strong>Treating Energy Efficiency as an alternative to Renewable Energy, or as a proxy for GHG-reductions ensures policy failure</strong>.</li>
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New York State Energy Plan</h2>
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The review period for the <a data-mce-href="http://energyplan.ny.gov/Plans/2014.aspx" href="http://energyplan.ny.gov/Plans/2014.aspx" style="color: #24890d; text-decoration: none;" target="_blank" title="2014 New York State Draft Energy Plan">2014 Draft New York State Energy Plan</a> is still open, and I have supplied my comments along the lines indicated here. On the whole, the plan has the laudable objective of 50% GHG-reductions by 2030 and 80% by 2050, but otherwise continues the errors that have ensured past policy failure by including energy efficiency and fuel switching in the options. Both of these options are environmentally counterproductive, and ensure minor GHG-reductions in the short term at best, and of course, if we want to achieve the objective of 50% GHG-reduction by 2030 and 80% by 2050, we should focus only on projects that can achieve over 50% GHG reduction. Therefore, neither fuel switching nor energy efficiency should be in the plan.</div>
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Letting the market take care of energy efficiency</h2>
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There is huge potential for renewable energy retrofits that can produce 50% or better GHG-reductions right away, and more later, and in ways that make economic sense today, if property owners make use of the right decision-making models. The EPA provides the <a data-mce-href="http://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/use-portfolio-manager" href="http://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/use-portfolio-manager" style="color: #24890d; text-decoration: none;" target="_blank" title="EPA Energy Star Portfolio Manager">Energy Star Portfolio Manager</a> to assess projects on a whole building basis, and the resulting models should be evaluated based on a 30-year CAPM cash flow analysis. This will quickly show that <strong>many renewable options that seemed expensive are actually economical based on the long tail of zero energy bills, while the 15-25% "energy savings" from energy efficiency upgrades will quickly be found wanting, unless some of them can be integrated to directly increase the payoff from renewable energy options.</strong></div>
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In short, competitive pressures will become more effective if policies and incentives support renewable energy first, and leave it to fossil fuel companies and their customers to work out arrangements for energy efficiency wherever it is economically justifiable.</div>
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Conclusion</h1>
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We are now experiencing a paradigm shift from the fossil-fuel era to the renewable era, and there is huge potential for quantum improvements, even on a building retrofit basis. The major impediment to GHG-reductions is not technology but proper financial analysis along with incentives and programs that reinforce the wrong decisions. In short, as in any other paradigm change, it is our thinking that gets in the way, but that can be corrected. Once you get it, it's obvious. <strong>The 2014 New York State Energy Plan should focus on Renewable Energy, and leave Energy Efficiency to the market.</strong></div>
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RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-71038468256901148202014-03-01T14:57:00.000-08:002015-06-11T15:00:21.701-07:00Renewable Energy, the Star of the Show<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
Renewable Energy has been the step-child of energy policy, which has been dominated by <a data-mce-href="http://en.wikipedia.org/wiki/Efficient_energy_use" href="http://en.wikipedia.org/wiki/Efficient_energy_use" style="color: #24890d; text-decoration: none;" target="_blank" title="Wikipedia on Energy Efficiency">Energy Efficiency</a> (EE). This emphasis on EE is really a relic of the energy crises of the last century, when it was thought the cost of energy and energy independence were the issue, and not so much the environmental dimension. Times have changed. Reducing Green House Gas emissions (<a data-mce-href="http://en.wikipedia.org/wiki/Greenhouse_gas" href="http://en.wikipedia.org/wiki/Greenhouse_gas" style="color: #24890d; text-decoration: none;" target="_blank" title="Wikipedia on Green House Gas">GHG-emissions</a>) now has taken center stage. <a data-mce-href="http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/" href="http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/" style="color: #24890d; text-decoration: none;" target="_blank" title="Renewable Energy Policy in the Soviet Republic of New York">Renewable Energy</a> (RE) is the only path that will get us the reduction in GHG-emissions which are now generally seen as a priority. <strong>The simple truth is that Energy Efficiency is not a generating technology, it only improves the performance of whatever system you have, be it based on fossil fuels, or based on renewable energy, therefore, it is equally applicable to both.</strong> The only real choice is between Fossil Fuels (FF) and Renewable Energy (RE), and RE is what we want, not more FF, or for our addiction to FF to last longer.</div>
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In the public dialog, and in public policy, EE is mostly treated as an end in itself, which results in policies that achieve the opposite of what we want to achieve, assuming that a reduction of GHG-emissions is really our goal. The reason for this is simple. Our existing systems are overwhelmingly based on Fossil Fuels, and if you improve them with EE, you are throwing good money after bad by making FF economically more attractive. If we make fossil fuels cheaper to use, people will use more of them and will use them for a longer time, which is strongly regressive for climate risk. If the government is subsidizing EE without further qualification, they are subsidizing the fossil fuel industry, which is the opposite of what they want to do.</div>
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<strong>The only rational policy towards GHG-reductions is one that minimizes GHG-emissions through Renewable Energy, and leaves it to the Fossil Fuel industry and their customers to make their systems as efficient as possible. It is not rational to subsidize Fossil Fuels indirectly by subsidizing Energy Efficiency without qualification.</strong></div>
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Renewable Energy Failure in NYC</h1>
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Despite many signature projects that demonstrate what's possible, New York City overall has fallen into the trap of prioritizing EE, hand in hand with state programs like NYSERDA, as well as various federal programs. Even worse, the NYC Clean Heat program diverted a large portion of the housing stock to natural gas for heat, in a laudable attempt to reduce particulates emissions and GHG-emissions, but by doing so missed the opportunity to begin the serious conversion to RE, which would have produced quantum advances in reducing GHG-emissions. As we now know, the switch from coal to gas, and from heavy fuels to gas, yield no reductions in GHG-emissions, except a displacement. So nominally NYC wins a little in the short run, but in the long run it is meaningless.</div>
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Typical EE projects yield 15-25% reductions in energy costs, mostly "savings" on fossil fuel bills, and these seem easily justifiable, however in many cases we are missing the opportunity for radical conversions to RE, which could easily produce over 50% reductions in GHG-emissions, and be financially successful for building owners, far more so than the EE projects that are now the norm. <strong>If proper capital budgeting were utilized throughout, it would become quickly apparent that in many cases integrated RE solutions for buildings have superior long-term economics, and PACE financing is a readily available vehicle to address the heavy up-front capital investment required for these projects. </strong>Simply put, every RE component we can retrofit in a building comes with a lifetime of no energy bills equivalent to the amount of energy it provides.</div>
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In the winter of 2014 New Yorkers paid the price for the massive shift to natural gas. Electricity in January 2012 was 7 cents/kWh (ConEd), in 2013 it was 13 cents and in 2014 it was 22 cents. Winter normally had low electric rates, now it has some of the highest rates of the year. <strong>New York City has become massively, recklessly and unnecessarily dependent on a single fuel: natural gas.</strong> Building resilience has been made infinitely worse as a result, while at the same time we're spending money on improving building resilience. The single biggest thing we could do for building resilience is to stop converting buildings to natural gas, and encourage them to switch to renewable energy instead.</div>
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It's all economics and finance</h1>
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The problem is not technology, there are more options every single day, The big things that are holding us back are practicing proper economic and financial analysis, to understand how rewarding RE retrofits really are. <strong>Thirty years worth of free energy will beat out 15-25% energy savings in most projects</strong>, especially if there are integration opportunities that produce legitimate engineering synergies which compound the returns from individual technologies. That geothermal heat pump combined with a wind turbine, or solar PV, becomes an energy harvesting system, and hot water storage tanks are cheaper and more environmentally friendly than batteries.</div>
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The primary importance of economics and finance is driven home forcefully by the fact that the <a data-mce-href="http://energyplan.ny.gov/Plans/2014.aspx" href="http://energyplan.ny.gov/Plans/2014.aspx" style="color: #24890d; text-decoration: none;" target="_blank" title="2014 Draft New York State Energy Plan">2014 Draft New York State Energy Plan</a> cites the inroads of solar PV on Long Island as a success. This is a success that is driven by Asset Backed Lending/Leasing based on marginal energy savings, and achieves shallow results, compared to what could be done if financial analysis were done right, and projects were engineered for the long-term. If property owners were to use proper capital budgeting techniques and did 30 year models, there is no way that 17% efficient solar PV should win over 98% efficient solar thermal installations. People are saving 10% on their electric bill, when with the same roof space they could do central HVAC and Domestic Hot Water for their entire property. This approach is more work, so it does not get done, but we as a society lose. Property owners who sign for these <a data-mce-href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" style="color: #24890d; text-decoration: none;" target="_blank" title="Look Ma, We’ve Got a Solar PPA!">solar panels</a> in most cases miss an opportunity for a major value enhancement to their properties.</div>
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C40Cities needs to prioritize renewable energy</h2>
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I have submitted an <a data-mce-href="http://bit.ly/1fvLWbu" href="http://bit.ly/1fvLWbu" style="color: #24890d; text-decoration: none;" target="_blank" title="Open Letter to C40Cities">Open Letter to C40Cities</a> in hopes that this group will start addressing these issues, and not have the rest of the world repeat the mistakes that were made in New York. Appearances always deceive, and this case is no different: in the short run some reductions in GHG-reductions were realized, but because it all came from EE and from fuel switching, it merely extends the reign of fossil fuel and is therefore regressive with respect to climate risk in the long run.</div>
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Will New York become a leader in renewable energy?</h2>
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Recently, I submitted an <a data-mce-href="http://www.vliscony.com/2013/10/13/new-york-green-bank/" href="http://www.vliscony.com/2013/10/13/new-york-green-bank/" style="color: #24890d; text-decoration: none;" target="_blank" title="New York’s Green Bank">open letter to Governor Andrew Cuomo</a> pertaining to the Green Bank. The Green Bank initiative could be coming at the right time for Mayor de Blasio, who has an interesting challenge. To his eternal credit, Mayor Bloomberg got climate change and energy policy the attention it deserved, but some key programs have been counterproductive, even if that is not widely recognized as yet. I have documented these issues with an <a data-mce-href="http://www.vliscony.com/2014/02/20/nyc-energy-efficiency-paralysis-open-letter-mayor-de-blasio/" href="http://www.vliscony.com/2014/02/20/nyc-energy-efficiency-paralysis-open-letter-mayor-de-blasio/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYC Energy Efficiency Paralysis – Open Letter to Mayor de Blasio">open letter to Mayor de Blasio</a>. Further clues are in my letter to C40Cities. Clearly, there is a big opportunity for the de Blasio administration to change course with some of the programs that have us going backwards instead of forwards. The opportunity for New York City to become a leader in this area is certainly there. Our infrastructure lends itself to rapid progress, but it will require the necessary regulatory changes to enable such developments, for besides bad financial analysis, regulatory hurdles are the principal brake on a breakthrough to clean energy.</div>
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Conclusion: Lasting Reductions in GHG-emissions from Renewable Energy</h3>
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It is time to break the stranglehold of the fossil fuel era by pursuing renewable energy breakthroughs that are well within reach, but often ignored, because EE seemed "cheaper" and "easier." Heretofore, we did not realize that the short-term reductions in GHG-emissions from Energy Efficiency would ensure long-term losses. <strong>Therefore, the time has now come to focus on creating the breakthroughs in renewable energy with projects that achieve in excess of 50% reductions in GHG-emissions, and New York City can certainly become a leader in the context of the C40Cities, much to the benefit of its citizens.</strong></div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-51282150012682025982014-02-20T06:33:00.000-08:002015-06-11T06:37:03.279-07:00NYC Energy Efficiency Paralysis - Open Letter to Mayor de Blasio<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
<a data-mce-href="http://www.vliscony.com/2014/02/02/energy-efficiency-trap-ghgreductions/" href="http://www.vliscony.com/2014/02/02/energy-efficiency-trap-ghgreductions/" style="color: #24890d; text-decoration: none;" target="_blank" title="The Energy Efficiency Trap and GHG-reductions">Energy Efficiency</a> (aka EE) is the most confusing issue in the entire green dialog. It is about time that the <a data-mce-href="http://www.greenmarketing.com/blog/comments/FTC-Green-Guides-Report/" href="http://www.greenmarketing.com/blog/comments/FTC-Green-Guides-Report/" style="color: #24890d; text-decoration: none;" title="Training on the FTC Greenwashing Claims">FTC took action</a> against anyone claiming that energy efficiency is green all by itself. It depends. If you make a fossil-fuel-based system more efficient, arguably you are reducing GHG-emissions somewhat, but that is seriously deceptive: you are simply extending the competitiveness of fossil-fuels, which is the opposite of what we want to achieve, if reducing GHG-emissions is the objective. If reducing GHG-emissions is what we want, that should be the focus, and Site Derived Renewable Energy (SDRE) is the only real answer.</div>
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Most programs nationwide are still stuck in the 1970's energy crisis. At that time, it was thought the issue was simply energy economics, which could be addressed by cleverly realizing that a dollar spent on reducing demand had more of an effect than a dollar spent on increasing supply. The environmental dimension, Green House Gas-emissions was not really on the radar yet. Also, there were not as many building-mounted renewable technologies available as there are today. But efficiency of fossil fuel systems has overstayed its welcome, and is not a major concern for a "green" future. Local Laws 84/87/88 need an overhaul for shifting the focus to SDRE, based on proper capital budgeting for energy infrastructure, not incremental spending on marginal efficiency of fossil fuel-based systems, which leads to <a data-mce-href="http://www.vliscony.com/2013/08/20/nyc-clean-heat-capital-destruction/" href="http://www.vliscony.com/2013/08/20/nyc-clean-heat-capital-destruction/" style="color: #24890d; text-decoration: none;" title="NYC Clean Heat Amounts to Capital Destruction">capital destruction, not building appreciation</a>--as explained in many ways on this blog.</div>
