The Future Of Wind At RETECH2012

Dropped off wind power poster at son's 1st gra...

With an industry tax credit in jeopardy and new projects at a virtual standstill in the U.S., you might have expected the wind industry to come limping into RETECH2012. Instead, the audience heard from a sector that’s honing in on what it can control — namely cost reductions and innovation.

“We haven’t placed any orders for turbines for 2013,” said First Wind’s Julia Bovey in the opening remarks. That’s been the norm in 2012 for wind developers and turbine manufacturers as utilities and power purchasers have adopted a wait-and-see approach when it comes to the Production Tax Credit (PTC).

As a result, she added, three primary drivers have taken hold: reducing costs, improving turbine technology, and accessing capital in different ways.

Life Beyond The PTC

While the PTC has taken up much of the industry’s focus, wind proponents like Bovey and other green advocates are pushing for other ways to access capital. Two that have captured the discussion recently are master limited partnerships (MLPs) and real estate investment trusts (REITs). Both are used by oil and gas companies and have driven more than $300 billion in private investment. Here’s the way it was described in a NYT Op-Ed piece.

“Some economists and green tech entrepreneurs have advocated a change in federal tax law to allow renewable energy companies to use a tax-advantaged investment device known as a master limited partnership, which has attracted $350 billion in private investment but is limited to oil and gas extraction and pipeline projects. Another proposal is to allow real estate investment trusts, which are like mutual funds for real estate, to cover energy transmission networks and renewable energy generation.”

The wind industry says the subsidy discussion is really about equal footing. An LA Times report showed how lopsided it can seem depending on the data being analyzed.

“Fossil-fuel producers reap tax accounting breaks such as the depletion allowance, which is worth an estimated $1 billion a year, according to the Environmental and Energy Study Institute, a Washington think tank created to advise Congress on energy policy. Tax-expensing options for drillers bring them $1.9 billion a year. Relief on royalty payments due to drillers on government property: $53 billion over the lifetime of the leases.”

However the subsidies play out, panelists agreed something similar to the current renewable portfolio standard should be a goal. As much of a hot potato that it might be politically, more than thirty states are already enrolled to spark renewable growth. As one of the speakers mentioned, RPS is the closest thing we have to a national clean energy standard.

Innovation Brings Multiple Benefits  

The pace of innovation in the wind business was certainly one of the bright spots. Taylor Geer, with energy consultancy Garrad Hassan, said turbine efficiency and reliability have improved dramatically over the last five years, something he attributes to better manufacturing processes and more R&D earmarked for things like forecasting and storage.

“We definitely have a better idea of what we need to look like within three-to-five years,” said Geer. “Not to mention we’re getting a better sense of what our cost of energy will be, and that’s a big lift.” Like other panelists, Greer emphasized the impact that energy storage would have on levelizing electricity costs. As the storage infrastructure improves, most agreed wind farms would likely resemble a generation model closer to conventional power plants.

To get a sense of how fast turbine technology is evolving, you can look at “repowering” efforts, which replace older turbines with new ones. According to Jeff Schlichting at wind developer Sustainable Legacy, one turbine can now replace up to five others as wind farms are upgraded.

Taking Costs Out Of The System

Cost reduction was another area where technology improvements are having an impact. But it’s not just better rotor technology or lighter materials that are helping, it’s supply chain efficiencies and the way wind farms are commissioned. “As the industry has matured, we’ve gotten better at everything from construction to logistics,” said Schlichting. “

And perhaps a sign of that maturity was the fact that IBM was on hand to address the operations and management (O&M) market for wind. According to Biren Gandhi of IBM Global Business Services, O&M costs can approach one-third of the total capital expenditures for a wind farm.
The company was pitching its IT-driven approach to managing large-scale wind operations, experience that it’s gained from running big servers and cloud applications for customers in the automotive industry and other manufacturing-intensive operations. IBM projects the O&M market could grow by as much as $6 billion over the next decade.

Big Opportunity, Big Risk For U.S. Cleantech Companies In Mexico

At last week’s RETECH 2012 session on Renewable Energy in Mexico, Miguel Vazquez from the U.S. Commercial Service in Mexico City presented a detailed look at the challenges and opportunities for U.S. businesses wanting to market renewable solutions in Mexico. With its own presidential election looming, Vazquez says that Mexico’s renewable energy policies would likely get a boost, but warned its regulatory framework would continue to be a challenge as American businesses expand across the border.

