Is small business left out of the EE boom?

By Elisa Wood

October 1, 2009

The US has about 29.6 million small businesses and they employ over half of the nation’s private sector. They hire 40% of our high tech workers, make up 97.3% of our exporters, and generate most of our innovations, according to SCORE. http://www.score.org/small_biz_stats.html

Still, we hear small business often say it gets the shaft when it comes to public policy; it just doesn’t have the political clout of big business.

What’s this got to do with energy efficiency? I’ve been wondering – suspecting actually – that small business is getting left out of the energy efficiency boom sweeping the United States.

I admit that my evidence is purely empirical and cursory. I have been trying to collect case studies from the Eastern states for an energy efficiency guide that I am collaborating on with my colleagues at RealEnergyWriters.com. I’ve put out a request for the case studies from small businesses to my many good sources, as well as through the social media.

I’ve received profiles of schools, colleges, hospitals, and manufacturing facilities – all non-profits or large energy users. Where I wonder is the dry cleaner, the Mom & Pop shop, the car wash?

I don’t mean to imply there are no small business efficiency programs. Several people have directed me to Efficiency Maine’s program, which does not target small businesses per se, but does serve many. I’ve also received some great examples from United Illuminating in Connecticut.

Manufacturers and data centers are low-hanging fruit that energy service companies like to pursue. Homeowners have consumer groups pressing state regulators on their behalf. But who is pushing before state utility commission’s to be sure small business gets its fair share of the vast amount of efficiency funding now being distributed?

Perhaps the fault lies with small business, itself. Overwhelmed by trying to operate in this economy, do small business owners have the time to think about energy efficiency?  It’s likely few even realize funds and financing mechanisms exist in several states to help them with upfront capital costs.

Small business may well fall victim to some of the market failures Environment Northeast points out in its October 1 report, “Energy Efficiency: Engine of Economic Growth.” http://www.env-ne.org/

These failures are:

* Liquidity Constraints – when a consumer or business has inadequate access to capital to purchase efficient equipment or improve building energy performance

* Split Incentives – when the owner of a piece of equipment or building (the landlord) does not pay the energy bill and is thus unlikely to invest in efficiency improvements that would benefit the resident/renter

* Information Problems – when purchasers do not know the future energy costs of a product or property and are thus unlikely to invest in the more efficient option with a higher upfront cost

* Behavioral Problems, such as bounded rationality – when the complexity of a decision is beyond the ability of a consumer to make an economically optimal choice.

So this blog does not really reach a conclusion, but asks a question: Are small businesses getting left out of the energy efficiency boom?  If so, what’s the problem? If not, please direct me to success stories!

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Efficiency is cheap, but will it sell?

By Elisa Wood

September 24, 2009

Expect to see this number a lot in energy discussions over the next few years: 2.5 cents/kWh. It is the average cost of energy efficiency, a figure pegged this week in a new report by the American Council for an Energy Efficient Economy. http://www.aceee.org/press/u092pr.htm.

This number is big news because it is so small.  As a resource, energy efficiency beats out all conventional power sources on price.  (See chart below.) Moreover, it’s a price that has been dropping. Five years ago energy efficiency cost 3 cents/kWh.

But just because something is cheap, doesn’t mean people will buy it. How much energy efficiency will make it into the nation’s energy shopping cart?

Efficiency boomed in the early 1990s, but then busted later in the decade when deregulation allowed many utilities to shed their efficiency programs. It is resurging now, part of push by state and federal policy makers to green and ‘smarten’ energy supply.

Most utilities do not make money on efficiency, and this is part of the reason it busted in the late 1990s. Perhaps as important, efficiency’s branding was off. It was seen as an extra, a nicety to pursue out of goodwill when a utility or state had some extra money.

ACEEE and other efficiency advocates are trying to reshape the image. They refer to efficiency as a fuel – just like wind, sun, coal, natural gas, oil. And they want efficiency to be the ‘first fuel.’ This means that when a utility is planning its energy supply, it first applies as much efficiency as is cost effective and plausible, before it builds more expensive new power. Some eastern states are already using this planning concept. In addition, many states have set specific energy efficiency goals, some very aggressive.

That is why ACEEE’s 2.5 cents/kWh becomes so important. It is a kind of marker against which other resources will find themselves competing more and more in policy planning.

Meanwhile, an increasing number of states are decoupling utility profits from kilowatthour sales or instituting other financial incentives that inspire utility support for efficiency.

Of course, our economy cannot prosper on efficiency alone, but many studies indicate we still have a lot of waste in the system.  So as an energy planner, if you were confronted with increased demand – and are not dealing with policy or system issues that require generation or transmission as a solution – which of these would you pursue first?