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PlaNYC was a Breakthrough of Sorts</h2>
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PlaNYC was a breakthrough in beginning to take these issues seriously, but it was heavily compromised by the old efficiency paradigm, and ended up putting marginal energy savings front and center. At some point particulates emissions from #6 and #4 oil became another bad proxy for GHG-reductions. This was merely another diversion from the real issue, and the NYC Clean Heat program was the result, causing a rapid shift to natural gas, resulting in an ominous city-wide dependence on a single fuel. Moreover, by the time of this writing it is accepted wisdom that natural gas is about as polluting as coal, when you add in the losses of methane in production and transportation.</div>
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Renewable Energy in NYC under Mayor de Blasio?</h1>
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We can only hope so. The time has come. I come from the school of hard knocks, having learned as a home owner that I unthinkingly spent myself silly on <span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">energy efficiency</span> for two decades, without accomplishing anything. At long last, in recent years I finally began to think about the problem more seriously, and since then the issues have become clear to me. NYC has another chance with another administration. Will we move to the new paradigm? I decided that at the very least I should throw in a suggestion or two in the form of an <a data-mce-href="http://bit.ly/1bXQLHz" href="http://bit.ly/1bXQLHz" style="color: #24890d; text-decoration: none;" target="_blank" title="Open Letter to Mayor Bill de Blasio">Open Letter to Mayor Bill de Blasio</a>.</div>
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Alternatives to PLaNYC: Pushing Renewable Energy</h3>
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The open letter to Mayor de Blasio focuses primarily on the NYC Clean Heat program, and the very deleterious spate of natural gas conversions it has brought about. It touches upon the mistaken economics that have driven other elements of PlaNYC, such as Local Law 84 (actually, both LL84 <em>and</em> LL87). These regulations simply push efficiency, and thereby assure the opposite of what they would accomplish: they serve to extend the rule of fossil-fuels with marginal energy savings, and have building owners fritter away capital on incremental improvements, instead of investing it in SDRE.</div>
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Energy efficiency is mostly about guilt-free shopping, which is why manufacturers love the Energy Star label, but it does nothing to solve the GHG-emissions problem. Instead, it makes it more intractable by making fossil fuels economical longer. Below I am providing a series of explanatory notes to the Open Letter, some additional comments, and some references that may be helpful.</div>
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Notes and References for Open Letter</h2>
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<li>NYC Clean Heat is regressive: By now even the <a data-mce-href="http://sierraclub.typepad.com/michaelbrune/2012/02/the-sierra-club-and-natural-gas.html" href="http://sierraclub.typepad.com/michaelbrune/2012/02/the-sierra-club-and-natural-gas.html" style="color: #24890d; text-decoration: none;" title="Sierra Club comes back from position on Natural Gas">Sierra club</a> is coming back from its advocacy for natural gas over coal (remember Bloomberg donated $50mln for that campaign in 2011?). The evidence is overwhelming that switching to <a data-mce-href="http://thinkprogress.org/climate/2014/02/19/3296831/natural-gas-climate-benefit/#" href="http://thinkprogress.org/climate/2014/02/19/3296831/natural-gas-climate-benefit/#" style="color: #24890d; text-decoration: none;" target="_blank" title="No Hope in Natural Gas....">natural gas is regressive</a> for climate change. So converting buildings from #6 and #4 oil to natural gas was a subsidy to the gas industry, and capital destruction for the owners of buildings. SDRE retrofits could have given building values a serious boost, instead of just some small time energy savings at best.</li>
<li>The <a data-mce-href="http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft" href="http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft" style="color: #24890d; text-decoration: none;" target="_blank" title="DaBx PlaNYC2020 Draft Report">DaBX PlaNYC2020</a> report was an alternative plan to maximize Site Derived Renewable Energy, and make real reductions in GHG-emissions. We focused on NYC's old line C- and D-class apartment buildings, all in all some 15,000 buildings, a large percentage of which might be able to do such retrofits. We pointed out that these conversions should be done over 5-10 years to maximize the value of existing plant. We emphasized proper capital budgeting techniques to make the right long-term economic decisions.</li>
<li>The Urban Green Council later made a more general case with their <a data-mce-href="http://www.urbangreencouncil.org/90by50" href="http://www.urbangreencouncil.org/90by50" style="color: #24890d; text-decoration: none;" target="_blank" title="UGC 90 by 50 Report">90 by 50 report</a> describing generalized solutions across all major building types in the city. The report reinforced the important point that the optimal way of implementing retrofits is over time, by leveraging the economic life-cycle of building energy infrastructure components. Forcing everything to be done at once makes projects uneconomical. The report emphasizes generating renewable energy on site as well, but fails to understand the deleterious economics that result from the focus on marginal energy savings.</li>
<li><a data-mce-href="http://www.vliscony.com/2014/01/28/geothermal-heat-pumps-strategic-renewable-nyc/" href="http://www.vliscony.com/2014/01/28/geothermal-heat-pumps-strategic-renewable-nyc/" style="color: #24890d; text-decoration: none;" target="_blank" title="Geothermal Heat Pumps Strategic Renewable for NYC">Geothermal energy</a> is strategically important. It is in fact the single most powerful SDRE option for energy retrofits in NYC. New York's bedrock is an ideal substrate, and with 400% efficiency, nothing beats it: 1 joule of energy in (electrical) yields 4 joule output (heat). At a minimum, buildings can do a Domestic Hot Water solution, but the design needs to be optimized for harvesting of energy, either from time of use metering, or from wind turbines or solar PV. Whenever feasible, it should be part of energy retrofits because of the energy storage capability. In exceptional cases (if there are sufficient grounds), it may be able to provide the total BTU load for buildings. Remember insulation helps too!</li>
<li>Solar thermal is a hands down winner at 98% efficiency, and no PV should ever be considered (17% efficiency) if you can do solar thermal at all. The point of generating electricity is that it can be easily transported, but when generating renewable energy on site, you don't have a transportation problem, and retrofitting is becoming easier all the time, although on balance a thermal retrofit is harder than PV. There are many ways conversions can be done towards integrated HVAC even in older buildings, given today's hydronic air handlers, etc. With the forecasts of <a data-mce-href="http://www.eurekalert.org/pub_releases/2009-08/cc-tdd081909.php" href="http://www.eurekalert.org/pub_releases/2009-08/cc-tdd081909.php" style="color: #24890d; text-decoration: none;" target="_blank" title="Three times the heat by 2050">3x more 90 degree days</a> in summer by 2050, the time is now to start planning that transition, for buildings that don't offer centralized HVAC will be marked for demolition sooner or later. The old model based on window air conditioners is past its prime.</li>
<li>Hydronic heat is more energy efficient. Yet with the NYC Clean Heat program, in most cases, buildings have just switched from oil to gas, and continue to heat with steam. What is needed is a thorough understanding of the economics of conversion to hydronic systems, which in turn ties in with the potential for solar thermal and geothermal. Here is a report from NYSERDA, documenting up to 40% energy savings by <a data-mce-href="http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&ved=0CGIQFjAD&url=http%3A%2F%2Fwww.taitem.com%2Fwp-content%2Fuploads%2FCS-EB-Steam-boiler-replacements-5-14-09.pdf&ei=EesFU6_PMcamygHP3IDICQ&usg=AFQjCNGtD4BzhlfzazqrqkJHy830HJYPOQ&sig2=7oohr7TYVNIWju9o9Z63OA&bvm=bv.61725948,d.aWc" href="http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&ved=0CGIQFjAD&url=http%3A%2F%2Fwww.taitem.com%2Fwp-content%2Fuploads%2FCS-EB-Steam-boiler-replacements-5-14-09.pdf&ei=EesFU6_PMcamygHP3IDICQ&usg=AFQjCNGtD4BzhlfzazqrqkJHy830HJYPOQ&sig2=7oohr7TYVNIWju9o9Z63OA&bvm=bv.61725948,d.aWc" style="color: #24890d; text-decoration: none;" target="_blank" title="NYSERDA MPP documenting 40% energy savings converting from steam to hydronic heat.">switching from steam to hydronic systems</a>.</li>
<li><a data-mce-href="http://www.getsmartenergy.com/windsphere/" href="http://www.getsmartenergy.com/windsphere/" style="color: #24890d; text-decoration: none;" target="_blank" title="Windsphere(tm) from Green Energy Technologies">Building mounted wind turbines</a> are coming of age and typically offer more bang for the buck than solar PV, if the building has the right location to use wind energy. Then, there are <a data-mce-href="http://en.wikipedia.org/wiki/Photovoltaic_thermal_hybrid_solar_collector" href="http://en.wikipedia.org/wiki/Photovoltaic_thermal_hybrid_solar_collector" style="color: #24890d; text-decoration: none;" target="_blank" title="Wikipedia on Solar PV/Thermal Systems">hybrid solar PV/Thermal (PVT)</a> systems which leverage the best of both solar technologies. In other words, SDRE, Site Derived Renewable Energy, is becoming increasingly realistic for retrofits, especially when considering that in a building you can harvest thermal energy in a variety of ways, as pre-heated hot water from geothermal or as high temperature process heat from solar thermal. All such designs solve the biggest problem of renewables, energy storage. Within a building, bridging the daily cycles does not need to be a problem.</li>
<li>Along the fourth dimension: timing is everything. One of the ways NYC Clean Heat is very regressive, is because it once more ignores the factor of time, and aims for a one time conversion for a short-term goal, which moreover now proves elusive, once we realized that the environmental benefit of natural gas is nil. The tie-in of this program with the NYSERDA MPP reinforces that short-term orientation. Long-term building economics dictate that you should generally not replace things before their time. What should be done is long-term planning for an SDRE retrofit, so that at every step of the way, you can pre-engineer the next steps. Both our DaBx PlaNYC2020 and the UGC 90 by 50 report advocate this longitudinal approach, but you need to make the plan first, otherwise you will be designing yourself into a corner.</li>
<li>Exemptions from NYC Clean Heat. Once it is understood that far greater advances in the reduction of GHG-emissions are possible with onsite renewable energy, the city should encourage exemptions on that basis, and give buildings 10 or 20 years to comply, provided they start out with a project that yields at least 30-50% reductions in GHG-emissions. Anything above 30% GHG-reductions can generally not be done with energy efficiency alone. The beauty is, that if it's planned right, SDRE will yield superior building economics, and thus increase building values, so that building preservation is ensured with SDRE conversions.</li>
<li><a data-mce-href="http:/http://www.nyc.gov/html/sirr/html/report/report.shtml" href="http://www.vliscony.com/http://www.nyc.gov/html/sirr/html/report/report.shtml" style="color: #24890d; text-decoration: none;" target="_blank" title="Building Resiliency in NYC">Building resiliency</a> is a central point. In the new flood zones, building resilience is mandatory, and in a much more profound way than discussed here. Resilience is a value that ensures buildings can stay at least partially functional in an outage. The switch to natural gas has undermined building resilience in a disastrous way, and it should be reversed as soon as possible.</li>
<li>The disaster of becoming overly dependent on natural gas was amply demonstrated in the winter of 2014. Not only were heating bills going up, but more and more electricity is generated with natural gas also, and while january in the past was normally the low season for electrical rates, in 2014 rates were at an all-time high. For my own apartment the ConEdison (spot/variable) rates were ca 7 cents/kWh in 2012, 13 cents in 2013, and 22 cents in 2014.</li>
<li>NYC did not have any pipeline ruptures in 2014, as happened in the Midwest. But the city has a very constrained gas distribution system, depending on a few major pipelines, and there are no backup storage facilities (off-shore LNG anyone?). New York production of natural gas is also coming to a stand-still because of environmental concerns.</li>
<li>PACE financing is the obvious means that is in place already, and NYC will need it. It is politically a worthwhile project to support as long as it is tied to projects that accomplish at least 30-50% GHG-reductions initially. Once owners have the taste, and make proper long-term capital plans for energy, the potential for building appreciation is enormous. For at every level, if you can generate your own energy on site, that investment in SDRE is a permanent energy price hedge. 50% is really the optimal point to strive for in the initial project, since then the building is "over the hump" with dependence on fossil fuels.</li>
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Converting PlaNYC from communism to capitalism</h2>
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PlaNYC as is, as well as other similar plans everywhere, operate in the central-planning style of the infamous 20 year plans of the former Soviet Union, which were designed to fail, as I've argued <a data-mce-href="http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/" href="http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/" style="color: #24890d; text-decoration: none;" target="_blank" title="Renewable Energy Policy in the Soviet Republic of New York">here</a>. The mistake is to take the macro view of "energy efficiency" and then ram it down to the micro level with laws and incentives, instead of to engage the economic self-interest of property owners. <strong>Property owners should be in the business of maximizing property values, and government- the public interest- should incentivize reductions in GHG-emissions.</strong> Energy efficiency is not a proxy for GHG-reductions. Energy efficiency of fossil fuel systems makes GHG-emissions more intractable, so if we subsidize it, we indirectly subsidize the fossil fuel industry.</div>
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The energy benchmarking and audits of LL84/87 are a positive. The requirements to tinker with marginal efficiency improvements without totally rethinking the system is regressive, and bad policy. The market might take care of it - or at least need a lot less help than we're spending now on making building owners do things they don't want to do. Net zero construction has been healthier than any other area of construction for many decades, net zero or near zero buildings keep their values better than anything. Once we get building owners to perform serious renewable retrofits, the economics will force others to comply, or die. The simple fact is that with today's technology, 80-90% reductions are possible in many existing buildings, if the buildings follow a deliberate renewable retrofit strategy--the 90 by 50 report from Urban Green Council demonstrates the point. The first project should be in the 30-50% (GHG-reductions) range, and that is more than any energy efficiency project can do. Competitively, the pressure will be on.</div>
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Conclusion: Renewable Energy over "Energy Efficiency"</h2>
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Once more, energy efficiency tends to mean making fossil fuel systems more efficient, and that is not a worthwhile goal for public support. PACE finance is an option that will enable the massive capital investments needed, to facilitate <a data-mce-href="http://www.vliscony.com/2013/05/25/liability-asset-renewable-energy/" href="http://www.vliscony.com/2013/05/25/liability-asset-renewable-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="From Liability to Asset with Renewable Energy">moving energy from liabilities to assets by means of SDRE</a>. The focus needs to shift from energy efficiency of fossil fuel systems to site derived renewable energy and the city can exceed the parameters of PlaNYC completely if it does so.</div>
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RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-5233018089812274632014-02-02T06:29:00.000-08:002015-06-11T06:31:56.393-07:00The Energy Efficiency Trap and GHG-reductions<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
