A Common-Sense Solution to a Problem

Congress Needs to Renew Clean Energy Tax Incentives

Congress Needs to Renew Clean Energy Tax Incentives

Guest opinion — Boulder Daily Camera

By Joel Serface

POSTED: 03/08/2014 01:00:00 AM MST

As Coloradans, we have seen how wind energy is creating jobs and driving economic growth.

We know that making our buildings, appliances and equipment more efficient saves money and helps our environment.

And we know what happens to our climate if we don’t act.

It’s simply inconceivable, then, that Congress sat back and let critical tax policies for wind energy and energy efficiency expire at the end of last year. Congress needs to reinstate these critical federal tax policies — and do so now.

As an entrepreneur and investor, I know that smart tax policies can help both our economy and our environment. These incentives work. According to Environmental Entrepreneurs (E2), a business group I belong to, hundreds of clean energy jobs were announced in Colorado in 2013, thanks in part to smart federal and state policies.

Because of the wind energy Production Tax Credit (PTC), for instance, there were more wind projects under construction in 2013 than ever before.

Vestas Wind Systems is a prime example of why Congress needs to immediately renew the PTC that expired in December. Vestas recently announced it will hire hundreds of Coloradans at its plants in Windsor and Brighton after a surge of wind projects were announced. But when those projects are done, those jobs could be done too. After the PTC expired the last time, in 2012, Vestas was forced to lay off hundreds of employees because wind projects slowed dramatically.

Wind energy companies aren’t just creating manufacturing and installation jobs. They’re also helping keep family farms afloat in eastern Colorado by leasing land for wind turbines. And by creating a stronger, longer term market signal, more investment will become available to fund local wind technology companies such as Boulder Wind Power.

Like the PTC, recently expired energy efficiency tax incentives for buildings and appliances drive growth and jobs in construction, manufacturing and other fields while saving consumers money.

Nationwide, energy efficiency projects could save U.S. consumers $1.2 trillion and create up to 900,000 direct jobs by 2020, according to a McKinsey analysis.

Denver Mayor Michael Hancock realizes the importance of energy efficiency. He recently joined nine other mayors nationwide to announce a new project that promises to increase energy efficiency in commercial buildings, slash energy use, cut pollution, save money and create jobs. According to Mayor Hancock, the improvements from the City Energy Project will save as much as $51 million per year.

Local officials can only do so much, however. We need action from Congress on smart renewable energy and energy efficiency tax policies.

All of us have learned from droughts, freak storms and other extreme weather events that we must address climate change. We know we need to move to cleaner sources of energy that don’t pollute our air and water.

Extending smart energy efficiency and clean energy tax policies is a common-sense way to help both our economy and our environment. Congress should do so immediately, for the good of our state, our country and our planet.
Joel Serface is Managing Director of Brightman Energy.

 

My Cleantech Journey: From California to Texas and Beyond

I have been told that blogs somehow have more importance and greater connection when written in first person.  I often tire of writing “analysis pieces” that seem cold, dry, and impersonal even though they are incredibly important.  I somehow have been bottling up the need to write my personal perspective on where cleantech is today and why my opinions and actions in it are as well.  It pretty much comes down to this…

I dedicated my entire career since business school to helping bring technologies to market and towards the birth and growth of the clean technology.  I have been incredibly fortunate to have learned from the best at MIT in how to bring ideas from lab to market and got to work alongside some of the best technologies and companies while there in learning this trade.  I then got to practice this in Silicon Valley with some of the best venture capitalists, best research universities and national labs, and was motivated by my experience being stuck in NYC on 9/11 to make my priority clean technology.  I was fortunate to band together with like minds to form durable organizations, policy, and funding mechanisms that popularized and accelerated the growth of cleantech.  I have led an enchanted life in being one of the early innovators and actors in this sector.  But it was not enough.

