There are no green electrons, nor can we change the supply sources at will, but we can purchase green power to varying degrees, by incorporating Renewable Energy Credits (RECs) into our electricity mix, or by generating your own clean electricity. The point of the exercise is that for consumers Green Power is a way of voting with your dollars, and signaling a preference for clean energy technologies. In short: RECs are a financial mechanism to support clean power, and credits are awarded to producers of clean renewable energy, and by buying those certificates, the consumer can stimulate development of such resources. RECs can be built into the rates by your provider or purchased independently. In the links section there are a whole range of information sources on Green Power and RECs.
If you look at the Corporate Top 50 Green Power purchasers, you see that Intel buys 88% Green Power, with a mix of on-site generation and recs from Sterling Planet and others. Starbucks buys 52% Green Power, Whole Foods 100%, and Lockheed Martin 15% , Wal-Mart 8%, etc. So it is pretty much a matter of how much you want to do in this area as a matter of corporate policy.
What it means for your rates. 100% Green Power typically adds some 2 cents per kwH to your rates. The typical household uses an average of 900 kwH/mo, so on average to "go green" should cost you ca $18/mo on your rates if you happen to be such an "average" household.
With my own household, I was with one supplier for a few years, and with the benefit of hindsight, I paid ranging from 0.5 cents to 4.00 cents per kwH extra for my 100% Green Power, so over time it averaged out ca 2%. Green power is a conscious choice to make a difference. Green power is about empowerment, about choice, about making a difference. It is a lifestyle choice, not an energy purchasing decision, and that is why most ESCOs fail in the mission of marketing Green Power.
Tuesday, December 6, 2011
Friday, December 2, 2011
On the Marketing of Green Power
The power industry by and large has failed to understand the potential of Green Power. Years ago, when I was attempting to design a Green Power marketing program for an ESCO (Accent Energy), I was arguing with the founders of that company that Green Power was different, and ultimately would require a separate company to market it.
Essentially, my analysis of the situation was that the mindset of the power industry was about price competition, and Green Power broke the mold, because to the power people it was power for 2 cents more, and that made no sense to them. Seen in that light the market place for Green Power was limited to some fringe cases, and was not worth worrying about. The power people therefore were incapable of understanding it, and I pointed out to them that selling Green Power rather meant promoting empowerment, and energy independence, not selling power.
Power is a negative, and people feel dis-empowered, because they have to pay that bill anyway, never mind whose name is on the bill. Moreover, they don't understand de-regulation, and it is somewhere between hard and impossible to verify the various claims, and many ESCOs have proven to be somewhat less than ethical in their dealings.
One of the major features of differentiation in the power market place has been often misunderstood and sold the wrong way: fixed rates. People think they are buying fixed rates in the illusion that they're going to beat the market, which is not so. Now, if you are responsible for a budget, and you'd like to fix one element of your cost, and you can rationalize that the cost is historically reasonable, well... perhaps you should consider the fixed price option. If you think you're going to beat the energy market, you probably should buy a lottery ticket instead. And, you are paying extra for the pleasure of having fixed rates.
All in all the ESCOs don't know what to do with themselves to differentiate their product. And in the direct sales model this inevitably leads to reps who will tell any lies necessary to get the deal, and in spite of codes of ethics that try to rein in the abuses, the results are a joke. In the last few months I've had more reps from power companies at my door than I can shake a stick at and almost all of them lie, although they've now been trained to not say they represent ConEdison, for then they could get fired. But they all violate the spirit of the law. From my time in the industry it was always clear that the system is rife with abuse, and that invariably the reps who lie the most make the most money. It is time to break the mold...
Fundamentally the justifications for de-regulated energy markets are not valid. Price competition is no solution to the nations energy problems. Instead it roots us in the illusion that we can beat the system, when in reality we can't. Here in NYC it is particularly evident. The real issue is transportation, for the T&D portion of your bill is 65%, and going up ahead of inflation as far as the eye can see. The real answer therefore is renewable energy generation at the building level, for these are investments that gain in value over time and therefore are conducive to appreciating real estate values. Their value goes up with every energy price hike, and with every rate increase for ConEdison.
Economically also, the utilities will have a long term economic interest in encouraging growing diversification of markets, because it is a proven fact that the overall system often becomes more reliable when the grid serves as a backup, as we have seen in energy intensive buildings like data centers, where reliability counts. Today's renewable technology is enabling this model for large groups of buildings, and it is part of the solution on a lot of levels. By the same token economic competitiveness, public safety and national security all gain from greater energy independence.
Especially in the urban environment the economics of energy are now solidly favoring the local production model in a growing number of cases. From the standpoint of economic modeling with T&D at 65% of the bill, and energy at only 35% of the bill, a 10% better energy rate is a 3.5% difference in the bill, and the arguments of de-regulation soon become laughable. Energy efficiency, demand management, and renewable production are where it's at because they gain on the T&D problem. As long as the incentive systems are done right, it should end up with both better utilization of the grid, and with greater energy diversification.
Thus, if we take the average household consumption of 900 kwH, at typical rates in NYC, of ca. 25 cents/kwH, of $225, a savings of 3.5% is ca $7.88 per month, or about 3 subway fares at current rates. Thus besides generating campaign contributions for the politicians that voted for it, financially it is not very meaningful. However if Green Power is an innovation that rides the back of de-regulation, it may be worth it after all. Watch the ratings of the largest corporate users of Green Power here:
http://www.epa.gov/greenpower/toplists/top50.htm
Essentially, my analysis of the situation was that the mindset of the power industry was about price competition, and Green Power broke the mold, because to the power people it was power for 2 cents more, and that made no sense to them. Seen in that light the market place for Green Power was limited to some fringe cases, and was not worth worrying about. The power people therefore were incapable of understanding it, and I pointed out to them that selling Green Power rather meant promoting empowerment, and energy independence, not selling power.
Power is a negative, and people feel dis-empowered, because they have to pay that bill anyway, never mind whose name is on the bill. Moreover, they don't understand de-regulation, and it is somewhere between hard and impossible to verify the various claims, and many ESCOs have proven to be somewhat less than ethical in their dealings.