<a data-mce-href="http://en.wikipedia.org/wiki/Efficient_energy_use" href="http://en.wikipedia.org/wiki/Efficient_energy_use" style="color: #24890d; text-decoration: none;" target="_blank" title="Wikipedia on Efficient energy use">Energy efficiency</a> as a single objective is a trap, because it prevents us from pursuing renewable energy and truly make inroads against GHG-emissions. Any user of energy, and that's all of us, would want his systems to be efficient. But if your energy systems are 80-90% based on fossil fuels, and you subsidize energy efficiency without further qualification, you are subsidizing the fossil fuel industry. Allegedly this is not what we're trying to do, but it is what we are doing, and the shareholders of ConEdison, Exxon/Mobil, Shell OIl, BP and others thank you very much for your support. I'm doing it for them here, because they seldom acknowledge all of these subsidies. But, energy efficiency grants and other financial subsidies should stop, if anybody, it's the carbon energy industry who should offer financial incentives to their customers to become more efficient, as a matter of customer retention.</div>
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There are in fact two columns to the energy decision for a property, which in an existing building amount to either the status quo, which usually means fossil fuel based, and the alternative being predominantly renewable energy based, with the ideal case being net zero. Regardless of which strategy you pursue you want to be efficient. The difference is that with energy from the grid your payback from efficiency comes from reduced energy bills in the future, whereas with renewable energy, the payback is a reduction in the installed capacity you need in the first place.</div>
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The Energy Efficiency Trap</h2>
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In his recent book, <a data-mce-href="http://www.amazon.com/gp/product/1616147253/ref=as_li_qf_sp_asin_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1616147253&linkCode=as2&tag=rogsblo-20" href="http://www.amazon.com/gp/product/1616147253/ref=as_li_qf_sp_asin_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1616147253&linkCode=as2&tag=rogsblo-20" style="color: #24890d; text-decoration: none;" target="_blank" title="Steve Hallet, The Efficiency Trap">The Efficiency Trap</a>, Prof. Steve Hallett gives a vivid and in-depth analysis of the problem that the pursuit of efficiency achieves the opposite of what we want to achieve, namely making carbon energy cheaper, so we use more of it, and use it longer, when the point was finding an alternative. Hallett goes well beyond the <a data-mce-href="http://en.wikipedia.org/wiki/Jevons_paradox" href="http://en.wikipedia.org/wiki/Jevons_paradox" style="color: #24890d; text-decoration: none;" target="_blank" title="Jevons Paradox on Wikipedia">Jevons paradox,</a> which says that demand goes up as efficiency improves, and MORE THAN offsets the efficiency gains. Hallet's outlook is based on natural cycles - his background is botany and he thinks in biological cycles of development - and the picture he paints is none too encouraging, as the world is still stuck in the confusion that energy efficiency is green. It isn't. It is very, very brown, if not actually black, and certainly bleak.</div>
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Diminishing returns from energy efficiency</h3>
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The behavioral analysis offered by Steve Hallett is important to understand first. Analytically, there is also the simple economical fact of diminishing returns from successive investments in <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYSERDA MPP and Diminishing Returns">energy efficiency</a>, so it is an absolute dead-end from an investment point as well. This fact becomes really problematic very quickly because you tend to make different decisions about efficiency in the two columns, although some will be shared between the two. The end result is that you need to decide first things first, and that means a make or buy decision between carbon energy or renewable energy. Economically, this is a make or buy decision, since renewable energy moves energy from liability to asset, and it is capital-intensive up front. In more cases than people think however, 30 years of free energy beats "investments" in energy that offer a 10-25% reduction of your bills.</div>
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The compound returns of renewable energy retrofits</h3>
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Not only does energy efficiency come with diminishing returns, renewable energy offers potential for valuable engineering synergies, and therefore compound returns. The example in a typical apartment building is the geothermal DHW system I discussed <a data-mce-href="http://www.vliscony.com/2014/01/28/geothermal-heat-pumps-strategic-renewable-nyc/" href="http://www.vliscony.com/2014/01/28/geothermal-heat-pumps-strategic-renewable-nyc/" style="color: #24890d; text-decoration: none;" target="_blank" title="Geothermal Heat Pumps Strategic Renewable for NYC">in my last post</a>. A smart replacement strategy would be to provide the hot water in such a building with a geothermal system, probably with a natural gas second stage heat. You are giving the boiler another few years of useful life, but when it goes you can then switch to a solar thermal system, which can replace that gas backup heat for the hot water, and provide HVAC for the whole building as well. In the interim, when the time is right you could generate your electrical requirements in part or in whole from either a building mounted wind turbine or from solar PV (that could be via a hybrid thermal/PV system), and then your geothermal pre-heat could act as your own energy storage, giving you higher returns than selling back to the grid.</div>
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How the green movement was hi-jacked by energy efficiency</h2>
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With the big oil price shocks going back to the 1970's, the logic was developed that said a dollar invested in reducing demand for energy had higher returns than increasing supply. Later, when global warming and GHG-reductions became an increasingly important issue, the carbon energy industry latched on to the idea that energy efficiency theoretically also would reduce GHG-emissions. Not only is this not true because of the effects of the efficiency trap and the financial fact of diminishing returns on investment, It also provides a very short-sighted strategy whereby carbon energy competes with renewable energy, so we continue to make the wrong decisions.</div>
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Energy efficiency and bad business planning</h3>
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For the most part, building owners seem to evaluate their energy options based on payback of equipment based on marginal energy savings, and as a result the more capital-intensive projects never get done. As a business planning tool, payback may give me a good view of the potential of one technology or another, but unless I am doing a 30 year cash-flow model of my property, I will not catch the potential for engineering synergies, and the long term cash flow effects of free energy. And unless I consciously model the two alternatives, I will make the wrong decisions about energy efficiency. Another example: if our building can generate its own electricity, and switch to electric cooking, an enormous amount of indoor air pollution can be eliminated, and we can specify tighter windows, and use some heat-recovery ventilation. If you went down the energy efficiency road, the best you might have done is specify a<a data-mce-href="http://www.vliscony.com/2013/05/12/energy-star-counterproductive/" href="http://www.vliscony.com/2013/05/12/energy-star-counterproductive/" style="color: #24890d; text-decoration: none;" target="_blank" title="When Energy Star becomes Counterproductive"> tankless gas hot water heater</a>,</div>
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Conclusion</h1>
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Global climate change policies need to change. Serious progress with Greenhouse gas reduction will depend on prioritizing renewable energy, and dropping the confusion with energy efficiency as an "alternative energy strategy," when instead energy efficiency only preserves the status quo.</div>
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RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-90947291455132578172014-01-28T06:18:00.000-08:002015-06-11T06:22:00.727-07:00Geothermal Heat Pumps Strategic Renewable for NYC<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
It is time to revisit <a data-mce-href="http://www.vliscony.com/2013/05/13/oil-regs-property-values/" href="http://www.vliscony.com/2013/05/13/oil-regs-property-values/" style="color: #24890d; text-decoration: none;" target="_blank" title="PlaNYC Heating Oil Regs Destroy Property Values">geothermal heat pumps</a>, and the battle of renewable energy versus energy efficiency. It has been noted with some regularity on this blog that <a data-mce-href="http://www.vliscony.com/2013/08/20/nyc-clean-heat-capital-destruction/" href="http://www.vliscony.com/2013/08/20/nyc-clean-heat-capital-destruction/" style="color: #24890d; text-decoration: none;" title="NYC Clean Heat Amounts to Capital Destruction">NYC Clean Heat</a>, and its comrade in arms the <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" title="NYSERDA MPP and Diminishing Returns">NYSERDA MPP</a> are destroying real estate values in NYC, and not contributing much to reducing GHG reductions. I was an early advocate for geothermal heat pumps as the single most strategic renewable technology for energy retrofits in NYC buildings, and in April of 2013, then Mayor Bloomberg finally commissioned a serious study of geothermal energy for New York. We had been advocates (with my consulting firm DaBX) since 2011 at least in our PlaNYC2020 report, and then hurricane Sandy did its bit to promote <a data-mce-href="http://www.nytimes.com/2012/11/07/business/geothermal-energy-advocates-hope-systems-get-a-second-look.html?pagewanted=all&pagewanted=print" href="http://www.nytimes.com/2012/11/07/business/geothermal-energy-advocates-hope-systems-get-a-second-look.html?pagewanted=all&pagewanted=print" style="color: #24890d; text-decoration: none;" target="_blank" title="Geothermal Designs Arise as a Stormproof Resource">geothermal heat pumps</a>. It is time now to demonstrate why not only does geothermal have "certain advantages," but is actually the single most important strategic renewable energy technology in the city.</div>
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Multi-family Buildings and Geothermal Heat Pumps</h1>
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In general, if you are looking at any building, energy that you can generate on-site with renewable energy technology (Site Derived Renewable Energy, or SDRE) has numerous advantages. Most importantly, financially, if you analyze long-term (say 30 years) cash flows, thirty years of no cost energy often beats out the "savings" of 15-25% that are achieved by most energy efficiency overhauls. This pays for the heavy capital commitment up front.</div>
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<li>The first advantage is that you have no transportation losses.</li>
<li>A second efficiency factor is that because there are no transportation losses, you can often save the conversion to electricity and pure thermal technologies win the day, because heating and cooling are the larger part of the energy budget, often 75%.</li>
<li>On top of that, if you are operating with pure process heat, you have a pretty economical way of storing that either at high temperature (i.e. process heat from solar thermal), or as pre-heated hot water (from geothermal).</li>
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A geothermal heat pump is 400% efficient: for every joule of energy it uses (electricity), it returns 4. To take the simplest application in a building, for Domestic Hot Water (DHW), it was traditionally provided by a coil in the boiler, and the efficiency of such systems is typically in the range of 45-75%, in particular because those boilers were oversized relative to the need for hot water, and the need for hot water is year round.</div>
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Why the NYSERDA MPP marginalizes Renewable Energy (RE)</h2>
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The NYSERDA MPP is built on a set of mistaken assumptions and foolish economics. It bundles a set of energy efficiency programs and incentivizes the building owner to deliver efficiency retrofits that score above (currently) 15% gain. It all but marginalizes renewable energy. It all results in owners trying to find the cheapest way to qualify for the incentives, and technologies are selected based on their marginal energy savings, just to get the incentives, in terms of advantaged financing etc. The program focuses on energy efficiency (EE), which always yields high returns at first, but suffers <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYSERDA MPP and Diminishing Returns">diminishing returns</a> later, and it is biased against renewable energy (RE) projects, which are capital-intensive at first, but come with a "long tail" of free energy.</div>
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The Math of Geothermal Heat Pumps</h2>
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Here is the typical math for a geothermal heat pump in the DHW application - based on the assumption that the prices for the BTU inputs (oil, gas, electric) are all the same:</div>
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<li>Old situation: DHW from a coil in the boiler - oil/steam, usually 60% efficient (between 45-75%)</li>
<li>New situation: DHW from geothermal heat pump (electric, 400% efficient), and natural gas secondary heat cum backup at 95% efficient, in about 70/30 proportions, so that the combined efficiency is 0.7*400+.3*.95 =280%+29%= 309% efficient.</li>
<li>Let's round it off: 60% efficient vs 300% efficient</li>
<li>Therefore, if the Btu pricing was all the same that would be the comparison, meaning in case OLD our marginal energy cost is 1.67x the Btu demand, and in case NEW it is 0.33x the Btu demand. In other words the marginal Btu input of the new system is ca 20% of what it would be under the old system.</li>
<li>In real life this picture is then complicated by the pricing differences between oil/gas/electric, but the point is clear, the innate efficiency of the solution is staggering.</li>
<li>We should emphasize again, if we can generate any of our own electricity, with wind energy or solar PV, we can store it as pre-heated hot water, and get a higher return than selling it back to the utility.</li>
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Geothermal Heat Pumps: The Math of Effective Btus</h3>
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Again, this beautiful equation will evidently have different outcomes depending on the actual pricing of the different energy sources.</div>
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<li>We were buying oil to heat the hot water, and the Btu value of #6 fuel is approximately 153,000 Btu per gallon. In the winter of 2014, in NYC, a gallon of #6 goes for $4.00, therefore, the cost per 1000 Btu is 2.61 cents.</li>
<li>We are substituting this with electricity, which in the winter of 2014 in NYC, goes for about $0.25 per KwH, and the thermal value of a kWh is about 3,214 Btu. The cost per 1000 Btu therefore is ca. 7.78 cents; and with natural gas as a secondary fuel, which goes for about $1.25 per therm (100,000 Btu) and therefore costs ca 1.25 cents per 1000 Btu.</li>
<li>For argument's sake, we needed 1,000,000 Btus for a given quantity of DHW, and the comparison now becomes: Old style (oil/steam): 1.67 x $0.0261 x 1000 = $43.59, and New style (geothermal plus gas): (0.7 x 7,78 x .25 + 0.3 x 1.25/.95) = 1.36 + 0.39 = 1.75 cents per 1000 Btu, or $17.50 for 1,000,000 Btu.</li>
<li>Now, if we can generate some of that electricity ourselves with a wind turbine or with solar PV, we have the benefit of storage, which gives us a higher return than selling it back to the grid, and we are compounding our savings.</li>
<li>In short, most building owners got taken to the cleaners when they invested lots of money in converting to natural gas, and made some small savings and efficiency improvements, but long-term they are still at the whim of energy prices. Their buildings have become LESS resilient. With DHW being 30-50% of Btu requirements in the typical apartment building, the geothermal solution would be a hands down winner, and perhaps a first step towards a mostly renewable heating and cooling solution...</li>
<li>From the standpoint of clean energy and reducing GHG emissions, we are now servicing 70% of this Btu requirement (DHW) with electrically driven geothermal heat pumps, with 400% efficiency. In short, 75% of the 70% is GHG-free, representing over 50% of this requirement is now free of GHG-emissions.</li>
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What really happened...</h3>
