Obama, energy efficiency & accountability

By Elisa Wood

January 28, 2010

Not once, but twice President Obama mentioned the importance of energy efficiency in his state of the union address January 27. His support for the resource is no surprise; his administration has channeled $20 billion toward energy savings programs. Obama made clear that going into his second year his support will not waver.

“I know that there are those who disagree with the overwhelming scientific evidence on climate change. But here’s the thing — even if you doubt the evidence, providing incentives for energy-efficiency and clean energy are the right thing to do for our future -– because the nation that leads the clean energy economy will be the nation that leads the global economy. And America must be that nation,” he said.

For many years, efficiency was the poor sister of the energy world. So continued support from the highest office comes as extraordinarily good news to the range of businesses that provide energy savings services and products – from appliance manufacturers to energy efficiency service companies to the new entrants — smart grid and information technology companies.

But when an industry receives this much incentive money, it inevitably comes under increased scrutiny. Is the taxpayer and the ratepayer getting bang for the buck?

Fortunately, a lot of work is underway to bring to buildings the kind of miles per gallon measure we now have in the auto industry. How many people know how well or poorly their homes and businesses use energy?

To find out, innovations are being developed in use of data loggers and other devices that measure actual energy output of equipment and other parameters. Another interesting approach is use of benchmarking and disclosure mandates to determine building performance.

The goal of such programs is give consumers and businesses information about building performance to trigger “market-based competition to own, operate, lease, finance, design and build the most energy-efficient buildings,” says the Institute for Market Transformation.

The Washington, D.C.-based efficiency group describes on its website several cities and states already using benchmarking and disclosure:

• The New York City Council requires building energy rating and disclosure, periodic energy audits and retro-commissioning. It also mandates building-wide lighting upgrades and the installation of submeters and compliance with a new city energy code.
• Washington, D.C. mandates annual energy performance rating and disclosure for commercial buildings. The district publishes building energy performance data on a public online database.
• Utilities in California must provide data for use in ENERGY STAR benchmarking. Commercial building owners must disclose ENERGY STAR benchmark data to prospective tenants, buyers and lenders.
• Austin, Texas requires commercial building energy rating and disclosure, mandatory energy audits for homes and mandatory audits plus retrofits (in some cases) for apartment buildings.
• Washington state has a building energy rating and disclosure mandate similar to California’s. The city of Seattle has its own benchmarking requirement.
• On the federal level, the House and Senate climate bills would create a national building label. In addition, the Department of Energy has a new National Building Rating Program to create a label for homes.

Stay tuned for increased city, state and federal activity in measuring and monitoring energy efficiency as activity expands. More details are available at:http://www.imt.org/

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

Investors and public back energy efficiency

By Elisa Wood

January 21, 2010

Energy efficiency finally has transitioned from being a good idea to a good business – to a very good business.

Money poured into the industry last year, pumping up total deal values by 664.7% and making 2009 energy efficiency’s break-out year, according to Peachtree Green Advisors.http://peachtreemediaadvisors.com/green/downloads/2009GreentechM&ARound-Up.pdf.

This increase for EE — from $164 million to $1.3 billion — came despite a 4.1% drop in overall transaction value for the green tech sector.

“VCs and angels—have targeted the energy efficiency as the next frontier in green tech investing,” the report said, noting that “a slew of money” was channeled into software technologies that manage energy use, as well as electric and hybrid cars.

What’s ahead for 2010? Much may depend on how the industry describes itself.

The Peachtree report warns that once federal stimulus money dries up, green projects may be shelved. Placing a carbon value on energy would bolster the industry, but that will take tremendous “political willpower,” says Peachtree.

And political willpower seems scarce in Congress, particularly with the surprise election this week of Republican Scott Brown to the open US Senate seat in Massachusetts. Those already nervous about voting for cap and trade see the Brown vote as a surprise indictment of not only Obama’s healthcare agenda but also his energy policy. http://www.bloomberg.com/apps/news?pid=20601087&sid=aLrXr50OGPR0&pos=9

But the electorate’s sentiments are hard to read right now. And it may be off the mark to assume that Brown’s election means weak public backing for cap and trade. In fact, an interesting poll by Frank Luntz indicates just the opposite.http://www.edf.org/language

Issued January 21 by the Environmental Defense Fund and NRG Energy, the poll shows Americans eager for Congress to act on climate legislation that would promote energy independence and a healthier environment. And the support crossed party lines.

Much depends, though, on how the issue is framed, according to Luntz. Discard the words “carbon neutral,” he says: “People want companies to focus on greater energy efficiency and a healthier environment – not on being carbon neutral.”

In fact, energy efficiency got the top response (47%) when pollsters asked, “If a company was genuinely interested in energy and environmental issues, which of the following do you most want them to focus on?” After efficiency, poll participants said they want a healthier environment (41%), a cleaner environment (32%), reduced energy consumption (29%), greater environmental stewardship (24%), carbon neutral (12%), none of the above – it’s a waste of time, (8%).

If this poll is correct, fearful lawmakers may again be misreading the public sentiment. A carbon cap and trade bill still can be won, if it is presented correctly to the public. The word from investors is that efficiency is a good bet. The word from the American public appears to be the same. Now we await word from Congress.

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

Smart Grid: The Game

By Elisa Wood

January 14, 2010

In his best seller “Outliers,” Malcolm Gladwell shows that it is not equipment failure or storms that typically cause planes to crash, but wrong decision-making. Much the same can be said for the power grid crash that took down a large swath of the Northeast in August 2003.

