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.

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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.