Resource	Cost
Energy Efficiency	1.6 cents/kWh to 3.3 cents/kWh
Pulverized coal	7 cents/kWh to 14 cents/kWh
Combined cycle natural gas	7 cents/kWh to 10 cents/kWh
Wind energy	4 cents/kWh to 9 cents/kWh

Credit: Cost figures from ACEEE, “Saving Energy Cost Effectively: A National Review of the Cost of Energy Saved through  Utility Sector Energy Efficiency Programs,”  September 2009, http://www.aceee.org/press/u092pr.htm.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter

Are you eligible for a manufacturing tax credit?

By Elisa Wood

September 10, 2009

The United States has been generous with tax credits for energy production. But until now, it’s been somewhat miserly about giving breaks to those who make the equipment that makes the energy – or saves it.

That’s changed with creation of the Advanced Energy Manufacturing Credit (MTC), part of the federal stimulus package. The 30% tax credit makes $2.3 billion available for new, expanded, or re-equipped domestic manufacturing facilities that produce clean energy equipment.

But with the deadline for applications right around the corner – September 16 – manufacturers are perplexed by eligibility requirements and wondering if they qualify.

Bridget Hust, partner with the law firm Faegre & Benson, who has been pouring over the rules on behalf of clients, says application requirements are “all over the map.” She suggests that if you think you might be eligible, then apply. It may not be clear exactly who will qualify until mid-January when the Internal Revenue Service accepts or rejects applications. And even those that are rejected may have a shot at revising and resubmitting their proposals, she said. The Feds plan to keep giving out money until the $2.3 billion is exhausted.

The credit seems particularly wide open for technologies that reduce carbon dioxide emissions – even the more obscure approaches. Hust says she is particularly eager to see how the tax credit affects manufacturing of advanced transmission, smart grid and energy storage products, since they may be key to integrating more wind power into the system.

The DOE says the credit is available for:

• Technologies that create energy from renewable resources (sun, wind, geothermal and other renewable resources)
• Energy storage technologies (fuel cells, microturbines or other energy storage systems used in electric vehicles)
• Advanced transmission technologies that support renewable generation (including storage)
• Renewable fuel refining or blending technologies
• Energy conservation technologies (advanced lighting, smart grid)
• Plug-in electric vehicles & vehicle components  (motors, generators)
• Property to capture and sequester carbon dioxide
• Other property designed to reduce greenhouse gas emissions

The manufacturer may not need the credit, particularly in a down economy where many lack taxable income. But like the solar and wind production tax credits, it could draw third-party investors in need of a tax break who will partner with the manufacturer.

See Hust’s white paper for more details http://www.faegre.com/showarticle.aspx?Show=10112, or go to http://www.energy.gov/recovery/48C.htm

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter

Businesses like efficiency, but hold back

By Elisa Wood

May 7, 2009

“It’s the economy, stupid,” the famous line of political strategist James Carville, seems even more relevant now than when he uttered it during Clinton’s 1992 campaign. A recent survey on executives’ attitudes shows that energy efficiency hasn’t escaped the shadow of recession, despite strong support for the resource.

Johnson Controls and the International Facility Management Association asked 1,400 business executives in April what they think of energy efficiency. They like it. A lot.

Seventy one percent said they pay more attention to energy efficiency than they did a year ago; 51 percent see energy management as extremely or very important; 45 percent plan to use efficiency as their top strategy to reduce carbon dioxide emissions.

Yet, the survey also found businesses holding back on making investments. The problem?  “Economic and regulatory uncertainty,” says C. David Myers, president of Johnson Controls Building Efficiency division, in a May 6 news release.

Energy prices have dropped significantly over the last year. But businesses apparently do not feel confident enough about the future to prepare to take the savings and invest it in energy efficiency — in preparation for the next jump in energy prices. In fact, the survey revealed a likely 10 percent decrease from last year in the use of facility capital budgets to fund energy efficiency projects. It also showed a six percent drop in the number of businesses planning to use their operation budgets to invest in efficiency.

Not surprising, nearly half of those interviewed cited lack of capital as a barrier to pursuing efficiency. However, if Washington plays it right, efficiency investment should rebound once the economy does. Business leaders believe incentives from utilities or government will drive the investment, according to the survey.  Eighty-five percent expect either legislation mandating energy efficiency or carbon reduction within two years.

Businesses are understandably hesitant to risk capital until they know the specifics about an energy efficiency portfolio standard and carbon requirements now under debate in Congress. Perhaps the slogan for this point in history should be: “It’s about the economy, stupid…and Washington.”