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The conversion to natural gas under the NYC Clean Heat program, combined with the NYSERDA MPP has been neutral event for GHG-emissions because, while gas burns cleaner, the production and transportation losses of methane make it about as bad as coal for overall air quality, although within city limits there would be some reduction of smog.</div>
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Only very few buildings made the conversion to geothermal hot water systems, and when they did, these systems were most often wrongly designed, as just water heaters, and not with a view to pre-engineering whole building energy solutions, in which boilers might eventually be replaced with a solar thermal plant, at most with only a simple boiler for backup.</div>
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In most cases, conversions were from oil to gas, which reduced building resiliency, for we are now in a city that is wholly dependent on a single fuel, and if you watched the news tonight, one pipeline explosion could cause a tremendous amount of havoc, as they are finding out in the Mid West.</div>
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Conclusion</h1>
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Energy efficiency programs mean that building owners are paying for making energy from the grid more economical, instead of investing in their properties and generating their own energy with (mostly) thermal technologies. Though finally geothermal heat pumps seem to be getting some more recognition, it is clear again that energy efficiency gets prioritized by current programs at the expense of renewable energy, and ultimately to the financial detriment of building owners.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-84937077946503646102014-01-05T13:31:00.000-08:002015-06-10T13:33:48.409-07:00Baucus Energy Tax Reform Misses with GHG-emissions Reduction<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
The Baucus Energy Tax Reform Proposal, which has reduction of <a data-mce-href="http://www.finance.senate.gov/newsroom/chairman/release/?id=3a90679c-f8d0-4cb6-b775-ca559f91ebb4" href="http://www.finance.senate.gov/newsroom/chairman/release/?id=3a90679c-f8d0-4cb6-b775-ca559f91ebb4" style="color: #24890d; text-decoration: none;" target="_blank" title="Baucus Energy Tax Reform Proposal">GHG-emissions</a> as its focus, risks aggravating the very problem it is trying to cure. As drafted, for all its merit, and precedent-setting simplification, it would exclude an entire class of technology that offers more bang for the buck in GHG-reduction: all forms of thermal technology that can be deployed at the demand-side of the grid.</div>
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The proposal limits itself to addressing electricity generation, and production of transportation fuels. In other words, it limits itself to addressing the production of energy at the supply side of the grid, and thereby reinforces the grid model, at the very time that technologically we are capable of building microgrids, and net-zero or near-zero buildings (including retrofits), and because of the increasing demand for building resiliency, we should be stimulating more Site Derived Renewable Energy (SDRE), for that eliminates at least one energy conversion (from whatever to electricity), as well as the transport problem for either gas, or oil, or electricity.</div>
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Net-zero, Near-zero, Thermal Energy to the Rescue</h1>
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The conversion to electricity goes with energy losses, as does its transportation, yet evidently it has redeeming value because of the ease of distribution, but the quiet revolution that is going on for the last decennia is the consistent growth and profitability of <a data-mce-href="http://www.vliscony.com/2013/05/25/liability-asset-renewable-energy/" href="http://www.vliscony.com/2013/05/25/liability-asset-renewable-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="From Liability to Asset with Renewable Energy">Net-Zero</a> Energy Building (NZEB) construction. With natural gas it is already becoming an accepted fact that the production and transportation losses are so significant, that it is just as bad as coal on a system-wide basis.</div>
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The next frontier is Near-Zero Energy Retrofits, and in all cases the difference between mere energy efficiency (typically with a 20-30% reduction of energy bills), and any solution that maximizes the use of renewable energy technologies, both active and passive (Site Derived Renewable Energy - SDRE), is that projects can achieve 70/80/90% reductions in Green House Gas (GHG-emissions) with SDRE, and be absolutely economical. The extreme example is the <a data-mce-href="http://www.zenesisdesignbuild.com/" href="http://www.zenesisdesignbuild.com/" style="color: #24890d; text-decoration: none;" target="_blank" title="Zenesis House">Zenesis house</a>, but in general Near-Zero Emissions is a tremendous achievement for existing construction, and any retrofit achieving over 50% GHG Emission Reduction should qualify.</div>
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The key technologies are thermal, both active and passive, including solar thermal and geothermal, and harvesting process heat from either the sun directly or from the ground with a ground source heat pump. The normal transportation losses with process heat do not apply if you are using the energy on-site, and you are saving energy conversions, plus you have an easy way of storing the energy in either high-temperature process heat storage or low temperature pre-heated Domestic Hot Water, as well as various other related, passive solutions. So the batteries are cheap, whereas with the centralized grid, and electricity in general, batteries are expensive, and very environmentally unfriendly.</div>
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Technological Non-neutrality and More GHG-emissions</h2>
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The stated goal of technology neutrality would therefore not be achieved by this proposal, for the most efficient solutions, thermal technologies at the demand side, i.e. in buildings would be excluded from this tax treatment, whereas they would be big winners if the new technology neutral regime applied to them, since they produce far more bang for the buck than the grid-based alternatives. For example solar thermal is about 500% more efficient in converting the Sun's energy, and if you add the benefit of the ease of storage for off-peak use, that advantage becomes even greater. Plus, by nature it does not produce the fluctuations on the grid that come from solar PV.</div>
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In short, this proposal would exclude the very technologies that offer the most bang for the buck (the words used in the proposal staff discussion documents), and the greatest reductions in GHG-emissions, as well as reduce demand on the grid, and improve building resiliency, all of which are highly desirable outcomes today. Especially greater resiliency is of extreme relevance for the coastal communities and many other areas, where the reliability of the grid is questionable. The current proposal would reinforce the centralized generating model at the exact time when the nation needs more decentralization.</div>
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Building retrofits:<br />reducing GHG-emissions by excluding energy efficiency and including SDRE</h3>
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Mere energy efficiency retrofits should probably be excluded from the tax incentives, for they are an indirect subsidy to the energy companies, not the building owners. Moreover, they are generally a solution with <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYSERDA MPP and Diminishing Returns">diminishing returns</a> to property owners, not to energy companies. They typically achieve only 20-30% energy savings, and maybe the energy companies should sponsor them as customer retention programs. What should be included is Site Derived Renewable Energy (which may include energy efficiency upgrades). If these incentives are structured correctly, there will be a huge increase in building level renewable energy retrofits, with all the desirable outcomes noted above: greater resilience, reduced demand on the grid.</div>
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The Audit Problem: Verifying Results of GHG-reductions</h2>
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The staff discussions of the energy tax proposal reflect concern about verification for retrofits on the demand side of the grid. Verification does not need to be hard, for long term lenders have a similar interests. Requiring audited GHG-reductions based on clear standards are the answer, and the EPA's Energy Star Portfolio Manager provides the framework.</div>
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Conclusion: net-zero and near zero buildings reduce GHG-emissions faster</h3>
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There is a huge potential for GHG-reduction through on-site energy generation with renewable technology (SDRE), in the form of net-zero or near-zero construction and retrofits. Retrofits will obviously be the larger market. The more these solutions gain traction, the more demand will be removed from the grid and building resiliency will increase. As long as these proposed simplifications of the energy tax structure are limited to the supply-side of the grid, they will greatly impede the most promising technologies available, and they will aggravate the problem of technology neutrality which they are trying to solve. The most bang for the buck in GHG-reduction is on the demand side, with net-zero and near-zero construction and retrofits.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-55809385110387274282013-12-21T13:28:00.000-08:002015-06-10T13:29:33.700-07:00Energy Tax Reform is in the Air<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
Senator Max Baucus (D-Mont), Chairman of the Senate Finance Committee proposed far-reaching <a data-mce-href="http://www.finance.senate.gov/newsroom/chairman/release/?id=3a90679c-f8d0-4cb6-b775-ca559f91ebb4" href="http://www.finance.senate.gov/newsroom/chairman/release/?id=3a90679c-f8d0-4cb6-b775-ca559f91ebb4" style="color: #24890d; text-decoration: none;" title="Baucus Unveils Proposal for Energy Tax Reform">energy tax</a> reform. The principles are solid, to quote:</div>
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“It is time to bring our energy tax policy into the 21st century,” Senator Baucus said. “Our current set of energy tax incentives is overly complex and picks winners and losers with no clear policy rationale. We need a system of energy incentives that is more predictable, rational, and technology-neutral to increase our energy security and ensure a clean and healthy environment for future generations.”</div>
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Regrettably, as drafted, it is limited to electrical generation, and thereby it aggravates the problem of confusing incentives that get in the way of maximizing reductions in GHG-emissions. It effectively accomplishes the opposite of its stated goal mainly by locking out the thermal technologies that are so powerful on the demand side of the grid, and can hugely reduce electrical demand, and therefore reduce GHG-emissions.</div>
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In its present form it would leave out the huge potential shift in energy production from the supply side to the demand side of the grid, where thermal technologies have the greatest potential. In general, renewable energy generation facilitates a move towards more on-site generation, and thus alleviates the demand on the grid. I addressed this issue earlier in an open letter to President Obama proposing <a data-mce-href="http://www.vliscony.com/2013/09/03/open-letter-pres-obama-ghg-emissions/" href="http://www.vliscony.com/2013/09/03/open-letter-pres-obama-ghg-emissions/" style="color: #24890d; text-decoration: none;" target="_blank" title="Open Letter to Pres. Obama on reducing GHG-emissions">simplifications in energy tax and incentives</a>, including eliminating incentives at the technology/component level, such as is now done with the Energy Star rating system.</div>
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We can only hope that the proposal be amended to include ALL ENERGY GENERATING technologies, as well as energy storage, and certain passive energy technologies, insulation, energy efficiency, etc. Careful drafting is in order as to what is in and what is out. At the extreme, some homes and buildings should arguably be scrapped altogether, if they are hopeless energy sinks. However, even if they were replaced with a net zero building, that should probably not be permitted as a tax write off in its entirety as intended in the proposal... or should it? (Think e.g. <a data-mce-href="http://www.zenesisdesignbuild.com/zenesis-house/" href="http://www.zenesisdesignbuild.com/zenesis-house/" style="color: #24890d; text-decoration: none;" target="_blank" title="Zenesis House">Zenesis House</a>.)</div>
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Utility-scale Projects</h1>
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For utility-scale projects that continue the old model of the grid, with centralized generation and mass distribution, electrical generation is the way to go, because electricity is easier to transport than process heat. Various technologies can come into play, and we have recently even seen solar thermal win some interesting applications, such as the Ivanpah project. For remote energy generation, the Baucus proposal levels the playing field in the only way that makes sense. But centralized energy generation is of decreasing importance, and the greater reductions in GHG-emissions can be achieved on the demand side of the grid, not on the supply side.</div>
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Building Retrofits Include Energy Generation</h1>
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Building retrofits are different. They are on the demand side of the grid. According to DOE, buildings account for 39% of total energy consumption, and 72% of all electricity. If the incentives are leveled in the spirit of the Baucus Energy Tax Reform proposal but include ALL forms of energy generation as suggested above, HUGE changes are possible. Not only can more electricity be generated in buildings (solar, wind, hydro), but more electrical demand can be replaced with thermal technologies, such as geothermal and solar thermal, thereby reducing the need for remote production in the first place.</div>
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This shift is necessary both because of direct environmental reasons, such as GHG-reductions, but also because greater building resilience is becoming mandatory, and in many areas with weather related risks (such as the coastal zones), greater energy independence and micro-grids are becoming very necessary, and laws are already starting to encourage them. Here is where thermal technologies will shine, and need to be on a level playing field with the alternatives.</div>
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The Potential Impact of Thermal Technology on GHG-reduction</h2>
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The advantage of thermal technology when it is implemented at the demand side of the grid is extensive:</div>
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<li>Greater efficiency, in some cases this is very obvious. For example, solar thermal directly converts the heat of the sun and uses it for heating and cooling, and it can even be used for on-site electrical generation.</li>
<li>Ease of storage, whether it is geothermal or solar thermal, storing process heat is much easier. With geothermal heat, preheated hot water used for heating or cooling can be easily stored, With solar thermal you can store process heat in high heat tanks, and downstream you can store preheated hot water.</li>
<li>Because there are no transportation losses, and heat can be easily stored for intra-day use on-site. Also, geothermal can easily provide the ability to store energy from wind or solar PV for intra-day use also, which typically provides superior returns compared to selling back to the grid at wholesale levels, and again water storage is more environmentally benign than batteries.</li>
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Energy Star Portfolio Manager to the Rescue</h2>
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Help is on the way from your friendly EPA. The <a data-mce-href="http://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/use-portfolio-manager" href="http://www.energystar.gov/buildings/facility-owners-and-managers/existing-buildings/use-portfolio-manager" style="color: #24890d; text-decoration: none;" target="_blank" title="EPA Energy Star Portfolio Manager">Energy Star Portfolio Manager</a> program is designed exactly to model building performance and plan energy retrofits with an eye to GHG-reduction, in short, the tools for a comprehensive revision of the incentives for ALL forms of energy generation are already in place. The proposed revisions of the energy tax could and should rely on this type of modeling, and it would seem proper if the EPA set the standards. With this type of support in place a simple incentive structure for GHG-reductions is all we would need.</div>