The emerging smart grid is supposed to make our power system more reliable. The bad news is that it also will add complexity to North America’s already byzantine power machine. So smart grid will only be as smart as the people who operate it.

The solution seems obvious: job training. But to hear Matt Sadinsky tell it, it’s not that simple. And he should know.

Sadinsky’s company, System Operations Success International www.sosintl.com, develops computer simulation and training programs to help workers operate the bulk power grid within standards set by the North American Reliability Council. The North Carolina company has provided NERC approved continuing education to thousands of engineers and grid professionals in the United States and Canada since 2002.

Operating the electric grid is not matter of flipping pages in a manual. Given the rapid and complex turn of events that can occur on the system, operators need gut understanding, according to Sadinsky. These are already very smart people. But how do you train old dogs new tricks, so that they can gain the same gut understanding of the latest rules and technologies? And how do you help them teach the pups?

Gladwell in his book says typically it requires at least 10,000 hours on the job to attain a proficiency that brings success. The utility industry, unfortunately, tends to rely on what Sadinsky calls “tribal learning,” a very slow process that can stretch training out far longer. Sadinksy describes it as the “some-guy-named-Joe-taught-me-everything-I-know” approach. After years of operating the system alongside Joe and experiencing various emergencies, the student gains the same gut instinct as the mentor.

However, utility tribal leaders are getting ready to retire in mass numbers and may leave before newcomers have their 10,000 hours or more of training. So SOS Intl has figured out a way to hasten the learning process, using a medium the up-and-coming generation can appreciate – electronic games. Through computer simulation the trainee gets hands on experiences in grid events and emergencies that it may take years to witness in real time. Rather than tribal learning, this system uses what Sadinsky describes as more rapid-fire “Huh?” and “Oh…” cognition (or in Canada “Eh?” and “Oh…”) The student has a chance to see the problem, test choices, and grasp the solution in the virtual learning-by-doing setting – without any real world crashes.

SOS Intl wants to bring this gaming method to the emerging smart grid. Thus, the company has applied for a $4.7 million federal stimulus grant with several partners — among them the University of California Los Angeles; George Mason University’s Center for Smart Power Grids; City of Burbank, California Department of Water and Power; Cleveland Public Power and the Southern California Public Power Authority.

They will use the money to study development of what they are calling Smart Grid — the Game. The simulated program will help operators learn how to handle issues involving solar and wind integration, storage, grid additions of plug-in electric vehicles, and other aspects of smart grid.

This project was proposed under the Smart Grid Workforce Training segment of the US Department of Energy Workforce Training for the Electric Power Sector Grant. Sadinsky expects to hear by January 31 if they won funding. Stay tuned to see whether or not the proposal creates a “Huh?” and “Oh…” for the DOE grant evaluators.

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

Ghost in green building

By Elisa Wood

January 8, 2010

In midtown Manhattan, home of the nation’s priciest office space, the equivalent of 16 office towers, each 40 stories high, now stand empty. This statistic, from the Wall Street Journal, underscores the vast damage inflicted on commercial real estate by the economic downturn.http://online.wsj.com/article/SB10001424052748703521904574614833750873314.html?mod=WSJ_Real+Estate_LeftTopNews

Given the ailing market, this hardly seems the time to invest in expensive green upgrades. But a recent report suggests just the opposite.

Issued by sustainability organization Ceres and investment services company Mercer, “Energy Efficiency in Real Estate Portfolios: Opportunities for Investors,” points out several reasons why both property owners and investors may want to consider improving buildings now.

• Several studies indicate that efficient buildings command a premium in both rent and sales prices, and a shortage of green buildings exists to meet demand.

• New programs and support are available through private and public sources to finance efficiency retrofits. The federal stimulus package alone earmarks $11.3 billion for energy efficiency.

• Efficiency upgrades can decrease operating expenses.

• Inefficiency could mean financial penalty if the US moves forward on pricing carbon dioxide emissions.

We are experiencing an unquestionable increase in the greening of buildings – a good thing since buildings account for 39% of energy use in the United States. But property owners would probably pursue more efficiency if not for the misconception that efficiency upgrades are expensive. Owners often believe energy efficiency upgrades will cost as much as 17% more than they do, according to the report. These “ghost expenditures” are scaring building owners away from making upgrades, the report says.

“Evidence suggests that in many cases, the most effective changes have low upfront costs and result in significant operational cost savings, rental premiums, shorter vacancies and reduced obsolescence, as well as slower depreciation, and therefore higher capital values,” the report says.

Some investors aren’t afraid of the ghosts. Financial services giant TIAA-CREF is well on its way to reducing energy use 10% for its real estate holdings, a goal it hopes to achieve before the year is out. Begun in 2008, the effort already is saving the company $4 million a year in reduced energy costs.

Likewise, the California Public Employees’ Retirement System (CalPERS), the world’s largest pension fund, is on target to meet a 20% cut in energy use for its real estate by the end of this year.

“As fiduciaries, focusing on energy efficiency in our real estate portfolios just makes sense,” said Anne Stausboll, CalPERS CEO, “CalPERS invests in millions of square feet of real estate so cutting back on energy use and lowering operating costs can only boost the value of the properties in our portfolio, while also contributing to climate change mitigation.”

The report provides advice about how to proceed with green investments for both property owners and those who invest in real estate trusts and other securities. It can be found at www.ceres.org/realestatereport.

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