One of the major features of differentiation in the power market place has been often misunderstood and sold the wrong way: fixed rates. People think they are buying fixed rates in the illusion that they're going to beat the market, which is not so. Now, if you are responsible for a budget, and you'd like to fix one element of your cost, and you can rationalize that the cost is historically reasonable, well... perhaps you should consider the fixed price option. If you think you're going to beat the energy market, you probably should buy a lottery ticket instead. And, you are paying extra for the pleasure of having fixed rates.
All in all the ESCOs don't know what to do with themselves to differentiate their product. And in the direct sales model this inevitably leads to reps who will tell any lies necessary to get the deal, and in spite of codes of ethics that try to rein in the abuses, the results are a joke. In the last few months I've had more reps from power companies at my door than I can shake a stick at and almost all of them lie, although they've now been trained to not say they represent ConEdison, for then they could get fired. But they all violate the spirit of the law. From my time in the industry it was always clear that the system is rife with abuse, and that invariably the reps who lie the most make the most money. It is time to break the mold...
Fundamentally the justifications for de-regulated energy markets are not valid. Price competition is no solution to the nations energy problems. Instead it roots us in the illusion that we can beat the system, when in reality we can't. Here in NYC it is particularly evident. The real issue is transportation, for the T&D portion of your bill is 65%, and going up ahead of inflation as far as the eye can see. The real answer therefore is renewable energy generation at the building level, for these are investments that gain in value over time and therefore are conducive to appreciating real estate values. Their value goes up with every energy price hike, and with every rate increase for ConEdison.
Economically also, the utilities will have a long term economic interest in encouraging growing diversification of markets, because it is a proven fact that the overall system often becomes more reliable when the grid serves as a backup, as we have seen in energy intensive buildings like data centers, where reliability counts. Today's renewable technology is enabling this model for large groups of buildings, and it is part of the solution on a lot of levels. By the same token economic competitiveness, public safety and national security all gain from greater energy independence.
Especially in the urban environment the economics of energy are now solidly favoring the local production model in a growing number of cases. From the standpoint of economic modeling with T&D at 65% of the bill, and energy at only 35% of the bill, a 10% better energy rate is a 3.5% difference in the bill, and the arguments of de-regulation soon become laughable. Energy efficiency, demand management, and renewable production are where it's at because they gain on the T&D problem. As long as the incentive systems are done right, it should end up with both better utilization of the grid, and with greater energy diversification.
Thus, if we take the average household consumption of 900 kwH, at typical rates in NYC, of ca. 25 cents/kwH, of $225, a savings of 3.5% is ca $7.88 per month, or about 3 subway fares at current rates. Thus besides generating campaign contributions for the politicians that voted for it, financially it is not very meaningful. However if Green Power is an innovation that rides the back of de-regulation, it may be worth it after all. Watch the ratings of the largest corporate users of Green Power here:
http://www.epa.gov/greenpower/toplists/top50.htm
Monday, August 15, 2011
When Energy Efficiency is a Trap
Massive new programs for energy efficiency are being deployed all around, and however wonderful they are, when they are applied in the right places, it remains equally true that under certain circumstances, they can be disastrously wrong.
As pointed out throughout this site, there is a huge class of buildings in New York, in the form of the City's old-line apartment buildings which because of their size and proportions make excellent targets for deploying renewable energy, yet they are caught up in the energy efficiency craze, and in the process destroying their renewable energy potential with tax payer subsidies.
The key insight is that the two investment strategies energy independence and energy efficiency of existing infrastructure are mutually exclusive, and progressively so. In other words if your building at the outset had a reasonable potential do switch to a largely renewable infrastructure, then every investment you make unthinkingly in energy efficiency of your fossil-fuel based infrastructure makes it harder financially to switch to the renewable energy strategy.
Successive investments in energy efficiency do not cumulatively add up to energy independence, on the contrary, they act to postpone energy independence indefinitely, and perpetuate your building, as a consumer of fossil fuels, albeit an ever more efficient one, and from that point of view they are customer acquisition programs for the fossil fuel based economy. In short, if there is an alternative, to unthinkingly commit more and more money to becoming simply more efficient in consuming fossil fuel based energy, is a bit like a junkie learning to 'manage' his habit.
The current spate of programs that are geared to achieving an 15% reduction in energy usage across the board, becomes a self fulfilling prophecy, as in the process there are thousands of buildings that would have been capable of 60-80% reduction of fossil fuel based energy usage, but they will never make that change, because of a whole system of incentives and programs that encourage them to make small incremental changes in usage, in lieu of radical re-engineering their energy systems and achieving deep energy change.
As pointed out throughout this site, there is a huge class of buildings in New York, in the form of the City's old-line apartment buildings which because of their size and proportions make excellent targets for deploying renewable energy, yet they are caught up in the energy efficiency craze, and in the process destroying their renewable energy potential with tax payer subsidies.
The key insight is that the two investment strategies energy independence and energy efficiency of existing infrastructure are mutually exclusive, and progressively so. In other words if your building at the outset had a reasonable potential do switch to a largely renewable infrastructure, then every investment you make unthinkingly in energy efficiency of your fossil-fuel based infrastructure makes it harder financially to switch to the renewable energy strategy.
Successive investments in energy efficiency do not cumulatively add up to energy independence, on the contrary, they act to postpone energy independence indefinitely, and perpetuate your building, as a consumer of fossil fuels, albeit an ever more efficient one, and from that point of view they are customer acquisition programs for the fossil fuel based economy. In short, if there is an alternative, to unthinkingly commit more and more money to becoming simply more efficient in consuming fossil fuel based energy, is a bit like a junkie learning to 'manage' his habit.
The current spate of programs that are geared to achieving an 15% reduction in energy usage across the board, becomes a self fulfilling prophecy, as in the process there are thousands of buildings that would have been capable of 60-80% reduction of fossil fuel based energy usage, but they will never make that change, because of a whole system of incentives and programs that encourage them to make small incremental changes in usage, in lieu of radical re-engineering their energy systems and achieving deep energy change.
Sunday, August 14, 2011
How to Stop Government Sponsored Capital Destruction
The indiscriminate push for energy efficiency over energy independence based on Renewable Energy results in a growing number of cases in missed opportunities for developing renewable infrastructure, which could have a wide range of beneficial effects in the long run, not least of which is the greater profitability of buildings, and their long term economic viability, and thus also building preservation.