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Conclusion: Include All Energy Generation</h3>
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As drafted. the Baucus proposal for energy tax reform is a step in the right direction, but it would accomplish the opposite of its stated goal by leaving out thermal technologies, and the sector that is capable of such dramatic GHG-reductions: building retrofits with on-site energy generation. We can only hope that the same simplification of incentives should be extended to all forms of energy generation, active, and passive, instead of applying to electricity generation alone.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-2298316923666607732013-12-07T13:25:00.000-08:002015-06-10T13:26:37.404-07:00Energy Efficiency, Handmaiden of the Koch Brothers<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
We are still in an alternate reality, as in: "down the rabbit hole" in <em>Alice in Wonderland,</em> where planning the green future is concerned. Basically, we are stuck repeating the mistakes from 40 years ago, based on assumptions that might have been more valid than now. Be that as it may, they are no longer valid today. A new plan is in order.</div>
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When the grid was still THE GRID and Energy Efficiency the solution</h3>
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Back in the day of the first serious energy price shocks, economists pretty quickly surveyed the energy landscape at the macro level, and figured out that the marginal dollar is more effectively spent on reducing demand than increasing supply. From that time forward the energy industry (oil companies plus the utility sector), adopted energy efficiency as an objective and participated in attempts to achieve those demand reductions, in order to keep its products economically viable.</div>
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After environmental damage (Green House Gas (GHG-) emissions) became more known as a cost of carbon energy, the energy industry hi-jacked the renewable future, co-opting green energy with a substitution of energy efficiency for renewable energy. Thereby "green" was now good for the shareholders of the energy companies, for it extended the franchise, and the do-gooders in the environmental movement fell for the snow job, and became the best allies of the carbon cowboys under the auspices of energy conservation, energy efficiency, or whatever other moniker will serve, anything that made people feel like they were sacrificing for the good cause...</div>
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All of this had its roots in a time when we thought that economic use of energy was the problem, and before it was widely known that GHG-emissions were the problem, and renewable energy the answer, but we have never adjusted our policies. Most importantly, what has also changed in the last 40+ years is the rapid development of renewable energy solutions that can be installed in properties, on the demand side of the grid.</div>
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The Energy Star Program takes the cake</h1>
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The Energy Star program is the epitome of the problem of dysfunctional energy policy, because it focuses on the component level, not on the systems level. This may be valid when it comes to selecting a new fridge or microwave, but anything that is even potentially part of the permanent energy infrastructure of a property needs to be looked at on a systems level. Unfortunately, only too often these days, there are tax-credits for specific items of Energy Star rated equipment, and all-too often these get specified by bookkeepers and accountants even when the engineers know they make no sense.</div>
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The Energy Efficiency Trap</h1>
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Energy Efficiency is actually an economic trap, and it is also an environmental trap, as is very convincingly argued by Prof. Steve Hallett in the book <a data-mce-href="http://www.amazon.com/gp/product/1616147253/ref=as_li_tf_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1616147253&linkCode=as2&tag=rogsblo-20" href="http://www.amazon.com/gp/product/1616147253/ref=as_li_tf_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1616147253&linkCode=as2&tag=rogsblo-20" style="color: #24890d; text-decoration: none;" target="_blank" title="Steve Hallett - The Efficiency Trap"><em>The Efficiency Trap</em></a>. <span data-mce-style="line-height: 1.714285714; font-size: 1rem;" style="font-size: 1rem; line-height: 1.714285714;">Economically and financially, energy efficiency is a trap because of the phenomenon of diminishing returns, which creates the perfect trap with which to lure suckers into uneconomic and eventually self-destructive behavior. Here is how it works:</span></div>
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<li>In year one we finally grab some subsidized program that will offer us energy efficiency. So we did a certain amount of weather-stripping and insulation, a set-back thermostat perhaps, and other low dollar, high impact fixes. It reduces our bills somewhat.</li>
<li>In year two or three the bills went back up, because of price increases, so our "investment" in weather-stripping has been wiped out,</li>
<li>However we now look at what inefficient equipment we have and with help from the Energy Star program we figure out how we can further reduce our energy use. In reality we get that new fridge we always wanted, and some other gadgets, but we save energy, so we can shop without guilt. Nobody is calculating what the return on investment is.</li>
<li>Another year later, it's time to get serious, we have cumulatively spent a lot of money on energy efficiency, with little to show for it. But we know our water heater is coming to the end of its life, and the boiler should be replaced in a few years. So let's do the water heater this year. In comes a happy salesman with a tankless hot water heater. Energy Star rated, good for a 30% tax credit, and with a ten-year guarantee, and 5 year financing so we are spending less than the energy we now buy to heat water. Miracle of all miracles: a self-liquidating proposition. The salesman loves saying that, and we like it too: "Sign here, press hard, three copies!"</li>
<li>Two years hence we finally have to replace that boiler, so we shop for new Energy Star rated boilers (what else!). Our old boiler was 60% efficient, and the new one is going to be 95% efficient. More tax incentives, and self-liquidating financing propositions. Finally we're spending less on energy, but we're still paying off this equipment. By this time we may have a 25-35% reduction in energy consumption compared to the year we started working on this issue. Our oil or gas bills are going down, but our electrical bill is still stubbornly high.</li>
<li>The next year there seems little left to do. Replacing the windows? A twenty-five year payback convinces us otherwise. But, wait a minute, here comes another sales person, now with a solar PPA, for less than our average monthly electric bill, we can now really go green and help the environment, not to mention impress the neighbors. And we're saving 10% compared to paying the electric bill, and we already know the rates will go up anyway...</li>
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By the time you add all this up, we have spent a fortune on energy savings, and our energy savings result in an energy bill that is only slightly less than when we started taking into account the various payments. Our utility company and our oil company love us. They even send us certificates to congratulate us on how "green" we are. But the problem is, every next investment was bigger than the last one, culminating in the solar panel that was an $35,000 investment, and 10% reduction of the electric bill was only a 4% reduction of the overall energy bills, and we're paying for it over 20 years, but the actual payback is very slow, and in the meantime, the remaining energy portion of our bills keeps going up.</div>
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Why Energy Efficiency is a trap</h2>
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In the six steps to energy efficiency above, there were several thresholds that were crossed. Instead of upgrading the boiler, we could have chosen a solar thermal solution, except it seemed expensive, and we had just eliminated the water tank two years earlier, not realizing that it could provide "free" energy storage, so what were we to do? Write off our brand new tankless hot water heater and scrap it? Of course not! So we upgraded the boiler. In short, we walked a path of successively larger investments, with less and less energy savings, and we still have an energy bill that is well over 50% of what we started with.</div>
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<span data-mce-style="line-height: 1.714285714; font-size: 1rem;" style="font-size: 1rem; line-height: 1.714285714;">If we had done a systematic analysis at the outset, taking into account when various equipment would run out, we might have ended up with a new energy plan in which we perhaps also did some insulation first, but saved up some money to install either geothermal or solar thermal for HVAC and Domestic Hot Water (DHW). And we got some tax credits on those as well, but we ended up reducing our energy bills by 70-90%. Moreover, we eliminated most major sources of indoor air pollution (boiler, DHW), leaving only the stove. We could now convert to electric cooking, and replace the windows with new triple glazing, and get some heat-exchange ventilation. And we could end up with our old house being near net zero, certainly if we could combine geothermal with solar PV. Site Derived Renewable Energy (SDRE) permanently replaces subscription energy from the grid. It is also permanent part of the plant and equipment of our property, and raises the value.</span></div>
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Ten years later Site Derived Renewable Energy wins</h2>
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In these two alternate realities for our lives, the energy-saving alternative had us walking into the efficiency trap. We reduced our energy but at a staggering cost, and we still have a significant energy bill left, and it keeps going up. In the second alternative, we bit the bullet and invested significant money in the early years, but it looked better with every passing year, for the payments did not go up, unlike the energy bills of the neighbors. This is the effect of Site Derived Renewable Energy (SDRE). In short, the value of the property goes up, and we are helping the environment by eliminating 70, 80 or 90% of direct carbon emissions from the house. Not only that, but a new development of net zero homes was going up nearby, and we were approaching that level for our own home, so the value of our property should hold up.</div>
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<span data-mce-style="font-size: large; line-height: 1;" style="font-size: medium; line-height: 1;">Conclusion: SDRE wins</span></h1>
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SDRE means permanently replacing the monthly energy bills with our very own generating capacity, which we only buy once. It could be solar thermal, geothermal, wind, solar PV, various passive energy solutions, or a combination etc. It adds to the value of the property. In fact, our property's value now goes up with energy prices, and we won't have to worry about the carbon tax when it comes. Site Derived Renewable Energy should be prioritized over energy efficiency, and ratings of components should not distract us from the total design concept.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-72975689284963495582013-12-01T03:42:00.000-08:002015-06-07T03:45:30.977-07:00The Voodoo Economics of Energy Efficiency<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
Recent reports continue to draw attention to the notion that energy efficiency predicts lower mortgage default rates. Indeed, it seems obvious that energy-efficient homes are worth more, and that <a data-mce-href="http://www.telegram.com/article/20131121/COLUMN69/131119925" href="http://www.telegram.com/article/20131121/COLUMN69/131119925" style="color: #24890d; text-decoration: none;" target="_blank" title="Lower Mortgage Default Risk on Energy Efficient Properties">mortgage default</a> risk on such properties should be lower. This is the same kind of analysis that was previously used to promote <a data-mce-href="http://www.pacenow.org" href="http://www.pacenow.org/" style="color: #24890d; text-decoration: none;" target="_blank" title="PACE Bonds explained">PACE bonds</a>. It may be superficially right, in the sense that the relationship is observable and provable, but it misses the point, simply because a more categorical understanding is possible. Or, while these relationships may exist and seem statistically significant, correlation does not imply causation. There is no consistent approach to underwriting risk for energy efficiency, nor is there an analytically sound approach to explaining why or to what extent the risk of defaulting on home loans is reduced under energy efficiency. The following attempts to fill that gap by means of a simple example.</div>
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Energy Efficiency is Secondary</h1>
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First, <a data-mce-href="http://www.vliscony.com/2013/05/20/energy-efficiency-cart-horse/" href="http://www.vliscony.com/2013/05/20/energy-efficiency-cart-horse/" style="color: #24890d; text-decoration: none;" target="_blank" title="Energy Efficiency: The Cart before the Horse">energy efficiency</a> is not a primary objective, but a secondary one. The first order of business is a make-or-buy decision about on site generation with renewables (Site Derived Renewable Energy) versus a carbon energy subscription. The easiest way to see this, is to realize that you cannot save yourself rich, something everybody knows and understands. Let's look at four people, property owners all, and their different approaches, Mr. Tinkerer, Ms. Efficiency, and Mr. Analyst, and Ms. Intuition.</div>
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Mr. Tinkerer - Energy Efficiency Flying by the Seat of your Pants</h3>
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<li>Mr. Tinkerer begins by "saving" energy without thinking, and thereby accepts the status quo. In his single family home he has an $300 electrical bill and an $700 oil bill, for $1,000/month combined.</li>
<li>He then buys some gadgetry that reduces energy consumption and some insulation, and his bills goes down to $900.</li>
<li>A year or two later, after some energy price increases, and more wear and tear, he is back to paying $1,000 a month.</li>
<li>He keeps tinkering and spending money on Energy Star appliances and other energy-efficient products, but never realizes why he's not achieving serious energy efficiency.</li>
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This is a case of casually pursuing energy efficiency, and it is probably the most common. Mr. Tinkerer operates from the unexamined belief that he can save himself rich, but all he does is overpay for "energy saving" devices, without ever realizing that energy savings are not additive. Most of us dabble in energy efficiency in similar ways, it's a way to shop without guilt. It probably is a wash in the beginning, we spend as much as we save, but in the long-run we spend way more than we "save." Sometimes it's a lot more, for the savings do not add up, EVER.</div>
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Ms. Efficiency - Energy Efficiency by the Book</h3>
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<li>Ms. Efficiency really goes hog-wild, and does everything she can to reduce energy consumption, year after year. The first year she spends $3,000 and creates a 20% reduction, i.e. she enjoys a 15 month payback on her investment.</li>
<li>The second year (she still have 3 months to go to earn back that first investment), she spends $6,000 for a further 10% reduction. Simplistically, 10% of the remaining $800/month energy bill is $80, and therefore she now enjoys a 75 month payback, or 6.25 years.</li>
<li>The third year she can't find anything else to do, she wants to do something major, and now she talks to <a data-mce-href="http://www.vliscony.com/2013/10/28/solar-ppas-impair-property-appreciation/" href="http://www.vliscony.com/2013/10/28/solar-ppas-impair-property-appreciation/" style="color: #24890d; text-decoration: none;" target="_blank" title="Solar PPAs Impair Property Appreciation">SolarCity</a> (or any other similar provider of solar pv on a PPA- or lease-basis), and they can provide her with a solar panel (nothing down!!!) and reduce her electrical bill by 10% (she's already very efficient), for a further 3% of her overall energy bills. It's a 20 year <a data-mce-href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" style="color: #24890d; text-decoration: none;" title="Look Ma, We’ve Got a Solar PPA!">Solar PPA</a>. So now her monthly energy bills are down to $698.40 in constant dollars, but there were a few price increases, so she's at $750/month for the year. However, now her roof is covered with a beautiful shiny solar panel! She sends a Christmas card to her mother, to show off the solar panel, and mom is duly impressed with how green her daughter has become.</li>
