Would Gordon Gekko go green?

By Elisa Wood

July 17, 2012

Energy books tend to be either jargon-filled tomes or hand-wringing, end-of-the-world, please-just-shoot-me-now reprimands. So it was a relief to see that Brian Keane avoids both of these worn-out roads in his new book, “Green is Good: Save Money, Make Money, and Help Your Community Profit from Clean Energy.”

Keane expertly tells the clean energy story with humor and anecdotes likely to capture readers who want to learn more about energy efficiency and renewables, but have found few credible, consumer-friendly vehicles that teach them. I’ve never before seen solar power compared to Tony Bennett: not a rock star, like say, micro-hydropower, but “older, more reliable and almost certain to give a top notch performance every time.”

For those who know Keane, this engaging writing comes as little surprise. As president of SmartPower, a non-profit marketing firm, he’s the guy at energy conferences who can hold people’s attention – even during the low-blood sugar late-afternoon sessions – with his insight into how we think and behave as energy consumers.

Keane’s been in the thick of it for several years, working to sell the idea of green to sometimes skeptical politicians and an often snoring public. He takes us inside some of his intrepid efforts. The book provides an account, for example, of how he convinced two very different Connecticut mayors (think blue blood versus blue collar) to engage in a competition to see which city could get the most people to sign up for renewable energy. The mayors agreed to participate in the duel even under the terms that the loser would wear a t-shirt saying, “I wish I were the mayor of [name of losing city.]”

We get a clear picture of where we are today as energy consumers versus where we were 40 years ago in Keane’s comparison of his drafty 12-member childhood home in Massachusetts to his present energy efficient six-member Virginia house. You would think the smaller family, alone, would mean less energy use (“fewer bodies mean fewer eyeballs staring into the open refrigerator”). But no. Even with better insulation and Energy Star appliances, our homes now consume a lot more juice.  Or here is another factoid from the book that puts our electricity appetite in perspective: College dorm rooms have more plug-in potential than the entire White House during Woodrow Wilson’s World War I presidency.

The book does not preach environmental religion; quite the contrary. Keane focuses on the relationship between green energy and capitalism. He advocates bringing “basic marketing principles to what often seems a holy cause.” In fact, Keane says “true believers” actually deter acceptance of clean energy by perpetuating the notion that going green requires adopting an alternative lifestyle (“wear hemp, eat only organic…”)

The title plays to the infamous line “Greed is Good” made by Gordon Gekko, the Michael Douglas character in the movie Wall Street. Keane portrays green as the flip side of Gekko’s destructive manipulation of capitalism; he takes us to a place where economic advantage and public good align. Rather than destroying the planet, here is where energy improves the environment using the good old-fashion profit motive. “Green is Good” offers an economic message that even Gekko might buy.

Published by Lyons Press, “Green is Good” is set for release in early October, and is now available for pre-purchase.

Elisa Wood is a long-time energy writer whose work is available at RealEnergyWriters.com

On-bill repayment: Great promise, but challenges remain

By Kat Friedrich

Guest blogger, Energy Efficiency Markets

July 11, 2012

On-bill repayment has received a great deal of attention during the last few years as a potential approach to expanding the reach of energy efficiency financing in the residential and commercial sectors.  With on-bill repayment, utilities or third-party lenders cover the upfront cost of energy efficiency retrofits and customers pay back the loans through their utility bills. 

Although on-bill repayment programs have many advantages, these programs are still in their infancy and many barriers to widespread deployment remain.  One of the programs’ advantages is that they build on utilities’ preexisting customer relationships. Another advantage is that the programs tend to be reliable investments if customers have a track record of paying their utility bills consistently.

However, some barriers still exist. As is the case with most energy efficiency financing mechanisms, lenders and utilities lack market experience with on-bill repayment. Therefore, many different perspectives exist about what is needed for on-bill repayment programs to succeed. 

To get a sense of some of the current issues, Clean Energy Finance Center staff talked with individuals who are trying to make on-bill repayment programs work across the United States.

On-bill repayment can expand the reach of energy programs

On-bill repayment makes energy efficiency available to almost all utility customers, including those who may not qualify for existing loan programs using standard underwriting criteria.

“If you ever want energy efficiency and renewables to compete head-to-head with buying energy, you have to buy them as a service,” said Dave Carey, Principal of Harcourt Brown & Carey, a consulting firm specializing in clean energy finance.  On-bill repayment can be viewed as a service because it can be packaged with utilities’ other services. 