We declared July 4th, 2011 Energy Independence day, by publishing our report DaBx PlaNYC2020 as a partial alternative to the PlaNYC2030 which the City has proposed, and we offered our report to the Mayor. Aside from that I felt that it was appropriate to also write to the Secretary of Energy, since ultimately many of the relevant policies originate at the federal level.
Whenever Energy Efficiency is pursued first, without examining the Energy Independence/Renewable Energy alternative first, some unfortunate outcomes result which are to the detriment of real estate values in the long run. In essence it is particularly the city's older apartment buildings which often offer the right economies of scale for the alternative, and there are very likely plenty of investors to be found who are interested in serious Green investments that produce long term steady income, so even if current owners are not interested, different investors could come into the market.
In order to get attention for the policy changes that are needed, we wrote to the Secretary of Energy:
quote
August 13, 2011
We declared July 4th, 2011 Energy Independence day, by publishing our report DaBx PlaNYC2020 as a partial alternative to the PlaNYC2030 which the City has proposed, and we offered our report to the Mayor. Aside from that I felt that it was appropriate to also write to the Secretary of Energy, since ultimately many of the relevant policies originate at the federal level.
Whenever Energy Efficiency is pursued first, without examining the Energy Independence/Renewable Energy alternative first, some unfortunate outcomes result which are to the detriment of real estate values in the long run. In essence it is particularly the city's older apartment buildings which often offer the right economies of scale for the alternative, and there are very likely plenty of investors to be found who are interested in serious Green investments that produce long term steady income, so even if current owners are not interested, different investors could come into the market.
In order to get attention for the policy changes that are needed, we wrote to the Secretary of Energy:
quote
U.S.
Dept. of Energy
Attn. Dr. Steven Chu,
Secretary of Energy
1000 Independence Avenue SW
Washington, DC 20585
Attn. Dr. Steven Chu,
Secretary of Energy
1000 Independence Avenue SW
Washington, DC 20585
Dear
Mr. Chu
Re:
DaBx PlaNYC2020 – A Paradigm Change
Attached
we are sending you a copy of our alternative plan for energy
independence in multi-family housing in NY, which was published on
July 4th, 2011 – Energy Independence Day, as I like to
think of it.
We
have provided the plan to NYC, and to Mayor Bloomberg specifically as
a partial alternative to the PlanYC2030, which is now in its second
generation. We are hopeful eventually to find both existing building
owners and investors who see the opportunity. This is an area rife
with opportunity for private/public partnership, and there are plenty
of funds that would be interested in financing buildings that
implement renewable energy, and reduce fossil fuel use in all forms
by 60-80% as we think is possible.
In
the meantime however, as a nation we are suffering a terrible case of
group think, and it is driving us all, and this class of buildings in
particular, straight off the cliff into the next energy crisis, not
to mention that it's aggravating a long list of infrastructural risks
and liabilities which could be solved by going the renewable energy
route directly instead.
The
point is this: there is a very large group of buildings in NY – the
same no doubt applies for many other cities – which offer the right
economies of scale for a holistic, integrated approach to renewable
energy, where it can be economical today, not twenty years from now,
and which will result in a massive improvement in the economics of
those buildings, and the economic competitiveness of the cities. With
that we will see asset values rise, and Freddie Mac and Fanny Mae,
and FHA should all become supportive, once they understand the value
adding capability of this radical investment strategy.
All
the building blocks to the methodologies we propose are available
today, and the only significant obstacles are government policies
that prevent it from happening, some minor regulatory hurdles that
could be improved, and the fact that all current official guidance,
programs, incentives, seem to be based on the pat assumption that
renewable energy is not (yet) economical, and thus it is never given
serious thought, causing an indefinite postponement instead.
The
whole situation is a classic example of a paradigm shift, the major
problem is that by and large the unexamined assumptions that cause
the present conundrum are based on evaluations of renewable energy in
a fossil fuel driven context. Contrary to that, what is needed to
make renewables pay is a strategy of complete re-engineering and
rethinking the energy infrastructure of existing buildings, and since
in NY there is already a program on the books for eliminating high
viscosity fuels, there is a tremendous opportunity to do that extra
step and do renewable energy now, not later.
Given
that there is a group of buildings where renewable energy would be
economical now, present practices, which are only becoming more and
more entrenched, amount to nothing else but massive case of capital
destruction with taxpayer money, or if you would, a government
sponsored customer retention program for the oil and utility
industry, at the expense of real estate values. Often it boils down to short term fixes financed with long term money, insuring that
buildings will be under water again at the merest sign of the next
energy crisis. Taken together, current policies also create an energy
monoculture around natural gas, and a huge and growing threat to
national security.
Our
alternative plan, which we've published under a Creative
Commons-Attribution-NonCommercial-ShareAlike 3.0 Unported License in
furtherance of public discourse, proposes essentially that once the
engineering integration is understood, renewable energy projects
which individually might not be attractive investments, could
generate compound returns, and thus taken together could be highly
attractive, and result in rapidly increasing building values. Simply
put, the same building that might be 30% more efficient with today's
best practices in energy efficiency, could reduce fossil fuel use by
75%, and be off the grid for common areas, as well as supplying car
charging station, or some of their tenants. Current energy efficiency
programs are fighting the last war, when the winning insight was that
a dollar spent on demand reduction was worth more than a dollar spent
on increasing supply.
To
make it even clearer, because there is no second act in energy
efficiency investments, due to arithmetically diminishing returns to
a limit that is well above 50% of usage, the currently dominant
regime of energy efficiency to the detriment of energy independence
also will lead to slum formation on a large scale, as it will
massively erode the economic viability of buildings within the next
20 years. Following our design strategies, many old buildings could
reduce fossil fuel usage by 60-80%, and be commercially viable for
the next 50 years.
Because
the two investment strategies – energy efficiency vs. energy
independence - are mutually exclusive, the current practice of
plunging into energy efficiency investments without thorough
examination of the energy independence alternative, condemns
buildings to what may be a sub-optimal strategy, if they would have
been capable of significantly utilizing renewable energy.