<li>However, once she analyzes the figures correctly, that solar panel is a 20 year investment of $40,000 for a 3% reduction in her energy bills (10% on electricity alone), which means a payback of 154 years.</li>
<li>She's still paying $750/month in energy bills (including the $200/month solar lease), and the prospects remain that prices will go up for the remaining $550 "energy" portion of her monthly payments. What has she won? To a financier it seemed things have improved, for $750 now is less than $1000 a few years ago, but that PPA commits $40,000 of her borrowing capacity, and the panel locks out most of her roof, for any alternative uses that might prove to offer better results.</li>
<li>The residual energy portion of her monthly obligations continues to be above 50% of her starting figure.</li>
</ul>
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In short, a categorical make or buy decision has to be made first before anyone starts on efficiency: do we continue to buy energy, or can we economically make our own. On site renewable energy generation is the alternative to buying energy in perpetuity. Energy efficiency only comes into consideration AFTER we make that make or buy decision, or else we falsify that decision, which is now commonly the case.</div>
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Energy Efficiency and Diminishing Returns</h2>
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The example above shows the effects of diminishing returns, the successive investments show less and less savings, because the base is growing smaller. Ms Efficiency started out investing $3,000 with a return of $200/mo then $6,000 with a return of $80/mo, and finally $40,000 with a return of $21.60/mo (clearly she is paying more for every successive improvement, while here additional savings decrease). This is a losing battle, and it is the battle home owners are losing all around the country, as long as they believe in the "savings" paradigm.</div>
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Short-term, yes cash flows are improving, but a few energy price hikes can wipe that out, and the result is that eventually the improvements prove minimal or non-existent within a few years.</div>
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PACE Bonds and Mortgage Default Risk</h3>
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The rationale for the creation of PACE bonds was to provide building owners with a means of financing major capital investments up front to do material retrofits in the energy infrastructure of properties. Unfortunately, the PACE bond camp has been hi-jacked by the energy savers also, and thus they have become yet another customer retention program for the energy companies, and the vendors of energy saving widgets, which was not the original idea. PACE bonds were designed to overcome the capital intensity of the switch to renewable energy, not to squander money on energy efficiency enhancements. Investment in renewable energy moves energy from liabilities to assets, and therefore would structurally reduce underwriting risk, if the economics are solid.</div>
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Enter Mr. Analyst - Investing in Site Derived Renewable Energy first</h3>
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Here is how it should work: Mr. Analyst, with the same $1,000/month energy bill, invests significant money (maybe $140,000), and gets 20-year PACE financing that costs him $900/month, but he wipes out 85% of his energy bills. He gets a geothermal heat pump that provides his HVAC, and a solar panel that offsets most of the electrical load. The first year he gets a 30% tax credit on some of that investment, etc., which helps, but he ends up in a similar situation to his neighbor Ms. Efficiency. She went the energy savings route for the first 3-5 years, but then gradually Ms. Efficiency observes her bills nudging above $1,000 again. Mr. Analyst stays steady at $900/mo in payments, and his residual energy bill of $150 grows a little bit, but not a lot. And Mr. Analyst looks better with every passing year. Let's assume that equipment lasts 30 years. By that time the energy profiles of the two homes will be vastly different.</div>
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Ms. Intuition - Thinking Long-Term</h3>
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Ms. Intuition in the meantime may be even smarter, she gets the same geothermal heat pump, and puts it on a time of use meter, running it mostly at night. She reads the papers, and she sees that solar panels today are 15-20% efficient, but there's some new invention every few months that promises a great breakthrough. She waits a few years, until solar panels have gone from 15-20% efficiency to 35% efficiency, and she now installs a solar panel that completely offsets her electrical use, and she ends up with zero energy bills. In short, she "ate" the electricity cost for a few years, but she gained a technology advantage compared to Mr. Analyst. Geothermal heat pumps are already 400% efficient -- returning 4 joules for every 1 joule you supply -- and are not likely to get any better. With solar PV there is another patent announced every week to increase the conversion efficiency, so it was a reasonable guess to expect that the efficiency of that technology would increase in coming years, and that waiting could be prudent. Notice also that the solar panel here enhances the investment in the geothermal heat pump and improves the value of that energy price hedge even further.</div>
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These are just examples. The numbers are rough, to show orders of magnitude, but the principles are clear. They show that the passive stance of "energy efficiency" and "energy savings" is often bested by a focus on generating your own energy wherever it is economical.</div>
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<li>We can't save ourselves rich, and energy efficiency might reduce underwriting risk somewhat, but there are better alternatives, such as investing in Site Derived Renewable Energy (SDRE) instead of energy efficiency.</li>
<li>Energy efficiency is an operational expense, not an investment, it is short term in nature and mostly not part of permanent plant, but subject to wear and tear.</li>
<li>Energy generation with renewable sources is an investment that adds to property values, by moving energy from liabilities to assets.</li>
<li>Logically, in the short-term "energy efficiency" might be a self-liquidating proposition, which by definition would reduce the underwriting risk and the chance of mortgage default by the amount cash outflows are reduced, however these effects don't last, for easily provable reasons.</li>
<li>Site Derived Renewable Energy (SDRE) is a clear and lasting energy price hedge, certainly if more than 50% of the energy requirement can be economically generated on site. In this case the performance of the property improves with every energy price hike, and thus there is a long-term reduction in underwriting risk, and we can expect a commensurate, but lasting reduction in mortgage defaults.</li>
<li><span data-mce-style="line-height: 1.714285714; font-size: 1rem;" style="font-size: 1rem; line-height: 1.714285714;">SDRE also offers protection against a carbon tax, if it ever were to come. Again, energy efficiency cannot do that, even if it may temporarily reduce mortgage default risk. </span></li>
</ul>
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Current research into the issues of mortgage default rates fail to distinguish these structurally and financially very different alternative scenarios, while it is analytically clear that the one has a short-term effect, and the other adds lasting value to a property.</div>
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Conclusion - Investment in SDRE wins out over Energy Efficiency</h2>
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Energy efficiency can be shown to produce improved cash flows in the short-run, and therefore should reduce underwriting risk and mortgage defaults. However, for good analytical reasons the longer term value of energy efficiency alone is uncertain, and a better option is renewable energy generated on site (SDRE), that is justified not only by the marginal savings of the equipment, but also by the lasting improvement of property values.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-63905319283811922522013-10-13T13:22:00.000-07:002015-06-10T13:24:21.052-07:00New York's Green Bank<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
New York's new <a data-mce-href="http://mobile.bloomberg.com/news/2013-09-10/cuomo-starts-1-billion-new-york-green-bank-for-energy-lending.html" href="http://mobile.bloomberg.com/news/2013-09-10/cuomo-starts-1-billion-new-york-green-bank-for-energy-lending.html" style="color: #24890d; text-decoration: none;" target="_blank" title="News about NY Green Bank">Green Bank</a> is another chance to start getting renewable energy right. This initiative appears to be driven by the concern that existing programs are not producing adequate development of renewable energy resources. No one however seems to have noticed that existing programs, both at the federal level (tax credits), and at the state level (NYSERDA programs, etc.), for the most part are effectively designed to prevent the widespread adoption of renewable energy.</div>
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<span data-mce-style="font-size: 1.5rem; line-height: 1.5;" style="font-size: 1.5rem; line-height: 1.5;">Marginalizing Renewable Energy</span></div>
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Typically, existing programs, such as the <a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYSERDA MPP and Diminishing Returns">NYSERDA MPP</a> tend to marginalize renewable energy solutions for retrofits simply because they prioritize energy efficiency over green house gas reduction, and because they encourage small incremental change over the radical change to renewable energy infrastructure. The cardinal issue here is that technologies are evaluated serially in terms of their marginal energy savings, and the fundamental question of what type of infrastructure do we even want is not being asked. Analytically, energy efficiency fixes will win the day with this approach, and it seems to become simply a matter of which ones to pick.</div>
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The trap in this approach is that you unthinkingly start tinkering with a bad system, and you maybe throwing good money after bad, if there is an alternative that makes more financial sense. Therefore the property owner first needs to develop a long-term energy plan, and prioritize energy investments purely on the basis of how much they improve the value of his property. What currently takes place is paid for by property owners, but it serves the interests of the utility industry, not the owners of the property, and it sacrifices long-term property appreciation for short-term efficiency gains.</div>
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An unintended consequence of the approach of evaluating options based on marginal energy savings, is that cheap energy efficiency solutions will always win the day initially, and beat out the more expensive renewable energy options, That serves the energy companies, who are trying to achieve certain demand reductions, but economically it is most often to the detriment of property owners because it destroys the potential of long-term asset appreciation with renewable energy. A nefarious side effect is that a property becomes committed to the path of energy efficiency, which has <a data-mce-href="http://www.vliscony.com/2013/06/03/energy-retrofits-underwriting-risk/" href="http://www.vliscony.com/2013/06/03/energy-retrofits-underwriting-risk/" style="color: #24890d; text-decoration: none;" target="_blank" title="Financing Energy Retrofits and Capital Destruction">diminishing returns</a>, so the future is a dead-end. With renewable energy there is always an upside for you can frequently do follow-up improvements that will further enhance the value of the renewable energy option, producing synergies and compounding financial returns.</div>
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We need to go back to square one, but do it in a way that harmonizes with the normal aging and replacement cycle of major plant, typically the boiler of HVAC system. A 30 year capital budget for the building should be developed to evaluate the options. If this were done, the adoption of renewable energy solutions would be progressing way faster than is now the case. Simply put, thirty years of no energy bills will most often beat the typical 20-30% reduction in energy use that is now often achieved by these retrofit projects, as long as it is feasible in your property.</div>
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Underwriting Standards can make all the difference</h2>
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The opportunity that arises with the new Green Bank is for establishing underwriting standards that would avoid all these problems. It would be very simple to demand as part of the underwriting requirements for loans that properties produce a model for green house gas reduction based on the EPA's ENERGY STAR portfolio manager, and combine that with a 30 year capital budget that shows how the project produces asset appreciation. Suddenly, the old approach of energy efficiency would look paltry by comparison, limited only by whats economically feasible in a building because of its features and location etc. Moreover, any investments in energy efficiency of the building now will produce compound returns to assets. Most importantly, in most cases one might now choose different types of energy efficiency measures at least in many cases. So the two paths are mutually exclusive both from a financial standpoint and an engineering standpoint.</div>
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Open Letter to Governor Cuomo: the Green Bank and Underwriting Standards</h3>
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My recent <a data-mce-href="http://www.scribd.com/read/168833382/Open-Letter-to-NY-State-Governor-Andrew-Cuomo-about-the-GreenBank-and-Underwriting-Standards" href="http://www.scribd.com/read/168833382/Open-Letter-to-NY-State-Governor-Andrew-Cuomo-about-the-GreenBank-and-Underwriting-Standards" style="color: #24890d; text-decoration: none;" target="_blank" title="Open Letter to Gov. Cuomo about the Green Bank ">Open Letter to Governor Cuomo</a> raises these issues in a systematic way. From a standpoint of governance of what could become a major and very influential economic institution, the adoption of sound <a data-mce-href="http://www.vliscony.com/green-finance-property-value/" href="http://www.vliscony.com/green-finance-property-value/" style="color: #24890d; text-decoration: none;" title="Green Finance and Property Value">underwriting standards</a> will have a decisive influence on:</div>
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<li>The speed of reductions in Green House Gas emissions</li>
<li>A speed-up in recovery of real estate values</li>
<li>Development of a sound secondary market for paper based on such lending</li>
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The last point is possibly the most important one financially, because by setting the tone through its underwriting standards, the uncertainties of valuing paper for energy retrofits could be cleared up, and it should be noted that both NYSERDA and the Commonwealth of Pennsylvania have experienced difficulties in placements, which in my view is attributable only to the absence of a rational financial/economic base for valuing papers that represent "20-30% energy savings over last year." That just does not cut it when on the margin it's net-zero construction that is the only real growth sector in markets nationwide, not to mention world-wide.</div>
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Indirectly, the Green Bank could therefore eventually have an influence on mortgage underwriting standards as well, and set the tone for PACE programs, which should abandon their disastrous focus on energy efficiency, and focus on the twin objectives of asset appreciation and reductions in green house gas emissions. The biggest reductions will come from retrofitting all types of clean energy, solar panels, wind energy, geothermal heat pumps, and other forms of heat exchange and recovery, and hydro power. Passive construction methods also have their role to play.</div>
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Conclusion:</h3>
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The Green Bank of New York could wield historic influence through prudent underwriting standards and shift renewable energy retrofits into high gear, to accelerate reductions in Green House Gas emissions, and help shore up property values, building resiliency, and economic competitiveness.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-43483612604742750322013-09-03T13:19:00.000-07:002015-06-10T13:21:19.226-07:00Open Letter to Pres. Obama on reducing GHG-emissions<h2 align="RIGHT" data-mce-style="text-align: left;" style="clear: both; color: #2b2b2b; font-family: Lato, sans-serif; font-size: 24px; line-height: 24px; margin: 0px 0px 12px;">