Carey said that while 50 to 60 percent of residential customers are approved for energy efficiency loans currently, on-bill repayment could increase that figure to 95 percent or more.  While it is important to increase loan approvals to expand customer access to energy efficiency finance, programs also need to consider the risk that higher numbers of approvals could lead to greater loan default rates.

According to Carey, there are four main components of on-bill repayment, all of which depend on the choices of program developers; programs rarely have all four of them. These components are: a payment which is on the utility bill, a shutoff option for non-paying customers, a requirement that the cash flow resulting from the investment stay positive, and an option to transfer the cost to new property owners.  While these components are intended to strengthen on-bill repayment programs, some of them can be controversial and difficult to implement.

Adam Zimmerman, Executive Vice President of Craft3, a community development financial institution which has been the primary lender for the Clean Energy Works Oregon program, said residential customers in Oregon and Washington have been very responsible in repaying their energy loans. Previous utility bill payments are a reliable indicator of future behavior, Zimmerman said. Because of the positive results Craft3’s residential lending program has achieved, using utility payment history as a qualification, Craft3 dropped its required credit score to 590 and does not have income requirements. Using these criteria, Zimmerman estimated, a large state like California could increase program enrollment levels by 25 percent.

“A lot of energy efficiency programs haven’t generated as much demand as those of us in the environmental community have wanted them to,” said Brad Copithorne, Energy and Financial Policy Specialist at Environmental Defense Fund. He believes on-bill repayment programs can increase demand for energy efficiency and drive private sector investment in both the residential and commercial sectors.

Bill Codner, Program Manager at National Grid, said he is excited about bringing lenders on board to support energy efficiency programs. He has a goal of expanding National Grid’s commercial and industrial on-bill repayment program by a factor of two or three this year – if he can get sufficient funding from lenders to do so.

Progress varies across state lines

“We are seeing strong uptake on the two coasts,” Carey said. He has observed that regulators on the east and west coasts tend to be more supportive of innovations in financing, including on-bill repayment, although all programs are still in their infancy.  While National Grid has strong support from regulators in Massachusetts, that is not always the case for utilities in other states. In Oregon, legislation paved the way for the Clean Energy Works Oregon program.

Driven by requirements from the state's Public Utilities Commission, California is developing on-bill repayment programs for both the residential and commercial sectors.  Copithorne played a large role in developing the blueprint for the state's on-bill repayment program. He said he hopes other states will copy California’s program and “have it go viral as soon as possible.”

Environmental Defense Fund is also collaborating with stakeholders in Ohio and Texas; the initial results have been positive despite the political differences between the states. Copithorne said on-bill repayment has broad political appeal because it is both business-friendly and environmentally positive.

Utilities and regulators are cautious

“In the end, this all boils down to a dialogue between regulators and utilities,” Carey said.
He said regulators in many states seem reluctant to allow utilities to begin on-bill repayment programs. “There’s always trepidation about risks and unknowns. In the end, there has to be an economic reward,” Carey said.

Utilities are also cautious about starting on-bill repayment programs, which require changes to their IT and billing systems. Copithorne is working with stakeholders to build support for a statewide program in California; he said he considers it essential to make the on-bill repayment process easy for both utilities and their customers. He also said utilities want to protect their reputations and customer relationships.

Copithorne emphasized that utilities can focus on their core competencies and play the role of middlemen rather than becoming deeply involved in financing. He uses the analogy of a Visa card, since Visa is the middleman for transactions between lenders and customers. Similarly, utilities can partner with lenders so they don’t need to become financial experts to offer on-bill repayment programs.

While many utilities are concerned that they may find the cost of making changes to their IT and billing systems to be costly, others have been able to make the changes at a relatively low cost.  For example, according to Zimmerman, the Oregon and Washington utilities which collaborate with Craft3 found the cost of altering their billing systems to accommodate on-bill repayment to be very reasonable.   

Craft3’s programs are designed to minimize the risk to utilities’ reputations. Zimmerman is skeptical of programs which promise customers a net neutral or net positive return (also known as bill neutrality).  He said the utilities he works with are cautious about promising bill neutrality due to the many uncertainties inherent in energy efficiency retrofit projects.

Customer-friendly programs are essential

Customers hesitate to participate in programs for many reasons, including the cost of upfront capital investment.  For example, Codner is interested in starting the first on-bill repayment program for natural gas in the United States. However, according to Codner, natural gas poses a financing challenge because the payback period for the customer investment is longer than it is for electricity. In the current economic climate, National Grid’s commercial and industrial customers are reluctant to initiate programs unless the payback period is short-term.