I have long stated that technology innovation alone was not going to solve our shift to a clean energy infrastructure.  My Silicon Valley compatriots, especially the ones that could risk their limited partner’s money into an arena they had no experience investing into, thought that if they built a cleantech company, it would be adopted as widely, quickly, and capital efficiently as their semi, software, and semi investments.  Unfortunately this was a naïve assumption and I quickly harkened back to my Texas roots upon realizing this.  The fact was that Texas is the energy expert and energy capital and that if the energy capabilities in Texas weren’t leveraged – project capital, project development, infrastructure deployment, industrial scalability, energy trading, and energy risk management – then we would not have sufficient expertise or capital to make this transition.  So, I went back to Texas to see if I could bridge this divide.  My tagline became “If Texas becomes a renewable energy state, then there’s hope for the planet.”  So if we can show traditional energy companies and investors how to make money in new energy, they would move more of their money and expertise there.

I was well on my way to doing this when I took a side trip to Colorado with the invitation of Kleiner Perkins to be their Entrepreneur in Residence at the National Renewable Energy Laboratory.  What I found at KPCB were the excesses of the Silicon Valley that I was trying to shift away from.  It was a portfolio that had limited prospects for success and an attitude that “Texas doesn’t matter” – that (before the economic downturn) there would be so much follow-on capital that the masters of Silicon Valley alone could re-make the energy marketplace.  At NREL on the other hand, there was tremendous resistance to want to commercialize technologies.  I found there that indeed there were a tremendous set of incremental innovations that could lower the cost of renewables, but these should be broadly licensed to industry (an quickly and freely) in order to bring down their costs.  There was a limited set of “disruptive” innovations that were potential game-changers in the energy marketplace, but needed 5-15 years each to mature to a point of being competitive.  There were no venture capital firms at that time, including my employer at the time, that were organized and capitalized to invest into the long haul for these applications.

What to do?  To fill the gap, I intended to set up a firm that crossed the divide between innovation and deployment, between California and Texas, leveraging maturation centers like NREL, Pecan Street Project, and others to accelerate demonstration and deployment.  Unfortunately, we hit the market window at the worst time possible and I faced a divorce in the process.  Therefore, this fund never came into existence.  The beauty in this is self-reflection.  For those of you who have been given the opportunity to completely re-evaluate everything in life through a traumatic life event, I found clarity, beauty, focus, and realization…

My realization was this:  Technology investing alone was not going to turn the corner on averting climate catastrophe.  What was needed were more large scale economic demonstrations that renewables are more cost effective today than coal, gas, or nuclear energy.  I was fortunately invited by a friend and one of the architects of the Pickens Renewable Energy Plan to form a new renewable energy development firm called Brightman Energy.   We quickly modeled and demonstrated that a fully-depreciated coal plant in Texas could be replaced at a lower cost (and with greater long term price stability) with a well-designed, geographically dispersed renewable energy portfolio.  This also led me to realize that renewables should be the baseload energy of choice in almost any geography in the US with natural gas providing the balancing or storage mechanism (at least until DSM, efficiency, and other storage solutions became cost effective with natural gas).  I also realized that Texas is the deregulated market of choice to demonstrate and scale these solutions – with the most advanced nodal market, transmission infrastructure, system wide preference for generation efficiency, efficient renewable energy trading market, and its own grid, Texas had already created the ideal market for renewables and had already become the largest renewable market in the US.

So where do I go from here?  With Brightman, we are building the case and project portfolio for integrated renewable deployment at a scale that can replace coal or natural gas plants (or could take advantage of the latter in order to balance increasing levels of renewables).  At the same time, I continue to look at other scalable business models, financial models, and deployment models that will accelerate renewable energy and clean technology deployment – things that will take huge slugs out of our carbon emissions and hopefully avert climate catastrophe.  And, yes, I still love disruptive technology – I continue to watch the ones that I think will make the greatest difference on the planet, because they will and they will replace the first generation of massive renewable deployment at an even lower cost more pervasively.