Streamlining Incentives is the Low Cost/No-Cost Option to Speed up Reductions in GHG-emissions by Accelerating Renewable Energy Retrofits and creating Property Appreciation</h2>
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The following is an open letter to President Barack Obama about ideas to promote faster reductions of GHG-emissions by simplifying incentives for renewable energy retrofits, and basing programs on correct economic and financial principles so that the benefits accrue to the investor (property owner) in the form of property appreciation, and not to the energy companies or equipment manufacturers as is now often the case.<br />Note that every major statement is backed up with references to relevant articles on this blog. Additionally the search functions allows the reader to drill down deeper.</div>
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Open Letter to President Obama on Reducing GHG-emissions, by increasing renewable energy retrofits and creating property appreciation</h1>
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Note: The letter was sent on the letterhead of <a data-mce-href="http://www.dabxdemandsidesolutions.com" href="http://www.dabxdemandsidesolutions.com/" style="color: #24890d; text-decoration: none;" target="_blank" title="Website for DaBx Demand Side Solutions">DaBx Demand Side Consulting</a>, Inc.<br />================================================================</div>
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August 8, 2013</div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">President Barack Obama<br />The White House<br />1600 Pennsylvania Avenue NW<br />Washington, DC 20500</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Dear Mr. President:</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Re: Climate Change – A Proposal to Make Major Progress to Reduce GHG-Emissions from Buildings by Streamlining Processes.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Please consider this an open letter. I may send copies to such federal and New York agencies and officials as may seem relevant given the topic, and/or the press, and/or publish the information online.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">There are a few very simple steps your administration could pursue that would unlock the forces of change to reduce GHG-emissions —without any need for major funding. Such action would also go a long way to shoring up real estate markets and boosting long-term economic competitiveness. These steps would entail both the radical simplification of many subsidies, incentives and programs, along with the proper use of financial solutions such as PACE bonds. These and other vehicles can be used to provide the financing to meet up-front capital requirements for renewable retrofits and to build asset values in real estate markets.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">In order to achieve these real estate value-enhancing goals, we would need to abandon all subsidies and incentives for specific technologies, such as ITC for Solar PV( but not for certain other technologies <i>which m</i><i>ight </i><i>be superior fora given building</i><i>)</i>. By targeting the incentives to property owners for GHG emissions reductions <span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">for individual </span><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">building</span><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">s</span>, instead of by technologies used, tremendous creativity will be unleashed.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Any engineer experienced in this field has seen optimal solutions rejected because some accountant comes along to point out a tax credit on one technology versus another. Very often, wrong solutions are specified to qualify for incentives. Imagine how much better we could do if a 30% ITC were awarded pro-rata for 50% reduction in GHG-emissions <span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">in a building</span>. Perhaps even award extra percentage point for every 10% above 50% reduction. Things would change quickly.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">This problem gets really out of hand when finance programs target specifics such as the use of Energy Star rated equipment. Sometimes, the wrong equipment will be selected because the financing depends on it. Again, the incentives should be based on the overall goal of reducing GHG-emissions at the property level. There should be simple, agreed regional standards for such improvements and the related financial computations.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">This <span data-mce-style="text-decoration: underline;" style="text-decoration: underline;">building-focused</span> approach has been proposed by us in our publication, the DaBx Renewable Energy Retrofit Portfolio Standard (copy enclosed) and is available with supporting references here:</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;"><span data-mce-style="color: #000080;" style="color: navy;"><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><a data-mce-href="http://www.vliscony.com/2013/06/12/dabx-renewable-energy-retrofit-portfolio-standard/" href="http://www.vliscony.com/2013/06/12/dabx-renewable-energy-retrofit-portfolio-standard/" style="color: #24890d; text-decoration: none;">http://www.vliscony.com/2013/06/12/dabx-renewable-energy-retrofit-portfolio-standard/</a></span></span></span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Also, our proposal has been published in our report to New York City, DaBx PlaNYC2020, in the new 2013 edition, available here:</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;"><span data-mce-style="color: #000080;" style="color: navy;"><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><a data-mce-href="http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft" href="http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft" style="color: #24890d; text-decoration: none;">http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft</a></span></span></span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">A copy will be gladly provided upon request.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">The individual issues referred to above have been discussed extensively on my blog at <span data-mce-style="color: #000080;" style="color: navy;"><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><a data-mce-href="http://www.vliscony.com/" href="http://www.vliscony.com/" style="color: #24890d; text-decoration: none;">www.vliscony.com</a></span></span> and in the annotated version of the DaBx Renewable Energy Portfolio Standard for Multi-Family Buildings. As previewed earlier, pressing issues documented by our firm include a) the distortions created by ill-conceived incentives b) the distortions in decision making caused by prioritizing energy efficiency over renewable energy, as well as, c) the way many programs incentivize counter-productive financial decisions, whereas d) under a 30 year Capital Asset Pricing, the attractiveness of renewable energy would move to the top of the list. For your ready reference, I have highlighted key issues and proposed fixes as Enclosure I to this letter with references to the relevant DaBx commentaries and documents.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Commending the above to your attention.</span></span></div>
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<span data-mce-style="font-family: 'Lucida Handwriting', cursive;" style="font-family: 'Lucida Handwriting', cursive;"><span data-mce-style="font-size: large;" style="font-size: medium;">Rogier F. van Vlissingen</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Encls. DaBx Renewable Energy Retrofit Portfolio Standard for Multi-family Buildings.</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">c.c.:</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">NYS - Governor Andrew Cuomo</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">NYC - Mayor Michael Bloomberg</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">EPA - Gina McCarthy, Administrator</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">DOE - Dr. Ernest Moniz, Secretary of Energy</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">New York Times - Jill Abramson, Executive Editor</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Bloomberg Business News - Matthew Winkler, Editor In Chief</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">The Wall Street Journal – Gerard Baker, Managing Editor</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Fannie Mae – Timothy J. Mayopoulis, President and CEO</span></span><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Freddie Mac - Donald H. Layton, CEO</span></span></div>
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Enclosure I – Open Letter to President Obama</h1>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Proposed Building Code and Energy Policy Revisions to Reduce GHG Emissions and Enhance Real Estate Values</span></span></div>
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<span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;"><i>Highlights from DaBx Demand Side Solutions<br />Commentary & Publications</i></span></span></div>
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<li><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Programs that prioritize energy efficiency as a proxy for reducing of GHG-emissions fail, because they will marginalize renewable energy in favor of efficiency improvements of existing carbon-based infrastructure. Thereby, they effectively crowd out investment in renewables that would, in many cases, create greater enhancements to property values than available through carbon-based energy efficiency. Improving energy efficiency is not a goal in its own right, as it merely lowers the cost and increases demand for energy. Example: <span data-mce-style="color: #000080;" style="color: navy;"><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><a data-mce-href="http://www.vliscony.com/2013/06/10/energy-efficiency-sinks-green-underwriting/" href="http://www.vliscony.com/2013/06/10/energy-efficiency-sinks-green-underwriting/" style="color: #24890d; text-decoration: none;">http://www.vliscony.com/2013/06/10/energy-efficiency-sinks-green-underwriting/</a></span></span></span></span></li>
<li><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Incentives directed at energy efficiency without regard to the prior (make or buy) decision regarding carbon-based energy versus renewable energy, will always work out as a subsidy to carbon-based energy due to sunk costs. Example: <span data-mce-style="color: #000080;" style="color: navy;"><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><a data-mce-href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" href="http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/" style="color: #24890d; text-decoration: none;">http://www.vliscony.com/2013/06/01/nyserda-mpp-dimishing-returns/</a></span></span></span></span></li>
<li><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Incentives directed towards specific technologies will tend to destroy property values given, first, the inappropriate technology choices they foster in many cases, and, second, their tendency to encourage property owners to make capital decisions on energy infrastructure based on payback of the equipment, instead of based on long term cash flow and increasing building values. Example: <span data-mce-style="color: #000080;" style="color: navy;"><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><a data-mce-href="http://www.vliscony.com/2013/06/03/energy-retrofits-underwriting-risk/" href="http://www.vliscony.com/2013/06/03/energy-retrofits-underwriting-risk/" style="color: #24890d; text-decoration: none;">http://www.vliscony.com/2013/06/03/energy-retrofits-underwriting-risk/</a></span></span></span></span></li>
<li><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">When securitized, the performance of energy-efficiency loan portfolios has not been an unqualified success, because the valuations are dubious. Net zero construction has been the fastest growing segment of the construction market for 20 years. Therefore, the value of reducing your energy use 20-30% over last year diminishes as this new construction upgrades the overall stock of buildings. Energy-efficiency driven finance is merely the latest form of predatory lending offered by Wall Street to Main Street, hi-jacking property appreciation from its rightful owners. Example: Solar PPAs – the current fad: <span data-mce-style="color: #000080;" style="color: navy;"><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><a data-mce-href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" href="http://www.vliscony.com/2013/05/30/ma-solar-ppa/" style="color: #24890d; text-decoration: none;">http://www.vliscony.com/2013/05/30/ma-solar-ppa/</a></span></span></span></span></li>
<li><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">The single most positive change to help bring about rapid reductions in building-level GHG-emissions—have the financial industry make mortgage lending for rehab/retrofits, including PACE bonds and similar vehicles, contingent upon 30-year cash flow projections for the property. The valuation extension would have the financial effect property by property of moving energy from liability side of the owners balance sheet to the asset side through renewable investment. Once 30-year cash flow models become the norm, the marketplace will start to appreciate that 30 years of no energy bills beats 20-30% of energy “savings.” Moreover, emphasizing property values is the proper, capitalistic approach, in lieu of the 20 year top down plans which are now the norm. These plans reek of the toothless 20 year economic plans proffered in the former Soviet Union to protect the status quo. Such plans subsidize the shareholders of energy companies at the expense of property owners and are generally designed to fail. Example: <span data-mce-style="color: #000080;" style="color: navy;"><span data-mce-style="text-decoration: underline;" style="text-decoration: underline;"><a data-mce-href="http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/" href="http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/" style="color: #24890d; text-decoration: none;">http://www.vliscony.com/2013/07/21/renewable-energy-policy-new-york/</a></span></span></span></span></li>
<li><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">Two simplifications go hand in hand here: 1) policy and regulations should focus on reducing GHG-emissions and 2) building owners should focus on investments that enhance long term property values. Together, these complementary priorities can eliminate vast amounts of red tape and unleash the economic forces that will drive the shift to a less carbon intensive economy.</span></span></li>
<li><span data-mce-style="font-family: 'Palatino Linotype', serif;" style="font-family: 'Palatino Linotype', serif;"><span data-mce-style="font-size: large;" style="font-size: medium;">The place to enforce the application of a proper 30 year cash flow model of the property is in the application process for financing and/or incentives. The model of current applications encourages financially counter-productive decision making, which benefits either energy companies (in the case or energy efficiency), or equipment manufacturers (ITC and other incentives), not the property owners, by emphasizing payback of specific equipment or efficiency measures. By shifting to a reporting of the long term improvement in property values, while qualifying for incentives based on reducing GHG-emissions, the correct habits can be enforced seamlessly as part of the process.</span></span></li>
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Conclusion: Simplifying Incentives will Speed Up Reductions in GHG-emissions with Renewable Energy Retrofits and Speed Up Property Appreciation</h3>
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Reducing GHG-emissions can be speeded up tremendously by simplifying regulations and targeting them better towards the real objective, instead of proxies for that objective, which always fail. Renewable energy retrofits in buildings directly reduce GHG-emissions at the source, and will serve to increase property values by moving energy from liabilities to assets for a property, creating property appreciation and constructive engagement of the property owner in reducing GHG-emissions with simple incentives to stimulate those investments.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-48113355277855325872013-08-26T13:16:00.000-07:002015-06-10T13:18:34.598-07:00Green Energy Policy Failures and Real Sustainability<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
The one thing that is missing in the whole sustainability area and renewable energy policy is a sound focus on the economics and the finance of green energy. With new buildings this is not a problem, but the greater market is retrofits in older buildings and in that arena by and large people are wasting their money with tinkering in the margin instead of making the most of the opportunity.</div>
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If it takes 10 years for a new efficiency standard to work its way through the car fleet, then the picture is much worse with buildings, because they typically last a bit longer than cars. Living in one of the older parts of NYC, I'm surrounded by 50+ year old structures, which still have plenty of life left in them.</div>