Meanwhile,
this country's infrastructure crisis is such that e.g. here in NY the
Transportation and Delivery portion of energy bills is already 65%,
and rising ahead of inflation indefinitely, and the renewable
strategies we are advocating could speed the way towards the smart
grid, not to mention accommodate electrical cars without causing
congestion on the grid. Thus transportation and delivery cost are the
real issue in the renewable energy strategies on the demand side
which we are proposing.
Lastly,
we emphasize that our multi-dimensional strategy recommendation
(looking again at NYC, our home market) includes strong beneficial
impacts in a wide range of related areas that are frequently
overlooked:
- Clean Air: short route for NYC to meet Clean Air Act standards
- National Security: reduction of dependence on foreign oil, diversification of energy inputs: these buildings will stay lit in the next blackout
- Transition to the smart grid: these strategies provide an accelerated transition to a smart grid, by evolving micro-grids that will be semi-independent.
- Public Safety: Buildings staying lit in a blackout, survivable in case of failure of the gas grid, and can provide unlimited backup for cell towers.
- Public Health: Better indoor air quality in the Asthma capital of the world, a.k.a. the South Bronx.
- Defense: The emerging Natural Gas monoculture is a huge new liability, diversification should have high priority.
- Economic competitiveness: Thousands of old apartment buildings could be upgraded into some of the most Green and energy efficient modes of city living. The outer boroughs would benefit most. In the near term it means jobs.
Because
of the importance of these issues at this critical junction in our
nation's energy policy and future, I am sending you this letter as an
open letter, which will be published on my blog at
http://nycgreenapple.blogspot.com,
as well as copies being sent to a number of relevant officials and
business people.
Yours
sincerely,
Rogier
Fentener van Vlissingen
unquote
Tuesday, July 19, 2011
Deep Energy Change at Steinway & Sons in Long Island City
The other day it was my pleasure to get a tour of the Steinway facility in Long Island City, and see their Energy Plant, in particular their solar thermal installation including a 100 ton absorption chiller, and which is smoothly integrated into their overall system with natural gas as a backup, and with an underlying development track of process improvement and rationalization of the energy infrastructure of the plant, which goes directly into improvements in their temperature (68F) and humidity control (50%RH), and increased systems reliability, and a payoff that includes measurable improvement in their operations. The tour was led by Mr. Bill Rigos, who was the project lead for Steinway, and who clearly took hands on responsibility for the project, including overseeing the development of a very customized system of controls that integrates essentially all of the relevant data from various sources, and makes easy control of their system a reality.
To me, what I saw was a demonstration of the kind of "deep energy change" the City needs more of. The financial people might tend to see a project with a ca 7.5 year payback, which in investment terms is not overly exciting, but, were the total scope to be modeled, including the greater measure of energy independence, and systems redundancy/reliability, as well as the various aspects of process improvements in the factory, the actual capital improvement to the business is staggering, since it not only saves energy but is directly responsible for process improvements, and reduced production loss ratios which are a direct consequence of a more controllable climate system. In other words, the secret is always in seeing the integral effects on overall operations and these types of intra-marginal investments add tremendous value to the economy.
These types of projects stand in shrill contrast to much of what is going on under the name of energy efficiency, which is often times actually a massive government subsidized form of capital destruction, that can be summed up as: make'm more efficient and switch 'em to gas, or, as a friendly engineer who is in the energy efficiency racket referred to their projects in upgrading multi-family buildings: "screwing in new lightbulbs." Central to the argument which we advance on this site the first generation of energy efficiency projects are always easy, have short paybacks, except they ignore the fact that there is NO follow-on, because they are an investment track with diminishing returns over time.
I could only say that it was a special privilege to see such a shining example of profound systems thinking, and an enduring deep commitment in the person of Bill Rigos himself, in such a venerable New York institution. Literally a shining example for the City, showing an alternative to the natural gas mono-culture that is engulfing us all, which is simply the next energy crisis in the making. At least here and there we are seeing example of looking at energy as we properly should, as a make or buy decision, in which renewable energy becomes the driver and subscription energy the backup. These are the breakthroughs we need to evolve to a sustainable economy and a measure of energy independence which can grow over time. Renewable energy plant is becoming a capital asset of buildings and companies, and valuations of businesses and buildings will undergo radical change in the years to come. Many who are dancing to the pied piper of energy efficiency will come to realize they foolishly invested in becoming more entrenched in fossil fuels and subscription energy, and are likely to find themselves cornere in a dead end street at the next energy crisis, which is presently being created by the current vogue of superficial energy change, which wrongly prioritizes energy efficiency before a proper assessment of the fundamental make or buy decisions about energy plant and the life-cycle consequences of those decisions.
The superficial story of the energy savings at Steinway will be validated over and over again by the immeasurable process improvements to their unique and incredibly valuable industrial process. The evaluation of these kinds of intra-marginal improvements remains notoriously difficult, but it is the difference between business-like investments in energy plant as a strategic asset of a business, compared to the herd-like and thoughtless pursuit of energy efficiency of existing plant, which is more a customer retention program for the utilities and energy companies, and at best an operational savings, that does not deserve the name of an investment.
As an example of the value of Solar Thermal technology in general this application is also valuable, for too often people are charmed by Solar PV because of the incentives, and because electricity is more sexy than heat. What is forgotten is that a lot of the energy you need in buildings is heat anyway, so as long as Solar Thermal produces about five times the amount of energy for the same square area compared to PV, there is little reason to look into PV if you could be using Solar Thermal instead in our densely populated area with high real estate prices.
Revision/Update: Here is a report on the same installation from Greentech Media from 2013: https://www.greenbiz.com/news/2013/02/22/black-and-gold-go-green-steinway-sons-journey-sustainability
To me, what I saw was a demonstration of the kind of "deep energy change" the City needs more of. The financial people might tend to see a project with a ca 7.5 year payback, which in investment terms is not overly exciting, but, were the total scope to be modeled, including the greater measure of energy independence, and systems redundancy/reliability, as well as the various aspects of process improvements in the factory, the actual capital improvement to the business is staggering, since it not only saves energy but is directly responsible for process improvements, and reduced production loss ratios which are a direct consequence of a more controllable climate system. In other words, the secret is always in seeing the integral effects on overall operations and these types of intra-marginal investments add tremendous value to the economy.
