Tom Murphy is an associate professor of physics at the University of California, San Diego.  His blog, Do the Math, takes an astrophysicist’s-eye view of societal issues relating to energy production, climate change, and economic growth.

With the exception of tidal energy, our focus thus far has been on land-based energy sources. Meanwhile, the ocean absorbs a prodigious fraction of the Sun’s incident energy, creating thermal gradients, currents, and waves whipped up by winds. Let’s put some scales on the energetics of these sources and see if we may turn to them for help. We’ve got our three boxes ready: abundant, potent, and niche (puny). Time to do some sorting!

Thermal Gradients

Wherever there is a thermal gradient, our eyes light up because we can create a heat flow across the gradient and capture some fraction of the energy flow to do useful work. This is called a heat engine, the efficiency of which is capped by the theoretical maximum (T_h − T_c)/T_h, where “h” and “c” subscripts refer to absolute temperatures of the hot and cold reservoirs, respectively. In the ocean, we are rather limited in how much gradient is available. The surface does not tend to exceed 30°C (303 K), while the depths cannot get much cooler than 0°C (273 K; pressure and salinity allow it to go a few degrees negative). The maximum thermodynamic efficiency therefore tops out at 10%, and in practice we might get half of this in a real application. The general scheme of producing energy from thermal gradients in the ocean is called ocean thermal energy conversion (OTEC).

Conti

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Tom Murphy is an associate professor of physics at the University of California, San Diego.  His blog, Do the Math, takes an astrophysicist’s-eye view of societal issues relating to energy production, climate change, and economic growth.

Now is the time on Do the Math when we scan the energy landscape for viable alternatives to fossil fuels. In this post, we’ll look at tidal power, which is virtually inexhaustible on relevant timescales, is less intermittent than solar/wind (although still variable), and uses old-hat technology to make electricity. For this exercise, we mainly care about the scale at which the alternatives can contribute, leaving practical and economic considerations sitting in the cold for a bit (spoiler alert: most are hard and expensive). Last week, we looked at solar and wind, finding that solar can satisfy our current demand without batting an eyelash, and that wind can be a serious contributor, although apparently incapable of carrying the load on its own. Thus we put solar in the “abundant” box and wind in the “useful” box. There’s an empty box labeled “waste of time.” Any guesses where I’m going to put tidal power? Don’t get upset yet.

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Clean Energy Efficiency Continues To Displace Expensive Dirty Power Plants

Some skeptics of energy efficiency claim that energy efficiency never really avoids the need for new power plants.  They claim that energy efficiency might reduce our energy consumption in theory, but not in practice.  Well, the good news is that there’s new evidence from the California Public Utilities Commission showing that energy efficiency is actually displacing the need to build power plants.  So much power is being saved, in fact, that California is embarking on a historic path: Instead of increasing the total amount of electricity we use, which has been the general trend since Edison’s time, energy efficiency will reduce the total demand for electricity.  (This efficiency will also provide a significant boost to economic growth, I might add.)  In the graphic below, you can see that energy efficiency is actually bending the demand curve downward. 
              Electricity Demand in California ISO From 2008 to 2020[1]

California is in the process of determining how many power plants it should allow private utilities to build over the next decade.  The Public Utilities Commission analyzes how much energy California is expected to consume over the next decade, and then determines how many power plants must be built in order to provide that energy.  The Commission is still in the process of making a final decision, but in the meantime, two fascinating results have emerged from the Commission’s analysis. 

First, energy efficiency will be relied upon to replace over 11 giant dirty power plants.  (That doesn’t even include all the power plants avoided due to previous programs.)   These savings will be coming from the energy efficiency programs, building codes, and appliance standards that allow us to get improved energy services for less energy.  For example, over the next ten years you might replace your air conditioner with the most efficient air conditioner on the market instead of an average one.  Well, the energy saved from that high efficiency air conditioner, along with the energy saved from all the other energy efficient air conditioners, along with the energy saved from efficiency improvements in other appliances and buildings, all add up to large amounts electricity that we don’t need to produce.  In the aggregate, this means Californians can avoid whole power plants worth of energy.  In this case, over 11 giant dirty power plants.[2]  

The second impressive finding in the Commission’s analysis is that energy efficiency will be accomplishing a truly remarkable feat over the next decade: It will actually stop the historic growth of electricity consumption.  For years, California has led the nation in stemming the growth of electricity consumption per capita.  Californians today consume the same amount of electricity per capita that they consumed in 1975![3]  Meanwhile, the rest of the country has increased its per capita electricity consumption over 50%.  This is one hallmark of California’s leadership in energy efficiency.  For state-to-state comparisons, you want to control for population changes, which is why those statistics are measured per person.  However, in planning for power plants, you want to measure absolute electricity consumption.  Even though consumption per person has been flat, total electricity consumption in California has increased due to population growth.[4]

This historic trend is about to be reversed: energy efficiency is displacing so much electricity, that we will actually be stopping the growth in electricity demand.  Historically, the Energy Commission shows that our demand for electricity grew at an average rate of 1.44% per year.[5]  Using a similar growth rate, and not including new energy efficiency programs, the Public Utilities Commission projects a total of 10.8 % growth in electricity demand between now and 2020.[6]  However, if you include all the savings from our strong energy efficiency programs, codes, and standards, there is zero growth in electricity demand.  (Incorporating the effects of our strong energy efficiency policies actually shows slightly decreasing consumption, an annual growth of -0.04%.[7])  There is no mistaking what is happening here: energy efficiency is leveling the demand curve, in absolute terms, marking a historical achievement. 

Over the last 40 years, California has led the nation in energy efficiency by leveling its energy consumption per capita.  Now, with even stronger energy efficiency policies, California is taking it to the next level: leveling its demand curve.            

[1] CPUC, Revised Scoping Memo Assumptions, Populated Load & Resource Tables for System, Scenario: 33% Trajectory (2011).  Available at: http://www.cpuc.ca.gov/PUC/energy/Procurement/LTPP/LTPP2010/2010+LTPP+Tools+and+Spreadsheets.htm.  Demand from 2008 and 2009: CEC, IEPR, Demand Forecast, Form 1.5b (2009). Available at:

http://www.energy.ca.gov/2009publications/CEC-200-2009-012/index.html.  It should be noted that this graph covers demand from the CAISO balancing authority, which excludes some publicly-owned utilities’ balancing authorities within California state limits.  However, CAISO covers about 80% of statewide peak demand. Id. Furthermore, the CPUC assumes that POUs will be contributing a proportionate amount of energy savings relative to the IOUs, so it is reasonable to assume that they will also be contributing a proportionate amount of demand savings.  See CPUC, Revised Scoping Memo Assumptions, Technical Attachment Spreadsheet, Load for RPS Calculation, fn 43 (2011). 