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Policy Failure #1:<br />Conflating Energy Efficiency and Renewable Energy</h1>
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Conflating energy efficiency and renewable energy is an obfuscation which serves only the fossil fuel industry, which is why they eagerly embrace "energy efficiency." This is how they compete against renewable alternatives. Energy efficiency is a marketing strategy and a greenwash of the fossil fuel industry, and it is financially disruptive. In various posts on this website, I have demonstrated how this manifests itself across many programs, and acts as a way to divert investment from green technology, even if it would be financially more advantageous to property owners.</div>
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Since this approach benefits the fossil fuel industry, this is a typical <a data-mce-href="http://cps.sagepub.com/content/39/4/490.short" href="http://cps.sagepub.com/content/39/4/490.short" style="color: #24890d; text-decoration: none;" target="_blank" title="Policy Failure should be a Reason for Change">policy failure</a>, which achieves the opposite of what is intended, and change is in order.</div>
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Policy Failure #2:<br />Arguing over Clean Fuels is like rearranging the deck chairs on the Titanic</h3>
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As argued in earlier posts, the whole <a data-mce-href="http://www.vliscony.com/2013/06/05/nyc-clean-heat-regressive/" href="http://www.vliscony.com/2013/06/05/nyc-clean-heat-regressive/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYC Clean Heat is regressive with respect to Clean Air Compliance">NYC Clean Heat</a> program is a massive example of <a data-mce-href="http://www.vliscony.com/2013/08/20/nyc-clean-heat-capital-destruction/" href="http://www.vliscony.com/2013/08/20/nyc-clean-heat-capital-destruction/" style="color: #24890d; text-decoration: none;" target="_blank" title="NYC Clean Heat Amounts to Capital Destruction">policy failure</a> in this area. The whole point is we are in a transition away from fossil fuels, and towards renewable energy, and now that we generally realize how much energy is consumed by buildings, and green energy technologies that are suited for mounting on buildings are proliferating, it is time for policy makers to encourage this development, instead of putting road blocks in the way. Even with all of the best intentions, this is how most programs have worked out so far.</div>
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Policy Failure #3:<br />Not seeing the forest for the trees - misguided incentives</h2>
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Tremendous amounts of time, effort and money are wasted over what technologies are blessed with the Investment Tax Credit, which is good for sales for the companies that make them. However this puts the focus on individual technologies, and not on the whole project, which can only be judged on the property as a whole. If accountants start specifying the wrong components because of ITC, inferior projects will be developed, never mind how good the individual components are. There is a right place for everything. But having accountants make engineering decisions is counter-productive.</div>
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Policy Failure #4:<br /><span data-mce-style="font-size: 1.285714286rem; line-height: 1.6;" style="font-size: 1.285714286rem; line-height: 1.6;">Disregard for long-term financial planning is encouraged by incentive programs</span></h2>
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By various forms of incentives on equipment, such as the ITC, or a requirement to specify <a data-mce-href="http://www.vliscony.com/2013/05/12/energy-star-counterproductive/" href="http://www.vliscony.com/2013/05/12/energy-star-counterproductive/" style="color: #24890d; text-decoration: none;" target="_blank" title="When Energy Star becomes Counterproductive">Energy Star equipment</a>, regardless if it is the best for the job from an engineering standpoint, suboptimal projects are being developed. What matters is to reduce the Green House Gas emissions on a building level, so the incentives should address the achievements of the building as a whole. Energy Star is fine for a fridge or a micro wave, which are one-off decisions, but specifying the credits on construction components causes accountants to mess up the best engineering. More importantly the whole industry has gotten in the bad habit of evaluating financial decisions at the component level, based on payoff of that component in terms of savings, which gets in the way of <a data-mce-href="http://www.vliscony.com/2013/05/26/compound-returns-renewable-energy/" href="http://www.vliscony.com/2013/05/26/compound-returns-renewable-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="Compound Returns from Renewable Energy">long-term capital plans</a>, which would reveal very different design strategies.</div>
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Policy Failure #5:<br />Absence of simple objectives, such as reducing Green House Gas emissions</h2>
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Once the policy focuses on the right issues, namely reducing Green House Gas emissions building by building, better designs will proliferate, and long-term capital budgeting becomes the obvious way to design capital plans. Thirty year cash flow models should be the norm, and ideally should be required by financiers and e.g. PACE bonds. The whole point of PACE bonds was to have a way to raise the upfront capital needed for this transition, which would add to long-term asset values. Instead, a lot of PACE money is being wasted on dubious "energy efficiency" projects, and property owners are frittering away the long-term appreciation of their buildings by investing in renewable infrastructure, and moving energy from the liabilities to assets.</div>
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Conclusion:<br />How to Achieve Sustainability in Spite of Policy Failure</h1>
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In spite of all policy failures, building owners have a vested interest in sustainability, because it increase asset values, and they should be using 30 year capital budgets for energy retrofits with green energy technology; in other words the various programs and incentives should be ignored and the long-term economics of the building should get priority, before you figure out how to qualify for the incentives.</div>
RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0tag:blogger.com,1999:blog-1972798913828884954.post-29304312902195096552013-08-20T12:45:00.000-07:002015-06-10T12:47:35.729-07:00NYC Clean Heat Amounts to Capital Destruction<div style="color: #2b2b2b; font-family: Lato, sans-serif; font-size: 16px; line-height: 24px; margin-bottom: 24px;">
Recently I demonstrated on this blog why <a data-mce-href="http://www.vliscony.com/2013/06/05/nyc-clean-heat-regressive/" href="http://www.vliscony.com/2013/06/05/nyc-clean-heat-regressive/" style="color: #24890d; text-decoration: none;" title="NYC Clean Heat is regressive with respect to Clean Air Compliance">NYC Clean Heat is regressive</a> with respect to Clean Air compliance, because it diverted buildings to natural gas, that would have been perfectly suited for renewable energy deployments. The typical buildings that were (and in some cases still are) burning #6 oil, are ideal candidates for renewable energy conversions. In many cases that would have produced financially and economically superior outcomes for building owners, and certainly for the city in terms of Clean Air, and for tenants in terms of quality of life. <a data-mce-href="http://en.wikipedia.org/wiki/Greenhouse_gas" href="http://en.wikipedia.org/wiki/Greenhouse_gas" style="color: #24890d; text-decoration: none;" target="_blank" title="Wikipedia on Green House Gas">Green House Gas Emissions</a> could be reduced far more than is now the case, and NYC Clean Heat was an unqualified victory for the carbon energy industry. Next time we should get our fossil fuels facts, before we argue any fossil fuels pros and cons.</div>
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There are several other aspects to the matter, which make the picture even far worse. There is no argument that natural gas burns cleaner than #6 or #4 oil (and even than #2 oil), and produces less CO2 and fewer particulates. However, the reality is that the distribution losses of methane are 30+%, and the uncontrolled release of methane into the air from fracking ("unconventional gas"), add even more environmental burden, since methane is a far worse Green House Gas than CO2. Increasingly, our natural gas is "unconventional gas." Fossil fuels are the problem, and "cleaner fuels" are mostly simply an obfuscation.</div>
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Greenwashing Fossil Fuel</h3>
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As has been pointed out in many ways on this blog, the <a data-mce-href="http://www.vliscony.com/2013/05/29/greenwashing-galore-energy/" href="http://www.vliscony.com/2013/05/29/greenwashing-galore-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="Greenwashing Galore in Energy and Otherwise">greenwashing</a> by the power industry is the single biggest PR stunt to halt the conversion to renewable energy. The argument is not over types of fossil fuels. it is a matter of renewable alternatives. With the evidence cited here, and more, it is clear that dubious claims were used to promote natural gas as a clean fuel, and a "bridge fuel," it is mostly a diversionary tactic, and it is absolutely imperative that we transition to renewable energy wherever it is economically feasible. Switching to different forms of fossil fuels is window dressing, not progress.</div>
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There are many more opportunities in the city's aging building infrastructure than are now being exploited (see my <a data-mce-href="http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft" href="http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft" style="color: #24890d; text-decoration: none;" target="_blank" title="DaBx PlaNYC2020">DaBx PlaNYC2020</a>), because government programs are steering owners away from them. In a more general sense, it is also clear that the obfuscation that results from promoting energy efficiency in fossil fuel based systems makes them more competitive, and fuels the demand, crowding out investment in renewable energy. So energy efficiency of fossil fuel systems is not part of any green agenda, except simply if it is the only thing you can do and arguably better than the alternative.</div>
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Methane leaks and more from Fracking</h2>
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How big is the problem of <a data-mce-href="http://spectrum.ieee.org/energywise/energy/fossil-fuels/how-big-a-problem-is-methane-leakage-from-natural-gas-fracking" href="http://spectrum.ieee.org/energywise/energy/fossil-fuels/how-big-a-problem-is-methane-leakage-from-natural-gas-fracking" style="color: #24890d; text-decoration: none;" target="_blank" title="Natural Gas Leaks from Fracking">natural gas (methane) leaks from fracking</a>? As usual the answers depend on who you ask. The article cited here is probably conservative and reports an extreme finding of 14% of production (output) in losses from fracking. And that is only the current leaks, during extraction. What no one knows is how much seeps out in the years following production. As the article notes, it will take a long time before we have an accurate fix on this issue, but it definitely takes away some of the charm of natural gas. The more alarmist view of <a data-mce-href="http://climatecrocks.com/2013/08/07/oops-methane-leakage-from-fracked-wells-alarmingly-high/" href="http://climatecrocks.com/2013/08/07/oops-methane-leakage-from-fracked-wells-alarmingly-high/" style="color: #24890d; text-decoration: none;" target="_blank" title="High Estimate of Methane Leaks from Fracking">methane losses from fracking</a> can be found in many places, if you want to arrive at a balanced view. The fossil fuel industry talks of 2% or less, and more independent opinions are as high as 10% of all gas produced.</div>
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The only encouraging information is that while methane is anywhere from sixty to one hundred times more destructive than CO2, it dissipates in the atmosphere within 20 years, while CO2 builds up forever. Be that as it may, renewable energy would reduce our green house emissions faster than the natural gas bonanza, and the element of leakage takes away some of the charm of natural gas.</div>
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The environmental degradation from fracking may well be equivalent or worse than the toxic sludge from the scrubbers of coal-fired power plants. The jury is still out on this part of the story.</div>
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Green House Gas Emissions from Distribution</h2>
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The <a data-mce-href="http://www.sourcewatch.org/index.php?title=Natural_gas_transmission_leakage_rates" href="http://www.sourcewatch.org/index.php?title=Natural_gas_transmission_leakage_rates" style="color: #24890d; text-decoration: none;" target="_blank" title="Sourcewatch on Distribution Losses of Natural Gas">distribution loss of Methane (Natural Gas)</a>, as you can see in this article, 5%-10% leakage from distribution may be the range in the UK, and according to the calculations cited there, anything over 2.8% leakage may be enough to offset the "clean" advantages of natural gas over coal, which is the dirtiest fuel. In the US losses may be lower. EPA estimates that the losses of natural gas are distributed as follows: 37% from transmission/storage, 24% from distribution, and 27% from production. Overall EPA estimates that globally the losses of methane from leakage are 3.2%, which would largely wipe out the advantages over coal or oil.</div>
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Green House Gas Emissions from Burning Natural Gas</h2>
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Here is where Natural Gas has it over coal and oil, producing far fewer problems, starting with less CO2, but also fewer particulate emissions, as well as various other toxic exhausts, including mercury. This is what allows New York City to claim that a switch from #6 and #4 oil to natural gas would produce reductions in Green House Gas emissions. Evidently NYC is the point of consumption, and the fact that gas is cleaner burning seems to carry the day. However, it should be obvious from even this brief overview, that this may appear to be true locally, it is not true on a complete system-wide view of the matter. Hence the drive to gas conversions is little more than window dressing, particularly in light of the alternatives that are not being pursued.</div>
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Government Sponsored Capital Destruction</h1>
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In short, the drive to convert from oil to gas is largely futile, and to the extent that it is forcing building owners to prematurely change boilers, it amounts to government sponsored capital destruction.</div>
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Most importantly, the opportunities discussed on this site, for green energy generation in buildings, which would permanently improve building values, and make huge contributions to Clean Air, are basically being disregarded as a result of the dubious environmental benefits of natural gas, and passing up that financial opportunity alone is yet another form of capital destruction, because with while <a data-mce-href="http://www.vliscony.com/2013/06/16/real-estate-valuation-age-renewable-energy/" href="http://www.vliscony.com/2013/06/16/real-estate-valuation-age-renewable-energy/" style="color: #24890d; text-decoration: none;" target="_blank" title="Property Values in the Age of Renewable Energy">fossil fuel</a> is an ongoing operating expense, truly renewable, green energy moves energy from liabilities to assets, and permanently improves building values.</div>
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Conclusion</h1>
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In short, NYC is missing the boat by rushing into a pseudo solution that merely shuffles the deck chairs on the Titanic of the fossil fuel economy, that has precious little real environmental benefit to offer in terms of reducing Green House Gas Emissions, except for some very short-term window dressing and greenwashing of the fossil fuel economy, while it passes up the long-term economic potential of substantially reducing Green House Gas emissions, greater building resiliency, and improved economic competitiveness that would result from a greater emphasis on switching to renewable energy within the city. Given the alternatives, the campaign amounts to government sponsored capital destruction.</div>
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RogierFvVhttp://www.blogger.com/profile/06620302882101332152noreply@blogger.com0