These types of projects stand in shrill contrast to much of what is going on under the name of energy efficiency, which is often times actually a massive government subsidized form of capital destruction, that can be summed up as: make'm more efficient and switch 'em to gas, or, as a friendly engineer who is in the energy efficiency racket referred to their projects in upgrading multi-family buildings: "screwing in new lightbulbs." Central to the argument which we advance on this site the first generation of energy efficiency projects are always easy, have short paybacks, except they ignore the fact that there is NO follow-on, because they are an investment track with diminishing returns over time.
I could only say that it was a special privilege to see such a shining example of profound systems thinking, and an enduring deep commitment in the person of Bill Rigos himself, in such a venerable New York institution. Literally a shining example for the City, showing an alternative to the natural gas mono-culture that is engulfing us all, which is simply the next energy crisis in the making. At least here and there we are seeing example of looking at energy as we properly should, as a make or buy decision, in which renewable energy becomes the driver and subscription energy the backup. These are the breakthroughs we need to evolve to a sustainable economy and a measure of energy independence which can grow over time. Renewable energy plant is becoming a capital asset of buildings and companies, and valuations of businesses and buildings will undergo radical change in the years to come. Many who are dancing to the pied piper of energy efficiency will come to realize they foolishly invested in becoming more entrenched in fossil fuels and subscription energy, and are likely to find themselves cornere in a dead end street at the next energy crisis, which is presently being created by the current vogue of superficial energy change, which wrongly prioritizes energy efficiency before a proper assessment of the fundamental make or buy decisions about energy plant and the life-cycle consequences of those decisions.
The superficial story of the energy savings at Steinway will be validated over and over again by the immeasurable process improvements to their unique and incredibly valuable industrial process. The evaluation of these kinds of intra-marginal improvements remains notoriously difficult, but it is the difference between business-like investments in energy plant as a strategic asset of a business, compared to the herd-like and thoughtless pursuit of energy efficiency of existing plant, which is more a customer retention program for the utilities and energy companies, and at best an operational savings, that does not deserve the name of an investment.
As an example of the value of Solar Thermal technology in general this application is also valuable, for too often people are charmed by Solar PV because of the incentives, and because electricity is more sexy than heat. What is forgotten is that a lot of the energy you need in buildings is heat anyway, so as long as Solar Thermal produces about five times the amount of energy for the same square area compared to PV, there is little reason to look into PV if you could be using Solar Thermal instead in our densely populated area with high real estate prices.
Wednesday, June 29, 2011
DaBx PlaNYC2020 Draft
Finally I have brought together the whole integrated vision for a renewable infrastructure, as an alternative, but also complimentary approach to the city's PlaNYC2030.
It is the city's old line apartment buildings, those grand old buildings of 5-6 stories that made the glory days of the Grand Concourse etc, which are the richest target of opportunity for what the city apparently calls Deep Energy Change - a radical shift to a renewable base of energy production. It is these grand old buildings which are there in their hundreds and thousands, that potentially are the proverbial low hanging fruit for an energy revolution that will accomplish deep energy change.
These buildings offer the right scale, large enough but not too large (as skyscrapers would be), to be able to make them substantially energy independent with today's technology. Simply put with the combination of a modicum of grounds around the building, usually plenty of available space in the basement, a flat roof, and few shading problems, usually all or most of the available conditions are in place to accomplish a substantially feasible program of conversion to renewable technologies today.
The prevailing framework of policies and incentives focuses on energy efficiency before energy independence perversely provides the indefinite postponement of energy independence with government subsidies. It promotes shallow energy change and in the process effectively prevents deep energy change from ever happening. For a building owner, if they are not planning for energy independence now, and develop long term plans to get there, they will never get there. Failing to plan definitely is planning to fail. To the extent that owners are following the current framework of energy efficiency oriented upgrades, they are digging their own graves, in the form of a collective next energy cirisis, moreover, this is often financed with long term money, ensuring that buildings will be under water again in the next energy crisis when it comes. Thus the present model is building the slums of tomorrow, and practicing capital destruction.
Any owners who have done nothing, and are still operating with the old steam boiler and hot water from a coil in the boiler, are actually potentially in better shape than the ones who have followed the prevailing energy efficiency regime, because every dollar they invested in making a fossil fuel infrastructure more efficient, becomes an obstacle for the economic justification of a switch to the energy independence program.
Very evidently, the administration is talking about "deep energy change," without much clarity that the current policy framework is an effective deterrent for its accomplishments. We can only hope that the administration can find ways to encourage a shift. There are a number of ways in which law makers and regulators can effectively make these changes possible, and even speed up adoption.
We are publishing the report in two forms, for $99 as an open-ended subscription to the report and all major revisions, and $25 for one time copies.
The subscription version can be found here: http://www.dabxdemandsidesolutions.com/Services.html
and one time copies can be ordered here: http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft
It is the city's old line apartment buildings, those grand old buildings of 5-6 stories that made the glory days of the Grand Concourse etc, which are the richest target of opportunity for what the city apparently calls Deep Energy Change - a radical shift to a renewable base of energy production. It is these grand old buildings which are there in their hundreds and thousands, that potentially are the proverbial low hanging fruit for an energy revolution that will accomplish deep energy change.
These buildings offer the right scale, large enough but not too large (as skyscrapers would be), to be able to make them substantially energy independent with today's technology. Simply put with the combination of a modicum of grounds around the building, usually plenty of available space in the basement, a flat roof, and few shading problems, usually all or most of the available conditions are in place to accomplish a substantially feasible program of conversion to renewable technologies today.
The prevailing framework of policies and incentives focuses on energy efficiency before energy independence perversely provides the indefinite postponement of energy independence with government subsidies. It promotes shallow energy change and in the process effectively prevents deep energy change from ever happening. For a building owner, if they are not planning for energy independence now, and develop long term plans to get there, they will never get there. Failing to plan definitely is planning to fail. To the extent that owners are following the current framework of energy efficiency oriented upgrades, they are digging their own graves, in the form of a collective next energy cirisis, moreover, this is often financed with long term money, ensuring that buildings will be under water again in the next energy crisis when it comes. Thus the present model is building the slums of tomorrow, and practicing capital destruction.