[2] A giant conventional power plant is assumed to be 500 MW in size.  New energy efficiency programs over the planning horizon will contribute 5,687 MW of demand, yielding the equivalent of 11.4 giant power plants.  Even this estimate is conservative because it doesn’t include all the efficiency coming from publicly owned utilities outside of CAISO jurisdiction, which are omitted here for simplification.

[3] In fact, Californians consume slightly less electricity today, 6,719 kWh/person, than they did in 1975, which was 6,891 kWh/person.  The rest of the country has increased that consumption by 57% since 1975, now at 12,890 kWh/person.  EIA, State Energy Database System (2011); EIA, Form 826 Monthly Utility Data (2011). Available at: http://205.254.135.24/state/seds/seds-data-complete.cfm.

[4] Although California’s total electricity use has grown at slower rate than the rest of the U.S.

[5] CEC, IEPR, Demand Forecast, Form 1.3, Years 1990 Through 2010 (2009). Available at:

http://www.energy.ca.gov/2009publications/CEC-200-2009-012/index.html. 

[6] A 10.8% growth over the entire 8 year period yields a 1.3% annual growth rate.  Demand starts at 51,129 MW in 2012 and grows to 56,658 MW by 2020. Supra note 1.

[7] Comment about POUs being excluded; how shouldn’t make much difference.  The CPUC shows that POU efficiency should be commensurate with that of IOUs, comprising about 25% of the load and about 25% of the efficiency savings.  Thus, they should average out, and in any case, not move the needle significantly. 

Tom Murphy is an associate professor of physics at the University of California, San Diego.  His blog, Do the Math, takes an astrophysicist’s-eye view of societal issues relating to energy production, climate change, and economic growth.

Many Do the Math posts have touched on the inevitable cessation of growth and on the challenge we will face in developing a replacement energy infrastructure once our fossil fuel inheritance is spent. The focus has been on long-term physical constraints, and not on the messy details of our response in the short-term. But our reaction to a diminishing flow of fossil fuel energy in the short-term will determine whetherwe transition to a sustainable but technological existence or allow ourselves to collapse. One stumbling block in particular has me worried. I call it The Energy Trap.

In brief, the idea is that once we enter a decline phase in fossil fuel availability—first in petroleum—our growth-based economic system will struggle to cope with a contraction of its very lifeblood. Fuel prices will skyrocket, some individuals and exporting nations will react by hoarding, and energy scarcity will quickly become the new norm. The invisible hand of the market will slap us silly demanding a new energy infrastructure based on non-fossil solutions. But here’s the rub. The construction of that shiny new infrastructure requires not just money, but…energy. And that’s the very commodity in short supply. Will we really be willing to sacrifice additional energy in the short term—effectively steepening the decline—for a long-term energy plan? It’s a trap!

When I first encountered the concept of peak oil, I was most distressed about the economic implications. In part, this was prompted by David Goodstein’s book Out of Gas, which highlighted the potential for global panic in reaction to peak oil—making the gas lines associated with the temporary oil shocks of 1973 and 1979 look like warm-up acts. Because I knew Professor Goodstein personally, and held him in high regard as a solid physicist, I took his message seriously. Extrapolating his vision of a global reaction to peak oil, I imagined that the prospect of a decades-long decline in available energy—while we strained to institute a replacement infrastructure—would destroy confidence in short-term economic growth, thus destroying investment and crashing markets. The market relies on investor confidence—which, in some sense, makes it a con job, since “con” is short for confidence. If that confidence is shattered on a global scale, what happens next?

I still consider economic panic to be a distinctly possible eventuality, but psychology can be hard to predict. Market optimists would see the tremendous investment potential of a new energy infrastructure as an antidote against such an outbreak. Given this uncertainty, let’s shy away from economic prognostication and look at a purely physical dimension to the problem—namely, the Energy Trap.

Energy Return on Energy Invested

Our goal will be to quantitatively assess the Energy Trap, and see if there is any substance to the idea. We will rely on a concept that has acquired a central role in evaluating our energy future. This is energy return on energy invested, or EROEI.

In order to utilize energy, we must exert some energy to secure the source and prepare it for use. In order to burn wood in our fireplace, we (or someone) must chop down a tree, cut it into logs, and split the large logs. To drive our gasoline-powered car, we must expend energy finding the oil, drilling and possibly pumping the oil, then refining and distributing the gasoline. To collect solar energy, we must invest energy to fabricate the solar panels and associated electronics. The result is expressed as a ratio of energy-out:energy-in. Anything less than the break-even ratio of 1:1 means that the source provides no net energy (a drain, in fact), and is not worth pursuing for energy purposes—unless the form/convenience of that specific energy is otherwise unavailable.

In its early days, oil frequently yielded an EROEI in excess of 100:1, meaning that 1% or less of the energy contained in a barrel of oil had to be expended to deliver that barrel of oil. Not a bad bargain. Oil production today more typically has an EROEI around 20:1, while tar sands and oil shale tend to be about 5:1 and 3:1, respectively. By contrast, it is debatable whether corn ethanol exceeds break-even: it may optimistically be as high as 1.4:1. Switching from conventional oil to corn ethanol would be like switching from a diet of bacon, eggs, and butter to a desperate survival diet of shoe leather and tree bark. Other approaches to biofuels, like sugar cane ethanol, can have EROEI as high as 8:1.

To round out the introduction, coal typically has an EROEI around 50–85:1, and natural gas tends to come in around 20–40:1, though falling below the lower end of this range as the easy fields are depleted. Meanwhile, solar photovoltaics are estimated to require 3–4 years’ worth of energy output to fabricate, including the frames and associated electronics systems. Assuming a 30–40 year lifetime, this translates into an EROEI around 10:1. Wind is estimated to have EROEI around 20:1, and new nuclear installations are expected to come in at approximately 15:1. These are all positive net-energy approaches, which is the good news.

The Inevitable Fossil Fuel Decline

Let’s explore what happens as we try to compensate for an energy decline with an alternative resource having modest EROEI. On the upslope of our fossil fuel bonanza, we saw a characteristic annual growth rate of around 3% per year. The asymmetric Seneca Effect notwithstanding, a logistic evolution of the resource would result in a symmetric rate of contraction on the downslope: 3% per year. I borrow a graphic from the post on the meaning of “sustainable” to illustrate the rationale for expecting an era of decline for a one-time finite resource.