More information on the survey is available at: http://www.johnsoncontrols.com/.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.

Efficiency stimulus will lower energy bills, says federal report

By Elisa Wood

April 30, 2009

Depending on your position, the federal stimulus money is either a jobs builder or a national budget buster. The Energy Information Administration offers another take. In a recent analysis, the EIA finds that stimulus money should reduce what consumers and businesses pay to heat, cool and light buildings.

The federal agency this month updated its annual energy outlook to compare how energy costs would fare with and without the American Recovery and Reinvestment Act. http://www.eia.doe.gov/oiaf/servicerpt/stimulus/index.html.

The stimulus package delivers about $12.5 billion for energy efficiency improvements in homes and buildings. Those upgrades should cut homeowner bills an average of $64 annually (in real 2007 dollars) over the next two decades. Homeowners will reduce use of heat 1.7%, and air conditioning 3.4% by 2030, the report says. Likewise, commercial buildings should see energy costs drop by an average of $5.7 billion, or 2.7% annually between 2010 and 2030. In all, the report pegs cost cuts for home and building owners in 2020 at $13 billion, or 2.6%, and in 2030 at $21 billion, or 3%.

In addition, expect to see a lot more solar panels and small wind turbines powering stores and offices very soon as a result of significant tax credits and loan guarantees. The stimulus funds should lead to 121 MW more of solar units on commercial buildings by 2011, a 15% jump, and 120 MW in distributed wind turbines by 2016, a 527% jump.

The EIA does not typically update its annual outlook after it is published. But the federal agency decided to do so this year because it was clear that the stimulus money, approved in February, would significantly alter its 2009 outlook, which was released at the end of last year. Indeed, the information may help inform national policy as Congress debates ways to avert higher energy costs under new programs being contemplated, such as carbon cap-and-trade and a renewable energy standard.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.

Making efficiency easy with on-bill financing

By Elisa Wood

April 9, 2009

Even if hostile governments corner all of the oil, the polar caps melt, and Oprah, herself, says, “It is time to save energy!” consumers will not pursue efficiency in a big way unless it is easy and painless.

That is why a growing number of state regulators are taking a close look at a concept known as on-bill financing. When a customer upgrades a heating system, insulates walls, or undertakes some other efficiency measure, the utility pays for it and then recoups the cost gradually over time in the customer’s monthly energy bill. The approach spares the customer the sticker shock of springing for the improvement all at once. It also gives the customer the opportunity to reduce energy use, which lowers heat or electricity charges and offsets at least some of monthly cost of the efficiency installation.

Utilities offer on-bill payment in two different ways: through loans or tariffs. A loan is assigned directly to the customer who must pay it back even if he moves. In contrast, the tariff approach links the charge to the meter, meaning that whoever lives at the house or owns the business pays the fee. If the customer moves, the new occupant picks up the payment.

The tariff approach allows for a long payment term and therefore lower monthly costs. “It also encourages renters to participate in the program because they only pay for energy saving measures while they benefit from them, and remain in the premises,” says Paying for Energy Upgrades through Utility Bills, a recent brief by the Alliance to Save Energy.

On-bill financing makes a lot of sense, but utilities are not jumping on board quickly. Many see the approach as experimental, given that it has yet to be tested widely. Further, while on-bill financing makes life easier for the customer, it complicates billing for the utility, which must modify its systems, said the ASE brief.

Connecticut and California have the largest on-bill programs. ASE says to keep an eye on New Hampshire, which has the greatest experience with the tariff-based systems. Hawaii and Kansas also have programs underway and may soon report results. Michigan appears to be heading toward adopting an on-bill program. Massachusetts and Rhode Island have used the approach for almost two decades.

More details are available at http://ase.org/content/article/detail/5476.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.

Federal energy stimulus: The check is in the mail

By Elisa Wood

March 26, 2009

Energy efficiency companies waiting for federal stimulus money probably feel like they are being told, “The check is in the mail.” It is supposed to arrive, but when?

The federal government will channel a large pot of the money through state agencies, so it is wise to keep an eye on announcements by governors and state energy offices. States must apply by May 12 for $3.1 billion in what is known as the State Energy Plan funds under the American Recovery and Reinvestment Act. The money will go toward rebates to consumers for home energy audits or other energy saving improvements; development of renewable energy projects; promotion of Energy Star products; efficiency upgrades for state and local government buildings; and other efforts initiated by the states.