Any owners who have done nothing, and are still operating with the old steam boiler and hot water from a coil in the boiler, are actually potentially in better shape than the ones who have followed the prevailing energy efficiency regime, because every dollar they invested in making a fossil fuel infrastructure more efficient, becomes an obstacle for the economic justification of a switch to the energy independence program.
Very evidently, the administration is talking about "deep energy change," without much clarity that the current policy framework is an effective deterrent for its accomplishments. We can only hope that the administration can find ways to encourage a shift. There are a number of ways in which law makers and regulators can effectively make these changes possible, and even speed up adoption.
We are publishing the report in two forms, for $99 as an open-ended subscription to the report and all major revisions, and $25 for one time copies.
The subscription version can be found here: http://www.dabxdemandsidesolutions.com/Services.html
and one time copies can be ordered here: http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft
Friday, June 24, 2011
Of Fannie, Freddy and PACE Bonds
If you are not familiar with the story of PACE Bonds, you can follow it here www.pacenow.org
Fanny Mae and Freddie Mac objected to the priority of PACE bonds over mortgages, and thereby scuttled one of the biggest hopes for a recovery in the real estate market.
What should have been done instead is to develop a set of clear engineering and financial test criteria to ensure that the types of investments that are made are never in mere energy efficiency, which face diminishing returns in the long term, but always in multiple renewable infrastructure producing compounding returns over time.
In the urban setting in particular what should be understood is that the investment decision is not primarily about energy costs, it is about grid costs. With transport and delivery costs at 50-70% of the energy bill already, the much ballyhooed volatility of energy prices has little to do with the price of beans, or energy for that matter. As far as the eye can see transport and distribution costs will go up ahead of inflation due to aging infrastructure and utility regulation and politics, so the fluctuating energy costs are a diminishing portion of the problem.
Conversely, if you know today that 50-70% portion of your bill will rise faster than inflation for the reasonable future, and that can be forecast with certainty, then the uncertainty of the price forecasts of the remaining 30-50% are less relevant. Meanwhile no reasonable person expects energy costs to be going down anytime soon, though we may have plenty of volatility.
Thus again to become more efficient at consuming a resource which will cost steadily more forever with substantial certainty, is a death trap, and a stay of execution, yet the financial sector wants to encourage that, and make sure that like lemmings the entire city will throw themselves off the same cliff at the sight of the next energy crisis.
The fork in the road is simple. It is not available to all properties, but by and large it applies to older multi-family buildings in NY of 50 units or more, and for those integrated renewable energy strategies are feasible today, and the priority of PACE bonds over mortgages should be conducive to long term appreciation of the underlying real estate assets. So Fanny and Freddy should become more selective, and resist any energy loans that focus only on energy efficiency, while supporting PACE bond financing WITH priority over mortgages if a well engineered compound strategy of integrated renewable technology is applied, which demonstrably faces continuous asset appreciation.
The current stalemate means the financial sector is creating the next energy crisis, not avoiding it.
Local generation of energy from renewable sources on the demand side of the grid reduces dependence on the grid, and can help improve economics for the grid operators as well, and so once the grid operators understand the new model they should also financially support it.
Fanny Mae and Freddie Mac objected to the priority of PACE bonds over mortgages, and thereby scuttled one of the biggest hopes for a recovery in the real estate market.
What should have been done instead is to develop a set of clear engineering and financial test criteria to ensure that the types of investments that are made are never in mere energy efficiency, which face diminishing returns in the long term, but always in multiple renewable infrastructure producing compounding returns over time.
In the urban setting in particular what should be understood is that the investment decision is not primarily about energy costs, it is about grid costs. With transport and delivery costs at 50-70% of the energy bill already, the much ballyhooed volatility of energy prices has little to do with the price of beans, or energy for that matter. As far as the eye can see transport and distribution costs will go up ahead of inflation due to aging infrastructure and utility regulation and politics, so the fluctuating energy costs are a diminishing portion of the problem.
Conversely, if you know today that 50-70% portion of your bill will rise faster than inflation for the reasonable future, and that can be forecast with certainty, then the uncertainty of the price forecasts of the remaining 30-50% are less relevant. Meanwhile no reasonable person expects energy costs to be going down anytime soon, though we may have plenty of volatility.
Thus again to become more efficient at consuming a resource which will cost steadily more forever with substantial certainty, is a death trap, and a stay of execution, yet the financial sector wants to encourage that, and make sure that like lemmings the entire city will throw themselves off the same cliff at the sight of the next energy crisis.
The fork in the road is simple. It is not available to all properties, but by and large it applies to older multi-family buildings in NY of 50 units or more, and for those integrated renewable energy strategies are feasible today, and the priority of PACE bonds over mortgages should be conducive to long term appreciation of the underlying real estate assets. So Fanny and Freddy should become more selective, and resist any energy loans that focus only on energy efficiency, while supporting PACE bond financing WITH priority over mortgages if a well engineered compound strategy of integrated renewable technology is applied, which demonstrably faces continuous asset appreciation.
The current stalemate means the financial sector is creating the next energy crisis, not avoiding it.
Local generation of energy from renewable sources on the demand side of the grid reduces dependence on the grid, and can help improve economics for the grid operators as well, and so once the grid operators understand the new model they should also financially support it.
Monday, May 30, 2011
PlaNYC2020 and the NYC Energy Conservation Code
OK. So Version 2.0 of PlaNYC2030 came out, and it is full of helpful research as well as wonderful initiatives and plans, and the question will be if this is going to be just like the yesterdays's infamous Soviet 5-year plans and 10-and 20-year plans - top down planning that does not work, or is it going to become a practical reality? Better yet, are some going to see the opportunities to get ahead of the crowd and cash in on the inevitable?
NYC seems to be ahead of much of the world, and most cities, in terms of planning and good intentions, and occasionally in some far-sighted action as well, but nevertheless there remains widespread room for improvement, and some of that comes in the form of opportunity. One of the most important insights of recent years is how disproportionate is the contribution of buildings to energy waste and the associated environmental problems in the city, and with all the brave plans we now have, some of which have already become reality, such as the new energy efficiency codes which the City adopted last year, this is starting to be addressed.