On the long view, the fossil fuel age is a blip, with a down side mirroring the (more fun) up side.

We could use any number for the decline rate in our analysis, but I’ll actually soften the effect to a 2% annual decline to illustrate that we run into problems even at a modest rate of decline. By itself, a 2% decline year after year—while sounding mild—would send our growth-based economy into a tailspin. As detailed in a previous post, across-the-board efficiency improvements cannot tread water against a rate as high as 2% per year. As we’ll see next, the Energy Trap just makes things worse.

Arresting the Decline: Take 1

Let’s say that our nation (or world) uses 100 units of fossil fuel energy one year, and expects to get only 98 units the following year. We need to come up with 2 units of replacement energy within a year’s time to fill the gap. If, for example, the replacement:

• has an EROEI of 10:1;
• requires most of the energy investment up front (solar panel or wind turbine manufacture, nuclear plant construction, etc.);
• and will last 40 years,

then we need an up-front energy investment amounting to 4 year’s worth of the new source’s output energy. Since we require an output of 2 units of energy to fill the gap, we will need 8 units of energy to bring the resource into use.

Of the 100 units of total energy resource in place in year one, only 92 are available for use—looking suddenly like an 8% decline. If we sit on our hands and do not launch a replacement infrastructure, we would have 98 units available for use next year. It’s still a decline, but a 2% decline is more palatable than an effective 8% decline. Since each subsequent year expects a similar fossil fuel decline, the game repeats. Where is the incentive to launch a new infrastructure? This is why I call it a trap. We need to exacerbate the sacrifice for a prolonged period in order to come out on top in the end.

The figure above shows what this looks like graphically, given a linear fossil fuel decline of 2 units per year. The deployment steps up immediately to plug the gap by providing an additional 2 units of replacement each year, at an annual cost of 8 units. While the combination of fossil fuels and replacement resource always adds to 100 units in this scheme, the ongoing up-front cost of new infrastructure produces a constant drain on the system. In terms of accumulated energy lost, it takes 7 years before the energy sacrifice associated with replacement starts to be less than that of just following the fossil fuel slide with no attempt at replacement. This timescale is beyond the typical horizon of elected politicians.

Another aspect of the trap is that we cannot build our way out of the problem. If we tried to outsmart the trap by building an 8-unit replacement in year one, it would require 32 units to produce and only dig a deeper hole. The essential point is that up-front infrastructure energy costs mean that one step forward results in four steps back, given EROEI around 10:1 and up-front investment for a 40 year lifetime. Nature does not provide an energy financing scheme. You can’t build a windmill on promised energy.

We can mess with the numbers to get different results. If only half the total energy invested is up-front, and the rest is distributed across the life of the resource (mining and enriching uranium, for instance), then we take a 4% hit instead of 8%. Likewise, a 40-year windmill at 20:1 EROEI and full up-front investment will require 2 years of its 2-unit gap-filling contribution to install, amounting to an energy cost of 4 units and therefore a 4% hit. It’s still bigger than the do-nothing 2%, which, remember, is already a source of pain.  Anyone want to double the pain? Anyone? Elect me, and that’s what we’ll do. Any takers? No? Wimps.

Ramp It Up!

It is unrealistic to imagine that we could jump into a full-scale infrastructure replacement in one year. To set the scale, the U.S. uses about 3 TW of continuous power. A 1% drop corresponds to 30 GW of power. Our modest 2% replacement therefore would require the construction of about 60 new 1 GW power plants in a single year, or a rate of one per week! Worldwide, we quadruple this number.

What capability have we demonstrated in the past? In 2010, global production of solar photovoltaics was 15 GW, which is only about 6% of what we would need to fill a world-wide energy gap of 2% per year. Even on a tear of 50% increase per year, it would take 7 years to get to the required rate. Wind installations in 2010 totaled 37 GW, or 14% of the 2% global requirement. It would take 5 years at a breakneck 50% per year rate of increase to get there. When France decided to go big on nuclear, they built 56 reactors in 15 years. In doing so, they replaced 80% of their electricity consumption, which translates to about 30% of their total energy use. So this puts them at about 2% per year in energy replacement.

I am being cavalier about comparing the thermal energy in fossil fuels to electricity delivered (factor of 3 in heat engine), but I more-than-compensate by not incorporating the large intermittency factor for wind and solar (factor of 4–5).  For nuclear, expressing the replacement in terms of displaced fossil fuel makes for fair play.  But in the end, this point only addresses realistic rates of infrastructure addition, and does not bear on the general Energy Trap phenomenon.

Arresting the Decline: Take 2

Let’s imagine a more realistic trajectory for the replacement effort. In our scenario, the world faces a huge crisis, so we could perhaps outperform France’s impressive nuclear push and ultimately replace energy infrastructure at a rate of 4% per year. But it takes time to get there. If it takes 10 years to ramp up to full speed, we have the situation seen in the following graph.

The energy investment still forces us to steepen the decline, initially looking like a 3.2% rather than a 2% decline. But it’s not as jarring as a sudden 8% drop. On the other hand, we fall farther before pulling out, bottoming out at >14% total drop around years 8–9. It takes more than 10 years to make out better than the do-nothing approach in terms of net energy loss. A table corresponding to the plot appears below for those interested in poring over the numbers to figure out how this game is played.

Note that anywhere along the path, a cessation of the replacement effort will bring instant relief. For example, at the beginning of year 6, having installed 6 units of replacement energy up to that point, abandoning the effort will see 88 units of fossil fuel plus the 6 units of replacement for a total of 94 units. This would be a considerable step up from the previous year’s 88 units of available energy, and an even larger apparent gain over the 86.8 units that would be available under a continuation of the crash program. Likewise, if one stopped the program at the end of ten years, the installed 22 units of replacement would complement the eleventh-year fossil fuel amount of 78 units to bring us back to a peachy 100 units—like nothing had ever happened, and far better than the 88 units that we would otherwise endure under a continuation of the program. But stopping renews the dangerous decline. The point is that there will always be a strong temptation to end the short-term pain for immediate relief.

General Behaviors

As mentioned before, the Energy Trap is a generic consequence of modest-EROEI sources requiring substantial up-front investment in energy. We would need the EROEI to be equal to the resource lifetime in order to have a null effect during the decline years, or better than this to ease the pain or allow growth. For a 40 year lifetime (e.g., power plant, solar panels, wind turbines), this means we would need 40:1 EROEI or better to avoid the trap. Our alternatives simply don’t measure up. Curses!