To secure this money, state governors must write letters to the US Department of Energy explaining spending plans and providing assurance that they will meet federal stipulations. In many cases, the states will pass along money to utilities, which will then hire energy efficiency installers, auditors and others to do the actual work. To see how much money your state will receive and your governor’s letter when it is sent, go to http://www.energy.gov/recovery. Scroll down and click on the map at the bottom of the page.

The DOE recovery site also links to information on funds for weatherization, advanced battery manufacturing, environmental management, research and development, smart grid and other energy programs.

Some states are moving ahead more quickly than others in making public their plans for use of federal money.

In Pennsylvania, Governor Edward Rendell announced this week the names of five companies that will receive $3.8 million for energy conservation improvements. In all, the state expects to receive $366 million through the State Energy Plan program.

The Massachusetts Division of Energy Resources let businesses and public agencies know that funds may be available soon to help them purchase green vehicles. The state expects to receive $5 to $15 million of a $300 million pot for alternative vehicles. To qualify, businesses and public agencies must submit letters of commitment to the state by May 18. The state will apply for the federal money by May 29.

In Connecticut, Governor Jodi Rell sent a letter to DOE explaining the state’s plans to focus on growing its existing fuel cell industry and responding to consumer demand for solar thermal and geothermal products with part of the $38.5 million Connecticut expects through the State Energy Plan program.

Two national efficiency organizations also are working to smooth the flow of stimulus money into the industry. The Alliance to Save Energy has launched an initiative to help publicly-owned utilities expand conservation programs. ASE is undertaking the effort with the American Public Power Association and the Large Public Power Council. Meanwhile, The American Council for an Energy-Efficient Economy continues to frequently update www.energytaxincentives.org, which has details on recovery act and other incentives available for consumers and businesses.

In addition, K&L Gates is tracking energy stimulus funding and recently reported several grant solicitations, including one to accelerate the market introduction and penetration of advanced electric drive vehicles. Details are available through the DOE’s Vehicle Technologies Program.

So, while the stimulus check for energy efficiency may still be “in the mail,” many hands appear to be ferrying it toward delivery.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.

$3.1 billion for state energy efficiency programs – Just one catch

By Patrick Costello, guest contributor

March 19, 2009

The American Recovery and Reinvestment Act promises to advance the U.S. energy efficiency movement with an unprecedented $26 billion infusion of funds. Of that, $3.1 billion goes to state energy efficiency programs through the Department of Energy’s State Energy Program.

Great news, right? Maybe not, says the Electricity Consumers Resource Council (ELCON) and the National Association of Regulatory Utility Commissioners (NARUC).

To receive the federal stimulus money, states must agree to set up financial incentives that encourage utilities to pursue energy efficiency programs. ELCON and NARUC fear that this promotes a “one-size-fits-all” approach to the administration of energy efficiency programs. In particular, they are concerned that these stimulus funds will sway states to implement revenue decoupling at the expense of developing a more unbiased energy efficiency program plan.

Revenue decoupling is a ratemaking mechanism that breaks the link between a utility’s revenues and energy sales. Since utilities normally profit from selling energy, it’s not in their best interest to push efficiency. Doing so reduces demand for their product. Revenue decoupling counters this problem by allowing utilities to earn a fair rate of return, and sometimes additional financial incentives, on energy efficiency programs. Decoupling has become a common way to align utility financial interests with state efforts to achieve greater energy efficiency.

The debate over revenue decoupling is central to discussion over what makes an energy efficiency program effective. Ratepayers measure success based on how much money they save. And how much money they save may depend on who runs the program.

Utilities, state agencies, third party non-profit organizations, or some combination of the three typically administer efficiency initiatives. Each state shapes its own approach. No one program design seems to be the most effective. Many highly regarded programs differ greatly from one another. But the best programs share one commonality: They are tailored to the unique policies and economic profile of the state and are based on input from a variety of stakeholders.

Critics of the stimulus bill argue that ‘the catch’ – the condition placed upon states before they can receive stimulus money – may stifle such tailoring, hinder development of a state’s full energy efficiency potential, and diminish cost savings. Decoupling creates the foundation for utilities to serve as the primary administrators of efficiency programs. By pushing for revenue decoupling, a state is arguably saying it wants utilities, not a third party non-profit or state agency, to take the lead in developing and administering energy efficiency programs. Therefore, the stimulus bill walks a fine line between encouraging states to implement only utility-administered programs and encouraging them to reform their ratemaking policy so that utilities can, on some level, contribute to the development of a sound energy efficiency program.

Decoupling is somewhat arcane, but ratepayers should be aware of how it may influence their rates as energy efficiency programs evolve.

