Regulatory Uncertainty is Crippling the RE Industry

EDPR Slashes US Growth Due to Political Uncertainty

EDP Renovaveis, the Portugal-based wind developer responsible for over 6.2 GW of installation (3rd in the industry), reduced it's forecast for US installations by 500 MW through 2011. If we used a very basic ballpark figure of wind installation costs at around $4 million/MW, that's $2 billion in US-based construction that's not going to happen.

CFO Rui Teixiera cites the unfavourable climate for Power Purchase Agreements (PPAs) without "[...] a long term and enforceable – and particularly federal – framework in the US". Which, when you think about it, makes a lot of sense. A Power Purchase Agreement between a utility company (power distributor) and a renewable energy project developer/owner (power generator) wherein the price that the utility agrees to pay for the power produced is established, heavily favours the utility when there are no bankable long-term financial incentives that help offset the cost of building the facility.

Some may say that an industry shouldn't need special treatment and incentives if the marketplace needs its product. Saying that renewable energy doesn't make economic sense if it requires subsidy to match the cost of fossil fuels is unfair though, because fossil fuel power generation facilities are built using subsidies as well.

All of the current administration's best intentions won't create lasting solutions for renewable energy unless a long-term, reasonable, and comprehensive energy policy can be established with safeguards against its dismantling. That doesn't seem likely when it requires a supermajority to get anything accomplished in Congress...

Bloom Box: The Shakedown

Press Conference Highlights

Nothing really earth shattering was announced that hasn't already been speculated, and my suspicions have been confirmed!

When asked about the cost-competitiveness of the boxes to conventional grid power, Sridhar said his current customers were paying 9-10 cents per kwh. However, when pressed whether or not that included incentives he merely answered that the price was the cost and all his customers were in California. Basically, yes without saying yes. The boxes as of now only make sense when they're discounted 50%.

They are also 10 years away from being solar powered. Sridhar claims that the market simply doesn't support the cost of the configuration yet.

All in all I'd say the technology is promising and interesting, but they didn't deliver as much as many hoped for the amount of fanfare and venture funding they've received.

Their website is fully up and running now, go check it out. The blogosphere as buzzing about Bloom Energy being the Apple Computers of energy. I was thinking more like the Google of energy. Oh, wait.... that's what it is!

Bloom Energy Official Site

Bloom Box Unveiled

Click Here for Live Blog Inside Press Conference

Stay tuned for more details and analysis of the product announcement.

It's Official (sort of): BrightSource wins first Dept of Energy Loan Guarantee to a Solar Developer at a Whopping $1.4 Billion

BrightSource Energy Official Press Release

The moment that many have been waiting for- the first stimulus loan guarantee funds for a project development. The Ivanpah project (ring a bell?) has been awarded a conditional DOE loan guarantee for $1.37 billion.

Not a lot to say about this one that isn't said better in the press release, however one big thing jumped out at me that I've been seeing a lot of.

In September 2009, BrightSource selected Bechtel as the engineering, procurement and construction contractor for the Ivanpah project. Bechtel Enterprises, the project development and financing arm of the Bechtel organization, has committed to become an equity investor in all of the Ivanpah solar power plants.

Basically this means that the contractor, who will be responsible for the design and construction of the plant, is also partially financing the plant. Which means to an extent they are paying their own checks. Not only is this a tremendously precarious position for a developer to place himself in, it is also a truly questionable conflict of interest, particularly when federal funds are involved.

Arrangements like these are becoming the norm and it is having a negative impact on project developers and other project sponsors, which hurts the industry as a whole. It would also not be surprising if Bechtel was providing some kind of output guarantee on the system, which large creditworthy EPC companies are able to do and also charge a hefty premium for it.

The loan guarantee can only cover up to 80% of the project loan. The loan ratio at a ballpark would look like maybe 75% loan to value. That means that at a minimum, the 400 MW project will cost $2.3 billion for a total of $5.7 million/MW. More likely, a guarantee in such a high amount with Bechtel providing equity would be more like a 65-75% guarantee which would make the $/MW even higher. Sounds to me like there's some serious price inflation going on and my money is on Bechtel's fee.

Balancing Policy Objectives with Bureaucratic Timelines

CSP Today's Weekly Intelligence Brief

A majority of the industry updates covered in the weekly CSP Today Intelligence Brief emphasize a common theme: timing.

The single largest stumbling block in the language of the ARRA renewable energy stimulus funding is the requirement that construction begin no later than September 30, 2011. Most large renewable energy projects require 3-5 year lead times from formation of the business model to breaking ground, particularly large projects requiring NEPA reviews and complex permitting procedures. BrightSource Energy, a much-lauded Israeli start-up funded in part by the omnipresent Google.org, has been dragging its 440 MW Ivanpah solar CSP tower project along for over 2 years now, and is still battling regulators and lawmakers.

The Oakland, California-based company has submitted a revised plan to the California Energy Commission (CEC) and   the Department of Interior’s Bureau of Land Management (BLM) that would reduce the project’s footprint of the overall Ivanpah project by about 12%.