For resources that do not require substantial up-front cost in the form of infrastructure, the trap does not apply. Fossil fuels tend to be of this sort. The energy required to deliver a barrel of oil or a ton of coal tends to be specific to the delivered unit, and is not dominated by up-front cost. It is similar for tar sands, which requires substantial energy to heat and process the sludge. Even at 5:1 EROEI, filling a 2-unit gap can be achieved by producing 2.5 units of output while losing 0.5 units to investment. Thus it is possible to maintain a steady energy supply. The fact that fossil fuels don’t trap us encourages us to stick with them. But being a finite resource, their attractiveness is the sound of the Siren, luring us to stay on the sinking ship. Or did the Sirens lure sailors from ships?  Either way, fossil fuels are already compatible with our transportation fleet, strengthening the death-grip.

Conversely, solar photovoltaics, solar thermal, wind, and nuclear, are all ways to make electricity, but these do not help us very much as a direct replacement of the first-to-fail fossil fuel: oil. This is a very serious point. As Bob Hirsch pointed out in the 2005 report commissioned by the Department of Energy, we face a liquid fuels problem in peak oil. As such, not one of the five immediately actionable crash-program mitigation strategies outlined in the report represented a departure from finite fossil fuels. The grip is tight, indeed.

We must therefore compound the Energy Trap problem if we want to replace oil with any of the renewable sources listed above, because we need to add the energy investment associated with manufacturing a new fleet of electric vehicles of one form or another (plug-in hybrid qualifies). This can’t happen overnight, and will result in a prolonged transportation energy shortfall even greater in magnitude than depicted above.

Do We Have What it Takes?

Many of us have great hopes for our energy future that involve a transition to a gleaming renewable energy infrastructure, but we need to realize that we face a serious bottleneck in its implementation. The up-front energy investment in renewable energy infrastructures has not been visible as a hurdle thus far, as we have had surplus energy to invest (and smartly, at that; if only we had started in earnest earlier!). Against a backdrop of energy decline—which I feel will be the only motivator strong enough to make us serious about a replacement path—we may find ourselves paralyzed by the Trap.

In the parallel world of economics, an energy decline likely spells deep recession. The substantial financial investment needed to carry out an energy replacement crash program will be hard to scrape together in tough times, especially given that we are unlikely to converge on the “right” solution into which we sink our bucks.

Politically, the Energy Trap is a killer. In my lifetime, I have not witnessed in our political system the adult behavior that would be needed to buckle down for a long-term goal involving short-term sacrifice.  Or at least any brief bouts of such maturity have not been politically rewarded.  I’m not blaming the politicians. We all scream for ice cream. Politicians simply cater to our demands. We tend to vote for the candidate who promises a bigger, better tomorrow—even if such a path is untenable.

The only way out of the political trap is for a substantial fraction of our population to understand the dimensions of the problem: to understand that we’ve been spoiled by the surplus energy available through fossil fuels, and that we will have to make decade-level sacrifices to put ourselves on a new track. The only way to accomplish this is through sober education, which is what Do the Math is all about. It’s a trap! Spread the word!

As the world’s oil supplies dry up and the price of gasoline and diesel continue to skyrocket, the need for practical, clean, alternative fuel sources for motor vehicles becomes increasingly imperative.  Fortunately, green energy devotees have been performing some amazing feats of ingenuity, drawing attention to the efficiency and practicality of numerous forms of sustainable energy.  Specially designed vehicles have been proven capable of things from setting speed records to traversing entire continents without using petroleum-based fuels.  These feats demonstrate that alternative energy can be effectively employed in order to rid the world of its dependence on petroleum for transportation while preserving the environment by reducing carbon dioxide emissions.

Breaking Speed Records
As the popularity of cars like the Chevrolet Volt and the Toyota Prius increases, the idea of using electricity to run vehicles is rapidly becoming accepted in our everyday lives. Unfortunately, most so-called electric cars are only hybrid vehicles, which means that they still require internal fuel combustion for some of their power.  A group of students at Brigham Young University set out to create a car that was not only fully electric, but also dispelled the stereotypes of electric cars being slow and underpowered.  They called their car Electric Blue, and it had a top speed of 175 miles per hour when it was tested at the Bonneville Salt Flats in Utah. This was fast enough to set a world land speed record for a car of its class.  Hopefully, this project’s success will aid in the production of electric cars that are faster and more powerful, and therefore more appealing to the public.

Crossing a Continent by Wind
In order to show the effectiveness of wind as an energy source, a German team crosses the Australian continent in a car powered by the wind.  Each night, they would set up a portable wind turbine to recharge the car’s battery, which gave it sufficient energy for the next day.  If the wind was strong enough, a kite attached to the car would propel it down the road and save batter power.  The trip 3,000 mile trip was completed in only 18 days, giving engineers hope that wind could become a practical source of energy for transportation in the future.

Crossing a Continent by Biofuel
Powered only by biofuel, the first ever land based trans-Antarctic expedition was recently finished at the end of 2010.  Funded by clean energy advocate Winston Wong, the so-called Bio-inspired Ice Vehicle (BIV) is the first bio-fueled vehicle to complete such a task. Not only was it designed to demonstrate the power of alternative energy, but it was engineered to withstand the extreme conditions that Antarctica is famous for while transporting a research team safely across a continent.

People Power
While this may immediately bring to mind something out of the Flintstones, the HumanCar, as it is simply known, harnesses the power of quick rowing motions by the driver and passengers to charge its battery.  The HumanCar is capable of reaching speeds over 60 miles per hour. While it’s currently only made for short-distance commuter travel, newer versions are being designed to allow long-distance journeys, as well.  Besides its clean power source, the HumanCar has other appealing aspects.  It is made from recycled materials, and the body is designed to last 100 years, resulting in little or no depreciation.  Also, its design is so simple that owners can easily change out electric components to stay current with technological advances.

Winston Wong, while discussing the reasons for the BIV, stated that they needed to “do something that people can take notice [of] and say this is the future, the future of human endeavor” in order to preserve the planet.  Obviously, all of the teams working on the projects above believed in that same message, and chose daunting tasks to test their various forms of alternative energy.  By uniting each of these enlightened ideas, it is quite possible that, in the near future, petroleum fuels won’t be needed for people to travel the Earth.

Written by blogger Alan Parker, whose works discuss green technology, the environment, and the great outdoors.  You can follow him on Twitter @AGreenParker

Photo courtesy Solar Power, Inc.

Solara sought to bring solar power to all of its tenants and was forced in install separate arrays of panels for each and every unit.  This meant taking a dozen panels at a time, wiring them to individual solar inverters (to convert energy from DC to AC), and running separate cabling from each cluster of solar panels directly into each tenant’s separate electricity meter.  Clearly, this was not the most efficient way to deliver power in an MTU property.