This is the House Energy and Commerce Committee’s report where the controversial provision can be found on page 26:

http://www.rules.house.gov/111/CommJurRpt/111_hr1_encrpt.pdf

To see a breakdown of the stimulus package’s energy efficiency measures, visit:

http://ase.org/content/article/detail/5388

To learn about and obtain forms for stimulus package energy efficiency tax incentives, visit:

http://www.energytaxincentives.org/

To see how your state’s energy efficiency efforts rank nationally, visit:

http://www.aceee.org/pubs/e086.htm

Visit us at www.realenergywriters.com and pick up our free Energy Efficiency Markets podcast and newsletter.

How US businesses can access federal stimulus money

By Elisa Wood

March 11, 2009

I thought that “federal stimulus” would be high on Google’s hit list. But alas, when I checked its analysis of hot trends yesterday, I discovered that “Rockin’ Robin” is number one.

Thanks to American Idol this 1950s song dominates the search engine. Bringing more music to the ears of business owners, however, is the $20 billion made available for energy efficiency through the American Recovery and Reinvestment Act of 2009. While it is easy to find information about homeowner opportunities (www.energystar.gov), it is difficult to ferret out how Joe-business USA can take advantage of the act’s benefits.

I did, however, find a few valuable sources. Linked-in brought me to a paper by law firm K&L Gates that advises companies with early stage projects on how to apply for money. The paper focuses on renewable energy, but also touches on efficiency, and includes guidance on how to approach government fund managers. Applicants need to make the case that their projects are “game changing” to win priority. They also must be “shovel-ready” – able to begin in 90 days. The paper is available by contacting fred.greguras@klgates.com.

Energytaxincentives.org, a coalition of public interest groups, offers detailed information on existing incentives for commercial buildings, appliance manufacturers and combined heat and power. But the site appears to be still updating to include the ARRA, not surprising considering how many funding details are yet to be worked out, particularly at the state level.

The old standby, Dsireusa.org, is quickly updating information to include ARRA offerings. Those who manufacture certain energy saving and renewable energy products will find details about the 30% tax credit at the site. The program offers $2.3 billion in credits for projects certified by the US Treasury. Preference will go to those projects that are commercially viable, and are best at producing jobs, reducing air pollution, deploying commercial technology and getting off the ground quickly. The Treasury also will look at the applicant’s costs for generating energy, saving energy or reducing greenhouse gases. Additional guidelines will be available in August.

Please post here, or email lisawood@aol.com, with other sites, papers or reports that offer details about how businesses can access incentives through the ARRA 2009.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.

How well is clean energy weathering the recession?

By Elisa Wood

March 5, 2009

The clean energy industry may not be popping the champagne cork, but it is at least holding the bottle in hand. While not unscathed by the recession, the industry sees growth in several sectors, according to recent reports.

For example, use of smart meters—a key technology for better energy management and efficiency – is increasing at a rapid clip. A study by ABI Research, “Advanced Metering Infrastructure (AMM and AMI),” forecasts that the number of smart meters installed worldwide will reach 76 million this year, up from 49 million in 2007. Smart meters will benefit from an estimated $4.5 billion that the US plans to spend on smart grid initiatives as part of the federal stimulus package.

“We don’t think that the economic crisis is having a significant effect,” says Sam Lucero, senior analyst for ABI Research. “Utilities’ smart metering deployments are typically multi-year plans developed in the context of regulated market environments, and not terribly susceptible to short-term economic fluctuations.”

Press reports indicate that two other energy-cutting products are poised for significant growth this year. Moneynews.com quotes analysts who say demand response companies are likely to see recovery in 2009 following a dramatic fall in stocks of some leading companies. Meanwhile, industry insiders say they expect continued expansion for combined heat and power, a resource that has won new federal tax incentives and state support. See my article in the January/February issue of Cogeneration and Onsite Power Production magazine for more details.

Not all the news is good though. Greentech Media and the Prometheus Institute for Sustainable Development project that the global market for photovoltaics will shrink 15% this year to $12 billion. This is solar energy’s poorest performance since 1994, according to the report. At the same time, Lux Research says this year’s solar shakeout – caused by oversupply of cell and module capacity – will push solar prices closer to grid parity and precipitate expansion.

Meanwhile, expect to read a lot more about the clean energy sector in the coming year. William Brent’s Search for Cleantech reports that members of the media foresee heightened coverage of the cleantech sector in 2009 (and it certainly wasn’t light coverage last year.) Seventy-five percent of bloggers, mainstream newspapers, magazines and broadcasters surveyed say readers and editors will demand more coverage of the sector. So while the champagne may not be flowing yet, the information certainly is.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.