He said things will likely be compounded by the fact that Mexico ‘s largest utility, CFE, has a mandate to buy the cheapest energy available. That’s a policy decision that helps zero out solar all the way into the year 2026. U.S. companies are also limited in terms of how they can work with CFE, said Vazquez. Today, only power generation projects are considered, not distribution or transmission.

But all that aside, the market for exports to Mexico can’t be ignored, especially in wind and biofuels, where Mexico ranks in the top three globally, according to Dept. of Commerce data. And from a U.S. perspective, Mexico ranks ninth for potential renewable energy exports.

gdmex

 

Vazquez also touched on some of the current renewable incentives in Mexico . One is aimed at taxpayers, and provides a 100% deduction incentive for investing in renewable energy equipment as long as the equipment is operational for at least five years. And in 2009, the Fund for Energy Transition and Sustainable Exploit of Energy was established. In less than two years, it had a capitalization of $260 million that could be spent on sustainability projects.

Mexico is also bringing its educational institutions into the mix, making funds available for renewable R&D from the Ministry of Energy and CFE. Lastly, U.S. business could also get some help from Mexico ‘s “Green Mortgage” program, which provides a lower APR if homeowners purchase renewable energy equipment.

Even with all the incentives, Mexico ‘s renewable portfolio will still only approach 25% by 2026. Because of that, Vazquez said U.S. companies really need to do their “homework” and streamline the way they approach the market. Legal challenges, permitting and land ownership were cited as some of the biggest obstacles. He mentioned it can still take a few years for permits related to power generation projects.

Clean Energy Growth And The Renewable Fuel Standard Hot Topics At Thursday’s RETECH Keynote

http://storify.com/georgedearing/clean-energy-potential-and-renewable-fuel-standard

SXSWECO Panel “Freeing Ourselves From A High Carbon Future”

"Freeing Ourselves From A High Carbon Future" PanelIn Wednesday’s SXSWECO keynote with U.S. Senator Byron Dorgan, Jigar Shah urged the crowd to “find some _____ inspiration!” You can guess what was left out. Shah argued much of what the environmental movement lacks in strategy, it can make up with focused rage. If you left the keynote inspired and looking for ways to get involved, Thursday’s session, “Freeing Ourselves From A High Carbon Future,” was a great place to reinvigorate the rage.

Moderated by Kelly Rigg, executive director of the Global Campaign For Climate Action, the talk brought real substance to the often cloudy world of climate activism. Panelists Andrew Behar of As You Sew, Sarah Hodgdon from the Sierra Club, and Tim Nuthall of the European Climate Foundation were on hand to share how their organizations are reshaping some of the narrative around cleaner energy and climate change.

The Carbon Bubble

Rigg opened the session with a few slides that set a sobering backdrop for the discussion. The first was an excerpt from the Carbon Tracker project, showing how much carbon will be “unburnable” if reduction efforts aren’t accelerated. It could be as high as eighty percent if we achieve only twenty percent of our reduction goals.

With reserves driving so much of an oil company’s value, it’s easy to see how models built on extraction could suffer.

Just as provoking was another slide (below) on the “450 scenario,” referring to the need to limit the concentration of greenhouse gases in the atmosphere to around 450 parts per million of CO2. The International Energy Agency (IEA) says that without action, in half a decade we could approach the 450 ratio. “At some point, we’re going to have to start decommissioning things,” said Rigg. “Nobody wants to do that.”

 

The Coal Fight

Sarah Hodgdon turned the discussion to some of Sierra Club’s work around its Beyond Coal campaign, and showed perhaps the slide of the session (below). Almost 170 coal plants have been defeated so far according to Hodgdon, a feat she attributes to the combination of grassroots political savvy, smart legal strategy, and effective communication.

“All those things working together have helped us get one win after another,” she said.

Sierra Club | 168 Coal Plants Defeate

And with coal’s percentage of electricity at its lowest in 30 years, Hodgdon emphasized the need to defend the production tax credit (PTC) along with State renewable energy standards.

She also mentioned how Sierra engages with local communities as renewable solutions continue to supplant coal production.

“We’re also supporting communities affected by coal by helping them make a smooth economic transition as plants close across the country.” Even with Beyond Coal’s success, there’s more collaboration that’s needed.

“It feels like what we’re missing though is a movement, where we’re connecting the dots between the coal and oil efforts.” When asked what was holding up those efforts, she thought much of the policy was in place, but that local issues were soaking up resources and time.

“People are working hard locally, so at times it’s hard to have the cohesion you need at the national level,” she explained.