A Better Way?

In 2008, the California Public Utilities Commission (CPUC) created a program called “Virtual Net Metering”, or “VNM” specifically for Multifamily Affordable Solar Housing (MASH) projects like Solara.  (CPUC decision 08-10-036.)  

Using VNM, a property could install solar panels and feed all of the energy into a single meter with a single inverter, and virtually divide the credit for energy production across a series of meter numbers provided to the utility.  With VNM, each individual unit would not require its own inverter and separate wiring, making it an elegant and efficient solution that significantly reduces solar installation costs.  Unfortunately, under the 2008 decision, VNM was only available for MASH projects.  Until now.

CPUC Expands VNM

In July 2011, the CPUC approved decision 10-05-004 to expand VNM beyond the “MASH only” restriction and make it available to all multi-tenant and multi-meter customers in residential, commercial and industrial properties.

This means that property owners can now install solar PV on their apartment buildings or commercial multi-tenant properties and virtually distribute those benefits across various tenants, even if those tenants are not physically connected to the PV array.

The decision also elucidates the fact that properties can utilize VNM regardless of their participation in the California Solar Initiative (CSI) rebate program.  Therefore, even if the state incentive programs become fully subscribed, a property could still use VNM to distribute solar benefits to its tenants. 

Building owners in California can now offer cost-effective renewable energy solutions to tenants, allowing them to enjoy lower energy costs and hedge against future escalations in utility rates.  Don’t be surprised if you begin to see apartment buildings and commercial office buildings advertising the availability of low cost solar energy bundled into the cost of rent, or included with the building as an amenity.

Next Steps for VNM?

One of the most promising applications of VNM would be an expansion to allow the trading of energy credits beyond contiguous parcels under common ownership.  VNM is an excellent option for tenants of buildings that cannot or will not go solar.  For example, the complex may have shading that prevents solar installation. Conversely, it may receive plenty of sunshine, but lack the necessary roof space to accommodate all tenants.

Residential apartment/home renters have no real options since they technically don’t own the roof over their heads.  However, many could benefit from the advantages of renewable energy.  So, what if there was a way to “rent” a solar panel inside a solar farm located in an unused plot of land, instead of on the roof that they don’t control?

Taking the CPUC 10-05-004 decision a step further, what if VNM could be used to allocate credits across town and not just on the premises of a particular MTU project?  Could that two-acre vacant plot be used for a “solar garden” which could sell “shares” of generation to individuals throughout the utility service area?  This concept of solar gardens (sometimes called “off-site solar”) is currently prohibited by the CPUC, but a bill introduced in February 2011 in the California state assembly (SB 843) aims to allow these gardens to grow and flourish.  You can learn more about SB 843, also known as the Community-Based Renewable Energy Self-Generation Program, at this website: http://www.e2.org/jsp/controller?docName=campaignDisplay&activityName=SB843.

Investment Grade Solar Projects

Solar gardens, as an extension of VNM, provide a very elegant solution to the collateralization problem faced in traditional equipment financing and solar leases: default risk. 

For example, if Joe Homeowner leases a car and stops making payments, the car can be repossessed and sold in a secondary market.  This is possible because the loan can be secured by the collateral of the underlying leased asset (the car). 

Unfortunately, solar assets on a rooftop are a little more difficult to repossess and the secondary market for panels is almost non-existent.  As a result, interest rates for solar leases are often in the high teens, as the investment community views them as unsecured consumer debt, much like a credit card.

With a solar garden, however, the assets are placed in a central facility, off-site from the consumer and similar to a traditional community garden (sometimes called “Community Supported Agriculture”, or CSA). 

Under a CSA model, people pool their capital, plant a garden and grow a basket of crops.  Every week, when the fruits and vegetables are harvested, each person receives their “share” of crops based on their individual ownership participation. 

The default risk is mitigated because when Joe Homeowner stops paying his CSA bill, his share of tomatoes is simply given to somebody else and the CSA subscription can be resold to another participant.  In the event of a default, no physical assets need to be repossessed from Joe Homeowner’s property.

In a solar garden, when a subscriber defaults, there are no panels that must be removed from their roof.  Rather, the solar garden can sell the subscription to somebody else and allocate the power “virtually” to a different meter.  This makes it easier for institutional investment to support community solar projects and allow more solar gardens to grow.

Feed-in Tariffs and VNM

A model where power is generated and fed into the grid may sound similar to a Feed-in Tariff.  However, a Feed-in Tariff (a policy mechanism implemented very successfully in Germany and other European countries) pays the project owner a fixed, agreed-upon rate for their generation.  While Feed-in Tariffs are themselves a very elegant solution, they have created some controversy in California around the pricing mechanism and the specific rate at which the utility should be required to purchase energy.

Solar gardens, on the other hand, don’t require the utility to determine a price at all.  Instead of paying a dollar amount, they “pay” a certain number of kilowatt hours (kWh) by virtually re-assigning the energy credit to a different meter.  For example, if a solar garden produces 50,000 kWh in a given month and is divided equally among 100 subscribers, each person would receive a credit on their bill for 500 kWh.  If a particular customer consumed 700 kWh that month, their utility bill would reflect a 500 kWh credit and they would only be charged for 200 kWh.

Next Steps?

Virtual Net Metering (VNM) has proven to be an effective solution for MASH properties and has now been approved for other multi-tenant applications such as apartment buildings and commercial offices.  As a result of this decision, scores of MTU properties will likely expand their renewable energy footprint beyond common areas and into the spaces occupied by individual tenants. 

The decision to expand VNM will enable a proliferation of distributed generation.  However, to take this program to the next level, the geographical boundary restrictions must be lifted.  The Community-Based Renewable Energy Self-Generation Program (SB 843) would expand the allowable VNM footprint beyond MTU buildings and allow individual renters (residential or commercial) to enjoy the benefits of renewable energy even if it is not physically installed at their location. 

This expansion would create a fertile environment for institutional investment which has largely shied away from renewable energy because of the lack of collateralization and negligible salvage value of the underlying asset.  VNM and solar gardens solve this problem and will open the door to significant renewable energy development.

Lee Barken, CPA, LEED-AP is the Energy and Cleantech practice leader at Haskell & White, LLP and serves on the board of directors of CleanTECH San Diego and as Vice-Chair of the WREGIS Stakeholder Advisory Committee.  Lee writes and speaks on the topics of renewable energy project finance, green building, IT audit compliance and wireless LAN technology.  You can reach him at 858-350-4215 or lbarken@hwcpa.com.