This new code is already a very important step, but the question remains how many owners will see money in exceeding it... that's where the music is. The logic of the code is to deal with new buildings and alterations of existing buildings, but we all know that if the problem with cars was that they live 10 years, building have even more obnoxious longevity habits, and can be around for many decades or even centuries. Meanwhile it is only buildings over 50,000 square feet, who must complete their benchmarking by August of this year. So the question is: what war was ever won by attacking the enemy where he is strongest? Or in this case by attacking the problem where it is the biggest? Granted, there is some underlying logic to this approach, but it is important to ask why we are not attacking the enemy where he is weakest. Namely: are there any targets of opportunity, which are being missed?
The answer is yes, and if these targets of opportunity could be addressed properly, the City's energy future, air pollution problems etc., could be improved both more and faster than in PlaNYC2030 as it stands now, which is why I'd like to suggest an alternative PlaNYC2020. Stronger yet, much of the current policy framework incentivizes short term, shallow, and incremental improvements in efficiency, which implicitly causes the indefinite postponement of deep energy change.
The City is full of older apartment buildings (I live in a reasonably decent old D-Class building). What it will take is owners who look at the long term future and realize that a building substantially without energy bills is going to be worth more than the identical building next door with very high energy bills. For comparison, I mention the fact that in my native Holland neighborhoods are already being planned from the standpoint that if they did not do anything, energy costs would eventually outstrip rents. That kind of view point is a big motivator for creative thinking. The current class of property owners very well may not have the mindset, and the NYC Dept of Housing Preservation and Development is no help in the matter either. They talk about putting the emphasis on Building Preservation (many of these old buildings could be quite viable), but their de-facto policies fly in the face of their pronouncements about building preservation. The emphasis on Energy Conservation over Renewable Energy and Energy Independence is by nature a path of diminishing returns, and bound to breed slums in the future, for when buildings are committed to the path of energy efficiency they eventually will be just as much at the whim of energy costs as they always were.
Older apartment buildings offer a scale which facilitates renewable energy even with today's technology, but it is not done, and the most important reason that it is not done may well be in the fact that existing incentive programs to encourage energy conservation, actually incrementally prevent the serious development of energy independence for the future. Many of the existing subsidies, and incentives, including things like NYSERDA's MPP (Multi-Family Performance Program), are geared to maximizing energy efficiency at a point in time. The worst problem from that viewpoint is the Energy Star program - for all its evident merits, from the standpoint of a building system it is anathema, for it suboptimally allocates resources (capital) at the component level, and thereby prevents other decisions which could have been more effective. The NYSERDA MPP program is an improvement to a degree, but it still misses the point because it only looks at thermal efficiency at the building level at one point in time, and ignores long term integration potential.
The critical observation here is that in an existing building, the two options, energy efficiency and energy independence are divergent investment paths. The former is really a customer retention program for your local utility and your oil dealer, whereas the latter is truly an investment in increasing building values in the future, as it produces compounding returns. Equally important, energy efficiency is by definition an investment with diminishing returns: every successive percentage point of improvement becomes rapidly more expensive as you approach the limit of what can be done, and so you might have reduced energy spending by 30 or 40%, or even 50% but then you hit the limit, and you are still buying subscription energy, and only waiting for prices to increase enough to do... what else? Then you may finally have to look at renewable energy seriously. Typically the first efficiency measures show paybacks under 18 months, but pretty soon you start running out, as paybacks for incremental improvements become explosively more expensive.
The alternative path, towards Energy Independence Now! is the plan towards PlaNYC2020... and it starts in a less attractive way, probably with 5-7 year paybacks, but it gets better after that, as you get the benefit of compounding returns. To choose the energy independence strategy now requires careful planning and a long term view. Speculative owners need not apply. Owners looking for a long term income property should explore this path, and in fact are stealing from themselves if they don't, for the more money you spend on energy conservation or energy efficiency without examining the alternatives thoroughly, that is capital down the drain that will make switching to the other track increasingly difficult. It is not that energy efficiency is not a factor in the energy independence path, but inevitably different efficiency measures would be prioritized under an energy independence plan.
In this context failing to plan is definitely planning to fail, for if you invest in the more efficient burning of gas, as in my all time favorite oxymoron of Energy Star rated gas hot water heaters, then you will never think of looking at other sources for heating water, and their economies, such as geothermal or solar. Nor will you think about the radically different energy infrastructure you will need to develop for your building to exploit these opportunities in the future. Because of engineering interdependencies, the critical choice is which of these technologies to deploy first, which will vary building by building. If that implementation sequence is done right, with at least a 10 year horizon, then the result will be a building that has eliminated 85% of their fossil fuel based energy bills, versus the same building next door which went the efficiency route, marching politely at the hands of NYSERDA and other authorities, and will be down to 60% of of their erstwhile energy bills. So again ask yourself, which building will be worth more in 2020, the one with 60% of the 2011 bills, or the identical one next door with 15% of 2011 bills, if the oil prices are $250/bbl, and NatGas is at $2/therm plus the ever rising delivery costs? For the grid costs are bound to rise ahead of inflation as far as the eye can see, for both gas and electric.
This is the real question. It is the difference between PlaNYC2030 and PlaNYC2020, and the crucial point is, that if you do not plan to get to the 2020 plan today, but you follow the rules for the 2030 plan, you will make absolutely sure that you will not get there in 2030 either, and a fortune of money will have been lost in the process. This amounts to pure capital destruction on a societal level, and the premature and exclusive focus on energy conservation over energy independence is to blame. Energy efficiency does NOT cumulatively add up to energy independence, and if it is prioritized without examining the alternative, the pursuit of it will postpone an energy independent future indefinitely, and PlaNYC2030 will not live up to its promise, though the potential is there today to exceed its targets by a landslide. Yet the majority of the market place is either doing nothing at all, or at best following some of the elements of the 2030, and thus collectively ensuring the postponement of energy independence, and the continuation of the maximum allowable levels of pollution in our urban environment.
NYC seems to be ahead of much of the world, and most cities, in terms of planning and good intentions, and occasionally in some far-sighted action as well, but nevertheless there remains widespread room for improvement, and some of that comes in the form of opportunity. One of the most important insights of recent years is how disproportionate is the contribution of buildings to energy waste and the associated environmental problems in the city, and with all the brave plans we now have, some of which have already become reality, such as the new energy efficiency codes which the City adopted last year, this is starting to be addressed.