With the proposed alternative design, BrightSource is trying to avoid the habitat of rare plants and other species. The company mentioned that the alternative design would reduce expected desert tortoise relocations by around 15%.

BrightSource is reportedly in the running for a Department of Energy loan guarantee and must begin construction close to their planned start date of late 2010 in order to qualify.

Another news item featuring the partnership of American company Fluor with Spanish Elecnor to provide engineering services on a 50 MW CSP plant in Badajoz, Spain mentions that services on that project began in 2009 and the engineering phase is not scheduled to be complete until 2011. The global financial freeze left many projects dead in the tracks for months now going on years, and the liquid capital required to bring projects far enough along for short or long term financing is scarce.

Granted, the point of ARRA is to help finance shovel-ready projects to get job creation jump started immediately. The Department of Energy also stated on the record at RETECH 2010 that any remaining funds after the current solicitation is closed will likely be rolled into a second solicitation.

The issue with this promise is that banks have been leery of the regulatory uncertainty surrounding renewables for a long time. Because of its highly politicized nature, incentives and programs are at the mercy of changes in the legislature and presidential administrations. Continuity has come to carry a high premium and the uncertainty leads to stagnation. When nations have implemented long-term energy programs that have been allowed to run their course, entire industries have blossomed and economies have grown. 

Today's American politics of  one-upsmanship and strictly polarized debates, the constant tug of war for power, are neglecting the very thing they claim to cherish. It is very difficult for a nation to flourish in spite of its leaders' worst efforts.

60 Minutes Interview Reveals New Fuel Cell. Can It Succeed Where So Many Failed?

The Bloom Box: An Energy Breakthrough?

In an interview with Leslie Stahl of the 60 Minutes evening news program (linked above), CEO of Bloom Energy K.R. Sridhar lifted a cube half the size of a loaf of bread and proclaimed that it could power an entire European household, half of an American household, or 4 Asian households.

Fuel cells are a lot like an open-ended battery. There is a central catalytic membrane that separates two chemicals that, when combined, generate electricity with their reaction. A battery has a set amount of each chemical available, but a fuel cell pumps the agents in continuously and harnesses the power generated. There are lots of different fuels including fossil and renewable options that work in these applications. However, fuel cells are generally very expensive to make with substantial amounts precious metals required.

Sridhar's Bloom Box was repurposed by Sridhar from a device he developed for NASA to generate oxygen on Mars. Venture capitalists have jumped on board, with a reported $400 million plus capital raise. Until now, however, no information or products had been released, and the company website is cryptic at best and Sridhar claims that in 5-10 years there will be a Bloom Box in every home, at a $3000 price point.

They have a long way to go. Currently production capacity is at one box per day and while some large companies have tested boxes and are now endorsing the company, it doesn't escape attention that all of these installations have been in California where a state tax credit combines with federal incentives for a 50% price cut.

Fuel cell technology is not exactly new, and few successes have been known in reducing the cost of close-cousin battery technologies. Several articles and the linked segment have all pointed out the same thing- fuel cells and other energy technologies can be successful and experience cost reductions when appropriate long-term policies are established to encourage the market. Policies such as these have been instrumental in the development of telecommunications and computer technologies and can do the same for energy.

The problem is the degree of politicization. Energy is not a partisan issue, it's a practical one. Commerce and industry require energy abundance, and relying on outside sources of this energy is foolish at best. Fostering high tech local job creation in the long term while stabilizing our economy through energy security is good for everyone.

Stay tuned for the product launch this Wednesday, February 24th!

Google Powers... Everything.

It's Official: Google Can Sell Power Like a Utility

Google Inc., the multitasking internet conglomerate, owns a subsidiary called Google Energy, which is the subject of the linked article. The Federal Regulatory Energy Commission has just officially granted this entity the right to sell power like any other utility company.

This is particularly interesting because of another Google subsidiary not mentioned in this article: Google.Org

Google.Org is a philanthropic division of Google Inc, focusing on investing windfall profits in a venture capital role with companies and organizations as a way of reducing Google's tax burden. Renewable energy is strongly represented in this portfolio, including high profile start-up technology companies like eSolar.

eSolar owns proprietary rights to a concentrated solar thermal tower design that has so far only been deployed in a quasi-operational pilot project. With their initial venture capital fund at their disposal to construct the pilot project and fund an extensive sales campaign, eSolar has locked down over 1 GW in PPAs already.

Here's the catch: eSolar initially intended to develop their own projects with their technology, hoping to rely on their big chunk of capital for project equity. Banks, however, have not been as receptive to new technologies in the current lending climate, and eSolar has experienced significant challenges obtaining the right combination of project partners and technology risk mitigation to actually break ground on new projects.

This leaves Google in an interesting position, being the proud new owners of an FERC approval. Via an inside contact who will remain anonymous, exclusive information was provided that Google has been exploring project development and ownership of renewable energy facilities.