In our country’s spirited debate over energy, innovation and the economy, perhaps no phrase has been uttered more often than “green jobs.” While the precise meaning of “green job” continues to be a topic of debate, I would submit that jobs in the algae industry are indeed at least a little shade of green. Or maybe blue-green.

In today’s biofuels industry, most of the growth has centered on jobs for those workers who have already been trained in the fields of construction; engineering; chemistry and biology; sales and marketing; legal and administrative, and others. The industry now supports tens of thousands of direct and indirect jobs across the country and up and down the value chain – from Ph.D-level microbiologists to plant personnel to legal counsel to metal fabricators and truckers; from the labs of San Diego to the ethanol plants of Iowa to the offices of Silicon Valley.

That is something we rightly celebrate as an industry. It also something policymakers in Washington D.C. would be wise to recognize as they continue to seek ways to create jobs and spur economic growth.

The next generation of green jobs

Much less has been said, however, about the tremendous need to develop the next generation of biofuels innovators. Regardless of technology, feedstock or business plan, this is something that is a concern of the industry as a whole. Because a new generation of experts will be required to help today’s companies continue to prosper and innovate; it will also be necessary to ensuring that tomorrow’s advanced biofuels companies have access to a highly-trained workforce. As an industry, we have the responsibility to help foster the creation of that new generation of biofuels innovators.

It’s no secret that the United States has lagged behind other countries in recent years in the field of science, engineering and math. Both the public and the private sector have gone to great lengths to try to encourage and inspire today’s youth to choose careers in these fields. I believe that the biofuels industry has the unique ability to drive today’s youth into careers into these disciplines. Why?

The sex appeal of sustainability

Today’s youth are more concerned about global sustainability than any other generation before it. Recent studies of the so-called millennials – those born from 1981 to 2000 – point to a generation that is more open to changing habits and behaviors to reduce environmental impact. They are more interested in authenticity than spin. And they are more interested in making a positive impact in the world than material gain. As The New York Times reported in a recent story on this generation’s interest in sustainability and clean technology, “Suddenly, ‘sustainability’ seems to resonate with the sex appeal of ‘dot com’ or ‘start-up,’ appealing to droves of ambitious young innovators.”

But in order for our industry to continue to attract these ambitious young innovators, we need two things. First, we must have continued federal investments in research at all levels.  Second, we need public-private partnerships between leading biofuels companies and research institutions to provide internships, bench experience and other opportunities for students at every level.  Such practical experience often converts interns to employees. Employees become advocates, experts and innovators, creating further demand for these skill sets. And when that happens, we can energize existing and next generation scientists and researchers to devote their careers to our industry.

How partnerships for education work

What might such a partnership look like? Fortunately for us, there are already some exciting examples of collaborations happening today that are creating a biofuels workforce for the future.

In San Diego, one of the country’s centers for the development of algae-to-biofuels technologies , a program called the Educating and Developing Workers for the Green Economy (EDGE) Initiative is helping to ensure that the region’s burgeoning biofuels industry has access to a highly trained, world-class workforce. Funded through the state of California and the Federal Workforce Investment Act, the training program is being developed by the San Diego Center for Algae Biotechnology, with CleanTECH San Diego helping to integrate the program with the region’s commercial biofuels sector.  The program is training the next generation of advanced biofuels leaders, including technicians, Ph.D.-level researchers and scientists, and engineers.

I look at this opportunity through a few lenses. As the executive director of the trade association for the US algae industry, I know we must find ways to populate today’s and tomorrow’s algae companies with the best and the brightest minds our country can offer.

As a concerned citizen, I know we must find ways to develop new domestic sources of energy while preserving our existing transportation infrastructure. And last, as a parent, my hope is that my own children will not only be inspired to pursue opportunities in clean energy, but will also find plentiful options awaiting them in the future.

Mary Rosenthal is the Executive Director of the Algal Biomass Organization.

   Blink twice in Seoul, South Korea, and you might think you’re in any big city in the United States.  Cars whiz by, tall buildings sprawl out in familiar, dense, urban patterns, and of course, there’s the occasional Starbucks dotting the landscape.  My visit to this country came at the invitation of the SWEET Renewable Energy and Cleantech Conference.  Given that this was to be my first trip to Korea, I accepted the speaking invitation with the eagerness and anticipation of a young wizard on his first train ride to Hogwarts.  Frankly, I had no idea what to expect, but I was excited to be on board.  What I discovered was striking.  Korea is a country with vast differences and abundant similarities to western culture.  “How is that possible?” you might be wondering.  Let me explain.
   After spending a week in Korea, one might make the observation that westerners are in familiar territory.  This is a place where the people are friendly, the cars drive on the same side of the road, and one can survive on English alone.  In short, it feels safe and navigable.  (OK, so all the measurements are in metric units, but you get the point.)  However, once you start engaging strangers in conversation and exploring off the beaten path, the richness and complexity of Korea become evident.

In my travels, I learned a number of anecdotal lessons.  In this article, I’ll share three:

1.  Respect Your Elders

   While wandering lost through the streets of Seoul in search of a lesser known tourist destination, I stepped inside a small market to get help with directions.  The elderly woman behind the counter did not speak a word of English.  Despite my best attempts at pantomime and charades, I was unable to establish communication.  I attempted to express gratitude with a smile and slight bow and then proceeded to leave the shop.  Within seconds, the aged woman rushed outside and shouted at two well-dressed businessmen who were passing by.  They immediately bowed to her and proceeded to provide us with navigational assistance.
   Later, in conversation with a docent at the National Folk Museum of Korea, I learned that respect in Korea is measured in years, and my experience with the shopkeeper may have been a reflection of this cultural norm.  Korean culture reveres elders.  The age of sixty is particularly important.  Why sixty?  The Zodiac calendar is comprised of 12 different animals, each representing one year.  For example, 2011 is the year of the Rabbit.  At the end of twelve years, the cycle repeats.  Traveling five times around the Zodiac calendar (i.e. 60 years) is considered a laudable accomplishment and is celebrated with great enthusiasm.

2.  Hierarchy is Respected and Titles are Important

   Are you an assistant manager or a regional vice president?  The title you carry on your business card speaks volumes about your corporate role and social status.  My first glimpse into the focus on titles came at the conference when I noticed that speaker titles appeared prominently ahead of names in conference literature, signage and even some business cards. 
   Unlike the U.S. where you might expect to see a person’s name, then title, the Korean version was quite the opposite, listing first a title, then the name.  Over dinner with an executive at a multinational solar company, I learned that Korean society respects titles in much the same way military organizations respect rank.  Everyone wants to know your title before addressing you, and corporate organizations function with a clear hierarchical structure.  Interestingly, PhD. is one of the most respected titles in both business and social circles.