This new code is already a very important step, but the question remains how many owners will see money in exceeding it... that's where the music is. The logic of the code is to deal with new buildings and alterations of existing buildings, but we all know that if the problem with cars was that they live 10 years, building have even more obnoxious longevity habits, and can be around for many decades or even centuries. Meanwhile it is only buildings over 50,000 square feet, who must complete their benchmarking by August of this year. So the question is: what war was ever won by attacking the enemy where he is strongest? Or in this case by attacking the problem where it is the biggest? Granted, there is some underlying logic to this approach, but it is important to ask why we are not attacking the enemy where he is weakest. Namely: are there any targets of opportunity, which are being missed?
The answer is yes, and if these targets of opportunity could be addressed properly, the City's energy future, air pollution problems etc., could be improved both more and faster than in PlaNYC2030 as it stands now, which is why I'd like to suggest an alternative PlaNYC2020. Stronger yet, much of the current policy framework incentivizes short term, shallow, and incremental improvements in efficiency, which implicitly causes the indefinite postponement of deep energy change.
The City is full of older apartment buildings (I live in a reasonably decent old D-Class building). What it will take is owners who look at the long term future and realize that a building substantially without energy bills is going to be worth more than the identical building next door with very high energy bills. For comparison, I mention the fact that in my native Holland neighborhoods are already being planned from the standpoint that if they did not do anything, energy costs would eventually outstrip rents. That kind of view point is a big motivator for creative thinking. The current class of property owners very well may not have the mindset, and the NYC Dept of Housing Preservation and Development is no help in the matter either. They talk about putting the emphasis on Building Preservation (many of these old buildings could be quite viable), but their de-facto policies fly in the face of their pronouncements about building preservation. The emphasis on Energy Conservation over Renewable Energy and Energy Independence is by nature a path of diminishing returns, and bound to breed slums in the future, for when buildings are committed to the path of energy efficiency they eventually will be just as much at the whim of energy costs as they always were.
Older apartment buildings offer a scale which facilitates renewable energy even with today's technology, but it is not done, and the most important reason that it is not done may well be in the fact that existing incentive programs to encourage energy conservation, actually incrementally prevent the serious development of energy independence for the future. Many of the existing subsidies, and incentives, including things like NYSERDA's MPP (Multi-Family Performance Program), are geared to maximizing energy efficiency at a point in time. The worst problem from that viewpoint is the Energy Star program - for all its evident merits, from the standpoint of a building system it is anathema, for it suboptimally allocates resources (capital) at the component level, and thereby prevents other decisions which could have been more effective. The NYSERDA MPP program is an improvement to a degree, but it still misses the point because it only looks at thermal efficiency at the building level at one point in time, and ignores long term integration potential.
The critical observation here is that in an existing building, the two options, energy efficiency and energy independence are divergent investment paths. The former is really a customer retention program for your local utility and your oil dealer, whereas the latter is truly an investment in increasing building values in the future, as it produces compounding returns. Equally important, energy efficiency is by definition an investment with diminishing returns: every successive percentage point of improvement becomes rapidly more expensive as you approach the limit of what can be done, and so you might have reduced energy spending by 30 or 40%, or even 50% but then you hit the limit, and you are still buying subscription energy, and only waiting for prices to increase enough to do... what else? Then you may finally have to look at renewable energy seriously. Typically the first efficiency measures show paybacks under 18 months, but pretty soon you start running out, as paybacks for incremental improvements become explosively more expensive.
The alternative path, towards Energy Independence Now! is the plan towards PlaNYC2020... and it starts in a less attractive way, probably with 5-7 year paybacks, but it gets better after that, as you get the benefit of compounding returns. To choose the energy independence strategy now requires careful planning and a long term view. Speculative owners need not apply. Owners looking for a long term income property should explore this path, and in fact are stealing from themselves if they don't, for the more money you spend on energy conservation or energy efficiency without examining the alternatives thoroughly, that is capital down the drain that will make switching to the other track increasingly difficult. It is not that energy efficiency is not a factor in the energy independence path, but inevitably different efficiency measures would be prioritized under an energy independence plan.
In this context failing to plan is definitely planning to fail, for if you invest in the more efficient burning of gas, as in my all time favorite oxymoron of Energy Star rated gas hot water heaters, then you will never think of looking at other sources for heating water, and their economies, such as geothermal or solar. Nor will you think about the radically different energy infrastructure you will need to develop for your building to exploit these opportunities in the future. Because of engineering interdependencies, the critical choice is which of these technologies to deploy first, which will vary building by building. If that implementation sequence is done right, with at least a 10 year horizon, then the result will be a building that has eliminated 85% of their fossil fuel based energy bills, versus the same building next door which went the efficiency route, marching politely at the hands of NYSERDA and other authorities, and will be down to 60% of of their erstwhile energy bills. So again ask yourself, which building will be worth more in 2020, the one with 60% of the 2011 bills, or the identical one next door with 15% of 2011 bills, if the oil prices are $250/bbl, and NatGas is at $2/therm plus the ever rising delivery costs? For the grid costs are bound to rise ahead of inflation as far as the eye can see, for both gas and electric.
This is the real question. It is the difference between PlaNYC2030 and PlaNYC2020, and the crucial point is, that if you do not plan to get to the 2020 plan today, but you follow the rules for the 2030 plan, you will make absolutely sure that you will not get there in 2030 either, and a fortune of money will have been lost in the process. This amounts to pure capital destruction on a societal level, and the premature and exclusive focus on energy conservation over energy independence is to blame. Energy efficiency does NOT cumulatively add up to energy independence, and if it is prioritized without examining the alternative, the pursuit of it will postpone an energy independent future indefinitely, and PlaNYC2030 will not live up to its promise, though the potential is there today to exceed its targets by a landslide. Yet the majority of the market place is either doing nothing at all, or at best following some of the elements of the 2030, and thus collectively ensuring the postponement of energy independence, and the continuation of the maximum allowable levels of pollution in our urban environment.
Subscribe to:
Posts (Atom)