For a company of Google's size and strength, not to mention money and influence, the prospect of such vertical integration in a blossoming market is somewhat frightening. On the other hand, many of the challenges to developing renewable energy that will be discussed in the coming days and weeks relate primarily to its newness- the risk inherent in new technologies, and the lack of experience and data. Perhaps Google's involvement on this level would give a jolt to the rest of the industry and bring credibility by proxy.

Bill Gates Likes Energy Equations, Too

Bill Gates on energy: Innovating to zero! | Video on TED.com

Seen here speaking at TED2010, Bill Gates addresses carbon emission reduction in a pragmatic and concise speech, breaking it down like this:

CO2 = P x S x E x C

Where P is the number of people, S is the number of services per person, E is the amount of energy for each service, and C is the amount of carbon emitted to produce that energy.

He makes some valid points that tie very closely to my essential argument that changing our energy model is critical to our future. The population is currently 6.8 billion, projected to reach 9 billion by 2050. P must continue to increase, so some of these other factors need to decrease. Services per person is increasing which is a positive thing for the developing world. That's not a number we would want to decrease. Now we have a lot of pressure placed on two factors: energy efficiency and energy production. Energy efficiency is improving but some new services on the horizon may require more energy than we can fathom. For example, the Large Hadron Collider, the world's largest and highest-energy particle accelerator, is estimated to consume 1000 Gigawatt hours of electricity in a single year, "enough to power the City of Geneva twice over"*

That leaves C, that last variable that we could have any hope of significantly reducing. And let's not forget that carbon emissions aside, we're going to need a whole lot of energy to support all those other variables that just keep going up. Bill Gates goes on to discuss some of the various alternatives and their challenges briefly, but I think his focus on this equation is the strongest part of his presentation.

Let's hand it to Bill, he really set this one up pretty well to use as a base concept. If you wanted to leave carbon out of this altogether, you could re-write the equation thus:

E = P x S x EF

Where E is the total amount of energy required to power the globe, P is the population, S is the number of services per person, and EF is the average energy efficiency of each service. With our population projected to reach 9 billion by 2050, that's a lot of E. And I don't mean the kind you remember from your 90s raver phase.

It is clear to me that the renewable energy and energy efficiency markets are going to experience a dramatic rise in fortunes over the next 10-15 years, the alternative being almost unthinkable. It's getting close to crunch time and innovators are like college freshmen cramming all night before the big exam because they were out partying and inventing Viagara and Segways.

* http://spectrum.ieee.org/computing/embedded-systems/powering-the-large-hadron-collider

The Energy Equation: A Manifesto

I think of energy production as an equation, a multi-variable balancing act of money, resources, technology, politics, and public opinion. Most people understand that our energy strategies need to change, that oil and coal alone will not be able to fuel our growth for much longer. This blog will not enter into the debate about climate change, or greenhouse gasses, or global warming. Thousands of blogs exist written by individuals of all levels of credibility on these subjects, and frankly I feel that the focus on this aspect of renewable energy is detrimental to the goal of overcoming fossil fuel dependence.

The emerging high-tech societies of the world demand energy in astronomical quantities, and future innovations will require no less. The world's population will reach 7 billion in the coming decade or two, while most don't even realize that we're already closing in on 6.5 billion. This growth must be sustained by energy that is abundant and affordable. Fossil fuels can only continue to fit that bill for so long, as soon it will cost more to access the remaining supplies than the energy produced is actually worth. This is a very simple math equation. If a resource is finite (like fossil fuels), and it is becoming more difficult to extract what remains of that resource, then the resource's cost to the consumer must increase to cover the increased cost of production.

When exactly we will reach the point where oil costs more to produce than it is worth is irrelevant. Again, there are thousands of blogs that debate peak oil and I will not pretend to be an expert. It is irrelevant because even a casual observer could conclude that our energy needs are increasing exponentially while oil and other fossil fuels are being depleted at nearly equal exponential rates. Isn't it a no-brainer? These are limited resources. If we know this, why does it not strike everyone as imperative that we safeguard our civilization against a post-digital Dark Age where all our toys lie useless in the dirt with no way to power them?

Technologies exist by the dozens to tap the unlimited energy potential all around us. They are clean, sustainable, and in some areas approaching cost competitiveness with traditional fuels. We have a global recession that has impacted the construction and finance industries hardest, without much hope on the horizon in the next few years. There are thousands of engineers and other high-tech individuals either without jobs, or working in industries without a future. We can solve these problems and create a thriving energy economy to support the next generations of scientists, engineers, and constructors by promoting renewable energy as the next chapter in human history.

This blog will explore renewable energy from every angle. There will be live reporting from industry events, news and analysis from across the globe, interviews with renewable energy CEOs and industry leaders, as well as opinion posts and an educational series that will cover technologies, policy, and finance. I will leverage my experience as a marketing and sales professional at a well-known renewable energy consultancy firm (which will remain anonymous) to present the issues in an objective, logical, and business-oriented manner. I recognize that markets and economies must benefit from energy independence and The Energy Equation will provide the tools necessary for businesses, activists, and policymakers to not only understand the renewable energy market and but also profit from it.