3.  Patriotic Pride is a Powerful Force

   Korea is a country on the move.  In just my ride from the airport to the city center, I must have seen a half-dozen large bridges or freeways under construction.  High speed rail projects are crosscrossing the country.  In the southern province of Jeollanam-do, aggressive plans are under way to develop large clusters of cleantech companies.  Conferences like SWEET are aimed squarely at attracting investment and promoting manufacturing ecosystems. 
   In conversations with Korean attendees at the tradeshow, I was very curious about attitudes towards “going green.”  Environmental concerns were certainly of interest; however, a more noteworthy thread seemed to be the overwhelming spirit of nationalistic competition.
   While Americans are still regarded in high esteem, (I even had one complete stranger thank me for the sacrifices of American Veterans during the Korean War), the majority of this competitive spirit seemed to be directed at Japan and China.  In short, cleantech aspirations are viewed through the lens of patriotic pride. 

Trading in Green

   Korea is a country graced by natural beauty and resources.  Its cleantech cluster plans are ambitious and exciting.  The people I met were committed, hard-working and resourceful.  This unique combination of places, plans and people aligns Korea on a trajectory of significant growth.  The desire to develop cleantech industries is good for the planet, good for Korea and also good for forward thinking trading partners.  For companies who can navigate the formidable cultural differences, the partnership opportunities are vast and lucrative.

Lee Barken, CPA, LEED-AP is the Energy and Cleantech practice leader at Haskell & White, LLP and serves on the board of directors of CleanTECH San Diego and as Vice-Chair of the WREGIS Stakeholder Advisory Committee.  He just returned from South Korea for a presentation on Solar Project Finance Models at the SWEET conference.  Lee writes and speaks on the topics of renewable energy project finance, green building, IT audit compliance and wireless LAN technology.  You can reach him at 858-350-4215 or lbarken@hwcpa.com.

Tom Steyer has a vision for a national dialogue about energy production and consumption.  At the 2011 gathering of the Cleantech Investor Summit in Palm Springs, California, Steyer shared his perspective on the defeat of Proposition 23, along with how that outcome can inform the national conversation on clean energy issues.

Steyer is an unlikely spokesperson in the clean energy movement.  As the founder and co-managing partner of Farallon Capital Management, he has built a career around institutional investing for schools, foundations and high-net-wealth individuals.

“I have been a professional investor for the last 30 years, not having to do with clean energy,” said Steyer.  “When Prop 23 was proposed, I assumed that I would do absolutely nothing.  When everyone else took the exact same tact as I took, which was to do absolutely nothing, eventually I got so upset and angry that I decided that I would spend my time and put up some money to try and change the dynamic about how this proposition was going to work.”

The Spark of Proposition 23

As Texas oil companies mobilized a campaign to pass Prop 23, Steyer observed that the general lack of an organized coalition against Prop 23 was leading to a tragedy of the commons.  “I don’t think I was doing anything smart.  I don’t think I was doing anything calculated.  I think I just lost my temper and said I’m damned if this is going to happen in our face,” said Steyer.

It was at that moment he decided to take a stand and encourage others to do the same.  For Steyer, there was a deep seeded sense of conviction and confidence in his message.

“Do not be disinclined to engage the other side or be intimidated by their brains or their money, because my experience from this and from previous campaigns is we have the brains and we can find the money,” said Steyer.

Coalition Building

With a keen and masterful sense of the importance of stakeholder engagement, Steyer served as co-chair of the “No on 23” campaign together with a staunch political polar opposite, former Secretary of State George Shultz.  The coalition itself was a demonstration of co-mingled ideologies and strange bedfellows.

“To get a coalition, you need visible leaders so that you can go to the people who are part of their constituency and make your pitch and not be thrown out of the room without a hearing,” said Steyer.

The new clean energy coalition, according to Steyer, needs to be comprised of four essential groups: Business People, Republicans, People of Faith and National Security Professionals (such as the military and Department of Defense).

“I think our goal has to be to build the coalition,” said Steyer.  “In order to win this national argument, we have to be able to reach out to the people who aren’t our natural allies and convince them not just that we’re right, but that it’s really important that they be on our side.  If we had these four groups, we’d have the passion and we could go anywhere in the United States and make this argument.”

The National Stage

Rather than blaming Washington, DC, Steyer takes the position that the capital will respond to the engagement of the American people at a grassroots level.  “Things happen in DC after the country decides what it wants,” said Steyer.  “DC is not going to lead.  DC is going to be the validation of the conversation that goes on across the country.”

On the national stage, Steyer sees the lack of federal energy policy as a reflection of the public’s lack of engagement in the discussion.  “One of the reasons I felt so strongly that we’d never get a major energy bill in 2010 is [that] I can’t believe it’s going to happen without a huge conversation at the national level,” said Steyer.

“If you think about the health care bill, if you think about civil rights, if you think about when we’ve changed massively, there has been a huge conversation with everybody participating, with people airing all their views with a close examination of what’s going on… and there hasn’t been that kind of conversation [around energy].”

Of course, the difference with health care and civil rights is the direct connection that Americans feel with those issues.  For most people, on the other hand, energy is an abstraction.  We understand that energy turns the lights on and keeps the beer cold, but how it’s made and where it comes from is beyond the familiar patterns of our daily conversations.  The key to engagement seems to be in how we make energy issues more approachable.

Winning Hearts, Minds and Solar Panels

“So when we think about this conversation, salience is really important,” said Steyer.  “People have to understand, ‘Oh my gosh, this is totally relevant for me.  This is an important thing.  This is going to change my vote.  This is going to change my life.’”

“Until that happens, I do not believe that we will be able to get [changes made].  This is not a minor change.  Energy runs through every part of our day and every part of our economy.  To change this is going to take a massive change of attitude.”

If ever there was a person capable of inspiring that massive change of attitude, it might just be Tom Steyer.  The roadmap he presented at the Cleantech Investor Summit was credible, well-constructed and achievable.  Is he up for the challenge?  Despite his attempts at self-deprecation, Steyer clearly has a knack for community building and a deep intuitive talent for understanding the dynamics of personal engagement.  In California, he was been battle tested with Proposition 23 and came out victorious.  What’s next for Tom Steyer?  Hopefully more of the same.

A web archive of Mr. Steyer’s presentation is available here.