Targeting Shareholders

Andrew Behar with Bay Area non-profit, As You Sow, is attacking the climate issue by targeting corporate shareholders. With a combination of advocacy and litigation, his team approaches the process both strategically and tactically.

“One of the ways we can make change is to file a shareholder resolution,” said Behar. “We target certain companies and you have to get through the SEC, so often it’s very complex.” And the companies As You Sow is battling are some of the largest in the world. Getting a seat at the table is only half the battle. “When you sit down with these companies — you have a human being there. We get to ask them, do you have kids, do you have grandchildren,” said Behar.

He also mentioned the firm’s focus on divestment, which essentially redirects assets to companies that support cleaner policies and more social responsibility. “You see a lot of activity on campuses, but the thing about these campaigns are they’re very complex.” Behar says many of the investments and funds are shielded under layers and layers of bureaucracy, so enacting change can be cumbersome.

But whether it’s a divestment campaign or simply filing a resolution, Behar stressed the importance of a multi-faceted campaign.

“These companies like Duke Energy and First Energy, they’re the guys that control what’s on the ground. They don’t see things in a short window of time,” he explained. “The key is coordinating all the pieces in a strategic way.” As You Sew says it boils down to five things: grassroots efforts, consumer awareness, litigation, policy and shareholders. The next deployment for Behar’s group will likely be the fracking battleground.

“We think stopping the building of gas plants will be the next big fight, you just can’t do coal anymore because the price isn’t viable. Strategically we need to get the price of gas up. That’s what we’re working on.”

A European Perspective: Roadmap2050

Artifact Via Roadmap2050.eu

Tim Nuthall with the European Climate Foundation had a hopeful, if not fascinating look at the Roadmap2050 project, aimed at helping move along Europe’s goal of 80-90% emissions by 2050. He was armed not just with data, but visually appealing data. Understandable data. For once, it looked like the environmental coalition had more resources than its usual opposition.

“What was impressive was the coalition that stood behind it. McKinsey did the analytics and KEMA led credibility to the solutions which got us into the meetings,” said Nuthall. For visuals, the group worked with a notable architect which he says helped the conversations live well beyond a project that was started in 2010.

As for mobilizing the effort, Nuthall says they ran a number of different models and all of them came to the same conclusion.

“Not surprisingly, what we found was that we needed to decarbonize our power sector.” The analysis looked at the costs of replacing carbon with renewable energy in various increments, from 20% all the way up to a complete phase out. He said the differences were accounted for by using carbon capture and storage (CCS) and nuclear. “We could use both CCS and nuclear because our goal was simply to reduce carbon, rather than single out any one technology,”he explained.

“What we found was the cost of those various scenarios are the same. It was technically feasible and financially doable,” he said. When asked about the political ramifications, he mentioned the data from their energy roadmap was used by the European commission to relay part of its own findings. “So from a political outcome perspective, it was a solid result.”

Roadmap2050 artifact

With a deep political focus, Nuthall’s team covers multiple fronts and is well-versed in what characterizes much of the denier mentality.

“In an European context, I’d characterize the deniers in three ways — disgruntled, ideological, and paid. Quite a heady mix,” he said.

“We’ve seen skepticism be very effective. Look at Poland, a country where 95% of its power runs on coal.” He says opposition to renewables has stood in the way of their proposal, essentially grinding it to a halt. Adding to the difficulty is the fact that power generation in Poland is owned by the government. “In the EU, we need rage in Poland.”

“One Thing As A Game Changer”

Rigg closed the session by asking the panelists to identify the one thing that could be a game changer for connecting the dots. In her view, there aren’t any technology barriers to fixing the problem, it’s political will. “We need to figure out how everyone that takes action in this movement has a way to connect with elected officials. We need to say we will make this an election issue,” she said.

For Hodgdon, it was how activists and environmentalists talk about their work, something she described as “drawing things together under the national narrative.” She urged fracking activists to bridge their communications with other groups targeting coal or oil.

Andrew Behar might have had the most disruptive suggestion, saying he wants to tie sustainability initiatives to executive pay. “Executives today are focused on keeping stock prices stable, quarter-to-quarter. If we have sustainability goals that look two, three, or five years out, corporations would start to shift. Right now it’s a total disconnect.”

Nuthall mentioned a few things. The Poland fight is obviously a big one, as he again mentioned more “rage” is needed. Effective grids was another key point, something that would be critical to keep renewable integration moving forward. Lastly, was a quote that could have been the bumper sticker for the session. “We have to stop taking a spreadsheet to a knife fight. We have to stop fighting ideology with policy.” In other words, the movement needs to get a helluva lot smarter. And fast.