Making the loan application process user-friendly is essential. Copithorne said he would like to see the private sector make it as easy as possible for utility customers to apply for loans. Ideally, the process might become as easy as applying for an auto loan. When a customer goes in to purchase a car, an employee takes down his or her information and provides loan options before he or she leaves the building. Auto dealerships offer same-day service.

Energy services agreements – where an intermediate company sells energy services to a customer and shoulders the burden of the risk – can reduce commercial building owners’ reluctance to participate in programs, said Copithorne. A building owner may lack the upfront cash for upgrades, the lease may require the owner not to borrow, the owner may not be able to pass on costs to the tenants, or the owner may simply be skeptical of salespeople. Copithorne believes that energy services agreements can solve some of these problems and should be part of commercial on-bill repayment programs.

National Grid targets its loans selectively to reach commercial customers who might otherwise not participate in programs. Codner said, “Our goal is not to provide zero-interest loans for everybody. Our goal is to get those companies that would not move forward with a project to do something. A lot of companies have capital constraints.”

Zimmerman said cash rebates may be more effective, from a residential sales perspective, than buying down interest rates. “Free money brings people to the table as customers,” he said.

Kat Friedrich is a staff writer for the Clean Energy Finance Center, which works with stakeholders to develop policies and programs that drive investment in energy efficiency and small-scale renewable energy. This blog is a repost courtesy of the center.

Too good to fail: What’s wrong with the electric grid?

By Elisa WoodJuly 5, 2012

The temperature is 100 degrees and we have no air conditioning, no running water, no telephone and no Internet. It’s been 60 hours since our household lost electricity because of the super derecho, a rare surprise storm that swept ten US states and the nation’s capital on June 29.

About 5 million of us suddenly are living in conditions of a century earlier. And as we fumble in the dark, it’s easy to see how vulnerable our profound reliance on electricity makes us.

The notion of grid reliability is embedded deeply in the American psyche. We are so accustomed to electricity flowing, we can barely comprehend its absence. By habit, we still flip on the light switch when entering a room, even after the power has been out for hours.

We have good reason to trust. After all, behind the switch is the world’s largest machine, the North American power grid. With 211,000 miles of high-voltage transmission lines and 5,800 power plants feeding electricity to our homes and businesses, the grid is an engineering wonder.

A wonder – until a storm, or a heat wave, or even a squirrel chewing the right wire in the right place knocks out power to large swaths of customers.

It is the grid’s size and interconnectivity that makes it remarkable and efficient, but also susceptible to widespread mishap. We saw that most clearly in the Northeast Blackout of 2003, when a cascading event caused failures that tumbled quickly from neighborhood to neighborhood, state to state, finally leaving 50 million without power.

But the American consumer generally does not view a blackout as a sign of an inherent problem with our electric grid. Following the June 9 derecho, about 30,000 workers, some borrowed from utilities as far away as Texas and Oklahoma, went to work restoring power in the Mid-Atlantic and nearby states. Still, consumers will be angry at the length of time it takes. And if the acrimony is as great as it was in New England last year following the freakHalloween nor’easter, politicians will take up the cause, regulators will investigate and some utility executives may find their jobs threatened.

If our lights fail and aren’t fixed quickly, we believe someone must be to blame. The problem can’t possibly be the nature of the interconnected grid itself. In the consumer’s mind, electricity is like air; it’s just there for us. If it’s not, someone messed up.

The energy industry refers to this as electricity’s invisibility. In many ways it speaks to the product’s success. Who in America ponders whether or not to buy electricity? It’s a given that we will connect our homes to the grid, pay the monthly bill and the power will flow.

But, this invisibility, this success, is a failing too.

Power companies throughout much of the nation are striving to make the grid less vulnerable by smartening it, and some of this smartening relies on consumer interaction, taking control over our electricity consumption through new digital technologies.  It includes installing smart meters and energy displays, building  microgrids and developing more solar energy and other forms of distributed generation, which decentralize the grid, and therefore takeaway at least some of the exposure that comes with size. (Think the Death Star in the movie Star Wars.).

Suddenly we need to pay attention to electricity, and we’d rather let it stay invisible.

So to make smart grid work, the energy industry needs to figure out what makes the consumer work. A great deal of study is now underway on human behavior and energy. The goal is to encourage us to embrace smart energy technologies, so that we will use electricity more efficiently. It’s been tough going. Most consumers see no underlying problem with the electric grid. If it’s not broke, why fix it?

I can’t say I like being without air conditioning and water. But maybe the occasional loss of comfort is a good thing, an eye opener, a reminder that we need to contemplate our electric system’s inherent weakness and work to strengthen it. The grid can break. It is not too good to fail.

Elisa Wood is a long-time energy writer whose work is available at RealEnergyWriters.com