Lee Barken, CPA, LEED-AP is the Energy and Cleantech practice leader at Haskell & White, LLP and serves on the board of directors of CleanTECH San Diego and as Vice-Chair of the WREGIS Stakeholder Advisory Committee. Lee writes and speaks on the topics of renewable energy project finance, green building, IT audit compliance and wireless LAN technology.  You can reach him at 858-350-4215 or lbarken@hwcpa.com.

Nearly a year ago, I wrote about the unanimous decision of the California Public Utilities Commission (CPUC) to allow Tradable Renewable Energy Credits (T-RECs) in California.  If you’re not familiar with a T-REC, it is, quite simply, an environmental commodity representing the environmental attributes associated with one MegaWatt hour of renewable energy generation.

According to the CPUC, under the new rules, T-RECs “can be purchased by a utility and traded separately from the underlying energy produced by a renewable generating facility.  These energy credits can then be applied, by the utility, toward their renewable energy compliance goals.”

Within days of last year’s March 11 decision, a flurry of controversy erupted.  A joint petition to modify the decision was filed by San Diego Gas and Electric, Southern California Edison and Pacific Gas and Electric, the three Investor Owned Utilities (IOUs) most affected by the T-REC ruling.  Additional modifications were requested in a petition by the Independent Energy Producers Association. 

Increasing pressure was felt throughout Sacramento from the Governor’s desk to the State Legislature.  A stay of the T-RECs decision was issued on May 6, 2010.  For more than eight months, the short lived T-REC program remained in a frozen, fossil-like condition.

Back From Extinction

“I think most of you are painfully aware that this commission has gone round and round on the issue of the role of Tradable Renewable Energy Credits in the RPS program,” said CPUC Commissioner Michael Peevey in his opening remarks at the January 13, 2011 CPUC meeting to consider a new decision for the T-REC program.

The CPUC’s January 13, 2011 decision reverses the stay from May 6, 2010 and reaffirms the original March 11, 2010 ruling with some minor modifications. 

“In largely rejecting the petitions to modify that were filed by the utilities and the IEPs, this decision effectively restores the decision that this commission voted [on] in March of last year.  It was, I think, a sensible and reasonable decision.  I supported it at the time, and I support today’s decision,” said Commissioner Nancy Ryan.

 In short, the rules going forward allow the use of Tradable RECs, including out-of-state generation, to meet compliance requirements under California’s Renewable Portfolio Standard (RPS), with the following notable exceptions:

 - T-RECs can only be used to meet 25 percent of an entity’s compliance obligation.

- Transactions are capped at $50 per T-REC.

- The 25 percent and $50 per T-REC limitations are temporary and remain in effect only until December 31, 2013.

“The basic approach of the March decision and today’s decision is to wade gradually into the emerging market for Tradable Renewable Energy Credits and I think that’s a prudent thing to do,” said Commissioner Ryan.

Since the limitations expire at the end of 2013, it provides an opportunity to revisit and make adjustments, as necessary.

“This training-wheels approach to market development will give the Commission an opportunity to more closely monitor dynamics to the end of 2013, at which time this commission will evaluate the need for these particular regulatory mechanisms,” said Commissioner Timothy Alan Simon, adding this hint about the possible sun-setting on the restrictions, “I look forward to a more robust and less restrained T-RECs market in the near term to enable cost effective RPS compliance for our rate payers.”

This sentiment was echoed by Commissioner Ryan, who said, “I think it’s appropriate that we have some role for RECs at the present and I hope to see a more open market in the future.”

Do more T-RECs mean lower costs for rate payers?  Will the broader adoption of out-of-state T-RECs translate into a better deal for California consumers?

Renewable Generation Civil War

Among the most contentious and controversial issues surfacing in the T-REC battle was the question of allocating in-state versus out-of-state production.  Under a T-REC program, a compliance obligation in California could be met by a T-REC generated in any of 14 states participating in the Western Electricity Coordinating Council (WECC).

“For many, the issue of Tradable RECs has become a proxy dispute over the role of in-state versus out-of-state facilities in meeting that state’s renewable objectives,” said Commissioner Peevey.

The core of this issue seems to be that T-RECs, which allow out-of-state generation, will stimulate green jobs outside of the state subsidizing that generation.  On the other hand, if California utilities are forced to purchase “Made in California” T-RECs exclusively, it will increase the cost of compliance, which is a price ultimately borne by the rate payer.

In short, multiple objectives are in conflict.  This begs the question:  Is the goal to stimulate jobs in California, or is the goal to stimulate renewable energy generation?  Is California trying to have its cake and eat it too?

“T-RECs is a very controversial issue, and I think the reason that it’s so controversial is that it casts in very high relief some of the internal conflicts about the RPS program and the concept of a renewable portfolio standard in California,” said Commissioner Ryan.

Among the goals mentioned by Commissioner Ryan are the reduction of GHG emissions, improvements in local air quality, local economic development, saving consumers money and promoting the development of new technologies.

“That’s just a few of the items on the list,” said Ryan.  “We can’t have all of those things at once.”

A Balanced Approach

In striking its compromise, the Commission appears to be supporting the general principle of T-RECs as a mechanism to lower costs, but with safeguards (albeit temporary) to experiment with and demonstrate the viability of the program.

“This will give us ample experience with the emerging T-REC market, as well as provide sufficient time to develop appropriate methods to assess the value of different contracts to ratepayers,” said Commissioner Peevey.

“It is, has always been and remains my opinion that having a role for Tradable RECs in the RPS program is a consumer protection measure,” said Commissioner Ryan.  “It provides necessary competition to bundled projects to contain their costs and bring the best value to consumers.”

New Life for T-RECs

It’s taken several years and one false start, but it now appears that the T-REC market in California is ready for its first trial run.

In closing the T-REC discussion, Commissioner Peevey added some comments in his characteristic light-hearted and humorous style.  “I think we finally resolved something.  Maybe it took a November election to do so, but it’s resolved for the moment.  I know not everybody is happy with this, but that’s how it is and we’re going forward.”

With that, Commissioner Peevey moved the item for a vote and it was adopted.  Welcome to California, mighty T-RECs.

Lee Barken, CPA, LEED-AP is the Energy and Cleantech Practice Leader at Haskell & White, LLP and serves on the board of directors of CleanTECH San Diego and as Vice-Chair of the WREGIS Stakeholder Advisory Committee.  Lee writes and speaks on the topics of renewable energy finance, green building, IT audit compliance, wireless LAN technology.  You can reach him at 858-350-4215 or lbarken@hwcpa.com.