Texas = Renewables firmed by Natural Gas

Here is an interesting report sponsored by the Texas Clean Energy Coalition and delivered by Brattle Group asserting the Texas market is gas and renewables and have incredible complementarity. As I have priced out renewables and gas projects, I find the report misses a couple of key points…

http://www.texascleanenergy.org/Brattle%20report%20on%20renewable-gas%20FINAL%2011%20June%202013.pdf

  • As renewable prices drop and as the ERCOT nodal market improves, renewables will increasingly be baseload energy (wind is the least expensive new form of energy in the market) and predictable peak (solar) with natural gas providing the firming capacity and ancillary services in the market. Think about natural gas as the battery for the renewable electricity market.
  • Texas’ market is already dominated by natural gas electricity. Any additions to this will increase price volatility and increase long term rates versus investing into increasingly lower cost renewables.
  • Both of these push coal off the system. There is expected to be 5,000 MW of coal retirements in coming years.
  • The report ignores the water problems of Texas. Frankly we don’t have enough water in Texas for increased thermal load… this points us back to renewables. Now that the state is intervening by investing $2B in taxpayer dollars for water infrastructure due to “long term draught” (some Texans have a hard time saying climate change), there will be increasing prices of water which will also be embedded into the cost of electricity. Renewables require no water and will increasingly be favored in the ERCOT loading priority accordingly.
  • The countercyclicality of wind presented in the report ignores the baseload nature of Texas Coastal wind that continues to ramp, decrease in cost, and provides baseload rates less than natural gas. 
  • The pricing of solar ignores 2012 numbers and predicted numbers of dropping solar prices. It is already out of date.
  • If you are to compare apples-to-apples, then each of these need to have a comparable LCOE with embedded fuel volatility, water, environmental (yes, carbon prices), and decommissioning expenses embedded. If we did this today for a 25-year set of projects, renewables already win (caveat: wind blended intelligently with solar).

Texas with its own ISO (ERCOT), advanced nodal market, preference for generation efficiency,free market model, expansion of advanced transmission lines to renewable development areas will serve as a leading post-incentive market for renewable deployment and integration.  Let’s see how this all plays out.

Go Big or Go Home SXSW Eco Style

Go Big or Go Home SXSW Eco Style

Over the next couple of months, I will begin sharing why I shifted from cleantech venture capital to large scale renewable energy development.  Simply, it is too late in in the climate game to not go big.  We need to take demonstrably large steps that are scalable and replicable to turn the corner on climate change.  If you would like to see this at SXSW Eco 2013, please vote for my panel picker and stay tuned🙂

The Japan Question

Please help answer my friend Yuji Hashiba‘s question on renewable energy in Japan: “Could you let me know more about renewable energy? As you know, we had and still have a terrible nuke problem, so we are always thinking of some other options.”

I invite my friends to comment on his question. My response below…

Japan has one of the greatest opportunities in energy transformation of any country in the world. As one of the largest economies, but geographically isolated from most of the resources that have historically powered our economies (mostly carbon producing), Japan has the opportunity to build energy independence and economic growth into its economy (which if some people haven’t noticed, hasn’t grown tremendously as of late). With the compounding problem of nuclear failure followed by stark energy efficiency measures from abrupt loss of generating capacity.

At this point last year, we discussed this topic at length at the Aspen Institute’s Clean Energy Roundtable and contemplated assembling a conference to discuss these topics immediately in Japan (Aspen Institute was formed post WWII to help bring Japan and Germany back into the world community and rebuild their economies then). The main points were to be…

1. Stimulate the domestic renewable energy economy and put the pieces to work. Japan already excels in solar production and could massively scale this for its domestic market. So far, Japan has taken on a Germany-like feed in tariff that incentivizes the production of renewable energy (not just installed capacity). Its still early, but this is a good policy that should accelerate Japan’s solar build-out.

2. Increase energy efficiency and build the smartest grid in the world. Japan was already among the most energy efficient economies. By adding building and grid intelligence, better utilization and reduction of existing energy resources can be achieved. This can be done based on Japan’s materials science expertise (high efficiency bi-directional power lines) and information technology / communications expertise. If built in Japan, these technologies can be exported to the rest of the world.

3. Use natural gas as an intermediary opportunity. This was one that i am not too crazy about, but the thinking goes that frack gas is inexpensive and can be exported from the US as LNG. Unfortunately, doing this does not benefit Japan, but serves to expropriate currency from the country that could be reinvested into its domestic energy / manufacturing economy. It is also capital intensive and takes time to build the LNG infrastructure and by the time Japan (and US) does so, natgas prices will likely have risen. My recommendation here is to avoid this and invest into 1. It will have a greater direct benefit to your economy.

I hope this helps answer some of your questions. I look forward to the thoughts of others on this.